Recent content on Paul Romer
Between Wednesday’s euphoric market reaction to the administration’s narrowed focus on a trade war with only China and the Friday’s quiet surrender exempting Chinese-made computers and smartphones from the President’s reciprocal [sic] tariffs, there was a story on Thursday about the astonishing disconnect between Trump’s belligerence and the nation’s…
There was a sad moment last week during the collapse of Frontier Math. Epoch AI had created this new benchmark to assess claims that the latest crop of AI models reason just like mathematicians with Ph.D.s who work on the research frontier.
Over the weekend, I had a chance to get to know Apollo Robbins. If you don’t recognize the name, Apollo came to public attention when he pickpocketed members of Jimmy Carter’s Secret Service detail.
To protect a hard-earned reputation for objectivity, Nobel laureates in economics usually refrain from making public policy recommendations on the basis of personal values or political beliefs. We comment in public only when logic and evidence show that some proposal is unambiguously worse than a feasible alternative. Donald Trump embraces so many harmful policies that there wasn’t space to…
In a previous post, I wrote that Anaconda got in my way when I was trying to learn Python. After I wrote that, I tried to recall the specifics. What was it that I started doing with the official Python tools that I didn’t do with Anaconda? Mostly, I broke the rules and made a mess.
If you teach a course that requires Python, you’ve encountered students on macOS who are trapped by Anaconda. Typically, they were told to install Anaconda in a first course on Python or data analytics. After that course is over, they discover that they can’t get an official version of Python to run. Many of these students have not used the command line. Many do not understand the…
For the second year in a row, we’ve been through an entirely unnecessary spring quarter’s worth of hand-wringing about whether progress toward lower inflation has faltered. This is a repeat of the mistake that I was boring on about last year. What’s the mistake? Why do “serious” people keep making it?
The URLsafe representation of my public key is given by the 44 characters in the box, including the equal sign at the end. ╔════════════════ PUBLIC KEY ════════════════╗ ║F4qzRqQSe6FRCdhxBcMCdhYnDg8fwz4WijxHGCnXCvY=║ ╚════════════════════════════════════════════╝ This public key is also the path component of the URL for this page.
The Platform Formerly Known As Twitter seems to be morphing into Ashley Maddison ||\times|| Weekend at Bernie’s, with a Hotel California subtext. Meet Fake-Me Even though I stay away from TPFKAT (which I subvocalize as “t-p-f-cat”), I’ve kept my account alive to prevent someone from taking over my handle, @paulmromer. No matter. A fake account has been using the similar…
In my interview on Bloomberg (also picked up here) I responded to a question about what the Fed should do by saying “It would be crazy to raise rates.” I meant that literally. A Fact Beats a Theory Every Time I prefaced my remarks by saying that no one expected what has happened–inflation has declined dramatically without any perceptible reduction in employment or any slow down…
I made a point in an interview today on Bloomberg that is worth emphasizing. “Inflation was lower in 11 of the last 12 months.” It is also worth explaining. Which Index? First, what inflation measure am I using? If you have been following my posts over the last 12 months on inflation (see e.g. here, or here, or here,) you know that I concluded that it is best to use just one index…
Flying with a Plan To descend from 20,000 feet to 10,000 feet, a disciplined pilot follows a plan that allows for stabilizing changes in the timing: Cut the power by enough to establish a rate of descent of about 1000 feet per minute. Monitor the descent for nine minutes. Depending on how things have gone, adjust the time for the gradual return to normal power, making sure that the throttles stop…
Here’s the latest update in a series of posts about seasonal adjustment and progress toward lower inflation. The CPI data released today suggest that we are, indeed, making substantial progress toward a lower inflation rate. The worrisome indications from February and March may simply have been caused by noise. Seasonal Effects If you’ve been following along, you’ll recall that…
I wonder if Kevin McCarthy understands that when you pull this kind of stunt, things can go wrong in ways you don’t anticipate.
You may have seen this headline about today’s inflation numbers, or something like it: Unfortunately, it gets things backwards. The real news from today’s numbers is that the rate of inflation has increased. From February to March, the CPI index that excludes food and energy shows that prices rose at an annual rate of 5.8% this year but at the lower rate of 5.2% between the same months…
If you thought that I was being too cynical when I said in my previous post that the decision makers at Silicon Valley Bank were not “well-intentioned naïfs,” Daniel Gilbert, Todd C. Frankel, and Joseph Menn have an update: Flush with cash from a booming tech industry, Silicon Valley Bank executives embarked on a strategy in 2020 to juice profits that quickly triggered an internal alarm. In buying…
If you were a pilot, how would you feel about being told that the copilot who will be flying with you is fun to talk to but sometimes lies convincingly? Microsoft is already rolling out products that use the AI systems it licensed from OpenAI. On Github.com, it has been offering something that it calls “Copilot” for a couple of years. I’ve tried it twice and each time decided…
After feeding the hype about the terrifying power of artificial intelligence, Sam Altman, the CEO of OpenAI, now confronts the downside of unrealistic expectations. Last week, he disclosed a bug in OpenAI’s software that leaked sensitive user information. The natural response is the question posed in the title. If his AI systems are so powerful that they can read and write code, why…
According to his webpage on the First Republic Bank website, James H. Herbert is the bank’s Founder and Executive Chairman: Mr. Herbert founded First Republic Bank in 1985 and served as CEO for 37 years. From 2007, he also served as Chairman. He was appointed Executive Chairman in 2022. Take the Money In my last post I wrote that to loot a bank, lazy bank insiders “could just lend to a…
The lesson from the 1980s that everyone seems to have forgotten (or never wanted to admit), is that bank losses due to interest rate risk merely set the stage. It’s the strategies that insiders use to loot their doomed institutions that cause so much trouble. The reaction to looting during the S&L Crisis Back in 1993, when George Akerlof and I presented “Looting: The Economic…
One week ago, I wrote that my point estimate of the decrease in inflation during the last quarter of 2022 was 300 basis points, with a subjective uncertainty interval of (-100, 400). The data for February offer less support for a large decrease in the inflation rate. My updated point estimate is a decrease in the inflation rate of 250 basis points, with an uncertainty interval of (-200, 350). The…
TL;DR Using the not seasonally adjusted CPI-U less food and energy, the average rate of increase for the months of October, November, December and January, was 6.5% in 2021–2. In 2022–3, the average for the same four months was 3.5%—down by 300 basis points. What’s Going on with Seasonal Adjustment of the CPI? This week, I discovered that I could no longer reproduce the graphs I posted last…
In my post on the CPI numbers from one month ago, I argued that the data on inflation was better than most news reports suggested. When inflation is falling, the average rate over the last 12 months – the type of measure that government officials and news reports tend to emphasize – give us an indication of the current rate of inflation that is biased upward. When I wrote last month, I…
If you are worried that the decision today by the Fed to increase rates by only 50 basis points is a sign that it is giving up on the fight against inflation too soon, you may not realize how good was the news that we received yesterday about the current rate of inflation. The reason you might have missed this good news is that most discussions of the data focus on an average inflation rate…
One of the side-stories in the FTX saga is the fawning portrait of Sam Bankman-Fried (SBF) that Sequoia Capital published less than 2 months before the collapse of his financial empire. The part that has already raised eyebrows comes toward the end: After my interview with SBF, I was convinced: I was talking to a future trillionaire. Whatever mojo he worked on the partners at Sequoia—who fell for…
I learned everything I needed to know to understand the crypto-crisis and the great financial crisis from the Savings and Loan crisis of the 1980s. For those too young to remember, I suppose it might be useful to resurface the paper that George Akerlof and I wrote three decades ago: When the smoke (and mirrors) clear Compared to their predecessors, the cryto-grifters have been pretty good at…
Inflation in the US Looks Similar A simple point emerges from this summary of the experience with inflation in the leading European countries and the Anglo-offshoots: Across countries, the timing of the recent increase in inflation is very similar. (Click the figure or here to download a larger version. I’ve added units on the graph for the US. The vertical black lines mark Q2 of 2022.) I…
John Cochrane used a theory about Lisa Cook to dismiss her as a member of the Board of Governors of the Federal Reserve System. I know Lisa well enough to know that John’s theory does not fit the facts. I respect both John and Lisa as economists but recognize how they differ. John is a theorist. Lisa is an empiricist. Of the two, I would rather have Lisa on the Board of Governors because she…
Someone who tweets under the handle @enn_nafnlaus cautioned that it is easy to make a mistake when comparing trajectories with different exponential growth rates. In fact, this mistake can bias down the measure of severity that is raising hopes that an omicron infection will be less serious. The bias can be large, off by something closer to a factor of 10 than a factor of 2. The underlying problem…
What follows is a timeline of events leading up to the World Bank’s decision to stop publishing the Doing Business report because of manipulation of the data used in the 2018 and 2020 reports. The timeline relies primarily on the report by the WilmerHale law firm, which is available here . I encourage anyone who wants to express an opinion about the actions of Kristalina Georgieva to read…
When I was asked back in June of 2021 about lessons for science from the pandemic, the gist of what I said was: In a democracy, the community of science can be a uniquely valuable source of objective facts, but assertions by scientists will be trusted only if they are careful not to overreach by advocating on behalf of their preferred political outcomes. (See below for my detailed response.) Three…
Two opposing interpretations of the evidence about waning vaccine protection are grounded in two very different models of the course of a Covid-19 infection. In two masterful tweets, John Burn-Murdoch captured and named them: the dice model and the two-walls model. Under the dice model, waning protection against infection implies waning protection against severe disease. Because there are fewer…
Suppose that a drug company is trying to get approval for a new pain medication that might have some serious negative side effects. How can the company keep regulators from finding any? Even if you have no training in statistics it is easy to understand that the sure-fire strategy is to focus attention on side effects that are rare. The smaller the number of events, the easier it is to dismiss the…
A recent study of vaccine effectiveness using data from the Mayo Clinic shows why it is sometimes better to base policy decisions on a change in a proxy indicator rather than to wait until effects are visible as a change in a direct measure of the variable we care about. In deciding whether to offer third doses of the vaccines, the indicator we care about the most is a vaccine’s…
There are two false dichotomies that are easy to steer clear of in the debate about third doses of the Pfizer and Moderna vaccines. The US government can keep pushing those who don’t yet have two doses to get them even as it offers third doses to those who already have two. The US government can pay manufacturers to produce enough doses to cover all domestic demand and to provide protection…
There are two mathematically equivalent ways to describe the protection that a vaccine offers against such specific outcomes as severe disease: relative risk effectiveness Specialists understand the quirks of these two measures, but the rest of us may not until someone calls attention to them. One of these quirks is that effectiveness activates a cognitive bias that misleads people about the size…
I have a new post that is available on its own subdomain: https://adtax.paulromer.net It offers a specific suggestion about a policy that the citizens of the US take change and protect their social and political discourse from the rapidly growing, unchecked power of the two ad-tech giants, Google and Facebook.
As reported in today’s New York Times , in response to a request by an intermediary, I made a last ditch attempt to explain the value of testing to WH advisor Scott Atlas in an email I sent on Sept. 21. Predictably, it had no effect. He was already dead set on chasing herd immunity.
What It Takes To Be a Leader in Both Basic Science and Technological Progress Paul Romer New York University Statement for House Budget Committee Hearing on Federal R&D Wednesday July 8, 2020 Contents The Weakness Revealed By the Pandemic Science, Technology, and That Trade-Off Thing Listening to Other Voices General Principles People are what matter, not papers or patents Achieve robustness via…
A lightly edited version of this twitter thread: In a week dominated by horrible news, there are signs that the Senate may make the right choice when it passes a new response to the pandemic this July:
Answers to questions the [proposal to use virus tests to reopen schools safely](https://schools.paulromer.net)
The number of virus tests that the US uses to fight the ongoing pandemic will be very sensitive to the cost of a test. Several bits of evidence suggest that the true cost per person tested is about $10. Yet in the United States, the providers of the approved clinical diagnostic tests for SARS-CoV-2 are able to charge a significant monopoly markup over their marginal cost of doing the test. The US…
According to the policy guidance on reopening schools from the American Academy of Pediatrics (AAP): “The AAP strongly advocates that all policy considerations for the coming school year should start with a goal of having students physically present in school.” Physical presence matters because students learn less when they study remotely. Students from poorer families suffer the most.…
It might be time to review the massive damage that the FDA is doing by restricting the supply and use of tests for the SARS-CoV-2 virus. Massive? With enough tests, the US could have avoided the enormous cost that this virus is imposing – at least 200,000 excess deaths and $8 trillion in lost output . Here I’ll provide a recap with links about how the FDA responded to just a couple of…
Labor market: In May 2019, about 5.9 million people were unemployed in a labor force of 163 million. In May 2020, the full count of the unemployed is about 30.2 million, which when divided by the May 2019 labor force, implies an effective unemployment rate of 18.6% GDP: By 2030, current projections foresee a cumulative loss in real GDP of $7.9 trillion New Infections: About 100,000 people in the…
(Data updates, May 1) In this post, I list a number of specific applications where tests could save lives and restore confidence. Tests could stop the deaths in nursing homes. They could make it safe for nurses to go back to their jobs. They could make parents feel safe taking their children to the clinic to get a vaccination. Such applications yield an immediate demand for 13.9 million tests per…
Imagine a world in which the only way to get a soda is to get your doctor to write a prescription. It costs $20 per can. Your insurance company pays. The economy produces about 100,000 sodas each day. If you lived in this world, do you think you could get people to scale up the production of soda to a level of millions of cans per day? It would be a challenge, but not because it is hard to produce…
America is confronting two crises: an economic crisis laying waste to our livelihoods and a health crisis threatening our lives. The twin crises are deeply intertwined: our economy cannot be reopened without credibly addressing fears of infection and resurgence.
How much difference does it make if the test used to send people into quarantine is bad? Not as much as you might think. The simulated data here contrast policies that isolate people who test positive using four different assumptions about the quality of the test. Even a very bad test cuts the fraction of the population who are ultimately infected almost in half. And when I say bad, I mean bad…
In a previous post, I presented a “dots in a box” model of the spread of a virus. In this post, I use it to compare the economic and social cost of two policies that are equally effective at containing the virus. What the simulations show is that if we use a test to determine who gets put into isolation the fraction of the population that needs to be confined and isolated is…