A Postcard from Brookings: Wolfers Bids D.C. a Fond Farewell

As my better half is preparing to leave the Obama administration for academic life, we’re packing up our DC apartment and, as typically happens while packing boxes, feeling a bit reflective. So I thought I would share what has made our time in DC so special.

For me, the great joy of being here has been spending time at The Brookings Institution. It’s an extraordinary place, and I’m convinced that I’ll look back on my time here as pivotal in shaping my evolution as an economist.

The rhythm of life for Brookings economists is dictated by the lunch table. This isn’t the usual lunchroom gossip, but rather an ongoing inquiry into the policy debates du jour, with a relentless focus on economics. It’s an intense ordeal, and facts are the only currency accepted. Scholars who are heading up to the Hill, briefing journalists or visiting the White House, will test drive their insights over salads and sandwiches. Survive lunch, and the rest of your day will be easy. Those Formica tables have heard a lot of great ideas improved, and bad ones decimated.

The biggest difference between Brookings and my usual academic gig is the degree of engagement with real public policy questions. And so this year has served as a wonderful education on the messy reality of U.S. economic policymaking.

Bernanke Speaks. But What Did He Say?

So Ben Bernanke finally spoke today. And as I predicted yesterday, all the early headlines are expressing disappointment that Ben didn’t announce QE3. But this disappointment is misplaced. New policy announcements are for the Federal Open Market Committee, not the Chairman. The most he could do is give an indication of where he thinks things will go.

And he thinks they should ease policy.  Soon.

Here’s the case he made:

1. Unemployment is too high. This is the usual argument for easing monetary policy.

2. Inflation is below target. The usual constraint preventing this doesn’t bind.

3. The possibility that high long-term unemployment may persist “adds urgency to the need to achieve a cyclical recovery in employment.” There’s a special reason to be more aggressive.

Previewing Jackson Hole: Why Markets Are Setting Themselves Up for Disappointment

On Friday all econ-loving eyes will be focused on Jackson Hole, Wyoming. Think of it as Oscar night for macroeconomists. Except with sensible shoes rather than plunging necklines. But the anticipation and gossip is just as intense. Markets are convinced that Ben Bernanke’s going to make a major announcement. I disagree.  Here's why:

1.       Central bankers generally try to be more boring than their audience wants them to be. That won’t change.

2.       The run of data since the last Fed meeting hasn’t really changed, so why would monetary policy?

3.       Given the slim governing coalition, Ben can’t get too far ahead of the rest of the committee. So look for all the action to come from official Fed statements, rather than cryptic hints at Jackson Hole.

4.       Sometimes Fed Chairmen are accidentally more interesting than they mean to be. At last year’s conference Big Ben shared some of his thinking about alternative monetary tools. This was news in 2010, and it excited the markets. But today, we’ve all thought long and hard about the alternatives, so it’s hard to see a surprise coming.

Prove Paul Krugman Wrong! Vote Wolfers

(8/24) Update: It appears that Real Paul Krugman was never on Google+. Instead, it was a hoax by a prankster with an ideological axe to grind. I’ll just say: He was convincing. And I was punk’d.

OK, so I’m in week three of my Twitter experiment.  And a funny thing happened along the way.  Google Plus. I’m enjoying the conversation at Twitter.  But I think G+ is the better technology. So I’ve started posting my more polished (and sometimes more verbose) gems over on Google+.

So far, it’s a bit quiet.  But helpfully, Patrick Bernau has compiled a page of economists publicly posting at Google+.  So if you prefer Google, you’ll love this page.

Interpreting the Fed: How Did it Lower Rates This Time?

I’ve found a lot of the recent discussion about the Fed to be, frankly, confused. So I thought it worth trying to put the issues into a broader context.

Read the Fed’s latest statement, and you’ll see many of the themes I’ve talked about recently. They’ve learned that the economy is not only weak, but that—as I’ve been forecasting for some time—“economic growth so far this year has been considerably slower than the Committee had expected.” Turn to the labor market, and they somewhat dryly note “a deterioration in overall labor market conditions.” And while they won’t use the word double dip, they do note that “downside risks to the economic outlook have increased.” Also, “inflation has moderated.” So there’s plenty of room for them to try to goose the economy. But how?

A New Indication of a Double-Dip

We all have our favorite business cycle indicators. I have a new one. Last week I was at the (superb!) NBER Summer Institute. And for the first time in 15 years of attending this conference, there was no guacamole on Taco Day. The bad GDP data had come out a mere three hours earlier. Coincidence, or coincident indicator?

No need to convene the Business Cycle Dating Committee: The guacamole has spoken. It’s the first casualty of a double-dip.

An Economist's Twitter Experiment Begins

I promised to give Twitter a real randomized trial. And so today, it begins. I woke up, flipped a coin, and it came up heads. Which means that today I’ll be tweeting. You can follow me @justinwolfers. What I do tomorrow is up to the coin.

I announced this experiment here three weeks ago, but wanted to spend some time getting used to this new medium. Here are eleven things I learned during my pre-experiment trial:

1. Twitter is fun. And addictive.

2. Information really does move at light speed. I find myself reading tomorrow’s newspaper, today. (But remember: tomorrow’s newspaper will be here in the morning.)

3. As a Twitter-virgin, I hadn’t previously realized how much more it is about sharing links than making glib statements. Hive-mind curation can be extraordinary.

A Teaching Moment on Numeracy

It’s an embarrassing episode. The opening sentence of James B. Stewart’s Tangled Webs: How False Statements Are Undermining America is:

“We know how many murders are committed each year — 1,318,398 in 2009.”

But this is false. As Jeffrey Rosen notes in a savage New York Times review, there were 15,241 murders in 2009. The cited number isn’t just wrong, it’s wrong by two orders of magnitude. Where did the 1,318,398 come from? It’s the number of violent crimes, which includes robbery, rape and assault. And only a small proportion of all violent crimes — a little more than 1 in 100 — are murders.

And so this provides a useful teaching moment for thinking about numeracy. How can you avoid such errors?

A Twitter Experiment

I’m a long-time Twitter skeptic. It’s difficult for an economist to see a 140 char lmt as a ftr. My journalist friends tell me I’m dead wrong. And a recent long and boozy evening with co-founders Evan Williams and Jason Goldman convinced me to give it a try. Is Twitter worth the hype? Let’s find out.

Today I’m beginning my Twitter Experiment. I’m now tweeting @justinwolfers. I’m going to keep this up for a couple of weeks as a “burn in” period—basically so that I can learn the ecosystem before my experiment begins. Then on the morning of August 1, I’m going to wake up, and flip a coin. Heads, I’ll open Twitter; tails I won’t. And I’ll do the same on August 2, and then every day for three months. If the coin comes up heads, it doesn’t necessarily mean that I’ll tweet, just that it will be a Twitter-aware day; I’ll consume the stream, and tweet away if I feel the need. Tails, and I’ll simply tweet “Tails, goodbye,” close the stream (unless I need it for research) and then resist the urge to tweet for the rest of the day.

Australia's Rising Political Star Is an Award-Winning Economist

My good friend Andrew Leigh is the winner of the Young Economist Award, granted every two years to the best Australian-based economist under the age of forty. It’s really a rather splendid achievement. And entirely well-deserved.

Andrew’s career has been quite extraordinary. You see, economics was neither his first career, nor is it his current career. He began life as a star lawyer—clerking for the Aussie equivalent of the Supreme Court, and joining one of the big city firms. He then moved on to his second act as a policy advisor for the center-left politicians in both Australia and the UK, and a think tank in the U.S.

Finally, he began his third act, as an academic economist.