John Cochrane
@JohnHCochrane
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The Grumpy Economist. Senior Fellow, Hoover Institution. Opinions are mine alone and do not represent the position of the Hoover Institution or Stanford Univ.
Palo Alto, CA
Joined July 2012
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It surely must be tempting for Nvidia, Microsoft, Meta and Apple to simply say "we're exiting your dumb market" and turn off every computer in Europe.
What if instead of just suing American tech companies they built their own
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When a politician uses "the derivative is worth less than the underlying" as his go-to metaphor, you know 1) he writes his own speeches 2) he means it that he treats people as equals, not little people for the self-appointed elite to govern.
To me, this is
@JMilei
's best speech so far, every sentence is a memorable quote!
I cut and translated it so the international audience can enjoy our Philosopher-President too 🇦🇷
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Who would have thought that the tousle-haired president of Argentina would be the best YouTube economics explainer of them all? The series is great fun.
Technological progress and population growth.
About: Milei, Argentina, economic growth, techno-optimists, techno-phobics, human capital.
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A BMW driver's median net wealth is $1,000,000. People who take the bus have median net wealth of $1,000. Subsidize BMW ownership so people can build generational wealth!
@JohnHCochrane
Per census bureau a homeowner’s median net wealth is $269,100 compared with 3,036 for renters. Building wealth through necessary housing expenses is good for households with little excees cash to invest.
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The single family home is a terrible investment. Low return, high leverage, illiquid, idiosyncratic risk, value depends on local politics, home value falls with local economy and your job. Build "generational wealth" in stocks, which are far more "accessible." Stop subsidizing!
I hope some conservative economists will step up and explain to the Heritage Foundation (and the Trump administration in waiting) that in fact excessive government regulation can be very harmful and costly.
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A tragedy. And a warning to the rest of us. Growth is not automatic, an effortless trend. Every step of the way is hard work. Growth can stop.
Italy’s 🇮🇹 dismal multi-decade economic performance 📉
Cc:
@zingales
@Noahpinion
@RanaForoohar
@sullydish
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@RichardHanania
This is insane, off by many zeros. Ukraine aid request $24 billion. (Total so far $100 billion). Social security (government current transfer payments 2021): $4 Trillion. $4,000 billion. Per year. 600,000 homeless x $1 million = $600 billion. Transparent false # weaken your case.
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The Grumpy Economist: How do interest rates lower inflation?
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This is an excellent distillation of what's going wrong at universities. It's admirable to cover the important points so clearly and concisely. And to end...the problem is politicization. Especially nice to see on usually leftish CNN.
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The Grumpy Economist: Defining inequality so it can't be fixed. Gramm and Early in WSJ
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US universities' self-destruction, from the Economist
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The most chilling part, to me: The NIH retaliates against NYU dean Bar-Sagi for even thinking about hiring Sabatini. Government supported research has a big downside, it eliminates the safety valve of competition.
One scientist said the depiction of Sabatini's lab in the Whitehead report is "alternate reality," and the characterization of Sabatini as lascivious and retaliatory "deeply insane." Another said: "They have the wrong guy."
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Great news for economics as a discipline: Papers carefully reexamine data, methods, and results; end up questioning the widening inequality narrative; are published in the top journals; by people who keep jobs. Replication, not prizes wins. Try this, other social sciences.
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Well, that should help out with inflation and housing costs.
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This is a fascinating graph. A lot of fertility decline is delay.
Was curious about fertility demographics people have been discussing, so pulled some data myself this morning.
Even though I knew it, striking how much of the childbirth change is from age 15-25.
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I went back to Kydland and Prescott (1977) for a literature section. I found this golden nugget. Plus ça change...
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With trepidation, some thoughts on how to increase the number of women in economics
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The Grumpy Economist: The cancel culture twitter mob comes to economics
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Price controls, "greed," collusion.. my that was fast. It usually takes a few years of inflation to bring out classic fallacies.
The “Ackshually, price controls are good” take we’ve been waiting for
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Simple. Chicago in the 80s- 90s was wonderful. Great ideas, serious economics, great faculty and students. The supposedly harsh culture is really egalitarian. Ideas matter, not titles.
@UChicago
I wonder what
@CliffordAsness
@JohnHCochrane
@anup_malani
@m_de_nardi
and others who experienced those years think. (I am aware of the selection bias, others welcome).
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People often ask me for recommendations of introductory economics books. But of course I don't read them so I don't know. A great list here. And a clear view of how badly economics is usually taught and how it might be better.
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Great story. And thread. Price controls beget shortages. And creative evasion!
In Argentina, the price of a 500g box of Frosted Flakes is controlled. At a grocery store recently, buyers found signs apologizing that the cereal was out of stock due to delivery problems. Amazingly, the shelves were full of 510g boxes, the price of which was not controlled.
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@ojblanchard1
An unusual view from Blanchard. I thought the one thing uniting macro since Keynes is aggregate demand. Whether money chasing goods, fiscal stimulus, MMT or FTPL, inflation is aggregate demand; not distributional conflicts, relative prices, unions vs. management, and so forth.
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The only thing that really matters, economics edition.
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Adieu Phillips curve. Amazing that all the discussion of inflation, especially in and around the Fed, centers on the labor market.
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The Grumpy Economist: How much do higher interest rates help to lower inflation? Not much. Classic estimates from Valerie Ramey and commentary.
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Simply amazing. CEA covers 80 years of inflation without mentioning monetary or fiscal policy. (One nod to Volker and high rates. Period.) All external shocks. Not our fault! The dog ate it!
Worried about inflation? White House take is here: Sadly, it ignores almost everything we have learned since the 1970s. And in doing so, it completely misses the boat on why today's $ has depreciated in value by 95% since WW2.
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A must-read.
Happy official pub day to A Monetary and Fiscal History of Latin America, 1960–2017: A major work that brings together dozens of leading economists to explore the economic performance of the 10 largest countries in South America and of Mexico.
@TimTkehoe
@HellerHurwicz
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One solid piece of behavioral economics: Always say "discount," not "surcharge!"
(This was inspired by the Wendy's "debate" where you had people saying that it is fine to give discounts in slow periods but unfair to have surcharges in busy periods--when those two are identical pricing policies just framed differently.)
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Larry Summers is on a roll of common-sense economics.
Judged purely in terms of economic impacts, the Administration’s decision to extend student loan moratorium is highly problematic.
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Super thread from Larry Summers, on how "hipster Brandeisian antitrust" is a terrible way to address inflation, "science denial." Great economists in the admin, where are you?
The emerging claim that antitrust can combat inflation reflects “science denial”. There are many areas like transitory inflation where serious economists differ. Antitrust as an anti-inflation strategy is not one of them.
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The right to transact anonymously will one day, when it is gone, be recognized as fundamental to political freedom.
We now know the federal government flagged terms like “MAGA” and “TRUMP,” to financial institutions if Americans completed transactions using those terms.
What was also flagged? If you bought a religious text, like a BIBLE, or shopped at Bass Pro Shop.
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Fantastic thread. Much climate policy now consists of moving carbon offshore, out of city, out of state, and claim virtue. Wood also has horrible particulate and other pollution.
9/ Not only are they going back to the future, but they also claim doing so is carbon neutral (spoiler alert: it isn’t, not even close). Nearly 40% of Europe’s so-called renewable energy is currently obtained by combusting wood, much of it coming from forests in the US.
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" we invented multiple effective covid vaccines in mere days or weeks, but then simply sat on those vaccines for a year, ticking off boxes called “Phase I,” “Phase II,” etc. while civilization hung in the balance." Then woke up with no plan to distribute said vaccines.
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The Grumpy Economist: Pro Dollarization. Specifically in Argentina.
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A lovely one paragraph disquisition on the wisdom of federal student loans, their trillion dollar forgiveness, research grants, tax exempt status for universities and various other subsidies.
So the press conference jihadist is a PhD student named Johannah King-Slutzky (really) and this is what she's working on. Dying. Absolutely dying. Beyond parody.
@TheBabylonBee
couldn't top this if they tried.
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A beautiful example on confusing growth vs levels for your econ 1 class. China, Vietnam: ease up a bit on communism and recover.
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The Grumpy Economist: Portfolios for long-term investors
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Rent Control Rhetoric. Comments on a lovely old essay by Friedman and Stigler.
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Thoughts on the crash.
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Expectations and the neutrality of interest rates. Published. Link to free version:
Blog post:
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The Grumpy Economist: Interest rates and inflation -- part 1, looking at the graphs.
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One bright light in Davos
Milei in Davos 2024: PREVIEW
Short interview on arrival to Frankfurt.
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A powerful view of ideology in schools and universities
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Inflation and the value of money. Comments on Bolhuis, Cramer, Schulz, and Summers
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@mattyglesias
Have some appreciation for great symbolism. Zelensky's country is invaded, his compatriots are dying in the freezing cold to defend it. He will wear a suit when it's over. Putin wears suits. From friend who visited: Foreigners should wear suits, not green t-shirts!
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Great article. Short version: Tax capital, people save less until they get the same after-tax return. Less capital = less productivity = lower wages. Don't distort the decision to consume now vs. invest and consume later. Tax consumption, not rate of return.
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How inflation changes economic ideas. A little essay at the IMF
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@M_De_Nardi
A framework helps. McCloskey "rhetoric of economics," Zinsser "on writing well" and of course my "Writing tips." Do as I say not as I do. Writing is hard; take time to learn as you do math. Don't bury the lede: main result first. Think of your busy reader. Get to the point.
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5 trillion in stimulus but cheap out on tests — the one most obvious externality.
I'm appalled by this answer, in part due the the tone. But also it suggests no one is talking about doing this -- free, widely available tests -- even though many other countries are. I just do not get it.
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First job for next Secretary of State: bring US consulate visa processing up to standards of the worst DMV.
I’m quite used to the cruelty students can face when they apply for a US visa but this one broke me. We offered admission to a stellar, talented & hardworking student. After months of work and hundreds of dollars, an embassy officer saw him for 5 mins & said no. why? …
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Many people disparage politician's grasp of issues. Here is a counterexample: Beautifully concise and well-worded statement on many things wrong at the Fed.
If the Fed's going to stray from its mandate and become a political actor, advocating for certain social policies, then there’s no way it’s going to maintain its independence from the politically-accountable branches of government that are actually responsible for those topics.
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Astonishing. "we won't tolerate changes in financing conditions that are not fundamentally justified." Speech full of technocratic hubris that central bankers know "mispricing" and "fundamental" asset value. Too bad hedge funds can't hire them away to make bazillions. Oh wait..
We won’t tolerate changes in financing conditions that are not fundamentally justified and that threaten monetary policy transmission, says
@Isabel_Schnabel
at
@SorbonneParis1
. By countering fragmentation, monetary policy contributes to European unity
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Excellent analysis by Raghu Rajan. The free lunch is over.
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An amazing confession from inside the castle. And they wonder why people don't trust "science" any more.
Gratified at the outpouring of responses to this important and courageous piece by
@PatrickTBrown31
.
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Whole thread is excellent. There is no "model" vs. "real world." There are only explicit vs. implicit (and usually wrong) models. Ben Moll and co have indeed made an extraordinary contribution, worth remembering in many circumstances. Substitution!
@ben_moll
is right to take a little victory lap in a new paper with
@MSchularick
and
@GeorgZachmann
. This is based on his his work with
@BachmannRudi
,
@DBaqaee
,
@christianbaye13
,
@kuhnmo
,
@andreasloeschel
,
@APeichl
,
#KarenPittel
,
@MSchularick
. Let me explain 1/
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Short sellers have found many frauds that regulators never saw. The anti-short bias, and regs to limit shorts and prop up stock prices, lead to this kind of craziness.
A rare case where I disagree with
@balajis
. We need to increase the profit from spotting fakes, scams, hyperbole. Shorts are the market solution to what in Science is called the replication crisis. Imagine how helpful it would be if you could short a paper.
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The Grumpy Economist: Fiscal theory of the price level draft
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The Grumpy Economist: Inflation in the shadow of debt. For higher interest rates to lower inflation, there must be a fiscal tightening, in a totally standard new Keynesian model. No austerity, no lower inflation.
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@McFaul
Supply and demand. Thanks to many restrictions on energy supply, oil companies are producing all they can. If they lower prices, people will want more gas than there is. Do you want gas lines again? Rationing? When people want more of something than suppliers can make, what then?
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Save money by cutting out "bankers and middlemen." Worked out great, didn't it.
In 2010, Biden says nationalizing student loans "will save taxpayers $68 billion over the next decade"
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Building restrictions: 36% of GDP today. Climate: 5% of GDP in 2100, in worst-case scenarios. Where is the crisis?
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The Grumpy Economist: FTPL news -- discount and Economist "best books of 2023" list
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The Grumpy Economist: Heterogeneous Agent Fiscal Theory. Review of a great paper by Kaplan, Nikolakoudis, and Violante. Picture: inflation with heterogeneous (red, blue) vs. representative (orange) agents after a fiscal helicopter drop,
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Close but not quite. Allow. People and businesses (even hated "developers"). To. Build. More. Housing. (Sentences need subjects, and government building housing is not the answer.)
There’s only one solution to New York City’s housing crisis:
Build.
More.
Housing.
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It's not that easy. The major problem is not sentence structure and grammar. The major problem is organizing the argument, and explaining things clearly. The editor would have to be an economist and able to follow the argument.
@JohnHCochrane
I will never understand why more academics don’t hire professional editors prior to submitting articles for review. Doing so is a low cost option for avoiding desk rejects due to poor writing.
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The Grumpy Economist: Interest rates and inflation part 2: Losing faith in shocks and VARs.
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The Grumpy Economist: Fiscal theory update. Last beg for typos!
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@Econ_4_Everyone
Actually reading papers rather than just counting and ranking journals would help a lot too!
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Nice review of "Getting Monetary Policy Back on Track" by Tom Hogan
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What does the recent inflation and its easing teach us about inflation theories? Who gets to take victory laps?
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Supply, demand, AI, and humans at Grumpy Economist. Will I be displaced by AI?
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What possible causal connection is there from high (statutory, with lots of deductions) tax rates to greater productivity growth?
"When we had much higher tax rates in the United States in the 50s, the 60s and the early 70s. Productivity growth was more rapid than it has been in recent years," says Former Treasury Secretary
@LHSummers
.
Watch "Wall Street Week" Fridays at 6pm ET👉
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Such a sign of the times. You feel mistreated. Do you a) contact the organizers and ask for an explanation? b) jump on social media with insinuations of evil activity, stoke outrage. I can certify that a) did not happen.
I wonder why mine was the only seminar in this series that was assigned a discussant.
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@Wu_Tang_Finance
Pfizer: $3.5 billion revenue. Savings to economy and government by ending pandemic: At least $5 trillion = $5,000 billion per year. Plus 100,000s of lives. And they complain about "profit." Never has so much been bought for so many by so little.
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And the main reason it declined recently is that it was inflated away!
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@jasonfurman
Micro, individual markets, move relative prices, not inflation. "House price inflation," "energy inflation," "asset price inflation" are relative prices. All inflation is macro. Absent macro, if cars go up something else goes down.
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Monetary policy does not affect risk premiums. An interesting paper by Stefan Nagel and Zhengyang Xu at NBER
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The Grumpy Economist: The Fiscal Theory of Inflation. Two simple parables, to show how fiscal theory really picks the path of inflation, not the initial price level. The two parables summarize a lot of FTPL.
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There is a job opening at the Fed, for supervision and regulation. Who is the most qualified person on the planet to hold it -- knows how regulation works, what is not working, how to fix it, explains in clear English, not Washington insider, politically neutral? Darrell Duffie!
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The shower Laffer curve.
And this is where we saw the big win-win: there's a clear negative relationship between water pressure and consumption. More powerful showers used less water overall.
A LOVELY TINGLY SHOWER MIGHT BE *BETTER* FOR THE ENVIRONMENT THAN A WEAK DRIBBLE. I know, right?
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The Grumpy Economist: Expectations and the Neutrality of Interest Rates
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How to game income-based repayment with 10 year limit: Double tuition, double loan size. Student pays the same. School uses some extra tuition to fund kickback to student. Brilliant
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Mine too. Fiscal theory says a debt expansion without expected repayment leads to a burst of inflation, which goes away without high rates & recession; Fed softens that fact but doesn't change it. Funny how widely different models can give the same result. Tests are hard.
Its bad for form to brag, and in any event pre-mature in this case. But while I failed to predict the burst in inflation in 2021, the model that I wrote to rationalize that failure predicted a soft landing. That predictions seems to be looking pretty good right now….
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“We have a generation of central bankers who are defining themselves by their wokeness," from Larry Summers. He means international too. Kudos to Larry for speaking out. ?
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Slave owners though they were good people. What in us will the future see similarly? Blocking immigration suggests Miles Kimball. Not just a moral imperative, but top restriction lowering world GDP, >25% some estimates, raising inequality, and protecting bad governments.
Okay, this post is so good I want to quote every single line of it.
@mileskimball
argues -- passionately and convincingly! -- that it is a moral imperative for rich countries to open wide the doors of immigration. Strong endorse!
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Fiscal theory of the price level discount coupon (this time with picture)
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The covid education disaster in one graph
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The Grumpy Economist: New-Keynesian models, a puzzle of scientific socio...
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It's not the generosity of the welfare state that counts. Many there are generous. It is the willingness of the country to tackle disincentives that generosity creates. Nordic countries are pretty level headed about countering disincentives, in ways unthinkable in US so far.
"a generous welfare state makes people not want to work"
(united states is the line on the bottom)
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