The Internet, Surveillance Cameras, and Misyse of big Data-Becker
Surveillance cameras, tax reporting, Internet-based data,
emails, mobile phone records and their cameras are some of the more salient modern
ways that provide information on individuals and organizations. Few object when
banks and other organizations use surveillance cameras on their premises to
deter theft and robbery. There is much greater concern when Internet companies
like Google and Facebook use their vast stores of data to learn about the interests
and other personal information, of the millions of individuals who use their
services. Probably, however, the most serious threat is the misuse of “big data”
by governments, including democratic governments.
This past week the possible misuse of exte...more
Ryan Avent watches Karl Smith remind Tyler Cowen that people respond to market prices, and piles on himself:
The euro crisis: Der Elefant im Raum: TYLER COWEN writes on the euro-zone economy:
Would the new helicopter drop money be kept in periphery banks and lent out to stimulate business investment? Or does the new money flee say Portugal because Portuguese banks are not safe enough, Portuguese loans are not lucrative and safe enough, and Portuguese mattresses are too cumbersome? The former scenario implies that monetary policy should be potent. The latter scenario implies that the helicopter drop will be for naught and the fiscal policy multiplier also will be low, on the upside at the very least (fiscal cuts still might cause a lot of damage on the down...more
Matthew Lynn at Marketwatch claims that his country, Britain, will become Europe's biggest economy. But that is just nationalist wishful thinking from his part. First, let's review the current situation, here was the 2012 GDP in local currency for the three biggest:Germany € 2,644 BillionFrance € 2,028.5 BillionBritain £ 1,540.5 Billion(Source, the respective national statistics bureaus)If you "translate" Britain's number using the current exchange rate of about €1.18/£, this is the result:Germany € 2,644 BillionFrance € 2,028.5 BillionBritain € 1818 BillionIn other words, the French economy is roughly 11% bigger and the German economy is roughly 45% bigger than the U.K. economy.Lynn claims that Britain, while doing poorly in absolute terms, is doing much ...more
Gavin Kennedy follows up on a recent post from Brad DeLong on Keynes and
laissez faire:
Keynes on Laissez-Faire, by Gavin Kennedy: I read
the Keynes quote below in Brad Delong’s Blog:
As John Maynard Keynes shrilly stated back in 1926:
“Let us clear…
the ground…. It is not true that individuals possess a prescriptive 'natural
liberty' in their economic activities. There is no 'compact' conferring
perpetual rights on those who Have or on those who Acquire. The world is not
so governed from above that private and social interest always coincide. It
is not so managed here below that in practice they coincide. It is not a
correct deduction from the principles of economics that enlightened
self-interest always operates in the...more
… is from pages 224-225 of Milton Friedman’s and Daniel Boorstin’s 1951 or 1952 essay, “How to plan and pay for the safe and adequate highways we need”; – an essay that was lost for decades until one of these authors, in 1988, found the original; it wasn’t published until it appeared as the Epilogue in Gabriel Roth’s 1996 book, Roads in a Market Economy:
The accepted approach to this problem [of highway provision] is an illustration of the way in which the proponents of our free enterprise system accept the role which is given them by their opponents – a role as fighters of a rear-guard action against socialism. While they devote their energies to preventing further encroachment by government, they take for granted...more
Why oh why can't we have a better press corps?
For at least half a generation, liberals--at least liberals that I know--have been hammering on the fact that the stepping-away from the commitment to universal free or nearly-free education has been a long-run disaster for America. With Claudia Goldin and Larry Katz's The Race Between Education and Technology serving as its analytical spearhead, the liberals I know spend lots of time talking about how the pace of technological progress requires a more-educated and thus more-skilled workforce, and about how the rise in college costs starting around 1970 stopped the normal American pattern by which each generation gets much more education in its tracks--with rising income inequality between the 80th and the 20th percentile ...more
Last week, we remembered Barron’s columnist and editor, Alan Abelson (A Few Words About Alan Abelson).
This week, Barron’s gathered various commentary from Colleagues, Wall Street Friends and Readers to remember Alan Abelson. It is a long piece filled with words from many readers.
The shame of it is that Abelson himself never got to see it. Why is it that we so rarely get to say what we mean to the people in our lives?
Its enough to make you want to fake your own death to see the nice (and even not so nice) things people will say about you.
...more
Paul Krugman:
The Mythical 70s: It’s actually even worse than Matt [O'Brien] says. For the 1970s such people remember as a cautionary tale bears little resemblance to the 1970s that actually happened. In elite mythology, the origins of the crisis of the 70s, like the supposed origins of our current crisis, lay in excess: too much debt, too much coddling of those slovenly proles via a strong welfare state. The suffering of 1979-82 was necessary payback. None of that is remotely true. There was no deficit problem: government debt was low and stable or falling as a share of GDP during the 70s… a runaway welfare state more broadly just wasn’t an issue — hey, these days right-wingers complaining about a nation of takers tend to use the low-dependency 70s as a bas...more
Formerly known as the Cold War Studies programme, LSE IDEAS has always been focused on post-1989 events in that part of Europe. As out founders keep saying, understanding the Cold War is key to understanding the current era of globalization. I need not remind anyone that the wars there were especially long and awful after the collapse of the former Yugoslavia. Although Western commentators tend to uniformly portray Soviet-era strongmen in a negative light, I have always had a more sanguine view of Josep Broz Tito. Say what you will about his methods, but centuries-long ethnic hatreds that were again to erupt after the Iron Curtain's demise were mitigated to a significant extent during his reign. It was not uncommon, for instance, for Serbs and Croats to train side by si...more
Feline Fate: Brigitta the Wheelchair Cat Adopts Lost Kittens Der Spiegel
Carbon storage in Arctic tundra shows ecosystem resiliency ScienceBlog
Harry Reid eyeing July for the `nuclear option’ WaPo. 2013 and not 2009?
Obama’s trust-in-government deficit Dan Balz, WaPo
Despite sequester, high-level federal executives slated to get bonuses McClatchy
Dueling Jobs (and Big Paydays) Gretchen Morgenson, Times
Bulls vs. bears
Dow at an all-time high, who cares? mathbabe
Economic Prospects for the Long Run Ben Bernanke, Bard College at Simon’s Rock. (English majors, rejoice!)
Historical Echoes: The “Mississippi Bubble” – When One’s Back Could Be Rented Out as a Writing Desk Federal Reserve Bank of New York. A la Les Liaisons dangereuses (1782)?
‘Mora...more
What is the difference between a socially active priest and one who dabbles in leftist politics? The dividing line was much clearer during the Pope John Paul II and Benedict XVI eras when the latter was strictly verboten and priests were discouraged from engaging directly--especially in electoral politics. A few weeks ago I discussed the changes that may be in store at the Vatican given that someone from Latin America-- homeland of liberation theology spurred by the world's highest rates of inequality--has become pope. While Pope Francis has disavowed liberation theology in speech, in practice, many alienated (former) Latin Catholics believe that the hardline of the past will be replaced by a more tolerant and receptive outlook.The highest profile critic of the Catholic...more
Paul Jay of the Real News Network interviews Heiner Flassbeck, who served as director of the Division on Globalization and Development Strategies of the United Nations Conference on Trade and Development, known as UNCTAD. He was a vice minister at the Federal Ministry of Finance in Bonn in 1998 and ’99. He’s now a professor of economics at Hamburg University.
More at The Real News
I’m going excerpt a bit more heavily than usual, and focus on the financial markets instead of the labor markets. And focus especially on the surreal parts:
JAY: [T]he policy is–of course, you know, sets the framework, but it’s the way the economy is built and structured now that you have such policy. …
FLASSBECK: … [T]he root cause is that we misun...more
Old-fashioned Austerity - Paul Krugman
The 1 Percent Are Only Half the Problem - NYT
Unconventional Monetary Policies - The Irish Economy
For Stock-Picking Advice, Don’t Ask an Economist - Greg Mankiw
The Week Ahead: Ready for Some Fedspeak? - Dash of Insight
Cookbook Econometrics - Reprise - Dave Giles
Stein's Paradox (Statistics) - Normal Deviate
The Liquidationist Urge - Paul Krugman
...more
By Ian Fraser, a financial journalist who blogs at his web site and at qfinance. His Twitter is @ian_fraser.
What has become of our markets? Nanex, the market analysis firm, has animated a half second of trading activity in Johnson & Johnson stock. The animation is both intoxicating and mindblowing, not only because of the sheer quantity of trades, each of which is made by computer algorithms (i.e. without human intervention) in such a miniscule timespan, but also because of the tremendous scope that high-frequency trading creates for what Nanex calls “abusive behaviour” — including arbitrage and market manipulation — and systemic risk.
The video illustrates an actual half second of trading in J&J stock from May 2nd, 2013, slowed down so it ta...more
George Hall and Thomas Sargent advise Republicans who support the idea of debt
prioritization to "ponder the
actions" of Hamilton, Madison, and Grant:
Fiscal prioritisation: Lessons from three wars, by George Hall, Thomas J.
Sargent, Vox EU: With the temporary suspension on the US Treasury’s
statutory debt limit set to expire in late May, Republicans in the US House
of Representatives have advanced the idea of debt prioritization. This
proposal, put forward in the Full Faith and Credit Act (HR 807), would
"require that the government prioritize all obligations on the debt held by
the public in the event that the debt limit is reached”. Specifically, as an
alternative to increasing the debt limit, the Secretary of the Treasur...more
Do you feel it too … The air of complacency that has engulfed financial markets and policy makers in the last month. With inflation falling and even the spectre of deflation now returning as a market meme as well as stubbornly weak growth, more stimulus and less concern about debt and deficits might of course seem warranted.
Still, two points have caught my attention in recent weeks. The first is the decisive push against austerity with the IMF, EU commission and Germany all seemingly content to allow the periphery more time. The second is the combination of two extraordinary headlines on Bloomberg in the past couple of weeks.
The first article refers to comments by GS’ CEO Lloyd C. Blankfein that he is getting a little worried about a back-up in interest r...more
Jeff Jarvis reprints the clip above, in an article dismissing the privacy concerns surrounding Google Glass. The Victorian attitudes of Newport’s cottagers, he clearly implies, were misguided and misplaced. “Rest assured,” he writes. “ I will ask you whether it’s OK to take a picture of you in private.”
The key words, here — words which weren’t even part of the cottagers’ vocabulary — are “in private”. We now live in a world where we have public lives and private lives — and for over a century now, since roughly the point at which the above article appeared, the portion of our lives considered “public” has been expanding, while the portion of our lives we can consider “private” has been contracting. What’s more, Jarvi...more
I am traveling today, so only have time to complain about some themes I keep coming across when reading the press and speaking to people out in the real world. No links.
1. There is no reason at all for the ECB to look around for transmission mechanisms to boost the eurozone economy. Europe is in recession because the ECB WANTS IT TO BE IN RECESSION. Yes, the ECB doesn’t know that it wants a recession, but the NGDP growth it is producing will inevitably produce a recession in the eurozone. OK, they aren’t even targeting NGDP, but the highly flawed CPI including oil and VAT that they are trying to hold well below 2% will inevitably produce the sort of slow NGDP growth that will inevitably produce recession.
2. The ECB is not at the zero bound. O...more
The recent policy debate over whether its time for interest
rates to start to rise after being at the lowest levels since the Great
Depression for nearly five years shows just how much of a policy box
governments are in when it comes to fiscal and monetary policy. Never mind the debate over whether there is a trade-off between monetary stimulus and financial stability. Raising rates to reduce the perverse
incentives on long-run economic behavior and activity comes with the risk of destabilizing
public finances by raising debt service costs.
On the one hand, the global economy has been stagnating for
five years and it can be argued still requires monetary stimulus in the form of
low interest rates and fiscal stimulus in the form of deficits and expansionary
fisca...more
Here’s a letter to an e-mail correspondent. I use his real name with his kind permission.
Jeremy Harris, M.D.
Dear Dr. Harris:
Thanks for e-mailing in response to my recent review of Cass Sunstein’s book Simpler. While I disagree with the thrust of your argument, I appreciate its civility and thoughtfulness.
The heart of your criticism is your claim that I “ultimately deny the significance” of behavioral economics.
No and yes. I don’t deny the worth of learning more about human behavior. I don’t deny that some economists forget that homo economicus is an analytical tool and not a description of, or a prescription for, real people. I don’t deny that behavioral economics gives us a richer and worthwhile picture of the ...more
… is from page 108 of Peter Drucker’s 1967 volume, The Effective Executive:
The need to slough off the outworn old to make possible the productive new is universal. It is reasonably certain that we would still have stagecoaches – nationalized, to be sure, heavily subsidized, and with a fantastic research program to ‘retrain the horse’ – had there been ministries of transportation around 1825.
...more
After a one-day pause, the US stock market resumed its advance on Friday. The S&P 500 rose 1.0 percent to a new record high even as the US dollar rose 0.8 percent to its highest level since July 2010.
Positive economic data on Friday helped boost markets.
US consumer sentiment improved in May. The preliminary Thomson Reuters/University of Michigan index of consumer sentiment increased to 83.7 this month, the highest since July 2007, from 76.4 in April.
The outlook for the US economy also appears positive. The Conference Board's index of US leading indicators rose 0.6 percent in April after falling 0.2 percent in March.
Earlier in the day, Japanese stocks also resumed their advance, with the Topix gaining 0.6 percent to close at its highest level since August 2008.
...more
Welcome to the Counterparties email. The sign-up page is here, it’s just a matter of checking a box if you’re already registered on the Reuters website. Send suggestions, story tips and complaints to Counterparties.Reuters@gmail.com.
Why might Yahoo want to buy Tumblr, as AllThingsD reported last night and Adweek confirmed this morning? Henry Blodget has a couple of ideas. For one thing, he says that “Yahoo wants to become hip and cool again, and Tumblr is hip and cool.” Tumblr also has a large following in the 18-29 demographic that Yahoo would like to capture (CFO Ken Goldman told a group of investors earlier this week that “One of our challenges is we have had an aging demographic.”) In that way, the move is similar to last year’s Facebook/Instagram dea...more
Jamie Dimon is wagging his finger from newstands across America this week, above the kind of headline his PR team can only dream of: “DIMON IS FOREVER: Why Jamie Dimon is Wall Street’s Indispensable Man”.
The story itself, by Nick Summers and Max Abelson, consists mainly of rich corporate insider types talking about how wonderful Jamie Dimon is, and how ridiculous it is that anybody might consider stripping him of the chairmanship of JP Morgan. Here’s a doozy:
Admiring rivals have been known to call Dimon “the sun god.” That cosmic aura has real use, says Kathryn Wylde, who served on the Federal Reserve Bank of New York’s board with Dimon until his term ended last year. “There’s no doubt that it helped the bank, because so much of that ...more
The key factors that we look for in a market – technicals, fundamentals and sentiment – continue to bolster our view for equity upside over the medium term. The German DAX and US Dow Jones are leading the way and still look great, technically. While both look slightly overstretched here at all-time highs, they have excellent support in the event of any major correction, at 8,100 and 14,200, respectively.
Among emerging markets, the Philippines, Thailand, and Turkey (upon which we have a bullish asset class strategy view) have climbed to new all-time highs too. The fundamental outlook is solid, with earnings near their pre-crisis peak, valuations at reasonable levels, dividend yields outstripping government bond rates, and positive earnings surprises outstripping the...more
Editors note: Moody’s released the following press release yesterday in conjunction with a ratings action it took on Turkish sovereign debt.
Moody’s Investors Service has today upgraded Turkey’s government bond ratings by one notch to Baa3 from Ba1, and has assigned a stable outlook.
The key drivers for today’s rating action are:
1. Recent and expected future improvements in key economic and public finance metrics.
2. Progress on structural and institutional reforms that Moody’s expects will reduce existing vulnerabilities to shocks to international capital flows over time.
Moody’s decision to assign a stable outlook on Turkey’s ratings reflects the rating agency’s expectation of continued prudence in the management of...more
Tableau to start trading tomorrow with symbol “DATA”. Nice. Love those guys. ->
Like services such as Wealthfront, but wish there was an uber-Wealthfront that managed allocations to LendingClub, CircleUp/Angellist, etc. ->
Frontline: The Retirement Gamble – http://t.co/ip8xqqyGwC ->
Today in “ewww”: Human feces taint more than half of U.S. public swimming pools | http://t.co/FVGlfXHLSD ->
Lovely: Newegg nukes “corporate troll” Alcatel in third patent appeal win this year http://t.co/4wVEwd0Hfy ->
...more
US stocks fell on Thursday. The S&P 500 fell 0.5 percent after four consecutive days of gains that saw the index reach new all-time highs.
The yield on ten-year Treasuries fell six basis points to 1.88 percent. Oil rose 0.9 percent but gold fell 0.7 percent.
Investors sold stocks on Thursday after several Federal Reserve officials recently voiced concerns over the Fed's asset purchases and raised the possibility of an end to these purchases. From Bloomberg:
Dallas Fed President Richard Fisher said today buying mortgage bonds risks disrupting the market, while Philadelphia Fed President Charles Plosser said, “it’s not good for the bank to be holding lots of mortgage paper.” Jeffrey Lacker of Richmond said to reporters yesterday the Fed should “get out of the c...more
photo from "Engendering Economics" by Zohreh Emami and Paulette Olson
Marianne Ferber was proud to have been a Canadian economist, if only for a little while.
The "Canadian" part was due to astute planning by her father, Karl Abeles. Marianne was born in Sudetenland, Czechoslovakia, in 1923. Canada was exceptionally hostile to Jewish immigration in the 1930s and 40s - we accepted by some estimates just 4,000 refugees, far fewer than Australia, Argentina, or any other remotely comparable country. But the Abeles were dairy farmers, and Canadian immigration policy was as pro-agriculture as it was anti-Semitic. The Canadian Pacific Railway representative who visited the Abeles farm liked what he saw, and fast-tracked the approval of their ...more
Japan’s new GDP numbers look a bit puzzling:
Japan’s economy expanded the most in a year last quarter as consumer spending and export gains outweighed the weakest business investment since the wake of the March 2011 earthquake and tsunami.
Gross domestic product rose an annualized 3.5 percent, a Cabinet Office release showed in Tokyo. Private consumption, making up 60 percent of GDP, contributed 2.3 percentage points to the jump. The Bank of Japan may upgrade its assessment of the economy after a May 22 policy meeting, according to people familiar with the central bank’s discussions.
. . .
Annualized real growth exceeded all but two of 36 estimates in a Bloomberg News survey. Nominal GDP, which is unadjusted for changes in prices, rose 1.5 percent, also the mo...more
CIPE’s long time partner Samriddhi, the Prosperity Foundation in Nepal is seeking to better understand why so many of their independent and small businesses never grow. What is preventing these mom and pop shops in Nepal from engaging in the formal economy, accessing credit, and growing their operations? What barriers do these entrepreneurs face? CONTINUE READING
...more
Below is a summary of Business Monitor International (BMI)’s current views on the global shipping sector:
Transpacific shipping rates are still doing relatively better than Asia-Europe rates, but are down in year-on-year (y-o-y) terms.
Asia-Europe freight rates are down on lack of demand (due to continued economic woes in the eurozone) and over-supply of vessels (there are more vessels and vessels of a larger size that can only operate on the Asia-Europe trade route).
A rate war has erupted in the Asia-Europe rote, which has forced rates down below the US$1,000 per TEU (twenty-foot equivalent unit) level, as operators fight for market share.
Ships are now sailing at a loss – a container can be shipped between Shanghai and Rotterdam for just US$740.
All this is ...more
Paul Krugman has really outdone himself this time, arguing that a big reduction in the U.S. federal budget deficit proves that calls for "austerity" measures were unfounded.But this drop in the deficit comes after austerity measures have been implemented! Remember, the so-called "fiscal cliff" that Keynesians said would trigger a deep slump if implemented. Well, most of the tax increases in the "fiscal cliff" have now been implemented, and the spending cuts of the so-called "sequester" were implemented entirely, though with a two month delay.Krugman's reasoning is like a fat guy who is forced to go on a diet, loses 10 kilos/22 pounds in weight, and then points to the weight drop to argue that the diet wasn't necessary to lose weight....more
Japan officially reported that quarterly growth was nearly 0.9% (3.5% at an annualized rate) in the first quarter, something that will no doubt be taken as proof that "Abenomics" works.However, this number presupposes that there was deflation of 0.5% , as nominal GDP only rose less than 0.4%. If we instead use the domestic demand deflator, which was unchanged, to calculate real growth, it was too less than 0.4%. That was less bad than in most European countries, but far from being a strong boom....more
Economic data on Wednesday were mostly negative.
The eurozone economy contracted 0.2 percent in the first quarter. This followed a 0.6 percent contraction in the previous quarter and was its sixth quarter of contraction.
The German economy managed to expand 0.1 percent in the first quarter but the French economy contracted 0.2 percent and the Italian economy shrank 0.5 percent.
The weak eurozone economy may be a drag on the US economy. A report on Wednesday showed that US industrial production fell 0.5 percent in April, reversing the 0.3 percent increase in March.
Further indication of weakness in US manufacturing on Wednesday came from the Federal Reserve Bank of New York, whose index of conditions for manufacturers in the region fell to -1.4 in May from 3.1 in Apr...more
Two weeks ago I wrote a post "Monetary stimulus vs financial stability is a false trade-off".
My opening lines in that post were: "There's an idea floating around out there that I fear may be
influential. And that idea is horribly wrong. Which makes it dangerous.
And I want to try to kill it."
Today, the C.D. Howe Institute publishes a Commentary by Paul Masson "The dangers of an extended period of low interest rates: why the Bank of Canada should start raising them now".
That's the idea I was talking about.
If you are worried about the dangers of an extended period of low interest rates, the worst possible thing the Bank of Canada could do would be to start raising them now. Because if the Bank of Canada tightens monetary policy ...more
In the past six months, Greece’s Athens Stock Exchange (ASE) index has set a blistering pace, notching up gains of 39.4% and ranking second in global equity market performance – an achievement more commonly associated with fast growing emerging markets. Indeed, notwithstanding the rally in Dubai financials and the policy-induced surge in Japanese stocks, the leader board is occupied by the likes of Argentina, Nigeria, and Kuwait.
Six-Month Equity Market Performance, %
In Business Monitor Online today, we discuss the reasons for the ASE’s outperformance, and the market’s prospects over the coming months and years.
...more
Researchers have recently identified 23 words they term “ultraconserved,” meaning they haven’t much changed since the end of the Ice Age 15,000 years ago. Words matter because they allow us to communicate clearly. CONTINUE READING
...more
Yesterday, the Teranet-National Bank National Composite House Price Index for Canada was released. It showed that 12-month home price inflation in Canada was down to 2.0%, the lowest level since November 2009. And given the huge amount of talk in Canada about a potential housing bubble, there is a worry that this is the beginning of a housing bust.
You can see from the chart provided by the house price index that there actually was a housing bust in Canada during the global financial crisis with year-on-year declines reaching 6%. What has separated Canada from other markets where there has been talk of a housing bubble is that Canada was able to reverse this trend and bring the year-on-year change to near record highs in 2010. SInce 2011 however, the pace of house pr...more
Diana Deutsch’s ‘Sometimes Behave So Strangely’ is the crack cocaine of looped audio http://t.co/zVDwEOveuh ->
Watching Penguins/Senators, and explaining the deep mysteries of Evgeni Malkin to the offspring ->
Jay Peak VT claims 350” of snow this season, more than Steamboat CO or Squaw Valley CA – http://t.co/IQvPkykCgY ->
New @MenInBlazers podcast out. A reminder how good quality podcasts can be. http://t.co/HrX4Ptey59 ->
Nice to see, but amusing when new TV shows don’t yet have names: Female Entrepreneur Project
- http://t.co/oROkaL0wtu /cc @lesamitchell ->
...more
By Edward Hugh
In a number of posts recently I have highlighted the impact of declining workforces on economic growth (here, for example, or here, or here) and the way the policies pursued to address the Euro debt crisis are having the impact of accelerating the movement of young people away from the periphery and towards the core (here, or here) thus accelerating the decline in their working populations and exacerbating their growth problem. This issue has been already highlighted strongly in Japan’s ongoing crisis, and has to some extent come to be known as the “shortage of Japanese” problem following Paul Krugman’s memorable use of this expression to explain why Japan’s economic performance seemed so poor to so many.
Recently I came across a post by Portu...more
The seventh ministerial meeting for the Community of Democracies (CD) was held last month in Ulan Bator, Mongolia. This year, for only the second time, the business community met as the Corporate Democracy Forum (CDF) to share its views with the CD ministerial, and CIPE was invited to participate. CONTINUE READING
...more
The 'IKEA Effect': How people overestimate the value of crap they assemble themselves – http://t.co/6eHfbQK1RF ->
Good news for losers everywhere: Players in a winning team run a higher risk of suffering an injury – http://t.co/gDW3dGvQbq ->
Tried to explain Bloomberg data story via analogy to Unix, “finger” & “.plan”. Might as well have been talking about the Oldovar toolkit. ->
Mance Rayder is real… RT @EQECAT: Wall of ice rises out of lake and destroys homes in Canada http://t.co/682ervGqY9 ->
...more
Last month, I had the pleasure of hearing Christy Romer give a great talk about Japanese monetary policy at the NBER Macro Annual conference. You can now read it here....more
In a recent blog post, Paul Krugman writes:As far as I know, among basic textbooks only Krugman/Wells even talks about the liquidity trap.This is probably a true statement. It is not that other books don't cover the topic, however. It is just that Paul Krugman doesn't know it.FYI, here is what the leading introductory text says about the topic:The Zero Lower Bound As we have just seen, monetary policy works through interest rates. This conclusion raises a question: What if the Fed’s target interest rate has fallen as far as it can? In the recession of 2008 and 2009, the federal funds rate fell to about zero. What, if anything, can monetary policy do then to stimulate the economy? Some economists describe this situation as a liquidity trap. Accord...more
There’s been a lot of excitement about the discovery of two Earth-like[^1] planets, a mere 1200 light years away. Pretty soon, I guess, we’ll be thinking about sending colonists. So, I thought it might be worthwhile to a little bit of arithmetic on the exercise.
I’m going to assume (generously, I think) that the minimum size for a successful colony is 10 000. The only experience we have is the Apollo program, which transported 12 astronauts to the Moon (a distance of 1 light second) at a cost of $100 billion or so (current values). So, assuming linear scaling (again, very generously, given the need to accelerate to near lightspeed), that’s a cost of around $100 trillion per light-second for 10 000 people. 1200 light-years is around 30 billion li...more
During the past 30 years tuition at American colleges has
been growing at a fast pace. The increase has been greatest at 4-year private
colleges and universities, and least at 2-year public colleges, but all college
categories have had large tuition increases. For example, real tuition at the
4-year private colleges has more than doubled since 1980, while tuition at
2-year public colleges increased by over 50%.
Many commentators have criticized these large tuition
increases. Colleges and universities are said to be too greedy and are charging
what the traffic will bear, or colleges are
claimed to conspire together to increase tuition. Although colleges do conspire
on some financial issues, such as agreeing through the NCAA to prevent payments
to college athletes, cons...more
I graduated from Yale College in 1959. Tuition, room, and board at Yale in the late 1950s was $2000 a year; this year it is $60,000. Adjusted for inflation, this is a more than threefold increase. Average salary for a full professor at Yale went from $13,000 in 1959 to $186,000 this year (excluding medical school faculty), which after correction for inflation, an almost twofold increase. The rates of increase in these two variables varies from college to college, but I believe it is generally true that college costs have risen significantly faster than faculty costs. One thing that has depressed the increase in faculty costs is the increasing use of graduate students and other part-time faculty in lieu of tenure-track faculty. In addition, the administrative staffs of ...more
A commenter asked me to do a post on what would have happened if NGDP targeting had been put into effect in mid-2008.
The immediate effect would have been a boom in asset prices, and most likely Lehman would not have failed. The big financial crisis of October 2008 would not have happened. In other words, macroeconomic conditions in 2009 would have played out much like the consensus of economists expected in mid-2008—nothing special.
But let’s say I’m wrong, what then?
1. A sharp drop in demand for credit due to the real estate crash. Note that “demand” is a misleading term, as some of the drop comes from tighter lending standards. This drop in demand for credit would sharply reduce real interest rates in the US, which would reduce the va...more
The Final Report of the Queensland Commission of Audit, headed by Peter Costello, has been released. It largely abandons the claims made in the Interim Report, suggesting that the state’s fiscal problems are the result of irresponsibility on the part of the previous government. To its credit, the Commission identifies the real problem, namely, the long-term tendency for the share of expenditure going to human services such as health and education to rise over time. Since these services are largely provided or funded by governments, they can’t be provided, on the scale people would like, without increasing taxation.
Unfortunately, that’s where the credit stops. The core of the problem, identified by William Baumol in 1967, is that, for obvious technolog...more
Henry Farrell's article on the plight of European democracy in the face of "technocratic" management is very good reading. Tangentially related is this bit from Thatcher making a similar argument ex ante: Which is not to say she was anti-Europe. She wasn't. Alex Harrowell put it well:[T]he European Union has not turned out to be the nice alternative to Thatcherism it was sold as in the 1990s. ... The policies it delivers – open trade, austeritarian macro-economics, open capital flows, no real redistributive budget, and a permanent war on inflation – are basically nothing Margaret Thatcher would not have welcomed. ... Thatcher was a European; it’s Europe that’s the problem.Except that Thatcher rejected the central bank, which is Europe an...more
Back in the early days of this blog, I was working on the idea of a new political dictionary, and made a start with a “Word for Wednesday” series. One of them is relevant to this comment from Megan, about whether we should put scare quotes around the word “reform”, to describe policies, advocated as beneficial reforms, but which we believe to be harmful. My general practice on this blog is not to use scare quotes, and I explain why.
As Raymond Williams points out in his excellent little book Keywords, from which I got the idea for this series, reform originally meant ‘restore the original form’ of something. In particular the Reformation was supposed to sweep away the abuses of the Papacy and restore the church to its original purit...more
The World Economics Association recently interviewed me on the state of economics, inquiring about my views on pluralism in the profession. You can find the result on the WEA's newsletter here (the interview starts on page 9). I reproduce it below.
1. How would you briefly state your perspective on economics?
I would say I am pretty conventional and mainstream on methods, but generally much more heterodox on policy conclusions. I have never thought of neoclassical economics as a hindrance to an understanding of social and economic problems. To the contrary, I think there are certain habits of mind that come with thinking about the world in mainstream economic terms that are quite useful: you need to state your ideas clearly, you need to ensure they are internall...more
Is "aggregate demand" really what anyone cares about? I don't think so. We care about the quality of peoples' lives. And new research is starting to look at what sorts of fiscal policies matter for improving well-being whatever the macroeconomic aggregates say. Evan Soltas describes some of this work and interviews the authors:Tax revenues fall automatically in recessions, and governments back that up with lower tax rates and/ or new credits and deductions. On the spending side, extra outlays on unemployment benefits and other transfers greatly exceed extra outlays on infrastructure and other purchases. This modern kind of fiscal stimulus is supposed to work by stabilizing disposable income. Stabilize that, the thinking goes, and you stabilize output and employment.&nbs...more
To paraphrase Steely Dan, this is not your Haitian but your Hainan divorce. Recent regulations in China intended to tamp down real-estate speculation have had an unintended consequence of separating happily married couples to take advantage of better tax benefits accruing to single persons:Long queues of happy couples waiting to get married might be a common sight in Las Vegas. But lines of happily married couples waiting to get divorced? Only in China. In major cities across the country last month, thousands of couples rushed to their local divorce registry office to dissolve their marriages in order to benefit from fast-expiring tax breaks on property investments for unmarried individuals.Local media reported long waits at registries in Beijing, Shanghai, Guangzho...more
A forum on labor rights and multinational corporations. Here is Richard Locke's lead essay. Here is Layna Mosley's contribution. Many other interesting contributions, too. Have a look. ...more
The recent surge in interest in Nominal GDP Targeting, as an alternative to money targeting or inflation targeting if the central bank is to commit to a nominal target of some sort, has prompted some pushback. This is not surprising. But one of the responses is most peculiar. This is the allegation (1) that the surge comes from liberals opportunistically adopting an idea that was originally proposed by conservatives, and (2) that they will not stick with this “fad” in the longer run because it is only designed to fit current circumstances of high unemployment and low output. Remarkably, every component of this argument is wrong.
I have in mind, especially, the views of Benn Steil and Dinah Walker of the Council on Foreign Relations, as expresse...more
The Future Fund’s creator, former Treasurer Peter Costello, does not have much faith in the ability of sovereign wealth funds to promote fiscal responsibility:
Now I put aside $60 billion in the Future Fund. People say “oh well you could have put aside 70 or $80 billion or something like that.” But I make this point. If we’d put aside more they’d probably just have borrowed more.
...more
I thought I’d quickly highlight a point made recently by two great posts. First, here’s J.W. Mason:
There is increasing recognition in the mainstream of the importance of hysteresis — the negative effects on economic potential of prolonged unemployment. There’s little or no discussion of anti-hysteresis — the possibility that inflationary booms have long-term positive effects on aggregate supply. But I think it would be easy to defend the argument that a disproportionate share of innovation, new investment and laborforce broadening happens in periods when demand is persistently pushing against potential. In either case, the conventional relationship between demand and supply is reversed — in a world where (anti-)hysteresis is import...more
This is so absolutely brilliant and important:
“One thing that experts know, and
that non-experts do not, is that they know less than non-experts think they do.”
It comes from Kaushik
Basu, currently chief economist at the World Bank and one of the world’s
most thoughtful expert-economists.
Economists would be so much more honest (with themselves and
the world) if they acted accordingly – letting their audience know that their results
and prescriptions come with a large margin of uncertainty. Public intellectuals would do so much less
damage if they did likewise. And if
experts are not aware of the limits of their knowledge – well, they do not
deserve to be called experts or intellectuals.
The real point, though, is that the other side –
j...more
A useful way to understand the pickle we’re in, I think, is that we are suffering from the so-called “resource curse”. If you are unfamiliar with the phrase, R20;resource curse” refers to the regularity with which countries “blessed” with abundant natural resources end up as dystopian polities with dysfunctional economies. Nigeria has a lot of oil but no one wants to live there.
The resource curse is pretty easy to understand. It’s not associated with just any sort of natural resource. Switzerland has beautiful mountains and stuff that people would pay a lot of money for, but it is still well-governed. Accursed resources are of a very particular type. They are valuable tradable goods the extraction of which requires a smal...more
An amazing thing has happened over the last five years. Against all expectations, American emissions of carbon dioxide into the atmosphere, since peaking in 2007, have fallen by 12%, back to 1995 levels. (As of 2012. US Energy Information Agency). How can this be? The United States did not ratify the Kyoto Protocol to cut emissions of greenhouse gases below 1997 levels by 2012, as Europe did.
Was the achievement a side-effect of reduced economic activity? It is true that the US economy peaked in late 2007, the same time as emissions. But the US recession ended in June 2009 and GDP growth since then, though inadequate, has been substantially higher than Europe’s. Yet US emissions continued to fall, while EU emissions began to rise again...more
I have an op-ed in the Business Spectator arguing that foreign exchange market intervention is a risk to taxpayers who would be better served if the RBA matched its foreign currency assets and liabilities. I also debunk the notion that Australia is a victim of a ‘currency war’:
It has been argued that Australia is somehow a victim of a ‘currency war’ being waged between foreign central banks engaged in quantitative easing. Yet there is nothing unusual about the effects of quantitative easing on exchange rates.
Quantitative easing is simply a change in the operating instrument of the central bank, from a price variable (the official interest rate) to a quantity variable (base money).
In itself, quantitative easing tell us nothing about whether ...more
My newest Project Syndicate column is on the BRICS. These countries – Brazil, Russia, India,
China, and South Africa – have little in common. Most prognostications
suggested they would agree on very little. Yet they have surprised the world by
proposing a New Development Bank to focus on infrastructure finance.
This is a beginning, but is it a useful one? I suggest not.
What the world needs from the BRICS is not another
development bank, but greater leadership on today’s great global issues. The
BRICS countries are home to around half of the world’s population and the bulk
of unexploited economic potential. If the international community fails to
confront its most serious challenges – from the need for a sound global
economic architecture to addressing...more
Steve Roth (1, 2), Scott Sumner (1, 2, 3), Bill Woolsey, and Matt Yglesias have been debating questions of saving versus investment and paradoxen of thrift. See also JW Mason in the comments here, and Simon Wren-Lewis a while back. Cullen Roche reminds us that, even under conventional definitions, the accounting identity S≡I only holds for a closed economy without government spending, and of JKH’s useful tautology S=I+(S-I). [See Update below.] I think the recent recrudation of these issues owes something to Garett Jones’ and my conversation on capital taxation, which Jones has continued and on which Matt Bruenig has weighed in.
As is often the case, I think that the protagonists agree more than we think we do. Our various allegiances — to sch...more
The idea of going for yield makes perfect sense; it is being encouraged by the wardens of our monetary system, it has continued to make a lot of money even as economic uncertainty has increased and despite trolls calling for a bubble in fixed income markets for years, prices have continued to soar.
Calling a top in the global dash for yield has so far been futile. Indeed, with ZIRP now a structural characteristic of the global financial system, one has to countenance the fact that the race to the bottom in global yields have only just begun. Consider for example the latest uptake for Wal-Marts bumper refinancing issuance schedule in 2013. Recent results on the earnings side and forward guidance have been less than impressive, but investors have still provided a healthy ...more
To me, the central issue raised by this week's Cyprus debacle is how it has affected confidence across the eurozone. To what degree has the possibility of insured depositors at a eurozone bank losing a portion of their deposits affected the mindset of depositors? To what degree has ECB acquiescence to this possibility undermined the notion that deposit insurance in the eurozone means the same thing in all countries? And to what degree has the ECB's direct threat to end support for Cyprus's banking system in the event that the government of Cyprus can not arrange sufficient funds to meet its conditions made a farce of its earlier promise to "do whatever it takes to preserve the euro"?These, to me, are the interesting questions prompted by this week's ev...more
President Truman famously called for a one handed economist. The Carolingian kings of France would have accommodated him. They realised that a kingdom required a common currency under the control of the king and well regulated markets to sustain the confidence of the people. At first mints were established widely, spread across the kingdom. Local barons began to profit from debasing the coinage, undermining confidence in the monetary system. So Charles the Bald established mints under his direct control and regulated the issue of coins: C.12. Following the custom of our predecessors, just as it is found in their capitularies, we decree that in no other place in all our kingdom shall money be made except in our palace, and in St. Josse and Rouen, which right in th...more
Note on this post:In the last while we have been provided with plenty of fodder for reflections on the virtual society. A virtual girlfriend that is (surprise) not real; a new product to help connect the dots across our indelible social network footprints; another product gathering steam that allows us to create footprints that, like those of real humans, wash away. (On the last two, here is a great article, crumbling footprints and all). A few months ago I had a post on the short stories of Borges, highlighting how various of his stories foreshadow issues of the virtual age, specifically the emergence of the double, i.e., a real and virtual self, and the problems that come with perfect memory and complete knowledge, which, though of course never obt...more
The International Olympic Committee has announced that wrestling will be removed from the summer games starting in 2020. I find this decision incomprehensible. I can only rationalize it if I rethink the Olympics as, well, some grand-scale ratings event. But if it has to do with athletics, and if it seeks to maintain a thread of history extending back to the Athenian Olympics, this decision is nonsensical.In the meantime, we have golf enter the Olympics. Not too many years ago that would have been thought to be a joke. For others, like tennis and soccer, the Olympics is overshadowed by other tournaments. Who would rather win the Olympics than Wimbledon or the World Cup? And yet others, like swimming, have become a numbing presence. We are treated to just about every pos...more
In the first paragraph of my book A Demon of Our Own Design(Wiley, 2007) I observe that “You don't deliberately obliterate hundreds of billions of dollars of investor money. And that is at the heart of this book – it is going to happen again. The financial markets that we have constructed are now so complex, and the speed of transactions so fast, that apparently isolated actions and even minor events can have catastrophic consequences.” I then spend a significant portion of the book explaining the mechanics that lead the financial markets to lurch from crisis to crisis; why is it that while engineering in other fields increases safety, financial engineering seems to make things get worse. I suggest that the problem stems from the complexity and tight coupling that...more
The International Economy magazine (Winter 2013) asks 16 authorities, “Can Changes in Exchange Rate Valuations Affect Trade Imbalances?“ It is referring to the claim in a recent book by Stanford economist Ron McKinnon that pressure on China to let the renminbi appreciate against the dollar is fundamentally misconceived because such a movement in the exchange rate would not reduce China’s trade surplus nor American’s trade deficit. This is part of an old debate that pre-dates the rise of the China trade problem. Ron has long claimed that exchange rates don’t determine trade balances because they are “instead” determined by national saving versus investment. I thought Paul Krugman demolished the argument pretty effect...more
By far the most important bit of economic news this week came in well after Europeans had closed down for the weekend in the form of Moody's decision to cut the UK's credit rating. It was important because it added some colour to why GPBUSD crashed through support earlier in the week (wink, wink) as well as it crystallised just how poor economic fundamentals have now become in the UK.
As always, Moody's are coming in after the fact. It has been pretty obvious for a while that to term the UK as a safe haven only made sense if you believed that continental Europe would sink into ground leaving an open sea between Dover and the Ural. This was always going to be one of the more unlikely outcomes, but with the famous speech by Draghi that the ECB would do whatever it t...more
What a simple question! Houses are listed for sale with the prices clearly stated. You make a bid, usually 10% below the list price. If it's accepted and validated by an appraisal, the price is set. On Wall Street, the agreement of a willing buyer and a willing seller is called "price discovery." Let's assume that, through this price discovery process, we have determined that the cost of the house pictured above is $250,000 and we want to buy it.
But there's a problem. Our house, like many others, costs $250,000, but we, like most ordinary Americans, do not have $250,000. We cannot pay the cost of our house from our own pocket. We can, however, pay monthly mortgage payments of principal and interest. Now, it might seem that the price of our house determin...more
Against independence, The Economist:Under Spain’s constitution of 1978, Catalonia enjoys more self-government than almost any other corner of Europe. It runs its own schools, hospitals, police, prisons and cultural institutions. It lacks only tax-raising powers and the Ruritanian trappings of statehood, which nationalist politicians appear to be hungry for. As for the self-deception, this is sometimes farcical: Catalan public television offers a weather forecast that includes provinces that have been part of France since 1659, but no meteorological information for Zaragoza or Madrid. And most Catalans still seem happy to be both Catalans and Spaniards. Support for independence has risen mainly because Catalans think it would offer relief from recession. It would ...more
The big economic news of the week was, in fact, big economic news: the Fed's announcement of significant changes from past practice in the the quantity of its next round of large scale asset purchases ("unlimited"), and in the timing of any future reversal of this expansionary policy ("a considerable time after the economic recovery strengthens").I view this as a pretty fundamental shift in how the Fed hopes to affect the economy. Rather than trying to push economic activity one way or the other through its management of interest rates (which can alter economic activity through its portfolio-rebalancing and wealth effects, for example), the Fed is now quite explicitly trying to affect economic activity by altering interest rate and inflation expectations. As...more
Interview with James Hamilton (published on Oilprice.com on Aug. 28, 2012).James Stafford: Oil prices have shot up in the last month. What range do you see oil prices trading in over the next 12 months?James Hamilton: Oil prices have always been very volatile. If you look at 12-month logarithmic changes in WTI going back to 1947, you come up with a standard deviation of 0.27. In other words, 25% moves up or down within a year are fairly common, and 50% moves or greater have also been seen on a number of occasions. If you look at options prices at the moment, they imply the same level of uncertainty looking forward. For example, somebody today is willing to pay $2.90/barrel for a NYMEX option to buy oil in September 2013 at $120/barrel, consistent with a standard dev...more
"Rogue institution" or "grandstanding" regulator? "A victory for Benjamin M. Lawsky and his 10-month old agency" or a bank that "acted with pragmatism and integrity in the face of extreme provocation?"
The case at issue is the New York State Department of Financial Services (DFS) and its head, Benjamin Lawsky, versus the New York branch of a 150-year-old British banking giant, Standard Chartered Plc. On August 6, the DFS issued a scathing order against the bank. The order charged Standard Chartered (SCB) with "willful and egregious violation of law" over more than a decade. Specifically, the bank "schemed with the Government of Iran and hid from regulators roughly 60,000 secret transactions, involving at least $250 billion, and reaping SCB hundreds of millions of ...more
Imagine a great ship dominating the skyline on a distant sea. Imagine the complexity of that ship: keel, ribs, planks, masts, spars, and an infinite number of less readily named components. Each component was hand-crafted by a craftsman skilled in his trade, to precise requirements, and secured in position to take the stress and strain of a life at sea.Now imagine a crew. They didn't build the ship. The crew are told that the one and only purpose of the ship is to realise a profit for every man jack aboard. Any hand not contributing a profit will be turned ashore. Down below in the ship are nails. Thousands and thousands of nails. Nails are useful. Nails are much sought after in every port the ship enters. Nails can be readily sold and never traced. The crew h...more
The concept of "trillions" has always eluded my comprehension. The picture shows how physically large a stack of a trillion one dollar bills is, which helps a bit. Now try to imagine a stack eleven times as large. That would represent the present amount of US Treasury debt. As of June 30, the US Treasury owed the public—defined as all foreign and domestic individuals, corporations, state and local governments—exactly $11,072,381,954,476.80. This amount has increased by $1,330,158,589,630.22 just in the last year. It has increased 220% or $7,608,234,581,695.98 in the last ten years. But, as I say, such numbers are incomprehensible. I expect you didn't really read them; your eyes just glazed through them.
The average interest rate for all US Treasury debt, aga...more
I've been hesitant to write about the LIBOR scandal because what I want to say goes so much further. We now know that Barclays and other major global banks have been manipulating the calculation of LIBOR through the quotation data they provided to the British Bankers Association. What I suspect is that this is not a flaw but a feature of modern financial markets. And if it was happening in LIBOR for between 5 and 15 years, then the business model has been profitably replicated to many other quotation-based reference prices.Price discovery is not a sexy function of markets, but it is critical to the efficient allocation of scarce capital and resources, and to the preservation of the long term wealth of investors and the economy as a whole. If price discovery is compr...more
Another jobs report in the US, another month where part of the private sector's job creation was undone by continued job destruction by the government sector. The 15,000 additional jobs lost in April brings total job losses in the government sector since January 2010 to over 500,000. While the US has not quite been experiencing European-style austerity over the past two years, that's still a pretty tough headwind to fight as it emerges from recession. ...more
It’s the time of year when everywhere I turn, I read tweets and posts about Davos1, which was a huge part of my life for ten years. I’m a long way from the mountain top these days, but I find that too many people don’t understand some basic truths about the Annual Meeting of the World Economic Forum.2
The Forum’s mission
The Forum’s often-stated mission is “Committed to Improving the State of the World”. There were moments that a few other subversives and I used to say that it was a bit like the signs you see entering a London borough: Croydon: The Brighter Borough.3 Sounds nice, but meaningless.
I don’t think — and, in the day, I didn’t think — that’s quite fair. The Forum is truly committed to im...more
Yesterday evening I wrote about the bizarre disappearance from Google News of my news site, Berkeleyside. What happens next is either an illustration of the power of digital democracy or an example of the value of friends with fantastic megaphones.
Shortly after my post went up, a number of friends tweeted about it. Dave Winer and Felix Salmon were first off the mark. Felix’s rare use of an exclamation mark (“Berkeleyside axed from Google News!”) seems to have provoked some of his regular followers to retweet, including The New York Times’ David Carr, with over 300,000 followers. My co-founders on Berkeleyside were doing their own tweeting and that reached plenty of others, from Exceptional Women in Publishing to the Knight Digital Media Cent...more
I spend the bulk of my time these days trying to figure out some of the future of journalism, with the local news site I started with two others, Berkeleyside. We’re unquestionably the leading news source for our city, and we’re widely recognized as such. The San Francisco Chronicle uses us to supply Berkeley news, we’re picked up occasionally by The New York Times, and we’re looked to by, for example, the local public radio station, for the latest on Berkeley.
So it’s not surprising that we’ve also been the prime supplier of Berkeley news to Google News. Until last Saturday.
For reasons as yet unknown, Google News stopped indexing our stories last Saturday. Nothing from us on Google News on the three arrests at Berkeley High today, a...more
Edwin G. Dolan is an economist and educator with a Ph.D. from Yale University. Early in his career, he was a member of the economics faculty at Dartmouth College, the University of Chicago, and George Mason University. From 1990 to 2001, he taught in Moscow, Russia, where he and his wife founded the American Institute of Business and Economics (AIBEc), an independent, not-for-profit MBA program. Since 2001, he has taught at several universities in Europe, including Central European University in Budapest, the University of Economics in Prague, and the Stockholm School of Economics in Riga, where he has an ongoing annual visiting appointment. During breaks in his teaching career, he worked in Washington, D.C. as an economist for the Antitrust Division of the Department of Justice and as a regulatory analyst for the Interstate Commerce Commission, and later served a stint in Almaty as an adviser to the National Bank of Kazakhstan. When not lecturing abroad, he makes his home in San Juan Islands, Washington.
Contact /
About Us
The EconoMonitor brings together a community of economic, financial and geopolitical thinkers from around the world. Its purpose is to surface new ideas and to push forward the economic and geopolitical debate.
