The Policysphere and the Blogosphere

Federal reserve Bank of St. LouisMarch 22, 2012

Mark ThomaDepartment of Economics

University of Oregon

Introduction

• Hoping to have a conversation about blogs and their interaction with policymakers, explore some questions.

• How might policymakers use blogs better? • When blogs are highly critical of policy, do they listen

or dig in their heels? How can we do better at listening to each other?

• Recent (and past) events suggest they do hear what is said, and the reactions vary. Will argue this has a lot to do with tone of the response.

Introduction• How might the Fed benefit from blogs? • Has bickering in public over policy (which is really a debate

about models) hurt the profession in the eyes of the public? Or has it simply exposed the truth about disputes within the profession, i.e. torn down a false front about the degree to which economists speak with a unified voice?

• Should it be different than conversation in a bar? (For Fed, yes)

• I expect that standards of communication will evolve over time. To where?

How should policymakers react to blogs, especially when blogs are highly critical?

• Start with some examples

Example: The Debate over Potential Output

• This is also a debate over monetary policy• If Y* has fallen, we have less of an output gap to close,

and hence policy should be less aggressive• I am more optimistic than many on this point, hence my

relatively aggressive stance• Began with a speech by someone you may have heard

of, Jim Bullard: Inflation Targeting in the USA• But it didn’t really begin until David Andolfatto wrote

about it: What output gap?• I echoed David’s post: "What Output Gap?"

The Econo-Blogosphere’s Reaction• Tyler Cowen: How large is the output gap really?• Scott Sumner: A loss in wealth should boost economic growth• David Beckworth: Some Thoughts for St. Louis Fed's James Bullard• Noah Smith: Jim Bullard chucks the Solow growth model!• Arnold Kling: Wealth and the Output Gap• Paul Krugman: Bubbles and Economic Potential• Brad DeLong: Asset Prices and Potential Output• Paul Krugman: The Great Sectoral Non-Shift• David Andolfatto: The trend is your friend (until it ends)• Stephen Williamson: Three Views of the State of the Economy• Karl Smith: More On the Sectoral Non-Imbalance• Tyler Cowen: Bubbles and economic potential and potential gdp• Noah Smith: Chucking the Solow growth model, cont.

More Reactions …• Tim Duy: It's Worse Than You Think

And a reply to Tim:

• James Bullard (via email): James Bullard Responds to Tim Duy

Note: You need a blog!

Tim responds:

• Tim Duy: Again With Potential Output

Even More Reactions …• Kevin Grier: The CBO and potential output• Paul Krugman: Duy on Bullard on Duy on Bullard on Tinker to Evers to Chance• Scott Sumner: Where Bullard is right and where he is wrong• Peter Dorman: Potential Output• Karl Smith: Bullard on the Output Gap• Brad DeLong: Thoughts on Potential Output, Monetary Policy, and Economic

Weblogging: A Comment on Scott Sumner's Comment on Bullard and Duy• Barkley Rosser:

The Potential Output Debate And the Older Natural Rate and NAIRU Debates• John Barrdear: Output gaps, inflation and totally awesome blogosphere debates• Karl Smith: More on the Output Gap• Menzie Chinn: More on Potential GDP and the Output Gap

More Recently …• Karl Smith: The Output Gap• Greg Ip (Economist): The worst of all worlds• Felix Salmon: Growth and Debt • Tim Duy: The Output Gap Debate Continues• Mark Thoma: The Gap In Monetary and Fiscal Policy• Tyler Cowen: The quest for microfoundations• Noah Smith: How can debt affect GDP?• Greg Ip: Risking Permanent Damage

• [Note: I missed some posts]

Historical Examples are Mixed

US

Hong Kong

Columbia

Spain

Sweden

Sweden – As Presented by Greg IP

South Korea

Philippines

Indonesia

Argentina

Japan

Norway

Thailand

Malaysia

Finland

Other Examples• Yet another example: Plosser at the recent FRBSF conference, "I don't think

we've met. You've excoriated me several times on your blog."• And there was also a previous instance where Jim Bullard responded to Tim Duy.

Hi Tim,

I read your "Fed watch" column this morning in our news clips. You do an excellent job of summarizing important issues facing the FOMC. I have three comments, all of which I have made publicly recently, and I think they are critical ones for the direction policy will take: --on the "raising interest rates" question... --on the effectiveness of QE...--on the "disciplined" QE program...

• Though in a sign of progress, unlike the most recent case, I had to convince President Bullard to let me post the email on my blog.

• Response after Narayana Kocherlakota’s speech• So blogs can certainly bat ideas around, but do they inform? If not, how can they

do better?

Getting the Right Reaction

• Some of these discussions have been very helpful, thoughtful, and professional. The potential output (and microfoundations) posts are good examples. Another is the discussion about learning models and dynamics sparked by Jim Bullard’s email

• But others have not been as admirable. The response to Narayana’s speech, for example

• Why the difference?

• One big factor is how the target of the criticism, and his or her defenders, respond

• Narayana’s defenders dragged the discussion downward, and blogs followed. But if we missed the message, what about the public?

• Jim Bullard’s response elevated the discussion and turned it in an academic direction (David Altig at Cleveland great at this)

How Might the Fed Benefit from Blogs?

Some of these apply more to an academic blog than a Fed blog, but the points still mostly hold

• Ties to the public– Information on topics in news, etc. easy to find– Teaching materials on YouTube, etc.– Signals a willingness to talk to public groups

• Ties to the Press– Directly as they read blogs– Press is better informed about who to ask questions– Phone, email inquiries– Economists with blogs are less afraid of misquotes, so

more willing to talk (for Fed, have the ability to respond when misinterpreted)

– Helpful to know what other economists are saying before weighing in

– Bloggers in press pools (e.g. Lindau, conference calls).

• Connections to Policymakers– Always been present, but increasing in recent years– E.g., Treasury, Fed seem to stay abreast of blog discussions

(I’ve been called by Treasury officials about posts)– Blogger conference calls from White House, Treasury, etc.– Congress members and staffs at both federal and state

levels read blogs, call or email frequently– Gives policymakers a wider array of views than ever

before, including analytic underpinnings– Allows new ideas to percolate up from academic blogs to

policy proposals (perhaps)

• Connections to Business and Government Economists– I’ve talked to five Fed presidents in the last few

months, four in the last week. I’m here.– Little interaction between business/academic

economists in particular since they are generally interested in different issues (forecasting vs theory)

– But now most have blogs (e.g. Macroadvisors, Treasury, CBO, NY Fed, FRB Atlanta, etc.)

• Connections to Other Disciplines– Blogging has increased the interactions with

political science, law, sociology and other disciplines– Not all of the ties are outside of academia (though

many are, e.g. lawyers on Wall Street)– Example: Conglomerate blog, others on financial

reform legislation, Historians (Edge of the American West) on Depression

• Act as intermediaries who translate technical speak into comprehensible terms

• Real-Time Analysis and Policy Prescriptions– Academic economists are typically “backward looking.”– They examine an event after the fact (e.g. we’re still fighting

about what caused the end of the Great Recession), figure out what happened, and then issue policy advice about how to avoid or attenuate similar circumstances in the future

– Blogs are forcing us to confront data, figure out what happened, and issue policy advice in near real-time

– We aren’t very good at this (Financial crisis example, Lehman, Europe, etc.). Often reach for simple models since they provide quick answers (guided by knowledge of where they can fail)

– Fed blogs can help. Lots of experience at this within Fed.– And maybe academic blogs can help Fed too.

• Classroom Teaching– Blogging has, at least for me, improved my abilities in

the classroom. I can speak on most any topic in the news with a depth and thoroughness that wasn’t there before, and connect much of what we study in the classroom to the real world

– Can help with Fed’s teaching mission• Ask better questions– When more aware of what is most valuable to the

ultimate consumers of research, forecasting, etc., can do a better job of focusing effort

Has Bickering in Public Hurt the Profession?

• Yes, but I don’t think it’s been the disagreements as much as it’s been the tone

• Among academics, perhaps responding in kind is justified. I won’t say that it isn’t, though I don’t think it’s best. Our public face shouldn’t be the disputes we might have among ourselves. Or should it?

• But for the Fed, that obviously doesn’t work

Conclusion• Get a blog• Don’t put too many constraints on it and turn it into Liberty

Street or even macroblog at Atlanta. The relatively unconstrained Cleveland version was much better

• Let them argue and defend the Fed. Respectfully, but firmly and backed by theory/evidence (and as someone told me one of the Fed presidents has learned, if you want to be ignored by the press/public, make it technical and bore them).

• It can be more than one person, but the more people, the more it seems like the official Fed voice. One distinct voice is easier to keep distant – the disclaimer might actually be believed.