Knittel vs. the internets (?)

The numbers guy goes after Knittel’s Woods study. I’m not sure Knittel and coauthor having had to take a mulligan should be seen as an embarrassment. BB (“before blogs”), to get the same feedback they got within hours, they would have had to wait for months or years, travelling from department to department and conference to conference presenting their paper.

Its funny that we always talk about the end of journals in the age of the internet, but this incident makes me wonder if the end of academic seminars is near.

14 thoughts on “Knittel vs. the internets (?)”

  1. Forget seminars – I want to see what the Web, data analytics, and data syndication will do to running businesses in quarters over the next 20 years.

  2. The tri-monthly clusterfuck, yeah.

    I’m fairly serious, though. Quarters seem like an artifact of running a business on paper. They also create all kinds of perverse incentives inside a business – rush schedules (and their subsequent costs) to meet arbitrary deadlines that have nothing to do with the market, drives to spend all of an organization’s remaining quarterly budget, artificial resource droughts if an organization blows their wad too soon in a quarter on something…

  3. When I was in your shoes, I felt the same way. There was one group who seemed to benefit from the quarterly cadence, though: salespeople. I mean, they’d bitch about it but the average salesperson’s productivity was basically zero until the last two weeks of the quarter.

  4. What changed your mind?

    I have a hunch that most ancient merchants resisted the adoption of Arabic numerals all the way to their deathbeds, and change mostly happened as sons took over the businesses.

  5. TV, your statement would be more credible if you told us at the time what the report would have to have looked like to not have looked “definitely worse”.

    To me, the report shows that unemployment is flattening out. In recoveries, one thing happens to unemployment rates after they’ve flattened out. Without a doubt 10% is a high number, but policy has to be forward looking. If current policy brings lower unemployment in the next couple of months, there’s not need for loosening.

    Here’s something we can check me on: if the February unemployment rate is greater than 9.9% than I’ll be the first in line to say we need more AD stimulus. Another thing to look for is a bottoming out in the JOLTS hire rate (let’s hope its bottom is 3%). My feelings wouldn’t be hurt if it were above 3.5% by July.

  6. swong, I never changed my mind. The question for the firm, though, is does the productivity bounce by the salespeople outweigh the productivity decline ops types get.

  7. Well, the first-announced job loss numbers for November were something like -9,000, so I was possibly expecting growth for December, or only a few jobs lost. As it was, -85,000 was worse than anybody — i guess except you — were expecting.

    The Fed, and the admin, should continue doing more until we’re at the point where we’re gaining at least 200,000 to 300,000 jobs a month for 2-3 months (i.e., until we know it’s not a fluke). We both know looking at the unemployment rate itself is a less important number than the jobs number.

    So, let’s say the Fed does another $500 billion in QE right now, and we gain 250,000 jobs in january and 500,000 in february. Then the Fed can merely reverse that $500,000 (and perhaps reverse more QE/raise the Fed Funds rate). The question for you is, WTF do we lose in this scenario?

    Scenario #2: We gain 25,000 jobs in January and 50,000 jobs in February. Those still aren’t great numbers, but monetary policy operates with a lag, and so w/ another $500 bill in QE now, w/ numbers like these we’d probably want to do a bit more or wait another month…

    Scenario #3: The economy loses another 50,000 jobs in january and 50,000 jobs in February. In this case we’d be really happy we did more QE now, and we’d definitely want to do more — a lot more. If we do nothing now, and then get these kinds of numbers however, we’d have made hundreds of thousands of people go unemployed for no good reason.

    I’m not seeing any symmetry between the “risks” of doing too much vs. too little right now… Recently, the Fed has continually erred on the side of doing too little, month after month. The stimulus will start to phase out in the 2nd half of this year, and the first time home buyer tax credit ends, as does the Fed’s purchases of MBS, and state and local governments are all cutting spending and levying more taxes…

    What you’re saying is your fine w/ a slow recovery and unemployment above 8% for several years on end…

  8. TV, suppose the Fed wants to decrease unemployment. Suppose it knows precisely how monetary policy translates to changes in the labor market. Suppose it can measure current employment with sufficient precision. Only under these assumptions does micromanaging the economy in the way you suggest good policy.

    I don’t think we disagree that the Fed would like to decrease unemployment… “to bring employment to its potential”.

    We don’t, however, know the transmission mechanism from monetary policy to output. How laggy is it, for example? We certainly don’t know the mechanism from monetary policy to labor supply and demand. Just so you don’t go off on the sorry state of knowledge in macro, what I’m saying is that it is not obvious what happens to unemployment next month when the Fed engages in QE.

    But suppose we knew the mechanisms: Are you sure the standard error on these surveys isn’t larger than the variations you’re talking about? Add in the non-sampling error and the Fed is next to blind about what the current (i.e. this months) employment rate is.

    So what? So what if the Fed doesn’t know how its actions will lead to reduced unemployment and so what if it doesn’t even know the current level of employment. You say it has nothing to lose if it were to take these actions. Well. I suggest if you have that point of view you should reread the history of the Fed (the most stark lessons are from the 70s) and the BOJ (the 90s mostly). The Fed will get the appearance of thrashing about; its failure to control month to month changes in unemployment in light of its hubris will translate into incredibility and risks unanchoring expectations (which is a long term problem).

    How do we get out of this situation? An error-correcting policy (like level targeting) would be a start. If people expected the Fed to have control over medium-term inflation, but was ok with short-run deviations, then the Fed could take the chances you suggest without risk. But we don’t have such a policy and there’s real questions about whether such a policy could ever be implemented.

  9. So, let’s say the Fed does another $500 billion in QE right now, and we gain 250,000 jobs in january and 500,000 in february. Then the Fed can merely reverse that $500,000 (and perhaps reverse more QE/raise the Fed Funds rate). The question for you is, WTF do we lose in this scenario?

  10. TV, you’re treating monetary policy likes its magic. What mechanism would lead to such an extremely temporary stimulus having any impact what so ever?

    There’s a million things we could try, why would we try this idea? Shouldn’t we have good reasons for policy?

  11. no, no, no.

    i’m saying we don’t know what employment will look like at the end of february. lets say things suddenly start to get better, independent of additional stimulus. In this case, if we had done another $500 billion of QE in the middle of january (right now), and find out at the beginning of March we didn’t need it, we can reverse it, and haven’t lost anything… if we do nothing, and then find out — shit! — we did need it, we have lost something.

    It’s clear right now that — shit! — we did need more stimulus the past six months…

  12. I see. You’ve described the state-dependent policy we should have, but don’t. I’ve argued we can’t move to such a policy now, because markets would interpret such a move as discretionary. We should move to a state contingent policy sooner rather than later though for the next time “shit!” happens.

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