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Misinformation: Strategic Sharing, Homophily, And Endogenous Echo Chambers

27 days ago

Posted on 27 August 2021
by Daron Acemoglu

— this post authored by Daron Acemoglu, Asuman Ozdaglar, and James Siderius, Vox eu.orgMisinformation spreads rapidly on social media platforms. This column uses a model of online content-sharing to show that a social media platform that wishes to maximise content engagement will propagate extreme articles amongst its most extremist users. ‘Filter bubbles’ prevent the content from spreading beyond its extremist demographic, creating ‘echo chambers’ in which misinformation circulates. The threat of censorship and a corresponding loss in engagement could pressure platforms to fact-check themselves, while regulating their algorithms could mitigate the consequences of filter bubbles.Please share this article – Go to very top of page, right

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Fiscal Austerity Intensifies The Increase In Inequality After Pandemics

29 days ago

Posted on 25 August 2021

from Voxeu.org

— this post authored by Davide Furceri, Prakash Loungani, Jonathan D. Ostry, and Pietro Pizzuto

In the aftermath of past pandemics, fiscal policy played an important role in reducing or amplifying income inequality. This column predicts the likely distributional effects of Covid-19 by analysing evidence from five previous outbreaks (SARS, H1N1, MERS, Ebola, and Zika). It finds that severe austerity measures were associated with inequality increases three times greater than expansive fiscal policy following a pandemic. Premature austerity is self-defeating from both a macro and an equity standpoint.

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In the early months of COVID-19, there

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Buy Businesses, Not Stocks

August 22, 2021

Posted on 22 August 2021
by John Mauldin, Thoughts from the Frontline

I write this letter on my way home from Steamboat Springs, Colorado, where I spoke to the fascinating “GoBundance" group of mostly young, successful, enthusiastic entrepreneurs.Please share this article – Go to very top of page, right hand side, for social media buttons.Before that I was in Grand Lake Stream, Maine, for the Camp Kotok economics/fishing retreat. I’ll have some details for you later. Today we will look back a few months to a Strategic Investment Conference presentation that truly affirms my optimistic outlook for both business and humanity.You’ve probably heard of Ron Baron, founder of Baron Funds which has grown to a stable of not just mutual funds but a variety of private investments and Ron’s

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The Cost Of Populism: Evidence From History

August 21, 2021

Posted on 21 August 2021
from Voxeu.org

— this post authored by Manuel Funke, Moritz Schularick, and Christoph TrebeschThe rise of populism in the past two decades has motivated much work on its drivers, but less is known about its economic and political consequences.Please share this article – Go to very top of page, right hand side, for social media buttons. This column uses a comprehensive cross-country database on populism dating back to 1900 to offer a historical, long-run perspective. It shows that (1) populism has a long history and is serial in nature – if countries have been governed by a populist once, they are much more likely to see another populist coming to office in the future; (2) populist leadership is economically costly, with a notable long-run decline in

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What Makes A Disease Eradicable?

August 18, 2021

Posted on 18 August 2021

Written by Econintersect Guest

— this post authored by Sophie Ochmann, Our World in Data

Before answering this question, it is important to understand what exactly eradication entails, especially in contrast to the elimination of a disease. While the eradication of a disease is permanent and global, the elimination of a disease is an achievement restricted to a specific geographic area such as a country or continent.

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It is not possible to clearly draw a line between eradicable and non-eradicable diseases. Diseases only become eradicable after scientific discoveries give us the tools to fight them. Smallpox was a disease that killed millions every year and

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The Data Shows The Fed Is Behind The Surging Wealth Gap

August 18, 2021

Posted on 18 August 2021
by Lance Roberts, Clarity Financial

The data shows the Fed is behind the surging wealth gap. Such is despite protestations “Quantitative Easing" and “Zero Interest Rate Policy" do not affect the financial markets.Such was noted previously by Minneapolis Fed President Neel Kashkari:“QE conspiracists can say this is all about balance sheet growth. Someone explain how swapping one short-term risk-free instrument (reserves) for another short-term risk-free instrument (t-bills) leads to equity repricing. I don’t see it."While he may be “technically correct," there is ample evidence of a direct impact on financial markets. As discussed in “Past Performance Is A Guarantee":“Given the high correlation between the financial markets and the Federal Reserve

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Re-Evaluating The Sources Of The Recent Productivity Slowdown

August 17, 2021

Posted on 16 August 2021
from Voxeu.org

— this post authored by Ian Goldin, Pantelis Koutroumpis, François Lafond, and Julian WinklerLabour productivity is a key determinant in improving living standards. But in recent years, productivity has stagnated, if not declined, in many countries around the world. This column re-evaluates the various reasons as to why this might be, applying three criteria to the existing explanations for the slowdown. It finds that the slowdown in productivity can be attributed to numerous factors, ranging from mismeasurement to changes in trade patterns.Please share this article – Go to very top of page, right hand side, for social media buttons.Labour productivity growth is the main long-run determinant of improved living standards. Its recent decline

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Ubiquity, Complexity, And Sandpiles

August 15, 2021

Posted on 15 August 2021

by John Mauldin, Thoughts from the Frontline

"How did you go bankrupt?"

"Two ways. Gradually, then suddenly."

. ― Ernest Hemingway, The Sun Also Rises

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Change happens quickly and, often, unpredictably. And as we will see, the unpredictable part is actually a mathematical principle. As in the Hemingway quote above, not just bankruptcy but change also happens slowly and then, seemingly, all at once. It’s time passing without change that causes the worst problems, including some historic economic catastrophes. It turns out we shouldn’t just accept change; we actually need it.

Last week, I said we would skip this letter since I’m fishing with friends

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The Evolution Of ‘Big’: How Sociality Made Life Larger

August 14, 2021

Posted on 13 August 2021
by Blair Fix

The game I play is a very interesting one.It’s imagination in a tight straitjacket.- Richard FeynmanLike Richard Feynman’s game of science, evolution is stuck in a straitjacket. It is driven by chance. But evolution is not free to explore every path.Please share this article – Go to very top of page, right hand side, for social media buttons.Take, as an example, the evolution of organism size. While it seems like there are many routes to bigness, I propose that there is fundamentally only one: sociality. In the march towards ever-larger organisms, there have been three major revolutions. All of them involved the merger of previously autonomous organisms into a new communal creature. I call this route to bigness ‘size through sociality’. It is a

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Oil Markets, Fracking, And The Global Economy

August 11, 2021

Posted on 11 August 2021
from Voxeu.org

— this post authored by Gideon Bornstein, Per Krusell, and Sergio Rebelo, Voxeu.orgOil markets have long been central to discussions of the global economy, and fluctuations in oil prices frequently gain widespread attention. This column explores the impact of the rising use of fracking on how oil markets are best conceived within modern macroeconomic theory. The author’s model predicts that as fracking accounts for an increasingly sizeable fraction of the world oil supply, it may herald a new era of lower, more stable oil prices.Please share this article – Go to very top of page, right hand side, for social media buttons.How important is the oil market for the global economy? Although oil shocks are often viewed as responsible for the poor

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COVID Consumer Headache

August 9, 2021

Posted on 08 August 2021
by John Mauldin, Thoughts from the Frontline

If you look just at 2021, it seems the US economy is tearing higher. Real GDP grew an annualized +6.5% in the second quarter, the Commerce Department estimated last week.Please share this article – Go to very top of page, right hand side, for social media buttons.This follows a similar +6.3% first quarter, and a pandemic-interrupted 2020 that turned out not so bad in the end. The July unemployment report showed more impressive jobs growth. The Fed will increasingly have problems maintaining its credibility with interest rates at the zero bound and massive QE and inflation still rising.For one thing, we’re only halfway through 2021. Much of this impressive growth derives from consumer spending, and much of the

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Understanding How Central Banks Use Their Balance Sheets: A Critical Categorisation

August 7, 2021

Posted on 07 August 2021
from Voxeu.org

— this post authored by Stephen Cecchetti, Brandeis International Business School and Paul Tucker, Harvard Kennedy SchoolSince the Global Crisis, the size of central bank balance sheets has grown significantly. Traditional goals of price and financial stability are insufficient for assessing the success of modern central banking operations. Please share this article – Go to very top of page, right hand side, for social media buttons.This column introduces a new framework for categorising and understanding central bank balance sheet operations. Monetary policy decisions are separated from facilities for lender of last resort, market maker of last resort, providing selective credit, and ensuring emergency government financing. To maintain

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Global Food Production: Too Little And Too Much

August 5, 2021

Posted on 05 August 2021
by Timothy Taylor, Conversable Economist

On one hand, it seems terribly important that global food supply increase dramatically in the next few decades, to feed the hungry around the world as global population rises. On another hand, obesity is a huge and ongoing health problem globally, even in many countries that do not have high income levels. And on yet a third hand, food production around the world is often a major contributor to environmental degradation, being related to issues including water pollution, deforestation, pesticides that linger in the ecosystem, and release of greenhouse gases.Please share this article – Go to very top of page, right hand side, for social media buttons.A desirable path for the future of global food production will take

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Krugman’s Delusion: The Difference Of Theory Versus Reality.

August 5, 2021

Posted on 05 August 2021
by Lance Roberts, Clarity Financial

In a recent interview with Business Insider, Paul Krugman’s delusion was evident as the difference between economic theory and reality was on full display.Please share this article – Go to very top of page, right hand side, for social media buttons.However, such is always the difference between economists who spent their lives in the “ivory towers" of academia instead of those who created businesses, jobs, and prosperity.While many economists attempt to make economic theory a science, it is still a function of human psychology and behaviors. For example, the theory is that if the price of beef rises too much, consumers will switch to chicken. However, in practice, individuals often make other choices instead.Most

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Policy Errors Have Consequences

August 1, 2021

Posted on 01 August 2021
by John Mauldin, Thoughts from the Frontline

This week’s Fed statement was another non-story. They added a new line about continuing to “assess progress" which some interpret as a step toward tapering. If so, it was a baby step. They’re simply thinking about whether they should start discussing the possibility of making a plan to begin tightening when conditions are right.Please share this article – Go to very top of page, right hand side, for social media buttons.“T.S. Eliot once wrote, ‘Only those who risk going too far can possibly find out how far one can go.’ It seems the US financial system is bound and determined to find out."- – John Hussman, July 29, 2021“If I was Darth Vader and I wanted to destroy the US economy, I would do aggressive spending in

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Clouds Likely To Provide A Positive Contribution To Global Warming, But Magnitude Is Uncertain

July 30, 2021

Posted on 30 July 2021
Written by Econintersect Guest

— this post authored by Ayesha Tandon, Carbon BriefClouds study finds that low climate sensitivity is ‘extremely unlikely’The response of clouds to a change in global temperature – known as the “cloud feedback" – plays a crucial role in how much the planet will warm. However, estimates of cloud feedback are uncertain. The new study, published in Proceedings of the National Academy of Sciences, uses global satellite observations to reduce this uncertainty.Please share this article – Go to very top of page, right hand side, for social media buttons.Taking their findings into account, the authors produce a central estimate of equilibrium climate sensitivity (ECS) – the global temperature change resulting from a doubling of

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German Reconstruction As State-Phobia

July 30, 2021

Posted on 29 July 2021
by Philip Pilkington

Nazism and Neoliberal Mythmaking, Part 1In a previous series of pieces about the origins of neoliberalism (available here: Part I, Part II, Part III and an interview) I put forward the idea that neoliberalism – and its extremist offshoot, libertarianism as represented by the Austrian School – was founded on a very specific myth. This myth I called “Hayek’s delusion" and it holds that any sort of economic planning will inevitably lead to totalitarianism. Thus even well-intentioned Keynesian policies of economic planning contain within them the seeds of the next Third Reich.Please share this article – Go to very top of page, right hand side, for social media buttons.In the first part of that series I tried to show that this myth had its

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As Scientists Have Long Predicted, Warming Is Making Heatwaves More Deadly

July 26, 2021

Posted on 26 July 2021
Written by Econintersect Guest

— this post authored by Dana Nuccitelli, Yale Climate ConnectionsIn its 2001 Third Assessment Report, the Intergovernmental Panel on Climate Change (IPCC) foresaw that global warming would lead to increasingly deadly heatwaves. The world’s top climate scientists warned:“More hot days and heatwaves are very likely over nearly all land areas. These increases are projected to be largest mainly in areas where soil moisture decreases occur." Please share this article – Go to very top of page, right hand side, for social media buttons.They wrote at the time:“The greatest increases in thermal stress are forecast for mid- to high-latitude (temperate) cities, especially in populations with non-adapted architecture and limited air

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Federal Reserve Folly

July 25, 2021

Posted on 25 July 2021

by John Mauldin, Thoughts from the Frontline

Great news: The US economy is officially out of recession. We know this because the National Bureau of Economic Research’s official recession-calling committee said so this week. The economy has been in an expansion phase since last April, making this the shortest recession on record at only two months.

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The NBER committee always makes these calls in hindsight – both the beginning and end of recessions. Literally everyone could see the economy coming to a halt in March and April. The signs weren’t subtle. Yet it wasn’t until June 8, 2020, that they said the economy had peaked in February, marking the recession’s

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My Coding Mix

July 23, 2021

Posted on 23 July 2021
by Blair Fix

Last week I ran a Twitter survey to see what software my fellow researchers use.Please share this article – Go to very top of page, right hand side, for social media buttons.As an avid R user myself, this result didn’t surprise me. But it did make me think about my own approach to coding. In this post I’m going to share the tools that I use for my research.To get a sense for my coding habits, I wrote a script to scan all of my code and break it down by language. Here’s the result:Figure 1: My code mix. Here’s a breakdown of the lines of code I’ve written by language.As you can see, I use R a lot. It’s my go-to language for most analysis. But sprinkled in the mix are C++, Linux shell, and the odd Python script. Here’s how and why I use each

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Outlook For Oil – 9.5 Years Ago

July 22, 2021

Posted on 22 July 2021

by Philip Pilkington

What follows is a complicated piece by Chris Cook, former director of the International Petroleum Exchange (IPE). While there is no way to improve upon Chris’ own nuance and knowledge of the oil industry, as an outsider I had to study the argument rather hard to make sense of it – reflecting my limited knowledge of the industry rather than anything else. So, I provide a short summary of Chris’ overarching argument for the interested layperson.

Jan. 12, 2012

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Editor’s note: This post from the past is being revisited because it is remarkable how prescient some of the observations were but also how they were not extreme enough to cover

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Monetary Policy Is Not Expansionary

July 22, 2021

Posted on 21 July 2021
by Lance Roberts, Clarity Financial

Monetary policy is not expansionary despite widespread belief otherwise.Please share this article – Go to very top of page, right hand side, for social media buttons.The general assumption by the Federal Reserve is that by providing excess reserves to the banking system, the banks would then lend to businesses and individuals to expand economic activity. Furthermore, as discussed previously, the Federal Reserve’s entire premise of inflating asset prices was the subsequent boost to economic activity from an increased “wealth effect."“This approach eased financial conditions in the past and, so far, looks to be effective again. Stock prices rose and long-term interest rates fell when investors began to anticipate the most

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Xi’s Big Mistake

July 18, 2021

Posted on 18 July 2021
by John Mauldin, Thoughts from the Frontline

I have mixed feelings about China. On the plus side, I think the country’s massive economic transformation may be one of the most impressive events in human history.Please share this article – Go to very top of page, right hand side, for social media buttons.Bringing hundreds of millions from primitive rural lives into relatively prosperous cities within a few years was awe-inspiring. I greatly admire the millions of Chinese entrepreneurs worldwide who create jobs and technology. They’ve helped the entire world in countless ways.And yet, I can’t forget that China’s leaders are devoted, ideologically centralist communists. Americans sometimes apply that term casually to our political opponents. Xi Jinping is an

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Is Human Probability Intuition Actually ‘Biased’?

July 17, 2021

Posted on 16 July 2021
by Blair Fix

According to behavioral economics, most human decisions are mired in ‘bias’. It muddles our actions from the mundane to the monumental. Human behavior, it seems, is hopelessly subpar.1Or is it?Please share this article – Go to very top of page, right hand side, for social media buttons.You see, the way that behavioral economists define ‘bias’ is rather peculiar. It involves 4 steps:Start with the model of the rational, utility-maximizing individual – a model known to be false;Re-falsify this model by showing that it doesn’t explain human behavior;Keep the model and label the deviant behavior a ‘bias’;Let the list of ‘biases’ grow.Jason Collins (an economist himself) thinks this bias-finding enterprise is weird. In his essay ‘Please, Not Another

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Fiscal Austerity Intensifies The Increase In Inequality After Pandemics

July 16, 2021

Posted on 16 July 2021

From Voxeu.org

— this post authored by Davide Furceri, Prakash Loungani, Jonathan D. Ostry, and Pietro Pizzuto

In the aftermath of past pandemics, fiscal policy played an important role in reducing or amplifying income inequality. This column predicts the likely distributional effects of Covid-19 by analysing evidence from five previous outbreaks (SARS, H1N1, MERS, Ebola, and Zika). It finds that severe austerity measures were associated with inequality increases three times greater than expansive fiscal policy following a pandemic. Premature austerity is self-defeating from both a macro and an equity standpoint.

Please share this article – Go to very top of page, right hand side, for social media buttons.

In the early months of COVID-19, there was

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The Model That Maketh The Man? Wynne Godley In The NYT

July 15, 2021

Posted on 15 July 2021
by Philip Pilkington

Article of the Week from Fixing the EconomistsThe New York Times ran an article in 2013 appraising the work of Wynne Godley and his colleagues and followers. This is fantastic. It is great to see this approach to economics, which the NYT rightly notes predicted the 2008 crash, get the proper media attention it deserves. The article, however, while extremely well-written and well-informed, is indicative of a danger that I have long been pointing out on this blog.Please share this article – Go to very top of page, right hand side, for social media buttons.The article in question is keen to point out the importance it, and others, attach to the fact that Wynne Godley not only predicted the crash but also built models. This is on the back of

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Snapshots Of Global Wealth

July 15, 2021

Posted on 15 July 2021
by Timothy Taylor, Conversable Economist

The Credit Suisse Research Institute has published Global Wealth Report 2021, its annual report looking at levels and distribution of wealth around the world (June 2021). Here are a few snapshots and comments from the report.Please share this article – Go to very top of page, right hand side, for social media buttons.This figure shows the wealth pyramid. As the report notes, “Our calculations suggest, for example, that a person needed net assets of just USD 7,552 to be among the wealthiest half of world citizens at end-2020. However, USD 129,624 was required to be a member of the top 10% of global wealth holders, and USD 1,055,337 to belong to the top 1%."Here’s a summary of the wealth pyramid from the report:We

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Concordian Economics: Tools To Return Relevance To Economics

July 13, 2021

Posted on 11 July 2021
by Carmine Gorga, The Somist Institute

AbstractWith the help of planes and solids, this paper presents an enlargement of the field of observation of economic theory. Through this transformation, the distribution of ownership rights to money and wealth assumes a central position in economic analysis. Thus social relevance is returned to economics. The validity of this operation is confirmed by the return of the millenarian field of economic justice to its traditional function as guidance to economic policy. The paper then presents four sets of economic rights and responsibilities that offer the potential of translating principles of economic justice into the complexities of the modern world.Please share this article – Go to very top of page, right hand side,

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TINA Is Stupid

July 11, 2021

Posted on 11 July 2021
by John Mauldin, Thoughts from the Frontline

In the 1980s, British Prime Minister Margaret Thatcher liked to say, “There is no alternative" to her market-driven economic reform ideas. She said it so much people began abbreviating it as “TINA."Please share this article – Go to very top of page, right hand side, for social media buttons.Whatever you think of Lady Thatcher’s policies, the slogan was certainly effective politics. If victory is inevitable, you can either cooperate or be left behind. But her phrase actually goes back further to an 1851 book by Herbert Spencer, who also famously coined “survival of the fittest."More recently, TINA has been applied to investing. You must buy stocks because TINA. You can’t make money any other way. Just close your

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Essentialism And Traditionalism In Academic Research

July 8, 2021

Posted on 08 July 2021
by Blair Fix

— this post is co-authored by Ryan Kyger1Philosophy of science is about as useful to scientists as ornithology is to birds.- attributed to Richard Feynman2Please share this article – Go to very top of page, right hand side, for social media buttons.Most scientists don’t worry much about philosophy; they just get on with doing ‘science’. They run experiments, analyze data, and report results. And by so doing, they fall repeatedly into known philosophical pitfalls.This essay is about two such pitfalls: essentialism and traditionalism.‘Essentialism’ is the view that behind real-world objects lie ‘essences’ – a type of eternal category that you cannot observe directly but is nonetheless there. Racial categories are a common type of ‘essence’. To be

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