Semi-Daily Journal

Funny thing. How about that nagging worry by Alan Greenspan about the suplus that would gobble up San Francisco if it were not squandered on tax cuts for the rich?

Yes, we have had fine monetary policy. I hold Alan Greenspan responsible however for helping foster this Administration's absurd and harmful fiscal policy. The fat cats about at Jackson Hole ought to be worrying more about Americans who need good jobs, and less about praising themselves. [Brad DeLong however is a trim cat who cares.]

Don't know how much you can blame Big Al for that one, Anne. They were going to pass tax cuts come hell or high water. It was nice that he agreed, but hardly necessary for them.

Brad wrote that those without models are "quicker to notice whenever the world changes than academic forecasters who". The key-word here I think is *academic*, I don't think models hurt at all, in fact I think all that we just cannot do without models.

But the role of universities is to conserve well proven old models, and the role of the academic is to defend his model rather than modify or develop it.

Industry is usually faster than University, the Wright brothers invented the aircraft with no help whatsoever from University, there was an options market (for oil-press capacity) already in ancient Greecy, long before Merton, Black, Scholes and others. And cargo ships were sailing long before any university ever had planned to create a hydrodynamics department.

Regardless of universities desires to picture themselves as places for research and innovation, they are more often institutions for describe, formalize, document and teach what the outside world already has created.

And that's a very important port that you should meditate on more, Brad. The fact is that the world often doesn't work the way economists think - and it often takes a long time for economists to notice, because the theory makes sense. It's coherent. But the primary test of truth isn't coherence - it's matching with reality.

I grew up in a family deeply involved in the foreign aid community - as a result I am deeply, deeply suspicious of development economics - and from there I go on to a deep suspicion of economics as a whole.

Because what I notice is that the countries that pulled themselves out of third world status mostly didn't do it by following the advice of western economists.