Obama, unemployment, financial modelling, and a book

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.

Clintonomics, macroeconomics, market research, and my search engine

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.

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!).

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

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.

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

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

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

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

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

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

The CBO announces its panel of economic advisors.

World Economic Forum on Latin America, Bernanke, charter schools

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

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

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

Just a few more things on my mind.

This mention of growth of the Chinese hat industry sticks out at me, only because I happen to know a guy who heavily invested in hat factories in China, buying up a few factories back in May or June. He must be doing very well, now!

Here's an interesting article pointing out that helping developing countries (in particular, countries to the south of us) is beneficial to the United States, due to positive impacts on trade. It's a point that most people outside of Economics haven't understood, it seems.

While I don't agree with everything the Economic Policy Institute believes, I think their post-election letter, Wall Street rescue plan, and their agenda for "Shared Prosperty" are interesting reads.

Moving onwards.

I've created a page on my website that includes links to some of the best commentary about the financial crisis around. With so much opinions on the matter, it's difficult to keep up with it all, difficult to figure out what's useful, and it kind of crowds out other interesting pieces of information. I'll keep that page updated with information or links to information, and try to keep this blog for other stuff (though, chances are there will be interesting financial crisis news I'll want to mention on here as well).

Robert Waldmann, on the Angry Bear, refutes the claims of the previously mentioned physicist. While Waldmann brings up good points, I don't think he refutes all of the claims with satisfaction. In a similar vein, a University of Houston physicist writes "What Economists should learn from Econophysics."

Now for a few links from Dani Rodrik. He's a Harvard professor specializing in developmental issues. He points to a useful site for development data. But, he's sometimes silly, such as linking this economics rap (I'm kind of impressed). He also sometimes takes on fellow Harvard professor Greg Mankiw. He also has a number of posts pointing out that subsidies can lower prices, not raise them (depending on whether the country is a net importer or a net exporter). MyC4 looks like a Kiva-type site. That's good stuff. And, a ranking of econoblogs, updated with data from the past 90 days. The other common ranking I knew of is here.

Here is a video archive of London School of Economics lectures. Nice stuff. I'll eventually make a webpage with economics podcasts and videos.

Phil Izzo at the Wall Street Journal tells us that most lawmakers don't have economic educations. Well, I think we all knew that already, but it's particularly pertinent when they're trying to fix a financial crisis.

It's interesting to note the net present value of a JD. I wish I could also find the study that shows the incidence of JDs in various countries.

I Bits is an interesting blog, and Laura Holson tells us that wireless broadband boosts economies.

Lastly, a couple of Slate articles I meant to post on here a long time ago. A discussion about automobile subsidies, and a commentary on Obama's law exams he used to give.

Enjoy!

The economy and presidential politics according to Dilbert.

Well, not exactly. Scott Adams, creator of Dilbert, polled AEA economists.

The CNN report.
Adams posts about it on his blog. 1, 2.

The gist? Economists favor Obama on the majority of issues. Also, economists tend to be Democrats, though Independent economists also favor Obama.

I'm not surprised Education is the top issue for economists (I'm sure, that most AEA economists work in academia is a factor), but I am surprised that number two is Health Care. Do we have a lot of geriatric economists? I would have thought international trade, energy, and innovation would be bigger issues for economists.

Still, interesting stuff.

More interesting things

It's been a tumultuous time around the world. Zimbabwe has just been a mess! Sadly, no one decided to do anything about it until after their elections were over.

Anyways, everyone knows oil prices have been high. Iraq wanted to try to get some help producing the stuff, but I've heard that has not met much success yet. It would be nice to get higher supply now, but if the situation is anything like how Heilbroner describes in Economics Explained, then we have a rough ride ahead of us regardless, with no easy end in sight (interesting bits on pages 181 and 207, regarding the 70s).

By the way, if you think everyone's doing poorly and losing money, take a look at McDonald's and Walmart. Inferior goods are an interesting thing.

And for those curious, Business Week had an interesting article to explain why it takes so long to call a recession. They don't really explain it very well, but it's still an interesting read.

Lastly, a Newsweek article asks if the president has the power to fix the economy.

Interesting news.

I think this is an interesting news bit that won't get enough air time, but the EU antitrust chief is apparently a fan of open standards. While he may push for open standards, the statement probably is not going to have much of an effect on actual business practices. Still, the more people who are aware of open options, the better.

I predicted before that the recession, if there was one, ended at least a month ago (not that we're recovering already, but we're probably in a trough). It's worth noting, though, that while businesses may be bouncing back or adjusting, the adjustment period is the part of the cycle that is most painful on the population. We'll feel the effects of the recession for maybe six to nine months after the recession is over (again, the numbers are my prediction). Some evidence is recently provided by Paul Krugman in his blog. And, some evidence for why I think we're in a trough rather than a recession (this is not nearly exhaustive): positive growth (more recently it's been adjusted up, too) and strong or seemingly unaffected production. And, according to recent news, the Fed and gold/commodity prices might agree with me. Note that I'm not saying the economy is doing well, just that the term 'recession' is not an accurate description of the current economy.

And, some interesting oil-related articles. Krugman, NYT, Mankiw, Forbes. I find that Forbes article particularly interesting because it mentions that Bernanke's implication that rates will rise in the future has strengthened the dollar, which in turn has lowered the cost of oil.

I thought this was interesting: Economists and their investments. They're apparently not bad.

Lastly, can I talk about economics and not politics? Yes, but it's more difficult when we're so close to elections. I'll just mention that I like Obama's economic advising staff, and it just got a boost. Obama should consider himself lucky, I think, and if this sort of thing was more publicized, Obama would have the edge on economic policy issues. Not that presidents have much control over that sort of thing, but it's one of those things people talk about.

Edit: Looks a little more definitive that Bernanke agrees with me.

Our next president

No, I'm not going to make any predictions, nor am I going to laud my favorite candidate.

I met two economists today, and we got into an interesting discussion. Eventually, they asked me the question, "Should our next president be a monetarist or a fiscalist?"

Caught off guard, I offered a throw-away answer, a joke. They chuckled. But the question isn't so easily answered. The terminology was easy enough to see through--should our next president try to use monetary policy or fiscal policy to keep the economy on its feet?

The question, of course, is inherently flawed. The president does not have direct control over either set of policies. Monetary policy is controlled by the Federal Reserve, and fiscal policy is the domain of congress. That is, of course, academic, and avoid the issue. Regardless, the president has sway--potentially strong sway--over both organizations, and thusly the policy it produces. Still: should our government try to use fiscal policy or monetary policy to keep our economy strong?

The answer I ended up going with was a monetarist. It's a good answer, and I think I want to stick with it. In the long run, there is evidence to show that fiscal policy has a minimal effect on the economy. That, in the long run, it's all a wash. So, monetary policy is the way to go, and thus was the support for my answer. Solid support, and the couple I met showed their approval with smiles and nods. I think we all made a fatal assumption, though: that our next president would know how to properly use said policy wisely. Maybe a fiscalist president is a safer bet for the country.

I haven't taken the time to do the research, but I wouldn't be surprised if we've never had a president with a degree with Economics.

I know, your faces are filled with shock.

This leads to a question I've been pondering: why is fiscal policy so weak? Shouldn't it make a difference where billions of our dollars are going every year?

The answer is, of course, yes.

So what am I getting at? Over the long run, our politicians go back and forth between policies. Sometimes it's a Democrat running things, other times it's a Republican, and it's certainly never the same. Back and forth, over time, it's a wash. A post-1900s president with nothing but good economic policy is hard to find, and he'd also be pretty unpopular. Go figure. More than that, most politicians (and congressmen) don't know anything about economics at all. Monetary policy is a different story. They, at least, have some training in their field. More than that, governors of the Fed tend to last for a pretty long time. Fed governors have a pretty decent track record past the Great Depression. Congress, on the other hand, is notorious for horrendous fiscal policy on all sides of the political sphere.

If the controllers of fiscal policy were not only educated, but rigorously tested in their fields and tenured (that is, they don't have to worry about politics as much), then fiscal policy would probably be much stronger. Moreover, the strength would probably lead to it making a difference and helping the economy out.

A novel idea, to be sure.

So, as it stands, I'm for a monetarist president, based on the overly optimistic assumption that the president will know what he's doing. Would a fiscalist president help? It would to some extent, though congress has too much power to let a fiscalist president have too good a time.

My initial response, though, was probably the best.

"We just need any economist."