Tuesday, September 16, 2014

Another analogy for monetary policy and recessions

The traditional mental model seems to see contractionary monetary policy as adding friction or letting up on the gas pedal in a car, for example, Noah Smith: "When the economy is doing well, raise interest rates to slow things down ..."

This is very different to the information transfer model view; I'd previous likened contractionary monetary policy to piling snow on a mountain until an avalanche occurs.

I'd like to add another mechanical analogy: contractionary monetary policy is like stalling an aircraft to lose altitude. Aircraft can become difficult to control at their stall angle/speed and you can end up losing much more altitude that you intended. Another interesting extension of this analogy is that at "high speed" (i.e. high inflation) a stall is less likely than at "low speed" (low inflation). In a sense, the economies of the US, EU and Japan all seem to be flying near their stall speeds -- contractionary policy could induce a recession.

10 comments:

  1. I love that analogy! I used to fly sailplanes when I was in high school (I worked for the local glider club on the weekends in exchange for flying lessons and free "aero-tows"). The old training glider (Schweizer 233) was hard to stall and impossible to spin... but if you pulled the stick all the way back, it would kind of mush around a bit: shaking, rattling, creaking and make noises, just barely flying, until you got a mild stall out of it, and the nose would fall, you'd pick up airspeed, and you could repeat the experience if you wanted: like a paper airplane w/o enough weight in the nose. The fancier trainer (called a Blanik) was built in Soviet era Czechoslovakia (by "slave labor," one of our regular customers would never fail to point out). We used the Blanik for "spin training" which was required when getting your license (I think!... it's been a while). The old Schweizer was slow and easy to fly, but ungraceful (and it had a definite red-line speed at which the wings might come off... so you didn't point it at the ground). The Blanik had a red-line too, but it was much higher. It was all metal construction and generally sleeker, faster, and had a better glide ratio than the Schweizer (The Schweizer was actually partly covered with cloth!). Why I'm I telling you all this?... because I'm working up to what a spin is, and maybe this would be something that Vincent would be interested in for analogy purposes: A spin was/is one of the leading causes of death in sailplanes... the scenario is you're just making it back to the airport or landing site... trying to preserve any remaining altitude you have (a common problem when your aircraft has no engine).

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    1. continued...

      So you make an abbreviated landing pattern and try to keep "the nose up" in the mistaken belief (or gut feeling really) that this will best preserve those few precious hundreds of feet of altitude you have... all the while letting your airspeed get to dangerously low levels... then you make one of your standard turns in the landing approach pattern, dipping a wing with the ailerons, but your airspeed is so low, when you try to raise the wing back up again, you actually stall out that wing (the aileron on the wing you're trying to raise has the effect of increasing that wing's angle of attack when you use it), then the whole glider stalls, the nose drops, and you start to spin towards the lowered wing... the weird part is this is a quasi-stable state: you're pointed almost straight down, but your wings are stalled... the angle of attack is still too great for them to "fly." You're also spinning, and of course losing altitude rapidly. The reason this is a killer is because you probably only had few hundred feet of altitude to start out with, which was why you got yourself into this mess... so people generally don't recover before they smash into the ground. The recovery process is counter-intuitive as well. This part Vince will like: the "natural" reaction of somebody not expecting to go into a spin is to make the spin worse by still trying to raise the wing that stalled and caused the spin in the first place. Adding more aileron only makes the stall worse in that wing, since it creates more angle of attack. The right answer is a thrill! First you stop the spin by returning the stick to the center position and using your rudder pedals to counteract it. Once that's accomplished, you *push the stick forward* to push the nose even further downwards, to break the stall. Once this is accomplished the airspeed starts climbing rapidly, so if you're in a sailplane like the Blanik (which has a red-line speed), you need to raise the nose back up again in short order (but not too short) in order to avoid red-lining and having your wings come off (or more importantly, avoid hitting the ground if it's not a training exercise!).

      So now the challenge is to work the "spin" story into your analogy somehow. :D

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  2. ... I know I crossed the TMI threshold long ago on this, but trying to break the spin by pulling the stick back (w/o 1st pushing it forward) is also bad positive feedback: it just helps keep your wings stalled. So the the thing your panicked gut tells you to do: raise the wing and the nose by pulling the stick back and away from the wing which fell, is exactly the wrong thing to do.

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    1. This comment made me think to extend the analogy to the gut reaction to implement "austerity" and "monetary responsibility" are exactly the wrong things to do ...

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  3. Jason, I apologize for polluting your comments on this one... but this brings back a lot of memories. Good inside and outside vids here. I soloed when I was 14, and was taking my friends for rides by 16... but I haven't flown since!

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    1. Don't worry about it -- it's great!

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    2. In sailing (on water) one of the great things when you're underway is there aren't any engine sounds, just the wind and water. In a sailplane you just have the wind :)

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    3. Do you sail? I have two colleagues who are really into it... they go all over to participate in regattas (regatti?). They won a big event one time up in the Seattle area (J24 class?). I went for a dismal ride once with one of them... just a short jaunt from Santa Barbara to Ventura... about 35 minutes by car. There was no wind at all and our outboard failed us, so we got a tow from another sailboat who's motor still worked... it took about six hours! :(

      The group of "soaring" (they prefer "sailplane" and "soaring" to "gliders" and "gliding") enthusiasts I spend many weekends with when I was in high school had a bit of an attitude... although almost all of them could also fly the tow plane, they definitely looked down their noses a bit on other flying enthusiasts... for just the reason you mention... they felt a kinship to sailing enthusiasts and imagined that sailing types must look down a bit on "motor boaters" ... Ha! Funny they also looked down on hanggliders, ultralights and para-gliders, etc ... for being unnecessarily crude and dangerous.

      The old training gliders were a little noisy, especially the Schweitzer, but nothing compared to a powered plane! I'm someone who hates noise in general (ear condition), so I do much prefer the relative quite of a sailplane. The sleek German sailplanes, like the "Libel" (dragonfly) were really quiet! I only had a chance to fly one of the fancy German ones once. But they were all quiet enough that they would attract the curiosity of soaring birds sometimes... usually ravens, but once in a while a golden eagle. They would sometimes come over to give you a look. The ravens in particular were very playful.

      BTW, my instructor (who was a retired Navy pilot... who'd been in WWII actually), was invited to give a talk on soaring for a community get together of some kind that my parents attended. Someone asked him "how much does this hobby cost?"... to which my instructor replied "Somewhere between golf and polo" ... which has always stuck with me. I suppose the same is true for sailing.

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    4. I grew up in the Mojave desert, so this was as close to sailing as we got. And personally, we didn't even get that far... I spent the 1st part of my childhood living on a Navy base there, and we had a dry lake bed right outside our back fence. My brother tied a flare parachute that my dad had brought home from the test ranges (he worked on the base), to his "Radio Flyer" wagon... and tried that on a windy day ... it worked!

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    5. Here's my sailing enthusiast colleague that gave me the 6 hr long ride ... but far from his finest!!... he had no idea this video was up until someone told him about it. It has almost a million hits. He said he made the corner to sail into the harbor (in a "laser"), and the water was flowing out at the same rate the wind was moving, so his sail went slack... and he lost all control... he was just carried by the current into the pier.

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