Links (2/19/19)

Is Neo-Fisherism Nuts? - MacroMania Why Can’t Trump Build Anything? - Paul Krugman Is the Xerox Corporation supervenient? - Understanding Society On Paying for a Progressive Agenda - Paul Krugman Measuring Connectedness between the Largest Banks - FRBSF The Birthplace of America’s New Progressive Era - Tyson & Mendonca How to pay for the Green New Deal - mainly macro "Unconventional" Fiscal Policies - EconoMonitor Making...

On Paying for a Progressive Agenda

Whoever gets the Democratic nomination, she or he will run in part on proposals to increase government spending. And you know what that will mean: There will be demands that the candidate explain how all this will be paid for. Many of those demands will be made in bad faith, from people who never ask the same questions about tax cuts. But there are some real questions about the fiscal side of a progressive agenda.Well, I have some thoughts...

Just do it.

There are a wide variety of ways of thinking about monetary policy. In this post I’ll use some graphs to illustrate various policy options, with the goal of shedding light on some of the major debates of the past decade. Let’s start with a shift from a zero percent target path for inflation to a 2% path. Let’s also assume that the Quantity Theory (QT) holds in the long run, in the sense that prices move in proportion to changes in the money...

Book Review: “The Souls of Yellow Folk,” by Wesley Yang

"He was ugly on the outside, and once you got past that you found the true ugliness on the inside." - Wesley Yang, "The Face of Seung-Hui Cho"Wesley Yang is not here to make you feel comfortable. He's here to find your most vulnerable places, and then, methodically, to poke you in those places. To pierce the veil of optimism that you use to get through your days. To make you think thoughts like: What if nobody really loves...

A Bright Future for Africa’s Girls

Education plays a central role in determining girls’ and women’s capacity to claim economic, social, and political rights and status in society. That is why it is so important that countries like Zambia are placing the education and empowerment of girls and women at the top of their political agendas. LUSAKA – Education gives young people the tools they need – from cognitive and social skills to...

A Special Valentine’s Message On Romantic Love

The first one is Researchers at AAAS Annual Meeting Explore the Science of Kissing. The following quote gives you an idea of what it is all about: "Kissing, it turns out, unleashes chemicals that ease stress hormones in both sexes and encourage bonding in men, though not so much in women." I guess economists call this "interdependent utility functions." Meaning that what brings one person pleasure brings brings the...

The changing nature of work calls for enhancing the human and financial capital of children in less wealthy families

The Canadian federal government should enhance the human and financial capital of children in less wealthy families, enhance market incomes of lower paid workers, and enhance the security of working incomes by adapting three existing programs to new realities: widening their scope, making them more flexible, and making them easier to obtain. The changing world of work is also a changing world of pay, a world that will likely lean toward...

Economics for Inclusive Prosperity (EfIP)

We launched today a new initiative for academic economists that we hope will make the discipline of Economics more relevant to today’s pressing policy problems. The initiative consists of a network called Economics for Inclusive Prosperity (EfIP) with an initial set of 10 policy briefs. The briefs open with an introductory statement of our philosophy and go on to specific policy recommendations for finance, trade, labor markets, social policy,...

How To Use Public Policy To Guide Accumulation Toward Virtuous Ends

Posted on 17 February 2019 Written by Carmine Gorga, The Somist Institute --co-authored by Michael Emmett Brady From Aristotle, Augustine, Aquinas, and Adam (Smith) to Concordian Monetary Policy Abstract - Aristotle, followed by Augustine, Aquinas, and Adam Smith, recognized, to a lesser or greater degree, that the ownership and control of private property (wealth, money, riches) is an initial, necessary condition to be able to put one's...

Mathematica advertising economics tools

This email has been going around.  Check it out!Dear Economist,Mathematical techniques and computational experiments have always been tools to complement and interpret data and models.Quantifier elimination, recognized by Alfred Tarski in the late 1940s as a computable task when working at RAND, was initially considered impractical because of its high complexity (doubly exponentially).But the task is conceptually quite simple: instead of...

The Newer History of Capitalism

Robert Wright has a blog post about Why the History of Capitalism Subfield Got Slavery (and Almost Everything Else) so Terribly Wrong His argument is that because history departments abandoned economic and business history, there was no one with expertise in these subjects to guide new scholars when interest in economic issues re-emerged. The evidence that history departments largely abandoned economic and business history is irrefutable, and...

Venezuelan incentives

The collapse of Venezuela illustrates the power of incentives, albeit in a negative way.  When the daughter of the former president is one of the richest people in the country, it is a sign that the wrong activities are rewarded. From Tyler Cowen: By boosting government spending so quickly, the Venezuelan government was sending a message that the key to future riches is courting government favor, not starting new businesses. Particularly by...

Should Congress Use The Income Tax To Discourage Consumer Drug Ads?

Senator Jeanne Shaheen (D-NH) and a score of Democratic cosponsors want to use the tax code to discourage direct-to-consumer advertising by drug companies. Their bill, the End Taxpayer Subsidies for Drug Ads Act, would prohibit firms from taking tax deductions for any consumer advertising of prescription drugs. Limiting tax deductions is a blunt and arbitrary way of approaching a legitimate concern. Consumer drug ads play an important role in...

Tax Policy and User Experience

Let me start with the following: everything I understand about User Experience I learned from my wife, and anywhere I fall short here likely is due to me not listening enough or understanding fully the point she was making. That is now out of the way. Economic policy makers give inadequate attention to user experience when formulating their policy. Sometimes this manifests itself in the “unanticipated effects” of policy, or maybe just...

A Simple Lesson About Money and Models

Imagine you are in your high school algebra class and you are presented with the following two equations: Two linear equations with 2 unknowns. This is a simple problem to solve. Now suppose that your teacher gives you the following three equations: Note that this is still a simple problem to solve. The first two equations are identical to the previous example. You can use those first two equations to solve for x and y. Then, knowing x, you...

Institute for Wow

Institute for Wow December 15, 2018 in academic satire, education, Popular Science Hot on the heels of its new Division of Linear Algebra, Empire State’s President announced a new Institute for Wow. Unlike other centers and institutes on campus that were dedicated to basic research or innovation, this one would focus only on research that would grab attention. “Universities,” she said, “ have tried for centuries to inform and...

Some Proposals for Improving Work, Wages, and Skills for Americans

The Aspen Institute Economic Study Group has published a collection of 12 papers on the theme Expanding Economic Opportunity for More Americans Bipartisan Policies to Increase Work, Wages, and Skills, edited by Melissa S. Kearney and Amy Ganz (February 2019). I'll list the complete Table of Contents for the volume below. Here, I'll just focus on four of the proposals that struck me as especially thought-provoking: caught1) A Boost for...

A Primer on Exchange Rate Misalignment (Updated)

As the administration pushes for “stability” in the Chinese exchange rate while imposing tariffs on China, it might be useful to recount the various ways in which different observers define currency “misalignment”. Here I update a primer first posted in 2010. Currency misalignment can be determined on the basis of the following criteria or models: Relative purchasing power parity (PPP)Absolute purchasing power parityThe “Penn Effect”The...

Lessons from the wreck of the Torrey Canyon

Lessons from the wreck of the Torrey Canyon On Saturday March 18 1967, around half past six in the morning, the first officer of the Torrey Canyon realised that his vessel was in the wrong place. The 300-metre ship was hurrying north past the Scilly Isles, 22 miles off the tip of Cornwall in the south west of England, with more than 119,000 tonnes of crude oil. The aim was to pass west of the islands, but the ship was further east than...

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 costs of public sector patronage: lessons from the British Empire

Civil servants constitute a key element of state capacity, with the responsibility for raising government revenues, providing public services and implementing reforms. But what happens to their performance when they are appointed to office less on the basis of their talents than on their social connections to powerful patrons? This research examines the costs of patronage through the lens of a historical bureaucracy that spanned the globe:...

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....

Current Account Deficits and Safe Assets

The International Monetary Fund has issued its External Sector Report for 2017, and among its key findings: “Global current account imbalances were broadly unchanged in 2016…” The U,S. continues to record the largest deficit, $451.7 billion, which is equal in value to 2.4% of U.S. GDP. The continuing deficits contribute to the increase in the ...

Breaking the pharmacy cartel

I wish that government spent even half as much time looking at how its existing regulatory structures create cartels as it did in the rest of its antitrust enforcement.The Herald reports that a new entrant has finally started shaking things up in pharmacy, reducing costs to consumers. They get the framing entirely backwards, focusing on reduced earnings among the Chemist Warehouse's nearby competitors. I wish they'd open an outlet in...

Venezuela is in large part the fault of socialism

Here is my Bloomberg column on that topic, excerpt: …rates of change are important. The Venezuelan figure of about 40 percent [govt. spending/gdp] is up from about 28 percent in 2000, a very rapid increase. By boosting government spending so quickly, the Venezuelan government was sending a message that the key to future riches is courting government favor, not starting new businesses. Or consider exports, which for most developing economies...

Real wage gains and energy prices

Readers know I’m a huge booster of the impact of low unemployment rates on wage gains, especially for middle and low-wage workers. This dynamic is alive and well in current data and those of us on team Full Employment should elevate and tout it! But, when it comes to real wage gains in “high frequency data,” which have been notable of late–as in, beating productivity growth–it’s important to also parse out the role of low energy prices. The...

How to pay for the Green New Deal

The Green New Deal has recently been promoted by a group of Democrats including the inspirational Alexandria Ocasio-Cortez. I first came across it in a reportin 2008 by the Green New Deal group, most of whom are pictured above a decade later (HTAndrew Simms). The view that we face a potentially existential climate change crisis, which politicians seem currently reluctant to sufficiently tackle, and which therefore requires a government led...

Why scan-reading artificial intelligence is bad news for radiologists

THE better artificial intelligence gets, the greater the popular concern that smart machines will soon usher in a labour-market catastrophe. In Chandler, Arizona, Americans can at this moment hail a ride from a car without a human at the wheel. Web users can read high-quality, instant translations of foreign-language newspapers—no professional translation service needed. And developers of machine-learning technologies are moving rapidly to...

Carbon taxes and the Marginalists’ difficult idea

This Economists' Statements on Carbon Taxes has been signed by a host of prominent economists: Global climate change is a serious problem calling for immediate national action. Guided by sound economic principles, we are united in the following policy recommendations. I. A carbon tax offers the most cost-effective lever to reduce carbon emissions at the scale and speed that is necessary. By correcting a well-known market failure, a carbon...

Andrew Biggs and Miles Kimball Debate Retirement Savings Policy

Andrew: The disagreement may be a bit narrow, in that I’m not really against auto-enrollment as a general policy. For middle-income people who do need to save but might forget to enroll in their 401(k), it’s a good idea.My issue is that applying auto-enrollment to low earners, as with the states’ proposals for auto-IRA plans, could have real downsides in that you’re pushing people to save when they may not really need to and when the costs to...

A potential new snag in the US-China trade talks

March 1 may no longer be a “magical date” for President Trump, but the deadline after which tariffs on $200bn worth of Chinese imports are set to more than double is fast approaching. Now in their ninth round of negotiations, the US and China remain at odds on a number of issues, despite making some progress on Wednesday. With the latest request from the US, officials may have added another problem to a long list of sticking points.According...

A Clue in Today’s Jeopardy!

The death of the healthcare market

People really do not need health insurance for regular small expenses, as they do not need car insurance to "pay for" oil changes. And any insurance system relies on an underlying cash market to find what the right prices are. Collision insurance works reasonably well because there is a supply and demand market for auto ...

Brexit Goes to the Brink

Less than two months away from the prospect of crashing out of the European Union (EU) in a “no deal Brexit,” Britain is about to test the proposition that the only way to get people to do something they know is bad for them is to offer them a choice between that option and something far worse. As made clear by top EU officials in recent days, there is no time for another Brexit referendum or another snap election, and no likelihood of the UK...

The housing bubble, the credit crunch, and the Great Recession: A reply to Paul Krugman

By Ben S. Bernanke Why was the Great Recession so deep? Certainly, the collapse of the housing bubble was the key precipitating event; falling house prices depressed consumer wealth and spending while leading to sharp reductions in residential construction. However, as I argue in a new paper and blog post, the most damaging aspect of the unwinding bubble was that it ultimately touched off a broad-based financial panic, including runs on...

Is Neo-Fisherism Nuts?

According to my friend and former colleague Steve Williamson, inflation is low in Japan because of the Bank of Japan's policy of keeping its policy rate low. Accordingly, if the BOJ wants to hit its 2% inflation target, it should raise its policy rate and keep it persistently higher. This is what I've called the NeoFisherian proposition. It's a provocative idea because it flies in the face of conventional wisdom. But is it correct? Does it...

Oh, the Horror of a Corridor!

The December 2018 FOMC minutes are out and reveal members continue to discuss the potential long-run frameworks for monetary policy implementation. Their discussion as to whether they should keep their current floor operating system or move to a corridor operating system can be illustrated using the figure below: The FOMC likes the floor system since it separates the size of the Fed's balance sheet from the setting of its target...

A Different Kind of Revisiting the 2008 Financial Crisis

During the past few months, John Cochrane and I organized a series of workshops on the 2008 financial crisis. Monika Piazzesi, George Shultz, Niall Ferguson, Caroline Hoxby, and Darrell Duffie joined us in making presentations and, along with other colleagues who attended, turned the series into a vigorous and informative discussion. We defined each workshop by topic: Causes, Panic, Recession, and Lessons, and posted papers or summaries by...

Why deficits are sustainable and inflation has a life of its own

My new working paper “The Fiscal Theory of the Price Level in Overlapping Generations Models” is now available here. The paper, joint with Pawel Zabczyk of the IMF, is also available as CEPR Discussion Paper 13432 and as NBER Working Paper 23445. Here is a teaser from the abstract“We demonstrate that the Fiscal Theory of ...

The euro’s first 20 years

January 28, 2019 —   In Europe, twenty years ago this month, 11 long-standing national currencies disappeared and were replaced by the new single currency, the euro.  Since then, the euro has had its successes and failures. Let us review the experience of the euro’s first two decades.  Where there were failures, to what extent were they the result of avoidable technical mistakes?  Of warnings not heeded?  Or were they the inevitable result of...

The Market: As an Institution, Its Pros, and Its Cons

The Market as an Institution: “The Market” as an Institution: We start from what look like to us deep truths of human psychology People are acquisitive People engage in reciprocity—i.e., want to enter into reciprocal gift-exchange relationships In which they are neither cheaters nor saps With those they trust… We devised property as a way of constructing expectations of trust… We devised money as a substitute for trust… And so, on the...

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