Tyler Cowen

Tuesday assorted links

by on September 1, 2015 at 11:29 am in Uncategorized | Permalink

1. Laura Miller on Elena Ferrante.

2. In praise of law reviews and jargon-filled academic writing.  And more on the marginal value of a good teacher.

3. Why do people do good spontaneously?  And Harvard responds to complaints about its faculty health planMore on the crack team of Chinese monkeysDramatic but not ridiculous claims about China.

4. Scott Sumner dissents on reach for yield.  I don’t think easier money will boost the American economy right now.  So I think you just get a loanable funds effect and then possibly a reach for yield.

5. Peak things?

6. “The world’s longest yard sale runs for nearly 700 miles along a mostly vertical line connecting Alabama and Michigan, from the first Thursday in August through the first Sunday. It’s called the 127 Sale, since most of it takes place along US Route 127, but that road ends in Chattanooga.

The culture that is Iceland (Syria)

by on September 1, 2015 at 9:31 am in Current Affairs | Permalink

Ten thousand Icelanders have offered to welcome Syrian refugees into their homes, as part of a Facebook campaign launched by a prominent author after the government said it would take in only a handful.

After the Icelandic government announced last month that it would only accept 50 humanitarian refugees from Syria, Bryndis Bjorgvinsdottir encouraged fellow citizens to speak out in favour of those in need of asylum. In the space of 24 hours, 10,000 Icelanders – the country’s population is 300,000 – took to Facebook to offer up their homes and urge their government to do more.

The full story is here.  And here is one such message:

“I’m a single mother with a 6-year-old son… We can take a child in need. I’m a teacher and would teach the child to speak, read and write Icelandic and adjust to Icelandic society. We have clothes, a bed, toys and everything a child needs. I would of course pay for the airplane ticket,” wrote Hekla Stefansdottir in a post.

Facts about Mexicans

by on September 1, 2015 at 1:36 am in Uncategorized | Permalink

In 2012, 5.9 million unauthorized immigrants from Mexico lived in the U.S., down about 1 million from 2007. Despite the drop, Mexicans still make up a slight majority (52% in 2012) of unauthorized immigrants. At the same time, unauthorized immigration overall has leveled off in recent years. As a result, net migration from Mexico likely reached zero in 2010, and since then more Mexicans have left the U.S. than have arrived.

There is more at the link, might I have found this reference through Michael Clemens?

From the FT:

The likes of Zambia, Ethiopia, Rwanda, Kenya, Ghana, Senegal, and Ivory Coast have all issued foreign currency dominated sovereign bonds in recent years.

Ghana is one African nation with a history of debt crises (pdf), and also dating back to the 1980s (pdf).  Tanzania was another offender, both current and past (pdf), and for a while a lot of lending to Africa dried up and that limited the number of possible debt crises.  But now…?

Here is Amadou Sy at Brookings, telling us it is not yet time to worry.  Here is the African Development Bank worrying a bit more than that:

Today, a third of African countries have debt to GDP ratios in excess of 40 percent. The outstanding sovereign debt for Africa as a whole increased 2.6 times between 2009Q2 and 2015Q2. In contrast, total debt in developing countries rose 2.3 times over the same period. The appreciation of the dollar has raised the nominal currency values of dollar denominated debts. Thus Africa’s outstanding bond debt is already 29 percent higher today in real terms than it would have been had the dollar remained at its March 2011 level…

Here is Andrew England at the FT:

A recent note by Fathom Consulting highlighted a 40 per cent year-on-year dip in Chinese imports from Africa for July. Martyn Davies, chief executive of Frontier Advisory, a group that specialises in Africa-China investment, says there is anecdotal evidence of an easing in Chinese activity on the continent. “The hurdle rates of Chinese sovereign wealth investment, or part sovereign wealth fund invested projects in Africa have been raised so the capital is more discerning and seeks greater profitability,” he says.

Here is my previous post on which countries are most likely to experience the next financial crises.

This is quite long, so it goes under the fold…class starts tomorrow night! Read More →

Monday assorted links

by on August 31, 2015 at 1:07 pm in Uncategorized | Permalink

1. Human capital leading up to the Industrial Revolution.

2. How will European cinema fare under a single digital market?  “Is he a collaborator?”

3. In America, is there too much TV?

4.  What the Chinese 2008 stimulus looked like.  And the Chinese use a bevy of animals to clear the parade skies.

5. How is the Greek election shaping upExit interview with Olivier Blanchard.

6. Consumption inequality tracks income inequality by more than we used to think.  Is scalping ruining the Disney dining experience?

Will Syria *ever* come back?

by on August 31, 2015 at 7:07 am in Uncategorized | Permalink

In just 4 years, over half of Syria’s population of 22m has been killed, displaced or fled the country.

Tweet here, by Paul Kirby.

Macau fact of the day

by on August 31, 2015 at 6:55 am in Current Affairs, Economics | Permalink

Gross domestic product in Macau, China’s semi-autonomous gambling haven, fell by more than a quarter in the three months to June as the junket-fuelled growth model comes under attack from Beijing.

The economy contracted by a whopping 26.4 per cent in the second quarter, following declines of 24.5 per cent in the first quarter and 17.2 per cent in the last quarter of 2014.

Stunning as the figure is, it’s not surprising, nor does it signal a collapse for the economy. Macau’s unemployment rate is just 1.8 per cent as construction booms and millions of Chinese visitors cross the border to shop, play some baccarat and attend an increasingly diverse array of Las Vegas style entertainment shows.

That is from Fast FT.

Remember back in 2009, and a bit thereafter (pdf), when so many people were praising China’s very activist, multi-trillion fiscal stimulus?

Yet some of us at the time insisted this would only push off and deepen China’s adjustment problems.  There was already excess capacity and high debt and favored state-owned industries, and the stimulus was making all of those problems worse and only postponing a needed adjustment.  The Chinese incipient contraction was based on structural problems, not a simple lack of aggregate demand.  As I wrote in 2012:

To keep its investments in business, the Chinese government will almost certainly continue to use political means, like propping up ailing companies with credit from state-owned banks. But whether or not those companies survive, the investments themselves have been wasteful, and that will eventually damage the economy. In the Austrian perspective, the government has less ability to set things right than in Keynesian theories.

Furthermore, it is becoming harder to stimulate the Chinese economy effectively. The flow of funds out of China has accelerated recently, and the trend may continue as the government liberalizes capital markets and as Chinese businesses become more international and learn how to game the system. Again, reflecting a core theme of Austrian economics, market forces are overturning or refusing to validate the state-preferred pattern of investments.

How’s that debate going?  While the final outcome remains uncertain, Austrian-like perspectives on China are looking pretty good these days.

Just as you go to war with the army you’ve got, so must a country conduct fiscal stimulus with the policy instruments it has.  And most forms of Chinese fiscal stimulus make their imbalances worse rather than better.  Yet dreams of fiscal stimulus as an answer to the macro problems on the table never die:

Sangwon Yoon writes for Bloomberg:

China is sliding into recession and the leadership will not act quickly enough to avoid a major slowdown by implementing large-scale fiscal policies to stimulate demand, Citigroup Inc.’s top economist Willem Buiter said.

The only thing to stop a Chinese recession, which the former external member of the Bank of England defines as 4 percent growth on “the mendacious official data” for a year, is a consumption-oriented fiscal stimulus program funded by the central government and monetized by the People’s Bank of China, Buiter said.

“Consumption-oriented” is the key word there.  I don’t blame Buiter for speaking precisely, but few readers will pick up on his careful use of words.  Still, switching to more consumption is a surrender to lower rates of economic growth, not a way of keeping the growth rate high.  That is a good idea, but a funny kind of stimulus.

In the meantime, the consumption sector in China seems to be faring poorly.  On the way up, investment rose at the expense of consumption, but on the way down they are falling together.  Funny how things like that work out, and it does suggest that a consumption-oriented stimulus maybe can break the fall but it won’t restore prosperity.

It’s striking how little recent discussion I’ve seen of China’s much-heralded fiscal stimulus of 2008-2009.

This is an object lesson in relying too much on short-run macro models, or models in which sticky prices are the only imperfections, or models where the quality of investment is not a factor.  Whatever you think of the American Great Recession, the Chinese case is very, very different.

Sunday assorted links

by on August 30, 2015 at 5:16 pm in Uncategorized | Permalink

1. Ten misunderstandings about beer (the culture that is China).  And does “ethical food” taste better?

2. Oliver Burkeman makes claims about sleep.

3. Interview about microscopes and other things.

4. The Manchurian recession.

5. Ruth Leger Sivard has passed away: “With what she knows, she has every right to get on a rooftop and scream,” Washington Post columnist Colman McCarthy wrote in 1986. “Instead, after 10 years of analyzing what 142 of the planet’s governments spend their citizens’ money on, she remains a clarifier. The field is small. Few are as skilled.”

6. Various airport ratings, including which countries’ citizens rate airports the highest and lowest.

A mistake by representatives of the Business Loop 70 Community Improvement District means a sales tax increase the district needs to thrive will require approval by a single University of Missouri student.

On Feb. 28, Jen Henderson, 23, became the sole registered voter living within the community improvement district, or CID, meaning she is the only person who would vote on a half-cent sales tax increase for the district.

Henderson says she feels negative about the tax idea, “but has not made a decision about how to vote. Henderson said her concerns include vague project outlines, Gartner’s pay, Business Loop improvements she said will help businesses but not nearby residents and how an additional sales tax would affect low-income people purchasing groceries and other necessities.”

For the pointer I thank Austin Vernon.

Utah fact (estimate) of the day

by on August 30, 2015 at 11:10 am in Uncategorized | Permalink

One of my web searches turned up a study from Trinity College’s American Religious Identification Survey (ARIS) on the demographics of Mormons. According to the ARIS study, there are now 150 Mormon women for every 100 Mormon men in the state of Utah—a 50 percent oversupply of women.

The article considers data on Orthodox Jews as well, via Jodi Ettenberg.

Solve for the equilibrium, as they say, and please consider as many different variables as possible…

Should the Fed tighten?

by on August 30, 2015 at 12:14 am in Current Affairs, Economics | Permalink

1. I do not know what the Fed should do, and I do not know what the Fed will do.  I don’t even like that phrase “should the Fed tighten?,” but the superior “what kind of multi-dimensional expectational monetary path should the Fed indicate?” is awkward.

2. Starting in 2008, I thought money was too tight during 2007-2011, and in general I am not afraid of upping the dose of inflation, ngdp, however you wish to express it.  I have never had “tight money” in my blood, so to speak.

3. There is good evidence from vacancies and the like that labor markets are fairly tight right now, equities are high and apparently China-robust, and we just had a gdp report of 3.8%.  So something other than more monetary loosening ought not to be out of the question.  Those variables simply cannot be irrelevant for the Fed’s current choice.

4. There is not a stable Phillips curve.  So the lack of strong price inflation does not carry clear labor market implications, nor does it mean we can boost employment through looser money.

5. Often I buy the “asymmetry argument.”  That suggests more price inflation probably won’t hurt us much, but monetary tightening could damage labor markets, so why tighten?  Paul Krugman among others makes this argument.

6. Now the risks look fairly symmetric.  The first reason is that zero short rates for so long might be encouraging excess risk-taking in the financial sector.  This can be the “reach for yield” argument, which in spite of its lack of replicable econometric support commands a lot of loyalty from serious observers within the financial sector itself.

7. The second reason for symmetric risks is that zero short rates for so long might be encouraging zombie companies:

The end of ultra-low interest rates may bode ill for the productivity of British businesses, which is already poor. Output per hour is still lower than before the crisis of 2007, whereas in America and even France it has grown. Tight monetary policy should be bad for productivity, since it makes business investment more expensive. As the cost to businesses of borrowing has fallen by more than half since 2008, investment by firms has risen by 20%. The worry now is that dearer borrowing will curb the investment binge, making productivity even more dismal.

Yet there is another side to the productivity equation. Kristin Forbes, a member of the MPC, points out that, as in Japan in the 1990s, cheap borrowing may allow inefficient “zombie firms” to survive for longer than they normally would. In Britain interest payments as a share of profits have fallen from about 25% in 2009 to 10% today, bringing down company liquidations with them. As they stagger on, zombie firms hold down average productivity levels in their industry and, as a result, put a lid on wage growth. Rising interest rates could slowly start to sort the wheat from the chaff.

That is from from The Economist and of course you can adapt it for an American context.

8. Those two arguments might be meaningful with only a chance of say fifteen percent each, but that still would put the risks in a broadly symmetric position.  I don’t see that the critics have made the case that a mere quarter point rate increase should be so damaging.

9. The contrarian in me rebels when I see article after article, blog post after blog post, consider the monetary policy problem in only two dimensions, namely as would be expressed by a Phillips curve.  See #4.  The “nice view” of monetary policy, as Faust and Leeper suggest (pdf), is probably wrong.

10. If I were at the Fed, I would consider a “dare” quarter point increase just to show the world that zero short rates are not considered necessary for prosperity and stability.  Arguably that could lower the risk premium and boost confidence by signaling some private information from the Fed.  But it’s a risk too — what if the zero rates are necessary?

11. The prospect of a stronger dollar, and the subsequent hit on American exports, remains a domestic reason not to let rates rise.  I doubt if it is a global Benthamite reason, but it is probably a reason held by some within the Fed.

12. The biggest piece of information here is that both Janet Yellen and Stanley Fischer both seem genuinely uncertain as to what the Fed should do.  No, they haven’t been absorbed by the hard money Borg.  They have their own version of these arguments and it seems they see the risks as being relatively symmetric, and thus the correct monetary policy choice is far from obvious.  No one has yet said anything that is smarter or more potent in Bayesian terms than what they probably are thinking.

13. Let’s say the Fed did decide to allow rates to rise.  How exactly would they make that happen?  How hard would it prove to accomplish?  That’s an under-discussed angle to all of this.  And the Fed might either wish to postpone this curiosity or get it over with, another set of symmetric risks.

We’ll know more soon.

A very good paragraph and a half

by on August 29, 2015 at 3:06 pm in Books, Uncategorized | Permalink

Claire Messud on Elena Ferrante in the FT:

…the novelist remains true to her broadest undertaking: to write, with as much honesty as possible, the unadorned emotional truths of Elena Greco’s life, from timid peasant schoolgirl to respected literary icon, riven always between her origins and her ambitions, between her intellectual pursuits, her romantic desires, and her maternal responsibilities — always with Lila as her fractured mirror.

I’ve pressed Ferrante’s novels on friends with mixed results. Some fall upon the books with a familiar eagerness, but by no means all: one woman said, of My Brilliant Friend, “How’s it different from Judy Blume? Just girls getting their periods.” But I end up thinking that the people who don’t see Ferrante’s genius are those who can’t face her uncomfortable truths: that women’s friendships are as much about hatred as love; that our projections determine our stories as much as does any fact; that we carry our origins, indelibly, to our graves. To imbue fiction with the undiluted energy of life — to make of it not just words upon a page but a visceral force — is the greatest artistic achievement, worth more than any pretty sentences: Ferrante has done this, if not perfectly, then with a rare brilliance.

Here is a good review of Ferrante from The Economist.  As I’ve been saying for a while, this is one of the important literary projects over the last decade or more.  And of course we still don’t know who Elena Ferrante really is, her (his?) true identity remains a secret.  And here is the new Vanity Fair interview with Ferrante.

Saturday assorted links

by on August 29, 2015 at 12:56 pm in Uncategorized | Permalink

1. Which Republican candidates actually cut government spending?

2. Will the financial mainstream pick up on the block chain idea?

3. Emmanuel Todd is getting himself in trouble.

4. When it comes to travel, skip the iconic.

5. Claims from Donald Trump.

6. Interview with Josiah Ober on ancient Greece.

7. “But we are not utilitarians. We are Americans.”  Is there a coming car revolution?