A Nonsupernaturalist Creed

“There is one miracle for all time: the existence of the universe — including the existence of consciousness. Every birth is a celebration of that miracle, and all our fear of death is worship of that miracle.”
— Miles Kimball

A Snail's Pace

It has been 12 years since my first blog post: What is a Supply-Side Liberal? I have written an anniversary post every year since:

  1. A Year in the Life of a Supply-Side Liberal

  2. Three Revolutions

  3. Beacons

  4. Why I Blog

  5. My Objective Function

  6. A Barycentric Autobiography

  7. Crafting Simple, Accurate Messages about Complex Problems

  8. On Human Potential

  9. Pandemic Passage: My Past 12 Months in Blogging

  10. Everything is Changing

  11. A Lull

Because our research team trying to bring about national well-being indexes that can stand as coequals with GDP has been at a critical and highly engrossing stage now for several years, I have tended to think of this blog as on hiatus. But as I look more closely, I see that my blog output is not zero; it is simply advancing at a snail’s pace.

In my own view, my most important post in the past year is “A Tweetstorm on Imperfect Information Processing.” Then there are several important pieces in video form:

There is one bit of PR for our work on well-being indexes:

Then I learn something about myself from what I ended up writing about. Though I am in a period of reevaluation of what I believe, I continue to be very interested in diet and health. After all, I at least have to figure out what to do myself, and might as well keep some record of things I learn and think about here on this blog. Here is what I have written in the past year on diet and health:

I teach about statistical identification in my “Ethics, Happiness and Choice” class at the University of Colorado Boulder. (You can see links to all of my course websites if you click the “Resources” button at the top of the page.) So I am always on the lookout for good examples to use. Here is one I found this past year:

For my classes generally, I have a bibiographic post under construction: “Posts Useful for Teaching.” You might see something there.

I continue to be very interested in US Supreme Court decisions, in part because I come from a family of lawyers. (My Dad, my uncle Spencer Levan Kimball and my brother Chris were all law professors.) The current revolution in constitutional and statutory interpretation is fascinating to me. Here are two posts I wrote:

It is good to be fortified by stories of how good ideas often meet initial resistance. So I wanted to keep hold of this story:

And there are many other useful things I wanted to keep track of; I used link posts as some of our forebears used commonplace books. You can page down to see those linkposts. I won’t try to repeat them here.

Why Subprime Mortgage Losses Mattered in the 2008 Financial Crisis

“In 2007, many analysts dismissed the significance of subprime mortgage losses, which they compared to a bad day in the stock market. In a report that November, Hatzius called the analogy flawed. Citing research by the economists Tobias Adrian and Hyun Song Shin, he noted that stocks were mostly owned by ‘long-only’ investors such as pension funds who ‘passively accept a hit to their net worth.’

By contrast, mortgages are owned by leveraged institutions such as banks, investment dealers, hedge funds, Fannie Mae and Freddie Mac. For every dollar of losses, these investors would have to shrink their balance sheets to preserve their capital ratios. This was a key reason Hatzius projected weaker growth and a higher risk of recession in 2008 than the consensus.”
— Greg Ip

A Tweetstorm on Imperfect Information Processing

Posts Useful for Teaching

On Learning

On Writing

Intermediate Macro

Happiness

Measuring National Well-Being

Political Polarization and Wokeness

Ethics and Choice

Jordan Peterson

Statistics

Monetary Policy

Business Cycle Theory

Finance

Political Economy

Basic Facts

Economic Growth

Housing Policy and Technology

Education Policy

Immigration

Futurism

Supply-Side Liberalism

Zombie Firms, Risk-Taking and Interest Rates

Link to the YouTube video shown above. h/t Torsten Slok

The video above is a nice discussion of zombie firms, with a bit of discussion of “cash” vs. risky assets toward the end. I was reminded of two passages I wrote in my post “Contra John Taylor,” in 2013:

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Low rates and zombie loans.

The low rates also make it possible for banks to roll over rather than write off bad loans, locking up unproductive assets. 

This is one of John’s best and most interesting points. It is a quirk of traditional loan contracts that the repayment rates expected by lenders are sometimes slower when nominal interest rates are low. This is a place where the free market should do its magic, with lenders making sure that the rates at which they are supposed to be repaid are adequate to help them identify badly-performing loans early on. The free market will get better at this the more experience businesses have with low nominal interest rate environments.

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Low interest rates as fuel for speculation. Here, he says

The Fed’s current zero interest-rate policy also creates incentives for otherwise risk-averse investors—retirees, pension funds—to take on questionable investments as they search for higher yields in an attempt to bolster their minuscule interest income.

I can’t make sense of this statement without interpreting it as a behavioral economics statement about some combination of investor ignorance and irrationality and fraudulent schemes that prey on that ignorance and irrationality. The often-repeated claim that low interest rates lead to speculation cries out for formal modeling. I don’t see how such a model can work without some combination of investor ignorance and irrationality and fraudulent schemes preying on that ignorance and irrationality. (That is, I don’t see how the claim could hold in a model with rational agents and no fraud.) Whatever combination of investor ignorance and irrationality and fraudulent schemes preying on that ignorance an irrationality a successful model uses are likely to have much more powerful implications for financial regulation than for monetary policy. It is cherry-picking to point to implications of a not-fully-specified model for monetary policy and ignore the implications of that not-fully-specified model for financial regulation.