Archive for October, 2012
Here are a few historical facts that I consider to be both true and contrary to what most economists (and libertarians) think. All have substantial historical evidence behind them, whereas I find the opposing case generally relies on just so stories. All 3 cast considerable doubt on pro-capitalist stories about trade and development. (I would use bullet points but wordpress seems to be in a mood. You’ll have to imagine them):
Rich countries did not get rich through free trade, but through the use of protectionism and other state interventions such as capital controls and subsidies. This includes but is not limited to: the UK, US, Germany, Japan and Scandinavian countries. Furthermore, more recently developed countries got rich by doing something similar, and in the case of the Southeast Asian ‘Tigers,’ the intervention was even more explicit, with state employees working inside the infant industries. There are a couple of exceptions such as the Netherlands, but even in their case their initial rise was characterised by large state backed monopolies in order to overcome transaction costs. Finally, supposed bastions of free trade such as Singapore and Hong Kong are both characterised by various public provisions, and Singapore has a large GSE sector. The go to accessible source on this is Ha-Joon Chang, though others are also available.
Money did not arise as a solution to the ‘double coincidence of wants,’ a highly improbable concept that begs a lot of questions (such as ‘how exactly does the cow farmer get all his inputs?’) Money primarily arose as a form of credit, and this was intertwined closely with social relations and kept communities bound together. Credit only became ‘exact’ once it was enforced by force rather than social pressure, and evidence suggests the use of coins and notes primarily followed the introduction of taxation. Before this, the overwhelming majority of barter was rare and between different tribes/nations, and often accompanied by feasts, sex and violence (sometimes all at the same time!) The primary source on this is, of course, David Graeber. I have not seen a convincing critic, though not for want of trying (‘it might have happened even if there’s no evidence!’ and ‘but debt is just delayed barter’ respectively).
Peasants did not freely move from their land into 12+ hour days in factories because it was ‘better than the alternative.’ In many cases they had their land taken by foreclosure acts and their hunting severely restricted by game laws. Prior to the industrial revolution they had plenty of problems – they were particularly susceptible to disease and famine – but evidence suggests they had a far greater degree of leisure and control over their working conditions than wage labourers. Michael Perelman’s book gives an in depth treatment of this, and similar arguments can be found throughout marxist writings.
The conclusion is clear, and something I have said before: western capitalism is neither harmonious nor natural. It is a product of specific historical circumstances, some of which were incredibly brutal. Any libertarian who accepts this (and some do) – presuming they adhere to a broadly Nozickean conception of justice – should take a deeply skeptical stance of everything that followed (e.g. the modern world). In fact, most libertarians should probably be revolutionaries.
P.S. This post is partially inspired by Robert Vienneau’s similarly formatted post on economist’s misinterpretation of the history of thought, worth a read.
Chapter 16 of Debunking Economics is a short comment on the use of mathematics in economics. Keen offers a defence of maths itself, suggesting that it is neoclassical economist’s misuse of the tool, rather than the tool itself that has caused the problems in economics today. He compares it to the story of a king who hears an awful tune played on the piano, and proceeds to shoot the piano.
Keen first recaps on some of the mathematical mistakes he has discussed throughout the book, such as the problems with demand and supply curves. I won’t go over these again here – that would be a summary of a summary – but will instead briefly note a couple of general problems with economist’s use of mathematics.
First, it seems economists are not ready to acknowledge the limits of mathematics: mathematicians have known for some time that some equations simply cannot be solved, or are incredibly difficult. Since economists are often dedicated to proving the existence of an equilibrium, they have to stick to overly simplistic analysis, where equations can definitely be solved. This causes them to rely overly on linear models.
Second, Keen makes a pithy mathematical observation about emergent properties and reductionism. Reductionism can be characterised as reducing something down to its component parts. However, if these component parts are multiplied together – rather than added – as you aggregate up, you will see a substantial change in behaviour at the aggregate level. Hence, reductionism has clear and obvious limitations.
Overall, I agree with Keen that mathematics is useful in economics. Jevons put it most accurately when he said “[economics] must be mathematical, simply because it deals with quantities.” However, this shouldn’t mean quantifying things with erroneous measures – such as capital – just for the sake of mathematics. Equations have to have clearly defined parameters, can only be considered as good as their assumptions, and may not have clear implications. Such is the nature of modelling complex systems.
Update: I was going to leave this out for fear of digressing, but a couple of the comments reminded me of a quote Keen used to end the last chapter:
The real problem with my proposal for the future of economics departments is that current economics and finance students typically do not know enough mathematics to understand (a) what econophysicists are doing, or (b) to evaluate the neo-classical model (known in the trade as ‘The Citadel’) critically enough to see, as Alan Kirman  put it, that ‘No amount of attention to the walls will prevent The Citadel from being empty’. I therefore suggest that the economists revise their curriculum and require that the following topics be taught: calculus through the advanced level, ordinary differential equations (including advanced), partial differential equations (including Green functions), classical mechanics through modern nonlinear dynamics, statistical physics, stochastic processes (including solving Smoluchowski-Fokker-Planck equations), computer programming (C, Pascal, etc.) and, for complexity, cell biology. Time for such classes can be obtained in part by eliminating micro- and macro-economics classes from the curriculum. The students will then face a much harder curriculum, and those who survive will come out ahead. So might society as a whole.
This is from the (econo)physicist Joseph McCauley. It’s an interesting reversal of roles for economists, who often label critics as mathematically illiterate. Having said that, I think McCauley’s attitude shares some of the same characteristics that I hate to see in economists.
The Efficient Markets Hypothesis is pretty much indefensible. It is based on ridiculous assumptions: all investors have access to money at the same interest rate, have the same information and interpret information in the same way. It also has counterfactual implications: according to the EMH, markets would stay in equilibrium and move only when new information became available (which they don’t); people would not consistently outperform the market (which they do); and in its strongest form, it actually implies that bubbles can’t exist. The only defence its proponents seem to be able to muster is that it can’t predict anything (and sometimes, that economists full stop can’t predict anything). I could go on, and have, as have others. But what’s more important is exploring the many available alternative theories of finance. This is the purpose of chapter 15 of Steve Keen’s Debunking Economics. Keen goes through and assesses the major alternatives to the EMH on by one.
First, Keen mentions the obvious choice: behavioural finance. But he doesn’t really explore all the different heuristics and biases that people experience in financial markets – that would and has taken entire books. Instead, he objects to the way that EMH proponents initially defined ‘rationality.’ Apart from basically meaning prophetic, it was based on a misreading of John von Neumann, the creator of Game Theory, who said that his definition of rational would only apply when games were repeated enough times. A game with an unlikely but large loss as one of the possible outcomes looks less appealing when you do it once than if you play it 1000 times, allowing the losses and gains to even out.
Hence, Keen touches on something that others have mentioned: the whole idea that behaviour is either ‘rational’ or ‘irrational’ is not a useful way to think about human behaviour. In fact, behavioural finance retains some unfortunate implications carried over from economics: that we need to reduce everything down to individuals making choices, and that if only people behaved how economists think they should, then financial markets would be efficient. Having said that, behavioural finance is promising and useful field, though so far it is still in its early stages with no clear forerunning theories.
There are, however, a few theories which have been fully developed, and look incredibly interesting. The additional bonus is that they are complementary to each other (and to behavioural finance).
A fractal is a pattern that looks the same no matter how much you zoom in or out (see above). So it’s no surprises that one of the implications of the fractal markets hypothesis is that markets display similar patterns of behaviour over a day, month, business cycle or what have you. The fractal markets hypothesis models price movements as a function of previous price movements, which explains the emergent fractal pattern, and also means that stock markets will exhibit a tendency for volatility to produce more volatility, something contrary to the EMH.
A skeptical reader might suggest that this implies future price movements are easy to predict, if only one had the relevant formulas. But a system as complex as this would be highly dependent on initial conditions: just a tiny error in the initial values would soon produce results that were wildly offbase. This is what happens with weather models, and is why weather predictions are more likely to be right the closer you are to the day. It is actually probable that calculating prices accurately ould be computationally impossible using a fractal model.
But this might beg another question: why is the stock market not more chaotic? This is explained by dropping one of the assumptions of the EMH: that investors trade with identical time horizons. Similarly to von Neumann’s observations, a trade that looks bad for a day trader due to large potential losses at any one time, could look good for a long term trader if it has net positive yields over a given period. Hence, introducing heterogeneity makes the model more realistic. A highly promising theory.
The Inefficient Markets Hypothesis (IMH)
Provocatively named by its originator Bob Haugen, who has written three books full of data contrary to the EMH. The IMH suggests that markets systemically overreact to price movements, and hence cause incredibly inefficient allocations of resources.
Haugen identified three sources of price movements: event-driven, error driven and price driven. The EMH assumes away the second two, but Haugen has calculated that the third one accounts for up to 95% of stock market volatility, because price movements create a self-perpetuating spiral as investors seek gains or cut losses. Haugen has concluded that the stock market in its current form is a serious drag on investment, and suggested reducing the length of the trading day or simply having one auction per day.
Physicists have recently turned their hand to economics, and, due their strong empirical bent and the relative lack of data in economics, have been drawn to finance, where streams of data are readily available. Keen comments that much of Econophysics would perhaps be better named ‘Finaphysics.’
There has been a plethora of suggested approaches from the physicists, mostly applying their various chaotic theories to economics: earthquake models, power laws, the Fokker-Planck model. Keen does not go into much detail here because, again, it would take an entire book. He briefly goes over Didier Sornette’s earthquake model, which has been used to make explicit predictions about the future of stock markets. Keen directs the reader to this website, which supposedly tracks its predictions, though I cannot find anything after a quick look.
So there are many alternatives to the EMH, and each involve making explicit predictions and drawing on data, rather than handwaving ‘the market is volatile we can’t do anything about it’ statements. Personally, I consider the fractal markets hypothesis the most promising framework, and it is also one that can easily incorporate elements from the other approaches. I look forward to future developments in all of thee theories.
Me on twitter:
There are two types of people: those who read Hayek and Bastiat and think 'wow,' and those who think 'meh.'—
Unlearning Economics (@UnlearningEcon) October 14, 2012
I am primarily referring to their two well-known (on the internet, anyway) essays, The Use of Knowledge in Society, and What Is Seen and What Is Not Seen. Libertarians and conservatives consider them seminal, perhaps even irrefutable rationales for a private market economy, while leftists generally don’t consider them that important.
I shouldn’t be interpreted as saying people who aren’t impressed by Hayek and Bastiat’s essays are smarter or more perceptive; I just think one’s attitude towards these two essays reflects the libertarian-left divide. I’ll try to explain why as a leftist, I found them underwhelming – perhaps good starting points, but little more.
Bastiat’s essay made a good point at the time: when we look at government spending, we need to remember that it comes from somewhere, and consider the ‘unseen’ effects of taxing. The story he uses to demonstrate this is one where a window is broken and the community observes that the money paid to fix it generates income. This, however, ignores that the money paid to fix it could have been used to, say, buy shoes from a shoemaker, and a result the community could have had it all: the window, shoes and the income. The broken window was therefore a net loss, even though it appeared to generate income.
Bastiat is right within the confines of his own examples, but really the real world throws up so many confounding factors that there is no need to invoke him in contemporary debate. Even when ‘Broken Window’ effects take place, Bastiat himself is not necessary.
People consider Bastiat relevant when discussing tax and spend – if you take money from one place and put it into another, you cannot only observe the positives of where you spend it; you must look at the negatives at the source of tax. But generally these things are considered separately anyway, and negative effects are incorporated into the analysis.
Taxation can have a negative impact on output, but it can also have a positive impact: if the taxed were going to save their money; if an activity is tax-deductible; if we are taxing economic rents, and so forth. If there are going to be negative effects, we can discuss them, too, but this generally revolves around elasticities, dead weight loss income versus substitution effects, and so on. I am not here to debate which of these effects is stronger: the point is that we have moved beyond Bastiat.
Similarly, arguments about stimulus/spending generally revolve around the claim that there are unemployed resources. The ‘crowding out‘ argument – that government spending will displace private sector spending that would have happened otherwise – retains Bastiat in some sense, but really it too has moved beyond him. What we need to discuss – sometimes empirically – are liquidity preference, multipliers, unemployment and the like. Again, there is no need to invoke Bastiat’s essay.
Hayek’s essay centres around the point that, since knowledge in society is highly dispersed among individuals and groups, the best way to coordinate this is through a price system. Individuals buy and sell at certain prices which reflects their knowledge of demand, supply, technology and whatever else. Thus the market system helps to coordinate and bring together dispersed knowledge in a way a single central planner or group of central planners could not do.
The essay does have something of an unsupported feel to it – Hayek’s idea that prices reflect knowledge (and not, say power) is never really justified. Having said that, it is overall a good rationale for a market economy, specialisation and the division of labour as a way to distribute resources.
My major problem is how one-sided his essay is. It would have been greatly strengthened if he’d acknowledged the limits of markets in coordinating dispersed knowledge – for example, that people have disparate knowledge opens the door to fraud, which is pervasive in both small and large quantities. That most people do not know the conditions, location or process by which their goods were produced is actually a justification for a lot of regulation: ensuring people have information about their products, or feel safe that somebody else has ensured they are not being deceived. Hayek does not mention fraud at all.
Furthermore, Hayek retains the phony markets versus governments dichotomy. In his essay there are basically two entities: private folk with dispersed knowledge, who are good, and ‘the government’ – apparently a massive leviathan with its own homogenous set of knowledge – that interferes with this process. But the government, too, is fragmented: the local policeman in a small town shares roughly the same knowledge as its inhabitants; similarly, a regulator will probably know something about the field they are regulating. Note that this is not necessarily an ideological point: that regulators have similar knowledge to the regulated opens the door to regulatory capture. But again, Hayek and his followers do not explore this issue.
Finally, Hayek completely disregards the democratic process in his arguments (if you think saying ‘Public Choice Theory‘ refutes democracy please do not comment). It is far to say that private individuals have a degree of influence over the actions of public enterprise, whether through voting, petitions, protests or what have you. In some ways, democracy brings together dispersed knowledge and wants too, even if it may be, as with markets, imperfect. (Incidentally, local knowledge is actually a good argument for worker democracy, something Chris Dillow is fond of pointing out.) Hayek explores none of this, but if he did his essay would be stronger no matter the conclusions.
In fairness, I may be commenting more on how Hayek’s essay is used rather than his original intent, as it was written during the rise of central communism. But my points apply to many of his modern followers. Perhaps something similar could be said for Bastiat, who did at one point offer limited support to public works programs during recession.
In summary, my problem with these essays is not that they are ‘wrong;’ Bastiat is right, but no longer relevant, and Hayek is roughly right, but incomplete. In the case of Bastiat I see no further need to invoke him, even though we may remember the essence of his point; with Hayek, I feel his essay would be far more respectable had he explored the implications of local knowledge a little more. At any rate, this is something that his proponents should be doing, rather than holding his essay up as pure truth.
It’s been a while since I did my last free market double standards post, which received some flak. To be honest, I think some of the criticisms were fair. Having said that, I don’t search for these contradictions just to wind up libertarians (though that can be a desirable side effect); generally they are quite obvious once you look past the way the right frame the debate.
I think the nature of many right wing arguments lends itself to contradiction: the shape shifting free market, which seems to mean something different to everyone; the nature of reactionary arguments, which causes people to make bizarre claims about proposed policies (see 5). Many right wingers also, despite themselves, end up supporting Republican candidates, which of course lends itself to all manner of contradiction (18).
I’ve also got some more economic theory ones in here. In particular, I’ve noticed economists ask some tough questions about new models, seemingly forgetting the various responses they have to the same criticisms of their own models (or if they don’t have responses, forgetting to apply these apparently pertinent criticisms to their own models). There are no links when I consider a point to be well established.
Anyway, enough preamble – let’s commence:
1. Libertarians emphasise that people didn’t consent to the state. They do not ask questions about whether people consented to the existing property distribution.
2. Mises and other libertarians thought socialism is about supposedly superior men running the world, which is wrong. Mises also said:
You have the courage to tell the masses what no politician told them: you are inferior and all the improvements in your conditions which you simply take for granted you owe to the effort of men who are better than you.
in a letter to Ayn Rand (p. 996).
3. NGDP targeting proponents will generally reference the Lucas Critique during discussions of modern macro. However, I have yet to see one apply the critique to NGDP targeting, when it is actually incredibly pertinent.
4. NGDP targeters defend supposed incidences of Central Bank’s inability to control NGDP (like 2008) by arguing that the CB must announce a policy rule for it to work, but simultaneously hold up Israel and Australia – where the CB has done no such thing – as examples of NGDP targeting working.
6. Austrians generally present businesses as smart and forward looking, but their business cycle theory effectively asserts business decisions will be wildly thrown off by temporary short term interest rates changes.
7. Milton Friedman emphasised that regulatory capture would create a lot of problems, but also suggested looking at the amount of regulations, rather than their actual enforcement, as a guide to the ‘level’ of regulation. So he simultaneously endorsed the bizarre idea that regulation is a dial we can turn up and down, and the idea that it’s really more complicated than that.
8. Milton Friedman argued that businesses have no social responsibility, but should not engage in fraudulent behaviour, and “stay within the rules of the game.” Which is a form of social responsibility.
10. Anarcho-capitalists are against the state, preferring insurance companies to provide what are commonly known as ‘public goods.’ They also have no trouble with monopolies. So if an insurance company that uses force is the only game in town (and owns all the land), how is that different from a state?
11. According to libertarians, if you can possibly leave a job, your freedom cannot be impinged during the job. Of course, many of us are free to leave our countries but libertarians still complain about coercive legislation.*
12. Libertarians are often resistant to the applicability of behavioural economics. Yet companies use behavioural insights in advertising and marketing to expand profits, something that’s usually a sign of efficacy in a libertarian world.
13. Libertarians generally oppose fraud in abstract, but many have the same knee-jerk reactions against prosecuting any specific instance as they have to most questioning of business practice.
14. David Smith (and other austerity defenders) tried to pin the decline in UK output on bank holidays. But this implies a day contributes a significant amount to output, so during every working day the economy must have boomed!
15. Again, austerians such as David Smith can’t decide whether to defend austerity by insisting it’s working (see 14) or whether it isn’t happening at all.
16. Economists complain a lot about sticky wages causing unemployment. But as of yet, I have yet to see one volunteer for a pay cut!
18. Greg Mankiw’s textbook analysis of the financial sector implies asset bubbles do not have a major effect on the real economy. But he also attributes Clinton’s boom to the internet stock bubble, implying the exact opposite.
19. Generally economists argue they shouldn’t be expected to make accurate predictions about the future. But when one of Steve Keen’s specific predictions did not come true, they took it as grounds to dismiss him (btw, bonus points for reading that entire thread and staying sane).
20. Economists, though few endorse a ‘hard’ version of Friedman’s methodology, will generally reference a derivative of it when pushed. However, when criticising alternative models, they raise questions about their internal mechanics.
What is original in the book is not true; and what is true is not original.
*Note also that Hayek roughly endorsed my position on this, but AFAIK he never drew attention to the workplace.
In chapter 14 of Debunking Economics, Steve Keen walks us through the macroeconomic model he has developed in recent years, and discusses the implications its conclusions might have for policy. The model is in its early stages, and Keen himself says there are “many aspects of the model of which [he is] critical.” Nonetheless, it is a promising start to developing an alternative to the dominant DSGE method.
Keen’s is a model of a pure credit economy, with three aggregated agents: workers, firms, and bankers. Instead of focusing on preferences, individuals and market clearing, it focuses on the flow of funds between different sectors. Bankers create their own money in the form of loans*, which at this stage they are only allowed to lend to firms. The firms pay the workers and the interest on the loans, whilst the bankers and workers consume the output of the firms.
The crucial sector here, is, of course, banking, which few neoclassical models include explicitly, as they believe finance plays the role of intermediation between savers and borrowers. However, in Keen’s model the banks are central. He disaggregates them into several accounts: a vault in which to store notes; a safe into which interest is paid and out of which bankers are paid; a loan ledger; firm deposits and worker deposits. The flows between the various agents and accounts are then determined by some arbitrary coefficients, which Keen uses simply to determine whether the model will ‘work’ (i.e. not break down). Each flow (e.g. wages; consumption) is determined by a constant times a stock (e.g. firm’s deposits; worker’s deposits).
This is the point at which economists might scream ‘Lucas Critique,’ but Keen’s comment from an earlier chapter, that is absurd to suggest that any change in policy will have the effect of neutralising arbitrary parameters, applies. Furthermore, there is no theory that is policy-independent, so whilst we must examine the relationship between policy and reality, we cannot render our models immune to it by micro founding them. In any case, the model is in its early stages, and there is plenty of room for adding complexity.
Keen uses this basic model to explore what effect bank bailouts will have. Quelle surprise, bank bailouts have the effect of increasing loans slightly, and benefitting bankers, but don’t do much for the real economy. Conversely, bailing out firms and workers creates a better result for everyone except…the bankers! A small data point can be found in support of this in Australia, where the government bailed out everyone over 18 with $1000, and the economy has performed better than those where the banks have been bailed out. Obviously there are a multitude of conflicting factors, but Keen’s hypothesis does not seem at all unreasonable when taking recent events as whole.
The interesting thing about Keen’s model is that a ‘Great Moderation’ and a ‘Great Recession’ are simply two parts of the same debt-driven process, rather than a ‘black swan’ or some other such event. Debt to GDP rises exponentially in a period of relative tranquility, and this is followed by a huge crash and mass unemployment. A substantial part of this difference from the core DSGE models is created simply by adding banks as explicit agents.
Keen has since developed his model further – he has included ‘Ponzi’ lending, sticky wages/price (which actually stabilise the economy) and a variety of other factors. There is plenty of scope for adding more to the model, such as an exogenously set interest rate with a central bank, but for now the core alone seems to be able to generate behaviour that closely resembles that of a capitalist economy: one prone to cyclical breakdown and intermittent financial crises, not due to any particular ‘friction,’ but due to the inherent characteristics of the system. This should be enough to get any empirically driven economists to pay attention, whether they agree or disagree with the mechanics of the model.
As many readers of this blog will know, Steve Keen is generally the economist credited with best foreseeing and warning about the 2008 financial crash. The 13th chapter of his book is dedicated to showing why his framework foresaw it, and what he did to warn of the coming crisis.
I have seen a few people saying that Keen didn’t really predict the crisis, and what predictions he did make were ‘chicken little’ predictions – repeating “there will be a crisis” until there was one. This is simply not true.
He certainly had the appropriate framework to foresee the financial crisis. His 1995 paper on Minsky and financial instability contains a model prone to endogenous fluctuations, and he concludes that any period of tranquility in a capitalist economy should not be accepted as anything other than a lull before the storm.
The key ingredient in Keen’s framework is, of course, private debt. Since banks create credit ‘out of nothing,’ new private debt adds to nominal aggregate demand. It follows from this that aggregate demand is current income plus the change in debt. I will quote Keen’s numerical example in full to explain why:
Consider an economy with a GDP of $1000 billion that is growing 10% per annum, where this is half due to inflation and half due to real growth, and which has a debt level of $1250 billion that is growing at 20% per annum. AD will therefore be $1250 billion: $1000 billion from GDP, and $250 billion from the increase in debt.
Imagine that the following year, GDP continues to grow at the same 10% rate, but debt growth slows down from 20% per annum to 10%. Demand from income will be $1,100 billion – 10% higher than the previous year – while demand from additional debt will be $150 billion.
Aggregate demand this year will therefore be $1250 billion – exactly the same as the year before. However, since inflation is running at 5%, that will mean a fall in output of 5% – a serious recession. So just a slowdown in the rate of growth of debt can be enough to trigger a recession.
For an economy to grow, either income must increase or private debt must
increase at an increasing rate accelerate; this means that even a slowdown in the rate at which debt is decreasing can create a recovery (as with the US in 2010). The higher the level of private debt relative to income, the more dependent the economy becomes, and the more vulnerable it can be to even a mild slowdown in the rate of change of debt. Thus, in the mid 2000s, when Keen looked up the levels of private debt in developed economies, he was taken aback by the exponential increase:
At this point he went public – most of the evidence for his warning of a coming crisis is from the blog he started, and the monthly reports he released on there, tracking the level of private debt and explaining why it mattered. These reports first analysed the Australian, and then the US economy. He also spoke at a number of events, as well as a few TV and radio appearances which I cannot find online (although the media didn’t really start to take notice until the crisis began).
As a brief aside, I’ve seen a few people mention his failed prediction of the Australian housing crash, and his subsequent having to take a long hike. It is true that he got this one wrong, but there is quite an easy explanation: the government injected a large amount of money into the housing market in the form of first time buyer grants. Coupled with Australia’s resource boom, and the demand from China, this has kept their economy afloat so far.
So the charge that Keen did not predict the crisis, or simply shouted ‘there will be a crisis’ for 10 years until there was one, is false. He has a clear analytical framework that has performed incredibly strongly empirically, both before and throughout the crisis, and he got the dates approximately right (he said 2006). In my next post I will take a more in-depth look at his models and their implications for where we are now.