Links on the current (and future?) recession

The Beer Recession (Economix)
Growth and Jobs, a.k.a. Okun's "Law" (Free Exchange)
The "R" word on the rise (The Economist)
Technology and jobs: Short run vs. Long run (Free Exchange)
Housing prices versus rental prices. Somethings gotta give (read: Sell my effing house!) (Economix)
Debt and growth according to the IMF (BBC News) My view is that it's not so much debt as political risk. In the short run, the fundamentals of our (and Europe's) economy can withstand the current levels, burdens, and rates of growth in the levels and burdens, in the debt. I also don't see specific policy "A" or specific policy "B" as being the most important thing, so much as greater agreement, consensus and confidence that policies will be stable of the the forseeable time horizon. In the long run debt does matter, but anyone who claims to be serious about controlling it must admit that three things have to be on the table: (1) taxes; (2) defense; and (3) programs for seniors.

Macro model?

I'm wondering what, if any, economic model (macro or otherwise?) political conservatives are applying when they advocate for tax cuts as a remedy to the current recession.

Business in China (Economist) and government in India (Economist)

Liberal Media Bias

I've blogged about this before, and it seems at first the answer was yes. Is it more complicated? A new Vox post suggests that on average it is 'liberal' but not much moreso on average than the average citizen. Furthermore, it appears (from print media) that the bias is more leftward on social issues, and more rightward on economic issues.

Some links on jobs and macro

Denser cities? (Ryan Avent OpEd for NYT)
Free Exchange on Cowen's Austrian predictions in 2005. Apparently he predicted a crisis, but not the one we got. (Noriel Roubini predicted the same crisis using more Keynesian principles!)
GDP and GDI: Which is the better measure? They should be roughly the same, with the difference being "statistical discrepancy". Basically, it's a difference that comes from differences in sample collection: firms versus households. For some reason, GDI seems to pick up turning points in the business cycle better. (links here, here, and here) Bottom line: things are still bad, but not as bad as we thought, maybe.
Some thoughts on the CPI: How important is health care? (Econbrowser)
How much does growth trickle down? (Economix)
The ethics of unemployment. (Freakonomics)

Some links on immigration

Let them come. (Economist)
Tap their earnings back home. (Economist)

Links on Macro stuff

Alternative macro indicators? (Economist)

The twitter version of Bernanke's Jackson Hole Speech: (1) high unemployment; (2) disinflation; (3) urgency; (4) it's not just structural; (5) we've still got ammo; (6) we're reloading; (7) short run fiscal stimulus still needed; (8) long run fiscal austerity always needed. (Freakonomics)

The twitter version of the long-term deficit problem: (1) Bush tax cuts. (Economix)

Can a double-dip be avoided? (Economist)

Pay incentives on Wall Street: get ready to go through this again soon. (VOX)

Is Bernanke Giving Us All the Bird?

This stock photo of Bernanke is a bit unsettling, no?

Some Links

Michelle Bachman's solution to high gas prices: another recession?
This always bears repeating. We live in one of the most peaceful times of the modern era.
Get up or pay!
The revenue-neutral carbon tax.
Diaspora bonds? Color me skeptical. Previous attempts to use active policy to sop up more of emigrants' surplus have not been so successful.
Biggest parenting mistakes ever? Mine, I'm sure, are still to come.
News flash: cash transfers dominate in-kind gifts.

Republican Tax Increases

Alex Tabarrok is on the Republicans today for wanting to increase taxes. I'm not in full agreement with him about tax increases in general (he thinks they should not be increased in general, and that less government and low taxes are roughly synonymous), but I wholeheartedly agree with the notion that the temporary payroll tax cuts proposed by Obama should not be allowed to expire.
Some things that puzzle me about the issue:
1. Payroll taxes are regressive (they affect lower-income workers more). Why would they want to raise payroll taxes during economic recession?
2. Payroll taxes are a direct impediment to private sector hiring. Why would they want to raise payroll taxes during economic recession?
3. One could argue that they aren't technically raising taxes; they're allowing existing cuts to expire, but the Republicans have argued that allowing tax cuts for the rich to expire would themselves be tantamount to tax increases. Why would they want to raise payroll taxes during economic recession?
4. Republicans have argued against cap and trade (not technically a tax) as well as against carbon taxes, both of which have been supported by economists of both parties as good ways to deal with emissions (subsidies for clean technologies that Republicans support are not as good) on the grounds that any tax on energy would disproportionately hurt low-income working Americans. So.... why would they want to raise payroll taxes during economic recession?
Lining up for payroll tax increases also seems to be a political no-win for Republicans politically. It only seems to cement the narrative that they don't really care about the economy itself, but rather that they represent the rich (sometimes at the expense of the poor).

Taxing Trades (This is not about tariffs)

I've thought about blogging this for a few weeks now, especially with all the talk about banning high frequency trading. I figure, if you think something is creating negative externalities (like high volumes of high frequency trades) then a small tax should help mitigate it, without as much of a negative impact on efficiency as an outright ban or fixed quantity restrictions.
I would apply similar logic to political contributions, but I'm sure some lawyer would argue that this would be taxing (and therefore restricting) speech.

The solution is growth (Daron Acemoglu - HBR Blog)? Will growth curb the debt problem or will debt reduction stimulate growth?

A neat randomization technique to facilitate truth-telling (Freakonomics).

As Greenspan says - we'll never be "forced" to default. Greece didn't have this option. Whither Euro? (Financial Times)

The downside of self-regulating occupational licensing boards (Jay Parkinson)

More policy options that would be dominated by a carbon tax. (Freakonomics)

Another way of looking at the value-added problem in trade statistics. Not all of the "Made in China" product's value should be counted as China's exports? But where do the profits really end up? (NYTimes)

I'm guessing the blockquote here is toungue-in-cheek. (Caplan) I worry about students who only learn a particular algorithm for applying knowledge to specific situations. Those students will be easily replaced by computers. Learn to think.

Some Links: Porn is good.

So, it at least looks doubtful that porn increases sexual violence; it may reduce it.

A couple of links on migration:

Where is everybody? Some difficulties in migration research and some new data sources (VOX).

Less Mexicans migrating (PeopleMove)?

Is the market crazy? (Freakonomics) I don't think so. I'm not surprised at a decline in stocks with the uncertainty about the debt and, more importantly, about debt politics. Political uncertainty can be an important factor in economic performance, but over the long run superior property rights, contracting, and civil liberty will root out the short run uncertainty wrought by partisanship.

What are the Tea Partiers' interests? (Economix)

Playing by the real rules of Monopoly. (Game Night)

Cocktail Party Economics.

Emission trading begins to go international. (Economist) For any "cap and trade" scheme to be effectively binding, it must be globalized; else I still prefer a tax, for that and other reasons.

Gender bias and agricultural technology. (Economist)

Media - back to coffee houses? (Economist)

A sad outcome for property rights theories of environmental protection.

Quick summary: Tim DeChristopher, environmentalist and former economics major at Utah bids on oil and gas permits and wins some while pushing the prices of others up; gets sentenced to 2 years in prison.

I've long thought that if environmentalists wanted to reduce environmental damage, one they should do is bid on (and buy) some of the permits to extract resources or otherwise pollute the environment. If the government's position is that this is criminal behavior, then it strengthens the case for Pigouvian taxation.

Some Random Links

An interesting short piece on the Isreli-Palestinian conflict (Haushofer, et al.)
A shamelessly self-interested link - somebody buy our house!
Is there a great divergence? (Rodrik)
Summary of an interview by Felix Simon with Larry Summers. Sentences to ponder:

The Treasury bond rate, Treasury note rate for ten years is 2.85 percent. Nobody is failing to invest because 2.85 percent is too much. They are failing to invest because there are no customers in their store. They are failing to invest because their factories are sitting empty. They are failing to innovate because they’re not sure how large the market for the product will be.

We don't need a C.E.O. A country is not a business. We need a policy expert. (Economix)

Economics for kids? (Freakonomics)

Banerjee on Poverty. (Economist)

Debt impacts of new policies GWB vs. BHO.

Price effects of WalMarts versus Sam's Clubs

An interesting discussion on Freakonomics. Basically, what is happening is that when a WalMart enters a market, existing retailers compete, and prices fall; when a Sam's (or Costco) enters the same market, prices rise. Why?

Phillips makes the argument that it's a mostly a product differentiation issue, i.e. that the monopolistically-competitive retailers are competing by distinguishing on variables like appearance, cleanliness, service, and convenience. I don't buy it, because they already do that with a WalMart around.

Instead I think it has to do with the pricing strategy of the club stores vis-a-vis non-club stores, and which consumers are attracted to each (and revealed as such to the competitors). Club stores price discriminate. They charge a membership fee, and then charge lower prices on marginal purchases. Smaller grocers don't have the size or clout to charge membership fees. Thus, they attract much more price-elastic consumers. The remaining consumers are considerably less responsive to price. At the same time, these leftover consumers are revealed to value the intangibles like service and appearance more. Small stores are free-riding on the informative role of the membership fees.

Some links

Increasing taxes a little and funding health reform may do more good (at least in the short run) than cutting spending. Someone remind folks that tax revenues are already at 50 year lows as a percentage of GDP.

A similar (but maybe a bit less firm) conclusion here.

More similar conclusions from Krugman on modern Keynesianism (on VOX not his hackish blog).

A couple of cool statistics links:

Paydays are a killer?

Billion Prices Project

Some institutional links:

Gender bias and agricultural technology

Cursed by resources or institutions?

Why continuing to be a Royals fan (among other things) is good for me.

Exports are overrated?

Education and Democracy

The Economist (see also HERE) asks why there is no apparent causal (or even correlative) relationship between education and democracy. They claim, "It is possible, however, that education reinforces authority and the power of ruling elites; indeed, it may often be designed to do precisely this." This seems entirely plausible to me.

A working paper by Bang and Mitra shows that, once we control for certain other factors, the impact of education on growth is even ambiguous. What other factors, you ask? Gender equity/bias. One explanation here is that in countries that have high rates of education among men (but not among women) education is doing precisely what the Economist suggests - fortifying the established position of the traditional elites.

Is it time to rethink the way university lectures are delivered?

Maybe. I'm all for efforts to make the learning environment more interactive. I'm less certain that there's a single way to do it best, or that even doing it at all will be "efficient" for the bigger schools. A few things:
1. Students will benefit from being confronted with (and even struggling through) a multitude of diverse teaching styles. This might sometimes include "boring" lectures. They will face different leadership styles in their jobs and will should be prepared for the fact that the world doesn't revolve around them.
2. GIGO (garbage-in-garbage-out). Regardless of teaching style, students will ultimately get out of a class only what they put in.
3. Experiential learning is good for reinforcing theories and principles if used in a complementary fashion, but can't substitute for learning the theories and principles themselves.
4. Disfluency. In some ways making the material more quickly understood does not make the material better understood. Sure, it will be fun, and likely boost a professor's course evaluations, but there is research that shows a little bit of struggle (on the students' part) can go a long way.

More Random Links

Can democracy precede (human, and hence economic) development? (VOX)
Just scroll down to the last graph. How long can the "big government" narrative be sold? Government isn't that big; transfers are just high because of the recession and taxes are horrendously low for the same reason, as well as the 2001 & 2003 tax cuts. (Menzie Chinn)
Some "odd"ities from InTrade. (Freakonomics)
"[H]ow many students struggle with elasticity formulas because they struggle to manipulate and understand fractions?" (Worthwhile Canadian Initiative)

A Mixed Bag of Links

HIV/AIDS on the decline: Education, drugs, and activism credited. (Economist)
Do law-abiding gun owners generate positive externalities? (Economix) I do not read this piece as an argument against most proposed restrictions, such as registration per se or waiting periods, or even bans on certain types of weapons.
Taxing pollution: The tax a sensible conservative should favor (Economist)
Tyler Cowen on Academic Publishing (Kosmos)

Some links on immigration and trade (and a couple on statistics)

So, what we can get from this is: (1) immigrants are favorably selected (relative to education levels in their home countries - nothing new); (2) this is not always a bad thing for the home countries in the long run. It does not lead to the conclusion that immigrants should be deliberately cherry picked by some artificial policy mechanism.
Banking in the US is finally catching up with resources already available to Africa.
Finance and trade: A historical perspective. (Vox)
Gambling: chance or skill? (Freakonomics)
Some interesting polling data on perceptions about homosexuality. (Economist/Democracy in America) Makes me think the "gay marriage trick" won't work in 2012 like it did in 2004.
Semi-random link on self-publishing a book. (Freakonomics)

Some links on institutions and failed states

The long-lasting effects of corrupt institutional history. (Vox; more here)
Oil (resources?) and democracy. (Vox)
Failed states, poor institutions, and poverty. (Freakonomics)

Some links on trade and immigration

Free Trade Agreements may be good, even if there is trade diversion. This is true, and we have known it theoretically for a while. This post summarizes some empirical evidence supporting it. (Jim Anderson, Vox)
US trade policy and Doha: Multilateralism is less important to US trade policy these days and bilateral agreements are starting to take precedence. Is this good? (Fred Bergsten, Vox)
US trade policy in the 21st century: strategic trade mistakes of the past redux? (Richard Baldwin, Vox, part I; here is part II)
Migration restrictions and the flow of immigrants. It seems plausible that one conclusion from this article is that immigration restrictions do almost nothing to curtail the quantity of immigrants, might even increase the number of immigrants in the US (by lengthening stays of would-be short term or seasonal migrants who now incur higher border crossing costs), and mainly serves to transfer rents to criminals. (Drew Keeling, Vox)
The curious case of the CIS. (Dilip Ratha, People Move)

Some links on trade and immigration

New regulations on remittances (WSJ)
What would really bring a dollar dive? (Chinn) (Answer: "a failure to raise the debt ceiling in a timely fashion")
Free trade agreements and democracy (Vox: Xuepeng Liu)
More on demographics in China and inter-temporal comparative advantage, sorta. (People Move)

Some links

There is no great stagnation. (Free Exchange)
Rule #1: Buy low sell high. Rule #2: You can't make up a per-unit loss with quantity. Don't forget rule #1.
Optimal punishment for bribery: giving a bribe is legal, soliciting is illegal. (Economist)
Optimal bribery for kids. (Boston Globe)
Rent vs. Buy (Economix)
Selling Government Land (MR)

Petition of the Candlemakers

From WSJ, via TC at MR:

Candles are one industry in which U.S. producers dominate their home market. The National Candle Association estimates the U.S. market is about $2 billion, with imports accounting for 20% or less of that. Imports have been low since 2004, when “the anti-dumping duties came into play,” said the association’s president, Frederic Contino. That’s when duties for Chinese-made candles entering the U.S. more than doubled to the current 108.3%.

Some international econ links

Trump's trade policy. WTF? More here.
TC on Stolper-Samuelson. I'd like to point out that S-S doesn't directly imply Factor Price Equalization. S-S just identifies the winners and losers; FPE is a stronger result that requires additional assumptions.
Closed borders, by one of my dissertation mentors.

Interesting

From Economix:

Very few countries default because they can’t afford to pay their debts, either to their own citizens or to foreigners. Defaults occur when the political process in a country determines that, for whatever reason, the government cannot raise sufficient revenue.

Interesting. It mentions the debt-to-revenue ratio as a critical factor in determining the sustainability (read: servicability) of our debt. Even with the tax-cut crazy republicans dictating the agenda, we're not at a critical level on that statistic.

The Long-Run Value of the Bin-Laden Raid

Link here.

A lot of stuff from VOX on International

Financial Globalization
Services Trade
Study Abroad and Labor Mobility
Hidden Barriers
Trade Slumps: Is this time different? Yes.
The New Elhanan Helpman Book

Links on Trade and Trade Balances

From Vox:
  Real Exchange Rates and "Dutch Disease";
  Intellectual Property Rights, FDI and the WTO.

Some Links on International Economics and other Random Stuff.

In factor endowments models of trade, we usually think of the quantity of land as fixed. Dubai tried to disprove this, but their man-made islands are now sinking. Nature seems to have a better way of proving me wrong. (NYTimes)
An interesting take on the trade deficit with China, which, by the way fits with a simple inter-temporal comparative advantage story. (Economist)
Female Migration and Development. (PeopleMove; also here)

Economists behaving badly. (Ezra Klein)
"Page Numbers are for Wussies." (Cheep Talk)

One Possible Take on the NPR Hoo-Hah

One take is that this is the gotcha moment where the right finally proved the liberal bias of NPR. Maybe.

But, as conservative Heather MacDonald points out:

I fail to see the relevance of an NPR employee’s off-air criticism of
the Tea Party to the question of NPR’s federal funding or its liberal
bias. Conservatives can easily prove liberal bias by analyzing the
content of the programming.

I have no doubt that there is a significant over-representation of
democrats and "liberals" among the employees  who work and report for
NPR, but that in and of itself does not imply that they are anything other than
professional and fair in their coverage of the news. In fact, on average, although there is liberal bias in the media overall, the Corporation for Public Broadcasting seems to be among the most scrupulously centrist news organizations out there, according to a study by Tim Groseclose and Jeffrey Milyo (2005, Quarterly Journal of Economics):

Our results show a strong liberal bias: all of the news outlets we
examine, except Fox News’ Special Report and the Washington Times,
received scores to the left of the average member of Congress.
Consistent with claims made by conservative critics, CBS Evening News
and the New York Times received scores far to the left of center. The
most centrist media outlets were PBS NewsHour, CNN’s Newsnight, and
ABC’s Good Morning America; among print outlets, USA Today was closest
to the center. [Emphasis added.]

Furthermore,

Conservatives frequently list NPR as an egregious example of a liberal news outlet. However, by our estimate the outlet hardly differs from the average mainstream news outlet.

PBS NewsHour is a CPB production. So, (1) according to Ms. MacDonald personal political views of the executives shouldn't matter; (2) also according to Ms. MacDonald bias should be proven through an analysis of the content; (3) statistical analysis of the content shows little or no bias by several major public broadcasting programs. What does this mean of Mr. O'Keefe's video? One conclusion might be that it only weakens the case against NPR and CPB as "left-wing liberal media."  In fact, given the widespread (and probably correct) notion that public broadcasting mostly employs bleeding-heart liberal hippies, the fact that NPR's and PBS's content is demonstrably unbiased relative to other media (not to mention lack of influence by corporate advertisers) only strengthens the case for its continued public support.

Some Links on International Econ, and other stuff.

Trade, integration, and political reform in MENA (VOX)
Really? Do we have to block everything? How bout you pass the pro-market stuff, Republicans? (NYTimes)
More people latching onto Uwe Reinhardt's flawed characterization of international economists (World Trade Law)
JLR for now, Tata for later? (Economist)
Second-generation immigrants - problem? (Economist)
Finally, some music. A few seconds from every chart-topper since 1956 (ECC)

Crock Pot Pork Butt

Excellent crock pot pulled pork tonight:

15 oz can tomato sauce
15 oz can pineapple, crushed
3 Tbsp brown sugar
3 Tbsp cider vinegar
1 Tbsp dried minced onion
2 tsp garlic powder
1 tsp cayenne pepper
salt & pepper to taste
4-5 pound boneless Boston Butt pork shoulder, halved
15 oz can mandarin oranges
Combine 1st 8 ingredients. Add meat. Cook 10 hours on low. Add oranges in last hour. Pull apart with fork.

The liquid makes a nice carolina-esque vinegar-based barbecue sauce (if it weren't for the tomato sauce). The meat falls apart. This is a variation on a recipe intended for chicken, but the combination of flavors seemed perfect for pork shoulder. Plus, cooking chicken breasts all day in a crock pot usually means dried out chicken, so I went with a bigger hunk of meat.

Some Links, Including the Benefits of Holding "it" In

We make better long-run decisions on a full bladder. I can't wait to share this with my 75-minute classes. (APS)
Wage gaps and education. Some of this seems contrary to the recent evidence of stagnating education wage premia. (Krugman and Cowen - separately, of course!)
Given these structural changes, structural change is not welfare-neutral, even in the long run. (Rodrik)
Even (especially?) informed voters just really don't have beliefs about politics and policy that are consistent with reality. (Caplan)
Is controlled immigration better for welfare programs? This seems to assume a lot about the effectiveness of the controls.  (VOX)

Wage Struggles of Men (and a Link on Helping the Homeless)

Wage struggles of men? (Economix) Forgive me for being cynical, but looking at earnings per capita instead of earnings per worker and concluding that there is some sort of tide against men in the labor market seems hypocritical and sexist. A paper on the gender gap scarcely gets published unless it looks at female earnings on a per worker and per hour basis. This, of course is because many say there is "voluntary" selection into (and more importantly out of) the work force. How concerned should we be if more men are beginning to voluntarily select out of the work force (or begin working fewer hours), as more of their wives work full time? For thirty years women were told that their hours-worked choices were "voluntary" and the bar for showing evidence of a culture of discrimination was set almost impossibly high. Now that things are changing, why are we so quick to feel sorry for the men?

Direct transfers are often better than paternalistic in-kind ones (Jason Kottke)

An Interesting Take

I hadn't seen much relation of the Wisconsin protests with international trade, but here's an interesting point from the international economic law and policy blog.

The right to collective bargaining is one of the so-called "core labor rights" that the U.S. uses for GSP conditionality, and the 2002 TPA required labor rights to be a negotiating objective in U.S. PTAs.  ...  Article 6 of the US-Jordan FTA, for example, ... requires that each party "strive" to ensure that its laws incorporate freedom of association and the right to collective bargaining.

Will this make us hypocrites? I guess not if you consider the fact that we probably already are, but it won't help.

Links on Arguing for Free Trade and Other Stuff

A simplistic argument for free trade by NG Mankiw; a simplistic response from Uwe Reinhardt; a better response here and here.
The other stuff. Can't resist a few links on the union stuff.
Matt Yglesias on Swedish labor unions:

Swedish labor unions could use their dominant labor market position to increase workers’ compensation by making Swedish firms less profitable than non-Swedish ones, but that would be bad for everyone. What you get instead is a kind of Mirror Universe version of the Chamber of Commerce, a politically powerful institution interested in maximizing the income growth of the median Swede rather than the median Swedish CEO.

This only works because a really high percentage of workers in Nordic countries is unionized.
Menzie Chinn on the fiscal non-problems in Wisconsin.
Finally, Chinn on, well, let's say buyers' remorse:

"I am going to make an effort to speak for myself, and every member of the Wisconsin State Patrol when I say this ... I specifically regret the endorsement of the Wisconsin Trooper's Association for Gov. Scott Walker. I regret the governor's decision to 'endorse' the troopers and inspectors of the Wisconsin State Patrol."

That's Chinn quoting Tracy Fuller, president of the Wisconsin Law Enforcement Association. To this I say, "Really?" I mean they guy campaigned against public sector unions when you supported him. Then again, I can understand a little surprise at a politician who does what he says he'll do.
In other news, it seems as if the governor is testing the water for having the National Guard take over for the bastard union prison guards (at what cost I wonder?).

Two Links on Pay Gaps

Seems the gender wage gap varies a lot by industry. Kind of mirrors some results in a working paper by Bang and Basu, 2010 (not Atin). If only the jerks fine and distinguished peers who review for journals would publish it. (Economix)

Public vs. private pay gap: it's not what you think, union-haters. (Econbrowser)

On the Future of Democracy in Egypt and China

Dictators, it seems, are increasingly facing a conundrum. Stifle growth and be thrown out now, or foster it and be thrown out later. I've made the same prediction Barry Eichengreen makes here many times over (and I doubt that I'm alone): That is, as a country ruled by an authoritarian regime becomes more prosperous, more and more of the population rises into a growing middle class; it then begins demanding more legal protections for their savings, wealth and property; next, it demands more voice in how the country's politics are administered, along with greater civil liberties; eventually, the authoritarian regime collapses. In the best of worlds, democracy might emerge. I still think China will undergo this sequence, although there is no telling how long the process might take or how long the regime will be able to forestall the endgame by controlling who is able to benefit from the boom and by buying off the small but growing middle class. Egypt is a good example, but whether the end result there is a democracy is yet to be seen.

Some Links on International Economics

I wonder if my students are having trouble finding news articles on international economics for their blog assignment. I'm not.
Trade in intermediate goods and underestimating the gains from trade (Vox).
More on measuring trade flows (WTI).
Opening Japan (again?) (Economist).
Germany's great decade through trade (Economist).
Should the EU ban on seal products be lifted (WTI)?
Somali piracy (and trade costs?) (Economist).
Trade liberalization in South Asia (Vox).
Barriers to remittances (lost gains from migration?) (Peoplemove).
Leaving Tunisia (Reuters).

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.

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

Gains from trade? (The Economist)
Gains from trade talks? (Vox)

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
compensation.

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
weather.

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?).

Reflections on a Bumper Sticker

There's a red minivan in my neighborhood that has a bumper sticker that reads, "Socialism isn't Cool." What didn't occur to me until today is that this person also has a special license plat that says "Keep the Lighthouses Shining." I'm pretty sure the irony is lost on her.

Some links, including some drunken research

I can imagine a situation where I might do research after a beer or two. All that would lead to is miscoding of data. These jackwagons made a breakthrough on superconductors.
Coffee in meetings: good for women, bad for men.
The costs of the war on drugs; cartel wars.
A couple of links on education and inequality.
Why seniors should favor immigration (legal or otherwise).
A couple of links on commodidty prices and growth: Econbrowser and The Economist.

Huh?

A couple of articles from this weeks Economist have me puzzled. There seems to be a bit of contradiction or confusion in their editorial office.
First, we have the Economist lending credibility to the idea that the "redback" might become a player as a reserve currency. I'm skeptical.
Seocnd, hedge funds are shorting China (i.e. betting on the notion that their boom is about up). On the one hand, this might be self-fulfilling; on the other hand it might explain the US-China trade deficits in terms of the standard inter-temporal current account macro model (if you expect the US to grow in the future, our running trade deficits today is optimal; if you expect China to shrink in the future, their running of trade surplusses today is optimal).
More on the Yuan from Econbrowser.

The Deficit We Want

Via Economix:

Herein lies the political problem. We want to cut spending. We just don’t want to cut the benefits that the spending pays for.

We want to cut the vague notion of spending ahead of raising taxes, but when given the choice between cutting specific spending (on the "big three" - Medicare, Social Security, and Defense - for example) versus funding it with higher taxes, people choose higher taxes in each case.
Cognitive dissonance?

Some links: Climate, China Trade, and Inefficiency

Exchange rates (if relevant in the first place) aren't the whole story with China (Economix)
Rebalancing (Brookings)
Green energy won't create jobs (Economix)
Green energy shouldn't be used to create jobs (Free Exchange) Right. A carbon tax (or if an international mechanism can be designed, cap and trade) would nudge the market to do the job with fewer unintended consequences.
Inefficiency in the tax code; good for somebody (Economix)

One Need not Move to Somalia...

...to appreciate the economic benefits of an active, competent public sector. According to Eric Crampton, New Zealand is "freer" in the libertarian sense (e.g. by the Heritage Foundation's definition) than the U.S.; yet, it seems they are not better off, economically.

By the general axiom of revealed preference, the increment of liberty isn't worth the loss of income (and inconvenience of moving and living abroad) for the vast majority of libertarians.

At what margin is liberty for liberty's sake worth it?

Advice to Right-Wing Bloggers

TC asks where the left-wing bloggers went, and wonders if the sphere promotes moderation. He also sees a few ways things can go: more moderation, or less. He seems to favor the former. Here's one option he proposes:

Hold strongly to a pure free market line, but not much consider the toughest issues, starting with Social Security, Medicare, and Medicaid, and finishing with the inability of government to precommit to a lot of policies which might work as rules but never can be rules. There are plenty of easy issues to focus on, starting with farm policy and free trade and on those the market-oriented point of view is a slam dunk.

That's free-market conservatism I can believe in. There are sosme areas where freer markets are not necessarily a win-win proposition.

An Interesting Market Failure

Will the market mechanism evacuate efficiently? George Stigler says yes; Tyler Cowen is not so sure.

If you are evacuating a city suddenly, along a constrained road or path, ideally (at least by economic standards, which may or may not be your final moral theory) you wish to favor the people who are young, productive to others, and people who value their own lives highly and are risk-averse. A market auction tends to favor the wealthy and in this context many of the first leavers in line will be inefficiently old

TC also notes that the old may also have a higher discount factor for spendig their current wealth, adding to the dilemma.

3 Links on Bayesian Probability; 2 Links on Teaching

Another reason Bayesian statistics might be intriguing. (Gelman)
Conditional expected productivity and benching players with fouls. (ESPN)
A Bayesian rational for a situation where high variance might be a good thing. (MR)
Paying for grades isn't easy. (Freakonomics)
Ugly fonts and material retention. (Wired) This gives me my quote of the day:

making material harder to learn — what the researchers call disfluency — can actually improve long-term learning and retention

...and worsen teaching evaluations.

The Illogic of Debt Ceiling Politics

One interesting sentence:

If the government is (a) required by the deficit legislation to spend,
and (b) precluded by the debt legislation from borrowing, the Treasury
would be forced into default.

From James Hamilton. There is more; all of it is good.

A Couple of Links about Children

Steven Landsburg's Big Answer about preferences for boy children and the proportion of boys and girls. (The Big Questions)
A game theoretic solution to child punishment. (Freakonomics)

Some Links on Trade, Immigration, and Income Distribution

(Unlike immigrants) will robots permanently drive down real wages? I agree that immigrants will not necessarily drive down wages, but am skeptical as to whether robots will. (Modeled Behavior)
Increasing opposition to immigration - is it inversely correlated with the actual immigrant population? (Cleveland Plain Dealer)
Baby steps to promote free trade in 2011. (WSJ)
Are the poor worse off when the rich are better off? Not always. (Economist)
Could you be richer if you really wanted to be and if so what does that do to income distribution at the macro level? (Gelman)
Giving back the Bush tax cuts for jobs and fairness (Freakonomics)

Some links

Poverty-reduction matters globally. Chalk one up for redistribution, a.k.a. "socialism." It's not just about money. 
American public opinion, then and now.
Happy old people. It beats the alternative.

Lazy Academics

Hamermesh has a post out on Freakonomics saying that he's paying the price of other professors' laziness at his own institution. My colleagues and I at VMI are paying the price for the laziness of professors at other institutions. VMI credibly fights grade inflation; many schools don't. It affects teaching evaluations.

Student in my class: Why are tests here at VMI so hard?
Me: What do you mean?
Student: My friend at (an institution about an hour north of VMI) took (a class in the business school) and her tests were 25 easy multiple choice questions and that's it. They get an easy A while we have to work for B's and C'sWhy is that?
Me: There are probably two reasons: First, there is a lot of grade inflation at other schools, which is very closely tied to whether professors get tenure. Second, the teachers there probably lazy - the cheapest way to get better teaching evaluations is to make the course easy and thus give higher grades.
Student: I wish VMI did that, too.
Me: No, you don't. In fact, you came to VMI knowing that it was a tougher place, and you made that choice anyway. If you want easy A's there are plenty of schools where you can get easy A's. Why didn't you go there instead?
Other Student: Because I don't want to get a shitty job.

There you go. Even students nearing final exams can get why grade inflation is bad, you just have to work them through the logic. Too bad incentives are so skewed the other direction.

A Political Question I don't quite Understand

Here. If the tax increase on folks making $250k + is based on AGI, and those folks are really making $315k on average, why wouldn't Democratic politicians phrase it that way when they stump for it? Wouldn't that make it less unappealing?

Ryan-RivlinCare

The Republicans hate ObamaCare so much that they want to expand it. I guess that makes sense, since ObamaCare was really the Republicans' idea... in 1993.

Sometimes the biggest factor is the least important

This WSJ editorial tries to make the case that we shouldn't care about distracted driving in a strange way. The author argues that even though distracted driving fatalities are up, overall fatalities are down. But then he seems to argue that  makes is that growth in fatal motorcycle accidents lead all categories for increases in road deaths and that many of these deaths involve inexperienced cyclists.

So what? I don't say that to seem insensitive, but someone who chooses to ride on a motorcycle, and eventually gets in a wreck is often only hurting (sometimes fatally) himself. When motorcycle fights car, car wins. In economic jargon, there is seldom an externality involved with this sort of accident. The driver of the motorcycle knows riding is riskier, and chooses to do so. On the other hand, when someone is dicking around on his cell phone (let's say while driving a Yukon or comparable grocery-and-kiddie wagon SUV) he puts innocent, responsible drivers at risk. Policy makers should only intervene if an argument can be made that there is a social cost (or externality) to certain types of behavior. I don't see that argument in the case of motorcycles.

So, motorcycle accidents are accounting for the biggest increase in driving fatalities, but there is no theoretical reason that policymakers to give a rat's ass. My guess is that Mr. White and his boss at WSJ, Mr. Murdoch are simply reveling in finding some research that promotes their supposedly pro-liberty (of a certain sort) agenda, and they would probably claim that no policy action is warranted in the case of Motorcycle OR distracted driver traffic deaths. If that's the case, why not just repeal all drunk-driving laws? It seems highly unlikely that Mr. White would support this proposal. Given that the impairment from cell use rivals that of intoxication, that seems to be the better place for policy.

Stunning "Results" about "Entitlement America"

There's a bogus calculation circulating today claiming that poor folks are making out like bandits due to all of the subsidies they're eligible for. I don't buy it, but neither does Tyler Cowen (who runs on the right side of the economic ideology spectrum):

That's after various government benefits and taxes, but the calculation
seems incorrect to me.  For instance, should the Medicaid and CHIP
benefits of the poorer household actually be valued -- to the user -- at
$16,500 a year?  (Is that number coming from some kind of cost basis? 
If so, is it adjusted for the age of the Medicaid recipients to rule out
nursing home expenditures?)  Is the $60,000 per year family receiving
employer-supplied health insurance?  The assumption seems to be that
they do not.

Of course, the "calculation" also sandbags the tax credits: The EIEC is credited to the 14,000 family, but other tax credits are probably not credited to the 60,000 family. Also, what about retirement contribution matching? Doesn't seem like the "total economic benefit" of the family "earning" 60,000 is being counted (and in particular the portions that are tax-exempt!). Most folks who earn 60,000 have a total compensation (with health and retirement benefits) of upwards of 80,000, about a quarter of which they never even think much about!

Andrew Gelman (who runs on the left side of the spectrum) isn't buying it either, for similar reasons as Kaiser Fung. From the latter:

If we concede that the middle-income person would end up with less
disposable income than the lower-income person, then we'd expect that
the middle-income people will take lower-paying jobs so as to increase
their disposable income. But I have not seen reports of such reverse
social mobility. Theory needs to fit reality. This hole in the theory
needs to be covered.

What's funny about this is that the theorist (Cowen) disagrees on data-related grounds, whereas the statisticians (Fung and Gelman) dispute it on theoretical grounds.

Profits in the Great Recession

Seems that if profits are booming (and they are), firms "should" be hiring (that is, if markets are efficient and quick to adjust). They're not, based on data from JP Morgan Chase and analysis from The Economist.

What are companies doing with all the money they are making? For now, sitting on it.

Seems like an example of the Thrift Paradox if I ever heard one.

Some Links: Sometimes, kids will cooperate.

Careful how you try to introduce game theory to your kids. They may seem competitive with each other, but they will cooperate against a common foe. (Marginal Revolution)
Bill Easterly on the new Human Development Indicators: "The HDR addressed [a criticism of the previous human development indicators] by making the problem much worse. Previously we were all whining about differences in the value of life of 70 times between rich and poor – now it’s a differential of 17,000 to one. Sorry, Zimbabweans, UNDP thinks your lives are worth 50 cents. (Aidwatchers)
Lotteries don't have to have a negative sum for their participants. (Freakonomics)
Bayesian Bees. The author suggests 5 lessons we could learn from bees. Here are two:
1. Minimise the leader's influence on the group. Here we humans have much to learn.
2. Seek diverse solutions to the problem. Humans realised only recently that diversity is good for a group.
(Marginal Revolution)

Follow-Up on the Austrian Explanation of the Financial Crisis

Via MR:

the increase in lending was greatest in 2006 and the first half of 2007,
after the federal funds rate had already returned to a level consistent
with normal benchmarks.

In other words excessively low interest rates, the crux of the Austrian school's departure from the Keynesian school, does not go far in explaining the biggest increases in lending. That is not to say that there aren't useful insights from other aspect of the Austrian school's analysis, namely the fact that agent's rationality and ability to process information from market signals is imperfect. (But one could also correctly argue that these are views that the Austrians SHARE with the Keynesians.)

Immigration in the News

Immigration may be the only real issue that gets any progress during the next two years. Here are some things happening at the state level.
Georgia seeks to keep immigrants' kids out of higher ed, while California seeks to give them a path to citizenship through education or public service (The Economist) I would say a reasonable compromise might be to let them be admitted, but charge full tuition.
SB1070 aftermath in Arizona. When neo-Nazis are among your most vocal supporters, it might be a sign that you're not doing the right thing, even if half of all Arizonans are on your side.

Some links: Robot soldiers, wine allergies, and junk.

Arnold Kling thinks liberals are hypocrites for teaching their kids to work hard; would the corrolary be true (conservatives are hyocrites for teaching their kids to share and be nice)?
Using AI to data mine on the battlefield and optimize decision making. Proceed with caution.
Wine allergen found.
Do hands on my junk make me more safe? Probably not, but I don't care enough to complain (and certainly not enough to hassle a guy getting paid 15 bucks an hour.

Bruce Schneier, a security guru, calls all this “security theatre”. He suspects they merely prompt attackers to change targets, and reckons it makes more sense to invest in better intelligence.

Von Missing the Point

I am not an expert on the Austrian school of thought, but I have been reading a great deal more about it lately. I think that it has some interesting insights, but I find a recent piece in the Economist to be completely off-point in its attempt to give positive press to the school. Buttonwood writes:

A one-paragraph explanation of the Austrian theory of business cycles would run as follows. Interest rates are held at too low a level, creating a credit boom. Low financing costs persuade entrepreneurs to fund too many projects. Capital is misallocated into wasteful areas. When the bust comes the economy is stuck with the burden of excess capacity, which then takes years to clear up.

This is reasonably accurate. Unfortunately, this explanation is not terribly unique to the Austrian school. The Keynesian school proposed that there could be a credit boom (although they were less apt to blame the government for the fact that interest rates were too low). In fact, in a bit more precise way of looking at it, uncertainty and adaptive expectations (what Mr. Keynes called "animal spirits") play a more prominent role in the boom and bust cycle in the Keynesian model. It turns out that this is also true of the Austrian school. In fact, both schools attribute some of the fluctuation in the business cycle to a "coordination problem" in the processing of information revealed by noisy market signals.
OK, so where are they different? Well, basically on the matter of policy response. There is some evidence that keynesian deficit spending can help. There is other evidence that shows that a more austere approach is better. As in all things it is probably simply the case that the devil is in the details. Government spending is probably most helpful when it is invested in things that would be useful to have anyway (like roads, bridges, and energy infrastructure), and not simply money transfers that just substitute for other spending now or in the future (like transfers to states, tax cuts, or entitlement spending).

New Budget Scenario Calculator

From the New York Times.

Confession of a Paper Mill Author

Great piece in the Chronicle of Higher Education on people who farm out their term papers to "pros", writen by one of the "pros".
Apparently, his business is doing quite well through the recession, and he gets a lot of business from future clergy.

Big Government

From the Economist:

This means that the economy has been creating private jobs at an above-trend rate for three months now, but the total has been held back by government; besides shrinking census employment, local government payrolls shrank in October.

In other words, government employment (partly due to the laying-off of census workers and partly due to stingy state and local governments) is SHRINKING as opposed to growing, as certain political narratives would have us believe.

Will the Election Guarantee Continued Deficits?

Insightful sentences from the Economist:

The President has struggled to get his agenda through a Senate with 59
votes on his side; the difference betwen 51, 50 and 49 votes might be
marginal. The deficit may be locked on autopilot as neither tax rises
nor spending cuts could gain a majority.

Gridlock = no tax increase + no spending cuts = high deficits until 2012.