Can "culture" predict economic development?

In this essay, Daniel Altman predicts that China will fall short of the West, because of its "Confucian" culture:

[Unconditional] convergence didn't seem to be happening in many parts of the world [in the last century]...[S]ome countries that appeared to be catching up to the West for a few decades, like Japan, hit a wall before they reached the same standards of living, falling inexplicably short of the target. 

In the very long term, [cultural] factors may turn out to be the most important ones [in China's development]. 

Confucianism is perhaps the leading influence on Chinese business practices...The teachings of Confucius date back centuries, and they are deeply ingrained in Chinese society...Yet some of its central tenets, though they may have benefits at the social level, are not necessarily conducive to economic growth. 

Confucian ethics teach that one should value the collective over the individual...A second and related tenet of Confucianism...encompasses the “respect for elders” that is a hallmark of many East Asian civilizations. In Confucianism, this deference belongs not just in family relationships but also between ruler and subject, master and servant, and employer and employee. 

Together, these tenets of Confucianism — and the way they have been interpreted by the Chinese authorities in recent times — have helped to maintain rigid hierarchies in Chinese businesses... 

There is one other cultural current that runs just as deeply as Confucianism...Chinese people learn a very particular story of the birth of their nation, in which the great struggle through the millennia has been to unite the enormous land mass and diverse ethnicities of China into one nation...The message is clear: to be united and realize the dreams of a great Chinese nation, the Chinese people need strong rulers who brook little dissent. 

The message carries through to the boardrooms of Chinese companies, which tend to concentrate the instruments of power in the hands of a single strongman... 

All of these factors will combine to lower the target for material living standards in China — or, to put it more technically, they reduce the level of per capita income toward which China is converging. With these factors in place, China simply is not in the same convergence club as the United States...

China may just manage to catch the United States and become the world’s biggest economy. But it will hold onto the title for only a few years before the United States, growing more quickly in both population and the productivity of its workers, passes China again... 

[A]s Japan’s example goes to show, holding onto culture — and other deep factors — can keep the limits to growth in place.

This column provides an object lesson in the degree to which using Twitter has limited my vocabulary. I'm struggling to think of a concise description of this essay that does not involve the word "derp".

First, I need to deal with the most glaringly annoying part: the Japan example. Altman claims that Japan failed to catch up with the West. This is laughably false. Here are the 2012 per-capita GDP numbers (at PPP) for Japan and its three closest analogues among the Western nations, the rich, medium-sized, ethnically homogeneous nations of West Europe (source: IMF):

• Germany:   $39,028
• UK:           $36,941
• Japan:      $36,266
• France:      $35,548

In case you wondered, here are the nominal GDP numbers (source: IMF):

• Japan:      $46,736
• Germany:   $41,513
• France:      $41,141
• UK:           $38,589

Hopefully, you are convinced that Japan has fully caught up to the West. Its per-capita GDP is no less than the GDPs of the countries that produced Locke and Hume and Adam Smith, Wittgenstein and Kant, Descartes and Voltaire. +1 for convergence, -1 for "culture". Why Altman feels justified in his casual assertion that Japan "fell short" of the West remains a mystery.

Anyway, let's move on to the claims about China's "Confucianist" culture. Just for fun, here are the GDP (PPP) numbers for two other East Asian countries commonly labeled as "Confucianist" - South Korea and Taiwan:

• Taiwan:      $38,749
• Korea:        $32,272

As you can see, Confucianism has not stopped these countries from rivaling Western ones in wealth. Taiwan, in particular, is populated by people of the exact same cultural heritage as mainland China, and yet has managed to overtake both the UK and France in GDP. Singapore, a city-state populated mostly by Chinese people, is even richer, rivaling the small countries of North Europe.

Anyway, I could sit here and question every assertion Altman makes about China's "Confucianist" culture - "How do you know that's culture and not institutions?" "Where's your data?" "Have you even ever worked in China?" - but I think the Taiwan and South Korea GDP numbers do the trick. I rest my case. +1 for convergence, -1 for "culture".

This clearly illustrates the perils of engaging in what I like to call "phlogistonomics" (a term coined by Matt Yglesias). The method goes like this:

Step 1: Take some hard-to-understand phenomenon, like economic growth. Explain the parts you can explain with standard economics (capital, labor, prices, etc.). What's left - the part that really drives the model - is the phlogiston.

Step 2: Label the phlogiston. Make sure you choose a name that refers to something people in general already believe in. "Culture" is great. "Confidence" works too, as do "institutions", "technology", "power","the true desires of the Fed", and of course, "irrational expectations" (the favorite of us behavioral finance types, hehe).

Step 3: Act like you know exactly how the phlogiston behaves. Predict its effects based on commonly held national/ethnic/gender stereotypes ("Greece is in trouble because Greeks are lazy!"), or your political beliefs ("Obama the Kenyan Muslim socialist is killing business confidence!"), or any plausible-sounding story that plays to popular prejudices, preconceptions, fears, or hopes.

Yes, in the end, conventional wisdom and stereotypes and politics end up driving the model. But along the way, your careful selection of like-minded sources, and your authoritative tone, allow you to seem really wise and sagely in front of an audience of people who were primed to believe your conclusion.

Unfortunately, you may run into a problem: Someone may use the same phlogiston, but different assumptions, to reach the exact opposite conclusion. Scott Sumner, for example, believes that China's culture is precisely what makes its catch-up to the West inevitable:

Like Japan, like Britain, like France, indeed like almost all developed countries, [China] will grow to be about 75% as rich as the US, and then level off.  It won’t get there unless it does lots more reforms.  But the Chinese are extremely pragmatic, so they will do lots more reforms... 

If we want to learn from the Chinese culture, learn from Singapore(or Hong Kong), which is how idealistic Chinese technocrats would prefer to manage an economy; indeed it’s how China itself would be managed if selfish rent-seeking special interest groups didn’t get in the way.  But they do get in the way—hence China won’t ever be as rich as Singapore; it will join the ranks of Japan, Korea, Taiwan, and the other moderately successful East Asian countries... 

I expect China to end up in the “normal” category, mostly based on its cultural similarity to other moderately rich East Asian countries.

Altman, you have met your match. Now all we, the readers, have to do is decide which of these European-Americans has a deeper, subtler understanding of the Chinese culture, and we'll know which one to believe!

(For the record, I'd go with Sumner. Also, Chinese culture seems a lot like American culture to me, but that's mainly based on my students, who of course chose to move here. If I had to predict, I'd say China will reach 50% of U.S. GDP, but that equaling us will be hard because of global resource constraints.)

Of course we could always admit that, well...we don't really know what's going to happen to Chinese growth. But we don't want to admit that. Because we don't like to not know things. Not knowing things is scary. There is safety in derp.


Update: Altman responds, noting that Japan's GDP is markedly less than that of the U.S., Canada, and Austrialia. Of course, I could have pointed out that Singapore, with a GDP (PPP) per capital of $60,410, is considerably richer than any of the countries named. But I thought it more appropriate to compare countries of similar population sizes and resource endowments...

Matt Harding: Around the world, one dance at a time with Google Maps

Today is International Dance Day, a celebration of a universal art form that spans cultures and countries. But dancing isn’t just limited to holidays. Since 2003, Matt Harding has famously been dancing his way across the globe with people from all walks of life and sharing to millions on his YouTube channel. His mission is simple: Dance. Dance with everyone. Dance everywhere. Dance to spread joy.



Matt’s journey began with a serendipitous, single dance step in Hanoi. While traveling through Southeast Asia, his friend encouraged him to dance for the camera—and he just kept dancing. At first, he was amused by the idea of capturing himself dancing in front of famous landmarks and in famous cities around the world. Since then, Matt’s videos have evolved beyond a single man dancing; his videos now focus on individuals that gather together to share in the fun of dance, as you can see in his 2012 YouTube film.



The joy that goes into Matt’s work is apparent—and well documented. However, there’s also a fair amount of planning involved to choreograph his efforts. Matt relies on Google Maps for comprehensive, accurate and useful tools to execute and track his steps.

Before he sets off on each adventure, Matt uses Google Maps to scout various locations. Using Street View and photos in Google Maps, he finds landmarks and points of interest around the globe that are prefect dance spots. For instance, he came across Piazza del Popolo while exploring Rome with Street View. These tools come in handy to help Matt choose a backdrop to highlight his assembly of exuberant, local dancers.

Piazza del Popolo in Rome - View Larger Map

Scouting is only part of the process. Once Matt has coordinated a group in a city, he helps everyone get to the designated destination by creating a customized My Map and sharing it with the participants so they can easily navigate to the planned meetup location. The end result is something everyone around the world can relate to.

Follow Matt as he continues to travel the world on his site www.wherethehellismatt.com.



Keep dancing!



Posted by Dave Kim, Google Maps Marketing Manager

Google Now on your iPhone and iPad, with the Google Search app

Many of us can no longer imagine life without our smartphones. We use them for all sorts of things, like getting reminders of important calendar appointments (say, a first date), and driving directions to the Italian restaurant where your table for two awaits. Today, with the launch of Google Now on iPhone and iPad, your smartphone will become even smarter.



Google Now is about giving you just the right information at just the right time. It can show you the day’s weather as you get dressed in the morning, or alert you that there’s heavy traffic between you and your butterfly-inducing date—so you’d better leave now! It can also share news updates on a story you’ve been following, remind you to leave for the airport so you can make your flight and much more. There’s no digging required: cards appear at the moment you need them most—and the more you use Google Now, the more you get out of it.



Google Now for iPhone and iPad is available as part of the updated Google Search app. Together, Google Now and voice search will make your day run a little smoother.

In addition to the handy cards in Google Now, the Google Search app still gives you instant answers to all your questions. Try tapping the microphone and speak to your phone—you’ll get quick answers spoken back to you. For example, ask Google, “Do I need an umbrella this weekend?” and you’ll get the forecast. Or ask “Who’s in the cast of ‘Oblivion’?” to decide if you want to see it. Voice Search is particularly handy on the go—try "Show me nearby pizza places" and you'll see a map of restaurants around you with directions, phone numbers, ratings and hours.







Get the Google Search app with Google Now from the App Store. Drag it to the tray, open it, sign in and you’re ready to go.



Posted by Andrea Huey, Engineer

Will Abe address Japan's number one problem after all?

First Abe surprised me by actually following through with his monetary policy promises; he appointed Haruhiko Kuroda to the BOJ, and together they are embarking on the most ambitious attempt at "reflation" ever tried by a central bank. It remains to be seen if this will actually work, of course; Japan remains mired in deflation even after the announcement, casting further doubt on the effectiveness of the "expectations channel" of monetary policy. But Abe is trying, and that is the important thing.

Now, Abe is talking about an issue that I think is far more important than monetary policy - and one which I had even less hope that he would address. I'm referring to the status of women in the Japanese economy.

One of the essential things that differentiates Japan's economy from ours is that in Japan, women still form an economic underclass. Japan's labor market has an infamous "two-tiered" structure, in which there are two kinds of workers: "Real workers" and "contract workers". The former have (theoretically) lifetime employment guarantees, guaranteed yearly raises, bonuses, and full benefits, with the possibility of promotion to top management. The latter have low, stagnant salaries, few benefits, few guarantees, and little if any possibility of promotion. The former are mostly men. The latter are mostly women.

Not only is this a tremendous waste of talent, it discourages women from entering the workforce. For this reason, most Japanese mothers quit work when they have kids, and working Japanese women tend to have few kids. In addition to holding down Japan's GDP, this is often cited as one cause of Japan's low fertility rate.

Many of Japan's peculiarities seem less peculiar once you know this fact. For example, Japan's unemployment rate is famously low. But Japan's labor force participation rate is even lower than ours. Women make up much of the difference (teenagers and early forced retirees make up the rest).

Anyway, it has long been known that women's exclusion from the Japanese corporate system is one of the main things holding back Japan. In addition to boosting U.S. total GDP by getting more people into the formal workforce, women's increased economic equality has thought to have boosted American productivity by quite a lot. Japan has received no such boost. Pretty much everyone knows that Japan needs to make women more equal; everyone from Aung San Suu Kyi to the U.S. Embassy to the IMF harps on the point. A thousand articles have been written on the topic, but not much has changed.

Why has not much changed? Japan's protected economy, heavily subsidized "zombie" companies, and weak corporate governance insulate it from the Beckerian free market forces that probably helped advance gender equality in the U.S. in the 80s and 90s. In the absence of such market pressures, the most proven route to gender equality is the Swedish/French route, in which the government basically just tells companies "Thou shalt hire and promote women." This method has proven successful in those highly regulated, somewhat protected European countries.

However, Japan's politics has long been dominated not by France/Sweden-type social democrats, but by arch-conservatives. These arch-conservatives made their home in the long-reigning Liberal Democratic Party, which ruled uninterrupted for 55 years and squelched most efforts at social reform. Nobusuke Kishi, the founder of the LDP and its most important leader, was Shinzo Abe's grandfather.

During Abe's first term, he appeared entirely uninterested in addressing the problems of women's equality. His foreign minister and right-hand man was the late Shoichi Nakagawa, who once said:

"Women have their proper place: they should be womanly...They have their own abilities and these should be fully exercised, for example in flower arranging, sewing, or cooking. It's not a matter of good or bad, but we need to accept reality that men and women are genetically different."

So you can see why I have been skeptical about Abe's commitment to women's equality.

However, Abe may surprise me again. According to all reports, Abe is contemplating a big push to put more women in corporate boardrooms:

Japanese Prime Minister Shinzo Abe moved Friday to compel corporate Japan to promote more women to executive roles, asking business leaders to set a target of at least one female executive per company... 

“Women are Japan’s most underused resource,” [Abe] said... 

More details are expected in June, when the government is to unveil a “national growth strategy” of deregulation measures and other structural changes designed to make the economy more dynamic.

Just by saying this, Abe has surprised me, actually. But given his party's strongly sexist traditions, it is far too soon to declare a revolution. As he did with monetary policy, Abe must convince me with dramatic, unprecedented, massive action...and more importantly, he must convince Japan itself.

But if he does...then Abe will have outdone even his predecessor and patron, Junichiro Koizumi...and maybe even his own grandfather as well.

Book Review: The Occupy Handbook

This is a book you should read. It's been a year and a half since the Occupy protests, and they've mostly disappeared off of the public radar. Doesn't matter. The Occupy Handbook (edited by Janet Byrne) is a great general guide to a number of the economic problems our country is facing, the solutions people have put forth, and the grassroots movements that have sprung up to vent people's dissatisfaction.

The Occupy Handbook consists of 55 chapters, each chapter written by a different author (though there are a couple repeat appearances). The authors include famous economists, no-name activists, authors and TV personalities, and more. Among said economists are Paul Volcker, Robert Shiller, Paul Krugman, Daron Acemoglu and James Robinson, Brad DeLong, Tyler Cowen, Peter Diamond and Emmanuel Saez, Jeffrey Sachs, Nouriel Roubini, Raghuram Rajan, and others. The topics range from statistics on inequality in America, to the social structure of protest movements, to the history of Marxism, to the nature of third-world informal economies, and more. Almost all of the chapters are brief and to the point, and there are very few that did not teach me something interesting and new.

The overall message of the book is (or should be) that America's problems are complicated and deep, and not confined to a cyclical recession. They are related to our industrial structure, our class structure, our political institutions, and our government policies. And there are lots of people working on solving these problems in a number of different ways, from the halls of academia to the streets of New York to the corridors of government. No person sees all of the problems. Each person has only a piece of the elephant. And no one's solution is completely right. We all have something to learn from each other.

Anyway, some of the chapters really stood out as excellent, even in a very strong field:

John Cassidy asks the question "What good is Wall Street?", a question that (surprisingly!) receives too little discussion in the rest of the book.

Michael Hiltzik gives a great history of protest movements during the Great Depression.

James Miller has a truly excellent discussion of the problems of "consensus" decision-making, and the reason we use majority-rule democracy instead.

Robert M. Buckley writes a history of Marxism that forever changed my thinking about that movement. Specifically, he presents Marxism as a quiet but ever-present underlying threat in Western societies - a spectre that continues to haunt Europe - that forces elites to share power and wealth with the masses. This is quite possibly the best chapter in the whole book.

The incomparable Michael Lewis has two brief, witty chapters whose writing outshines the rest of the anthology.

Martin Wolf's chapter serves as a microcosm for the entire book. It represents one of the most succinct summaries of the West's economic problems that I've ever read.

Felix Salmon has the single most sensible policy proposal in the book, a call for banks to write down the principal on underwater mortgages.

The ideological distribution of the authors is naturally centered on the left, but there is definitely a spread. Tyler Cowen gives a reasonable (if not entirely convincing) conservative rebuttal to many of the complaints about inequality voiced elsewhere in the book. If I were the editor, I would have included one or two more of these, just to make Cowen's piece seem slightly less out of place, but it's not a big problem.

The book does whiff badly a couple of times - with over 50 authors, that's really inevitable. In particular, a guy named Brandon Adams is given three (three!!) chapters, more than any other author, in which he spouts a bunch of derp about how American culture is going down the tubes. These chapters can be safely skipped.

Also, Thomas Philippon really should have had a chapter.

But these are very minor quibbles. Overall, Occupy Wall Street is perhaps the most important, comprehensive guide to America's discontents since...well, I can't even think of another such guide in recent decades, and we haven't had this many discontents for quite a while. Its influence seems likely to outlast the Occupy movement itself. So, go read it, if you haven't already.

The Big Tent comes to Washington

When we started holding our Big Tent events in London two years ago, we wanted to stir up lively conversation about some of the hot topics relating to the Internet and society. After all, the political meaning of a “big tent” is to attract diverse viewpoints to come together in one place. Since then, we’ve held more than 20 Big Tents on three different continents to debate issues ranging from arts and culture online to the economic impact of the web.



Later today, the Big Tent is coming to Washington, D.C. for the first time. Along with our partner Bloomberg, we'll hear from some of the top names in media, government and the arts for discussions about one of the values we hold most dear: the right to free expression.



Can free speech survive in the digital age? At a time when too many governments deny their citizens the right to dissent, we’ll ask if the Internet is reaching its promise of empowering people around the world. We’ll have sessions on the limits to free speech online, national security in the Internet age, and creativity and freedom on the web.



Google’s executive chairman Eric Schmidt and senior vice president and chief legal officer David Drummond will be joined by a variety of speakers, including former U.S. attorney general Alberto Gonzales, deputy secretary of homeland security Jane Holl Lute, Bloomberg chief content officer Norman Pearlstine, former New York Times executive editor Bill Keller, and Saudi Arabian comedian and YouTube star Omar Hussein.



Things kick off at 1:30pm EDT today—you can watch the entire event on Bloomberg’s live stream and tune in to the Big Tent Google+ page for updates as the event unfolds. Later on, we’ll also upload video clips to the Big Tent YouTube channel. We hope you’ll join us for exciting conversations about how to best keep the Internet free and open.



Posted by Susan Molinari, Vice President, Public Policy and Government Relations

Two Googlers elected to the American Academy of Arts and Sciences

On Wednesday, the American Academy of Arts and Sciences announced its list of 2013 elected members. We’re proud to congratulate Peter Norvig, director of research, and Arun Majumdar, vice president for energy; two Googlers who are among the new members elected this year.



Membership in the American Academy of Arts and Sciences is considered one of the nation’s highest honors, with those elected recognized as leaders in the arts, public affairs, business, and academic disciplines. With more than 250 Nobel Prize laureates and 60 Pulitzer Prize winners among its fellows, the American Academy celebrates the exceptional contributions of the elected members to critical social and intellectual issues.



With their election, Peter and Arun join seven other Googlers as American Academy members: Eric Schmidt, Vint Cerf, Alfred Spector, Hal Varian, Ray Kurzweil and founders Sergey Brin and Larry Page, all of whom embody our commitment to innovation and real-world impact. You can read more detailed summaries of Peter and Arun’s achievements below.



Dr. Peter Norvig, currently director of research at Google, is known most for his broad expertise in computer science and artificial intelligence, exemplified by his co-authorship (with Stuart Russell) of the leading college text, Artificial Intelligence: A Modern Approach. With more than 50 publications and a plethora of webpages, essays and software programs on a wide variety of CS topics, Peter is a catalyst of fundamental research across a wide range of disciplines while remaining a hands-on scientist who writes his own code. Recently, he has taught courses on artificial intelligence and the design of computer programs via massively open online courses (MOOC). Learn more about Peter and his research on norvig.com.



Dr. Arun Majumdar leads Google.org’s energy initiatives and advises Google on its broader energy strategy. Prior to joining Google last year, he was the founding director of the U.S. Department of Energy's Advanced Research Projects Agency-Energy (ARPA-E), where he served from October 2009 until June 2012. Earlier, he was a professor of mechanical engineering as well as materials science and engineering at the University of California, Berkeley, and headed the Environmental Energy Technologies Division at the Lawrence Berkeley National Laboratory. He has published several hundred papers, patents and conference proceedings. Find out more about Arun.



Posted by Alfred Spector, Vice President, Engineering

Transparency Report: More government removal requests than ever before

Three years ago when we launched the Transparency Report, we said we hoped it would shine some light on the scale and scope of government requests for censorship and data around the globe. Today, for the seventh time, we’re releasing new numbers showing requests from governments to remove content from our services. From July to December 2012, we received 2,285 government requests to remove 24,179 pieces of content—an increase from the 1,811 requests to remove 18,070 pieces of content that we received during the first half of 2012.

As we’ve gathered and released more data over time, it’s become increasingly clear that the scope of government attempts to censor content on Google services has grown. In more places than ever, we’ve been asked by governments to remove political content that people post on our services. In this particular time period, we received court orders in several countries to remove blog posts criticizing government officials or their associates.



You can read more about these requests by looking at the annotations section of the Transparency Report. Of particular note were three occurrences that took place in the second half of 2012:

• There was a sharp increase in requests from Brazil, where we received 697 requests to remove content from our platforms (of which 640 were court orders—meaning we received an average of 3.5 court orders per day during this time period), up from 191 during the first half of the year. The big reason for the spike was the municipal elections, which took place last fall. Nearly half of the total requests—316 to be exact—called for the removal of 756 pieces of content related to alleged violations of the Brazilian Electoral Code, which forbids defamation and commentary that offends candidates. We’re appealing many of these cases, on the basis that the content is protected by freedom of expression under the Brazilian Constitution.
  
  


• Another place where we saw an increase was from Russia, where a new law took effect last fall. In the first half of 2012, we received six requests, the most we had ever received in any given six-month period from Russia. But in the second half of the year, we received 114 requests to remove content—107 of them citing this new law.
  
  


• During this period, we received inquiries from 20 countries regarding YouTube videos containing clips of the movie “Innocence of Muslims.” While the videos were within our Community Guidelines, we restricted videos from view in several countries in accordance with local law after receiving formal legal complaints. We also temporarily restricted videos from view in Egypt and Libya due to the particularly difficult circumstances there.

We’ve also made a couple of improvements to the Transparency Report since our last update:

• We’re now breaking down government requests about YouTube videos to clarify whether we removed videos in response to government requests for violating Community Guidelines, or whether we restricted videos from view due to local laws. You can see the details by scrolling to the bottom of each country-specific page.
  
  


• We’ve also refreshed the look of the Traffic section, making it easier to see where and when disruptions have occurred to Google services. You can see a map where our services are currently disrupted; you can see a map of all known disruptions since 2009; and you can more easily navigate between time periods and regions.

The information we share on the Transparency Report is just a sliver of what happens on the Internet. But as we disclose more data and continue to expand it over time, we hope it helps draw attention to the laws around the world that govern the free flow of information online.



Posted by Susan Infantino, Legal Director

KrugTron the Invincible

If you grew up in the 80s you probably remember Voltron. Although the show often had convoluted plotlines, it would somehow always end with Voltron (a super-powerful robot formed from five mechanical lions) facing off against a monster called a "Robeast". Voltron had plenty of weapons, but he would invariably strike the killing blow with his "Blazing Sword". Eventually the show became kind of routine, but to a four-year-old, it was pure gold.

In the econ blogosphere, a similar dynamic has played out over the last few years. Each week a Robeast will show up, bellowing predictions of inflation and/or soaring interest rates. And each week, Paul Krugman...I mean, KrugTron, Defender of the Blogoverse, will strike down the monster with a successful prediction of...low inflation and continued low interest rates. Goldbugs, "Austrians", New Classical economists, and harrumphing conservatives of all stripes have eagerly gone head-to-head with KrugTron in the prediction wars, and have been summarily cloven in twain.

Don't remember? Well here's a quick (partial) episode guide:

Krugman vs. Peter Schiff (see also here)

Krugman vs. Ron Paul

Krugman vs. Robert Murphy

Krugman vs. Niall Ferguson (see also here)

Krugman vs. Allan Meltzer

Krugman vs. a giant hive-mind of goldbugs

It's really kind of amazing. And in case there was any doubt as to KrugTron's prognosticatorial puissance, just ask the experts, who found that he pummeled all other pundits in prediction prowess, getting 14 out of 15 predictions right.

So it's fair to ask: What is KrugTron's Blazing Sword? How does he keep vanquishing the Robeast of the Week?

Well, Krugman himself will tell you that his secret weapon is simple, elementary Keynesian economics - a rough-and-ready IS-LM view of the world, backed up by sophisticated "liquidity trap" models like this one. In those models, low aggregate demand will always keep the economy trapped in a low-inflation, low-interest-rate world.

But I'm not so sure. Keynesian models aren't really used for forecasting the world; they're used as guides for policy. A Keynesian model, be it IS-LM or Liquidity Trap, tells you "If you do fiscal policy, the economy will respond thus." It doesn't tell you how the economy will do in total; that is jointly determined by policy and by the external "shocks" that the Keynesian models (like all macro models) take as given. 

Keynesian models didn't predict that unconventional monetary policy (QE2) would be insufficient to raise expectations of future inflation, and thus would be unable to bust us out of the liquidity trap. Nor did Keynesian models predict that private investors would be willing to ignore the possibility of a U.S. sovereign default, thus allowing the U.S. to avoid a spike in interest rates.

But Krugman did predict both of these things.

And here's the most interesting one. Krugman's earliest prediction victory came at the expense of John Paulson, one of history's most successful investors (although unlike the Robeasts pictured above, Paulson didn't seek out a battle with Krugman; he was set up as the anti-Krugman by a writer at Businessweek). In 2010, Paulson predicted a strong economic recovery. Such a recovery, if it had come, would have busted us straight out of the liquidity trap and allowed monetary policy to cause inflation. Paulson backed up his bet with billions, and rolled snake eyes.

But Paulson is no mere Robeast. He is no inflationista, "Austrian" econo-troll, or conservative ideologue. In fact, he has a large group of very skilled macroeconomists working for him. There is no way his team doesn't know Keynesian econ backwards and forwards.

Nor does Keynesian theory, of the type used by Krugman, insist that an economy will remain mired in recession without a fiscal stimulus to prime the pump. Sure, somewhere out there, there are models in which the economy can fall into a bad equilibrium that requires fiscal policy to kick it out (in fact, Miles Kimball and Bob Barsky are building such a model, but they are severely late in publishing the working paper; so hurry up, guys!). But IS-LM and the Eggertsson-Krugman model don't have this feature. In those Keynesian models, growth can recover on its own.

So how did Krugman know growth would be slow? He didn't (I hope) put his trust in Reinhart and Rogoff's assertion that growth is always slow after financial crises. Maybe he just assumed that the underlying drivers of aggregate demand are sluggish, but I think Paulson's team could have done that just as easily.

No, I think Krugman's real secret weapon is something else: Like Voltron before him, he's borrowing heavily from Japan.

See, I myself am fairly agnostic about Keynesian ideas. But I've expected nothing but low growth, low interest rates, and low inflation since 2008 (though I haven't been as confident about these things as Krugman, and am thus not in his class as a super-robot). I expected these things because of one simple proposition: We are like Japan. 

Since its land bubble popped in 1990, Japan has had low inflation and low interest rates and low growth, even as government debt mounted and quantitative easing was tried. Paul Krugman was there. He watched Japan carefully, and he often states that it deeply affected his thinking. In fact, it might not be an exaggeration to say that watching Japan made Krugman the Keynesian he is today.

Meanwhile, the Robeasts have all used a different example to inform their understanding of the world: America in the 70s and early 80s. That was a time when government intervention in the economy (seemingly) led to high inflation. This taught generations of conservative economists, politicians, pundits, and regular folks that government intervention leads to inflation. And that if you wait long enough (or maybe enact the right structural reforms), growth will come back on its own.

But America 2008-present has not looked like America 1975-1985. It has looked like Japan, 1990-present. The proper comparison was across space, not across time. Assuming that other countries are fundamentally different than ours - that cultural differences, or institutional differences, etc. make cross-country comparisons utterly worthless - has proven to be a losing bet.

So if you want to get into the economic prediction game, and you don't want to be sliced and diced by KrugTron's Blazing Sword, but you can't bring yourself to fully embrace Keynesianism, I have a suggestion: Take a good close look at Japan.

Meanwhile, the Austrians, goldbugs, and other assorted Robeasts will continue to provide us with our weekly entertainment.

Celebrating the 50th country on Street View

Whether you're planning a summer vacation to visit the Colosseum or exploring potential neighborhoods for your next move, Street View gives you instant access to the places you want to see—even before you leave the house. We launched Street View in 2007 in five U.S. cities to give you what we called a “feet on the ground” experience and have since been growing the program to make it more comprehensive, accurate and useful for everyone.



Today, we’ve reached 50 countries with the launch of Street View in Hungary and Lesotho and are significantly expanding our coverage in Poland and Romania, among other locations around the world. This is also the largest single update of Street View imagery we’ve ever pushed, including new and updated imagery for nearly 350,000 miles of roads across 14 countries.



Now you can take a virtual stroll through the historic center of Budapest, right along the Danube (the river that carves the city in two). See the Hungarian Parliament building or the famous Chain bridge.

View Larger Map

Budapest, Lánchíd (Chain bridge)

Other Hungarian treasures to be discovered include the Széchenyi thermal bath, the largest medicinal bath in Europe, as well as the wonders of Buda castle.



Lesotho, an enclave surrounded by South Africa, is the only independent state that sits entirely 1,000m or more above sea level. Explore some of the mountainous imagery captured by our Street View cars, including the winding roads and lakes.

View Larger Map

Leribe District, Lesotho

Other sights include the Lesotho Evangelical Church, which is one of Africa's oldest Protestant churches, founded in 1833 by missionaries from Paris, and the traditional architecture in Nkesi, Maseru.



We’re also refreshing and expanding existing Street View coverage in France, Italy, Poland, Romania, Russia, Singapore and Thailand. And, we’ve added new special collections of a host of picturesque spots—using our Street View Trike technology—including Portugal’s Pena National Palace, or the Sha Tin Che Kung Temple in Hong Kong or the Kilkenny Castle in Ireland.

View Larger Map

Kilkenny Castle, Ireland

From the first handful of U.S. cities, to the now thousands of cities and villages worldwide, we’ve spent the past six years updating Google Maps for you. From Antarctica to Australia, from South Korea to South Africa, from the snow-capped peaks of Everest to the Great Barrier Reef, you can navigate more than 5 million miles of the world, without ever leaving home. So spin the globe and take a walk through any one of the 50 countries now on Street View.



Posted by Ulf Spitzer, Program Manager, Google Street View

A new kind of summer job: open source coding with Google Summer of Code

If you’re a university student with CS chops looking to earn real-world experience this summer, consider writing code for a cool open source project with the Google Summer of Code program.

Over the past eight years more than 6,000 students have “graduated” from this global program, working with almost 400 different open source projects. Students who are accepted into the program will put the skills they have learned in university to good use by working on an actual software project over the summer. Students are paired with mentors to help address technical questions and concerns throughout the course of the project. With the knowledge and hands-on experience students gain during the summer they strengthen their future employment opportunities in fields related to their academic pursuits. Best of all, more source code is created and released for the use and benefit of all.



Interested students can submit proposals on the website starting now through Friday, May 3 at 12:00pm PDT. Get started by reviewing the ideas pages of the 177 open source projects in this year’s program, and decide which projects you’re interested in. Because Google Summer of Code has a limited number of spots for students, writing a great project proposal is essential to being selected to the program—be sure to check out the Student Manual for advice.



For ongoing information throughout the application period and beyond, see the Google Open Source blog, join our Summer of Code mailing lists or join us on Internet relay chat at #gsoc on Freenode.



Good luck to all the open source coders out there, and remember to submit your proposals early—you only have until May 3 to apply!



Posted by Stephanie Taylor, Open Source team

In support of a national STEM Teacher Corps

Last year, while hosting the White House Science Fair, President Obama said, “If you win the NCAA championship, you come to the White House. Well, if you're a young person and you produce the best experiment or design, the best hardware or software, you ought to be recognized for that achievement, too.” We agree—and we think the best science, technology, engineering, and math (STEM) teachers who inspire those young people should be honored and supported as well.



That’s why Google and our partner organizations support a national STEM Teacher Corps to acknowledge the great teachers who help students achieve amazing things in the fields of science and technology. We’re excited that the President has recommended funding for a STEM Teacher Corps in his budget (PDF).



Today we’re co-publishing a white paper (PDF) with Math For America and the Broad Institute that outlines some of the key features of such a corps. We gathered input from more than 80 organizations to make recommendations for a program that will reward teachers and schools with significant stipends, foster a community of teachers empowered to make broad improvements in STEM education, and recognize a larger percentage of teachers than any existing recognition program.



We must do more to retain the best teachers so our students have the opportunity to succeed in these growing fields, and we applaud the many organizations already working to elevate and celebrate the top STEM teachers nationwide. We look forward to continuing to support the development of the STEM Teacher Corps and doing our part to ensure that every student has access to truly great STEM teachers.



Posted by Jordan Lloyd Bookey, Head of K-12 Education Outreach and Nancy Lee, Director of People Operations

Following the lead of nature’s engineers

It’s no surprise that Google appreciates engineers. And this Earth Day, we’re looking at some of our favorite engineers from nature to see how they can teach us to treat the environment better. We’ve created a website where we can see the beauty and ingenuity of the natural world through photos from National Geographic. We also want to provide easy ways to be greener in our own lives, so this site shows us how we can all be like those organisms by taking simple actions to care for the environment.

For instance, until recently I’d never heard of a remora. Turns out that these fish latch on to other ocean creatures such as whales and turtles to catch rides. In a way, these fish are using their own form of mass transit. To be like the remora and travel with a lighter footprint, we can plan trips using rapid transit. Or we can be inspired by bears—the true experts on “sleep mode”—to save energy in our own lives by adjusting our home thermostat and using energy efficient appliances.



Our doodle today also acknowledges the interconnections of the natural world. You can interact with elements of the environment to affect the seasons, weather and wildlife.

As another way to move from awareness to action, we’re hosting a Google+ Hangout On Air series focused on pressing environmental issues. We’ll kick it off today at 12pm ET with a Hangout on Air connecting NASA (live from Greenland), National Geographic explorers from around the world, and Underwater Earth (live from the Great Barrier reef). Throughout the week, we’ll hold daily Hangouts on Air covering topics such as clean water and animal conservation.



This Earth Day and every day, let’s take a moment to marvel at the wonder of nature and do our part to protect the natural ecosystem we all depend on. A salute to nature’s engineers!



Posted by Erin Reilly, Google Green team

Happy birthday Campus London. You’ve grown up so fast.

Just over 12 months ago, Campus London opened its doors to the young, upcoming London tech startup community. I’d like to think we always knew it would succeed, but I don’t think any of us expected the level of engagement and enthusiasm we’ve seen in year one.

In just 365 days of operation, Campus now has more than 10,000 members, permanently houses more than 100 young companies and has hosted more than 850 events, attracting more than 60,000 guests through the door. From individual entrepreneurs looking to explore their back-of-a-napkin idea to global venture fund managers, there’s something for everyone in the London tech scene at Campus, and the vibe is electric.







We asked Campus members to provide their feedback and outlook on year one, and their response has been overwhelmingly positive. Campus-based companies are growing and creating jobs. One in four are already looking to find bigger office spaces to house their growing teams. We’ve also seen that the success of the London technology startup community as a whole has mirrored that of Campus.



Campus members are younger than the average Tech City entrepreneur, and with initiatives like Women@Campus, increasingly more female entrepreneurs are signing up. Campus is also truly international, with 22 nationalities working, interacting and attending the many mentoring sessions and classes we and our Google volunteers run every day.

Looking ahead to the next year and beyond, we’re offering even more: more globally-acclaimed speakers, a new Campus EDU education programme offering mentorship from Googlers, inspirational talks from thought leaders like Guy Kawasaki, Eric Schmidt and Jimmy Wales, and a curriculum of classes to develop the skills young startups need to build successful businesses.



Google started as a two-person startup in a garage in California. We’re looking to provide the best possible garage to our 10,000 members every day. And so far, all indicators show that Campus is one of the most exciting places in the world for technological innovation.



Posted by Eze Vidra, Head of Campus

Why did Reddit get the wrong guy? (Or: the Wisdom of Crowds vs. the Madness of Mobs)

Short answer: It didn't. Or more accurately, we'll never know if it did, because we don't really have a way of knowing what "Reddit" thinks, only what some people on Reddit seem to think.

Long answer: OK, let's back up. When the Boston Marathon bombing manhunt began, there was a Reddit forum (subreddit) devoted to finding the bombers. A lot of people had high hopes for this effort. But the main "suspect" to emerge out of Reddit was a guy named Sunil Tripathy, who had no relation whatsoever to the bombings. Meanwhile, in about the same amount of time, police found the real guys, Tamerlan and Dzhokhar Tsarnaev. If you're interested in the details of Reddit's epic fail, see here. (And more here.)

Which brings us to the question, which someone asked me on Twitter: Why, exactly, did Reddit whiff so badly?

In recent decades, we've heard a lot about the "wisdom of crowds". James Surowiecki, who wrote an excellent book on the topic, mentions things like the stock market's identification of the reason for the Challenger disaster, or the ability of a group of non-experts to collectively outguess an expert on questions like "How many jelly beans are in this jar?". More recently, we've learned that prediction markets are more accurate than polls at predicting election outcomes, and in fact that they beat sophisticated "expert" forecasts in many situations. Companies have experimented with internal prediction markets to tap the collective wisdom of their employees. In general, we have come to believe more and more in the ability of large groups of non-experts relative to the ability of small groups of experts.

Should that belief be challenged by the Sunil Tripathy fiasco?

Not necessarily. The key is that the "wisdom of crowds" may work very well in some cases, while in other cases it may give way to the "madness of mobs". We don't know exactly which case is which, but we do have a general idea what sets them apart. Surowiecki summarizes it well in his book, in fact.

Basically, when we have a method for aggregating the information of diverse independent individuals, crowds will perform very well. When the individuals in a crowd coordinate, however, diversity and independence breaks down, and crowds can pounce on the wrong answer.

We see this in finance experiments. A number of experiments, including classic work by Charles Plott, have established the ability of financial markets to aggregate the private information of diverse participants to arrive at the "right" price. However, other experiments, e.g. by Colin Camerer, have shown that when people pay attention to the actions of others instead of to their own private information, then information can become "trapped", and markets can arrive at the wrong price. There are a number of different theoretical reasons why herd behavior might take over from efficient information aggregation; some of these are "rational" explanations and others are "irrational", but they all rely on individuals having some reason to ignore their private information and focus on what other people do.

You can definitely see the herding dynamic at work in the case of the Sunil Tripathy fiasco. A few guys started saying "It was Sunil Tripathy!" And a lot of other people on the subreddit started focusing on that name, and looking for information about Tripathy. The Tripathy idea was a wrong idea that was initially concentrated among a small group of individuals, who pushed that idea loudly and confidently. Meanwhile, a large number of people on the subreddit may have had small, weak pieces of information pointing to the Tsarnaev brothers. But since Reddit had no way of collecting and aggregating these dispersed small pieces of information, it might have become "trapped", just like in a Colin Camerer experiment.

So let me return to the "short answer" at the beginning of the post. It's not really right to say that "Reddit" picked Sunil Tripathy. Some people on Reddit picked Tripathy, and their voices emerged loud and clear from the chaos, not because most people agreed with them, but because they were the loudest and most strident minority voice. So anyone paying attention to Reddit picked out a few shrill cries of "Tripathy!" rising above the cacophony, and concluded that this was Reddit's consensus verdict. Meanwhile, the attention of other Redditors was turned toward Tripathy, and they spent their time and effort evaluating the Tripathy hypothesis instead of generating alternative hypotheses.

In other words, because it had no way of aggregating information, Reddit became less like a prediction market and more like a lynch mob.

Would Reddit have done better if people could have voted on who they thought did it? I doubt it, because the set of hypotheses was not properly mapped. In an election prediction market, you know the set of candidates. In a jellybean jar contest, you know the set of numbers of jellybeans that might be in the jar (i.e. the real line). But a "whodunit" poll can't list every human being as a potential culprit; it has to limit the choices to a few popular hypotheses. In Reddit's case, a poll would have included 1. Tripathy, and 2. Someone Else. Not very helpful. A prediction market would have suffered from the same problem.

So is there any hope for crowdsourcing terrorism investigations? I think that there already is such a method: Police tip hotlines. Tips tend to be independent, since people usually don't know who else is calling in a tip. And in a high-profile case like a terrorist attack, people who call in tips tend to be fairly diverse, since so many different kinds of people are paying attention. Finally, police can tabulate the number of similar tips, which is a method of aggregation. So tip hotlines satisfy the loose, general criteria for the "wisdom of crowds" to overcome the "madness of mobs". I think it's no coincidence that in the Boston bombing case, a victim's tip ended up being hugely helpful to the police.

Anyway, it's worth pointing out that these criteria for "crowd wisdom" aren't clear-cut. How do you know how independent and diverse a crowd's members are? What is the optimal method of aggregating their beliefs? This is a large, important, open area of research. So have at it, smart people. Just don't pay too much attention to what others in the field are doing...

Expanding options for companies to buy renewable energy

We’re always looking for ways to expand the use of renewable energy. To date we’ve committed more than $1 billion to renewable energy project investments, signed agreements to procure wind power near our data centers, and installed solar panels at our corporate headquarters.



It’s also important to work directly with our utility partners to find solutions that will make more renewable energy available for us and for others. The most straightforward way to do this is for utilities to offer a renewable power option for companies that request it—something that’s not currently offered by most utilities. We’ve just published a white paper (PDF) laying out our thoughts on how and why such programs might work.



We’re also announcing our first effort to put this idea into practice. We’re expanding our Lenoir, N.C. data center, and our local electricity provider, Duke Energy, has pledged to develop a new program for large companies like Google who want to buy renewable power for their operations. Duke will file the plan with their state commission within 90 days.

Our Lenoir, N.C. data center

Offering companies like Google a renewable energy option has many advantages. Because the service is made available to a wide range of customers, companies that don’t have the ability or resources to pursue alternative approaches can participate. And by tapping utilities’ strengths in power generation and delivery, it makes it easier for companies to buy renewable energy on a larger scale. Of course, the approach is not without its challenges: utilities will need to work out the mechanics of the service within their local regulatory structure, and in many cases state utility commissions will need to approve the programs. There’s also the challenge of finding cost-effective renewable projects.



We'll continue to find creative ways to supply our facilities with renewable energy, but we think this solution can provide an important new way to increase the use of renewable energy nationwide. We look forward to working with utilities, state utility commissions, companies and other stakeholders to make it a reality.



Posted by Gary Demasi, Director, Global Infrastructure

The reason macroeconomics doesn't work very well

I don't think it's politics (mostly). I don't think it's the culture of consensus and hierarchy. I don't think it's too much math or too little math. I don't think it's the misplaced assumptions of representative agents, flexible prices, efficient financial markets, rational expectations, etc.

Fundamentally, I think the problem is: Uninformative data.

I was planning to write a long post about this, and I never got around to it, and now Mark Thoma has written it better than I could have. So I'll just steal most of his excellent, awesome post, and add some boldface:

The blow-up over the Reinhart-Rogoff results reminds me of a point I’ve been meaning to make about our ability to use empirical methods to make progress in macroeconomics...it's about the quantity and quality of the data we use to draw important conclusions in macroeconomics. 

Everybody has been highly critical of theoretical macroeconomic models, DSGE models in particular, and for good reason. But the imaginative construction of theoretical models is not the biggest problem in macro – we can build reasonable models to explain just about anything. The biggest problem in macroeconomics is the inability of econometricians of all flavors (classical, Bayesian) to definitively choose one model over another, i.e. to sort between these imaginative constructions. We like to think or ourselves as scientists, but if data can’t settle our theoretical disputes – and it doesn’t appear that it can – then our claim for scientific validity has little or no merit. 

There are many reasons for this. For example, the use of historical rather than “all else equal” laboratory/experimental data makes it difficult to figure out if a particular relationship we find in the data reveals an important truth rather than a chance run that mimics a causal relationship. If we could do repeated experiments or compare data across countries (or other jurisdictions) without worrying about the “all else equal assumption” we’d could perhaps sort this out. It would be like repeated experiments. But, unfortunately, there are too many institutional differences and common shocks across countries to reliably treat each country as an independent, all else equal experiment. Without repeated experiments – with just one set of historical data for the US to rely upon – it is extraordinarily difficult to tell the difference between a spurious correlation and a true, noteworthy relationship in the data. 

Even so, if we had a very, very long time-series for a single country, and if certain regularity conditions persisted over time (e.g. no structural change), we might be able to answer important theoretical and policy questions (if the same policy is tried again and again over time within a country, we can sort out the random and the systematic effects). Unfortunately, the time period covered by a typical data set in macroeconomics is relatively short (so that very few useful policy experiments are contained in the available data, e.g. there are very few data points telling us how the economy reacts to fiscal policy in deep recessions). 

There is another problem with using historical as opposed to experimental data, testing theoretical models against data the researcher knows about when the model is built...It’s not really fair to test a theory against historical macroeconomic data, we all know what the data say and it would be foolish to build a model that is inconsistent with the historical data it was built to explain – of course the model will fit the data, who would be impressed by that? But a test against data that the investigator could not have known about when the theory was formulated is a different story – those tests are meaningful... 

By today, I thought, I would have almost double the data I had [in the 80s] and that would improve the precision of tests quite a bit... 

It didn’t work out that way. There was a big change in the Fed’s operating procedure in the early 1980s... 

So, here we are 25 years or so later and macroeconomists don’t have any more data at our disposal than we did when I was in graduate school. And if the structure of the economy keeps changing – as it will – the same will probably be true 25 years from now. We will either have to model the structural change explicitly (which isn’t easy, and attempts to model structural beaks often induce as much uncertainty as clarity), or continually discard historical data as time goes on (maybe big data, digital technology, theoretical advances, etc. will help?). 

The point is that for a variety of reasons – the lack of experimental data, small data sets, and important structural change foremost among them – empirical macroeconomics is not able to definitively say which competing model of the economy best explains the data. There are some questions we’ve been able to address successfully with empirical methods, e.g., there has been a big change in views about the effectiveness of monetary policy over the last few decades driven by empirical work. But for the most part empirical macro has not been able to settle important policy questions... 

I used to think that the accumulation of data along with ever improving empirical techniques would eventually allow us to answer important theoretical and policy questions. I haven’t completely lost faith, but it’s hard to be satisfied with our progress to date. It’s even more disappointing to see researchers overlooking these well-known, obvious problems – for example the lack pf precision and sensitivity to data errors that come with the reliance on just a few observations – to oversell their results. (emphasis mine)

This is the clearest and based statement of the problem that I've ever seen. (Update: More from Thoma here.)

I'd like to add one point about the limits of time-series econometrics. To do time-series, you really need two assumptions: 1) ergodicity, and 2) stationarity. Mark addressed the ergodicity problem when he talked about trend breaks. As for stationarity, it sometimes matters a lot - for example, if technology has a unit root, then positive technology shocks should cause recessions. But the statistical tests that we use to figure out if a time-series has a unit root or not all have very low power. There are some pretty deep theoretical reasons for this.

Anyway, that's just yet one more reason macro data is uninformative. That problem isn't going to be solved by gathering more accurate data, or by seeking out new macroeconomic aggregates to measure (though we should probably do both of those things anyway).

So what are the implications of this basic fundamental limitation of macro? I think there are three.

1. Beware of would-be prophets from outside the mainstream. There are a number of people, usually associated with alternative or "heterodox" schools of thought, who claim that macro's relative uselessness is based on an obviously faulty theoretical framework, and that all we have to do to get better macro is to use different kinds of theories - philosophical "praxeology", or chaotic systems of nonlinear ODEs, etc. I'm not saying those theories are wrong, but you should realize that they are all just alternative theories, not alternative empirics. The weakness of macro empirics means that we're going to be just as unable to pick between these funky alternatives as we are now unable to pick between various neoclassical DSGE models.

2. Macroeconomists should try to stop overselling their results. Just matching some of the moments of aggregate time series is way too low of a bar. When models are rejected by statistical tests (and I've heard it said that they all are!), that is important. When models have low out-of-sample forecasting power, that is important. These things should be noted and reported. Plausibility is not good enough. We need to fight against the urge to pretend we understand things that we don't understand.

3. To get better macro we need better micro. The fact that we haven't fond any "laws of macroeconomics" need not deter us; as many others have noted, with good understanding of the behavior of individual agents, we can simulate hypothetical macroeconomies and try to do economic "weather forecasting". We can also discard a whole slew of macro theories and models whose assumptions don't fit the facts of microeconomics. This itself is a very difficult project, but there are a lot of smart decision theorists, game theorists, and experimentalists working on this, so I'm hopeful that we can make some real progress there. (But again, beware of people saying "All we need to do is agent-based modeling." Without microfoundations we can believe in, any aggregation mechanism will just be garbage-in, garbage-out.)

After the financial crisis, a bunch of people realized how little macroeconomists do know. I think people are now slowly realizing just how little macroeconomists can know. There is a difference.