The unknown economist

He is known for tirelessly bringing the facts to every debate and applying economic theory in the midst of heated arguments. The unknown economist works behind a veil of nerdiness, invisible to normal people going about their daily lives. Yet through his perseverance we hope that some order is brought to the world, one internet argument at a time. We can now exclusively reveal his secret identity…
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The profession in three minutes

Pareto optimality: when you can’t take someone’s shit without them giving a shit.

HT: Greg Mankiw

Update: Eric points to some good additions here. Particularly relevant to the libertarians among you.

More Mankiw

Well, shame on Greg Mankiw for failing to cover the eternal battle between the adherents of Smith and Keynes in his 101 course. More interestingly, he also reposted this from FlowingData.

The driver of the latest market meltdown

Although some people think its poor US economic data and increasing concerns around European sovereign debt driving the current market crisis, the Onion has unveiled the true story:

Bernanke, who sources confirmed was “totally sloshed,” arrived at the drinking establishment at approximately 5:30 p.m., ensconced himself upon a bar stool, and consumed several bottles of Miller High Life and a half-dozen shots of whiskey while loudly proclaiming to any patron who would listen that the economic outlook was “pretty goddamned awful if you want the God’s honest truth.”

Interesting.  I especially enjoyed this part of the story:

While using beer bottles and pretzel sticks in an attempt to explain to the bartender the importance of infusing $650 billion into the bond market, the inebriated Fed chairman nearly fell off his stool and had to be held up by the patron sitting next to him.

As it reminds me of the sort of thing I like to do when I’ve been drinking – namely talking economics and falling over repeatedly.

Although this behaviour by Bernanke was irresponsible, it does add an alluring human element to him – something that I haven’t seen from a central banker since reading Alan Bollard’s 2010 annual RBNZ report 😉

Update:  Just as a pointer, although I’m making fun this is a serious crisis at present.  I don’t mean to demean its seriousness by joking around, so keep this in mind.  This is an event I am going to be keeping an eye on all weekend.  I will post some general points once I feel that what is going on has become clearer – but I will save more timely and detailed analysis for clients 😉 … what can I say, I love you all – but I love clients as well and they pay the bills.

Bollard’s crystal ball, my tarot cards

Given that Alan Bollard felt compelled to get out his crystal ball when it comes to discussing the next year, I feel like I should get hold of my tarot cards to see what the year ahead holds.

As I have said previously, the general justification for tarot card reading is the same as for any sort of forecasting, or even policy analysis – it provides a framework, which is objectively verifiable, which you can hang your value judgments off and get conclusions from.  Tarot cards use theoretical archetypes as its framework, while economic forecasting uses supply and demand and a bunch of measured data.  We may not feel that the framework used in tarot card reading is particularly well suited to this task – as it isn’t.  But that isn’t going to stop me trying.

So without further adieu, here is the Celtic Cross reading for the New Zealand economy over 2011 – with a specific focus on the labour market.

Note:  I read the CC differently to those instructions – all will be explained.  The main difference is that the “cross” is treated as a self-contained general reading, while the “staff” is a ‘sort of self-contained’ specific reading – in this case solely on the labour market.

Note 2:  In case it isn’t obvious, the comparison between the relatively holistic tarot card reading framework and the more reductionist economic framework is meant to be facetious

Note 3:  No offence intended for professional economists or tarot card readers 😉

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The importance of economics education

Is keenly illustrated here:

Asked about overseas investment funds profiteering during a period of economic uncertainty, she said:  ‘I see some of them looking for returns of 20 or 25 per cent, at a time when fellatio is almost non-existent.’

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Then again, everyone is saying there is too little inflation at the moment – so surely a bit of confusion won’t hurt anyone.  Another issue for the Reserve Bank to include in its mandate perhaps?