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File Under: Easy Listening

JACKSON HOLE, Wyo. -- The annual

American Economic Association

meetings were held between Jan. 3 and Jan. 5 this year in New York. Your correspondent attended. These meetings are not to be missed because (a) it's a great way to help keep current with what's going on in the field and (b) the proceedings and characters involved are downright amusing. Account of adventures herewith.

Began day with delicious eggnog java drink and

Krispy Kreme

donut that seduced even from behind the dirty plastic display case. Took less than an hour for things to deteriorate from there.

Arrived early for a session called "The Importance of Historical Events in Determining Monetary Trends" because

Anna Schwartz

was presiding. But even before the scheduled start time, one of the presenters got up and announced that Anna wouldn't be attending owing to the fact that her husband of six decades had passed away on New Year's Eve.

Figured it would be kind to sit tight. Not many others did. Emergency program page flipping pre-empted even a moment of respectful silence, and exodus followed immediately thereafter. Left in the room: Your correspondent and five others, three of whom were discussants.

Someone from Babson College got up and gave a paper on the currency and inflation in Slovenia. And although the subject matter was not entirely uninteresting, said presenter's practice of making "dinar" sound exactly like "dinner" prompted impure thoughts. "The dinner was attracting all kinds of attention, and speculators wanted badly to get to it." This made the dinar sound delicious. That, in turn, induced an attempt to re-savor aforementioned donut. It worked.

Bade farewell to Slovenia. Headed to a session called "Risk Aversion: The Determinants of Risk Attitudes in a Heterogeneous Population" because (a) risk aversion is all the rage, especially since


Oct. 7


speech, and (b) it featured a rarity at gatherings like this: a University of Wyoming professor.

Walked in on a young

Carnegie Mellon

guy who one would have sworn was the lead singer for the

Mighty Mighty Bosstones

. He was just as active (his hands shook more than your correspondent's during the morning of Jan. 1), and he talked more than a mile a minute. The upside was that he needed less than five of the 20 allotted minutes to present. The downside (presumably) was that no one had any idea what he said.

But the Wyoming professor shone. She demonstrated clearly that she was the most clever person in the room (and arguably in the state of Wyoming). She touched on a range of behaviors from driving under the influence of marijuana to flossing to wearing (or not wearing) seat belts in order to hammer home some of the underlying themes that help to explain risk-taking behavior. Best of all, her work is very accessible (read: devoid of ridiculous equations), and she was kind enough to accept a request to have it appear in this column sometime soon.

Got to "Is This Expansion Different?" very early to guarantee a seat, thinking that a sea of blue suits would eventually soak every inch of the room. It did. And file this session under M.F.E. (Main %$^& Event). The room was so crowded -- packed like lemmings into shiny metal boxes, we were -- that one fellow had (presumably) no choice but to stand immediately over your seated correspondent. And sadly, the warm stink of the burps he was trying to suffocate was seeping out between his fingers and washing down over your correspondent's head.

Victor Zarnowitz

, also (rightly) known as the God of all things business cycle, got up and said the same predictable thing that every subsequent discussant would say: Sure this expansion is different. They all are.

But then God lowered the boom. He said he very much doubted that a New Era is upon us. Sure, inventory adjustment is less important than it used to be; sure, technical progress is all around us; sure, globalization has offered plusses (and a few minuses). But there just ain't no New Era. (And if Victor believes it, maybe you ought to, too.)

Mark Watson

spoke next. (This fellow, along with the next presenter,

James Stock

, is a graduate student's worst nightmare. Or best dream. Depending.) He claimed the slew of vector autoregressions, or VARs, that he was carrying under his arm showed two things. One was that gross domestic product growth rates were generally bigger and more volatile during the 1960-1984 period than they were during the 1985-1998 period. The other was that the volatility of oil and other commodity prices held relatively constant over the two periods, but that the volatility of the funds rate showed a small decrease during the latter. No one was in a position to challenge him -- or his VARs -- on either count. And judging by the furious scribbling that followed his final point -- that the 10-year Treasury explains a lot of the volatility of the funds rate and output over the last 10 years, meaning that the bond market has done much to help the Fed shoulder its load -- well, no one disagreed with him on that, either.

Stock made two points with his VARs. The first was that the kind of inflation numbers we have seen over the past few years owe much more to plain dumb luck (in the form of favorable supply shocks) than they do to the advent of a New Era. The second was that, pronouncements of the death of the


concept notwithstanding, indicators like capacity utilization and housing permits show no New Era shift. In other words, even in light of the gap between GDP growth and growth in broad price measures that has widened since 1995, there has been no material structural change in the relationship between aggregate activity and prices.

Stock also predicted that, unlike they did in 1997 and then again last year, oil prices wouldn't fall another 30% -- which would put a barrel of crude at roughly four dollars -- again in 1999. And lots of people wrote it down so quickly that one could tell they wished December would just get here already.

Alan Blinder

drew attention to the huge difference between an event being not predicted before the fact vs. it being inexplicable after the fact. He then pointed out that although few forecasters predicted smartly slower inflation in the face of smartly faster growth, at least the price performance was now explicable (he cited overly kind energy, import, and health-care prices, a change in the way the


calculates the consumer price index, and the tremendous decrease in computer prices). He also praised the Fed for its work in recent years but contested that good policy was much more a function of both smaller shocks and bigger and faster bond moves than it was a reflection of an increase in the collective IQ of Fed Governors.

Phillip Klein's

presentation was short and sweet. He claimed that the title of the session was really just a different way of framing the same age-old question: "Is the business cycle dead?" He then proceeded to quote a number of articles from newspapers, periodicals and journals, some upwards of 50 years old, in which poor souls had answered the question -- and some violently so -- in the affirmative.

What a hoot!! We all had a good laugh at that one. Even the two poor quoted souls sitting in the audience.

Side Dish

I have enough material for at least three or four more of these. You want them, or not? And Yes wins only if it beats No by a lot.

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