A Texan Economist

Are private forecasts useful?

2011-11-12T11:40:00.000-06:00

Tyler Cowen thinks about the industry for forecasts. He makes me wonder how much private work he's done, as I think he seems to really miss the point of private economic modeling.

I must say--remember that a firm will often purchase a number of difference forecasts, which will disagree, as well as produce their own forecasts. Does one expect a firm to "believe" all of these forecasts? I don't think so. Would a firm cherry-pick one forecast that they choose to believe? Then, why purchase the others?

No, I think forecasts are more used to consider a range of possibilities. None is particularly more believable necessarily, but having a variety of forecasts gives us a starting point in talking about what may happen in the future and assumptions we may consider using.

Particularly in the light of the recent recession, there is a lot of distrust in models anyways, even if they're considered necessary.

In that vein, Free Exchange tells me about a new NBER paper actually taking a stab at the financial aspect of macroeconomic modeling.

Congratulations!

2010-10-11T15:16:00.004-05:00

Congratulations to the recent Nobel Prize winners in Economics! I know, it's not called that, but you know what I mean. There's a plethora of sources you can read to learn more about the winners.

Also, how about some other interesting articles? Monetary views, shale, the Great Depression, currency wars, and China/India/Brazilian growth. I don't really agree with that last one at all, but it's an interesting topic.

Enjoy!

Happy 4th of July!

2010-07-04T11:51:00.002-05:00

A couple of my favorite videos to commemorate the day.

The Muppets

Robin Williams

Bachmann and the global economy, Zimbabwe constitutions, Google's money, and currency standards

2010-07-02T13:31:00.001-05:00

Wait... what? Who is this Michele Bachmann person and why don't she understand what 'global economy' means? Politicians confuse me sometimes.

I imagine (best as I can) that things are scary, right now, in a country that needs a new constitution. Zimbabwe has been through a lot, and it's hard to trust those who are making the new document... I doubt they have a significant number of constitutional scholars working on it. Is it a liberal American bias to demand experts be involved in decision making?

I imagine that, upon doing further research, Google discovered that you can't throw money at a problem to fix it. Also, they have less power than they think they do (I'm looking at you, Google China).

While a monetary basket might be a better standard than the dollar, any attempt to make such a basket would be highly political rather than economic in nature. Countries will likely continue making their own decisions in determining currency standards rather than deferring their sovereignty. Though, I suppose, the international lending agencies could make it a requirement of aid.

Google, unemployment, sports, and loans

2010-06-14T13:53:00.000-05:00

More data on Google! This from the World Bank.

Here's a chart showing the duration of unemployment, for the unemployed.

Some Houston sports hotshots (not those) talk about how their sports businesses are going.

Angry Bear has an interesting graph of the number of loans given by banks. I'd like to see the graph go back a few (maybe seven) more years.

Cell phones, optimism, health care systems, and latin america

2010-06-07T11:50:00.000-05:00

SCSU also talks about the cell phone industry. Phone-carrier exclusive contracts are frustrating! I wonder when we'll move on from that.

Professor Emerson at Oregon State tells us that we have reason to be optimistic about the economy. I wonder what he thinks about the relationship to inflation.

The WSJ Numbers Guy tells us about the problems of ranking health care systems in different countries. I don't think geography should come into the mix, personally.

The IMF examines why latin america did better during this crisis than during past crises and also other emerging markets. I read a similar observation about Chile, before.

Health care, unemployment, and gifts

2010-05-31T12:43:00.000-05:00

Small businesses pay more than large firms for the same health care policies. A quarter of the uninsured are employees in firms smaller than 25 workers.

More, rising unemployment means less health care coverage.

The Game Theorist tells us that gift giving is a bad idea. I'm not sure he's taken all of the externalities into account, though.

Krugman tells us that the health care bill will lean liberal because the facts do. I didn't know facts played such a large part of politics.

HFT, education, pedigree, and health care

2010-05-24T10:41:00.001-05:00

An interview about high frequency trading. Recently, I've been more and more interested in similar topics.

Does education hurt your real income or help it? Data can be tricky.

Tyler Cowen thinks about pedigree bias in economics. Economics professors in top schools are very likely to have come from top schools themselves.

SCSU Scholars talks about innovation in health care. I've mentioned this before--technological advances in health care are unlike others. The equipment hasn't gotten smaller or cheaper. There seems to be different incentives at play than economists typically assume. More, given two procedures that give similar results, a doctor will often choose the more expensive procedure, since he can charge more for it. Consumers, meanwhile, don't know their options.

Samuelson, Greece, fair trade, and academic journals.

2010-05-18T13:24:00.001-05:00

A tribute to Samuelson, from an ex-coworker.

Rodrik uses Greece as a teaching tool for the world economy. Economic globalization, politcal democracy, and the nation-state: pick two. I wonder if the EU will be more careful in the future.

An Economist debate on fair trade. It's an interesting debate, but Bhagwati in particular never fails to impress in my opinion. I think the benefits of free trade are less clearly documented in the media, and public opinion (of developed states, especially) ends up mattering more than it should.

What kinds of articles get published in journals? Empirics seem to be winning the day. I thought people use to think academia was divorced from real life...

Historical GDP Growth v Top Marginal Tax Rates

2010-04-29T09:38:00.003-05:00

How about this chart?

Should we raise the top marginal tax rate?

Is there a positive correlation between the top marginal tax rate and GDP growth? Cursory analysis says yes.

Also note that for over 60 non-consecutive years (70 years with an 8 year gap in the middle), the top marginal tax rate was over 50%.

Water, Google, Christianity, and Energy

2010-03-25T12:43:00.000-05:00

A new chip can cleanse water to be suitable for drinking. The eight inches of these (postage stamp sized) chips can produce four gallons of water per hour, while using as much electricity as a light bulb. If these things become mass produced and affordable, that'll rock the developing world! What a news report to hear in the same week as World Water Day.

Google pessimists ask what the point was, while tech-savvy Googlers are unaffected. Can Google incite larger change?

These maps of Christianity make me think about how religious views intersect with political views.

How will traveling wave reactors affect the energy scene? On a side note, TED is pretty neat.

Job Advice, Saving Money, and the Planet

2010-03-12T13:48:00.000-06:00

Jon Brooks gets a job! And this is how he did it. Job seeking advice is abundant this time of business cycle.

Also, remember that you need to save money for retirement. After you find a job, that's something you need to think about. That way, you can become the richest man in the world.

I can't say that I agree, but a couple of ecologists are worried about how our current economic model interacts with the world. I can't say I agree, but it's worth thinking about, certainly. Change isn't necessarily a bad thing.

Climate change, exchange rates, education, and new frontiers in economics

2010-01-18T12:17:00.000-06:00

John Whitehead on climate change. The science hasn't been settled. Professor Whitehead doesn't go into this, but the consequences haven't been settled either.

Chavez is still trying to fix his economy, this time by playing with his fixed exchange rate. The blind lead the blind.

Tyler Cowen makes a partial list of over- and under-explored areas of economics. There are a lot of really interesting under-studied areas of economics.

Ed Glaeser looks at the link between GDP per capita and school enrollment in 1900. Education benefits seem to be very, very persistent.

Caballero's story

2010-01-15T08:55:00.000-06:00

David Beckworth considers the proximity of economists to the financial system and their view of the effect of interest rates in the housing and credit boom. The idea is that, essentially, business economists see the Fed's lowering of interest rates as a key factor in the boom because of their keen, first-hand knowledge of the situation, rather than academic economists who have less contact. I'll ignore the obvious problems of Professor Beckworth's hypothesis to point out something that struck me as odd: Cabellero's story. Caballero seems to believe that the demand for safe assets rose...

By 2001, as the demand for safe assets began to rise above what the U.S. corporate world and safe mortgage‐ borrowers naturally could provide, financial institutions began to search for mechanisms to generate triple‐A assets from previously untapped and riskier sources. Subprime borrowers were next in line, but in order to produce safe assets from their loans, “banks” had to create complex instruments and conduits that relied on the law of large numbers and tranching of their liabilities.

... does this make sense? So, financial institutions poorly measured risk, sure. But, in order for complex instruments to be made from subprime loans, more subprime loans had to be made. Meaning, there had to be incentives for subprime borrowers to receive subprime loans. Does Caballero really believe that lower interest rates couldn't have been among these incentives? And that had interests rates been higher, there wouldn't have been less incentive? Ricardo Caballero's story can't be the one held by most academic economists, can it?

Media woes

2009-12-15T10:36:00.000-06:00

Did everyone forget that the current recession (or, at least, the remnants thereof) was originally started by a housing crisis and financial crisis? And that these crises started before the Obama administration? And that, at the time, many people said that unemployment may not return to normal levels until 2012? It seems disingenuous for news anchors to discuss when the Obama administration's use of the word 'inherit' just becomes an excuse. Must they contrive issues for the sake of seeming unbiased?

Also, does no one realize that banks make money, at least partially, by lending money? They don't need political pressure to continue lending, they have monetary incentives, and that's how they work. If they're not lending, there aren't enough monetary incentives for them to do so.

On the other hand, it seems like Republicans are claiming fiscal responsibility merely by disassociating themselves from Democrats, no matter what the issues actually are, and forgetting that the Bush administration ever happened. While the Obama administration is too classy to take advantage of Bush's unpopularity (a good move, in my opinion), the Democratic party leadership shouldn't let people forget so easily. So far, Republicans need to consider themselves lucky for getting off so easily.

A giant has fallen.

2009-12-14T18:45:00.001-06:00

Good bye, Paul Samuelson.

Thank you for formalizing Economics.

Recession, tax revenue, the Economist, and Monopoly.

2009-10-26T11:30:00.000-05:00

Glenn Rudebusch, at the FRB San Francisco, answers five key questions. The financial crisis is over. The recession is most likely over. We won't return to normal employment for some time. Inflation will not be too high. The Fed has an exit strategy to undo its recession-fighting policy actions.

Federal revenue as a share of GDP is at its lowest point since 1950. It's an interesting graph, and I want to see how the percentage federal revenue has fluctuated with GDP growth and also with the change in tax rates. The top tax rate was slashed a lot in the 60s, but you don't see much of a change.

The Economist's forecast. No big surprises, I think. Still, an interesting read. I might expect a slower increase of the federal funds rate than they do, though.

Free Exchange on the history of Monopoly, Anti-Monopoly, and Hasbro.

EIA, map of job losses, new wave of research, and Caterpillar

2009-10-22T14:58:00.000-05:00

Env-econ re: BCA vs EIA, OK?

This is a very interesting map of job losses and gains around the country since 2004. It'd be nice if it showed percentage loss/gain rather than net, but it's still illuminating, I think.

Will Google Wave change how research is done?

Caterpillar sees "encouraging signs" of economic recovery. The construction industry, many say, is a pretty good leading indicator.

Unemployment rates, Shiller on housing, urban data, and soccer.

2009-10-21T14:36:00.000-05:00

The FRB Cleveland again, this time telling us about alternative unemployment rates.

Shiller, of the Case-Shiller housing index, tells us about the housing market. Seems like people are more rosy now about their long term investment prospects.

Matthew Kahn talks about possibilities with urban data. If we could look at power bills, we could determine whether people have high-power consumption items, of if they're just being wasteful. I'm sure there might be a number of interesting uses of the data, if privacy issues could be resolved.

The economics of soccer. How do I get to do that?

Dr. Doom/Roubini, public health care, mancession, and Cash for Clunkers.

2009-10-20T13:42:00.000-05:00

Dr. Doom's at it again. I don't share his opinion about the growth "since March." I think the bottom was a bit too low, and at least some of the later stock growth was corrective.

The Boston Globe explains how a public health care option would work in pretty easy terms.

Free Exchange picks up Chris Swann, saying that men aren't necessarily the hardest hit during this recession.

The FRB Cleveland shows us some of the effects of the Cash for Clunkers program. I'd like to see their numbers on slightly longer-term effects.

Cap and trade, data, open journals, and more econblogs.

2009-10-16T12:55:00.000-05:00

Krugman explains the basics of cap-and-trade.

Here's a handy little tool from IBM to facilitate data visualization. Looks neat!

And, if you didn't know about this before, but there's an open-access Economics journal. There look to be some really neat articles in there.

In the same vein, here's an econblog aggregator to keep up with research and academic blogs. Thanks to RePEc.

Climate Change: A devil's advocate

2009-10-15T12:15:00.001-05:00

Today is, apparently, Blog Action Day. A day where bloggers blog about one issue of global importance, to raise awareness and to further a dialogue.

This year, the issue is climate change. I've always had a very market-driven view of climate change. So, in effect, I don't really care. It'll work itself out.

The problem, I think, is that climate changes very, very slowly. This is good for us, since it gives us time to respond to problems. That is to say, climate "problems" are solved by technology.

Let's say the world gets too warm. First of all, it's not clear that warming is a bad thing. Warming encourages plant life. But, anyways, let's ignore the positive effects. What would we do? We'd create areas with more shade, use the extra sun to power solar energy cells, and use the power to create more freeon (or something).

Let's say the water level rises. We'll have elevated houses and buildings, and possibly start to travel by waterway. Or, we could create bubble cities a la sci-fi stories.

Let's say the entire environment becomes unuseable. That is, we can't go outside at all. Maybe we don't have an ozone layer anymore, maybe the storms are too strong, maybe the heat would kill us, maybe we'd be underwater--whatever. What then? We'd dig underground and create towers. We'd have wind and water turbines to take advantage of the chaos outside of our towers, and we'd cover the towers in solar panels. With that, we can create our own artificial light, and have towers of greenhouses to grow whatever plants we need to survive, and raise cattle there to graze on grass indoors, or something. We could grow whatever we needed to keep us healthy and have plenty of diversity in our diets.

This may seem far-fetched, but it's within the realm of possibility, and is likely even very feasible. As resources become more scarce, prices go up. This creates financial incentive for companies to invest in this sort of stuff--the technology is available, it's just a matter of the towers being too darn expensive. If there was enough demand to support it, though, this would become reality.

My point is this: though any kind of change is painful (see the most recent recession), climate change is not a deal-breaker. Climate change doesn't lead to the end of humanity as we know it. The human race would get along, still. And, who's to say such a futuristic world is better or worse? It's important to note that in this view of the world, our survival depends on technological advancement and development.

On the other hand, I think sustainability initiatives are great. I don't care so much about the environmental impacts of fossil fuels so much, but I don't think it's a good idea to rely on relatively volatile countries for vital energy. If OPEC decides to turn off the spigot again, that would really hurt us, and that's a pretty big weakness. But we're headed in the right direction.

Preservation programs can be pretty bad, though. When your neighborhood keeps out developers, that just hinders progress. We need to develop communities to be ready for the technological advances that need to come to prepare us for the future. Old neighborhoods in growing city centers can cause problems.

Dow 10,000

2009-10-14T15:00:00.001-05:00

The Dow ended above 10,000 today.

Any predictions for tomorrow? Let's hope it stays up.

Obama, unemployment, financial modelling, and a book

2009-10-14T11:00:00.000-05:00

The New Yorker highlights Obama's economic staff. Romer, Summers, Orszag, Geithner, and Bernstein.

Also from the New Yorker, John Cassidy talks about the unemployment numbers and what we might expect in the future.

Mike Rorty makes a version of an argument that I made before. I'm eager to see what interesting papers will come out, though.

I recommend you read John Quiggin's book snippets. They're good reads.

Recession, employment, risk modelling, and multipliers

2009-10-13T11:58:00.000-05:00

The IMF says that things aren't so bad anymore! They're seemingly less bad than previously thought. They credit monetary and fiscal policy, apparently (I wonder how that'll go in the macro debates?). Feel free to check out the video of the press conference and the actual report.

Robert Reich makes sure we know what the employment numbers really mean.

The Baseline Scenario tells us about the problems of risk modelling. VaR = bad? I think people are being too harsh, though a company shouldn't use one model and nothing else to evaluate risk.

Via Thoma, Krugman talks about multipliers. He says 1.5 is a good estimate for right now.

The 2009 Nobel Memorial Prize in Economics

2009-10-12T14:37:00.000-05:00

After a number of predictions, the Nobel Prize in Economics has been awarded to Oliver E. Williamson and Elinor Ostrom. Congratulations to them! Check out all of the reactions. It should also be noted that Elinor is also the first woman to win this prize.

G-20, telecommunications, saltwater v freshwater, further than Krugman

2009-10-02T16:32:00.000-05:00

Can you name all of the members of the G-20?

The Economist has a chart of cell phone users and internet users in developing countries. Internet access via mobile networks seems like an expensive prospect to me, for Africa.I suppose it might be cheaper than any other way of accessing the internet.

Urbanomics has a pretty good summary of the econoblogosphere saltwater versus freshwater macroeconomics debates. The conclusion: saltwater seems to be winning. I wonder what percentage of economists fall into each category, and how man "moderates" there are.

Paul Rosenberg goes further than Krugman in his discussion of the problems of macroeconomics.

Modesty, Nobel Prize, AEA survey, and salaries.

2009-10-01T11:56:00.000-05:00

Gilles Saint-Paul tells us that economists should remain modest. After all, it's not our job to forecast crises. But, should we be able to recognize bubbles when they're happening?

The Nobel Prize in Economics announcement is coming soon! Who will it be? I note heavy favoritism in that list towards American economists. I don't know why people seem surprised when I say the top economists are in the United States.

Do you want to know what sorts of things economists agree upon? Try out this survey of AEA economists. There were another two surveys done before the last presidential election which also give insight. I really would have liked to have seen questions on single-payer health coverage and the auto industry, though.

How much can you make with different graduate degrees? Look at the data for starting and mid-career salaries for different majors. Economists have their median salaries double from starting to mid-career. Nice!

Say's Law, finance in macro, the elderly, and Pfizer.

2009-09-30T16:48:00.000-05:00

Say's Law has gotten a lot of attention recently! Nick Rowe, Robert Waldmann, and David Beckworth. Poor Say, these guys are just piling on. It's not Say's fault he assumed a barter economy! DeLong even invokes Friedman.

Thoma points us to another person talking about the need to take into account financial factors in macroeconomic models. My first reaction is, "Duh," but why haven't I seen any serious attempts to do just that? I've talked about this before. Thoma also provides us with a growing list of people talking about the state of macro. Interesting stuff.

The elderly are the reason why we have a national debt, says Bruce Bartlett. That'll get some people angry. I don't think he's particularly young, either. I wonder if he's banking on the idea that most of the elderly won't be online.

Bad business articles annoy me. Pfizer pays $2.3 billion to settle a lawsuit, but that's less than three weeks of sales. It seems that the author doesn't realize that this is a lot of their sales. He may want to look into how many weeks of profit it'll be. Pfizer's first quarter profit this year was$3.7 billion. That's right, they paid out two months of profit. Ouch.

Since Dec 2007

2009-09-27T15:52:00.001-05:00

The Detroit Lions win their first game since December 2007. Is this a sign the recession is over?

Macro debates, national debt, and media regulation

2009-09-25T14:35:00.000-05:00

Quiggin on macro wars. Yes, another one. I find them interesting, though.

Here's a global debt clock. Neat! Check out your country's debt, and compare it to other countries.

Here are some interesting thoughts on media and regulation. I'm not sure that they authors have thoroughly thought out the implications of a corrupt government, though. That might be something that's hard to capture in traditional economic analysis, though.

Yet more thoughts on the current state of macro (pdf). Arguably, I think these may be some of the most compelling thoughts on the future of macro--Kocherlakota talks about the research of relatively young macroeconomists at top universities. I think most of the complaining has been about how "most" macroeconomists view things, and how macroeconomics has affected policy, which are more likely to reflect a slightly older brand of the field. Still, this is a great read.

Journalists, macro, twitter, and the housing bubble

2009-09-24T16:50:00.000-05:00

The market for journalists. I think this has gotten a lot of publicity lately, with newspapers closing down.

Micro-based macro led us astray says John Quiggin. I think it's kind of an extreme statement, though. Macroeconomists have to have many tools, one of which is handy use of micro.

100 best business twitter feeds. For all of you tweeps who like to keep up with business/finance/economics stuff.

When did the housing bubble begin? I think a lot of people agree that low interest rates were a large cause, regardless.

The Cash for Clunkers fallacy

2009-09-23T13:12:00.000-05:00

Why are there so many people who claim Cash for Clunkers is an example of the broken window fallacy? It's not.

First, like everyone else has started, let's talk about the broken window fallacy. The story goes like this: A guy has a window. Someone throws something through the window, smashing it, and runs away. The guy now has to pay for a new window. Bystanders say, "Well, your window broke and you have to pay for a new one, but at least that money you're going to spend on it goes into the economy." Let's say that the new window costs $100, so now the economy is stimulated by $100. Is this the right way of looking at the situation? Is this an efficient outcome? Was the window being smashed a good thing, overall?

The answer is no. The guy had $100, which he may have spent on something else. Had his window not been shattered, then he would have a window and $100 worth of stuff rather than just a window. The guy would have spent the $100 on something to make him better off rather than being on par. With the window smashed, he now has a window and has effectively lost $100. He is worse off by $100, even though the economy is better off by $100. Had the window not been shattered, he'd be better off by $100, and the economy would still be better off by $100.

The bystanders have fallen into the broken window fallacy. Because the economy gets $100, they have assumed that there is an overal benefit. The argument is also applied to war and natural disasters.

Some opponents of cash for clunkers say that the program is an example of this broken window fallacy. They say that the destruction of cars isn't an overall benefit for anyone, and follows the same logic as the broken window fallacy.

There may or may not be an overall benefit of the cash for clunkers program--that topic is an interesting one, but it's a more complicated issue. It's certainly not an example of the broken window fallacy.

First of all, the destruction in the broken window fallacy refers to mindless destruction. It's a natural disaster, a force majeur, or an act of God, it's not something we choose. In the cash for clunkers program, people give up their cars to be destroyed, and the cars must fulfill certain requirements.

More importantly, in the broken window fallacy, the owner of the window did not want his window broken, because it makes him worse off. In the cash for clunkers program, the owner of the car willingly gives his car to be destroyed because it makes him better off. He effectively trades his car to get a discount on another car of his choice among a selection. If he doesn't want a car from the selection, he doesn't have to give up his car. The car owner makes the decision. He likely would have bought a new car anyways, were the new car cheaper than the original sticker price. The government merely provides the discount.

Why does the government provide the discount? Maybe they believe there's some benefit in carbon emissions, or maybe they want to spur the auto manufacturing industry, or maybe a number of other issues. The important issue is that the program will hopefully provide some effect the government want to attain.

So, is the cash for clunkers program a good program? Well, presumably, the car owners are better off, and the government is better off (having their desired effect come into fruition). Is everyone better off? It's hard to say, there will be some effect in the real economy and there will be some effect in carbon emissions. Were the taxes worth it? That's for someone else to figure out.

Inflation, modern macro, monetary policy, and wages

2009-09-22T15:43:00.001-05:00

Inflation is low, but still positive. There have been a number of forecasts saying that inflation will stay low for some time--seems like Austrian economists haven't been listening, though.

Robert Waldmann on modern macro.

Sumner on monetary policy. Could the Fed have acted better? Sumner is sometimes wordy, but always worth a read.

A bit on wages from the San Francisco Fed. Wage growth has been stagnating. Hopefully the rise in productivity will turn that around?

The state of macro, choice, Krugman, and five of the greatest equations in Economics

2009-09-21T17:16:00.002-05:00

People have been talking about the state of macro for quite some time now. The recent crisis just underline the importance of the discussion.

Chris Blattman points us to an article that talks about inconsistency in choice.

It seems like Krugman inspires a lot of anger sometimes.

Tim Haab tells us about the five greatest equations in Economics (in his opinion). I think this might be more difficult for macro.

Why we don't care

2009-09-17T14:38:00.000-05:00

Fine! I'll bite! William Easterly, we don't care about Afghanistan. It's not that Afghanistan doesn't deserve our care--it likely does. We're just tired.

View Larger Map
We just don't care.

Here's the short story: We're tired of it. We don't know anything about them, and they can't be helped anyways.

After the 9/11 attacks eight years, news for a long time covered the several Arab leads of the culprits. A lot of time and energy was invested in learning about the region, and we were bombarded with pundits, news, even movies trying to explain to us what things are like in the Middle East and how to better understand their mindsets. When we started war in Iraq and Afghanistan some time later, we were bombarded with nightly updates on the situation. Despite all of this, we have learned little, but it's a safe bet that the majority of Americans, asked to describe any of the involved countries or surrounding, would tell you that it's a war-torn place with no progress. Many, I'm sure, mix up Iran and Iraq. Many would lump all the "stans" together. Many would say that we're in (any of) those countries just for the oil. Pakistan isn't any better. What, specifically, is going on in Afghanistan? Few could say. It's just another one of those countries. Certainly, conflict in the Middle East has been going on for centuries.

What's more, we've been bombarded with this sort of thing for over eight years. Multiply information overload over eight years, and no one knows what's going on. How can we be expected to care anymore? Sure they need help--that's partially why we have troops there--but they're just like any other war-torn country that needs our help. We've been "trying to help" for over eight years, and what has come from it? Caring about Afghanistan specifically is a lot to ask.

Compare this with Africa. While parts of Africa are still affected by war, we're pretty insulated from it. There seems to be less war, confined to individual warlords who rape and pillage. That's all. The bigger problem in Africa is poverty, and being cut off from the rest of the world. You can't easily truck goods from sub-Saharan Africa to anywhere important like you can in the Middle East. Africans don't even have roads! Poverty is something we can try to help with. Fighting among your own people? That's your own problem.

The term "sub-Saharan Africa" is probably to specific a term to mean anything to most Americans, actually. Many probably don't even know what it means. Regardless, people have more recently seen progress in Africa. Maybe it can be saved! Jeff Sachs said so in a book! They have cell phones in Africa now, they've become tech-savvy! Angelina Jolie is adopting children from there and helping them, so they must be getting better!

Do you see the difference here? What does Afghanistan have going for it? We barely get photographs showing us how things are in the Middle East, much less any information. And, when we do, we certainly can't distinguish what country it's from (whereas Africa gets lumped into one big area deserving of our help). I'm sure there are other issues too. The significance of cultural differences, the bad stereotype of Arabs, and so on. I don't see Americans caring about Afghanistan any time soon without some large, unexpected shock.

Do you see, Dr. Easterly? Why we don't care about Afghanistan? We should, probably, but it's a really tough situation there, and we can't do anything about it.

Tires, Nobel Prize, macro debates, and solar cells.

2009-09-16T13:06:00.001-05:00

Garth Brazelton defends the tire tax as a Pigouvian tax. I'd be interested to see if there was any data to show that Chinese tires are significantly less safe than American tires. Since they both presumably have to meet some sort of standard, should we just make tougher standards? If Chinese tires are less safe than American tires, would the tax not apply to safe Chinese tires, or would the tax be repealed when Chinese tire makers improved their tires?

Tyler Cowen starts thinking about the Nobel Prize for Economics. I'm eager to see everyone's thoughts.

Krugman talks about freshwater economists while David Warsh says there isn't as much vitriol as we might think. Warsh links us to an interesting paper that thinks about 1978 macro (link to Thoma).

Solar energy is apparently getting off to a slow start. Overinvestment due to a subsidy combined with a recession led to dropping prices, whic wasn't good for the industry. Does that mean we'll see solar energy picking up again as the world recovers? I've been seeing more articles about solar-powered things anyways, so maybe China is picking up a large degree of the slack from Spain.

Happiness, universities, Africa, and income gaps

2009-09-15T13:40:00.000-05:00

What makes you happy? And, how much is your happiness worth?

The success rate of universities and their prices are brought to question. Do "better" universities have more of an incentive to graduate their students (who might be in wealthier families or are well-connected)? James Hamilton pointed out that students seem to prefer prestigious research universities. Seems to me that the job market prefers students from prestigious research universities.

As much as Africa is progressing, they don't have very many trade links, and are disconnected from the global economy.

Some money news. Poverty is up, and income is down.

A model, Africa, well-being, and teaching hours

2009-09-10T15:21:00.004-05:00

Let's take a brief break from unemployment news! That stuff is depressing.

How about that supermodel who vowed to stay naked until USAID gets to starving children? I'm not sure what kind of incentive she's going for.

More on development--Africa isn't looking so bad, historically speaking. It's made large gains, though there's a lot more that needs to be made. While this is true and all, I think the reason this sort of thing doesn't get spread very much is for the fear that people will miss the point. Though aid might be working, Africa still needs a lot of help.

Via Thoma, Stiglitz tells us we need a better measure of well-being. Unfortunately, he doesn't provide much insight into the discussion. How about median debt as a percentage of income? Or average savings rate? Any ideas, Joe, are you just going to complain?

A chart of hours taught by teachers around the world. Our teachers are apparently putting in a lot of work!

Job search, emotions, and graphs.

2009-09-09T12:33:00.004-05:00

The average number of weeks in a job search has slightly dropped. 25 weeks is still six months, though. And, remember this is an average. 50% will find a job sooner, and 50% will find a job later.

Calculated Risks shows us some graphs on the projected unemployment rates compared with actual unemployment rates, and with the diffusion index, which roughly measures how widespread job losses or gains are. Things aren't great, but they're not as bad as they could be or have been.

Emotions and the economy. Interesting article. How much could smiling help the recession?

Job openings are at record lows, and the jobless rate by weeks unemployed. This needs to turn around, and fast! In most of the country it isn't getting worse, I suppose.

Google,, unemployment and stocks, wages, and an interactive map

2009-09-08T09:50:00.000-05:00

Google has more data to easily peruse through! Mmm, data...

Unemployment is up, but apparently the stock markets like it. 9.7%... after two months almost flat. Who knows where this is going? Will it hit 10%? Still, this is better than the 13% projected earlier in the year by some.

Average hourly wages are up again. Mind you that the unemployment rate for people with less education is higher than for people with more education. Also, retail isn't doing well, still. Lower wage people just can't find work, while experienced workers are being held on to.

Here's a neat interactive map showing foreclosure rates, unemployment rates, and household income. Data's good, but it's even better when it's easy to look through.

Budget gaps, bank regulations, confidence, and forecasts.

2009-09-04T13:34:00.001-05:00

The city of Houston needs to make up a $25 million budget gap. There was a budget gap of $103 million, but about $50 million was previously set aside for this sort of situation, with about $28 million more already planned to help try to reach the rest of the gap. $25 million is a lot better than $103 million!

A good, though lengthy, article on bank regulation in the Harvard Magazine.

Consumer confidence seems set to go higher and business confidence is loads better. Seems like consumers are looking at the unemployment rate while businesses are looking at stocks. Go figure.

The OECD predicts growth (or lack thereof) for some countries. Pretty decent news for the US--less so for Canada.

Oil, government, manufacturing, and low wage workers.

2009-09-03T12:32:00.003-05:00

BP found a lot of oil in the Gulf of Mexico. Good news for Houston, and anyone who pays for gas. Though, keep in mind, that this is just a drop in the bucket for worldwide supply, and the oil is harder to get than ever.

The Wall Street Journal actually has an article about government helping the economy.

Growth in manufacturing too? Interesting. Cash for Clunkers may have helped that, but I don't know if it'll hold in the long term.

Low wage workers reportedly are often cheated, as a result getting paid less than the minimum wage. This is widespread, not just affecting undocumented workers.

Bailout money, underwear, and good news.

2009-09-02T14:44:00.000-05:00

Banks are paying back bailout money, with interest. Sounds like it was a pretty good deal!

Another strange economic indicator: underwear. The worse times are (and, presumably, the less money you have), the more willing you are to wear tattered underclothing. Who's gonna see? Also, people attempt to cut their own hair (with hilarious results).

Some regions are seeing potential growth! Seems a little early to be sure, though. Building contracts are up in the Houston area.

There is now increased productivity. Not a surprise, really. When firms lay people off or slow hiring (as they have been doing), they presumably hold on to more productive people in order to achieve this very effect--higher productivity at proportionally lower costs. This goes hand-in-hand with higher profits, which leads to all sorts of benefits in the economy. Yet another sign that we're in recovery mode.

Solar power, education, inflation, and majors

2009-09-01T14:20:00.000-05:00

China is really pushing the production of solar panels. Siemens has also invested a lot of money into solar power recently. I've heard people say that oil prices will only go up in the long term, but I wonder if energy prices will actually go down.

Some people talk about why the price of upper education has risen.

As the economy bottoms out, we look more towards inflation. With slow growth, I don't expect inflation to get out of control, though even if that were the case it seems to be a necessary condition for growth in this recovery period.

College students fret about their majors. I thought this has always been a problem for them, especially for liberal arts people.

Water, TARP, incentives, and Austin.

2009-08-27T12:58:00.002-05:00

Here's an interesting article on the issue of water in Latin America.

Here's a look at TARP funds--they were actually used to make loans! Some were afraid this may not be the case for very much of the funds.

A TED talk (those things are great) by Dan Pink, former speechwriter for Al Gore. He talks about incentives, and how they can hurt. Also follow the links for similar talks by Dan Ariely.

Austin, TX looks like it's going to rebound this year, too. News for Texas looks relatively rosy.

The rich, Bernanke, unemployment, and cell phones

2009-08-26T12:46:00.000-05:00

Over the past two years, the rich have not gotten richer, ending a 30-year rise.

Bernanke is apparently optimistic on near-term growth. That shouldn't be a surprise to anyone, I think. There's a lot of reason to be optimistic, it seems.

Unemployment rose in 26 states.

Another development article: the solar-powered cell phone. I always thought heat was detrimental to the lifespan of electronics--though, I guess a solar-powered cell phone makes more sense than a wind powered or hydroelectric cell phone. Still, there are small solar cells you can buy to charge small electronics. Why not just replace the car charger (or whatever) with a solar charger?

Silver bullets, aid money, institutional reform, and Texas

2009-08-25T13:13:00.000-05:00

Dennis Whittle tell us about the attraction and myth that is the developmental silver bullet.

Here's an interesting graphic on monetary flows of developmental aid. Aid in Israel has shrunk a lot, apparently.

Another of development: William Easterly reminds us that institutional reform may help developing nations, but we don't know what that means. I disagree that the term is meaningless, though. It helps us to narrow down what types of reforms might be most helpful, and then a more detailed analysis of the factors of institutional reform may help us pin down specific actions.

The economy in Texas is looking strong! Or, at least, looking to rebound soon. I don't expect commercial real estate construction to start up very strongly soon, though.

Health care, global health care, job losses, love, and ham

2009-08-24T14:27:00.000-05:00

Myths of health care reform. It seems like there are a lot of scare tactics.

While discussion on domestic health care policy is fierce, Ruth Levine reminds us about global health care policy.

Back here, job loss claims are slightly up, while the overall unemployment rate is down slightly. I'm hoping that we avoid 10%.

Love is worth over a quarter million dollars.

What would your bank do if you offered them wine and ham as collateral?

Job markets, mortgage default rate, credit, and spending

2009-08-21T15:34:00.001-05:00

Insight's best and worst job markets. It's nice that the page is continually updated, too.

13%? That's a very high mortgage default rate. And it's not supposed to peak until at least a year from now. CalculatedRisk tells us that the problem is growing to fixed rate prime loans. Yikes! That last link also shows rates per state.

Banks are cutting credit limits for 58 million card holders. I've also heard that they're raising the rates that they charge companies who use their credit card services for payments. This sort of thing isn't a surprise, due to recent credit card reform, and this is probably a good sign.

Here's a neat graphic: how the average consumer spends his paycheck. It's actually a "consumer unit," which is apparently about 2.5 people with 1.3 earners.

Development, savings rates, and billions of dollars

2009-08-20T12:13:00.001-05:00

Charles Kenny, via William Easterly, on the successes of development. If you're down on development issues, this is a very worthwhile read.

Speaking of development, check out Intel's Small Things Challenge. It's kind of like the free rice site, except Intel donates money to a couple of charities, and if they get enough clicks, then they donate $300,000.

On an unrelated note, the personal savings rate was at a 15 year high this past quarter. It's still nowhere near where it used to be from the 60s to the 80s. I haven't looked at much international data, but it looks like a lot of countries are pretty low.

Here's a visualization of the billions of dollars that are spent on a variety of things.

Subprime mortgages, the end of the recession, FDI, and health care

2009-08-19T13:48:00.000-05:00

The Cleveland Fed presents us with ten myths about subprime mortgages.

Mark Thoma tells us when we'll know that the recession is over. I think there are two important themes: 1) it's tough to tell, and 2) it'll be pretty obvious when it's there.

Foreign investment in long-term US bonds are up. Although China is pulling out some of its money, the scare that everyone wants to pull out their money and ruin the US is unfounded. Sometimes, economics is telling people the obvious, when they want to believe the ludicrous.

The public health care option may be off the table. Back to high health care expenditures? Have congressional Republicans attempted to make any concessions at all? Bipartisanship seems to imply compromise.

Good news on the recession, sugar, bubbles, and new homes.

2009-08-18T13:55:00.000-05:00

A few pieces from Capital Gains and Games. Some thoughts on the unemployment numbers--getting worse slower isn't getting better. Still, I prefer getting worse slower. Still, the prospect that the unemployment rate won't hit 10% is great. The deficit would have been the same under Bush (or McCain) and is likely going to be less than originally forecast. So, it was largely unavoidable. Still, I hope that our money was put to good use.

A reduction in the supply of sugar is causing prices to increase. If there are profits to be made, then we'd expect other firms enter the market. Good sign for South American and African sugar farmers?

The Business Pundit speculates at the next possible bubble to burst. Gold seems a little far fetched to me, as I always thought of gold as a back-up place to store wealth, which means that it'd be more of an effect than a cause of speculation.

Felix Salmon reminds us that a home is not an investment as Krugman buys a new place. I've seen it argued that people thinking of homes as investments is a part of what caused the housing crisis.

Healthcare, good income news, good recession news, and blips.

2009-08-17T12:51:00.000-05:00

Chris Dillow looks at the relationship between health care spending as a percentage of GDP and life expectancy. It's not the whole story, of course, but it does start an interesting discussion.

Real average hourly earnings is up a lot. Presumably, firms are holding on to qualified workers. We'll see how this measure holds out against the unemployment rate.

The chances of positive GDP growth are up! According to a Philly Fed survey. It's been a long recession.

Capacity utilization has a small up-blip, and industrial production is up. This, honestly, doesn't tell us much. If it continues up, that's a good sign, but this increase is probably too small to indicate anything.

Unemployment rate <10%, income distribution, IV, the recession's end, and unemployment again

2009-08-14T14:45:00.000-05:00

Nate Silver makes the claim that the unemployment rate won't hit 10%. Bold, considering there are many expecting it to go well above 10%.

People in the top .01% have 6% of the nation's income, the highest ever. It's interesting how it was so low for so long.

The Economist has an interesting article on instrumental variables. The gist: they attain more accurate answers to less broad questions. Instrumental variables are tools, however. We should never rely on one tool in our toolbox--that has always led us astray. That's just like articles bashing macroeconomics due to "bad" econometric forecasting.

According to this graph, a lot of economists seem to think that the recession is over. That's the WSJ, though, so take that with a grain of salt. The more interesting part, in my opinion, is that the unemployment predictions, on average, don't hit 10%. More predictions here.

Venezuela, China, and land grabbing

2009-08-12T15:56:00.000-05:00

Venezuela's inflation (still) isn't doing so hot. No surprises there, right?

Though, China's doing well! (again, still) A lot of countries seem to want to piggy-back on China's growth. Still, no surprises. Investing in China yields better returns than investing in a country with negative growth.

Since bubbles have popped, investors are buying up land in developing countries. Housing isn't bringing in money anymore, so commodities and land is where the money is going. ... So, what happens to the developing countries when this new bubble pops?

Taxes and unemployment, the recession, health care, income, and advertising.

2009-08-07T12:00:00.000-05:00

Krugman reports that there is no correlation between taxes and the unemployment rate. Looks like, if anything, there might be a negative correlation.

Though the specifics vary slightly, things are looking a little better now for Krugman and Hamilton.

Health care is a pretty tough issue, politically.

Political Calculations has data on how your income will increase each year.

Karl Smith continues discussion on the advertising industry. I think he's wrong when he says that people aren't easily swayed--though, they may not be so easily swayed as advertisers may think. I think people can be swayed to at least try a new cereal, even if it costs 20 cents more. They may not be swayed in buying a car. When you're talking about relatively cheap, quickly consumed goods, advertising can be powerful. Advertising may actually convince us to try a new restaurant, or a new brand of deodorant.

Oil and gas prices, health care, university productivity, and Houston power rates

2009-08-04T11:58:00.000-05:00

James Hamilton takes a look at oil and natural gas prices. Something has got to give.

PBS has a Frontline report comparing the health programs in five capitalist democracies around the world. Paul Krugman explains why health care can't be solved by the free market. Seems to me that health insurance suffers the tragedy of the commons.

Catherine Rampell at Economix reports on a measure of productivity of universities.

Houstonians: TXU is lowering their rates. They may still not be the lowest for you, but keep an eye out! How's that for price fluctuation?

Macroeconomics, taxes, and auto insurance

2009-07-30T12:41:00.001-05:00

Keeping you up-to-date on some of the interesting things around the econoblogosphere.

Another article jumping on the macro-bashing bandwagon. I'd like to see more people offer solutions, or at least helpful criticism. Menzie Chinn offers his insight.

The Wall Street Journal seems to think that executives should pay more in payroll taxes. That's refreshing.

When we're worried about our economic situation, we're willing to try more innovative ways to make society more efficient. Pay-as-you-go auto insurance sure sounds efficient, though people are worried about privacy issues. Presumably, someone knows where you're driving? I think the privacy issue is interesting--lack of privacy might mean more safety. People are less likely to commit crimes if they know they can be easily tracked or caught. Then, people worry that more safety means less free, but I don't know why that necessarily follows.

Some news on the recession

2009-07-24T11:48:00.000-05:00

Ritholtz on Feldstein's double-dip warning. Mark Perry has some good news. The Chicago Fed Index and the Confence Board's index are both up. Double dip or slow, long recovery? We have to wait and see. The way to see it, as long as housing continues to get better, and credit markets recover, I don't see how a double-dip is likely. Employment may double-dip, if they're decide that holding on to excess qualified workers will take too long to pay off.

Houston median home prices reach a record high.

Here's a look at the state-by-state change in per capita income. We're down, overall, but some states are doing okay!

Drea, at the Business Pundit, shows us five industries doing well during the recession.

Trains, raising taxes, popping bubbles, and oil

2009-07-17T15:19:00.000-05:00

Ed Glaeser doesn't like the high-speed train idea. We should focus on high-density areas, he says. What about focusing on major airline routes? Houston may not be particulary dense (though, we're getting our own rail system, eventually) but having a train option to get to Chicago or Boston relatively quickly would be a boon. Ryan Avent has more criticisms of Glaeser.

David Leonhardt talks about Club Wagner--to recognize that we need to raise taxes in a wealthy society.

Kevin Drum agrees with NY Fed Chairman William Dudley when he says that the Fed should take a more active role in recognizing and popping bubbles.

I always find it interesting when people try to make predictions about the future price of oil. One analysts thinks it'll go down to $55 soon, and hover there as a summertime low.

Healthcare, financial crisis, stimulus, and jobs.

2009-07-09T16:30:00.000-05:00

Instead of the UK and Canada, Jonathan Cohn compares our future healthcare system to France and the Netherlands--whose plans he says is actually more similar to our proposed plans. It's a worthwhile read, I think.

Justin Fox points to an investment banker who says that the fault of the financial crisis should fall onto the people who bought toxic assets, not the people who created them. They should never believe that you can make a return on a riskless security. I still think there were many people at fault--after all, the true risk was not properly assessed by ratings agencies.

The French think they've done fiscal stimulus better than the Americans. Could be. Certainly, our more "free" system carries with it more risk and uncertainty. It's harder to get effective government action done here.

Catherine Rampell at Economix points out that the problem with the job market is a hiring slowdown, not layoffs.

Bernanke, job growth, healthcare, and fairness

2009-06-30T17:08:00.000-05:00

FreeExchange voices their support of Bernanke. I think there hasn't been enough air time given to exactly what he has done and how it has helped the economy in the past year. In a similar vein, the NY Fed has provided a timeline of the financial crisis.

Michael Mandel reports on job growth over the past ten years. The graphs certainly do highlight the stark picture. Outside of healthcare, education, and the government, no sector has grown. Wow.

Donald Marron says that health is an R&D problem. There are a variety of problems with the current system, and a variety of solutions, and we're not sure how effective each solution would be. Marron seems to think we should take baby steps, and evaluate the progress of solutions as we go. An economist who wants more data? Shocking.

Fairness in economics. National economic policy isn't based solely on economic principles, nor are traditional mathematic economic principles the only factors that affect the economy. How people feel about their individual situations also affects their economic behaviors, including how fair they feel they are being treated. In short, we should take some lessons from sociology and psychology. Of course, this harkens back to a famous Keynes quote:

"The study of economics does not seem to require any specialized gifts of an unusually high order. Is it not, intellectually regarded, a very easy subject compared with the higher branches of philosophy or pure science? An easy subject at which few excel! The paradox finds its explanation, perhaps, in that the master-economist must possess a rare combination of gifts. He must be mathematician, historian, statesman, philosopher—in some degree. He must understand symbols and speak in words. He must contemplate the particular in terms of the general and touch abstract and concrete in the same flight of thought. He must study the present in the light of the past for the purposes of the future. No part of man’s nature of his institutions must lie entirely outside his regard. He must be purposeful and disinterested in a simultaneous mood; as aloof and incorruptible as an artist, yet sometimes as near to earth as a politician."

High School Performance, Newspapers

2009-06-29T10:09:00.000-05:00

Mark Perry shows that high school GPAs are rising while SAT scores are falling. I think that this indicates two competing objectives. High schools want their students to have high GPAs so they can go to good colleges--which gives prestige. SAT scores are falling because they (College Board?) wants to be able to claim to have a difficult test, most capable of determining the quality of students. I wouldn't be surprised if high school students were more objectively performing about the same they always do.

Professor Becker thinks through the newspaper industry. I like the idea of newspapers being structured not unlike the BBC, if the market would otherwise not support private journalistic efforts. I think it's a pretty important service to society. Although, I think Becker underestimates the potential power of internet advertising. Google has made tons of money off of it, and newspaper companies may need a similar sort of revenue generating revolution. News sites may also become sources of analysis of news from experts, rather than just the source of the facts.

Finance, Scrabble, and productivity

2009-06-23T12:37:00.000-05:00

Free Exchange challenges a Dean Baker statement in which Baker essentially claims that the current economic situation is due more in part to the housing bubble rather than the financial sector. Free Exchange points out that the two are tied together. In that vein, Mark Thoma quotes Krugman as saying that we need to get rid of so-called shadow banking.

On a lighter note, Jeff Ely applies auctions to Scrabble with interesting results.

Robert Waldeman hypothesizes that, in the 90s and naughts, the productivity increases were due to downsizing. It's an interesting idea--and quite possibly some of the story--but I think that, at best, it works in tandem with the standard theory. Who ever said that there could only be one reason for productivity increases in the 90s?

A round on healthcare

2009-06-19T15:38:00.000-05:00

In a piece of news that no doubt highlights the need for healthcare reform, healthcare costs are expected to jump 9% for companies in 2010. More on healthcare: an interesting note in the comments section at Angry Bear on Singapore. And, some thoughts on different plans, with links to more information, from ataxingmatter. E.J. Dionne at the Washington Post would prefer to have good rather than bipartisan reform. I was recently thinking about healthcare reform--Democrats (as well as many others, including health economists) claim that they can provide more care to more people while saving a lot of money. I'm not sure what problem the Republicans have with this. So I asked around, and the answer I got was the ideological problem against the concept of socialism. Not only does the argument not apply very well, but public investment hasn't been all that bad, historically. You'd think Republicans could back a single payer option considering all the horror stories of the current state of affairs, and the prospect of saving a lot of money.

Then again, I think it's mostly politics. Republicans can get some of what they want without giving up much political capital. On the other hand, Republicans need to get their names on some successful bills if they want to have a chance of winning back more seats in the future. If Democrats can claim to have fixed the system and saved a lot of money at the same time, what can Republicans run on?

Batteries, aid, old experiments, macroeconomics, and taxes.

2009-06-17T14:05:00.000-05:00

Lithium ion batteries might start getting cheaper, as we may get a mass producer in the United States. Battery news excites me.

Felix Salmon wades into the developmental economics debate of the success and failure of aid, and is plugging a new book on the subject. I wonder what Easterly would say about the book.

Tim Harford talks about old experiments, and some efforts to rethink the studies.

Steve Chapman at reasononline takes on macroeconomists saying, essentially, that the field is very politicized, and this is partially a result of it being a less definite field.

Nancy Folbre thinks about why people who support raising taxes are wealthy. I think it's more about deeply ingrained ideologies. Though, it's strange that people on the lower end of the income spectrum aren't more strongly supporting their own taxes being lowered.

Graphs, Krugman/DeLong, inflation, and psychology

2009-06-16T17:45:00.000-05:00

The recession in graphs. Felix Salmon points us to a bunch of graphs comparing the current recession to previous recessions. It's nice to see all of these together.

Krugman thinks about some notes from DeLong. I think they're interesting reads, though a bit rough.

The Fed is not concerned about falling inflation due to too much slack in production. This seems like a very AD/AS argument, and one that supports the idea of a prolonged recovery. I wonder what they think about the possibility of dipping into another recession.

There's an argument for psychology to be as accurate a science as medicine. I can't say I'm surprised, though I think psychology gets a bad rap. The story here is that psychological correlation coefficients were considered weak, when values of .3 were given, when this is actually a stronger value than "good" values in medical experimentation.

The internet, market design, and Clive Granger

2009-06-15T15:04:00.000-05:00

A recent report tries to capture the economic impact of the internet in the United States. In short, $300 billion and 3.1 million jobs. That doesn't take into account the social aspect, either, and how the internet has shaped the job market. As massive as the reported number is, it possibly understates the real impact of the internet.

In a similar vein to a past article on Varian, David Warsh thinks about economic engineers in the field of game theory and market design. The boom of auction theory combined with the economic impact of the internet makes for a large impact of relatively recent economics. There are a lot of really interesting examples of market design in the real world, and I think more recent events will only serve to highlight practical and empirical applications of economics.

I apparently recently missed the death of econometrics giant Clive Granger.

Krugman's history, South Africa, rational markets, HDMI cable, and crime trackers

2009-06-12T14:18:00.000-05:00

Also from Newmark's Door, Krugman gets history wrong. Both people on the left and the right disagree with him, though I think that's kind of an empty statement.

Relatively good news for HIV/AIDS in South Africa. The infection rate has leveled off, with reductions in certain age groups. Still, South Africa has 5.5 million HIV-positive people.

Justin Fox gives a quick summary of the history of rational markets in the last 80 years, which is also a summary of his books.

Ezra Klein and Tyler Cowen seem to think that some traditional brick-and-mortar stores are not lowering their prices in their competitive markets. HDMI cable seems to be very expensive in stores, but online is available for next to nothing. Klein further comments that online shopping is a wealth transfer from those not comfortable with online shopping to those who are comfortable with online shopping. It seems to me that those comfortable with online shopping are in larger, more competitive markets. Brick-and-mortar stores cater to a different demographic than online stores. Moreover, I think that particularly in the case of 80% and 90+% discounts, online stores sell excess stock or used stock, rather than stock just recently received from a manufacturer. I admit these are conjectures, though.

ThinkMarkets provides some links to crime tracking websites, and neighborhood information websites.

Inflation, scalping, 100 resources, protectionism, and development

2009-06-10T10:26:00.003-05:00

Free Exchange discusses the possibility of inflation as recovery comes. It seems to me that the argument is that once the recession starts to lessen, the effects of loose monetary policy will start to show, though I'm not sure why inflation will rear without the usual corresponding GDP growth. Typically, you'd think that banks spreading money around would boost GDP growth, and it'd be pretty hard to get around that.

Ticketmaster is trying to stop scalping, using paperless tickets.

Here are 100 useful resources.

Wow, this is pretty cool. The Global Trade Alert. It supposedly keeps track of all protectionist policies, worldwide.

Continuing on a previous story, Sachs v Easterly. Easterly seems to have the more nuanced position, while I feel Sachs is approaching the subject of aid money from a more political point of view. Specifically, Sachs is worried that an anti-aid position will lessen the amount of money that will go towards development goals. On the other hand, Easterly isn't against aid money, but sees it as ineffective due to problems in the field.

Finding a job, human rights, and Mish's Google talk

2009-06-09T10:27:00.001-05:00

Barbara Kiviat tells us how we can find jobs using social networking sites. Essentially, if more people knowing you're looking for a job helps, then social networking sites get the word out quickly to a lot of people who can vouch for you. I don't usually blog on this sort of article, but I think it's interesting how technology affects the job market.

On another issue I don't usually blog about--here, particularly--the SCSU Scholars argue that a problem with poverty being called a "human right violation" is that such a claim requires identifiable violators to violate rigid laws. One violates a right, or one does not violate a right, there is no inbetween. In the case of poverty, the so-called 'poverty line' is unclear, and there are no clear violators. It's an interesting argument, but my first thoughts are that prejudice also comes in degrees (arguably, a reason that it still exists in places where we consider ourselves to have moved past that), and that institutionalized corruption is largely to blame for poverty in developing nations. Institutionalized corruption is difficult to fight, though, especially when they're, almost by definition, better financed than those who would fight.

Mish gives a talk at Google on the state of the economy. Among other things, he predicts we'll dip into another recession. I've heard some people predict a second or a third dip into recession, but I haven't heard a lot of explanation for it. I think he's off base at times, but it's an interesting talk.

Education, Google monopoly, racism, and behavioral economics

2009-06-08T14:14:00.000-05:00

CalculatedRisk has graphs on unemployment rates and wages for different education levels. That things are tough for everyone isn't a surprise, nor is it a surprise that lower education levels are worse off. The degree is pretty striking, though.

Donald Marron lists three defenses Google can use in anti-trust cases. Not only is being a monopolist legal, but Google has a claim on not being a monopoly (in my opinion, the first and third reasons are the strongest ones).

David Henderson argues that free markets reduce racism by making the discriminators bear the cost of their prejudice. That is, if you refuse to do business with a certain type of person, then you're limiting the scope of your own business. On the other hand, if you're willing to do business with anyone, then you can make more money.

Geoff Riley offers his introduction to behavioral economics.

Clintonomics, macroeconomics, market research, and my search engine

2009-06-05T16:50:00.000-05:00

An interview with Bill Clinton was too long, so the section on the economy was cut. Economix has it. It's pretty interesting to see Clinton's take on the situation, and he addresses the different arguments pretty well. Many have remarked that not only is this an interesting read, but it's also strange to hear an ex-president critique himself.

Matthew Yglesias continues the discussion of what's wrong with macroeconomics, mentioning that model which don't contain micro foundations are not considered. The microeconomic foundations provide a lot of useful ways to think about macroeconomics, I think, such that it seems logical that there should be a strong relationship between the two.

Rosengren, the head of the FRB-Boston, is calling for more research in markets, and their relationships to the economy as a whole. He points out that regardless of predicting the crisis, once the crisis was upon us, many forecasters mispredicted the size and length of the recession. This recession was of a different nature of those in the past, and we need to understand it better.

Oh, and I put together a custom Google search of economics blogs, with a few foreign policy ones thrown in. Not only is it accessible at that link, but it's also on my sidebar here now. Enjoy!

Michigan, foreign policy, Varian and Google, and food prices.

2009-06-03T15:45:00.000-05:00

Might business be okay in Michigan? The Grand Rapids Press reports good news in Michigan for a machinery/furniture company, an AHL team, an advertising company, and a construction company. Michigan isn't all about cars--maybe some of those displaced auto workers will be able to find other work.

Obama makes the country a safer place, says National Security Advisor James Jones. New strategies in Afghanistan and Pakistan, as well as strategically pulling troops out of Iraq are good policies, he reports, as opposed to Guantanamo, which created more enemies than were detained. He also says that North Korea isn't an immediate threat, and that Obama's "team of rivals" is working out well so far, with everyone being heard.

Wired highlights Varian and Google auctions. I've heard a lot about these auctions in the past year or two--maybe the idea is spreading? Hal Varian certainly has a cool job.

David Leonhardt shows us price changes in certain foods over time. Looks like healthy foods are getting relatively more expensive (though, fish and meat is doing okay!).

Africa, college gards, unemployment and stocks, children, and cheap condos.

2009-06-01T14:37:00.000-05:00

William Easterly challenges Sachs in development issues, pointing out problems with Sachs's arguments, and problems in aid money. I think Easterly's position is often overstated by others--Easterly doesn't think that we shouldn't provide aid to Africa, necessarily. Easterly, instead, recognizes that much aid to Africa is wasted, and helping Africa requires some non-monetary reform.

Mike Shedlock tells us how hard the job market is for new college graduates. This isn't anything new, I think, but it is important. We know the job market is bad, Mike just tells us that it's also bad for recent college grads.

Felix Salmon shows us that unemployment and stocks are more coincident than we may have thought. I'd like to see more historical data, though it'd be understandable for unemployment to be more coincident with large changes in stock markets, unemployment being a less sensitive indicator, and both potentially being affected by other economic phenomena. Still, I'm not sure I buy it. The decline in the stock market from 2007 - 2008 alone seems within normal fluctuations and doesn't quite justify the rising unemployment rate.

Nancy Folbre warns us that kids may be the most severely effected by the recession. Parents' job loss can lead to instability in the home, which hurts education and hurts physical health due to lower quality food.

The amazing Tata is making $8000 condos. I wonder if this sort of thing will catch on in other parts of the world, as land becomes more scarce. Certainly, I would think this sort of thing would be popular among college students.

Wasting a recession, African aid, principles courses, housing, stock predictions, and Krugman.

2009-05-27T13:52:00.000-05:00

Simon Johnson echoes an idea from Rahm Emanuel: Don't let a recession go to waste. The idea is, essentially, that a recession is a time where more people are willing to back big change. I'm not sure how I feel about this--I'd be happy if things changed for the better, but how do I know I can trust legislators? Should interest groups have an opportunity to push the country around, while we're down? That being said, the five points that Emanuel listed seem like good ones, and people seem to trust this administration much more than the previous one.

A FT discussion on Africa: Is Aid Working? It's an interesting discussion, and I'm of the opinion is that aid can work, but more than giving money, steps must be taken to ensure and enhance the effectiveness of aid.

Scott Beaulier relays a message from Greg Mankiw. Despite the recent events, economics principles courses won't change significantly. The groundwork that those classes lay stays the same, though graduate courses will likely see change in the fields of financial economics or public choice.

A couple on housing. Six years of housing price gains have been wiped away in three years, in real terms. CalculatedRisk has graphs on that, as well as the price-to-rent and price-to-income ratios.

And a couple (more) on the recession: Political Calculations tries to predict changes in the stock market, based on recession probabilities. It should be interesting to watch June 16-23 and September 10-16. And, Krugman is somewhat optimistic in a recent statement, as he says the world economy is stabilizing. We've avoided catastrophe! Still, he frets about the nature of the recovery. I note this isn't getting more media coverage, like Krugman's previous, less optimistic predictions.

Asia, law, international trade, and health care

2009-05-18T10:26:00.002-05:00

Asian economies are supposed to be the first ones to recover. I suppose that's not a surprise--lesser developed countries tend to have a higher GDP growth level, so a global recession is less likely to keep their growth rates negative.

Economics is respected in law. James Kwak thinks maybe lawyers shouldn't stick so closely to economic principles, or at least they should recognize its shortcomings. I don't advocate as drastic a view as James Kwak puts forth, but I do think it's important for lawyers to understand the limitations of using the Hand formula and of traditional economic analysis.

Dani Rodrik thinks about which sorts of trade liberalization policies will have the greatest positive impact. He says that we should open agricultural trade and increase quotas for highly skilled foreign workers.

Apparently, we can pay for universal health care using sensible cost-cutting practices.

CPI, developing nations, marriage, and Wolfram Alpha

2009-05-13T16:12:00.000-05:00

Matt Nolan tells us not to confuse CPI growth with inflation. CPI is a bad indicator of the magnitude of inflation--besides, they measure different things.

Here's a vox article on trade advice for developing nations during a recession. Avoid protectionist policies. Um, I think they need more help than that.

Spendthrifts tend to marry tightwads, which contributes to marital conflict. Does this mean that, on average, couples make pretty good savings decisions? And, with less variance than single people?

Wolfram Alpha provides a new way to search for information. This looks like a really neat system, actually. It gets released this month, so check back to see it in action!

Credit rating, soda tax, education, and political definitions

2009-05-12T15:42:00.000-05:00

Free Exchange wonders what we should do about credit rating agencies. Should we have more competition to ensure better, more reliable ratings? Or, will that cause people to just shop around for ratings?

Tim Haab talks about a soda tax, and quizzes us on it. Personally, I wouldn't mind swallowing the three cents per twelve ounces (pardon the pun).

Newmark's Door points to a paper that emphasizes the importance of education in helping low-wage workers. Really, this surprises no one, but it should continue to get airtime as long as there aren't many educational options to low-wage workers.

William Easterly tries to apply more broad definitions of "liberal" and "conservative" to US politics--definitions which hold more internationally. Really, I think this isn't important. In the US, "liberal" and "conservative" are more titles than descriptive adjectives. Though it's good to be aware of what the terms actually mean, it's also good to be aware that the real definitions don't apply.

Maternity leave, Jamaica, Zimbabwe, the world, Venezuela, and the US federal budget

2009-05-11T12:12:00.001-05:00

The Economic Policy Institute points out that the United States is severely lacking in maternity leave benefits. I wonder how that affects our national birth rate.

I've heard a lot about problems in Jamaica recently--I was surprised, and I think this article reflects why I was surprised. Socialism doesn't work.

The IMF provides an update on Zimbabwe. As you might expect, things aren't going so well there.

Simon Johnson reminds us that the rest of the world matters, too. Since the US economy is 20-25% of world output, they have an impact on us.

Speaking of the rest of the world, there's apparently some research showing how Venezuela's Chavez has hurt his opposition. This isn't a surprise to those who have been following Venezuela, but it's nice to see the research.

Lastly, the Obama Administration takes a jab at trimming the federal budget.

When Krugman makes me roll my eyes.

2009-05-09T12:46:00.001-05:00

Krugman had a pretty grim outlook of the possibilities of the stress tests before, as I mentioned before, referring to an interview he had. Now he says that "everyone knew" that the banks would be all right. It seems to me that he makes a lot of leaps of logic.

Here's some other commentary on the stress tests.

Hurricane claims, grocery stores, inventive cities, recession news, and Venezuela

2009-05-08T12:05:00.001-05:00

2008 hurricane claims put Texas home insurance companies in the red. Ouch. Hurricanes continue to affect us. I guess whoever designed the hurricane insurance plans didn't know how much risk was actually involved, or those insurance companies didn't properly prepare themselves for such a situation.

Grocery stores are doing well during the recession.

Houston is one of the world's most inventive cities. We're pretty creative people! I don't think a lot of people believe this, though.

Productivity and labor costs are up. You might expect this from a recession, as companies try to focus on efficiency to weather the rough times.

Venezuela is seizing the assets of more oil service companies. I would have ended my operations there some time ago.

100 days, blogging v journalism, econophysics, and jobs.

2009-05-07T13:41:00.000-05:00

The guys at Capital Gains--Stan, Pete, and Andrew--provide their thoughts on Obama's first 100 days. Stan notes Obama's popularity, and partially attributes it to a weak opposition party. Pete, on the other hand, notes six strengths of Obama. Andrew isn't happy with how banking was handling, but admits that there is reason to be optimistic on five other fronts.

Felix Salmon compares blogging and journalism. He says that bad journalism is worse than bad blogging.

I suppose at a time when economists are being blamed for everything, it's not surprising to see more articles on econophysics. This one from Mark Buchanan. I think most economists don't take econophysics seriously, but I think it's interesting to see how other people handle similar problems--though, really, econophysics doesn't handle very similar problems as most of economics.

I like articles like this, which highlight how flexible the economy is. Though we're losing a lot of jobs, a lot of jobs are opening up, too. Sure, there may be fewer jobs created than lost, but the situation is not as dire as some may want you to believe.

History, open data, auto industry, financial planning, bachelor's degrees, and gas prices

2009-05-06T12:01:00.002-05:00

A new blog on economic history.

Hey, world bankers like open data too! Those are great guys.

Speaking of which, Hal Varian used Google Trends to make better forecasts.

James Hamilton is still on the case, reporting about the declining auto industry.

ESPlanner, a long term financial planning website, though the site isn't always working.

Some community colleges offer bachelor's degrees. I like that degrees are becoming less expensive, but they shouldn't be easier to get. This is the classic Spence problem.

Mark Perry gives us a look at real gas prices. It looks like a falling trend since 1919, with some big spikes thrown in. And, note that the spikes take us to about back to the 1919 level anyways.

Excess demand for money, manufacturing news, grid parity, and Austrian BC theory

2009-05-05T10:55:00.001-05:00

Nick Rowe on the importance of excess demand for money. This directly relates to what the Fed has been doing for quite some time to help the current crisis. Nick has had a lot of really good posts lately, it seems to me.

Mark Perry had optimistic news on the manufacturing front. It seems like these numbers will return to normal pretty soon, which makes me think that more focus will turn towards worsening labor numbers. Though, we're only six months or so away from the peak. Six months seems like a relatively short amount of time considering how long this had dragged out already.

John Quiggin reports that some solar power companies may be approaching grid parity, or the point where solar power is as cheap as conventional power.

Another good post from John Quiggin, he talks a little about the history of the Austrian Business Cycle, and why it isn't really taken seriously anymore by more empirical-minded economists.

Development, crowding out, NewDeal2.0, economic terminology, and China,

2009-05-04T12:38:00.002-05:00

Here's a nice story about a UCLA grad student making a difference in the world.

The Skeptical Optimist points out that the "crowding out" theory is bunk.

Here's an interesting website providing commentary from political scientists, economists, historians, and more. NewDeal2.0.

Uwe Reinhardt tells writes an article mostly directed at economists, I think. Some our terminology shouldn't is misleading when used in public discourse. We should be careful in using it, and others should take it with a grain of salt.

Is the Chinese economic model more effecting than the US economic model? Uh, no. Despite China's growth, models show pretty clearly that underdeveloped economies will tend to have higher growth rates than developed economies. This isn't a function of types of economic systems.

Fuel efficiency, forecasts, gendered lob losses, April economic summary, and GDP growth rates

2009-05-01T12:45:00.000-05:00

Fuel efficiency raises demand, not lower it. Efficiency lowers cost, which raises demand in the long run. I keep thinking that the short run effect should be modeled as a rise in supply, but the narrative doesn't quite fit.

Simeon Djankov says not to pay attention to the forecasts. They lag behind the news, and are thusly not worth much.

Job losses for different genders. Men have lost many more jobs than women, net. Women seem to have more recessioon-proof jobs.

April economic summary in graphs. It seems to me that most of them tell a similar story.

GDP growth rates for beginners. This is really a well-written and easy to understand post, I think.

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

2009-04-30T16:33:00.003-05:00

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.

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

2009-04-29T12:05:00.000-05:00

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.

Stress tests, immigration, trade balances, R&D

2009-04-28T15:15:00.000-05:00

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.

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

2009-04-27T12:56:00.001-05:00

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.

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

2009-04-24T16:03:00.000-05:00

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?

The CBO announces its panel of economic advisors.

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

2009-04-23T16:20:00.000-05:00

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!

Local stuff, business models, infrastructure

2009-04-22T18:04:00.003-05:00

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.

Oil prices, health care

2009-04-21T15:29:00.000-05:00

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.

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

2009-04-20T21:13:00.001-05:00

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.

World Economic Forum on Latin America, Bernanke, charter schools

2009-04-17T17:38:00.000-05:00

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.

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

2009-04-16T12:01:00.000-05:00

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.

Krugman on the IMF and stress tests.

2009-04-15T12:30:00.004-05:00

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.

First:

"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.

Second:

"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.