Filed under: Holy Grail
Discussed research idea with JK.
Let’s think positive: the great thing is that now I won’t get needlessly excited about a topic that I conjured up. Because of this meeting I was forced to write up some ideas. And because of it, I now I have a lot of work to do.
How do people model exchange rate in asset pricing models? Just found this paper by Ribnon and Pavola — it took them 4 years to get the paper to the current working paper format.
I have a lot of work to do.
Plan of attack:
1. Study well for the final, and think about the general equilibrium/economic basis of the asset pricing models.
2. Read the Pavola or Engel paper.
Filed under: Methods
Today is the last lecture, and Prof. Star Wars said it again. (This professor just has the ability to give curt but immensely insightful comments).
On What is “Crappy” Research
Crappy research is focusing on adding variables on the right hand side of a regression. When he said this, he used an adjective which I did not know to describe this sort of research. I couldn’t tell immediately whether this adjective is positive or negative, because adding variables on the RHS of a regression does not strike me as an obvious crappy way of doing research because that’s what I saw being done all over the field.
“There’s a place call the Heritage Foundation which publishes an economic freedom index,” he said. “Add it to the RHS, that’s crappy research.” What you want to do is to write down a model. Write down a model of economic freedom. Writing down a model gets you to think about the problem at a higher level.
I think the style of research he described has been what’s making me felt this place is different from what economics research I learned from Hippie college. I don’t mean to disparage Hippie College, what I meant is that as an ignorant undergraduate there who have not much training to building models, the only type of research I know how to do is adding variables on the right. And even then, I hated it. I had always known there is something better out there. There is. Prof. Star Wars said it: it is the model that get you to think at a higher level. How is economic freedom related to the other factors in the model and how is it going to drive the results? We need a model.
On Growth and Trade
Back to the Sachs and Warner graph.
Filed under: Methods
Somehow Prof Star Wars managed to tell me how to be a good economist and novelist in one sentence.
As advanced grad students, he said, we shouldn’t be waiting for him to give us homework problems. To read a paper, we have to work it out, impose our own notations, write out different cases, and in short, take possession of the paper. Take the Eaton-Kortum paper, which is a “break-through.” He said it was very hard for him, he didn’t know what was going on there. But you got to work on it until the concepts in the paper became very “concrete” to you. Abstraction is our biggest enemy, he said.
You can’t be a good novelist with just adjectives. Who the hell care whether the character’s hair is long or what. To have a good novel you got to reveal the nature of the characters through concrete demonstrations — from conversations. (At this point my jaws kind of dropped because I think I have this tendency to overdose my characters and settings with adjectives, although I know that my high school creative writing teacher would have said what Prof. Star Wars said in this regard).
