How news affects markets

Tyler Cowen linked to a new NBER study by Scott R. Baker, Nicholas Bloom, Steven J. Davis, and Marco C. Sammon, which looks at the response of asset prices to various types of news. Here I’ll discuss the paper’s abstract: We examine next-day newspaper accounts of large daily jumps in 16 national stock markets to assess their proximate cause, clarity as to cause, and the geographic source of the market-moving news. Our sample of 6,200...

Over at the SubStack in the Last Week…

BRIEFLY NOTED: For 2021-04-18 Su 2021-04-18 Su READING: Carl von Clausewitz: "On War": Friction2021-04-18 Su READING: Eisenhower: “Their Number Is Negligible & They Are Stupid…” 2021-04-17 Sa WORÞY READS: For 2021-04-16 Fr 2021-04-16 Fr BRIEFLY NOTED: For 2021-04-15 Th 2021-04-15 Th I Do Not See "Overheating" This Year… 2021-04-15 Th PODCAST: Hexapodia X: Global Warming2021-04-14 We BRIEFLY NOTED: for 2021-04-13...

What’s New in Economic History

If you want to get some idea of what's new in economic history check out the program for the NBER Development of the American Economy Program's Spring Meeting(contains links to papers and presentation slides)and the program for the annual meeting of the Economic History Society(contains links to abstracts)

Misleading Baltimore Stats for Celebrating Lax on Crime

In 2020, the City of Baltimore stopped prosecuting "minor charges" such as drug crimes.  The headlines are that 2020 crime "went down a lot" from 2019.  Homicides fell by 13.Not mentioned is that, over a similar time frame (2020 Q1-Q3 vs 2019 Q1-Q3), "Opioid Intoxication Deaths" increased by 48 persons (at an annual rate).  That is an increase of 36 percent, compared to 21 percent for the rest of the state of...

Economics’ race (and other) problems

There’s been much discussion in recent days about Economics’ race problem. Some of what has come out is quite disturbing. I have not said much, but I have listened and thought. Here are a few reflections I want to add. It doesn’t surprise me that the field, as a whole, reflects the ingrained attitudes and practices of the society of which it is part. But there are some features of the discipline that magnify and aggravate the problem. First,...

What is Grand Forks? (Post #500!)

For at least the last 6 or 7 years and maybe as many as 10 years Jarrod Thomas and I asked some pretty important questions about Grand Forks and the immediate vicinity in North Dakota (1310 KNOX AM Grand Forks, Thursdays at 9am central). One of the most important questions remains unanswered (that seems to be the way it usually goes): what is Grand Forks? This is not just a simple matter of civic pride. Identity in this case is a starting...

Company Price Change Announcements and Future Inflation

Goldman Sachs (Walker, “Company Pricing Announcements and the Inflation Outlook”) points out that changes company statements regarding price changes is contemporaneously correlated with PCE inflation, but not predictive. This puts in a different perspective media discussion of impending inflation. The below is Exhibit 2 from their report: Source: Walker, “Company Pricing Announcements and the Inflation Outlook,” Goldman-Sachs, April 16,...

A Natural Rate of Interest

This post was motivated by a conversation with Eric Lonergan. It began with a simple question: what should be the interest rate paid on reserves? I answered that according to theories I'm familiar with, reserves should earn the "natural" rate of interest, which I defined as the sum of population and productivity growth. So, assuming 2% "real" growth and 2% inflation, reserves (and government debt more generally) should be...

Do the self-employed opt out of the Canada Pension Plan?

In 2017, anyone with earnings was required to pay $4.95 in Canada Pension Plan contributions for every $100 of earnings (up to a maximum earnings threshold of $51,800 - rates here). For the employed, their $4.95 CPP/QPP contribution was matched by an equal contribution by their employer. However self-employed individuals are required to pay the entire employer+employee contribution themselves, amounting to $9.90 for every $100 of earnings. Now...

Cautionary Tales – Number Fever; How Pepsi Nearly Went Pop

Pepsi twice ended up in court after promotions went disastrously wrong. Other big companies have fallen into the same trap – promising customers rewards so generous that to fulfil the promise might mean corporate bankruptcy. Businesses and customers alike are sometimes blinded by the big numbers in such PR stunts – but it’s usually the customers, not the businesses, who end up losing out. Cautionary Tales is written by me, Tim Harford,...

A Hive of Authentic College Applicants

As someone with a couple of college-age children who have navigated the admissions process at selective colleges, I found myself nodding in agreement with Matt Feeney's essay in the Chronicle of Higher Education, "The Abiding Scandal of College Admissions: The process has become an intrusive and morally presumptuous inquisition of an applicant’s soul" (April 16, 2021). A basic fact is that applications at selective colleges are way...

How news affects markets

Tyler Cowen linked to a new NBER study by Scott R. Baker, Nicholas Bloom, Steven J. Davis, and Marco C. Sammon, which looks at the response of asset prices to various types of news. Here I’ll discuss the paper’s abstract: We examine next-day newspaper accounts of large daily jumps in 16 national stock markets to assess their proximate cause, clarity as to cause, and the geographic source of the market-moving news. Our sample of 6,200...

How rational was Spock?

[Julia] Galef was curious to see exactly how often these predictions pan out. “I went through all of the Star Trek episodes and movies—all of the transcripts that I could find—and searched for any instance in which Spock is using the words ‘odds,’ ‘probability,’ ‘chance,’ ‘definitely,’ ‘probably,’ etc.,” she says. “I catalogued all instances in which Spock made a prediction and that prediction either came true or didn’t.” The results, which...

Two types of recovery from the COVID recession, or how you cannot effectively fight plutocratic populism by returning to the recent past.

I don’t normally talk about forecasts, but last week’s IMF World Economic Outlook illustrates a point a number of people have made. While both the UK and EU countries are prepared to gradually return what they believe as their non-inflationary level of output from below, the approach in the US is to overshoot, running the economy slightly hot for a period. This table from the Outlook shows expected GDP growth. The key figure is the last...

Geography, transportation, and endogenous trade costs

Summary Whether by sea, land or air, the entirety of trade is carried out by the transportation sector. We know surprisingly little, however, about the role of transportation in shaping trade networks. How do transport markets interact with the markets for world trade in goods? How does the behavior of profit-maximizing transport agents influence transport costs, and thus global imports...

Rebuilding Macroeconomic Theory

Image is from Chapter 22 of Dynamic Macroeconomics by George Alogoskoufis. Martin Sandbu has written a nice piece in the FT about the latest issue of the Oxford Review of Economic Policy, which is dedicated to an idea I have been promoting for more than three decades. Multiple Equilibria matter. For David this is a ...

A Requiem for the Stiff Upper Lip

With the passing of Prince Philip on April 9, the United Kingdom may have lost its last exponent of the stoic attitude that has defined so much of its modern history. Nonetheless, other cultures have picked up the baton, and modern society will always have a need for those who excel at keeping calm and carrying on. LONDON – The late Prince Philip, Duke of Edinburgh and husband to the queen, was long...

Andrew Yang Hasn’t Done the Math

Will Andrew Yang, the current front-runner, become New York City’s next mayor? If he wins, would he be any good at the job? I have no idea, although I’m skeptical about the latter.My guess is that the mayoral office needs an effective political brawler, not an intellectual, and Yang, who has never held office, owes his prominence largely to his reputation as a thought leader, someone with big ideas about economics and policy.What I do know is...

Noahpinion has moved to a new website!

Well folks, it's been a fun 10-year run at this little website. I'm moving on to a new platform: Substack! Here's the new Noahpinion:https://noahpinion.substack.com/Thanks for reading, and hope to see you at the new site!

The cost of a rolling omnishambles

The travel bubble with Australia has not brought room for others to come into the MIQ system from overseas. Instead, spaces are being decommissioned. Why? The system is leaky. The government cannot afford to let riskier people into those spaces, because the system can't handle them. My column in Insights last week went through the problem.Maintaining quarantine-free travel with Australia is important. Expanding the bubble to include other...

Geography, transportation, and endogenous trade costs

Summary Whether by sea, land or air, the entirety of trade is carried out by the transportation sector. We know surprisingly little, however, about the role of transportation in shaping trade networks. How do transport markets interact with the markets for world trade in goods? How does the behavior of profit-maximizing transport agents influence transport costs, and thus global imports...

John Furlan on the Political Role of Economists in 2021

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“We don’t have a chance in hell …”, Canada’s poverty reduction strategy needs real voice

Source: https://twitter.com/ESDC_GC/status/1364596131590791171The Minister of Employment and Social Development in the Canadian federal government, Ahmed Hussen, recently tabled an annual report taking stock of the country’s poverty reduction strategy. The advisory council responsible for the reported dedicated it “to all those courageous people who shared their stories, successes and struggles with the Council in the hope that we would in...

32+ Years…

The Disneyland Dilemma

Some vintage Disneyland ticket books reminded me of Walter Oi's famous paper "A Disneyland Dilemma: Two-Part Tariffs for a Mickey Mouse Monopoly." He highlighted the two-part tariffs as part of their price discrimination scheme. The simplest rides, appealing to the younger children, such as Sleeping Beauty Castle Walkthrough or the King Arthur Carousel, required only the cheaper A tickets. The best rides, such as the Matterhorn...

A New Look at Income Inequality in the US

Yesterday, at the Hoover Economic Policy Working Group (EPWG), David Splinter of the Staff of the Joint Committee on Taxation discussed a paper he wrote with Gerald Auten of the Office of Tax Analysis at the Department of Treasury. A video of Splinter’s presentation, including many questions and answers, is posted on the EPWG web page here along with the paper “Income Inequality in the United States: Using Tax Data to Measure Long-term Trends”...

Inflation levels

 March inflation is up. The CEA delivered a historic tweetstorm. It starts with temporary factors: base effects, supply chain disruptions, and pent-up demand, especially for servicesI'm glad for once to have nailed a forecast: That Fed and Administration's first response to inflation would be to invoke "temporary" factors, just as in the 1970s.  We'll see how ...

Paying for the right to be infected

Paying for the right to be infected August 14, 2020 in covid-19, economics, infection, Mechanism design Serious infectious diseases are a prime example of a public bad (non-exclusive and non-congestible). We limit them by restricting behavior and or getting individuals to internalize the externalities they generate. For example, one could mandate masks in public places. To be effective this requires monitoring and punishment....

Biden Avoids Mistake of Insufficient Fiscal Stimulus

TweetMarch 27, 2021 — It has been a year since the US and the world went into recession.  Because of its origins in the sudden pandemic, it was possible to reliably discern the advent of the recession before it was reflected in any of the standard economic statistics, which is rare.  (I hope it shocks no one to learn that economists can’t normally predict recessions.) By the end of the second quarter of 2020, US GDP had fallen 11 %. This...

The Deep History Of Human Inequality

Posted on 17 April 2021 by Blair Fix Man is born free, yet he is everywhere in chains. - Jean-Jacques Rousseau, 1762 In his epic 18th-century treatise Discourse on Inequality, Jean-Jacques Rousseau argued that inequality is an ill of civilization, created by private property. If you roll back the clock on civilization, he claimed, you should also roll back inequality. Please share this article - Go to very top of page, right...

If you believe, they put a Dogecoin on the moon

Dogecoin — the crypto token that was started as a joke and that is the favourite of Elon Musk — is having a bit of a moment. And when we say a bit of a moment, we mean that it is on a lunar trajectory (in crypto talk: it is going to da moon). At the time of writing this, it is up over 200 per cent in the past 24 hours — more than tripling in value (for those of you who need help on percentages, it is Friday afternoon after all). Over the past...

Bloated central bank balance sheets

[unable to retrieve full-text content]There are good reasons to believe that there will be no return to the pre-QE configuration of balance sheets. First, the increasing global financial integration in the last few decades has imposed increasing challenges in terms of making liquidity management effective as cross-border volumes of capital flows have expanded significantly. Second, changes to financial regulation have induced private agents to...

The Worst Jobs Day Ever

Driven by the COVID-19 shutdown, April marked the greatest job loss in American history. The unemployment rate skyrocketed to 14.7 percent, and employers cut 20.5 million jobs. Those figures are heart-wrenching. But as awful as they are, they do not fully capture workers’ hardships. To be counted as unemployed, people must be available for work and actively seeking it. With schools closed, job opportunities withering, and social distancing the...

Is There Economic And Political Meaning In “The Wizard of Oz?”

To get a handle on this, you can read Money and Politics in the Land of Oz By Quentin P. Taylor.  Below is an excerpt from the Taylor paper: "Dorothy, the protagonist of the story, represents an individualized ideal of the American people. She is each of us at our best-kind but self-respecting, guileless but levelheaded, wholesome but plucky. She is akin to Everyman, or, in modern parlance, “the girl next door.” Dorothy lives in...

Ranking economists

...with google trends. (More complete ranking here.)

The new tools of monetary policy

By Haowen Chen Since the 1980s, interest rates around the world have trended downward, reflecting lower inflation, demographic and technological forces that have increased desired global saving relative to desired investment, and other factors. Although low inflation and interest rates have many benefits, the new environment poses challenges for central banks, who have traditionally relied on cuts to short-term interest rates to stimulate...

Central Banking Stories to Watch in 2019

Happy New Year, everybody! 2018 has been a quiet year for my blog, but productive on other fronts, as I've kept busy with research and my family. But here are a few central bank-related stories I'm interested in following in the new year. 1. New Governor at Reserve Bank of IndiaFollowing the early exit of Governor Urjit Patel in December, Prime Minister Modi appointed the third central bank governor in just three years: Shaktikanta Das....

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The media cannot reform itself until it acknowledges its power

As regular readers know, I have for the last few years been banging on about the importance of the media in influencing public opinion. (It formed a key part of my SPERI/News Statesman prize lecture.) It is not a partisan point about whether the media is politically biased in a particular direction. Instead it is a claim that the media can and sometimes is profoundly important in influencing major political events. I think it is fair to say...

In Memory of Bob Rossana

Robert “Bob” Rossana died back in February of this year. I was inadvertently left off of the university announcement email and did not hear about it until much later. Bob was my dissertation advisor. He meant a lot to me and so I want to share some thoughts. In graduate school, there were four macroeconomics courses. Two core classes and two field classes. Bob was instrumental in getting this four-course system started, as well as a “macro...

Who were the top taxpayers in 1923?

From page 71 of Daniel Marcin’s “The Revenue Act of 1924: Publicity, Tax Cuts, Response” div{float:left;margin-right:10px;} div.wpmrec2x div.u > div:nth-child(3n){margin-right:0px;} ]]> Advertisements

The media cannot reform itself until it acknowledges its power

As regular readers know, I have for the last few years been banging on about the importance of the media in influencing public opinion. (It formed a key part of my SPERI/News Statesman prize lecture.) It is not a partisan point about whether the media is politically biased in a particular direction. Instead it is a claim that the media can and sometimes is profoundly important in influencing major political events. I think it is fair to say...

The media cannot reform itself until it acknowledges its power

As regular readers know, I have for the last few years been banging on about the importance of the media in influencing public opinion. (It formed a key part of my SPERI/News Statesman prize lecture.) It is not a partisan point about whether the media is politically biased in a particular direction. Instead it is a claim that the media can and sometimes is profoundly important in influencing major political events. I think it is fair to say...