Links (1/11/19)

Trump’s Big Libertarian Experiment - Paul Krugman Oceans Are Warming Faster Than Predicted - Scientific American The effect of machine learning on credit markets - VoxEU When is more competition bad? - MacroMania Time for China, Germany, the Netherlands, and Korea to Step Up - Brad Setser The deep roots of development - Part 2 - Growth Economics Monetary Policy Outlook for 2019 - Richard Clarida Inequality in the joint distribution of...

Donald Trump and His Team of Morons

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When should we be worried about monetary policy?

During late December, there was a lot of chatter in the press and the blogosphere about monetary policy.  Many pundits expressed concern that policy was off course. Back in September 2010, there was relatively little chatter about monetary policy.  Why is there a great deal of discussion at some points in time, but not others?  One answer is that people talk about monetary policy when it is not hitting its targets. Let’s look at the most...

Yuppie Fishtanks: YIMBYism explained without “supply and demand”

YIMBYism is the idea that cities need to build more housing in order to relieve upward pressure on rents. In Northern California, where I live, YIMBYs tend to get into fights with progressives about market-rate housing. YIMBYs don't want to build only market-rate housing, but they think market-rate housing has to be an important component.NorCal progressives, in contrast, tend to think that market-rate housing is bad - either they think it...

Will the Rule of Law Hold?

There can be no definitive answer. Still, the rule of law and the institutions that sustain it – whether courts, elections, or independent public agencies – have proven to be a source of greater resistance than many populist leaders expected, and more resilient, perhaps, than democratic forces dared to hope. WARSAW – The great political question of 2019 is clear: Will the rule of law withstand the...

TV chefs showcase recipes using mutton, prices jump

By Lucy Craymer of The WSJ. When tastes increase, demand shifts to the right, raising price. That might have happened since chefs have been featuring this meat, increasing consumers' desire for it. Also, farmers have been raising less sheep in order to move into more profitable products. When the price of good A rises, the supply of good B decreases or shifts to the left (if a firm can produce both products)   Excerpt: "Prices of mutton...

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...

Economists’ statement in support of Atif Mian

It is with dismay that I learned recently that Princeton's Atif Mian, one of the greatest scholars on finance and macroeconomics I know, was disinvited from Pakistan's Economic Advisory Council because of his religious beliefs. See here and here for more background. Timur Kuran and I have put together a statement, along with many friends who support Atif. The statement is below. We already have more than 90 signatories, including 26 economists...

The Decline Of African-American And Hispanic Wealth Since The Great Recession

Posted on 14 January 2019 from Voxeu.org -- this post authored by Edward Wolfe, New York UniversityUnlike income inequality, wealth inequality along racial lines in the US has received relatively little attention. This column presents new evidence on the changing landscape of relative wealth among whites, blacks, and Hispanics between 1983 and 2016. Using an augmented measure of wealth, it highlights how cuts to social security will...

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 History of the History of Sears and Jim Crow

After the announcement that Sears had filed for bankruptcy Louis Hyman put out tweet thread about Sears role undermining Jim Crow in the South. The thread got thousands of likes and the story was picked up by The Chicago Tribune, The New York Times, The Washington Post, NPR, and Vox. I have posted a copy of the tweet thread below. The thread argues that Sears catalogs helped to undermine Jim Crow. To preserve racial...

Risk/return tradeoff: investors compensating for holding risky local Chinese debt

The gap between rates on Chinese national borrowing (16% debt/income ratio) and local borrowing (150% debt to income ratio) is getting bigger as investors demand a higher return for holding the riskier debt. (Source:  WSJ.)

Designing Carbon Dividends

Carbon dividends are the hottest idea in climate policy. A diverse mix of progressive and conservative voices are backing the idea of returning carbon tax revenues to households in the form of regular “dividend” payments. So are a range of businesses and environmental groups. Two weeks ago, six House members—three Democrats and three Republicans—introduced carbon dividend legislation. Here is the idea: A robust carbon tax would cut emissions...

Still more wages in ND

Of late my discussions on the Jarrod Thomas show centered on the issue of ranking the performance of Grand Forks. Ranking against whom is an open question that is still not even close to resolved. By default the early comparisons are against other places in the state, though for reasons we discussed on the radio and I mentioned in other posts, that does not feel like a perfect comparison. Still it seems like the statewide comparison is...

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...

A Global Human Capital Index

Finding ways for people to be healthier and better-educated is both a useful goal in itself, and also an investment that increases future economic production. When I find myself worrying, as one does, that the world is falling to pieces, it's useful to remember basic facts:  "The world is healthier and more educated than ever. In 1980 only 5 in 10 primary school-age children in low-income countries were enrolled in school. By 2015 this...

Adding Insult to Injury

Mr. Trump considers redirecting funds committed to rebuilding Puerto Rico toward the building of the Wall. From WaPo: Trump has urged the Army Corps to determine how fast contracts could be signed and whether construction could begin within 45 days… The list includes dozens of flood control projects in areas affected by recent natural disasters, including the Texas coastline inundated by Hurricane Harvey and parts of Puerto Rico battered by...

Stop sniping at central banks and set clear targets

Stop sniping at central banks and set clear targets What is the most important job in the world? President? Teacher? Parent? I suggest a post that would not feature on most people’s lists: central banker. James Carville, who advised US president Bill Clinton, once quipped that he wanted to be reincarnated as the bond market, able to intimidate anybody. But as Ben Bernanke, Mervyn King and more recently Mario Draghi (crisis-era central...

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

Bias in cable news

How much does consuming news with a strong political slant influence Americans’ votes in presidential elections? And how strongly do people prefer news sources that are slanted towards their own political preferences? This research provides evidence on the persuasive effects of slanted news and viewers’ tastes for like-minded news by analyzing data on the three big US cable news channels: CNN, Fox News, and MSNBC. The results indicate that...

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 ...

What should Knightean economists do?

Andrew Farrant trawls the archives to figure out what happened when James Buchanan visited Pinochet's Chile. Although Milton Friedman and Arnold Harberger became involved with Pinochet's Chile in the mid‐1970s, an increasingly influential body of scholarship argues that James M. Buchanan was similarly eager to provide Pinochet's dictatorship with advice. Buchanan reportedly had a heavy influence on the development of Chile's 1980 Constitution...

Might there be a new eurozone-China recession?

Latest: Eurozone industrial production shrank 1.7% in November Worst decline in almost three years. Introduction: China’s exports fell 4.4% in December Biggest fall in exports in two years as slowdown gathers pace Here is the link, developing… The post Might there be a new eurozone-China recession? appeared first on Marginal REVOLUTION.

There’s heightened nervousness about the next recession and there are signs pointing in both directions.

I can’t turn around without seeing or hearing people worrying more about the next recession. Google Trends: Web search for “next recession” Source: Google Trends My peeps at the Indicator have a nice podcast on the topic. The WSJ points out that more than half of economists they surveyed expect a downturn by 2020, which, in case you live under a rock, the article helpfully notes is an election year. The reasons for the heightened anxiety...

Is Norway+ the way forward?

A number of MPs seem to think so. Their argument goes as follows. Although the Withdrawal Agreement (WA) is not about trade (beyond the backstop), and trade is dealt with in the Political Declaration that is not legally binding, a vote for Theresa May’s deal will be taken by her as endorsing her wish for a hard Brexit. In that case parliament should instruct the government to pursue a much softer Brexit now, because it is better to do that now...

How to interpret a market plunge

FOR much of the past two years, market watchers have had little to write about, apart from the passing of one stock-index milestone after another. The events of the past week, however, have shaken the financial world awake. A recent, upward zag in bond yields seemed to signal the arrival of a new theme in market movements. Stock prices confirmed it, and then some. Over the past week, American stocks have dropped about 7%, punctuated by a...

NAFTA – The “Worst” Trade Deal Ever

With time on my hands over the last week of the holiday season, I spent a bit more time than usual surfing news channels and watched a press conference by U.S. President Donald Trump in  which among other things he again reiterated how the United States had been hard done by NAFTA and that it was the worst trade deal ever.   Needless to say, while he has pronounced from the mount on this matter numerous times, for some reason it particularly...

John Locke’s Argument for Limited Government

America has never worried about financing its priorities

There is nothing inherently socialist about government debt. A government can issue debt to pay for whatever it likes. It can pay to fight a war, to lower taxes for a preferred group, to soften the sharp edges of a recession. The United States has, in fact, issued debt to pay for all of these things. American politicians say that public debt crowds out private investment, that it's unsustainable and will turn the country into Argentina. Or...

ASSA 2019

I just arrived at the ASSA meetings in Atlanta. Readers of this blog might be interested in the following public events that I am involved with. First, I will have a book signing to celebrate the publication of the 10th edition of my intermediate macro text. It is Saturday at 2:10 pm at the Worth Publishers booth. (I understand that copies are already going fast, so if you want one, you might stop by the booth earlier to pick it up.) Second, I...

Volalitily, now the whole thing

An essay at The Hill on what to make of market volatility, from Dec 31. Now that two weeks have passed, I can post the whole thing. I add some graphs too.  (Though at the rate things are going any forecast will have been proved wrong in two weeks!)What’s causing the big drop in the stock ...

Adjusted for Aging, the US Employment Rate Continued to Rise Above Its Pre-Recession Level in 2018

In the beginning of 2018, the US employment-population ratio—the share of the civilian population ages 16 and older that is currently working—had recovered to its pre-recession level on an age-adjusted basis.[1] By the fourth quarter of 2018, it was 0.5 percentage points higher. Without adjusting for the effects of aging, the employment rate was still 2.2 percentage points lower than before the last recession. The improvement in the...

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...

When is more competition bad?

Contrary to popular belief, standard economic theory does not provide a theoretical foundation for the notion that "competition is everywhere and always good." It turns out that legislation that promotes competition among producers may improve consumer welfare. Or it may not. As so many things in economics (and in life), it all depends.I recently came across an interesting paper demonstrating this idea by Ben Lester, Ali Shourideh,...

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 ...

New Year questions about the economic outlook

January 1, 2019 – Five questions about the international economic outlook, from Chosun Ilbo (the leading Korean newspaper), and my replies: US president Trump and China’s president Xi agreed to a temporary ceasefire, in which the US suspended to impose higher tariffs on Chinese imports next year. How do you see the Trade War is going? How would it affect the global economy next year? The trade war is not going well, for either the United...

Brad DeLong's Grasping Reality 2019-01-14 14:40:48

Seems to me @biscuit_ersed and everybody else needs their first game-theory lecture to be (1) defect-defect as dominant-strategy Nash equilibrium in prisoner's dilemma, (2) the unraveling equilibrium in finite related prisoner's dilemma, and (3) this first prisoner's dilemma ever played: http://www.j-bradford-delong.net/economists/prisoners_dilemma.html https://twitter.com/biscuit_ersed/status/1084812993509105671... #noted #economics

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