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This blog is based on an article in the Journal of Social Policy by Marie Valentova, Anissa Amjahad and Anne-Sophie Genevois. Click here to access the article. In Luxembourg, the likelihood of mothers and fathers taking parental leave is substantially lower in very small companies compared to larger firms. Mothers working in predominantly female-dominated sectors… Continue reading Unlocking the Influence of Work Environment: How Company Size and Industry Shape Parental Leave Choices →

Call for Abstracts for an Online Workshop on September 11–15, 2023. Deadline: May 31, 2023

Call for Papers for a Research Stream at the 16th Conference of the European Sociological Association in Porto, Portugal, on August 27–30, 2024. Deadline: January 15, 2024

Call for Papers for a Workshop in Graz, Austria, on November 16–17, 2023. Deadline: August 31, 2023

Call for Papers for a Routledge Handbook. Deadline: March 31, 2024

For three years, I have been waiting for good news from Washington to share with Yvette Beatty. Beatty, 63, is a home health aide in Philadelphia who has provided care for elderly adults and people with disabilities for nearly 40 years. Like most direct care workers, she earns very low wages despite the increasing demand…

Call for Papers for a Research Topic of Frontiers in Sociology. Deadline: August 31, 2023

Call for Applications of Vienna University, Austria. Deadline: January 15, 2024

Call for Abstracts for a Special Issue of Socius: Sociological Research for a Dynamic World. Deadline: June 1, 2023

This post is from a set of comments I gave at the NBER Asset Pricing conference in early November at Stanford.  Conference agenda here. My full slides here. There was video, but sadly I took too long to write this post and the NBER took down the conference video. I was asked to comment on "Downward Nominal Rigidities and Bond Premia" by François Gourio  and Phuong Ngo. It's a very nice clean paper, so all I could think to do as discussant is praise it, then move on to bigger issues. These are really comments about whole literatures, not about one paper. One can admire the play but complain about the game. The paper implements a version of Bob Lucas' 1973 "International evidence" observation. Prices are less sticky in high inflation countries. The Phillips curve more vertical. Output is less affected by inflation. The Calvo fairy visits every night in Argentina. To Lucas, high inflation comes with variable inflation, so people understand that price changes are mostly aggregate not relative prices, and ignore them. Gourio and Ngo use a new-Keynesian model with downwardly sticky prices and wages to express the idea.  When inflation is low, we're more often in the more-sticky regime. They use this idea in a model of bond risk premia. Times of low inflation lead to more correlation of inflation and output, and so a different correlation of nominal bond returns with the discount factor, and a different term premium. I made two points, first about bond premiums and second about new-Keynesian models. Only the latter for this post. This paper, like hundreds before it, adds a few ingredients on top of a standard textbook new-Keynesian model. But that textbook model has deep structural problems. There are known ways to fix the problems. Yet we continually build on the standard model, rather than incorporate known ways or find new ways to fix its underlying problems. Problem 1: The sign is "wrong" or at least unconventional.The basic sign is wrong -- or at least counter to the standard belief of all policy makers. In the model, higher interest rates cause inflation to jump down immediately, and then rise over time. Everyone at the Fed uniformly believes that higher interest rates cause inflation to go nowhere immediately, and then gently decline over time, with "long and variable lags." Larry Ball pointed this out 30 years ago. The behavior comes straight from the forward-looking Phillips curve. Lower output goes with lower inflation, relative to future inflation. I.e. inflation rising over time. To be clear, maybe the model is right and the beliefs are wrong. It's amazing that so much modeling and empirical work has gone in to massaging theory and data to conform to Milton Friedman's 1968 proclamation of how monetary policy works. The "long and variable lags" in particular are a trouble to modern economics. If you know prices are going up tomorrow, you raise prices today. But that's for another day. This model does not behave the way most people think the economy behaves, so if you're going to use it, at least that needs a major asterisk.  Well, we know how to fix this. You can see that sneaking lagged inflation into the Phillips curve is going to be a big part of that.  Christiano Eichenbaum and Evans, 20  years ago, produced a widely cited model that "fixes" this problem. It has a lot of ingredients. Most of all, it assumes that wages and prices are indexed. Firms and workers that don't get tapped by the Calvo fairy to change their price or wage nonetheless raise by observed inflation. This gives a Phillips curve with lagged inflation. Moreover, in preferences, investment, and this Phillips curve, CEE modify the model to put growth rates in place of levels. (More review in a three part series on new-Keynesian models here.) The result: If the funds rate goes down (right panel) unexpectedly, inflation goes down just a bit but then turns around and goes up a year later. (Several other authors get to the same place by abandoning rational expectations. But that has its own problems, and it's going to be hard to incorporate asset pricing that way. Much more in Expectations and the Neutrality of Interest Rates) Great. But notice that neither Gourio and Pho nor pretty much anyone else builds on this model. We cite it, but don't use it. Instead, 20 more years of NK theorizing studies different extensions of the basic model, that don't solve the central conundrum. Problem 2: Fed induced explosionsThe standard new-Keynesian model says that if the Fed holds interest rates constant, inflation is stable -- will go away on its own -- but indeterminate. There are multiple equilibria. The standard new-Keynesian model thus assumes that the Fed deliberately destabilizes the economy. If inflation comes out more than the Fed wishes, the Fed will lead the economy to hyperinflation or hyper deflation. Under that threat, people jump to the inflation that the Fed wishes to see. But the Fed does no such thing.  Central bankers resolutely state that their job is to stabilize the economy, to bring inflation back from wherever it might go. Despite thousands of papers with new-Keynesian equations written at central banks, if anyone were ever to honestly describe those equations in the introduction, "we assume that the central bank is committed to respond to inflation by hyperinflation or deflation in order to select from multiple equilibria" they would be laughed out of a job. This has been clear, I think, since 2000 or so. I figured it out by reading Bob King's "Language and Limits." My  "Determinacy and Identification" in the JPE 2011 was all about this. We've also known at least one way to fix it, as shown: fiscal theory. OK, I'm a broken record on this topic. Instead, we go on with the same model and its underlying widely counterfactual assumption about policy. Problem 3: The fit is terribleA model consists of a set of equations, with the thing you want to determine (say, inflation) on the left, the economic causes described by the model on the right, plus "shocks," which are things your model can't capture. In the explanation part, there are parameters (\(\sigma, \ \beta, \ \kappa, \ \phi\)), that control how much the things on the right affect the things on the left. The fit of new-Keynesian models is usually terrible. In accounting for economic variables (\(x_t,\) \(\pi_t, \) \(i_t \) here), the error terms (\(\varepsilon\)) are much larger than the model's economic mechanisms (the \(x,\) \(\pi\) on the right hand side). Forecasts -- predicting  \(\pi\), \(x\) ahead of time -- is worse. For example, where did inflation come from and why did it go away? Expected inflation hasn't moved much, and the economy just plugged along. Most of the rise and fall of inflation came from inflation shocks.  Related, the fit of the models is about the same amount of terrible for different values of the parameters. That means the parameters are "poorly identified" if identified at all. That means that the mechanisms of the model -- say, how much higher interest rates lower output, and then how much lower output affects inflation -- are weak, and poorly understood. In part this isn't often noticed because we got out of the habit of evaluating models by fit in the 1980s. Most models are evaluated, as I showed above for CEE by matching select "identified" impulse response functions. But as those response functions also explain small variances of output and inflation, it's possible to match response functions well, yet still fit the data badly, i.e. fit the data only by adding big shocks to every equation. I don't know of good fixes here. Old fashioned ISLM models had similar problems (See Sims 1980). But it is a fact that we just ignore and go on. The Phillips curve is a central problem, which has only gotten worse lately. Unemployment was high and declining throughout the 2010s, with stable inflation. Inflation came with high unemployment in 2021. And inflation fell with no high real interest rates, no unemployment, and strong growth in 2022-2023. But what will replace it? So where are we?Macro is surprisingly un-cumulative. We start with a textbook model. People find some shortcomings and suggest a fix. But rather than incorporate that fix, the next paper adds a different fix to the same textbook  model. One would think we would follow the path on the right. We don't. We follow the path on the left. This is common in economics. The real business cycle literature followed much the same path. After the King Plosser Rebelo stochastic growth model became the standard, people spent a decade with one extension after another, each well motivated to fix a stylized fact. But by and large the next paper didn't build on the last one, but instead offered a new variation on the KPR model. Posteriors follow priors according to Bayes' rule, of course. So another way of putting the observation, people seem to put a pretty high prior on the original model, but don't trust the variations at all. I sin too. In Fiscal Theory of the Price Level  I married fiscal theory with the new-Keynsian IS and Phillips curve, exactly as above, despite problems #1 and #3. Well, it makes a lot of sense to change one ingredient at a time to see how a new theory works. I'm unhappy with the result, but I haven't been able to move on to a new and better textbook model, which is what has occasioned several of these related posts.  Wę need a digestion. Which of the new ingredients are reliable, robust, and belong as part of the new "textbook" model? That's not easy. Reliable and robust is very hard to find, and to persuade people. There are so many to choose from -- CEE's smorgasbord, capital, financial frictions, heterogeneous agents, different expectation formation stories, different pricing frictions,  and so on. What's the minimal easy set of these to use? Part of the trouble lies in how publishing works. It's nearly impossible to publish a paper that removes old ingredients, that digests the model down to a new textbook version. The rewards are to publishing papers that add new ingredients. Even if, like CEE, everyone cites them but doesn't use them. I've asked many economists why they build on a model with so many known problems, and why they don't include known fixes. (Not just fiscal theory!) The answer is usually, yes, I know about all these problems, but nobody will bother me about them since every other paper makes the same assumptions, and I need to get papers published.     I went on a bit of a tear here as I referee lots of great papers like this one. Every part of the paper is great, except it builds on a model with big flaws we've known about for 30 years. It feels unfair to complain about the underlying model, since the journal has published and will publish a hundred other papers. But at what point can we, collectively, scream "Stop!" The new-Keynesian model has been the standard model for an astonishing 30 years. None of ISLM, monetarism, rational expectations, or real business cycles lasted that long.  It's even more amazing that it is so unchanged in all this time. It is definitely time for a better textbook version of the model! Maybe this is a plea for Woodford, Gali or one of the other NK textbook authors, which much better command of all the variations than I have, to bless us a new textbook model. Or, perhaps it's time for something totally new. That's not fiscal theory per se. Fiscal theory is an ingredient, not a model.  You can marry it to new-Keynesian models, as I, Leeper, Sims, and others have done. But you can also marry it to old ISLM or anything else you want. Given the above, maybe there isn't an existing modification but a new start. I don't  know what that is. (My comments also have some similar comments about term premiums and how to think about them, but this post is long enough.) Update:Twitter correspondents Stéphane Surprenant and Tom Holden point me to The Transmission of Monetary Policy Shocks by Silvia Miranda-Agrippino Giovanni Ricco in the AEJ Macro, and Inflation, output and markup dynamics with purely forward-looking wage and price setters by Louis Phaneuf, Eric Sims, and Jean Gardy Victor in the European Economic Review. The former is a VAR with high frequency measurement of the monetary policy shock. And.. Source: Miranda-Agrippino and RiccoThe price level as well as the inflation rate can jump down immediately when the interest rate rises! (I think the graph plots the level of CPI, not growth rate.) That's even stronger than the baseline model in which the price level, being sticky, does not move, but the inflation rate jumps on the interest rate rise. The latter is a nice theoretical paper. It adds a lot of the CEE assumptions.  I overstated a great deal that others have not used these ingredients.  They are used in these "medium scale" models, just not in "textbook" models. However, it gets rid of indexed prices and wages with purely forward looking Phillips curves. It adds intermediate goods however. This makes prices changes work through the network of suppliers adding interesting dynamics, which has always struck me as a very important ingredient. And...Source: Phaneuf, Sims ,and VictorThe main estimate is the dark line. Here you see a model with the conventional response: inflation does not move on impact, and increases some time after the interest rate rise.  So, we can switch places! Estimates can replicate the conventional model, with an instant inflation response. Models can replicate the conventional estimates, with a slow inflation response. This one is much prettier than CEEs. 

Call for Applications of Aarhus University, Denmark. Deadline: May 12, 2024

Call for Applications of the Institute of Czech Literature in Prague. Deadline: February 29, 2024

 this is not a picture of meThe dominance of intellectual property in film is driven by one central affect, or affective composition, nostalgia, the sense that something about the past was once better. It is unclear, however, if this mood is oriented towards the actual films of the recent past, or childhood itself. What is it we are nostalgic for? In asking this question I am taking a Spinozist definition of an emotion, an affect, that affects tell us something about ourselves, our bodies and capacities, and something about the object that has affected us, but they do so in a confused and jumbled way,  making it difficult to understand which is which. If one wanted to offer a Spinozist definition of nostalgia, since none is offered in the definitions of the affect, at least directly, then one could say that it is joy with the idea of an absent cause. This makes it especially ambivalent, since it is not clear if the cause is only momentarily lost or gone for good. Is it possible to experience it again, to regain that joy or does it become an object of sadness. The reign of intellectual property depends on the confusion regarding the object of desire and the ambivalence of the affect, making us believe that it is the intellectual property of the past we desire, want to see again and again, when it might just be childhood itself.  How can we come to form an adequate idea of this nostalgia, understand its true causes?My answer to this question are framed between two half remembered statements. The first, from wayback in graduate school, was something that Max Pensky said in a class on Walter Benjamin. That was over twenty years ago, and I cannot recall it exactly, but it was something to the effect of nostalgia is often a memory of a prior stage of commodification. The second is something that Boots Riley once said in an interview, that so many decisions made by the people with money, producers, studios, etc., are predicated on real ignorance of music, movies, etc. that they are producing. To put it in Spinozist terms, they only know the effect, that it made money. Boots Riley said this in explaining why his own unapologetically communist agitprop group The Coup got a record deal. The record label wanted to sign another group from Oakland. That is just one example, but there are more. The massive success of Star Wars in the seventies is often cited as the explanation for so many science fiction films, Alien, Outland, hell, even Félix Guattari got a meeting for his science fiction screen play. Of course this list also includes films like Krull and Lazerblast. To put it back in Benjamin's terms, this mad grasp for money coupled with a poor understanding of the success of Star Wars explains one of the weirdest toys from my childhood, the Alien action figure my brother got one Christmas. Making a toy from an R-rated movie, that scared the hell out of me as a kid, makes sense only if you think in terms of effects and broad categories. Alien is science fiction like Star Wars, and Star Wars toys made a lot of money. It seems unimaginable to us now because it would not happen today. The same is true of another object of misplaced nostalgia, The Star Wars Holiday Special. The reason that it is such an object of nostalgia despite being by every account terrible is because it would not happen today: no studio would waste valuable intellectual property having on a TV special in which the characters that were being marketed as everything from toys to bed sheets made space for a musical number with Bea Arthur. 
Film studios have in some sense gotten better at managing their intellectual property. The Guardians of the Galaxy Christmas Holiday Special is less a strange mashup of space opera and variety TV than it is a moment in cross platform synergy, drawing attention to the Disney channel and keeping interest for the next installment of Guardians of the Galaxy Film. We should be clear what success means in this context, it means return on investment, and not some other criteria, exchange value not use value.  The period of the highpoint of the IP film, from roughly 2008 until now, is a period of consistent return on investment. Which is not to say that all of these films predicated on Intellectual Property are guaranteed success, even the MCU, in which every movie is a commercial for the next movie, is breaking under the contradiction between brand synergy and narrative closure. Even the contemporary forms of data extraction which know not only what people watch, but for how long, and when they binge, cannot create a guaranteed model for reproducing success. It produces copies. The current culture industry is aimed more towards making Krull than Alien, of extracting a few things that work, space princes, cool weapon, quest, monster sidekick, etc., into another film than gambling that the popularity of a space opera would translate into a horror movie about an alien and an evil corporation. The existence of Barbenheimer can in some sense be understood as a celebration, not of failure or even originality, but the inability for the culture industry to program everything. It turned a moment of counter-programing into a cultural event. Part of the joy of it was the feeling that there will not be another event like it, Saw Patrol notwithstanding. It was made by the audience and not the industry. What is true, however, is that the failures are less interesting than they used to be. In the summer of ninety eighty-two The Thing and Bladerunner were released on the same day, both flopped, but transformed their respective genres to become classics. That is what I am nostalgic for, for failure. I do not think that kind of failure is coming back. So in that way nostalgia is for me a sad affect, a memory of a phase of commodification that seemed more creative, more uncertain, if only because it is measured against the current real subsumption of creativity under property. I will let J-Church play us out. I am also nostalgic for an earlier day of punk rock, but that is a different story. 

If you want to keep the lights on, it might be a good time to shop for a generator.