Friday, February 4, 2011

Another Interpretation of Payroll Numbers

There's been a lot of chatter about the new unemployment numbers. This Free Exchange post talks about some of the methodology, and why, when it's said and done, the unemployment drop is for real.

Monday, January 31, 2011

Sentences of the Day

Via Free Exchange:
Imagine a world in which technology has advanced to the point that
robots can build robots that operate at basically no cost at basically
no cost, such that people can have anything that want anytime for free;
the only constraint on consumption is the time available. That would be a
cashless economy, and as a result, debtors would be totally unable to
pay creditors. But does that matter?
Maybe we in the US are rationally accumulating debt in perfect foresight of costless robot production. That or we don't give a shit because the rapture's a-comin in 2012 and it won't matter.

A Couple of Trade-Related Links

Confused Libertarians Arguing Against Free Press?

Market Power is a pretty libertarian economics blog, if you happen to read it. Today's post seems a little confused about the difference between the micro and the macro, though.
Is internet access a right?  I'd say "no" ... Saying that someone has a right to scarce resources means
someone else has an obligation to give the same resources up without
And yes, this is in the context of Hosni Mubarak's decision to cut off the internet for the entire country of Egypt. There is a difference between saying "internet access is a right" at the micro level of thinking the government should subsidize it for individuals who do not have it and saying that "internet access is a right" at the macro level in the sense that the government should not restrict it wholesale. In the first context it is NOT a right; in the second context it IS a right because it represents a medium for free press. Also, according to a theoretical paper by Basuchoudhary and Razzolini (2010) communication reduces splintering and conflict escalation; according to a paper by Basuchoudhary, Bang and Shughart (2011), there is empirical evidence to support this hypothesis.

Commodity Prices

I generally don't read Krugman much anymore. This post, on commodity prices, seems reasonable. Specifically, on food prices (which some have pointed to as evidence that QE has been inflationary):
this is straightforward supply and demand. Demand may be up to some
extent because of that emerging-market boom. But if you look at the FAO reports
it becomes clear that the key thing for cereals prices is that
production is down in advanced countries, largely owing to terrible
But if it were coming from monetary pressure, it would likely be a demand-side pull rather than a cost-side push. Also, it might be temporary, since it has to do with weather (unless it is also linked to longer-term climate change).

What about those gas prices? Tyler Cowen is saying that this time it is different, and that there will probably be a change in the long-term trend in energy prices in the coming years. (Note: the long term trend in real resource prices has been negative since about the start of the 20th century.) Yglesias largely agrees. The theory is that during previous increases in price, growth in demand was led by technological innovation, which made us richer, but also better able to pull stuff out of the earth. During current price increases, growth in demand has been led by countries catching up (China and India, for example), and therefore less likely to be accompanied by adjustments on both supply side (better extraction) and demand side (enhanced efficiency). 

They may be right, especially in the short and medium run, but I'm skeptical for a few reasons. First, we've heard the Malthusian trap story before, and it's turned out to be false each time so far. Second, I'm not entirely convinced that their history is spot-on; during previous spikes there was also considerable catch-up growth in Southeast Asia (in fact, the 60s and 70s are a textbook example of "catch-up" growth for countries like Japan, South Korea, and other "Asian Tigers"). Third, prices are incentives, and thus if there is a significant increase in the real price of resources, there is likely to be a supply-side adjustment of some sort, including a shift to new sources of energy (nuclear?). Policy will also play a role in incentives (carbon tax?).