Null findings

What happens when we have a null finding? I was puzzled over this post from John Cochrane on a paper by Dupor and Li:

Bill Dupor and Rong Li have a very nice new paper on fiscal stimulus: "The 2009 Recovery Act and the Expected Inflation Channel of Government Spending" available here.

New-Keynesian models are really utterly different from Old-Keynesian stories. In the old-Keynesian account, more government spending raises income directly (Y=C+I+G); income Y then raises consumption, so you get a second round of income increases.

New-Keynesian models act entirely through the real interest rate.  Higher government spending means more inflation. More inflation reduces real interest rates when the nominal rate is stuck at zero, or when the Fed chooses not to respond with higher nominal rates. A higher real interest rate depresses consumption and output today relative to the future, when they are expected to return to trend. Making the economy deliberately more inefficient also raises inflation, lowers the real rate and stimulates output today. (Bill and Rong's introduction gives a better explanation, recommended.)

So, the key proposition of new-Keynesian multipliers is that they work by increasing expected inflation. Bill and Rong look at that mechanism: did the ARRA stimulus in 2009 increase inflation or expected inflation? Their answer: No.

I wasn't sure if the paper was about the stimulus, i.e. based on the model there was no effects of stimulus on inflation or whether this was a test of the New Keynesian model. The post seems to read as though the paper was making a case that the stimulus did not work although I sort of read between the lines for this. The comments seem to indicate this was a test of the model which indicates then that the model is somewhat off.

Shutdown non-puzzle

In an earlier post, I considered the "puzzle" of the government shutdown through the lens of the median voter theorem. Three are two (at least) possible was to reconcile this:

1. The median voter theorem does not apply.
2. The focused single issue special interest lobby. This is usually used to respond to why protectionism legislation always passes even though (possible) lower prices from free trade benefits the wider population.
3. Update: John Boehner is trying to protect his job as House Speaker

Shutdown Puzzle #2

I've been trying to make sense of the shutdown and this Washington Post interview by Ezra Klein (EK) with Robert Costa (RC) makes good reading:

The thing that makes Boehner interesting is he’s very aware of his limited hand. Boehner doesn’t live in an imaginary world where he thinks he’s Tip O’Neill and he can bring people into his office and corral them into a certain vote. So he treads carefully, maybe too carefully. But he knows a clean CR has never been an option for him.

EK: But why isn’t it an option? A few dozen unhappy members is an annoyance, but how is it a threat? Wouldn't Boehner be better off just facing them down and then moving on with his speakership?

RC: So there are 30 to 40 true hardliners. But there’s another group of maybe 50 to 60 members who are very much pressured by the hardliners. So he may have the votes on paper. But he'd create chaos. It'd be like fiscal cliff level chaos. You could make the argument that if he brought a clean CR to the floor he might have 100-plus with him on the idea. But could they stand firm when pressured by the 30 or 40 hardliners and the outside groups?

The reason why I think it is a puzzle is that the media is representing this as a fight within the Republican party and that a minority within the party is holding Boehner hostage. The median  voter theorem predicts that because extreme constituents (i.e. the base of a political party) will never abandon the party, it makes more sense for the leader/politician to lean toward the center/median voter.

So why should Boehner care about the 30-40 hardliners? The "hardliners" represent their districts and their median voter is on one end of the spectrum. But aren't the total of all of these constituents still a minority within the Republican party? And Boehner who leads the party and presumably all congressional members as well within the party would lean toward the center if the majority of the members also have constituents who lean more toward the center.

So here goes: Its the 50 or 60 and perhaps more whose constituents may also be less "centered". Not knowing who they are and the size of all the congressional districts of all of these members it is difficult to say with certainty but I'll go ahead and say it anyway - that perhaps the minority isn't really a minority - and that the Republican party and their constituents truly have swung to one end.

There is some supporting evidence for this from Larry Bartels using data by James Stimson:



(graph by Larry Bartels)

Update (10/7/2013): From Buzzfeed via The Atlantic (emphasis mine):

From its genesis in 2009, the Tea Party movement has been fueled by the rhetoric of revolution. True believers attend rallies unironically dressed in colonial garb. Their early organizers preached earnestly from Saul Alinsky’s left-wing activist handbook Rules For Radicals — a book that advises just the sort of procedural disruption they’ve imposed this week. And while Nevada Senate candidate Sharon Angle outraged mainstream political observers when she suggested people may start looking for “Second Amendment remedies” to the country’s problems, one recent survey showed that nearly half of Republicans believe armed insurrection might be necessary “in the next few years.”

Update (10/9/2013): From the Washington Post/Monkey Cage:

Recently on this blog, Larry Bartels drew attention to an astonishing fact: the public is as conservative as it has been in 50 years. To highlight this point, Professor Bartels presented the public’s policy mood — James Stimson’s measure of public support for government programs—from 1950 to 2012. In a recent article, Julianna Koch and I generated measures of policy mood for each state from the 1950s to 2010 (our measures our here). What we found is that the conservative opinion shift Professor Bartels highlighted repeats itself in every state.

Memo to NSA

Dudes, this is so cool! Awesome, man!

The head of the National Security Agency has admitted to secret pilot programs to monitor the precise location of Americans through their cellphones, saying the highly intrusive tracking data "may be something that is a future requirement for the country".

And I thought that all this technology was made up for "24" and "Person of Interest".

In light of the ACLU, the do-nothing congress, and the mainstream media being so hard on your case because of all this hogwash about our privacy, I thought I'd send a note of congratulations on coming this far. Perhaps in order to appease the public - and I for one would definitely be on board - you could offer to pay for our voice and data plans for the rest of our lives in exchange for the ability to track us.

Thanks for your kind attention.

Fog of war

It's easy to be confused during traumatic events.

During the shooting at the Naval Yard, there were conflicting reports as to whether there was one, two, or even three shooters. Even after killing the shooter an hour after the rampage that began at 8:30 am, authorities weren't sure if there was a second shooter. Consequently, people who were in hiding did not leave until almost midnight.

Yesterday, media reports and eyewitness testimony of shootout at the US Capitol seem to conflict that it leaves some doubt as to what really happened.

Here is one report:

The driver of the black Infiniti had a toddler with her, confounding everyone who watched the car crash through barriers and lead police through the heart of high-security Washington.

Here is another:

“Whoa! Whoa!,” Secret Service officers were shouting at the car, according to a witness, Shawn Joseph, 29. “It looked liked [the driver was] scared or lost. I thought they might have been a tourist.”

But then, witnesses said, officers tried to place a barrier in front of the car. The driver swerved. The officers moved the barrier. She hit it, and a Secret Service officer was thrown up on the hood and then off the car.

In one the driver crashed through it, in another she merely hit it. Of course I described this as a shootout in the preceding paragraph which of course it wasn't.

This is definitely a mystery: why would a seemingly normal person behave the way they did? Did the authorities overreact by shooting here? At least one was close enough to see that it was a woman and possibly with a child in the car. Could it no have been interpreted as a hostage situation? It's hard to know in the fog of war.

Shutdown Puzzle #1

From the Washington Post:

What Washington area commuters hoped would be a silver lining of a federal government shutdown — a less-frenzied rush hour — didn’t materialize for many Wednesday, leaving some to ask: If hundreds of thousands of federal workers stayed home, why was my commute still so bad?

In fact it seems to be worse?

It was the volume that shocked me,” said Jean Stoner, who had expected a breeze of a drive between her Arlington County home and her office at the Health Information Services division of 3M, in Bethesda. Eastbound Route 50 and roads through Rosslyn were “incredibly slow and congested,” she said.

“I was yelling at the other cars, ‘Aren’t you furloughed today?’ ” Stoner said with a laugh.

But ...

Some Metrorail and bus riders, on the other hand, found nearly empty buses and vacant seats on trains that are usually standing-room only. About 56,000 fewer people than usual — enough to fill 60 trains — rode Metro between 5 a.m. and 10 a.m., Metro said. That amounted to a 20 percent drop in ridership from the previous Wednesday morning.

One rider tweeted a photo of an empty Metrorail car with the headline “Furlough train.” Another wrote: “Ghost train/ snow day feel to the Metro this morning.”

The answer?

The short answer: Federal workers telecommute, carpool and take transit in disproportionate numbers, local commuting experts said. That means they don’t take up as much room on the road as their numbers might indicate.

Moreover, experts say, the Washington area’s traffic volumes are so crushing that even taking thousands of people out of the equation leaves enough traffic that everyday occurrences — fender benders, debris in the road — still create quick backups that can take hours to dissipate.

Meanwhile, some carpools partially made up of federal workers likely have broken up, leaving the remaining people to drive in individual vehicles, experts say.

Another leading theory: Some people who prefer to drive but usually don’t jumped at the notion of open roads.

“Some people who didn’t drive before may be thinking, ‘Ooh! I can drive now!’ ” said Ronald Kirby, transportation planning director for the Metropolitan Washington Council of Governments.

Here's a new one

The title of the article from The Guardian was:

How the last US government shutdown almost cost Clinton the presidency

...

During the 1995 shutdown, unpaid interns had taken on tasks normally performed by staff who'd had to be sent home. One of those interns brought the president pizza and the two got chatting. Her name? Monica Lewinsky.

Or in statistical terms: How the government shutdown caused Clinton to have an affair with Monica Lewinsky.At least this article was more tongue-in-cheek:

Government shutdown winters tend to be cold and snowy in D.C.

Let’s at least momentarily assume that hot air is cast away from the city in a shutdown, causing a ripple effect that ultimately impacts winter.

Example? The last time the federal government shut down in 1995-96, 46 inches of snow paralyzed D.C.! It was one of the snowiest winters on record.