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June 2005

Joel Spolsky, an amazing polymath linked to frequently in these pages, has just edited a new book titled The Best Software Writing I. The essays were drawn from online sources, and thanks to brevity.org, there is now a list of links to these essays.

I have only read a few, but I can recommend "How Many Microsoft Employees Does It Take to Change a Lightbulb?" and "Powerpoint Remix".

Mandel's criticism of macro

Michael Mandel, chief economist at Business Week, writes some harsh things about modern macroeconomics:

1) Year ahead forecasts of short-run growth, by and large, are terrible, because macroeconomists have developed no good way of forecasting structural productivity growth.

2) Year ahead forecasts of long-term interest rates, by and large, are terrible. On average, forecasts peg the interest rate next year as being equal to the interest rate today.

3) There's little agreement about the magnitude of the link between wealth and consumption, and whether it matters which kind of wealth it is. Forecasts about the effect of the stock market decline on consumption were way off.

4) The estimated "natural rate of unemployment" seems to move around unpredictably, as Samuelson says.

5) Even though macro models have formally included an international component for years, economists have continued to make policy suggestions as if the U.S. was still a relatively closed economy.

Macroeconomics fails the empirical test--it missed the biggest economic events of the past ten years, including the acceleration of growth in the mid-1990s, the tech investment slump of 2000-2002, the continued strength of consumption over the past 5 years, and even the housing boom.

Number 1 surprises me the most; I had thought macro forecasts through six quarters or so were pretty accurate. I wish he would document this claim. Numbers 4 and 5 also surprise me and again, I wish he would document the claims. The fairest criticism seems to me to be the last paragraph, but even there I would like to see more evidence. For instance, I would guess a number of macro models and modelers foresaw the "tech investment slump".

It's funny to me when Liberals suggest we should worry about Europe's opinion or when Supreme Court justices cite other countries' laws as having some bearing on what ours should be. Famed journalist Oriana Fallaci will soon be on trial in Italy for "vilifying" Islam.

Call me crazy, but I prefer the First Amendment.

Book Tag

John Palmer, The Eclectic Econoclast, has asked that I play book tag. I will, but I won't play entirely by the rules.

1. How many books have I ownedHow many do I own?

Sorry, I don't know and I don't care.

2. The last book I bought?

I don't buy many. One of the nice perqs of my job is easy access to a fine university library. And through it, access to two other fine libraries at Duke and UNC-CH.

The last book I bought was an impulse buy while waiting for my family in a mall: Eats, Shoots & Leaves. (There's hope for the country when a book about punctuation makes the best-seller list.)

Before that, I bought Genghis Khan and the Making of the Modern World and enjoyed it. The multi-culti types do have something of a point: I took my share of history in school, including "world" history, but missed out almost entirely on non-Western history. Ol' Genghis was an interesting guy.

3. The last book I read?

Very close together, I read Tradeoffs by Harold Winter and Economics for Lawyers by Richard A. Ippolito.

4. Five books that have meant the most to me?

The heart of the game. Interesting question, of course, but I'm a bit reluctant to answer. My concern is similar to the Academy Award winners who worry aloud about forgetting to thank someone. I might well be omitting something due to failing memory, not lack of significance. And I see no need to restrict the question just to "books". Or to just five entries.

That said, here are five books and two articles that have meant a lot to me:

1. Ernest Hemingway, The Old Man and the Sea. Read it in ninth grade and it absolutely ruined for me all subsequent English classes. Fooey on English and Early American authors! I don't care what feminists and the MLA think, here was a man, and this is how to write.

2. Paul A. Samuelson, Economics, Ninth Edition (the first edition with color!). I went to college without any idea what I was going to major in. First semester I took economics and drew a young teacher, just a year or two out of grad school, who was one of the least effective teachers I've ever had. But at least he had the good sense to assign Samuelson. Almost every chapter thrilled me and I found my major.

3. Thomas Sowell, A Conflict of Visions. The best work of synthesis I have ever read. Phenomenally insightful. If you want to understand politics in the U.S. over the last 40 years and probably for many years to come, you should read this book.

4. F. A. Hayek, "The Use of Knowledge in Society," American Economic Review, September 1945. To me, the central question in applied economics is how much allocation should be by government and how much by markets. In a few simple pages Hayek provides an impressive analysis, an analysis that with experience just looks better and better.

5. Harold Demsetz, "Industry Structure, Market Rivalry, and Public Policy," Journal of Law and Economics, April 1973. Can any issue in applied economics be settled? Isn't it true that for every study in economics that says "X" there will be an equal and opposite study that says "not X"? No. By the early seventies there were about 100 studies that claimed high profits in concentrated industries were evidence of non-competitive behavior. (This was described by one scholar as one of the most strongly verified propositions in all of economics.) In this tour de force, Demsetz begged to differ. And he won.

6. Steven Landsburg, Price Theory and Applications (any edition, 1 through 6). Has made my teaching career easier and more fun. The best book I know of for teaching intermediate micro. The best book I know of for teaching economics to MBAs. The best book I know of for teaching principles of economics to honors students. (Given the slightest excuse, I'll use it.) One of the very first exercises at the end of the first chapter is, "True of false: the invention of a form of birth control that is cheaper, more effective, and easier to use will surely result in fewer unwanted pregnancies."

If you don't think you can get the attention of 19-year-olds with that question, guess again.

7. Berke Breathed, Bloom County Babylon (and all the earlier books in the series). When I was a kid, I loved Peanuts. Later, for a while, I admired and loved Doonesbury. Today, Beavis & Butthead and South Park often give me a laugh. But the absolute king, the finest, most consistent comic I know of, is Berke Breathed. I don't hesitate to call his Bloom County strips genius. And I sure miss Opus.

5. Ask five other people to play.