China's repaying of the demographic dividend

Today the Wall St. Journal relays a report by Citigroup analysts claiming that population aging brought on by the one child policy in China could reduce annual growth by 3.25 percentage points between now and 2030. I haven't had time to verify this, but that seems like an enormous effect. But then again, fertility in China has indeed fallen a lot, from a TFR of 2.5 births per woman in 1990 to 1.7 in 2011 according to the World Bank's WDI database.

Interview with Robert Shiller

Over the weekend, the Times published this fun interview with Robert Shiller, co-winner of the 2013 Prize in economic sciences. Great quote about co-winner Eugene Fama at the end, and the philosophy of scientific disagreement.

Chetty on economics as a science

Today Harvard's Raj Chetty defends economics as a science in the NYT with specific references to modern study design and data-driven findings. The parallel he draws to population health sciences is a good one; in neither case do we have full rein to conduct randomized controlled experiments to figure out how things work. I'm not sure Janet Yellen or Nobel Laureate Paul Krugman would fully agree with Chetty that they are "theorists," which sounds as though their work is uninformed by data, but maybe his point is that things like monetary policy are a lot more like something you can't run clear tests with than topics like unemployment insurance duration or health insurance.

Contrast Chetty's summary of the literature comparing states that expanded UI duration with those that didn't, which he describes as showing what sounds like a small 1-week increase in average unemployment duration for every 10-week increase in UI limits, with Casey Mulligan's recent work on marginal tax rates. Mulligan doesn't connect his marginal tax rate series to employment effects, but the CBO uses a Frisch elasticity of 0.4 as its central value. An increase in the marginal tax rate of around 4 percentage points, which is what Mulligan finds during the Recovery Act and then again under the Affordable Care Act, might then produce a reduction in hours by about 1.6 percent, which seems large.

Statistical releases post-shutdown

I was wondering about when we'd see the September unemployment report, and the answer is next Tuesday. Blinders ... being removed!

"Generational Theft"

Well, that's a strong way of putting it, but maybe sometimes it pays to be flashy. Today in the NYT, Tom Friedman discusses his friend Stanley Druckenmiller and his recent rather strongly entitled presentation at NYU about U.S. entitlement spending and intergenerational transfers. It's good to see a blunt discussion of this, especially with the added focus on poverty among the young compared to that among the elderly, although that focus is not new. Sam Preston pointed it out in the early 1980s.

Child behavior, bedtimes, and study design

The NY Times reports on a Pediatrics article on regular bedtimes and child behavior. As you might expect, parents' self-reports of regular bedtimes is associated with better children's behavioral scores, but who knows whether it's having a regular bedtime that causes better scores, or better behavior causing the scores and the regular bedtime. Not revealed in the Times article is that the study looks at differences-in-differences or changes in these variables over time in the panel, which will remove any unchanging sources of variation. But without a clearer source of identifying variation, it's hard to accept such results reveal a causal lever.

Now there's a return on an asset

Today the Nobel Committee awarded the 2013 prize in economics to Eugene Fama, Lars Peter Hansen, and Robert Shiller, for theories of asset pricing and the generalized method of moments (GMM) estimator, which has become a standard element of the econometrics toolkit. I remember when I arrived at UC Berkeley in the late 1990s, Roger Craine, now emeritus, was interested in the finance side of macroeconomics and introduced some of these topics to our Ph.D. cohort.  Some of it made its way into my dissertation.

More recent memories are of the New Yorker's John Cassidy interviewing Eugene Fama for a piece entitled "After the Blowup" that appeared in early 2010.

Update: Over at the WSJ, Michael Casey quotes from Cassidy's piece on the topic of credit bubbles and feels Shiller's "Animal Spirits" approach seems to better capture at least recent events. In the interview, Fama explains what he means about bubbles, that in a way the term only applies in hindsight.