The Ambrosini Critique

Data!

Even if The Emails discredit all the “science” on tree-rings, there’s still ice cores and bore hole data. And even if all paleoclimatology is BS, thermometer readings of temperatures show a sharp spike in the last couple of decades.

One piece of evidence for AGW has, perhaps!, been discredited. Not all evidence has been discredited. We still know C02 is a green house gas, humans have been pumping tons of it into the air and there’s the direct evidence of warming. There is no reason at all to think the AGW theory is a “scam” or a “fraud”.

I hope not. In the 1990’s, Macroeconomic Advisors GDP forecasts performed worse than random walk forecasts (basically guessing next year’s GDP will be the same as last year’s) in 6 out of 9 years (Fed WP, Anderson 1998). No sense paying someone to give you worse answers than a quick glance on a government website would give.

Brad Delong says we should believe these people’s forecasts because they get paid to make them. MA’s performance, on the other hand, suggest people pay them for services other than their GDP point estimates.

I recognized myself in Krugman’s remarks about otherwise bright, educated people who need to have arguments about international trade explained to them in baby talk. I’d hate to be on the side of the creationists in any argument, so I started asking questions.

— Sierra Madre

Referenced Krugman essay, the Landsberg post that referenced it and his post that provoked Sierra.

Robustness is a fledgling literature in Macro. The primary concern of robust analysis is that we don’t know the exact model of the economy and this model uncertainty has policy implications. Also, the math is neat.

Uncertainty about what the correct model is causes optimal policy to give heavy weight to worse-case scenarios.

Ellison and Sargent found a pretty neat application of robustness. The Fed staff are a bunch of academics who believe they know the true model of the economy. They use the “true” model to make forecasts and those forecasts are usually really good. The FOMC is the policy making branch of the Fed. They take the staff’s forecasts, produce their own forecasts and then set policy. It turns out the FOMC’s forecasts are worse than the staff’s. Those dumb policy makers, right?

Wrong. It turns out that because the FOMC is uncertain about the true model of the economy, they won’t take the staff’s model as the true model. The optimal response to this uncertainty would lead them to worry more about worse-cases. As Ellison and Sargent say, the FOMC “can be bad forecasters and good policymakers”.

I agree with McArdle who agrees with Cowen and Hanson. There appears to be consensus in the literature…

Lesson one: scientists are people, people are jerks and that Mann guys seems to be an especially big person.

Lesson two: its way too fun reading other people’s email.

Lesson three (the real lesson): data and methods should be freely available. Reading all the nonsense that goes on trying to replicate policy-important studies (like the Mann et al 1999 paper) is infuriating. Luckily, in my experience, we don’t have this problem in economics.

Contrary to McArdle and Cowen, my prior on the joint claim “the last century was the hottest of the millennium” or “tree ring data is a good proxy for temperature” has decreased reading some of the replication studies. While thermometer readings show a pronounced increase in temperatures in recent decades, the tree ring data probably doesn’t. There’s even a good chance the tree ring data, if a good temperature proxy, show several periods in the past 1000 years that were warmer than the last century.

Here’s a paper in Science that uses a different data set from Mann paper and shows the so-called “Medieval Warm Period” probably had temperatures at least as high as the 20th century.

I haven’t seen a good explanation for why thermometer readings show different trends than tree rings (or other temperature proxies). Of course, I trust thermometers over proxies, but still.

Somebody has the mistaken impression that people read CT for the posts. The comments are the only reason to “read”¹ CT.

The posters at CT deserve some credit for having attracted so many good commenters, I suppose. But there was probably some first mover advantage in this case, so not too much credit.

1. i.e. skim the post and head straight for the comment section [↩]

Oh man, the latest NBER working papers are hot! Hotter than usual! Come on inside and take a peek!

• Taylor and Jorda on the much talked about carry trade
• An argument that inflation in the US should be high to take advantage of all those ferners taking our jerbs cash
• Hall on the fiscal multiplier (I like his framing: “By How Much Does GDP Rise if the Government Buys More Output?”)
• Globally, household wealth is extremely skewed
• Taylor on the long history of credit crunches: “policymakers ignore credit at their peril”
• Leeper connecting long-run fiscal imbalance to inflation expectations

Travis Berg’s paper on statistically identifiying recessions (watch out NBER dating committee!) not surprisingly got James Hamilton’s attention.

“Conservatives” hate the unemployed so the facts on display in this editorial are obviously ideologically tainted. (h/t Wilkinson)

Look at the JOLTS data yourself: unemployment is being driven by a slow hire rate (fire rates are at about their normal level). Hiring rates could be depressed because of low demand for workers or for low supply of job hunters. GDP is rising which suggests demand for workers should be increasing. Unemployment benefits, on the other hand, have risen substantially so there are incentives to stay unemployed. Finally, we know the disincentive effect is large because of research by conservative stalwarts such as Larry Summers and Alan Krueger¹.

1. both somehow sneaked their way into high posts in the Obama administration [↩]