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Against the Horse Race

In the run-up to the 2008 election, virtually all of my friends became devotees of Nate Silver's 538.com analysis. A number of people thought the popularity of this site said something positive about American civic engagement, but I was aghast, and not just because I find Silver's tone off-putting and social science simplistic (although I do). It seemed to me to perfectly encapsulate the us-them, tribal nature of politics to be worrying about war gaming the Electoral College.

I bring this up nine months after the fact because over at Cato Unbound, Clay Shirky (in the midst of an argument for newspaper subsidies that I disagree with, but that's a story for another day), made this statement:

I am an avid New York Times reader, and love the work of both Gretchen Morgenson, a financial reporter, and Eric Asimov, a restaurant reviewer. I am also a politics junkie, and was glued to Nate Silver’s 538.com, which tracked electoral votes in the 2008 presidential election. Subsidizing newspapers would help Asimov but not Silver, a perverse outcome if the goal is civic value. The ideal would instead be a subsidy that aids Morgenson and Silver but not Asimov, not because his work isn’t terrific, but because the behavior of the nations’ banks and the outcome of its elections are critical public issues, but the quality of that new restaurant in the East Village isn’t.

Am I the only one who finds the popularity of horse-race style election coverage negative and bad for society, certainly not something to be subsidized?

To be sure, I don't care if some people find political races thrilling, in the same way I find the ACC standings interesting. But I wish people wouldn't confuse caring about issues with caring about elections.

My second post ever here was in praise of not caring about politics. I still believe that if we took 90% of our time spent thinking about and discussing politics and applied it productively in our own lives, the world would be a better place. And if we took 90% of our politics time and spent it thinking about and debating issues rather than looking at logit regressions to predict Lancaster County's Democratic party vote share, that would be a plus too.


Procyclical State Policy

James Surowiecki blames federalism and the state governments for holding back recovery:

Fiscal policy at the national level is countercyclical: as the economy shrinks, government expands. At the state level, though, the opposite is happening. Nearly every state government is required to balance its budget. When times are bad, jobs vanish, sales plummet, investment declines, and tax revenues fall precipitously—in New York, for instance, state revenues in April and May were down thirty-six per cent from a year earlier. So states have to raise taxes or cut spending, or both, and that’s precisely what they’re doing.

But is it really the case that federalism dooms states to running pro-cylical fiscal policy? Consider this seemingly unrelated story from Chile from a few months ago:

Thousands of government workers marched on downtown Santiago last November, burning an effigy of Chilean Finance Minister Andres Velasco and calling him “disgusting” as a strike for higher wages paralyzed public services.

Five months later, polls show that Velasco is President Michelle Bachelet’s most popular minister. During a three-year copper boom he and central bank President Jose De Gregorio set aside $48.6 billion, more than 30 percent of the country’s gross domestic product, that he is now using for tax cuts, subsidies and cash handouts to poor families.

The Chilean peso has risen almost 10 percent against the dollar this year to become the best-performing currency among emerging markets. The country’s economy is expected to grow 0.1 percent in 2009, as the region contracts 1.5 percent

There is no reason California could not have done the same thing. The growth of Silicon Valley has been a tremendous windfall for California. Revenue for the state government soared over the past decade. It, and more, was all spent. California could be cutting taxes and boosting spending simultaneously if they hadn't squandered their money on reckless spending.

So why the difference? It isn't federalism, but rather leadership. Chile had a finance minister with guts and intelligence (Harvard professor in economics). California had dysfunction and ill-designed referenda. The blame for the current sorry state of state finances lies not in federalism.


The Age of Diminished Expectations

Megan McArdle laments the loss of imagination in the United States, reflecting on the 40th anniversary of Neil Armstrong's walk:

During the incomprehensibly lengthy interval between you and adulthood, man would surely prepare itself to go to Mars and beyond, and you were going to be among the pioneers.

Four years before I was born, man walked on the moon for the first time, the most magnificent single feat our little tribe of East African Plains Apes has ever managed. Now we don't even do that. What happened to the dream? Government mismanagement, yes, but something more than that, too, some failure of imagination and will.

I'm in complete agreement, and I don't think the blame for this state affairs lies with government interference. Although I don't doubt that space travel would be in a more advanced state with a freer market, there seems to have been a deeper, psychological shift in the nation's psyche. We just don't want to build big anymore.

A few weeks ago while researching something else, I ran across one of the odder transportation ideas I've ever heard of:

A vactrain is a proposed, as-yet-unbuilt proposal for future high-speed railroad transportation. This would entail building maglev lines through evacuated (air-less) tunnels. Though the technology is currently being investigated for development of regional networks, advocates have suggested establishing vactrains for transcontinental routes to form a global subway network. The lack of air resistance could permit vactrains to move at extremely high speeds, up to 6000-8000 km/h

And these ideas were not coming random kooks writing in their parents' basement. The vacuum tunnel high speed train proposal was published by RAND, one of the most respected research institutes of the time (and today). Serious proposals about space colonization were being published by NASA in the 70s.

I'm not saying these particular projects made any sense. Rather, there's something sad about a society that doesn't even dare dream of wild, even stupid things, preferring a sedate existence. But is it true that we have lost all ability to think big? I don't think so. Projects like the sequencing the human genome are huge undertakings too, to say nothing of, say, Aubrey De Grey's SENS proposal. And yet these manage to capture at least some of the public's attention.

It seems more to me that we've lost the interest in building things, even if our imaginations still run wild in other areas. And if that's the case, why has this happened? And does anyone else see this is as a bad thing?


Why Bioconservatives will Lose

Here's an excerpt from an article in the Wall Street Journal three days ago:

A study published Wednesday found that rapamycin, a drug used in organ transplants, increased the life span of mice by 9% to 14%, the first definitive case in which a chemical has been shown to extend the life span of normal mammals.
[. . .]
Mice given rapamycin -- starting when they were 600 days old, or roughly the equivalent of 60 human years -- lived longer on average than mice who didn't get the drug. Their "maximal life span" -- meaning the age at which 10% of the mice were still alive -- increased to 1,245 days for females, compared with 1,094 days for those not fed the drug, or a 14% increase. For males, the maximal life span was 1,179 days, a 9% increase over the 1,078 days for those not fed the drug.

"This is really extreme," said David Harrison, who led the group studying the drug at Maine's Jackson Laboratory, in Bar Harbor. "No other intervention that I know of has been effective starting so late in life."

And this is a sponsored link that showed up in my gmail browser a few minutes ago:

Rapamycin - www.selleckchem.com - mTOR inhibitor,immunosuppressive 100mg $70; 500mg $275-- Bulk Also

Now, I know nothing about that website, could be straight scam artists for all I know. But what's notable to me is that within days of a publication of a story suggesting that the drug could be life extending, there's already an (illegal) market developing in it. Imagine something safer, and more effective. How quickly would people get their hands on it?

There are those out there who oppose research into extending human longevity. Good luck with stopping the spread of that technology, because it'll get out. Personally, I'd rather it be developed in the United States rather than in China or Singapore, but it doesn't much matter. Even the ultra-risk averse FDA won't stop an anti-aging hospital seastead, or the discreet delivery of pharmaceuticals from overseas when the demand is strong enough. And it will be.


Immigration and Elections

Long before I started posting here at the DR, there was an interesting dust-up on immigration's effects on political culture, and whether we should care:

If you believe (as Russell claims to) that in a country like the US, an influx of people hostile to freedom will reduce the freedom of people in that country, one is led inexorably to an uncomfortable conclusion. Namely, that the impact on freedom is the combination of gains from the increased freedom of the immigrants and losses from the decreased freedom of the residents. We can let in the coercers and be coerced, or we can coercively keep them out.

Now, there is plenty of room for debate about the resulting net impact. But if immigrants truly are anti-freedom, then the real question is how to evaluate this tough tradeoff. Not whether libertarians can have their immigration and a small government too.

The Economist recently discussed [HT-Maggie's Farm] some recent research on this topic, and the news is not good for libertarians:

Mr Luttmer and Ms Singhal analyse data from the European Social Survey, a biennial multi-country exercise, on the attitudes of over 6,000 immigrants who have moved from one of 32 countries in the survey to another and they find precisely this result.

Even after controlling for income, education and other relevant economic and social factors such as work history and age, views about redistribution in an immigrant’s home country are a strong predictor of his own opinions. Indeed, this measure of “cultural background” explains as much as income levels, and three-fifths as much as income and education combined. These results hold even for immigrants who moved 20 years before they were surveyed; they cannot be attributed to people not having had time to adjust their views.

Nor is it true that simply waiting out for the next generation of immigrants will solve the problem:

Even more convincing evidence of the impact of culture comes from second-generation immigrants. The opinions of children born in the host country about the desirability of redistribution are strongly influenced by the norms that prevail in the countries their parents came from.

Now, there are several possible reactions one could take to this finding, assuming it holds up, which is always tricky in social sciences. One is to find that the net benefit of immigration for libertarians is still positive. Another is that free movement of people is simply a basic civil right, consequences be damned (I'm not wholly unsympathetic to this view). A third would be to blame this entire problem in the existence of the state, which strikes me as true but irrelevant (since anarchy isn't coming any time soon, I fail to see why we shouldn't consider how our policies on immigration will effect the world as it currently is).

But what is unacceptable is to just sweep aside concerns over the cultural and political effects of immigration as simple racism. What this study shows us is that it really does matter who constitutes the voting public, and that immigration could easily change the beliefs of the people in ways libertarians will find discomforting.


Say No to Email Taxes

Today's new tax proposal comes from the British Prospect magazine:

Internet service providers (ISPs) have proposed price mechanisms to control it, but users objected. The time has come for a public sector remedy: a tax, perhaps no more than 2p, or 3c, on every email sent.

There's something strange about this argument. Here we have someone admitting that public opposition killed the private proposal to charge for email. Presumably this is because they thought the expense of paying an email charge was greater than the cost of dealing with spam. What does government involvement change about that calculation? Nothing. So why should the result be any different?

I also get incredibly annoyed at this argument:

How much would it cost? An average employee might send 100 emails a day. At 2p or 3c, the tax would be £2 or $3, less than a large caramel macchiato.

It's very common to compare some tax or cost to a cup of coffee a day, as if to make the point that it's completely trivial. But it isn't at all. For someone who works a full year, that's $750. Sure it's a 'cup of coffee', but guess what? I love vanilla lattes and almost never drink them because I can't afford them. Now you're going to tell me that emails will become as unaffordable to me as coffee. Great.

Then there's what the author wants to do with the revenue:

Above all, an email tax could safeguard the future of the internet itself. Peer-to-peer data transfers, video streaming and voice services like Skype demand ever greater bandwidth. When new capacity is needed, part of the tax proceeds could be used for investment.

Now this makes no sense, right? Suppose, as I have no reason to doubt, Skype and video streaming are what are causing internet bandwidth problems. Even if you accept this is a reason for government investment (rather than, say, abolishing net neutrality regulation), wouldn't you want to fund this investment from a tax on Skype, which is causing the problem in the first place?

As a libertarian-leaning fellow, I'm temperamentally opposed to new taxes in general, but this seems like an uncommonly bad proposal, even among tax hike initiatives.


Property Rights are Orwellian?

I'm having trouble working up outrage in defense of the civil right to noisy sex:

Yes, in modern-day Britain even the decibels of our sexual moaning can become the subject of a police investigation.

At the end of April, Caroline Cartwright, a 48-year-old housewife from Wearside in the north east of England, was remanded in custody for having "excessively noisy sex." The cops took her in after neighbors complained of hearing her "shouting and groaning" and her "bed banging against the wall of her home."

Now, if you were to say this is an inefficient use of resources because the cost of litigating are excessively high, that I understand. If you claim the ASBO procedures don't respect people's rights and circumvent good legal procedure, I'll agree with that too (not that I know all that much about it.)

But from a purely (non-anarchist) libertarian perspective, I'm not seeing much of a problem here. Most classically liberal people I know have great respect for the common law, and for handling matters through courts rather than through legislation. But isn't nuisance one of the oldest torts in existence, and hasn't the common law long held that excessive noise is a nuisance and abrogation of private property rights?

This is precisely the sort of issue which should be handled through local norms and practice (and, ideally of course, private property.) But it isn't 'Orwellian' for different communities to settle on different standards. Some may choose a free-for-all of blaring music and shouting sex. Others may choose to respect people's rights to quietly enjoy their own property. Neither is more libertarian than the other, though one may be more libertine.


On Small Externalities

Megan McArdle, one of my favorite economics writers, makes this rather odd statement on whether or not a small (say, $0.40) gasoline tax is worth the trouble:

It did take a lot of increase to change driving behavior, which is why in Europe, taxes can account for as much as 90% of the price of a liter of gas. There's a plausible argument that a 40 cent tax won't do much to change driving habits. But then, why have the 40 cent tax at all?

Is this really an issue? The reason to impose a Pigouvian tax is to correct an externality. I'm no expert on carbon taxes, so I'll outsource to wikipedia

Many estimates of aggregate net economic costs of damages and benefits from climate change across the globe, the social cost of carbon (SCC), expressed in terms of future net benefits and costs that are discounted to the present, are now available. Peer-reviewed estimates of the SCC for 2005 have an average value of US$43 per tonne of carbon (tC) (i.e., US$12 per tonne of carbon dioxide) but the range around this mean is large. For example, in a survey of 100 estimates, the values ran from US$–10 per tonne of carbon (US$–3 per tonne of carbon dioxide) up to US$350/tC (US$95 per tonne of carbon dioxide.)
[. . .]
A tax of $100 per ton of CO2 translates to a tax of $0.978 per gallon of motor gasoline.

Let's take the numbers here as given (since I know little about it). It would seem the maximum optimal tax is about $1/gallon (Greg Mankiw would approve). Megan is probably right: This wouldn't reduce driving all that much. But what I don't understand is why that's a problem. If the optimal tax is low, that means precisely that behavior shouldn't change after a tax is imposed, because the externality is not high. Now, maybe you disagree with the scientists and economists and think the external cost of carbon is higher. But if you agree with the calculations, well, they are what they are.

The failure of a hypothetical carbon tax to raise transportation costs to European levels or to slam Americans into higher density living isn't a failure of Pigouvian taxation. It's a recognition of the underlying economics; namely, from an economics point of view, even if you follow the IPCC recommendations (as did the Stern report), there's little justification to be found in global wamring for stratospheric energy prices.


Bill Simmons' Bizarre Statistics

I don't much care for Bill Simmons' columns, and this week's (HT: Newmark's Door) column reminds me why:

Q: Why won't you understand shooting percentages? 33 percent from beyond the arc is the equivalent of 50 percent from within. If a guy shot 50 percent from the field, would you be killing him for shooting? Of course not. You obviously realize how stupid that would be. Yet that's what you've been doing -- FOR YEARS -- with your mind-boggling argument against 3-point shooting unless the guy can hit 75 percent of his 3s. Just think about it for a couple of seconds. Please ... we are begging you.
-- Nick, New York

SG: Dozens of readers e-mailed me Nick's same stupid argument in a similarly condescending way, which is what makes the following so much fun: I'm not stupid, YOU'RE STUPID. That 33/50 logic only makes sense in a professional basketball league in which they aren't calling fouls and you aren't allowed to pass to a teammate ... which, as far as I can tell, doesn't currently exist.

Let's say that one player attempts 12 3-pointers and makes four (for 12 points). His teammate attempts 12 2-pointers and makes six, but during that time -- because he's not standing 25 feet away jacking up 3s like an idiot -- he also draws three fouls on his defender, creates two assists for teammates, makes three of four free throws, turns the ball over once, and misses one layup that gets tapped in by a teammate (we'll call it 19 points). You're telling me those two scenarios are equal?

I don't disagree with his point that you can't just compare shooting percentages in a naive way like the emailer suggested. But his numbers are senseless, for a number of reasons.

Simmons conflates two different actions: "Going inside" and "shooting a two point shot" are not the same thing. If you're looking at shooting the ball, then you've already gone through a great deal of action, and either you have to do that on the inside and outside, or for neither. For some reason, he's willing to allow his hypothetical interior player taking twelve shots to also get fouls and passes, but the hypothetical perimeter player isn't allowed to find someone cutting to the basket, since his only "action" seems to be jacking up twelve 3-pointers.

He also double-counts points in an irrational way. Consider his "two assists for teammates". If one of those is a kick out to the perimeter, then surely this isn't a knock against using a three-point shot as a weapon. And if it is to another interior player, then you can't count the same "shot" twice, both as an assist and the shot itself, which seems to be what he's doing.

Like I said, I'm completely willing to believe that interior shots are underrated, for a variety of reasons (rebounding, fouls, etc.). I bet it's already been done (Kyle surely knows more about this than me.) But Simmons' argument is fairly nonsensical, and he manages to be amazingly condescending about it as well. Not an appealing combination.


Shortages are Bad

When I was a teaching assistant for introductory microeconomics, one of the main lessons I really tried to impress on the students was the wastefulness of shortages caused by price controls. Lots of issues are controversial in economics, but the wastefulness and pure social loss of shortages are not one of them. Usually the students understand this quite well.

And then I read articles like this [HT: Instapundit], and I despair:

I spent last week staring at parking meters. And wondering if I was witnessing the beginnings of a boycott.

Boycott is probably too strong a term. Quiet rebellion may be more like it.

Whatever the word, on Wednesday at 10:30 a.m. there were at least 10 open parking meters down one short block of Clark Street next to Lincoln Park.

At noon in Wicker Park, where Milwaukee Avenue is usually packed with parked cars, there were open meters waiting.

And at 2 p.m. around the Sheraton Hotel on Columbus Drive, a place where normally you can't crowbar your car into a space, there were at least three or four parking spaces. What's up with this?

What's up is that a month ago, when the City of Chicago privatized parking meters, rates were immediately jacked way up, and you now have to feed 28 quarters into the meter to park a car in the Loop for two hours. In exchange for a 75-year lease, the city got $1.2 billion to help plug its budget holes.

Look, this is a good thing. When the city privatized the meters, then the price for parking went to something resembling a market-clearing rate. And what happened? Well (surprise!) there are no longer chronic shortages of parking spaces. Imagine!

What's exasperating in this article is the idea that the optimum quantity of open parking spaces is zero. That's rubbish of the first order. Where the Sun-Times sees a boycott, I see a market. I see the opportunity to park in front of the Sheridan, rather than the extraordinary inefficiency of 100% occupancy. We don't say it's a "boycott" of milk if the grocery store sets prices above zero and so there is actually an inventory of milk present. Why should it be different with parking spaces?

People think of free parking as a God-given right and costless. It is neither. While I would prefer fully-privatized ownership of parking spaces, competitively set meter rates would actually be a reasonable close substitute. And the cost of "free" parking is enormous. There's a wonderful book on this topic.

Think of all the time you have to circle for thirty minutes to find a place to park. Think of all the traffic that consists solely of people in the endless hunt for the perfect spot. These are real costs. Just because they aren't monetized doesn't mean they don't exist.

I'm sympathetic to people who think that allowing legitimate road pricing just gives the government more revenue[*]. But there is a name for these people, even those that call themselves libertarians. The word is socialist. And it's no wonder this kind of socialism fails spectacularly.

*I actually don't necessarily agree (as I think other mechanisms determine the overall size of government), and I also think that the deadweight loss of our "free" roads and parking is so enormous that I'd deal with it if the government gets slightly bigger in exchange for real pricing. Congestion is an abomination.


Cloning is not Replication

This is a bit astray from the economics I usually talk about here, but I just wanted to get something off my chest. I was reading Overcoming Bias today and ran across this passage in the comments, in a discussion of cryonics:

Yes, if you value your own life highly enough, if you have enough money, cryonics can make sense - despite the low probability of success. What I don't get is why anyone would value their own life that highly. Why not preserve enough to make a clone of yourself - and then give the clone a similar education? Are the "random" developmental details of your life *that* important - compared to the genes (in your DNA) and the memes - which can be acquired again - or better, replaced with more modern versions?

What irritates me about this is the assumption that a clone who shares the same "memes" and DNA as me would be as good as me, and that it would be no loss to replace me with it. This is, of course, nonsense. Consider the case of identical twins, who are every bit as much of a "clone" as what is being discussed here. The logic of the argument above is that a twin should be indifferent between living and dying, because after all, their genes will be propagated anyway. But no one believes this.

I take this a touch personally, because I'm an identical twin myself. And it's just stupidity to claim that somehow it'd be just swell if I dropped dead tomorrow because my DNA, which is just that awesome, would survive.

People act as if genetic clones are something mysterious. They're not; I have one already. And if every time people replaced the word "clone" with "identical twin", we'd have much more sensible discussions on these topics.


Rising Inequality as a Statistical Mirage?

I don't much care about rising inequality, but for a lot of people, it's a very important issue. And even if people disagree on the causes or the necessary policy responses (if any), everyone knows that inequality has exploded over the last 25 years or so, right?

Well, maybe not. Here's a fascinating new paper about inequality in America. From the abstract:

I show that from 1980 to 2000, college graduates have increasingly concentrated in metropolitan areas that are characterized by a high cost of housing. This implies that college graduates are increasingly exposed to a high cost of living and that the relative increase in their real wage may be smaller than the relative increase in their nominal wage. [. . .] I find that half of the documented increase in the return to college between 1980 and 2000 disappears when I use real wages. [. . . ]The empirical evidence indicates that relative demand shifts are more important than relative supply shifts, suggesting that the increase in well-being inequality between 1980 and 2000 is smaller than the increase in nominal wage inequality.

What's going on here? Well, it turns out that while it is true that the rich have been getting richer in nominal terms at a faster rate, much of that extra income is eaten up in higher rent.

This is not the only paper arguing that inequality may not have increased all that much. They are only looking at housing costs, but other goods show the same property. From a recent working paper:

We revisit the distributional consequences of increased imports from China by looking at the compositional differences in the basket of goods consumed by the poor and the rich in America. Using household data on non-durable consumption between 1994 and 2005 we document that much of the rise of income inequality has been offset by a relative decline in the price index of the poor.

Both papers are worth a read. I'm not claiming they are the end-all of the discussion on inequality, or that the issue is now settled. But it may very well have been the case that much of the increase in inequality is a statistical fiction, an artifact of how we collect and aggregate data.


One Decade's Time

In 1999, federal outlays were $1.70 trillion.

In 2009, we have a $1.75 trillion deficit.

Have a nice day.


Democrats against Democracy

Here's an excerpt from a letter which appeared in the Washington Post today regarding the Orwellian-named Employee Free Choice Act under consideration in Congress:

The problem is that the election process overseen by the National Labor Relations Board has become drawn out and acrimonious, with management campaigning fiercely to deter unionization, sometimes to the extent of violating labor laws. Union sympathizers are routinely threatened or even fired, and they have little effective recourse under the law. Even when workers overcome this pressure and vote for a union, they are unable to obtain contracts one-third of the time due to management resistance.

To remedy this situation, the Congress is considering the Employee Free Choice Act. This act would accomplish three things: It would give workers the choice of using majority sign-up-- a simple, established procedure in which workers sign cards to indicate their support for a union – or staging an NLRB election; it triples damages for employers who fire union supporters or break other labor laws; and it creates a process to ensure that newly unionized employees have a fair shot at obtaining a first contract by calling for arbitration after 120 days of unsuccessful bargaining

Now, generally speaking, I try to think the best of my political opponents, since I tend to think almost all political ideas have some merit. But not this. Let's look at a few of the "best" parts of the letter.

The problem is that the election process overseen by the National Labor Relations Board has become drawn out and acrimonious, with management campaigning fiercely to deter unionization

Management campaigning "fiercely" against unionization? The horror! To be fair, the letter writers then go on to complain that some of the campaigning violates the law. One can fairly ask, though, the extent we, as an allegedly free society, want to regulate the speech employers are allowed.

But what's truly crazy is the idea that signing cards rather than elections is going to lead to a more accurate representation of employee preferences. Look, if anyone truly believes that, I have a counter proposal: Why not allow employers to ban unions after 50%+1 sign cards saying they don't want unions? If card check is a legitimate method to get at preferences, this clearly is acceptable. So how about it: Let's have a system where your boss calls you into his office and asks you to sign the union-banning card. And, gosh, I do think employee evaluation season is coming up . . .

Better yet, if we're going to follow the principle that signing cards represents preferences, and that's it's perfectly OK if only one side has this privilege, why not allow it in the United States in general? From now on, I propose that once 50%+1 of registered voters can be persuaded to sign a card, the Republican candidate for president becomes the winner. After all, it saves us the time and expense of acrimonious elections.

Now, as a skeptic of democracy, I don't necessarily think weird alternatives to elections are always wrong. But at least I have the balls to admit it. Would that the leftwing economists here, fed up with the annoyance of democracy leading to policies they don't like and proposing to do away with the roadblock of elections, would show the same courage.


There's More to Economics than Macro

Gregory Clark calls out economists as failures in an interesting piece over at the Atlantic's business section:

The debate about the bank bailout, and the stimulus package, has all revolved around issues that are entirely at the level of Econ 1. What is the multiplier from government spending? Does government spending crowd out private spending? How quickly can you increase government spending? If you got a A in college in Econ 1 you are an expert in this debate: fully an equal of Summers and Geithner.

The bailout debate has also been conducted in terms that would be quite familiar to economists in the 1920s and 1930s. There has essentially been no advance in our knowledge in 80 years.

I find this an extremely frustrating line of argument. Look, you'll get no arguments from me that modern macro has not been a beacon of light in the financial turmoil. But the idea that somehow the failure to predict, or solve, banking crises somehow discredits all of economics, from industrial organization to labor and everything else, is bizarre. Really, Greg, do you think your excellent book on economic history has been revealed as rubbish because GDP might decline 5%? Nonsense.

Or, as Will Wilkinson (who has been on fire lately) put it: It's macro that's embarrassing.