Monetary Policy in a New Era (Video) – Ben Bernanke

Subsidies, Spite, and Supply Chains

As many people have been pointing out, Trump’s decision to cancel cost-sharing subsidies for health plans is a rare policy trifecta: it raises prices, reduces the number of people with insurance, and costs taxpayers money. Nor is there evidence of any political strategy worthy of the name. This is policy driven by sheer spite: Trump can’t get what he wants from Congress, so he’s going to punish innocent people. There are many lessons to be...

Why John Taylor might be a good choice for Fed chair

I’ve done a few posts expressing opposition to Kevin Warsh being nominated to chair the Fed.  Now there are rumors that John Taylor’s stock is rising: Stanford University economist John Taylor, a candidate for Federal Reserve chairman, made a favorable impression on President Donald Trump after an hour-long interview at the White House last week, several people familiar with the matter said. Former Fed board governor Kevin Warsh has meanwhile...

Defending Thaler from the guerrilla resistance

So, Richard Thaler won the Nobel Prize, which is pretty awesome. If you've read Thaler's memoir, you'll know that it was a long, hard, contentious fight for him to get his ideas accepted by the mainstream. And even though Thaler is now a Nobelist and has been the AEA president - i.e., he has completely convinced the commanding heights of the econ establishment that behavioral econ is a crucial addition to the canon - resistance still pops up...

Educating for Myanmar’s Future

After a half-century of neglect under military rule, Myanmar's education system has fallen apart. Prospects for sustaining the country's fragile political transition hinge not just on the resolution of the Rohingya crisis in Rakhine State, but also on the country's progress on ensuring access to quality schools for all students. GENEVA – The violence that has ravaged Myanmar’s Rakhine State underscores the challenges the...

How Odysseus Started The Industrial Revolution

Factory work may have been a commitment device to get everyone to work hard. Odysseus tying himself to the mast was also a commitment device. Dean Karlan, Yale economics professor explains how commitment devices work: "This idea of forcing one’s own future behavior dates back in our culture at least to Odysseus, who had his crew tie him to the ship’s mast so he wouldn’t be tempted by the sirens; and Cortes, who burned his ships to show...

The Canada Child Benefit is an important innovation in cash benefits to families with children

Tags child poverty, National Academies of Sciences Engineering Medicine The Canada Child Benefit is an important innovation in cash benefits to families with children July 1, 2017 The Canada Child Benefit offers a policy option that the United States should consider in pursuing a goal to reduce child poverty by half. The commitment to address child poverty has waxed and waned in Canada since an all-party...

What’s Wrong With Our System Of Global Trade And Finance?

That is what John Judis wanted to talk to me about, and we did. This over at TPM is what came out. By the way, Judis' book on populism is great. It makes an important distinction between right-wing and left-wing populism, a distinction that I have used as well.

Two Different Approaches to Economics and One Approach to Pseudo-Economics

By Philip Pilkington In the comments to my piece on Janet Yellen the hypocrisy of my position was pointed out, as it so often is, by a certain reader of this blog. What was my hypocrisy on this particular occasion? It was the fact that I complained about Yellen’s obsession with ‘closing’ models but, in other circumstances, champion Godleyian Stock-Flow Consistent (SFC) modelling which, of course, contains models that have ‘closures’ of various...

Furman and Summers revoke Summers’ academic work on investment

Former CEA chair Jason Furman writes “The economic debate about the %age of the corporate tax paid by labor ranges from 0% to 100%. The new CEA study puts it at 250%.”Larry Summers reiterates Furman’s argument, calling the CEA and its estimate “dishonest, incompetent and absurd.”Furman’s first sentence has the economics of investment completely backwards.I will point to academic papers in a minute, but they can be understood with capital...

New History of Capitalism meets the History of Economic Thought

Jonathan Levy has a paper forthcoming in Business History Review, “Capital as Process and the History of Capitalism.” If you have access to the journal it is available on First View. He attempts to develop a definition of capital that is useful for the study of capitalism. I should be grading papers right now so I will make this quick. Unfortunately, it bears many of the hallmarks of some of the most celebrated work in the new history of...

G-Eazy on opportunity cost

There is naturally a close affinity between economists and rappers, which is why it should be no surprise that G-Eazy's chart topping debut album, These Things Happen, includes his powerhouse economics-lecture-disguised-as-rap, Opportunity Cost. Everything costs something bro Winning somewhere, somewhere else you just lost something though The cost of opportunities is always good to know But if you know that then you're good to go I could...

How Should Tax Reform Treat Employee Stock and Options?

The tax treatment of employee stock and options raises a classic Goldilocks problem. We want to tax this compensation neither too much or too little. In a recent policy brief, I consider three questions about how to strike that balance. Do companies get excessive tax deductions for employee stock and options? This concern rocketed to prominence in 2012 when Facebook went public. Its employees earned billions from their stock options and...

Barter is Evil 2017-10-12 03:21:17

Sorry for the lack of blogging but I was a speaker at the Minneapolis Fed Regional Economic Conditions Conference this Tuesday (link to presentations here). My slides are available from the Fed site as well. I thought I would highlight a few things that got the attention of the audience. First, in this post I highlight oil production, which  continues to be high in North Dakota. It is pretty clear that we are down from the peak of oil...

The Law of Reflux Returns

One could make the case, quite convincingly, that all of the major monetary debates are between those whose arguments are based on classical monetary theory and those whose arguments are based on the quantity theory of money. This would be fine if one theory or the other was always correct. However, the model that is appropriate for any given debate depends on the particular monetary institutions in place. For example, if money is convertible...

Entrepreneurship

Entrepreneurship September 27, 2017 in economics, education, Uncategorized My students often use me as a sounding board for their new ventures. A sign that the modern University could pass for a hedge fund with classrooms. The request brings a chuckle as it always reminds me of my first exposure to entrepreneurial activity. It happened in the most unlikeliest of places as well as times. A public (i.e. private) school in...

Teacher Absenteeism in the U.S.

It is of course arbitrary to draw a line about what level of absence of a K-12 teacher should be considered "chronic," but a common line seems to be more than 10 absences per year. The data on teacher absence is collected nationally by the federal Office of Civil Rights. The most recent data is for the 2013-14 school year, and it's now being used by various researchers. Here's one bottom line from David Griffith in "Teacher...

The Association between China-based Job Displacement and Drug Overdose Deaths

A recent White House internal memo has suggested a causal relationship between the decline in manufacturing jobs and a host of social ills, including the opioid epidemic. Here is a graphical/geographic comparison of two variables that are related to these factors. Here is the geographic variation in job loss due to trade competition from China: Source: EPI via Oak (2012). Here is the geographic variation in drug deaths in 2015: source: Jacobs...

Echoes of a bygone age show Britain losing its sense of direction

Echoes of a bygone age show Britain losing its sense of direction “It’s that 1970s vibe again,” a senior colleague tells me. This being the Financial Times I presume he is picking up echoes of a bygone economic and political milieu, rather than gleefully anticipating the re-emergence of flares or X-rated movie theatres. Either way, it is hard to venture a firm opinion on the matter: as late as the 1990s, I was still at school. My...

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

Bargaining with asymmetric information: an empirical study of plea negotiations

By far, most US criminal cases are resolved before trial through plea bargain agreements between the defendant and the prosecutor. In return for a guilty plea, the prosecutor reduces or dismisses some of the charges against the defendant and/or recommends the court assign a relatively short sentence. In 2001, for example, 94 percent of federal cases were resolved by plea bargain (Fischer, 2003). Similarly, in 2000, such deals accounted for 95...

Rethinking Macroeconomic Policy

I had the pleasure of attending “Rethinking Macroeconomic Policy IV” at the Peterson Institute for International Economics. I highly recommend viewing the panels and materials online. The two-day conference left me wondering what it actually means to “rethink” macro. The conference title refers to rethinking macroeconomic policy, not macroeconomic research or analysis, but of course these are related. Adam Posen’s opening remarks expressed...

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 ...

A Wellington City Deal?

Newsroom's Shane Cowlishaw reported yesterday that Wellington City has been talking with central government about either a variant on the Manchester city accord, or a Special Economic Zone. What would be in the deal isn't known - the OIA did not provide many details. It noted that Wellington would like a city deal following the UK examples, or a Special Economic Zone to allow different regulatory settings for Wellington, and a revenue-sharing...

Thursday assorted links

1. “The fast food chain has recently introduced mobile phone lockers in one of its branches in Singapore, encouraging diners to take a break from the virtual world and have real conversations over meals.” 2. DEDCC[octave lower]G. 3. The bestselling musical artists of all time? 4. Panasonic moving fridge, comes to you when called. 5. “Today, humanity lives in a relatively quiet volcanic period.” (NYT) 6. Margot Sanger-Katz on cutting off the...

A verse for Trump as he meets w/ Yellen on Thursday

Trump’s meeting with Fed Chair Janet Yellen tomorrow. Here’s some free advice, in verse! When it comes to Cohn, Leave him alone. I worry that Powell Might throw in the towel. Sorry to be harsh But do not go with Marsh. We’ve all seen the trailer Don’t be ruled by Taylor. By now you’re probably smellen’ The idea that I’m sellen’ Steady as she goes, Trump: Stick with Yellen. For a bit more substance, here’s a piece from a few weeks ago about why...

The lesson monetary policy needs to learn

It seemed obvious to write a post about the Peterson Institute’s recent conference on ‘Rethinking Macroeconomic Policy’, but nowadays I find it more efficient to let Martin Sandbu do the job. We agree most of the time, and he does these things better than I do. It allows me to write something only in the unlikely event that I disagree, or if I want to take the discussion further. I only have one quibble with Martin’s columnyesterday. I think...

Richard Thaler’s work demonstrates why economics is hard

RICHARD THALER has won the Nobel prize in economic sciences this year for his contributions to behavioural economics. It's a well-deserved prize and a clarifying one, as far as economics is concerned. For a very long time, economists hoped to treat individuals a bit like particles in physics, whose activity can be described by a few well-understood rules, which allow researchers to model and understand complex interactions between particles....

Soldiers of Fortune goes to Hollywood

There are six identical men, who must choose one of them to do an unpleasant job. They could hold an auction and pay one of them to volunteer to do the job. But if they have diminishing marginal utility of consumption, they will prefer instead to roll a die to decide which one of them does the job. Their expected utility is higher. If the job is unpleasant because it has a risk of death, then state-contingent preferences (the marginal utility...

The Relative Citation Ratio

A key problem with citation counts is that they disadvantage fields or subfields that are either small or have a culture of short reference lists. I am intrigued by the solution offered by B. Ian Hutchins, Xin Yuan, James M. Anderson, George M. Santangelo in their paper "Relative Citation Ratio (RCR): A New Metric That Uses Citation Rates to Measure Influence at the Article Level." This is a concept defined at the article level. At a...

Is “growing the pie” overrated, and does that explain why everything is terrible?

The most important question in all of economics is: what can societies do to get richer? Sadly, nobody has a great answer. Only a handful of countries* have ever moved from “significantly poorer than the richest” to “about as rich as the richest”.There has been plenty of research on differences between rich and poor countries, gaps in prosperity within countries, and even how to improve productivity within individual businesses. But there is...

An Exercise for My Readers

There has been a lot of discussion lately about how much a cut in the tax on capital will increase wages. So I thought I would pose a relevant exercise for my readers.A small open economy has the production function y = f(k), where y is output per worker and k is capital per worker. The capital stock adjusts so that the after-tax marginal product of capital equals the exogenously given world interest rate r.r = (1-t)f '(k).Wages are set by the...

Cowen on Fed Chair

Tyler Cowen has a good thought on the Fed chair question. The next chair has to be a good politician, in all the positive senses of that word, more than a good technocrat:The Fed has functioned as a technocracy for a long time, but might the future bring a Fed that is irrevocably split between ...

Stumbling Blocks for Brazil’s Economic Recovery as Election Looms

Against all odds, the Brazilian economy is gradually recovering. Despite the country’s hapless regime, the enormous corruption scandal, and the substantial fiscal challenges ahead, Brazil has emerged from its worst-ever economic recession, responsible for a GDP per capita drop of more than 10 percent. Authorities and markets have been celebrating these recent trends, as they expect greater economic traction into 2018 will help elect a...

Temporary price-level targeting: An alternative framework for monetary policy

By Ben S. BernankeLow nominal interest rates, low inflation, and slow economic growth pose challenges to central bankers. In particular, with estimates of the long-run equilibrium level of the real interest rate quite low, the next recession may occur at a time when the Fed has little room to cut short-term rates. As I have written previously and recent research has explored, problems associated with the zero-lower bound (ZLB) on interest...

A monetary-fiscal theory of inflation

On December 17, 2015, the FOMC has raised its policy rate (IOER) from 25bp to 50bp. It has since raised the IOER rate three more times to 1.25%. Many on the committee seem convinced that further rate hikes are needed (in addition to actions designed to shrink the Fed's balance sheet, which is already shrinking relative to the size of the economy). What is the source of this enthusiasm for monetary policy tightening, given that the unemployment...

From a Floor System to A Corridor System

So I was looking at the Fed's 2016 annual report and was able to construct the following chart: Several observations from this figure. First, the sharp growth in the Fed's income is unsurprising as it is a natural consequence of the Fed's QE programs. These large scale asset purchase programs expanded the Fed's assets from around $900 billion in late 2008 to $4.5 trillion today. Moreover, the Fed's portfolio has changed from being...

New Results on International Monetary Policy Presented at the Swiss National Bank

This week I gave the Swiss National Bank’s  Annual Karl Brunner Lecture in Zurich, and I thank Thomas Jordan who introduced me and the hundreds of central bankers, bankers, and academics who filled the big auditorium. Karl was a brilliant, innovative economist who thought seriously about both policy ideas and institutions. For the lecture, I focused on ideas and institutions for international monetary policy. Since Karl died in 1989, we can...

My Interview with Cloud Yip: Part 1:

A couple of months ago, I had the pleasure of speaking with Cloud Yip. Cloud is running a series of interviews under the title of “Where is the General Theory of the 21st Century” and I was privileged to be included in that series. The interview was published in its entirety a couple of weeks ...

The VIX is too low!

September 30, 2017 —   During most of this year, the VIX — the Volatility Index on The Chicago Board Options Exchange — has been at the lowest levels of the last ten years.  It recently dipped below 9, even lower than March 2007, just before the sub-prime mortgage crisis. It looks as though, once again, investors do not sufficiently appreciate how risky the world is today. Known colloquially as the “fear index,” the VIX measures financial...

Must- and Should-Reads

Over at Equitable Growth: Must- and Should-Reads: Issi Romem: Paying For Dirt: Where Have Home Values Detached From Construction Costs?: “In the expensive U.S. coastal metros, home prices have detached from construction costs… Melissa S. Kearney: How Should Governments Address Inequality?: “Putting Piketty Into Practice… Ben Thompson: Netflix’s Earnings, Netflix’s Price Raise, Additional Netflix Notes: “Netflix has a completely orthogonal...

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