1. The Ravenna mosaics, most of all at St. Vitale.
2. Monreale, the Norman church outside of Palermo, Sicily.
3. Matthias Grünewald’s Isenheim altar, in Colmar, France.
4. Tiepolo’s paintings in the Residenz, in Wurzburg.
I much prefer any of those to the Mona Lisa, and to my prejudiced taste they are all among the very greatest of artistic masterpieces. They are all worthy of pilgrimages.
1. Romanian uh-oh.
2. The beloved FT Alphaville launches a Tumblr.
3. The new Brian Doherty book on Ron Paul.
4. James Crabtree worries about India and India facing stagflation. This whole matter is already looking worse.
5. The bank jog, a deadly picture.
6. How much will global aging slow economic growth?
Mauldin’s claim is that we are in what he calls the “endgame,” meaning that the Keynesian option of increasing government borrowing is no longer available to European countries. The only willing lenders are banks, which in turn need to be propped up, and ultimately they can only be propped up by printing money.
My take-away from Mauldin is that, contra the mainstream media narrative, the real dilemma in Europe is not fiscal–deciding whether to maintain government spending or not. The real dilemma is financial–whether to recognize losses and absorb defaults (by both governments and banks) or turn loose the monetary printing presses.
Creo que si. It is increasingly clear that Spain’s recent “austerity” has been forced, rather than a voluntarist mistake. Here is yet more wisdom from Scott Sumner:
… if I thought higher demand was needed, I’d recommend that the fiscal authorities raise their inflation target from 2% to 4%. Oddly, I’ve never seen a fiscal proponent make that recommendation. Why not? My hunch is that deep down they know that fiscal authorities can’t really control inflation. But in that case, how can they control aggregate demand?
Is the shortage [sic] of dollars in China the real global financial ticking time bomb? This post, from Isabella at FT Alphaville, is essential reading. The world will not be safe again until FT Alphaville is neutered into irrelevance, unfortunately that won’t be anytime soon.
“The euro will leave Greece before Greece leaves the euro.”
On Monday, bank deposit withdrawals from Greece were about 700 million euros.
In survey data collected as part of the study, Washington, D.C.–based migrants from El Salvador report that they would like recipient households to save 21.2 percent of remittance receipts, while recipient households prefer to save only 2.6 percent of receipts.
This is one reason why emigrant workers do not send more back home all at once, namely that the sender does some ex ante forced saving on behalf of the recipient, who otherwise is not trusted to do it. Remitters also send relatively small sums — typical is $300 — but they send many times a year (16.9 times on average, in one study, despite some fixed costs of sending). That is to stop the recipient from spending all of the aid at once.
Perhaps you have noticed that cross-national and multilateral aid is also often doled out in multiple parts, rather than all at once.
Is this socially optimal? Maybe not. Is this nearly universal? Possibly so.
The quotation is from Dean Yang, here is more (pdf, see p.12).
Still, I find this interesting:
M2 money supply growth rates are plunging in Greece (down -16.8% y/y through February), Spain (down -4.7%), and Portugal (-3.8% through January). It is up only 1.3% through February in Italy.
Germany’s M2 is up 7.5% y/y through February. Some of that growth is coming from Greece, Portugal, and Spain, where money supplies are falling as depositors move their funds to banks they deem to be safer in Germany.
On 30 April, the housing minister, Grant Shapps, announced that the government was creating a nationwide “beds in sheds” taskforce, to identify the thousands of sheds and outbuildings being illegally rented out, often to illegal migrants. He said it was “a scandal that these back-garden slums exist to exploit people, many of whom … find themselves trapped into paying extortionate rents to live in these cramped conditions”.
The story closes with this:
There are only two toilets, which she says, “is not at all enough”. She is looking forward to returning to Hyderabad, where the living conditions will be much better.
No doubt you have heard how the leadership of China is meritocratic and composed of technocrats with PhDs. Minxin Pei suggests that there is less than meets the eye.
…Contrary to the prevailing perception in the West (especially among business leaders), the current Chinese government is riddled with clever apparatchiks like Bo who have acquired their positions through cheating, corruption, patronage, and manipulation.
One of the most obvious signs of systemic cheating is that many Chinese officials use fake or dubiously acquired academic credentials to burnish their resumes. Because educational attainment is considered a measure of merit, officials scramble to obtain advanced degrees in order to gain an advantage in the competition for power.
The overwhelming majority of these officials end up receiving doctorates (a master’s degree won’t do anymore in this political arms race) granted through part-time programs or in the Communist Party’s training schools. Of the 250 members of provincial Communist Party standing committees, an elite group including party chiefs and governors, 60 claim to have earned PhDs.
Tellingly, only ten of them completed their doctoral studies before becoming government officials.
Simply put, Chinese institutions are not as good as those in say Mexico. Thus, China will not overtake Mexico in terms of GDP per capita any time soon, hence Chinese growth rates will fall. All we are seeing today is the logic of the Solow model in action.
A few times recently Paul Krugman has raised the issue of structural unemployment in the Great Depression, so I thought I would offer a look at what has been written on the topic. Here is Richard J. Jensen, from a survey article:
Economists agree that Keynesian stimuli would not have helped structural or hard-core unemployment, only cyclical unemployment. As Table 1 suggests, about half of the unemployment was cyclical from 1931 through 1933; it was then that stimulus was needed and might have worked. By 1933, the appearance of a large, new, structural/hard-core element raised the natural level of unemployment from the 5 to 6 percent range to 12 to 15 percent. If a Keynesian stimulus had been tried and it had eliminated cyclical unemployment, the remaining unemployment still would have been io to 15 percent. Further fiscal or monetary stimuli would have resulted in inflation.
Later he moves directly to the key question:
…we need to discover how the war cured hard-core unemployment permanently. On the supply side, the growth of high schools and colleges, the postwar draft, and Social Security retirements removed young and old from the labor force. Wartime training and experience, in industry and in the military, made workers more productive, and upgraded skills so that the supply of unskilled labor was much smaller. In terms of efficiency wages, employers reshaped jobs to suit the skills and increase the productivity of available workers. They had to use men (and women) whom they would not have dreamed of hiring a few years before.
Personnel management became even more important. The number of industrial-relations staff rose from 2.5 per 1ooo employees in 1937 to 8.o in 1948. They were charged with improving productivity despite the extraordinary shortage of manpower, the high quit rates, the government-imposed wage freeze, and the new strength of labor unions. They dropped categorical restrictions against the poorly educated, the unemployed, women, the old, the handicapped, and sometimes, in spite of intense resistance, blacks. Recruitment of new workers became an art form, with sound trucks blaring in the streets beseeching people to come to work and earn big money. Jobs were restructured so that fewer skills were needed. Intensive in-shop and in-school training programs reached millions. Anyone with a modicum of skill was rapidly promoted, even to the status of foreman or instructor. The results further justified the use of efficiency-wage procedures, but this time efforts were made to find the right niches for workers who had been “hopelessly unemployable” in the 1930s.
In other words, the path out of high unemployment involved much more than a mere reflation of nominal values. (By the way, when it comes to terminology I might not use the phrase “structural unemployment,” but it also is not “simple cyclical unemployment.” I would say that in some circumstances the traditional distinction between cyclical and structural unemployment breaks down, but note that in terms of its parent literature this piece is using the terms properly, even if they sound somewhat off in a 2012 blogosphere context.)
In any case, history suggests that stimulus policy has to take some very specific forms to reach those “called cyclically unemployed by some, structurally unemployed by others” unemployed workers and that is the practical upshot.
Another practical upshot is that you still can believe in labor market hysteresis, as presented by DeLong and Summers. Without some analysis like the above, the DeLong/Summers claims are otherwise contradicted by American post-Depression productivity once joblessness lifted. Where were the long-term scars? Well, they were fixed but it wasn’t easy. So the relevance of hysteresis can be saved, but we still are left with proper stimulus being very difficult to do, unemployment being quite sticky, and proper policy requiring lots of structural attention. The Great Depression is evidence for all of those views, not against them.
Here is one more bit, with a sad sting at the end:
The war, by removing millions of prime men from the labor market, by restructuring the work process, by subsidizing wages, and by massive retraining, finally gave the private sector the methods and the incentives to rehire the hard-core. Never since has hardcore unemployment affected more than one worker in a hundred.
Michael A. Bernstein’s book, The Great Depression: Delayed Recovery and Economic Change in America, 1929-1939, also considers the significant role of structural unemployment (don’t forget my taxonomic caveat) in the Great Depression.
It is important to learn from this literature rather than dismiss it.
Or should that read what is “austerity”?
The May 11 IHT has a headline “German line on austerity appears to soften,” and the article is about monetary policy and inflation targeting (I don’t see it on line). While monetary policy has ramifications for fiscal policy and output, I would not refer to tight money as “austerity,” in spite of the mood affiliation.
I googled “austerity define” and Wikipedia reports this:
In economics, austerity is a policy of deficit-cutting, lower spending, and a reduction in the amount of benefits and public services provided.
Notice that is mostly about spending, and notice the word “and.” I find this definition confusing, especially if one interprets the “and” strictly. Tax hikes are then mentioned:
Austerity policies are often used by governments to try to reduce their deficit spending while sometimes coupled with increases in taxes to pay back creditors to reduce debt.
That seems to make the “tax hikes” something other than “austerity policies.” The Macmillan on-line dictionary makes it all about spending and not about taxes at all.
A financial source in the top ten, Investopedia, reports this:
A state of reduced spending and increased frugality in the financial sector. Austerity measures generally refer to the measures taken by governments to reduce expenditures in an attempt to shrink their growing budget deficits.
That starts with spending, then shifts to the financial sector (?), and the second sentence shifts back to spending. That’s confusing too. How do higher taxes fit in? What are the baselines?
Krugman I do not think has offered a definition or measure of austerity (he spends more time doing a link-less attacking of others, including possibly myself, for claims about austerity which he does not document anyone making or they simply did not make), but he seems to think that automatic stabilizer-driven spending increases do not count as spending increases for the purpose of defining austerity. Neither does spending on bank bailouts count for him.
I could imagine a definition something like this: “the net effect of all government fiscal policies on ngdp, relative to the baseline of a stabilized path for expected ngdp growth.” Or should it read: “…relative to what will happen to ngdp growth in the absence of budgetary changes”? I wonder if some Keynesians have in mind the baseline of “the expansionary policies which I think would be appropriate,” in which case doing less than the Keynesian optimum is always a form of austerity. Angus notes correctly that clear definitions of austerity are hard to come by.
In Bucharest I cannot alas consult my library for further definitions.
In any case, austerity is a misleading and often misunderstood word. It is better if we describe policies more concretely, and in fact that is not hard to do. Furthermore, insisting on a clearer accounting should not be equated with “austerity denial.”
1. An old but still interesting Bertola and Drazen paper on fiscal policy (pdf): “We propose and solve an optimizing model which explains counterintuitive effects of fiscal policy in terms of expectations. If government spending follows an upward-trending stochastic process which the public believes may fall sharply when it reaches specific “target points,” then optimizing consumption behavior and simple budget constraint arithmetic imply a nonlinear relationship between private consumption and government spending. This theoretical relation is consistent with the experience of several countries.”
2. Should Greece default now or later?
3. Bahrain and Saudi Arabia to move toward a closer union.
4. 2005 me on the end of the euro; “It would be ironic if the strongest argument against the Euro was simply the eventual need to dissolve it.”
More than half of all police officers in Greece voted for pro-Nazi party Chrysi Avgi’ (Golden Dawn) in the elections of May 6. This is the disconcerting result of an analysis carried out by the authoritative newspaper To Vima (TheTribune) in several constituencies in Athens, where 5,000 police officers in service in the Greek capital also cast their ballot.
Here is more, via Chris F. Masse.
An interesting piece from the Boston Globe on “genoeconomics”:
Though the name wasn’t coined until 2007, genoeconomics flickered briefly into existence once before. In 1976, the late University of Pennsylvania economist Paul Taubman published the results of a study in which he followed the financial lives of identical twins, and found there were curious similarities in how much money they made as adults. Taubman concluded that between 18 percent and 41 percent of variation in income across individuals was heritable.
It was a startling conclusion, and one that Taubman’s fellow economists didn’t quite know what to do with. One joked that Taubman’s findings meant the government might as well shut down welfare, since clearly some people would remain poor no matter what.
….After Taubman, the idea that genes had an important role to play in decision-making was largely abandoned in the world of economics. But with the completion of the Human Genome Project in 2000, the first full sequence of a human being’s genetic code, people started wondering if perhaps it would be possible to push past broad heritability estimates, of the sort that Taubman generated, and figure out what part of a person’s genome influenced what aspect of his behavior.
…Over time, social scientists started coming to terms with the fact that even the most heritable of traits, such as height, were influenced not by one or two powerful genes, but by a combination of hundreds or even thousands—and that environmental factors, like a person’s upbringing, play a complex role in determining how those genes are expressed. “Every single direction has proved to be less promising than people originally expected,” said Laibson.
… hope lies in a new approach to data-gathering that is only just getting underway, wherein researchers look for patterns among thousands, and even millions of people—numbers that are only just becoming possible thanks to massive collaborations linking gene studies being conducted all over the world.
The researchers in question, Daniel Benjamin, David Laibson, David Cesarini and others, seem worried about the possibility of tracing attributes and behavior to genetics. Most of the big news is out already, however, and more easily observed in phenotype than genotype.
For more on the new approach see The genetic architecture of economic and political preferences.
