Posts Tagged ‘macro’

Olivier Blanchard is a cool guy

Friday, April 2nd, 2010

Olivier Blanchard, currently chief economist at the IMF, gave a talk at Georgetown on Wednesday 3/24. So, of course, I went to see him, since occasionally listening to awesome people talk is one of the fringe benefits of being a Georgetown student. His talk was titled “Rethinking Macroeconomic Policy”, which as interesting to me because I rarely even think about macroeconomic policy, let alone rethink it. I’m going to summarize what I found most interesting and prescient in what he said.

Blanchard noted that monetary policy in the past has focused on one target and one instrument. He said that, in the future, monetary policy should instead have many targets and many instruments. His reasoning was that, while in this past crisis there was a housing boom, there wasn’t an overall boom, so raising the federal funds rate may have slowed the housing sector, but it would have hurt other sectors. He also said that the future of central banks should be that they are 1) transparent about objectives, and 2) flexible as to their instruments.

Another thing I really like was an example of what Blanchard called a “schizophrenia” in economic thinking. When economists discuss fiscal policy, there is usually mention of automatic stabilizers, and how they are better than active policies because of the time lag of the political process. But, Blanchard noted, there is no talk about how to design better automatic stabilizers. It’s like the progressive tax system and social services, exactly the way they exist now, just so happen to be optimal as automatic stabilizers. I think this is a really good point — from first-hand experience, I can vouch that Greg Mankiw’s favorite textbook glosses over automatic stabilizers in this exact way.

Blanchard’s thoughts seem to be consistent with my view that economics should become more of an engineering discipline than it currently is.

High point

Saturday, January 23rd, 2010

Yesterday was unequivocally the high point in my graduate school career to date. The big event was our first Micro 2 class, in game theory. Micro was the only class we hadn’t had yet, and my expectations were high: Econometrics is typically dry and exceedingly difficult, and our Macro class is shaping up to be intense, courtesy of our new professor. I was hoping that Micro could be the class to keep me sane this semester.

Luca Anderlini is our professor for Micro. He’s the new Director of Graduate Studies too, so my performance in Micro serves the dual role of not failing out of the program and not embarrassing myself in front of the guy running things. I had seen him present a paper last semester, and this gave me high hopes. He had a sense of humor, an entertaining manner of lecturing, and a way of making the topics at hand seem relevant.

Let me cut to the chase: my hopes were realized. The lecture was interesting, but most important, something crucial happened, something I have been waiting my entire time at Georgetown to hear someone admit. Before Professor Anderlini got into the meat of the lecture, he made a caveat. He expressed to us, in no uncertain terms, that math is not the point of what we’re doing. While, he explained, he enjoys math a great deal, and even considered a career in math, he stressed that math is a just a tool to clarify our thinking. Anyone can reason, he argued, and make a convincing case. The key is that math is a rigorous formal language to express our ideas,  so that we can make sure we are not just deluding ourselves with words. Again, math is not the end, it is only the means.

That was the breath of fresh air I needed.

Grad school as constrained optimization

Sunday, December 6th, 2009

I had a thought while sitting in class the other day. (This is, in fact, less common than you might imagine.) In loose terms, graduate school can be cast as a constrained optimization problem. Students have preferences over their classes, so that they prefer to spend time on the topics they enjoy learning about. I for one used to like microeconomics, but now I am leaning toward macro, for reasons to be discussed in the future. Students also prefer not to fail. So, other things equal, they will spend more time on classes that they’re doing poorly at.

I posit that, for whatever reason, not liking a class and not doing well in a class are correlated. For students who are sufficiently intelligent, and thus not close to failing any one of their classes, this doesn’t matter. They can spend the most time on the classes they like most. Those are good times.

But if you are up against the failure constraint, you will tend to be spending less time on the classes you like and more time on the classes you need to make sure you pass. It is all the worse if the classes you are doing poorly at are also those you do not enjoy very much. (This is probably the case: see above). Those are not very good times.

Here’s hoping my constrained optimization problem has a feasible solution.


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This work is licensed under a Creative Commons Attribution 3.0 Unported.