I find this paper (pdf), by Anna Cieslak, Adair Morse, and Annette Gissing-Jorgensen, quite scary.  Do you?:

We document that since 1994 the US equity premium follows an alternating weekly pattern measured in FOMC cycle time, i.e. in time since the last Federal Open Market Committee meeting. The equity premium is earned entirely in weeks 0, 2, 4 and 6 in FOMC cycle time (with week 0 starting the day before a scheduled FOMC announcement day). We show that this pattern is likely to reflect a risk premium for news (about monetary policy or the macro economy) coming from the Federal Reserve: (1) The FOMC calendar is quite irregular and changes across sub-periods over which our finding is robust.  (2) Even weeks in FOMC cycle time do not line up with other macro releases. (3) Volatility in the fed funds futures market and the federal funds market (but not to the same extent in other markets) peaks during even weeks in FOMC cycle time. (4) Information processing/decision making within the Fed tends to happen bi-weekly in FOMC cycle time: Before 1994, when changes to the Fed funds target in between meetings were common, they disproportionately took place during even weeks in FOMC cycle time. In addition, after 2001 Board of Governors discount rate meetings (at which the board aggregates policy requests from regional federal reserve banks and receives staff briefings) tend to take place bi-weekly in FOMC cycle time. As for how the information gets from the Federal Reserve to the market, we rule out the Federal Reserve signaling policy via open market operations post-1994. Furthermore, the high return weeks do not systematically line up with official information  releases from the Federal Reserve or with the frequency of speeches by Fed officials.  We end with a discussion of quiet policy communications and unofficial information flows.

Say it ain’t so!

The pointer is from BH, a loyal MR commentator.

The IMF picks 25 top young economists

by on August 27, 2014 at 3:59 pm in Economics | Permalink

The list is here, I wonder how young is young, in any case overall a very good set of names.  Other than Piketty and Rey, they all teach in the United States.  John List is one person I would have added, Jesse Shapiro is another, plus I dare them to try out their judgment on someone who is not at a top ten school and then track how that person does over time.

Who else is missing?

In 1997, the response rate to a typical telephone poll was a healthy 36 percent, according to Pew. By 2012, it had fallen to 9 percent. Fortunately, many surveys appear to be doing a good job of weighting the answers of people who do respond, to make up for those who don’t. Still, the long-term reasons for concern are clear: People who are more likely to avoid polls, such as anyone born after, say, 1980, are different from those who answer them.

The response rate of the Labor Department’s monthly jobs survey is far higher (about 89 percent) than that of a political poll, but it has also fallen (from 96 percent in the 1980s). Not surprisingly, the people who do not respond have different experiences in the job market than those who do.

That is from David Leonhardt.  One implication is that actual unemployment may be higher than we are measuring.

Assorted links

by on August 27, 2014 at 11:58 am in Uncategorized | Permalink

1. The benefits of early work experience are declining, especially for men.

2. Interview with Pete Best, who is happy and still alive.

3. 38 maps of the global economy.

4. How the Japanese messed up Pearl Harbor.

5. Very good (and complex) FT Alphaville post on long-term unemployment this time around; “…about 10 per cent of men who are laid off en masse are never employed again. Intriguingly, the overall health of the economy at the time of getting laid off does not seem to play much of a role, although age does.”

6. Carrying costs > liquidity premia, unsheared sheep edition.  And can a panda fake pregnancy for better treatment?

Big Sugar

by on August 27, 2014 at 7:09 am in Economics, Food and Drink, Political Science | Permalink

From Bloomberg:

Because of a plunge in U.S. sugar prices amid a hefty crop of sugar beets and cane, the Agriculture Department estimates that it may have to buy 400,000 tons of sugar from processors who might default on $862 million in government loans. Sugar producers have the option of repaying the loans either with cash or with their harvests if prices fall below a certain level.

…The sugar, by law, would be sold to ethanol refiners, who would pay 10 cents a pound less than the government paid — an inducement needed to get the ethanol industry to use the sugar. Aside from the ridiculousness of piling one ill-advised subsidy atop another, this would produce a loss of $80 million for the U.S. Treasury. Some industry analysts estimate the government may have to buy as much as 800,000 tons of sugar to restore balance to U.S. stockpiles, potentially doubling the loss.

Police Killings

by on August 27, 2014 at 7:08 am in Data Source, Economics, Law | Permalink

Richard Epstein writes:

Police officer deaths in the line of duty, year to date for 2014, were 67 of which 27 were by gunfire. For the full year of 2013, the numbers were 105 total deaths, with 30 by gunfire. It would be odd to say that police officer deaths (which are more common than deaths to citizens from police officers) should not count…

It would indeed be odd to say that police officer deaths should not count, which is perhaps why no one says this. Police officer deaths are counted but the literal truth is that we don’t count deaths to citizens. No one knows for sure exactly how many citizens are killed by police because the government doesn’t keep a count. Draw your own conclusions. What we do know, is that it is not true that police officer deaths are more common than deaths to citizens from police officers. Not even close.

105 officers were killed in the line of duty in 2013 but to be clear this includes heart attacks, falls, and automobile accidents. Deaths due to violent conflict include 30 deaths by gunfire, 5 vehicular assaults, 2 stabbings and a bomb. To be conservative, let’s say 50 deaths to police at the hands of citizens.

According to the FBI there are around 400 justifiable homicides by police every year, where justified is defined as the killing of a felon by a law enforcement officer in the line of duty. But note that if the killing of Michael Brown is found to be unjustified it won’t show up in these statistics.

The best information we have of citizens killed by the police, believe it or not, are private tabulations from newspaper accounts. On the basis of one such collection, DataLab at FiveThirtyEight estimates that police kill 1000 people a year.

Thus, killings by police seem to be on the order of 10 to 20 times higher than killings of police.

Santa Cruz notes

by on August 27, 2014 at 2:36 am in Food and Drink, Travel | Permalink

The town square is lovely, even though they removed the sloth for fear he would electrocute himself.  The population is friendly, the weather is perfect, and there are few sights.  Unlike in much of South America, danger is not a concern.  The small children who hang out in the central square seem to think that a full embrace of a pigeon is a good idea.

The food is excellent and yet you never hear about it.  Try El Aljibe for local specialties (peanut soup, or duck and corn risotto, with egg on top), and Jardin de Asia for Amazonian Andean Peruvian Japanese Bolivian fusion.  It is hard to find the Cochabamba version of Bolivian food that has made it over to the U.S.   The steak here is decent but not as good as Argentina or Brazil.

The taxi equilibrium is that you do not ask in advance what the fare is, because that indicates you do not know.  Be confident, and you will be surprised how little money they ask for.

If you had to pick one city to represent South America as a whole, Santa Cruz might be it.  You can feel elements of Brazil, Argentina, Venezuela, and yes even Bolivia here, all rolled into one.  The proportions of fair-skinned, mestizo, and indigenous people mirrors the Continent as a whole more than the Altiplano.  The secession movement here seems to have failed.  Amazonian indigenous peoples and Guarani are common here.

Arriving at the airport at 3:30 a.m. involves a nightmarish wait.  There is not much air pollution.  I didn’t meet a single person in the service sector who spoke English.  People in Santa Cruz seemed fairly happy relative to their per capita income.

You can study the economic development of China by visiting Bolivia.

In the new NBER paper on this topic by Daron Acemoglu, David Autor, David Dorn, Gordon H. Hanson, and Brendan Price, we see the evidence for this proposition piling up:

Even before the Great Recession, U.S. employment growth was unimpressive. Between 2000 and 2007, the economy gave back the considerable gains in employment rates it had achieved during the 1990s, with major contractions in manufacturing employment being a prime contributor to the slump. The U.S. employment “sag” of the 2000s is widely recognized but poorly understood. In this paper, we explore the contribution of the swift rise of import competition from China to sluggish U.S. employment growth. We find that the increase in U.S. imports from China, which accelerated after 2000, was a major force behind recent reductions in U.S. manufacturing employment and that, through input-output linkages and other general equilibrium effects, it appears to have significantly suppressed overall U.S. job growth. We apply industry-level and local labor market-level approaches to estimate the size of (a) employment losses in directly exposed manufacturing industries, (b) employment effects in indirectly exposed upstream and downstream industries inside and outside manufacturing, and (c) the net effects of conventional labor reallocation, which should raise employment in non-exposed sectors, and Keynesian multipliers, which should reduce employment in non-exposed sectors. Our central estimates suggest net job losses of 2.0 to 2.4 million stemming from the rise in import competition from China over the period 1999 to 2011. The estimated employment effects are larger in magnitude at the local labor market level, consistent with local general equilibrium effects that amplify the impact of import competition.

There are more details in this version of the paper than in an earlier version cited on this blog.  Here is my related column on economic contraction, from a few days back.

Tuesday assorted links

by on August 26, 2014 at 12:45 pm in Uncategorized | Permalink

1. The FAA vs. model airplanes.

2. What it’s like to be in a plane crash.

3. Larry Summers on reading.

4. The eleven funniest papers in the history of economics?  How about that one that got published twice (identically) in the QJE?

5. Beware tall men.

6. Political diversity will improve social psychological science (pdf), coverage of that paper here.

From David Cay Johnson:

From 2000 to 2012, American workers as a whole had a tough time, as population grew much faster than new jobs and many people gave up looking for work. There was one major exception: jobs paying $100,000 to $400,000 (in 2012 dollars).

This is what I call America’s new prosperous class. Many of these workers have an advanced degree. They no longer struggle, but they continue to work because their wealth is far from adequate to support their lifestyles.

The number of prosperous-class jobs soared to 10.8 million, an increase of 2.1 million since 2000. That is almost 10 times the growth rate of jobs paying either more or less.

Most astonishing is how much of the overall increase in wages earned by the 153.6 million people with a job in 2012 went to this narrow band of very well paid workers: Just 7 percent of all jobs pay in this range, but those workers collected 76.9 percent of the total real wage increase.

For the pointer I thank Mary Ray.  (p.s.: the paperback edition of Average is Over is out today).

Mr Gan estimates that China’s existing housing stock is already more than sufficient for every household to own their home but developers are still supplying well over 15m new units a year.

There is more here from Jamil Anderlini in the FT, more than just the usual.

An MR reader refers me to this interesting paper (pdf) by Max Gillman, Michal Kejak, and Michal Pakoš, the abstract is here:

Rietz (1988) and Barro (2006) subject consumption and dividends to rare disasters in the growth rate.  We extend their framework and extent consumption and dividends to rare disasters in the growth persistence.  We model growth persistence by means of two hidden types of growth slowdowns: recessions and lost decades.  We estimate the model based on the postwar U.S. data using maximum likelihood and find that it can simultaneously match a wide array of dynamic pricing phenomena in the equity and bond markets.  The key intuition for our results stems from the inability to discriminate between the short and the long recessions ex ante.

In essence there is tail uncertainty about the length of the recession.

Markets in everything

by on August 25, 2014 at 4:05 pm in Food and Drink, Law, Uncategorized | Permalink

It’s a nail polish that doubles as a way to thwart sexual assault – and it’s being developed at N.C. State University: Undercover Colors.

The chemistry startup, developed by undergrads, is creating a nail polish that, when exposed to date rape drugs, changes color.

The full story is here, via Catherine Rampell.

David M. Levy and Sandra J. Peart have unearthed some very valuable, hitherto undiscovered material in the history of economic and political thought, as well as the history of American philanthropy.  I have followed this paper through several drafts, with great enthusiasm, and am pleased to report it is now on-line.  The abstract is here:

In 1960 the Thomas Jefferson Center [TJC] of the University of Virginia applied for a “massive” grant from the Ford Foundation. Although James Buchanan, Warren Nutter and Ronald Coase had all received grants from Ford, Ford turned down their proposal because of the Center’s unified “point of view.” We report on correspondence and private discussions of the events. Following the submission of their proposal, Buchanan, Nutter and then President of UVA, Edgar Shannon met with representatives of the Ford Foundation, Tom Carroll and Kermit Gordon. Buchanan concluded that the “reaction of the Ford representatives must be considered to have been almost wholly negative.” The crux of the matter, in Gordon’s assessment was the TJC reflected “a single ‘point of view’.” As the conversation unfolded, it became clear to the UVA representatives that by this the Foundation officials meant a narrow ideological perspective, one in line with Chicago-style economics. Buchanan attempted to dispel this conclusion, arguing that the program was “sufficiently broad” to “encompass wide and divergent points of view.” Coase was particularly incensed by allegation of ideological narrowness since, as he explained, he had close ties to the Fabian Society. Despite the attempts of both Coase and Buchanan to defend their proposal, Ford officials turned down the application and the TJC never fully recovered.

This is what they call “real history.”  In my version of this story, of course, the Virginia School, Coase, Buchanan, and Tullock were the good guys, as was demonstrated by their subsequent research record.

Assorted links

by on August 25, 2014 at 11:33 am in Uncategorized | Permalink

1. Several observations about the sleep of horses.

2. Interview with Craig Venter.  And the motivations of Kobe Bryant.

3. How the French protect real wages for some, and why it is not sustainable.

4. Laura Miller on Excellent Sheep, I wanted to like that critique of Ivies education more than I did, but I found it lacking in substance.

5. The wettest place on earth? (photo essay)

6. Paul Krugman on affordable housing.