India’s Growth Model: A Need for Change

By Suranjana Nabar-Bhaduri (Guest Blogger)

India has been cited as an example of an alternative development strategy under which economic growth in the early stages of development is service sector-led rather than manufacturing-led. The international press has heralded its exemplary growth performance, projecting it as one of the emerging market economies that will take over the world economy. As expected in the process of development, the share of the agricultural sector in GDP has decreased over time. However, the share of the manufacturing sector has not shown any significant increase. Rather, the services sector has emerged as the main contributor to India’s economic growth, especially since the 1990s. Evidence suggests that between 1993 to 2007, more than 60 per cent of the increase in India’s GDP was driven by an increase in services GDP. This growing importance of the service sector is partly the result of a meteoric rise in services exports, mainly software and information technology (IT)-enabled services. This performance has been greatly associated with the offshoring process in the developed world, and India’s ability to provide English-speaking workers at relatively lower wages. India’s trade balance and current account have shown persistent deficits, and it has relied on earnings from services exports, remittance inflows, and capital inflows to sustain these deficits.

When one evaluates the ability of this current growth path to generate inclusive and sustainable development, the picture is far from promising. The contribution of the IT-enabled services and the IT industry to employment generation has been miniscule, given the size of the Indian workforce, and the fact that a major part of this workforce remains rural and unskilled. While the total estimated size of the Indian workforce is more than 450 million, total employment in these services is only around 2 million workers. The rest of the employment in the services sector has been in low-productivity self-employment services in the unorganized sector. Furthermore, employment in IT-enabled services and the IT sector falls way short of the annual increment of around 12 million in the Indian workforce. 65 per cent of India’s population of nearly 1.2 billion people is now below the age of 25, leading to the emergence of a young population, a fall in the dependency ratio and a rise in the worker-population ratio. Without concrete policy efforts to accelerate the growth and expansion of agriculture and manufacturing, India cannot tap into the demographic advantage of a relatively young population by providing productive employment for both expanding output, and making the process of growth more inclusive. Equally important, there remain the questions of meeting the needs of food, clothing, investment and industrial products that must constitute a large part of consumption before a sufficiently high standard of living can be attained.

It has been generally argued that India’s trade and current account deficits can be financed and sustained by earnings from services exports, remittances and capital inflows, particularly portfolio investment inflows. Though India is nowhere close to a balance of payments crisis, this argument neglects the constraint imposed by external demand. There is no guarantee that the strong export performance of India’s services can be indefinitely sustained, and generate sufficient foreign exchange earnings to finance rising deficits. The major destinations of India’s IT-enabled services exports, and the main sources of remittances (since the mid-1990s) have been the US and Europe. The slow economic recovery in the US, economic recession in Europe in the backdrop of the Euro crisis and the possibility of tighter immigration laws in Europe have the potential to significantly affect India’s exports of services and remittances. Even the potential to significantly increase receipts from the Middle East, another major source of India’s remittances, has narrowed with the slowing down of the oil boom in these countries in the late 1990s and early 2000s, and the plateauing out of the Indian diaspora in this region with respect to size and economic scope. Moreover, short-term inflows such as portfolio investment appreciate the real effective exchange rate, and further widen trade and current account deficits. The persistence of large trade deficits, can, over time, reduce investor confidence, ultimately resulting in a reversal of inflows and speculative attacks on the domestic currency.

What the Indian economy strongly needs are proactive policy efforts to be directed towards accelerating the growth and expansion of agriculture and industry. This calls for more research and development (R&D) programs through public-private partnerships; credit policies that will make it easier for industrial entrepreneurs to replace outdated or inefficient capital equipment; the establishment of more development financial institutions and subsidies to firms for investing in R&D. Public investment, education policies, vocational training programmes and government procurement policies need to be directed to the increase of labor skills and well paid, high- productivity jobs that reduce the needs for imports, and the dependence on services exports, remittances, and volatile capital flows. There is also a need for more comprehensive employment generation initiatives through infrastructural development and rural development programs. India’s development strategy needs to be one that promotes the growth of the domestic market in order to raise the living standards of its population without hitting the external demand constraint. It should not merely seek to integrate into global markets through a reliance on low-wage services exports, implying the exploitation of its workers, for the benefit of global consumers.

(Originally published in Spanish in Página/12 with information on the author here)

2013 Leontief Prize

Wassily Leontief (1905-99)



Tufts University’s Global Development And Environment Institute announced today that it will award its 2013 Leontief Prize for Advancing the Frontiers of Economic Thought to Albert O. Hirschman and Frances Stewart. This year's award, titled "Development in Hard Times," recognizes the critical role played by these researchers in crossing disciplines to forge new theories and policies to promote international development. The ceremony and lectures will take place on March 7, 2013 at Tufts University’s Medford campus.

“Development economics is experiencing a deserved revival, as developing countries increasingly seek to define the appropriate role for the state in a global market economy that is suffering upheavals from politics, economics, and resource constraints,” says GDAE Co-director Neva Goodwin. “A serious return to development theory must start with the work of Albert Hirschman, one of the early leaders in the field. Frances Stewart’s practical and theoretical work on the challenges of modern development further advance such interdisciplinary approaches to international development.”

The Global Development And Environment Institute, which is jointly affiliated with Tufts’ Fletcher School of Law and Diplomacy and the Graduate School of Arts and Sciences, inaugurated its economics award in 2000 in memory of Nobel Prize-winning economist and Institute advisory board member Wassily Leontief, who had passed away the previous year. The Leontief Prize for Advancing the Frontiers of Economic Thought recognizes economists whose work, like that of the institute and Leontief himself, combines theoretical and empirical research to promote a more comprehensive understanding of social and environmental processes. The inaugural prizes were awarded in 2000 to John Kenneth Galbraith and Nobel Prize winner Amartya Sen.

2013 Awardees
Albert Hirschman needs no introduction to those in the field of development. He has been an eminent figure at Columbia, Yale, Harvard, and at the Institute for Advanced Study in Princeton, with which he is currently affiliated. He is considered a pioneer in the field of political economy in developing countries, with a long history of work in Latin America. He has always seen development as a process of creating economy-wide benefits for all, and he understands deeply the nature of “unbalanced growth” and the importance of fostering industrialization and innovation. He has authored some of the most insightful works in the social sciences, straddling economics, psychology, and political theory. His key works include National Power and the Structure of Foreign Trade (University of California Press, 1980 edition), The Strategy of Economic Development (Yale University Press, 1958), Exit, Voice, and Loyalty (Harvard University Press, 1970), and The Passions and the Interests: Political Arguments for Capitalism before its Triumph (1977). In 2007, the Social Sciences Research Council established an annual award in his honor.

Frances Stewart is emeritus Professor of Development Economics at the University of Oxford and was director of Oxford's Department of International Development and the Centre for Research on Inequality, Human Security and Ethnicity (CRISE). Her 1977 book, Technology and Underdevelopment (Macmillan) presents a comprehensive approach to technology choice, challenging neo-classical assumptions. Adjustment with a Human Face (co-authored with Andrea Cornia and Richard Jolly), published in 1987 was highly influential in challenging IMF approaches to adjustment. She has worked on the Human Development Reports of the UNDP since the first Report, and in 2009 was awarded the Mahbub ul Haq prize for lifetime contributions to Human Development. Her long-term project on poverty compares four different approaches – monetary, capabilities, social exclusion, and participatory – from both a theoretical and a policy perspective. Most recently she introduced the concept of “horizontal inequalities” (i.e. inequalities in economic and political resources between culturally defined groups) and has shown how such inequalities constitute a major cause of conflict. Her 2008 book, Horizontal Inequalities and Conflict: Understanding Group Conflict in Multiethnic Societies (Palgrave Macmillan) documents her rich interdisciplinary approach to development.

The Global Development And Environment Institute was founded in 1993 with the goal of promoting a better understanding of how societies can pursue their economic and community goals in an environmentally and socially sustainable manner. The Institute develops textbooks and course materials, published on paper and on its web site, that incorporate a broad understanding of social, financial and environmental sustainability. The Institute also carries out policy-relevant research on climate change, the role of the market in environmental policy, and globalization and sustainable development.

In addition to Amartya Sen and John Kenneth Galbraith, GDAE has awarded the Leontief Prize to Paul Streeten, Herman Daly, Alice Amsden, Dani Rodrik, Nancy Folbre, Robert Frank, Richard Nelson, Ha-Joon Chang, Samuel Bowles, Juliet Schor, Jomo Kwame Sundaram, Stephen DeCanio, José Antonio Ocampo, Robert Wade, Bina Agarwal, Daniel Kahneman, Martin Weitzman, Nicholas Stern, C. Peter Timmer, and Michael Lipton.

Learn more about the Leontief Prize for Advancing the Frontiers of Economic Thought and view a list of previous award recipients
Learn more about the Global Development and Environment Institute
Learn more about Leontief and Input-Output Analysis

The Sinister Irreversibility of the Euro

Giancarlo Bergamini and Sergio Cesaratto (Guest Bloggers)

Draghi's decision to provide unlimited support to short term bonds of those countries who submit their public finances to European control has been greeted with widespread acclaim in Italy.

Albeit necessary to cut the spreads, which had attained unbearable levels, the European Central Bank (ECB) initiative is by no means decisive and under the current terms risks being counterproductive. For starters, it is politically indigestible for Spain and Italy, who hope in fact to scrape through without subscribing to any austere “precautionary program” imposed by Europe and policed by the IMF. In other words, they hope that the expectations triggered by the ECB's announcement can do the trick of lowering the spread on their sovereign bonds, even if nothing concrete follows without conditionality constraints. In reality, if nothing happens the spreads are likely to increase, possibly because the markets expect that the bailout will be requested too late. Let's not get carried away by market euphoria. On occasion of the previous ECB interventions, the Strategic Management Plan (SMP) of 2010-2011 and the two Long Term Refinancing Operations (LTROs), we had the same immediate reactions, only to be wound up after a few weeks. And this time we haven't even had ECB intervention to speak of, just the threat of it and subject to an abstruse mechanism (request for aid by country concerned, signing of a Memorandum of Understanding (MOU), participation of European Financial Stability Facility/European Stability Mechanism (EFSF/ESM) in the bond actions, and at last ECB purchase in the secondary market). It seems highly impractical, save that in the process the applicant country may lose access to the markets.

How much the ECB intends to shrink the spreads is left unknown, however, the presumable inadequacy of its “Outright Monetary Transactions” and the hardening of the austerity clauses attached thereto will make it more and more difficult for the applicant countries to comply with the prescribed terms. If the countries do not comply with the objectives agreed upon, the ECB may withdraw its support, thus sanctioning a possible breakup of the Euro.

A true mess indeed, which renders Draghi's move the umpteenth kicking of the can down the road. Yet, it confirms what heterodox economists (including those subscribing to “Modern Money Theory”) have always asserted: Interest rates are determined by central banks, not by the markets. Hence, the deduction that the bulk of the fire of the past two years has been set by the ECB itself, subservient to the European elite's diktat that welfare state and trade unions be wiped out by means of a fiscal crisis– first in the periphery, but as a lesson to German unions as well.

The fact is, monetary unions are set up with the primary goal of constraining member countries (and their working classes) into a devastating deflationary competition. This teaching derives from Keynes, but few left-wing economists are culturally capable of drawing its dire consequences. Indeed, the ECB has acted in conformity with its mandate. Out of the three sources of the Eurozone crisis, the Euro itself, the two-year-long weakness of ECB's actions, and austerity policies, Draghi's move softens the second, but at the price of exacerbating the third, and without doing anything to deal with the first.

Draghi's move should be read as a response to the fear that the fire could bring down the very reason of the ECB's existence, namely the Euro, and that peripheral countries' citizens call an end to this exasperating agony. The patient is, thus, kept barely alive, so that augmented doses of the other treatment, austerity, effectively annihilate any remaining willingness to react. Therefore, the implications of Draghi's message on the irreversibility of the Euro are pretty sinister, rather than progressive as some commentators seem to infer.

Are there alternative routes? The unconditional intervention of the ECB, while affirming its role as lender-of-last-resort, makes sense as far as it allows the peripheral economies to execute a growth strategy aimed at restoring their competitiveness, with a view to dealing with the huge intra-European trade imbalances. To this end, stabilisation (not reduction) of the debt-to-GDP ratio should be sought. This objective would hopefully reassure the markets, while leaving room for more expansive fiscal policies. However, this would still not be enough.

A rapid increase in the European public budget should also be pursued, with a strong redistributive bias from core to periphery, whereas the role of national budgets should correspondingly decrease (as in the USA, in short). This vision of a Federal Europe is tantamount to a transfer union subdivided between those who subsidize and those that are subsidized, which would prove unacceptable to both, and not because of “national and nationalistic idiosyncrasies” that one commentator regards as obstacles.

Above all, the hard truth is that Europe is headed in another direction, in keeping with the true purpose of the Euro.

(A former version of this article appare in Il manifesto September 8 2012)

Why Tax the Rich?

A question that has been central in this electoral season is whether taxation of the wealthy matters. Republicans suggest that it reduces growth, since it creates negative incentives to 'job-creators', while Democrats argue that it is a question of fairness. The figure shows some data which sheds light on the second issue.

The graph shows the top marginal rate from 1913 to 2010 in the left-hand axis, with a low of 7% in 1913 and an all time high in 1953 at 92% of the marginal dollar being taxed, and the income of the top 1% (the non-99%) on the right-hand side. The lowest level of total income of the top 1% was 7.7% in 1973 and the highest levels were 19.6% in 1928 (right before the 1929 crash) and 18.3% in 2007 (before the 2008 Lehman collapse). There is a clear negative correlation. And, by the way, it is no coincidence that after the increase in inequality we had a financial crash both times.

Economists do it with models, again

Updating my blog on Nate Silver's FiveThirtyEight.com model forecasts, I left the story in the aftermath of the RNC when it looked like any Romney bounce was below the expectations built into the model. Prior blog linked here.

The model is now responding to inputs from the DNC period, and is showing substantial gains in President Obama's probability of winning in the Electoral College. His probability as of today's (9/8/12) model update is 79.8%, up 2.5 percentage points since the end of the DNC, up 3.5 percentage points since the beginning of the DNC, up 8.2 percentage points since the end of the RNC, and up 10.5 percentage points since the beginning of the RNC. So the model has been consistently increasing the probability of an Obama win for the last 13 days. This is also a model high since it began in June. The early specific poll returns indicate that the Obama bounce is at or exceeding model expectations.

At an 80.0% probability of winning, Obama's win should be categorized as likely on the scale election forecasters appear to use.

I write these words, of course, with pleasure given my political bias. But also with fascination at the extent to which Nate Silver has gone to build a model which responds to the most important inputs to the eventual election outcome. Econometricians, good ones, rock!

This is a clumsy way to show the model output, but the site does not permit a link to just the graphs afaik. And I wanted to visually document the clear uptrend in Obama's winning probability as of this date.

Early Sunday update: Nate Silver has found faith in his model (it's OK Nate, you have the best model I am aware of): link here.

Europe’s Adjustment: How much has happened?

Austerity to reduce spending, and decrease the need for imports, and liberalization reforms to reduce real wages, and promote internal devaluation, have been going on for a while in the European periphery to promote rebalancing, that is, to reduce the current account deficits and allow for continuous service of the debt.

How much fiscal adjustment and wage reduction has already been pushed by the Troika (ECB, EU, IMF)? Quite a bit in fact. Figure 1 below shows the fiscal adjustment (all data from the European Commission’s Statistical Annex of the European Economy, Spring 2012). [Note that the crisis was not fiscal]

Read the rest here.

Employment numbers

Bureau of Labor Statistics (BLS) Employment Situation Summary posted. Total nonfarm payroll employment rose by 96,000 in August, and the unemployment rate edged down to 8.1%. This is weaker than last month, which suggests that the economy is slowing down.

Participation rate fell from 63.7 to 63.5%, meaning that the number of people not in the labor force edged up. The employment-population ratio fell from 58.4 to 58.3%, as shown below.

Note that while the employment-population ratio has been flat since the last recession, the previous boom (the Bush housing bubble) was so weak that the ratio never topped the previous peak (the Clinton dot.com bubble one).

Income Inequality in the US (1917-2010)

Atkinson, Piketty and Saez have a new website on income inequality that provides free access to a lot of data. Below a taste, showing the ratio of average income of the bottom 90% to the average income of the top 10% in the US from 1917 to 2010.

It is clear that the war, and the policies enacted during the 1930s, allowed a significant compression of the income of the top, which has been basically reverted in the last 3 decades, after Reagan and the rise of the Conservative movement. Nothing new, but good to see it this clearly.

Heterodox central bankers again

A new version of the paper Heterodox Central Bankers: Eccles, Prebisch and Financial Reform co-authored by Esteban Pérez Caldentey has been published in the Network Ideas Working Paper Series. Again from the abstract: The Great Depression led to a need to rethink the principles of central banking, as much as it had led to the rethinking of economics in general, with the Keynesian Revolution at the forefront of the theoretical changes. This paper suggests that the role of the monetary authority as a fiscal agent of government and the abandonment of the view of the economy as self-regulated were the central changes in central banking in the center. In the periphery, the change in central banking was related to insulating the worst effects of balance of payments crises, while the use of capital controls became more common. The experiences of Marriner S. Eccles in the United States following the Great Depression, and Raúl Prebisch in Argentina in the 1930s and in Latin America in the 1940s are paradigmatic examples of those new tendencies in central banking at the time.

Is Growth Still Possible?

Paul Krugman has recently pointed out a very pessimistic, but very instigating paper by Robert Gordon, about the possibilities of long run growth. Gordon suggests, very boldly, that the: “rapid progress made over the past 250 years could well turn out to be a unique episode in human history.” In his view, long-term stagnation is a very possible outcome. The reasons are associated to the effects of technical progress on investment.

Gordon argues that, while the first (steam, cotton textiles, railroad) and particularly the second (automobile, chemicals, electricity, oil) Industrial Revolutions (IR) led to a significant increase in investment, the third IR (information technology) has been less prone to lead to significant increases in investment. Further, the advantages of the first and second IRs were incremented by demographic changes and the process of urbanization, which created the need for investment in infrastructure.

Read the rest here.

The IMF and stylized fiction

The IMF has posted their Top 20 list of most popular entries since the launch of the blog. At #3 they have the Ten Commandments of Fiscal Adjustement in Advanced Economies, which is from 2010, but still worth reading, since their views have hardly changed. I am not going to go through the whole list, even though it does merit careful analysis. I want just to point out a few problems with three of the commandments (do they really need the religious analogy?). This 10 Commandments are based on the IMF's views on the stylized facts of fiscal consolidations.

Note that the IMF wants a reduction in debt-to-GDP ratios in the long run (commandment #3), even if nobody knows exactly what is the difference of having a 40% ratio, which they recommend for 'emerging markets' (meaning developing economies), or a 250%, as the UK had during the Napoleonic Wars (here). My first concern is with the idea that consolidation (by which they mean austerity) should be done by cutting spending and not increasing taxes (#4), because this is more conducive to growth.

This is a proposition they repeat in their last Fiscal Monitor (2012: p. 35), where we are told that:

"a number of earlier studies have shown that expenditure-based fiscal consolidations have a more favorable effect on output than revenue-based consolidations, in spite of the standard multiplier analysis … Chapter 3 of the October 2010 World Economic Outlook reaches the same conclusion (IMF, 2010b) and notes that this result is partly because, on average, central banks lower interest rates more in the case of expenditure-based consolidations (perhaps because they regard them as more long-lasting)."

Note, however, that the reason for the superior performance for cutting spending instead of raising taxes (on the rich one would hope) is that the Central Bank does not hike rates in the former case, since it is part of a conservative plan to reduce the size of government (note that the IMF asks for consolidations to be fair, #6, but then wants to cuts social spending, #5). Worse the notion is also based on the idea that lower (higher) spending brings down (up) the rate of interest and leads to crowding in (out) of private investment. The problem is that the evidence for a positive (negative) effect of fiscal deficits (surplus), or public spending increase (reduction), on interest rates, is that it is almost non-existent (see UNCTAD, 2011, chapter 3 for a review).

The other point is related to the last commandment (#10), which says that you should coordinate your macroeconomic policies with other countries. I'm not even going to deal with the problems of coordination. My problem is that the arguments tend to be based on the Mundell-Fleming (MF) model (the ISLMBP with perfect capital mobility), which suggests that fiscal policy is less efficient in a small open economy. In this case, fiscal policy raises the rate of interest, with capital mobility, pressures for inflows lead to an appreciation of the currency, and lower trade surpluses. Instead of crowding out, meaning lower investment, one gets lower output from the external accounts. That's why they say in their last Fiscal Monitor that "in line with the theory, fiscal multipliers tend to be smaller in more open economies" (2012, p. 33).

Again this depends on a weak empirical relation. In the United States seldom is the case that expansionary fiscal policy causes higher rates of interest. In fact, the policy of the strong dollar, with the impact on manufacturing output and exports, has often been detached from fiscal expansionism or higher rates of interest (e.g. the Clinton years in which a strong dollar went hand in hand with fiscal consolidation and monetary easing to feed the dot-com bubble).

Finally, note that even small open economies in several periods were able to have very effective fiscal policies, because in spite of relatively flexible exchange rates, they used capital controls to avoid the effects of volatile capital flows on their external accounts. In this sense, the world of relatively regulated capital flows, rather than of fixed exchange rates (even if sometimes the two are confounded as a result of the Bretton Woods arrangement), seems to be more conducive to effective fiscal policy. So the lesson should not be that small open economies cannot do effective fiscal policy, but that capital controls (which they are not quite okay with contrary to what you might have heard, but I leave for another post) are necessary.

PS: For a more consistent theoretical critique of the MF model see Serrano and Summa (2012).

Productivity slowdown and and the return of secular stagnation

Robert Gordon has recently argued that secular stagnation is a likely possibility. Alvin Hansen, one of the most influential of the neoclassical synthesis Keynesians, was the father of the idea. For Hansen the reasons were associated with declining population growth, the disappearance of labor-saving technology, and the closing of new frontiers.

His views were published in a famous book titled Full Recovery or Stagnation?, in which he argued that investment opportunities were lacking. Since Keynes theory was also dependent on the expansion of autonomous investment, and Hansen was a Keynesian, the stagnationist thesis was considered a Keynesian theory. All in all, Hansen's views are not very different from Gordon's position. However, it is important to note that Gordon presumes that productivity determines growth, which is not a very Keynesian proposition.

The table below shows the rate of labor productivity growth from 1948 to 2011, and the two sub-periods that start with the productivity slowdown in 1973. Note that productivity growth follows the rate of growth of output (GDP).

This is not the Okun's Law discussed before, since these are averages that eliminate the cyclical relation between productivity and growth. In other words, the relation above is about the trend, something referred to as the Kaldor-Verdoorn Law (KVL). KVL suggests that productivity growth is not the cause of growth, but the result, and it assumes that growth is demand led, in Keynesian fashion. This would suggest, at least from the technological point of view, that there are less reasons than Gordon suggests for his pessimism. Of course one may very well think that stagnation in the US will result from the political forces that do not allow demand expansion. And yes everything hinges on the thorny issue of causality.

Election anti-bounce - economists do it with models

A very brief observation on economists, models, and the US presidential race.

Nate Silver, an economist (who successfully escaped the University of Chicago after completing his BA there), and a person who got hooked on econometrics, has the best electoral race forecasting model I am aware of.

During the 2008 race, he forecast the outcome within 0.1%.

His current model (as of 9/1/12) has President Obama's probability of winning at 72.0%. That is an increase of 2.7 percentage points during this last week of the Republican national convention. The Republican anti-bounce? Maybe they needed more of Dirty Harry, er, Clint Eastwood?

More importantly, this lead has been fairly consistent, perhaps slowly widening, since June. Those who call the race close are paying too much attention to the national horse-race polls. There, Obama's current projected lead is 1.8%, which is fairly close. But at this point has little bearing on the forecast outcome.

For the more wonkish of you out there, check out Nate's blog FiveThirtyEight.com here. Essentially, Nate's model is a (Bayesian?) weighted average of poll results and economic indicators. His results last time were impressive. It's the best political forecasting model I am aware of.

Update 9/3/12. Happy Labor Day! Some have suggested, including an anonymous comment here, that I am being too optimistic in interpreting the Silver models' outputs. No, I am interpreting the models' output. If they are trending toward Obama, that is what the model is saying.

So it is incumbent that if the model goes negative, I also report that output. Silver's Now-cast went negative early today, indicating a 3.1 percentage point decline from the intra-RNC peak to 71.0%. Note that level is 0.3 percentage points lower than the model indicated at the beginning of the RNC, so interpretation is sensitive to choice of starting points. Some, including Silver wearing his hyper-conservative hat, say this is evidence of a Romney RNC bounce.

OTOH, the paired Nov. 6 Forecast model, which has an adjustment for relative convention bounce as well as an adjustment for relative economic indicators, indicates a further widening in the probability of an Obama win, to 74.5%, a model high.

So the convention period was, in terms of these two models, a toss-up, or as Silver says a split-decision. No one knows which model is more accurate at this point in time; I simply point out that Silver built the Nov. 6 Forecast model to specifically adjust for relative convention performance. (Don't go too wobbly, Nate Silver). What is clear right now is that Romney has underperformed recent convention performances.

On to Charlotte to continue the saga.