Khazbi Budunov

Nearly a third of statistically significant findings in development economics may be false discoveries

In a new NBER working paper, Qingyuan Chai, Kevin Lang, and Liang Zhong question the statistical credibility of randomized controlled trials (RCTs), which have become one of the main tools of modern empirical economics.

The authors analyzed 745 tests of primary hypotheses from 190 papers published in leading economics journals and arrived at some rather troubling findings.

nber.org/papers/w35999

AOC should be the President of the United States.

I can’t remember where this quote comes from, but it’s a fascinating idea:

“Paradoxically, the impossibility of perfectly accurate pricing is what makes markets possible in the first place. Trading is only possible as long as the value of assets remains uncertain. If we imagine God descending from heaven and putting an exact price tag on every company listed on the stock exchange, most trading in their shares would come to a halt.

Prices diverge from values not because markets lack sufficient knowledge, but because value is inherently elusive. The discrepancy between price and value gives rise to a continuous process of trying to establish how the two are related. It is through this very process of discovery that markets emerge. Constant price fluctuations are evidence that this process of discovery never comes to an end.”

A little provocation: If you had to choose between the Austrian School and New Keynesian economics, which would you pick?

I’d go with New Keynesian

But QE does not necessarily increase M2. When the central bank purchases bonds directly from a commercial bank, it simply swaps one bank asset for another: bonds are replaced by reserves. Since reserves are not included in M2, the transaction itself leaves M2 unchanged.