Thursday, April 30, 2015

Bernanke on the Taylor rule

The first two-thirds of my yearlong macro sequence in grad school was team-taught. Half of the classes were taught by Bob Hall. Hall is brilliant, but quirky, and overall he was not a very inspiring teacher. He shared the duties with a young fellow named Ben Bernanke. Bernanke was rigorous, clear, and practical-minded. An excellent teacher. These qualities are still apparent in his post-Fed Chair gig as a blogger. His latest post, on the Taylor rule, is exemplary. Sure, he's not a disinterested party when it comes to assessing recent Federal Reserve policy. But he is clear, careful, and fair. There are two main takeaways for me. First, Bernanke does a splendid job distinguishing between the Taylor rule as a statistical description of how the Fed has set policy in the past, and the Taylor rule as a potential normative guideline for setting optimal Fed policy now and in the future. Second, he shows that the normative advice that follows from applying the Taylor rule to current economic conditions is rather sensitive to certain key assumptions and parameters, on which reasonable people can disagree. For Bernanke, a rigid rule cannot replace considered discretion on the part of Fed policy makers.

Wednesday, April 29, 2015

Red Hills

In retrospect I would have enjoyed my visit to the Red Hills a lot more had I better calibrated my expectations. Anticipating a vivid display of unusual spring wildflowers, I instead encountered a rugged, rather hostile terrain, dominated by a monoculture of pine and buckbrush, with a fair-to-middling bloom of poppies and clarkia, in pockets here and there. What I should have appreciated more was the stark beauty of that terrain... I see that now in my photos. Tips to visitors: (1) The trails are poorly marked. Bring a map and compass, and plenty of water. (2) It was 90 degrees on an April afternoon. Did I say bring plenty of water? I did, and I was glad for it.

Very big trees

I played hooky Monday and Tuesday and spent a night camping at Calaveras Big Trees State Park, and did some hiking in the general vicinity. My main objective was actually to see the spring wildflowers in the foothills... in particular the Red Hills Area of Critical Environmental Concern (!), a Bureau of Land Management property near Chinese Camp, CA. More about that in the next post. Meanwhile, some highlights from Big Trees...

Calaveras Big Trees SP preserves a couple of fine stands of giant sequoia. After I arrived in the late afternoon I took the longer hike to the more pristine South Grove, home to the park's largest sequoias. I had the grove entirely to myself. Ditto for my early morning stroll through the more accessible North Grove, adjacent to the park's headquarters and visitors center. In other words: If you have some desire to experience these extraordinary places in complete solitude, go on a weekday off season. I would not characterize myself as a spiritual person, but wonderment is something I am capable of, and you get it here.

Calaveras was privately owned for a period, and the dudes who ran the operation committed some "atrocities." They felled one of the largest specimens and made the resulting log into a bar and bowling alley. When you see the stump today there is some wonderment at how much trouble they went to in the mid 1800s to cut down such a behemoth. Essentially they attacked the thing with an auger, repeatedly drilling holes until they had hollowed out a slice, and it toppled.

Another giant(ess), the Mother of the Forest, some 2500+ years old, was stripped of its bark, which killed the tree in short order. The corpse is still standing. The bark was shipped around to various exhibitions, where it was reassembled to provide onlookers some idea of the enormity of these trees. Such pillaging is unimaginable to us now, but I have mixed feelings. Humans are collectively, for better or worse, the planet's stewards, and they can have no desire to steward what they cannot imagine or conceive. Aside from pure preservation from extinction, this is our best defense of zoos. If a traveling exhibition inspired people to value these trees and their habitat, well, perhaps the Mother died not in vain.

I have never seen a photo of a sequoia that does justice to the experience of the mammoth ancient thing in person, so I'll stick to the sideshow. Late afternoon and early morning brought slanting light, which illuminated the blossoming and leafing dogwoods against the dark hulks of the big trees. The bugs were out (photo 3), and with them the birds.

They still have asparagus in Florida...

Asparagus season may be over in California, but it's still thriving in Florida, where the spears grow a lot bigger. Here's Dad standing next to this year's crop... hoping to win first prize at the Marion County Fair...

Pessimism is the new optimism

Eduardo Porter on inequality and the frayed safety net:
That is, perhaps, the best reason for hope. The silver lining in these dismal, if abstract, statistics, is that they portend such a dysfunctional future that our broken political system might finally be forced to come together to prevent it.

Sunday, April 26, 2015

The last asparagus of spring

Asparagus is my favorite vegetable, and most years we have excellent organic asparagus into early summer and beyond at the local farmers' market. Not so this year. Maybe it's the drought, or maybe the mild winter. I'm thinking the latter, considering that we already have organic California zucchini appearing at the market. Not a bad consolation.

Very funny

The President has excellent writers... only a few of the jokes fell flat. But stand-up is half jokes, half delivery. And his delivery is near-professional quality. Not to mention a very nice assist from Mr. Key. How Barack kept a straight face through that little duet is beyond me...

Saturday, April 25, 2015

Hunters Point...

... is a scruffy industrial and low-income section of rapidly gentrifying San Francisco. The old naval shipyard barracks at the Bay's edge are now home to one of the country's largest artists' communities. We checked out their open studios today. I wasn't quite ready to shell out a couple thousand for one of Jenny Robinson's exquisite, large-scale monotype / drypoint prints, but I was really tempted.

Thursday, April 23, 2015


Professor Beth Shapiro of UCSC seems to have her heart in the right place, but c'mon, don't we all want to see woolly mammoths roaming Canada again, asap?
... elephants are highly social creatures and there is no reason to suspect that mammoths were not. One mammoth would be necessarily alone in the world. It could not be released into the freedom of the Arctic until there were many of them. Until we can make many mammoths without using elephants, to my mind it is ethically unsound.

Yellow Pad Report

This week's Santa Clara Economics Department seminar was presented by Giovanni Peri, who took the Amtrak down from his home department at UC-Davis. He presented his latest paper on a topic he has been studying for some time now: the effect of immigration on native-born workers. The paper, with Mette Foged, analyzes an extraordinarily rich longitudinal data set of Danish workers.

As is the case in the United States, low-skilled workers are overrepresented among recent Danish immigrants. The most basic "Econ 101" analysis would predict that these low-skilled immigrants would compete with native-born low-skilled workers, increasing the supply and depressing the wage along the demand curve. Indeed, one of the most influential economists working on immigration effects, George Borjas, has a paper elaborating on precisely this claim, entitled "The Labor Demand Curve is Downward Sloping."

Well I'm sure Giovanni would agree that the demand curve slopes downward, but it turns out that immigration does not necessarily drive down the wages of low-skilled native workers. In fact, as his new paper shows, low-skilled Danes actually benefited from the waves of low-skilled refugees who settled in Denmark after 1995. The reason appears to be that as low-skilled foreigners filled jobs as manual laborers, many Danes who had held these positions were upgraded to new jobs that were complementary to the manual labor and actually paid a little better. For example, a construction laborer might have been upgraded to foreman to supervise the new foreign workers. Thus the effect of the shift in supply of low-skilled workers was more than offset by a shift in the demand for low-skilled native workers. This is a recurring theme of Giovanni's work: low-skilled workers are not homogeneous, and in particular native-born and foreign-born workers are not perfect substitutes.

The beauty of the paper is in the empirics. Studying immigration effects is notoriously challenging because of the endogeneity problem– determining the direction of causation. For example, suppose we observe immigrants flooding into a city or region, and wages rising at the same time. Can we conclude that immigrants caused the wages to rise? Or is it the reverse: that a growing regional economy, with increasing labor demand and rising wages, attracted the flow of immigrants to those employment opportunities?

Giovanni's solution to this tricky problem exploits some special features of the refugee flows to Denmark and some details of Danish refugee policy, along with careful application of modern panel econometrics. A fine paper cogently and enthusiastically presented, with interesting lessons for immigration policy.

Not with a bang but a whimper

That's how the third season of The Americans ended. Not the fast-paced nail-biter one has come to expect from season finales of this kind of series, and good on them for doing it. It was by far the best episode of a somewhat disappointing third season. Without giving too much away, the climactic scene has our Soviet-spy protagonists struggling to express their own devastating truths to one another, their words and thoughts instead articulated in inverted form by none other than Ronald Reagan, delivering his "evil empire" speech on TV in the background. Contrived? Yes. Compelling? You bet.

Tuesday, April 21, 2015


We're thinking of getting away for a few nights up there around the 4th of July. It reminded me of this outstanding song. But even more outstanding is this video, which, frankly, well, um, you just have to watch it! It's groovy!

Daily routines

The most amazing thing about this chart is the implied labor productivity of Immanuel Kant...

Sunday, April 19, 2015

The Memphis Grizzlies...

... just kicked butt in Game 1. For some reason the team decided to retain the mascot of the Vancouver Grizzlies when the franchise moved, even though it seems unlikely that a grizzly ever set foot in Tennessee. Then again, I live in the state that adopted it as our state symbol, and they don't set foot in our state either.

Graphic: "Ursus arctos horribilis map" by Cephas - Own work. Licensed under CC BY-SA 3.0 via Wikimedia Commons -

Friday, April 17, 2015

Cafe Borrone All Stars

The Bay Area's best. How it is that Menlo Park of all places came to be blessed with this band, I haven't a clue. Go hear them play great American music, and throw some money in the can.


I note that cheese is mentioned in my last three blog posts. Make that four.

How to communicate

Becky Blank is a first-rate economist who also happens to have the hapless job of Chancellor of the University of Wisconsin... Wisconsin, formerly land of Fighting Bob, now land of Austere Scott. She has a blog. It seems to be aimed at UWI employees, to keep them abreast of what's going on, but any cheesehead can read it and see what the eggheads are thinking. Excellent. I'm sure she doesn't write every word herself. But I bet she takes every post seriously. Hint to university administrators everywhere (even Santa Clara, CA): consider her example.

Thursday, April 16, 2015

Band name of the day

Hammond Cheese Combo. Speaking of sandwiches! They're playing in Martinez May 1. Too far away for me, but I'll keep an eye out in our area.

Tuesday, April 14, 2015


Like many "Americans," I grew up on sandwiches, and I like them a lot. As a youngster in Connecticut, there were the sandwiches you made at home, usually to pack for lunch. In my case the sandwich for school was quite often the appalling but nonetheless delicious fluffernutter, or a simple sandwich made with a cold cut we called "medvist," which was basically salami and presumably a Swedish-American version of Mettwurst(?), always on sliced store-bought Sunbeam white bread. I'm not sure what I would make of it today, but we gobbled them up quite happily back then. Of course we also ate hamburgers and hot dogs and grilled cheese and, when hungry or forced, sloppy joes.

Then there were the grinders we ate out. This was a different matter. A good Connecticut grinder is a work of art. The ingredients are not much at all: some kind of deli sandwich meat (usually turkey or boiled ham), tomato, shredded lettuce, oil and vinegar, salt and plenty of black pepper, on an Italian roll. The key is that when you pass the assembled sandwich through the pizza oven, the roll gets super crusty outside, with the interior a little wilted and steamy. When I say super crusty I mean that you cut the roof of your mouth when you bite into it. Sounds easy to do, but not so. It seems that Greek-Americans made the best grinders in eastern Connecticut... the best pizza as well.

Since then I have had even better sandwiches. New Orleans is a place where you can get a really good sandwich. The muffuletta at the Central Grocery is justly famous, as is the po'boy at Mother's Restaurant. At least it was some years ago when I last paid a visit.

The best sandwich I ever had was at I Due Fratellini in Florence. Well, maybe the atmospheric location clouds one's judgement, along with the fact that you can order a cheap glass of decent chianti in a real wine glass and drink it on the street while you consume your sandwich. But I don't think so. They make a damn good sandwich.

Meanwhile, although the San Francisco Bay Area is a paradise in most respects, sandwich-wise it is largely a wasteland. I had a fine sandwich or two in Sonoma at the Fig Pantry, which inexplicably closed a while back. Our local Safeway had an astoundingly good deli counter for a brief period, which would make you something called a Veggin' Out, with avocado, cheese, and tapinade, on an exceedingly fresh and tasty rustic whole-wheat baguette. Amazing. That didn't last long. Otherwise, there is the banh mi, which when done well is a little reminiscent of the Connecticut grinder texture-wise. They make a very good one at the Slanted Door, but I have to think there is a more economical alternative somewhere in Little Saigon. Further research is called for.

Sunday, April 12, 2015

Can Music Be Perfect? Vol. 56

I love this very melancholy song (aren't all Beach Boys songs melancholy, really?). I was reminded of it when a friend and colleague suggested I was born in the wrong generation. I'm inclined to disagree: I guess I was made for these times as much as any other...

Saturday, April 11, 2015

Barbara Bergmann, RIP

She was a major figure in the economic analysis of discrimination. Her theory of occupational crowding offered an elegant explanation of wage discrimination when disadvantaged groups are restricted to certain occupations. She was also a reliable and forceful voice for economic justice:
“We have our Scrooges, and lately the Scrooges have grown bolder in expressing themselves,” she wrote in December 1981. “But we are not a nation of Scrooges. On the contrary, we are a nation that, seeing voluntary efforts as commendable but chronically insufficient, has for almost 50 years been relieving social distress through the federal Treasury, using the coercive powers of government to collect the funds.”

Your FSA/OWI Photo of the Day

More Bubley! More!

Washington, D.C. The telephone in a boardinghouse is always busy. Esther Bubley, 1943.

Clarence King on Yosemite

Yes: "... the magical faculty displayed by vegetation in redeeming the aspect of wreck and masking a vast geological tragedy behind draperies of fresh and living green."
What sentiment, what idea, does this wonder-valley leave upon the earnest observer? What impression does it leave upon his heart? 
From some up-surging crag upon its brink you look out over wide expanse of granite swells, upon whose solid surface the firs climb and cluster, and afar on the sky line only darken together in one deep green cover. Upward heave the eastern ridges; above them looms a white rank of peaks. Into this plateau is rent a chasm; the fresh-splintered granite falls down, down, thousands of feet in sheer, blank faces or giant crags broken in cleft and stair, gorge and bluff, down till they sink under that winding ribbon of park with its flash of river among sunlit grass, its darkness, where, within shadows of jutting wall, cloud-like gather the pine companies, or, in summer opening, stand oak and cottonwood, casting together their lengthening shadow over meadow and pool. The falls, like torrents of snow, pour in white lines over purple precipice, or, as the wind wills, float and drift in vanishing film of airy lacework. 
Two leading ideas are wrought here with a force hardly to be seen elsewhere. First, the titanic power, the awful stress, which has rent this solid table-land of granite in twain; secondly, the magical faculty displayed by vegetation in redeeming the aspect of wreck and masking a vast geological tragedy behind draperies of fresh and living green. I can never cease marvelling how all this terrible crush and sundering is made fair, even lovely, by meadow, by wandering groves, and by those climbing files of pine which thread every gorge and camp in armies over every brink....
Mountaineering in the Sierra Nevada (1871)

Friday, April 10, 2015

Castle Rock State Park

I hadn't been there in years! A very special place: fascinating geology, compelling botany, and glorious views, all in a highly accessible package. Aidan and I took the loop that leads past the waterfall (quite a drop, but just a trickle right now), then along the ridge with views of Monterey Bay up to San Gregorio or beyond, past Goat Rock, and then back to the eponymous Castle Rock, sculpted by wind and percolating water erosion into a kind of big lump of Swiss cheese sandstone.

In order: a very fuzzy lupine, Nemophila (foliage belongs to someone else), trees, very fuzzy black oak leafing out, very fuzzy offspring.

Your FSA/OWI Photo of the Day

Indianapolis, Indiana. A soldier and a girl saying goodbye at the Greyhound bus station. Esther Bubley, 1943.

Wednesday, April 8, 2015

Yellow Pad Report

A new and exclusive Sundstrom blog feature! The Yellow Pad is our weekly Economics Department seminar series at Santa Clara University.

Yuriy Gorodnichenko (UC-Berkeley), "How Do Firms Form Their Expectations? New Survey Evidence" (with Olivier Coibion and Saten Kumar), April 8, 2015

We were quite fortunate to have Yuriy Gordnichenko take time to drop by Santa Clara and present his very interesting paper on expectations formation. He and his co-authors surveyed a large sample of New Zealand firms to ascertain how accurate their forecasts of key macroeconomic variables are, and what factors influence the degree of forecast error.

A better title might have been: "Why are so many firms ignorant of basic macroeconomic facts?" The authors find that a large percentage of top managers are badly misinformed about inflation. In particular, like ordinary consumers, managers tend to believe that the inflation rate is much greater than it actually is. Whereas the NZ central bank has been pretty successfully targeting inflation at around 2% for about 25 years, lots of decision makers in small- and medium-sized firms there seem to think inflation is on the order of 10% or higher.

What gives? Yuriy and coauthors attribute the errors to rational inattention. That is, the firms that are ignorant about inflation have no good reason to become better informed. Whereas, the firms that need to care more about prices because of their market circumstances tend to gather better information and form more realistic perceptions and forecasts.

This paper represents my kind of macro. Go out and get some real data on how people make decisions. Still, puzzles remain. Firm managers seem to have much more accurate knowledge and forecasts of unemployment and economic growth than inflation. But are these variables that much more important than inflation to their decision making? The rational inattention story would seem to have to answer yes. But my conjecture is that (1) none of these macro variables matter all that much to most firms, and (2) when it comes to inflation, managers are subject to many of the same biases and heuristics that afflict ordinary folks: They notice the price of gasoline or milk going up, and they overlook the price of bananas and tablets going down. Yuriy and colleagues do show that firms update their expectations when given new information they deem reliable. So managers are not mulishly ignorant. Just pretty damn ignorant.

Your FSA/OWI Photo of the Day

Old covered bridge near Greenhills, Ohio. Theodor Jung, 1936.

Tuesday, April 7, 2015

Your FSA/OWI Photo of the Day

Typical wood frame house, Hamilton County, Ohio. Carl Mydans, 1935.

Explaining tuition trends in public higher ed

Facts are stubborn things...
Declining state expenditures on public universities are in fact driving tuition increases
By Sandy Baum :: April 5th, 2015 
In his April 4, 2015 New York Times Sunday Review article, “The Real Reason College Tuition Costs So Much,” Paul Campos dismisses the role of state funding in explaining increases in tuition at public universities, criticizing an NPR quote in which I highlighted declining per student state appropriations. 
But the facts are clear. After adjusting for inflation, state appropriations per student were 18 percent lower in 2013-14 than they were thirty years earlier, and 29 percent lower than their peak in 1988-89. Over the past decade, state funding per student declined by 14 percent. 
In contrast, institutional expenditures per student rose by a total of 6 percent at public doctoral universities over this ten-year period, and by 3 percent at public master’s universities. Community colleges spend 7 percent less per student in inflation-adjusted dollars than they did a decade ago. So there has not been a rapid rise in spending on public college campuses that could be the primary driver of tuition increases. 
It is not rising expenditures, but declining state revenues that account for most of the pressure on state institutions to raise tuition. 

Can Music Be Perfect? Vol. 55

Happy 100th, Billie.

Monday, April 6, 2015

I do love the mighty Sony Trinitron...

... but do you notice something missing from this picture? Like, maybe THE GUY WITH THE BALL?!

Sunday, April 5, 2015


As a faculty brat growing up in Storrs, CT, I attended many of the UConn men's basketball home games. We sat in the huge, rickety bleachers in the old stadium, and it was loud and fun even when the team was mediocre, as it often was. Women's hoops existed, I think, but was not really on the radar screen. Times have changed.

The East River

It's not really a river...


The graceful Brooklyn Bridge, in the distance, needs no defenders. The muscular Manhattan, in the foreground, is pretty nifty, with the rumble of the "subways" passing back and forth overhead.  Yeah, you're in New York.

Friday, April 3, 2015

Wolf Hall

Go ahead, y'all can watch the BBC version if you like. I'm sure I'd prefer to spend those hours reading the books a second time.

Thursday, April 2, 2015

Red Plenty

In many ways, Francis Spufford's Red Plenty reads like a first-rate "hard" science fiction novel. The reader is dropped onto an alien planet... familiar in many ways, inhabited by humans who possess most of the characteristic psychology of earthbound humans: love, curiosity, greed, lust, conscience. But their social system is quite peculiar; it plays by unfamiliar rules. The planet's rulers seem to think that total control is possible, that every transaction can be planned by a central authority, and yet at every turn their crazy imperfect human subjects undermine the whole project.

But it's not science fiction, it's real history: the alien planet is the USSR, late 1950s-60s. Genre-wise, the book should be classified as a historical novel: the main events it depicts are real, as are many of the characters. There are also many pages of scholarly footnotes– so on second thought, maybe it is postmodern history masquerading as fiction. Structurally, the narrative is constructed as a series of loosely connected vignettes. The writing is consistently beautiful and efficient– traits that could never be used to describe the Soviet society that Spufford depicts.

Whatever else it may be, Red Plenty must certainly be the best novel ever written about the socialist calculation debate and general equilibrium theory, and probably the best overall exposition of the issues raised by that debate in any genre. Could a computer really run a complex, modern economy better than a decentralized market? Could the computer be used to set the prices for the optimal central plan, and then let folks implement it locally, leading to prosperity that would eventually overtake the capitalist West? A Nobel prize-winning Soviet economist named Leonid Kantorovich thought so... or did he? Maybe his economic reform really was the capitalist camel's nose under the socialist tent, as his hardliner opponents claimed. Spufford holds his cards close, so the reader might wonder whether our narrator believes Kantorovich's promise of Red Plenty was a missed opportunity, or a total chimera... or perhaps a tragic historical joke.

Spufford does reveal his hand, I think, and it happens early in the book, in one of his italicized expository chapter intros. The fatal economic flaw with central planning was never really about the inefficiencies of allocation associated with central planning, wasteful as they were, and frustrating as they must have been for everyday Soviet citizens, lined up in queues for bread and meat. No, the fatal flaw was that Soviet economic growth rested on increasingly intensive application of resources to production, rather than productivity growth due to technological dynamism. In this sense the socialist calculation debate was a sideshow in the competition between capitalism and socialism.

Before we bourgeois economists get too cocky, however, it's worth reminding ourselves that we really have no rigorous account of technological progress, even under capitalism. It is a residual, not just empirically but conceptually.

And there's a lot more: Spufford's novel bubbles over with ideas. For instance, there's the irony that a system of central planning inevitably results in the devolution of power to the local level as an unintended consequence. The reason is that by setting the wrong prices (or no prices), central planning creates rents, and rents bring rent-seekers, and local market power. The novel's wheeler-dealer/ black marketeer Chekuskin is the exemplar of such a purveyor and exploiter of local knowledge.

And then there is the story of Soviet science, which despite the triumphs of Soviet space exploration and an extraordinary system of mathematical and technical education (STEM!) was hamstrung by ideology and bureaucratic control– a point driven home here through a parallel story of the pernicious influence of Lysenkoism on Soviet biological science.

Still, when all is said and done, ideas do not a great novel make. One needs poetry, and a compelling story, and vivid characters. In Red Plenty you get them all in spades. Chekuskin is worthy of Bulgakov. A fellow named Khrushchev is particularly vividly drawn. And I defy you not to fall in love with the brilliant and defiant biologist Zoya Vaynshteyn.

Read it!

Wednesday, April 1, 2015

Liquid Trills, Turbulence, and an Ode to the Soil

So goes the print headline for the New York Times review of Alexi's Carnegie debut recital. As the proud papa, I can't be objective... not by a long shot. I still sit there in the audience fretting about the coming memory lapse or muffed note (which never comes), and in awe that this fellow is related to me. But some aspects of Alexi's playing always stand out, and I think the review picks up on them: absolute emotional and intellectual engagement with the music– rare, but I suppose to be expected at his level; adventurous programming; sensitive collaboration; and the trills, for sure. Nobody trills like Alexi. These are the details that turn proficient playing into... music!