Tyler Cowen

*The Americans*

by on May 18, 2013 at 4:42 pm in Television, Uncategorized | Permalink

Natasha and I have finished watching the first season, and I am pleased to report it is one of the few TV series I like.  It pretends to be about “two Soviet KGB officers posing as an American married couple in the suburbs of Washington D.C. in order to spy on the United States.”  But it’s actually about a) Russian mothers having to raise their children in the United States, b) what a marriage actually consists of (spoilers in that link), and c) to what are we loyal?  It captures the 1980s uncannily well.

TV viewing for this summer will likely include the full-length version of Fanny and Alexander, the Danish political thriller Borgen, and season two of Enlightened.

18 comments

Assorted links

by on May 18, 2013 at 1:50 pm in Uncategorized | Permalink

1. Memoir of an internet troll.

2. Photo of Iceland, via GH.

3. Restrictions on doctor-owned hospitals.

4. How Laura and John Arnold wish to give away their money (recommended, and cameo by Steve Levitt).

5. “…the Colorado cannabis industry is purely cash-based…”  You also can take on-line classes about how to grow marijuana.

6. Ben Bernanke gives a whole speech discussing the great stagnation and the “grandma test.”

7 comments

Karl Smith on the liquidity leak

by on May 18, 2013 at 7:46 am in Uncategorized | Permalink

What Tyler calls a liquidity leak, I call markets at work. The ECB provides enough stimulus to get all of the Eurozone going but it all leaks to Germany. Fine. The German market heats up. German wages and rents rise. Retired German doctors start considering the virtues of a flat in Lisbon overlooking the harbor. German consultancies hold seminars on “How to make your  Mediterranean town competitive in the new German Outsourcing Model.”

This is the way things are supposed to work. The idea that a more competitive and efficient Germany should not command higher wages and rents is bizarre; and is only called inflation because the Eurozone, in its heart-of-hearts, doesn’t actually believe its one monetary union where the richer parts are distinguished principally by the fact that they have more money.

The link is here.  The analysis of course is correct, but I think this illustrates rather than solves the problem.

First, Portugal and Germany are not directly competing in so many export markets to a high degree.  So raising German wages and prices helps Portugal only somewhat.  Furthermore, the marginal propensity of Germans to spend, or the marginal propensity of German banks to lend, is not mainly directed toward the periphery.  Therefore the gradient of “how much inflation are Germans tolerating to get some real output effects in Portugal” is a steep one, much steeper than you would find within a traditional, one-nation, single currency area with geographically mobile money.

Imagine telling Americans that they must endure a good deal of inflation to help solve some aggregate demand problems in Ecuador and El Salvador.  No one doubts there is spillover, but if the banking system in Ecuador is falling apart, many of the possible transmission effects may not easily stick, or would not if Ecuador used more bank money and less pure currency.  (Just fyi, right now inflation in Ecuador is higher than in the U.S.; here are numbers for El Salvador.  It doesn’t look like a tight belt of monetary transmission to me, and those countries do not have the same bank insolvency problems which we are seeing in the eurozone periphery).

Second, this mechanism solves (at best) only one of the core problems of the eurozone, namely incorrect relative prices between Portugal and Germany.  It helps less with the “Portuguese nominal wages are too high” problem, the “Portuguese banks are not sound” problem, and the “Portugal badly needs structural reform” problem, among other difficulties.  The inflation would be an easier sell to the German public if it really would set the rest of the eurozone right, but that is a difficult case to make.  Just try uttering this sentence vor dem Publikum: “It’s the leak that will make this work.”

Third, one effect of this policy would be that Germans buy up a lot of Portuguese assets.  “Not that there is anything wrong with that” I hear you saying and indeed that is right.  Still, solving the crisis by selling a lot of the country to the Germans is not exactly a popular policy in a lot of the periphery and we could expect political resistance from that side as well.

You can think of this all as a rather odd and stunted “price-specie flow mechanism,” where the specie itself has limited geographic mobility.  To be sure, this means the inflation would have worked much better had it been applied in earlier years, before various periphery banking systems saw so much trouble.

My initial post on the liquidity leak was here.

10 comments

What I’ve been reading

by on May 18, 2013 at 7:04 am in Books | Permalink

1. T. J. Clark, Picasso and Truth: From Cubism to Guernica.  I guess I had to read this one, but it did deliver as I had promised.  Excellent color plates, and overall a very good book (the best?) on what makes Picasso special.

2. C.P. Snow, Variety of Men.  Have I mentioned that most older books — beyond the immediate classics — are, well…crud?  But this series of portraits, covering such diverse figures as Ernest Rutherford and Robert Frost, is both entertaining and useful.

3. Julian Barnes, Levels of Life.  A subtle and moving short tale which cannot be described without introducing spoilers.  Avoids the problems which plagues some of Barnes’s less-deep works.  Right now out in the UK only, U.S. release coming later in the year.

4. Nicholas Murray, Aldous Huxley: A Biography, and Jeffrey Meyers, D.H. Lawrence: A Biography.  These are good books to read in tandem.

5. Mark Mazzetti, The Way of the Knife: The CIA, A Secret Army, and a War at the End of the Earth.  On the origins of drone warfare and also how the role of the CIA has changed.  The contents of this book, which cover secret intelligence (in a non-sensationalized fashion) are difficult to judge, but I can say it held my interest.

8 comments

Bayonne business practice of the day

by on May 17, 2013 at 2:28 pm in Economics, Medicine, Uncategorized | Permalink

The most expensive hospital in America is not set amid the swaying palm trees of Beverly Hills or the luxury townhouses of New York’s Upper East Side.

It is in a faded blue-collar town 11 miles from Midtown Manhattan.

Based on the bills it submits to Medicare, the Bayonne Medical Center charged the highest amounts in the country for nearly one-quarter of the most common hospital treatments,  according to a New York Times analysis of 2011 data, the most recent available. No other hospital was at the top of the price list more often.

Bayonne Medical typically charged $99,689 for treating each case of chronic lung disease, five times as much as other hospitals and 17 times as much as Medicare paid in reimbursement. The hospital also charged on average of $120,040 to treat transient ischemia, a type of small stroke that has no lasting effect. That was six times the national average and 24 times what Medicare paid.

For those prices, the quality of care at Bayonne Medical is no better — or worse — than that at most other New Jersey hospitals.

The back story is this:

Bayonne Medical, which was founded in 1888, was losing nearly $1.5 million a month before it filed for bankruptcy in 2007. By 2011, under new ownership and a new financial model [sic], its patient revenue had nearly tripled and its operating income had reached $9.3 million, according to the American Hospital Directory, a publication that compiles data from Medicare and other sources about health care facilities.

Here is one commentary:

“Their model is to charge exorbitant rates, particularly for emergency room services, and if the insurance companies don’t pay them, they threaten to go after the member for the balance of billing,” said Carl King, head of national networks for Aetna, whose in-network contract was also ended by Bayonne in 2008.

You can read more here, interesting throughout.

39 comments

Sentences to ponder

by on May 17, 2013 at 1:18 pm in Law, Medicine | Permalink

A family can get implicitly taxed 238% on that additional $501.

The thing is, I don’t even need to tell you what the topic is.  The original source is here.

41 comments

Assorted links

by on May 17, 2013 at 11:38 am in Uncategorized | Permalink

1. Does parenting suffer from a cost-disease?

2. Ezra Klein interviews Bill Gates about public health and development.  Excellent piece.  Gates, by the way, is now the world’s richest man once again.

3. College enrollment is falling more than had been expected.

4. “The french fries arrive soggy.”

5. John Lanchester on Google Glass.

6. The pervasive effect of priors.

7. The culture that is English.

22 comments

Does the eurozone have a monetary policy transmission mechanism? Or rather a liquidity leak?

by on May 17, 2013 at 2:03 am in Economics, Uncategorized | Permalink

What would happen if the ECB immediately and directly ran a helicopter drop of money to the periphery?  I don’t find that an easy question to answer.  Here is one recent report:

But the indicator [interest rate spreads] has since risen again and reached a record of 3.7 percentage points in January, indicating companies in southern Europe were paying significantly higher interest rates than northern rivals.

“Market segmentation remains, divergence in bank lending rates persists and, as a result, immediate growth prospects in the periphery are bleak,” said Huw Pill, European economist at Goldman Sachs, who was previously a senior monetary policy official at the ECB in Frankfurt.

Or read this update. Here is a more specific story about how small to mid-sized Italian banks are contracting.

Would the new helicopter drop money be kept in periphery banks and lent out to stimulate business investment?  Or does the new money flee say Portugal because Portuguese banks are not safe enough, Portuguese loans are not lucrative and safe enough, and Portuguese mattresses are too cumbersome?

The former scenario implies that monetary policy should be potent.  The latter scenario implies that the helicopter drop will be for naught and the fiscal policy multiplier also will be low, on the upside at the very least (fiscal cuts still might cause a lot of damage on the downside).  I call this the liquidity leak, rather than the liquidity trap.

So which scenario is it?

Does it matter who gets the helicopter drop?  Perhaps a granny gets the money first and sticks it in the local bank.  Alternatively, a financial manager in Lisbon would transfer that same euro rather seamlessly to his second account in Frankfurt.  Under this differential scenario, changes in the distribution of wealth also have nominal and eventually real effects.

Is the flow of marginal deposits the problem or the flow of marginal loans?  Or both?

Ryan Avent suggests allowing banks to swap their risky commercial loans for safer assets.  Other ideas propose running QE on packages of small to mid-sized loans or accepting those loans as collateral at the ECB.  Of course these assets are difficult to price and also moral hazard problems would loom.  If the ECB is not “overpaying” for the small loans, they won’t be encouraged.  If the ECB is overpaying, there are plenty of Sicilian businessmen who have friends at the local bank.  The mere lending isn’t enough, the projects also need to be good ones, because in these cases we are talking about tackling issues in the real economy.  Can a long-distance ECB collateral support operation spur good, growth-inducing projects?  It is easy to see why the Germans might be skeptical.

In some regards these problems will look like liquidity traps, because monetary policy will not always work.  But in the periphery lending rates are high (albeit with restricted credit), and standard liquidity trap models will not in general apply.  Again, I call it the liquidity leak.

Liquidity trap approaches will encourage you to think in terms of raising expectations of inflation (which is indeed the correct question in many settings), but here the geographic distribution of credit and economic activity is instead the crux of the matter.  Our current macroeconomic tools are not well-suited for integration with spatial economics, I am sorry to say.

Addendum: On some related issues, read Scott Sumner.

24 comments

Further results on hypergamy

by on May 16, 2013 at 4:47 pm in Economics, Education, Science, Uncategorized | Permalink

This paper, by Marianne Bertrand, Jessica Pan, and Emir Kamenica, was pointed out by Matt Yglesias on Twitter, the abstract is this:

We examine causes and consequences of relative income within households. We establish that gender identity – in particular, an aversion to the wife earning more than the husband – impacts marriage formation, the wife’s labor force participation, the wife’s income conditional on working, marriage satisfaction, likelihood of divorce, and the division of home production. The distribution of the share of household income earned by the wife exhibits a sharp cliff at 0.5, which suggests that a couple is less willing to match if her income exceeds his. Within marriage markets, when a randomly chosen woman becomes more likely to earn more than a randomly chosen man, marriage rates decline. Within couples, if the wife’s potential income (based on her demographics) is likely to exceed the husband’s, the wife is less likely to be in the labor force and earns less than her potential if she does work. Couples where the wife earns more than the husband are less satisfied with their marriage and are more likely to divorce. Finally, based on time use surveys, the gender gap in non-market work is larger if the wife earns more than the husband.

Their title is “Gender Identity and Relative Income within Households.”  There is a non-gated copy here.

94 comments

Assorted links

by on May 16, 2013 at 3:17 pm in Uncategorized | Permalink

1. Actual weekly number of hours worked in the UK, the data series.  Not your grandfather’s AD problem.

2. Ross Douthat on conservatives and health care costs.

3. Publisher threatens blogger with $1 billion lawsuit, in India too.

4. Markets in everything, Bea Arthur edition.

5. Europe’s problem is the banks.

6. The new smart rifle, which hardly ever misses.

7. In the world of theater, is this vigilante justice or not?

18 comments

U.S. clothing chains do not support pact on Bangladesh reforms

by on May 16, 2013 at 1:39 pm in Current Affairs, Law | Permalink

From Brad Plumer:

Nearly all U.S. clothing chains, citing the fear of litigation, declined to sign an international pact ahead of a Wednesday deadline, potentially weakening what had been hailed as the best hope for bringing about major reforms in low-wage factories in Bangladesh.

Companies including Wal-Mart, Gap, Target and J.C. Penney had been pressed by labor groups to sign the document in the wake of last month’s factory collapse in Bangladesh that killed at least 1,127 people. More than a dozen European retailers did so. But U.S. companies feared the agreement would give labor groups and others the basis to sue them in court.

…Wal-Mart reiterated Wednesday that it would not sign the accord at this time, because it “introduces requirements, including governance and dispute resolution mechanisms, on supply chain matters that are appropriately left to retailers, suppliers and government, and are unnecessary to achieve fire and safety goals.”

…Most U.S. companies, however, balked at the language in the accord. Some said it would would expose them to excessive legal liability — particularly in America’s litigious courts. Written by labor groups, the agreement would require retailers who source clothing from Bangladesh to commit to pay for inspections, building upgrades and training — all enforced by binding arbitration.

Here is more.  Most likely, the damage done to Bangladesh will continue.  Note that the prospect of successful litigation was not what drove FDI into the 19th century United States, or twentieth century Singapore, to the point where wages rose significantly.

14 comments

Claims about pastries

by on May 16, 2013 at 11:32 am in Education, Food and Drink | Permalink

Which raises a delicate question: Having already eclipsed Paris in Michelin stars, could Tokyo chefs one day eclipse the French at their own cuisine?

I put the question to pastry chef Sugino, who trained in France and is one of only four Japanese members of the prestigious Relais Desserts, an association of the world’s top pastry makers who meet regularly to exchange ideas.

Choosing his words carefully, he notes that pastry shops in France are having difficulty finding young people willing to put in the time and effort required to learn the craft. He also says that even top French patisseries are now taking shortcuts — by using stabilizers in their desserts, for instance.

“They are losing the basics,” Sugino says. “It is possible that, 10 or 20 years from now, the French will have lost the art of pastry but that it will live on in Tokyo, in Japan.”

Here is more.

14 comments

Have we seen self-defeating austerity in the United States?

by on May 16, 2013 at 6:12 am in Current Affairs, Economics, Uncategorized | Permalink

Everyone has been talking about the revised CBO deficit forecast, which suggests the short-term U.S. fiscal picture is more favorable than had been realized.  It can be said that in the short- to medium-term, the deficit is no longer an issue (in my view that was the case anyway, but that is a different story.)

But I am puzzled as to how the whole story is supposed to fit together, at least from an Old Keynesian perspective.

For instance, we have been told that the United States has been engaged in a good deal of fiscal austerity in the last few years.

We also were told that fiscal self-austerity was quite possibly self-defeating (or here, pdf) or at the very least fairly close to self-defeating.  That is, it would make budget balance harder rather than easier.

The amount of attention, and the fervor of the rhetoric, also suggest that this was seen as a major issue, not one minor to moderate factor with seven other significant confounding factors operating on top of it.  Admittedly this latter point is more of a subjective impression, but I believe many people have shared it.

OK, now here goes the potential story.  We did fiscal austerity, it was self-defeating, that was a major factor, and we ended up in…a better budget situation than we had been expecting?

It is fine to say “our budget situation could have been better yet,” but then the fiscal austerity story then seems to collapse into one factor among many confounding factors.  Which is fine by me, but it is not the story we seem to have been receiving.

I am myself comfortable arguing something like “when underlying fundamentals are sound, and/or there is monetary accommodation, an economy can withstand fiscal consolidation just fine.”  That is simply a more specific variant of the above.

Another “way out” is to question whether “austerity” is always to easy to measure, given the associated modalities and baselines involved in its current definitions, and given the multiple dimensions of fiscal policy, and so perhaps the degree of austerity has not been nearly as high as we were told.  I can buy that too, but still it would be news to the Old Keynesian accounts we have been reading.

So what’s up?

101 comments

Matt Yglesias appreciates *Star Trek*

by on May 16, 2013 at 4:12 am in Film, Philosophy, Television | Permalink

You will find his essay here, and I have many points of agreement with him, but I think he undervalues the first series.  Characters and script were excellent in about sixty percent of the original episodes.  It is also noteworthy that the original characters have entered popular culture for an enduring period of time and we are still making movies about them forty-five years later.  It’s not absurd to think of someone saying “Beam me up, Scotty” fifty years from now.  I don’t see Data or any other later character receiving the same treatment, nor do I think that any of the later installments would have, on their own, generated an entire franchise of installments, spin-offs, sequels, and the like, where Matt can tweet something like “Animated series is non-canon, people. Get with the program.”  If you’d like a treat, watch some of the D.C. Fontana-scripted Star Trek episodes, noting that “Tomorrow is Yesterday” is one of the funniest and most profound takes on “the great stagnation” to be found in popular culture or anywhere else for that matter.  And it was written before the great stagnation even started, and by Roddenberry’s office assistant at that.  Magic was in the air.  As for “Spock’s Brain,” well, that is another matter.

72 comments

How to eat well in Genoa [Genova]

by on May 15, 2013 at 3:55 pm in Food and Drink, Travel | Permalink

Genoa is one of the best food venues in Italy, as is Liguria more generally.  It is also one of the best places in Europe for vegetarian dining.  Maximize the number of tarts and vegetable tarts you eat, skip hotel breakfast and look for small places with morning snacks, preferably baked goods, and treat them as the equal of cooked dishes.  Forget about meat altogether.

1. Antica Sciamadda, 14-16 Via San Giorgio, arrive at the 11:30 opening and keep on buying the tarts and farinata as they are freshly baked and put out on the counter.  There is a vaguely Arabic feel to the dishes, and there is an excellent video of the place here.  There are many excellent “sciamadda” in Genoa and they lie somewhere between a food stall and a very small restaurant, so do not count on them being open for dinner.

2. Trattoria alle Due Torri, Salita del Prione 53, near the Columbus house.  Order pasta and focaccia, this is some of the best spaghetti I’ve had, and the pansotti (ravioli in walnut sauce) is notable.

3. La Rina, superb seafood restaurant, don’t focus on the main courses.

There are relatively few tourists in town, although the most common group — by far — is Russians.  From Bologna, here is a post about flunking out of Gelato University.

7 comments

← Previous Entries