Thursday, April 30, 2009

Sumner, World Bank, global recession, GDP, the auto industry, and education.

Scott Sumner with an excellent post covering macroeconomics, democrats being called socialists, soaps promoting liberal values, and Tyler Cowen. As is normal on Sumner's blog, the post is quite long, but he makes a lot of great points. Of course, I don't agree with him on the causes of the current recession, I take a more moderate view, I think.

Geo, a map of World Bank development projects. There are some very good, interesting maps there, if you're interested in international aid.

The St. Louis Fed releases some data on how the US is faring compared to other countries.

Even though Wednesday's GDP report was pretty bad, there are some silver linings. For example, the part of GDP that did the worst was the lagging indicators--the leading indicators weren't quite so bad. So, a turnaround may be in sight.

An interesting discussion: does America need the auto industry? Some pretty smart people take a stab at the question. Another NYT "debate" on education reform.

Wednesday, April 29, 2009

Agriculture, Libertarianism, TED talk, law, city house prices, and Google

Some stylized facts about agricultural subsidies. It looks like a very inefficient market. Again, no surprise there.

Henry Kaufman explains how Libertarianism hindered the Fed. While I don't agree with all of it, it raises some good points, I think.

A couple of very interesting pieces from Marginal Revolution. I recommend you read them. Alex Tabarrok gave a TED talk, and Tyler Cowen discusses the field of Law and Economics.

Here's some Case-Shiller city data on housing prices. They're still dropping, though it looks like we're nearing normal levels in some places. Unfortunately, there's still likely more dropping to happen, due to a super saturated market.

On a different sort of note, now Google offers some searchable public data. I hope they greatly expand this.

Tuesday, April 28, 2009

Stress tests, immigration, trade balances, R&D

A basic explanation of the bank stress tests. Apparently, most of the banks are doing well.

Would legalizing immigrants improve the economy? I don't think this is a tough question for most economists, though they'd probably disagree on the degree to which it would help.

Some interest graphs on US trade. The trade balance is improving very quickly, helping the dollar, and lowering import prices. Menzie Chinn with a more advanced econometric analysis. I guess we'll see how this plays out in GDP forecasts.

On news of Obama announcing he wants to raise R&D spending, here's a graph showing R&D spending as a percentage of GDP, for the US and some other places. I'd be curious to see a longer term graph. It looks like the US spends very little on R&D, as a percentage of GDP, compared to other countries. I've seen research saying that government R&D isn't very effective, but if economic growth is tied to technological growth (which few economists diagree), then increasing R&D spending sounds like a good idea, in general.

Monday, April 27, 2009

Chile, debates, housing, oil and recessions, and cognitive skills

Rodrik talks about the Chilean Minister of Finance. He saved during the boom, although it was unpopular, and is now spending the massive savings. Why don't more countries do this?

Alex Tabarrok talks about the debates at Intelligence Squared. I like the concept of the website, though. Get experts to debate issues and provide podcasts. People vote on winners.

Jon Lansner talks about housing, via CR. Prices should bottom out late next year.

James Hamilton points out the connection between oil price spikes and recessions. That's really interesting research.

Some research shows that people with higher cognitive skills perform better economically. Moreover, to the extent that this is a genetic trait, evolution may play a factor in separating people with of cognitive skill levels.

Friday, April 24, 2009

Development, Obama's international policies, education, Microsoft, LPB, and the CBO.

Some research on the impact of the financial crisis on developing countries. Menzie Chinn breaks down the first chapter of a piece from the IMF.

Mankiw celebrates that Obama has improved his platform on international economic issues.

The US apparently spends the most money per grade point in education. Solutions? Why not figure out where the most bang-for-buck comes from, and restructure spending?

Some interesting numbers behind Microsoft. Could they be losing their massive market share? Maybe, but they'll still be a big player.

Kotlikoff and Leamer propose Limited Purpose Banking. Banks wouldn't hold assets, and would only borrow to fund mutual fund operations. What ever happened to depository institutions?

Thursday, April 23, 2009

Life expectancy, displaced auto workers, solar energy, and the Clark Medal

Having friends increases your life expectancy. I guess it's not much of a surprise, considering stress decreases your life expectancy. Parents don't have an effect. Sorry, mom.

Auto and manufacturing workers can get an accelerated bachelor's degree. This sort of thing should be much more common. Haven't we had a shortage of teachers, too? There are lots of places for these workers to go.

Texas State Senators have approved a $500 million solar energy bill. I'm glad to hear we're not just focusing on wind.

The John Bates Clark Medal gets awarded this Friday. Exciting!

Wednesday, April 22, 2009

Local stuff, business models, infrastructure

Unsurprisingly, the economy is the top concern for Houstonians. The Harris County Sheriff wants federal stimulus money for a helicopter, a surveillance van, eight machine guns for their boats, and some other stuff. Is that really necessary? Not only do machine guns not provide jobs, but who exactly are they going to shoot? Is that really in their jurisdiction? Will that keep Harris County safe? Galveston is considering bringing in gambling. I wonder what studies there are to show the negative effects of casinos for a neighborhood or area. I suppose Nevada does casinos pretty well. Houston's job losses increased, though unemployment held constant. Dr. Barton Smith gives some commentary, though to clarify one point--he projects Houston will lose 56,000 more jobs over the next two years. That doesn't sound too bad. Houston home sales and prices continue to drop. Some people in Houston want some infrastructe expenditure to upgrade the power grid. I hope this gets off the ground.

I think this is a good example to use when I describe firms in the same industry with different business models. I often lack knowledge of real life examples of this. Pepsi is buying up their bottlers, while Coke chooses not to.

There was a lot of talk, recently, about Obama's high-speed rail plans. I've gotta say, I like the infrastructure spending, but I didn't really expect this in Obama's first 100 days. I expected a more along the lines of smart grids and high-speed internet access. I'm not sure how essential high-speed trains are, but I admit having realistic rail options would be nice. And, hey, maybe they'll have wireless internet access on them, too. If I could jump on a train and go from Houston to Chicago or New York in 4-6 hours, that'd be nice. I don't think that's very realistic, though. I wonder how much tickets would be.

Tuesday, April 21, 2009

Oil prices, health care

Mark Perry tells us that oil prices are going to stay low for quite some time. I'll admit that he also called oil prices going down about as low as they did, and I didn't think it'd be quite as extreme (if I recall correctly, the actual was somewhere very close to the average of our estimates), and I'll also admit that I don't consider myself an expert in the oil industry, but I don't see the cycle he mentions as everlasting. Eventually, I think oil will be priced out of or nearly out of the market. Since by all estimates there's a limited amount of oil in the world, and it's non-renewable, alternatives must eventually dominate.

Reinhardt gives a health care reform option, without being quite socialized. It seems to me that there are a number of feasible options, but the trick is finding any that are politically popular. I suppose it's all in bipartisanship and PR.

Monday, April 20, 2009

Tea parties, retail sales, and more on the macro ranting.

Bruce Barlett, a former Regean official, points out some of the problems with the logic behind recent tea parties. I somehow think any such attempt to use logic will fall on deaf ears, but the tea parties seem rather silly to me. (part one)

Economix is still on the case of retail sales. We've seen a bigger decline than in the past. I'm going to predict that the trend line will stay below 100, as people try to save more, rely on credit less, and spend less. Dave Altig at the Atlanta Fed doesn't think there's anything so historically odd, though.

Menzie Chinn provides another excellent post, this time on the role of financial systems in macroeconomic models. Kling isn't convinced that macroeconomists have good models, and he's at least partially right, since all models require some degree of simplification. I think it's a field that will continue to get a lot of attention. In a not-totally-unrelated light, Dani Rodrik provides an interesting comment on the field of economics. Still on forecasting, Simon Johnsons provides his forecast of forecats. Nicholas Bloom at Stanford says that the response to the financial crisis was effective in avoiding a severe recession, and that growth will resume at the end of this year. I wonder how much of an effect the "response to the financial crisis" really had.

Friday, April 17, 2009

World Economic Forum on Latin America, Bernanke, charter schools

President Lula, of Brazil, calls for ethics ahead of the World Economic Forum on Latin America. Brazil has been doing much better than most countries in that region, so I'm hoping for Brazil to take the lead. Obama is there too, which will be interesting, as Chavez has spoken against the United States (well, Bush at least) for the past eight years. While reports say that Obama plans to talk about Cuba, I'm hoping for a more diverse agenda for the US president and maybe talk about problems in Venezuela.

Fed chairman Ben Bernanke has apparently been explaining his policy decisions. While it may be helpful for some, I'm not sure it's necessary. I think he's been doing a pretty good job anyways.

Why do charter schools fail? Well, at least 68% of them fail because of "finances, mismanagement, or other organizational problems." Wow. That's an impressive percent of them.

Thursday, April 16, 2009

Macroeconomics again, Africa, safety nets, and retail spending.

Matt Nolan at TVHE provides a critique of macro critiques. Over the past few months, he has provided some insightful commentary on the state of macroeconomics, I think. While it's important to try to explain stylized facts about the economy, I think what people want out of macroeconomics is something more concrete. Hopefully that'll come with time.

The Guardian emphasizes the dire condition of Africa during the global recession. Though they have relatively little political capital, they are in great need of assistance. I'm not convinced that people are more willing to help during a recession, though. It's hard enough to help Africa when things are going well. Still, it's important for that region to improve. Thank goodness Zimbabwe dollarized!

Mike Moffatt comments on safety nets--protect people when they start businesses.
safety nets. Sure, it's inefficient and could cause people to take advantage of the system, but it'll speed up growth a lot. While I agree it'll speed up growth in the short run, I'm not convinced it's a good idea. Since we're trying to affect the recession, it'd have to be a temporary safety net. Do we want to prop up the economy with temporary inefficiencies? What will happen when we take away the safety nets?

Michael Mandel points out why falling retail sales are good--they reduce our trade deficit. It matters whether retail is falling more in imports or domestic goods, though. Still, since we've been spending beyond our means for quite some time, reeling that back and having some savings will be a good thing in the long run.

Wednesday, April 15, 2009

Krugman on the IMF and stress tests.

Calculated Risk reports on a Krugman interview. I have to say--Krugman might be right on the state of the economy and on the state of the stress tests, but what he says in the interview is quite misleading.

"We have some real real problems. They are not going to go away through self-fulfilling optimism. One of the little things that has been reported is that the IMF now - International Monetary Fund - has upped its estimate of losses on bad loans to $4 trillion."
The IMF upping its losses estimate isn't a problem. Forecasts aren't problems. The causes of low forecasts can be problems. That is to say, the bad stuff happened before, and the forecasts reflect the past. Bad stuff may also happen in the future, but the IMF forecast only reflects the scale of some problem.

"I think we can say pretty clearly that if the stress tests were saying that every thing was fine, they probably wouldn't be eager to postpone the release of that."
Maybe, maybe not. Remember that good results of the stress tests don't mean that we have no problems. Postponing the release of the results of the stress tests may be the treasury's way of keeping optimism in check (as Obama has been trying to do, recently). Or, they may want to make sure to have their report as complete as possible before releasing any information, which is important for both good news and bad news. Really, we can't say anything pretty clearly about the postponement of the stress tests.

Tuesday, April 14, 2009

Consumer spending, demand, and markups

Carter Dougherty at Economix mentions that we've been seeing a decline in consumer spending during this recession--an historical oddity. I read once that consumer spending doesn't change much because most of what we buy, we have to buy. We don't buy a washing machine or a sandwich because we merely want these goods, we buy them because we need clean clothes or are hungry. So much for that idea! As credit increases what we are able to buy, we buy proportionally fewer necessities. When credit dries up, we have fewer means with which to buy stuff. Credit causes consumption to be more volative.

Andrew Cassel reports that the cause of the 2008 oil spike may have been demand expectations in developing countries. Developing countries were growing much faster than expected, which caused future demand expectations to become very high.

Mark Perry reports on the markup on iPod devices. iSuppli is a firm that takes apart devices and estimates how much the components would cost, to try to estimate the cost of making such a device.

Monday, April 13, 2009

Macroeconomic questions

Tim Harford is yet another to consider the problems of macroeconomics. He says that the field hasn't answered or even asked the right questions. I wonder, what questions should be asked? Has anyone asked them? It seems like that's an important step to take. There should at least be a dialogue on the issue about it.

A lot of models look at output, or consumption, interest rates, or exchange rates... those seem to be the answers people want to know. When are we going to get out of this recession? What will the level of unemployment be a year from now? How much money will people lose? Those are questions that we can roughly provide models for, and questions people want answers to.

I think, other questions are much more detailed--and maybe would push the field toward finance. Note that we can try to answer these questions, but not rigorously. There's something to be said for a model, I think, in a world where people look to forecasters, and firms, industries, central bankers, and governments use models. People at least want to see numbers as rough estimates.

I find intro economics courses interesting, because there are a number of things taught that aren't ever covered again in higher-level courses. They seem much more basic. The three functions of money. The flow of money. We make lists and draw diagrams, but to what degree are these things deeply studied? As financial crisis turned into recession, these are issues that could be studied more. How is a crisis in the financial industry different from a crisis in the book industry? To what extent should we care? What models do we have to illustrate this? How often are the circular flows of the economy even discussed? The first cycle that comes to an economist's mind is probably the business cycle. Are we ignoring the money cycle? I learned a more complicated version than I see in Mankiw's book*.

We can use microeconomics to model firms, and even multiple firms, but without regard to a larger effect on the economy. We can model a generalized economy. There's an important disjoint there, particularly when a firm becomes "too big to fail." What happens when a single firm or industry gains price control over the economy? What happens when firms or industries affect each other? You can try to model firms and industries as small open economies or large open economies, but does that take you far enough? What are the effects when one of these diminishes in size by a significant amount? What are important differences between firms, industries, and economies, and how can this be modelled?

I think that rather than refine our current models, macroeconomists of the future will use a bunch of different models. There will be a number of models predicting different things (much like weather forecasting), and we'll report a range of possible outcomes with likelihoods--not unlikely today's forecasters, I suppose, but with more models. We won't have as much, "I use this model, not that model..."

*no offense to Mankiw, or an otherwise good textbook--this is purely a commentary on macroeconomics

Friday, April 10, 2009

Taxes and the recession

Here's an interesting bit on effective tax rates, share of tax liabilities, and after-tax income growth for different income groups. From Catherine Rampell at Economix.

James Hamilton reports on a possible indicator of a recession trough. It seems like there are more and more optimists every week.

Have a good Easter weekend!

Thursday, April 9, 2009

Tax on soda, fat, PUMA, broadband, solar power, and recession news.

A study shows that a tax on "sugary soft drinks" will result in health benefits regardless of how the tax revenue is used. $1.2 billion could be raised in tax revenue in New York alone, but I wonder how it'd impact the economy as a whole--I imagine the soft drink industry and the medical care industry would each take a hit.

A reduction of "brown fat" could make you more resistant to gaining weight and developing diabetes. Apparently, brown fat is what works to keep you warm when it's cold out.

The PUMA, a two-seater Segway, makes short commutes to work more feasible. During the modernization of Europe, people lived in smaller-sized communities as technology increased. I wonder if that'll happen again. Towers keep getting bigger and bigger, and land becomes more and more precious. In a similar vein, the FCC's $7.2 billion plan to expand broadband can serve to pick up the speed of commerce, and expand markets.

Here's a solar-powered city planned for Florida.

Jobless claims fell more than expected, and many retailers report disappointing sales numbers. Things aren't looking good yet.

Wednesday, April 8, 2009

Google, the recession, Thoma v Sumner, creditors, and GM's bankruptcy

Google's Android looks like it's going to start gaining more ground. I always love free stuff, and when other companies use free stuff to lower their prices.

A few good pieces from Mark Perry. The housing market may have bottomed. The NY Fed says that economic recovery may have started. Russia's subsidized auto industry has been making the same car for 40 years.

Watch some Mark Thoma and Scott Sumner discuss a variety of economic issues. I really like there being a lot of active economic discussion out there.

Tyler Cowen says that creditors need to suffer more. He's probably right.

GM is preparing for possible bankruptcy. It's been a long time coming!

Tuesday, April 7, 2009

Health care, alternative energy, housing in Houston, and police

Companies are working harder than ever to ensure the health of their employees, it seems like.

Algae as an alternative energy. They apparently have a very low carbon footprint, and can be grown just about anywhere. Seems pretty good to me, and likely good for the city of Houston. Houston seems to have a number of routes to keep their title as the energy capital.

The price of homes per square foot went down 2% last year, in Houston in 2008. No surprise, really.

Another bit of Houston news: policemen get pulled off the streets to work on a backlog of work in internal affairs. Some worry that public safety will be affected. I'm not so sure that public safety will be drastically affected by a temporary shock. I'm assuming, of course, that once they're caught up with their work, the policemen should be able to go back to their normal duties.

Monday, April 6, 2009

Are the employment numbers good or bad?

There seems to be a lot of different charts going around out there.

Justin Fox points out that we're officially worse than the 81' recession. His is a measure of the change in employment starting from the peak employment level. But, does peak employment really mean anything?

Mark Perry says that we're nowhere near as bad as the 70s and 80s. He has graphs of initial and continuing jobless claims as a percentage of the labor force.

Calculated Risk weighs in. Free Exchange reminds us that this data isn't inconsistent with good economic indicators elsewhere. The Minneapolis Fed gives us interactive charts.

Friday, April 3, 2009

G-20, credit crisis, auto industry, and taxes

Now that the G-20 summit is over, you can imagine that a lot of people are weighing in on what they consider to be the important results. Dani Rodrik says that it was a victory for Europe. Vicky Pryce talks about the focus on trade. Free Exchange seems optimistic about most of the results. Justin Fox talks more about the IMF's cash. ... And that's just a drop in the bucket of all the commentary going around out there.

Calculated Risk provides a bunch of graphs of credit crisis indicators. We're still high on all of them, but things are looking better.

Free Exchange considers how one would separate the auto and oil industries. We don't want rising oil prices to sneak up on us again, which may happen due to rising demand in China, but there are fewer incentives for fuel efficient or electric cars while oil prices are low. Of course, this is nothing new, it's just another thought on that same old topic. The way to do it might be a tax on gas.

Mike Mofatt talks about why value-added sales taxes are more efficient than other taxes.

Thursday, April 2, 2009

Auto industry, G-20, Department of the Treasury

Justin Fox wonders if Obama is going to stick to the tough stance he's taken on the US auto industry. David Brooks says it's political suicide, Justin Fox thinks it's possible.

To keep up with the London G-20 Summit, you can follow their website. announced some time ago that they were working with the summit to provide economic commentary and debate. Drea at the Business Pundit gives us pointers on who to watch during the G-20 summit. It sounds like it's going to be very, very interesting to follow.

Obama has announced a couple of new big names to his staff of advisors--Levitt and Mankiw. What an interesting surprise! I've got to give it to Obama for choosing a diverse staff of highly intellectual and respected economists.

Wednesday, April 1, 2009

Foreclosures, wallpaper, last month's news, and the OECD.

Wow. In some cases, banks are just walking away from foreclosures. The costs of dealing with foreclosed properties just isn't worth it.

I think this is pretty funny. Money as wallpaper in Zimbabwe.

Calculated Risk provides March economic news in 20 graphs. That's data released in March, which is February data.

Speaking of data, Menzie Chinn reports on OECD's forecasts for the next year or so.

The G-20 summit is going on, so people are anxiously waiting to see how it'll turn out.