Sunday , September 26 2021
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# Tag Archives: Commentary

## Hope for California — housing edition

California has at last passed the first laws overturning some residential zoning restrictions. WSJ coverage here.  From the California YIMBY press release, “The end of exclusionary, single-unit zoning in California is a historic moment -- we’ve taken a huge step toward making California a more affordable, equitable, and inclusive state.”...SB 9 ... makes it legal to build duplexes on lots zoned for one house statewide; the law also allows property owners to split their lots...

## Interest rate survey

Torsten Slok passed on a lovely graph, created from the Philadelphia Fed survey of professional forecasters: It's not just the Fed, whose own forecasts and dot plots have the same characteristics. Some potential lessons1) Just you wait. There is the story of the hypochondriac, who when he died at 92 had inscribed on his tombstone "See, I told you I was sick." More serious stories have been told of the 1980s high interest rates, worried for a decade about inflation that could have...

## Debt ceiling modest proposal — perpetuities

The debt ceiling dance has started again. Read Treasury Secretary Janet Yellen in the Wall Street Journal. A modest proposal: Issue perpetuities.  The Treasury computes the total amount of debt by its face or principal value, not its market value*. If the Treasury issues a bond that pays $1 coupons each year for 10 years and then pays$100 at maturity, the treasury counts this as \$100 additional debt. The Treasury ignores the coupon payments, and how much the bond actually sells...

## Inflation, debt, politics, and insurance at Project Syndicate

An essay at Project SyndicateInflation in the Shadow of DebtToday’s inflation is transitory, our central bankers assure us. It will go away on its own. But what if it does not? Central banks will have “the tools” to deal with inflation, they tell us. But just what are those tools? Do central banks have the will to use them, and will governments allow them to do so?Should inflation continue to surge, central banks’ main tool is to raise interest rates sharply, and keep them high for several...

## Inflation in the shadow of debt

(Note: This post uses mathjax equations. If you see garbled latex code, come to the original source.) The effect of monetary policy on inflation depends crucially on fiscal policy. In standard new-Keynesian models, of the type used throughout the Fed, ECB, and similar institutions, for the central bank to reduce inflation by raising interest rates, there must be a contemporaneous fiscal tightening. If fiscal policy does not tighten, the Fed will not lower inflation by raising...

## ESG catch 22

The point of ESG investing is to lower the stock price and raise the cost of capital of disfavored industries, and therefore slow down their investment. It's a form of boycott. The cost of capital is the expected return. If it works, it raises expected returns of disfavored industries, and lowers the expected return of favored ones. Yet ESG advocates claim that you do not have to trade return for virtue, that you can even make alpha by ESG investing! If that is the case, it means...

## Math education — or not

Percy Deift, Svetlana Jitomirskaya, and Sergiu Klainerman have a well-informed essay at Quillette on the state of math education in the US and China. Italics are mine throughout. I did not copy over the links, but the article is full of documentation. The most interesting part is the economics and politics of math education: One obvious problem lies in the way teachers are trained. The vast majority of K-12 math teachers in the United States are graduates of programs that teach...

My previous post on Delta policy and masks led to some discussion that went off the rails, on twitter especially. An effort to summarize the point: From the literature I have read, masks can be moderately medically effective. The literature has pretty wide ranging estimates, from some studies and meta-studies saying no effect, and others saying substantial effects.  Delta has a reproduction rate of 6. (Again, best guesses with varying estimates.) Even if masks are 50% effective --...