Update on Dec. 29
Here is Noah Smith piling on. Trump’s trade advisor, Peter Navarro, made a “rookie mistake”, according to Smith.
I have no quibble with Noah on the economics, thankfully, although I would guess Navarro more flat out lied than got this technical issue wrong.
I just think that if you are going to go around calling other guys “rookies” or prone to “silly mistakes”, then you should probably be careful to recognize that their errors might not all be piled up on the one side. In liquidity trap, protection could raise GDP by more than the reduction of the net imports achieved with the protection. It is pretty analogous with fiscal stimulus, so what is good for the goose… … means that advocates of fiscal stimulus here are also pretty dumb.
I will be less opinionated and conclusory in the New Year. But I still have a whole week to do this stuff.
A really great way to make people think Trump might actually have a point would be to present as a know-it-all novice, lacing into Trump for not getting what you condescendingly deem basic things.
Here is Matt Yglesias, comfortably in that role, in a post called Donald Trump’s trade team has based their analysis on a remarkably silly mistake. Starting out with the deep — and suddenly very popular — insight that accounting identities don’t imply causation*, he argues:
That’s written down as an equation: GDP = G + C + I + NX.
But this is an accounting procedure, not a causal theory. The accounting procedure says that government purchases are an element of GDP — higher G means higher GDP, and absolutely everyone agrees on that. But whether increasing government spending will boost or harm the economy is obviously a hot topic of political debate. A sensible high-level take would be “it depends.” It matters what you spend the money on; it matters how you raise the revenue and what the larger economic situation is.
The net exports situation is just the same. If America’s net exports grow because America becomes a fashionable tourist destination and sales of Boeing airplanes surge, then that will boost the economy. But if America’s net exports grow because new Trump-imposed taxes cause the price of imported goods to surge, then the economy is going to shrink.
It is reasonably common for people to make the kind of mistake that Ross and Navarro are making here, which is why professors generally make it a point of emphasis when introducing the GDP concept to students. Why a credentialed economist would do it in a policy paper for a presidential candidate is another matter.
That’s nice, but also untrue. The much bigger issue is whether the economy faces unemployment and liquidity trap. If it does, then protection might actually cause GDP to rise by more than the reduction of imports, contra smarty pants.
Alternatively, if the Fed is tightening into a tight labor market or other capacity constraints, then a surge of export demand might cause GDP to go up by a lot less than any associated rise of (correctly deflated) real exports. Indeed, real GDP as conventionally mismeasured, might not budge at all, although that reflects a weakness of the GDP measurement, which systematically misses effects associated with changes of the terms of trade.
Incidentally, any liberal economists still looking for fiscal stimulus (the “right kind” of course) are making the same “silly mistake” as Trump.
You know, it takes a real smug liberal to get me to think, hey wait a minute, maybe Trump might actually have a point!
Of course, Trump does not, among other reasons because we are for now out of liquidity trap and in the region of full employment. It has nothing to do with Yglesias’ smart ass argument, is all.
* Accounting identities don’t imply direction of causation, but they sure as hell imply co-determination.
Virginia Postrel is very open-minded. Although she converted from Christianity to Judaism, she does not mind being wished Merry Christmas. Nor should Christians resent Happy Holidays.
As long as you believe in some sort of sky fairy, we can all easily get along! Freest country in the world.
As part of our War on Christmas, the lapsed Jew and the really lapsed Catholic here on Beinn Bhiorach got a really shitty tree this year. That’ll show em.
But you may think I am too hard on religious people. Some of them insist that atheism is itself a religion. Sort of an, I know you are but what am I?
I don’t agree, personally. Not believing in something for which there is no evidence is not the same as insisting on the existence of something for which there is no evidence. One is common sense and the other is stupid.
Also, there is no need for the word atheist. Why should we allow you religious nutbars to define us based on just one chosen ridiculous notion we sensibly dismiss. The number of stupid ideas in the universe is infinite.
On the other hand, we atheists do occasionally do missionary work. When my 5-year-old boy turns 16, I have to buy him a drab black suit with a black tie and send him off to Alabama, Pakistan or the Israeli settlements in the West Bank to have him knock on people’s doors and ask them if they have heard the good news about how there is no god.
No sense of aesthetics
One of Slate’s critics says that Billions is so laughably bad it is great. The main problem is that they mix up when they are being profound. But the show takes itself so seriously, it is hard not to root for it. Plus the two-dimensional characters suck you in.
I have no faith in my own sense of aesthetics and cannot follow the plot in even a Bond movie, even the Roger Moore ones. So I assign no weight to my opinion here, but reading the critique I could not tell if the critic is berating the show or the situation the show is meant to depict. It seems like she wants long/short equity traders to be philosophers and poets. But maybe the issue is that they have other skills?
I am an utterly uncritical fan. It is hard to pick among all the great scenes, but my favorite one so far is where the head of HR goes over to the house of a guy who recently resigned and says that if he does not fly right he will end up writing a blog.
The plot is implausible and the characters are exaggerated, as if Shakespeare does not do as much. But it is kind of like Mad Men in reveling in getting the fun, unimportant details right. If I whale on you after the close, you are screwed. During market hours, don’t worry.