Saturday, July 11, 2009

NBER Summer Conference

So, I was at the 2009 Econ shindig. There were literally a hundred presentations, and discussions, and the variance of findings very broad.

My summary in brief (see papers here):
  • On average, economists are thinner than average. I'm not sure why, or if that's good for economists. Financial economists are also about 85% male, and while most practice in the US, most are from Europe and Asi. Most importantly for me: Everyone in finance speaks English!

  • discussions are very honest and thorough about things like logic, innovation, and relation to the literature.

  • discussions are silent on irrelevancies. If you estimate something very complicated on something that 90% of he audience finds irrelevant, those 10% who find it interesting will mention ways to adjust your method. The 90% who find it irrelevant just keep their mouths shut. This encourages irrelevancies (eg, GMM, looking at various instruments)

  • there was a strong feeling that the Federal Reserve was in danger of losing its independence. That the Federal Government was basically lost all fiscal discipline, and so anticipating future Fed monetizations, was a common theme. If hyperinflation due to fiscal irrationality comes, it will be with a large number of those seeing it before the fact, very unlike the recent crisis where very few in 2006 warned of a housing price collapse.

  • There were a lot of papers about how to account for fat tail events. These were called 'nuclear' or crisis events under the Barro-Reitz framework (aka Peso problems). If you listen to Nassim Taleb you would think economists were unaware of fat tails, but if you went to this conference, you would hear a lot about what Taleb calls 'Black Swans'. This is why Taleb hates academics, because they don't see his big idea as 'new'.

  • Calibration exercises, which are true by definition, have too much weight. Either demonstrate out-of-sample usefulness or don't mention it. I find these totally useless empirically, but that's because my game is to make money for investors, in contrast to academics, which is to publish papers useful for future publications.


Anonymous said...

I guess hyperinflation isn't in the cards. Good to know.

Anonymous said...

Are implying that, since everyone is worried about hyperinflation, we are at more risk for deflation?

Anonymous said...

Isn't setting inflationary expectation the first step in getting inflation?

Anonymous said...

Just snarking about economists missing the housing bubble. But a wage price spiral with declining wages would be something to see.