Are private forecasts useful?

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!

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!

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

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

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

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

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

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.

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

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

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

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

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

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

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.

Good bye, Paul Samuelson.

Thank you for formalizing Economics.

Recession, tax revenue, the Economist, and Monopoly.

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

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.

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.

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.