Hat tip: Daniel Altman.
Hat tip: Daniel Altman.
So, what do you do about the problem of secular stagnation? Again here there is divergence of opinion. Some still seek to treat the phenomenon as if it were a variant of the liquidity trap issue. Most notable here is Paul Krugman, who continues to hope that massive quantitative easing backed by strong fiscal stimulus will push the economy back onto a healthy path. But if the issue is secular stagnation, and the root is population ageing and shrinking, it is hard to see how this can be. The fact that Japan is just about to fall back into deflation 2 years after applying a monumental Quantitative Easing problem seems to endorse the idea that the problem may have no “solution” in the classical sense of the term.
There is this:
Finland has transited from being a country with a significant goods trade surplus, to being one with a structural deficit.
Even the current account balance has now turned negative.
And the country’s Net International Investment Position is also turning negative.
With pictures at the link.
Hugh’s conclusion is this:
At the end of the day, only two things can be said with a fair degree of certainty: short term fiscal austerity won’t make any significant improvement and could help make things worse (this whole discourse is based on a misunderstanding about the problem) while short term stimulus won’t stimulate.
More sensible than most of what you will read on this topic.
I may not follow any of your suggestions, but just thought I should ask for advice, for my dialogue with Peter next week. I am the interviewer, he is the interviewee, more or less. #CowenThiel
It is also possible that the MEP [Ministry of Environmental Protection] will be given law enforcement authority for the first time, for example, the authority of forced inspection, search, sequestration, fines, recall and closure.
There is more here, a good and interesting piece by Wu Qiang on the changing politics of smog in China.
You will find a Qanta primer here. Here is an excerpt:
In the same month, separate teams of scientists at Harvard University and the Broad Institute reported similar success with the gene-editing tool. A scientific stampede commenced, and in just the past two years, researchers have performed hundreds of experiments on CRISPR. Their results hint that the technique may fundamentally change both medicine and agriculture.
Some scientists have repaired defective DNA in mice, for example, curing them of genetic disorders. Plant scientists have used CRISPR to edit genes in crops, raising hopes that they can engineer a better food supply. Some researchers are trying to rewrite the genomes of elephants, with the ultimate goal of re-creating a woolly mammoth. Writing last year in the journal Reproductive Biology and Endocrinology, Motoko Araki and Tetsuya Ishii of Hokkaido University in Japan predicted that doctors will be able to use CRISPR to alter the genes of human embryos “in the immediate future.”
Thanks to the speed of CRISPR research, the accolades have come quickly. Last year MIT Technology Review called CRISPR “the biggest biotech discovery of the century.” The Breakthrough Prize is just one of several prominent awards Doudna has won in recent months for her work on CRISPR; National Public Radio recently reported whispers of a possible Nobel in her future.
Even the pharmaceutical industry, which is often slow to embrace new scientific advances, is rushing to get in on the act. New companies developing CRISPR-based medicine are opening their doors. In January, the pharmaceutical giant Novartis announced that it would be using Doudna’s CRISPR technology for its research into cancer treatments. It plans to edit the genes of immune cells so that they will attack tumors.
Here are my earlier remarks on eugenics. Here is a group of scientists calling for a moratorium on the technique, at least until rules can be established. Here are further articles on CRISPR. There are further comments here.
I believe the implications of all this — and its nearness to actual realization — have not yet hit either economics or the world of ideas more generally. This is probably big, big news.
The grand confluence of Protestantism has dwindled to a trickle over the past thirty years, and the Great Church of America has come to an end.
…The death of Mainline Protestantism is, as we’ve noted, the central historical fact of our time: the event that distinguishes the past several decades from every other period in American history. Almost every one of our current political and cultural oddities, our contradictions and obscurities, derives from this fact: Mainline Protestantism has lost the capacity to set, or even significantly influence, the national vocabulary or the national self-understanding.
That is from Joseph Bottum, An Anxious Age: The Post-Protestant Ethic and the Spirit of America.
The Tea Party, the great stagnation, etc., maybe you can find it all right here.
Don’t worry people, just joking on that one…
That is the new Ian Bremmer book, with the subtitle Three Choices for America’s Role in the World. It can be Indispensable America (our postwar role), Moneyball America (pick priorities and accomplish them), or Independent America (limited foreign policy aspirations but lots of nation-building at home and trade abroad), and Ian prefers the latter — “I believe it’s time for Americans to redefine our value to the world.” Most of all he thinks we have to choose, and articulate the reasons for our choice; right now we are left with Question Mark America, arguably the worst of all worlds.
As you would expect from a focus on foreign policy, he builds a good case for TPP, starting on p.114, from a broadly social democratic point of view, very much worth the read.
The most notable feature of this book is that Bremmer constructs the very best case for each of the foreign policy approaches, not just his favorite, and in this sense he makes the maximum effort to instruct the reader. We could use a lot more of this approach. He is also one of the very best people to follow on Twitter.
Our previous blog entries on Singapore are here, there are many dozens of them. And yet Singapore is about the size of Fairfax County.
For the last fifty years, Singapore has been one of the truly special places in the world and a large part of that credit has to go to Lee Kuan Yew.
Here are previous MR entries on “China fact of the day.” Again, there are many dozens, and a lot of the credit there too should go to Lee, who provided the model and inspiration for China’s reforms.
Daniel Davies reviews New Zealand. Here is one excerpt:
The key to understanding the economy of New Zealand is that it’s an industry cluster, and the industry in question is agriculture. Or, and this might be a bit more controversial, the industry in question is agriculture marketing, the most perfect example of which being the way in which the Chinese gooseberry was renamed the “kiwifruit” and production ramped up exponentially to meet US and European demand. At some point, if they can transport them without bruising, I’d guess that they’ll have a go at doing the same thing with the Feijoa, a kind of South American guava that’s very popular domestically. Marketing isn’t looked down on as a frivolous activity for people not clever enough to do science in New Zealand, as far as I can see – farmers, if they want to enjoy middle-class incomes, have to be very aware about the difference between the stuff that comes out of the ground or off the animal, and the sort of thing that people want to see in their shops.
I liked this bit (among many others) too:
One of the things that originally got me interested in the subject of economics was asking the question “How come they’re able to send lamb and butter all the way from New Zealand and still sell it cheaper than Wales?”, and never being very satisfied with the answer.
The discussion is interesting throughout.
Corey Robin has a useful survey of responses from the Left, some of which include repudiations of Zionism, in addition to claims that the current Israeli policies simply have to unravel, to the detriment of virtually everybody. Think of the latter as a prediction of comeuppance, much like how inequality critics sometimes predict eventual doom for the wealthy if they do not redistribute their wealth.
From a separate direction, economist Glen Weyl explains on Facebook why he is now supporting the BDS movement.
I’m not interested in debating the normative side of the election, or various peace plans, right now. What I find striking is how unready many critics are to confront what has happened, not just in the “Plan B” sense but also rhetorically. The possibility that civil rights progress, peace progress, and self-governance and democratic progress simply have stopped, and won’t be back any time soon, is before us. If anything, matters might become worse yet, especially once you contemplate Gaza. Yet Western commentators don’t know where to turn, because the prevailing progressive narrative is one, not surprisingly, of progress. The common progressive remedy is one of moral exhortation, but at this point it doesn’t seem like another lecture to Israeli voters is going to do the trick.
Such stagnation and possibly retrogression in outcomes is hardly novel at the global level, and even within Israel/Palestine proper it’s far from clear there has been much actual news from the Israeli election (i.e., the two-state solution has been failing for some while now). Still, Israel attracts enough attention, and loyalty, that this is producing an intellectual crisis for many. Some people feel they have been made fools of, and they are no longer happy playing along with the fantasy of an eventual peace deal based on ideals of democracy and rule of law. They wish to recast their mood affiliations, but where really to turn?
By the way, the world has been getting more violent since 2007.
An important but unreported indicator of Ferguson’s dilemma is that half of young African American men are missing from the community. According to the U.S. Census Bureau, while there are 1,182 African American women between the ages of 25 and 34 living in Ferguson, there are only 577 African American men in this age group. In other words there are more than two young black women for each young black man in Ferguson. The problem of missing black men extends to other age groups. More than 40% of black men in both the 20 to 24 and 35 to 54 age groups in Ferguson are missing.
It is worth noting that there are approximately equal numbers of African American boys and girls, under the age of 20, in Ferguson (2,332 boys and 2,341 girls). What has happened to young African American men in Ferguson? There are several possibilities. First, the Census counts only the civilian population, and excludes individuals serving in the Armed Forces. Second, tragically, some of these young men have already died. Third, Census figures do not include individuals who are incarcerated at the time of the survey. Finally, the Census Bureau may undercount homeless men, men who are marginally attached to the community, and men who are primarily engaged in criminal behavior.
That is from Stephen Broners, fascinating throughout. Note that the possibility of differential rates of incarceration does not in general account for the gap, though it likely explains part of the discrepancy.
Sender, Foley, and Fleming write for The FT:
Today, many analysts fear the knock-on effect any Fed tightening will have, particularly on emerging markets, especially when combined with a strong dollar.
Messrs Dalio and Dinner wrote: “If one agrees that either a) we are near the end of the developed country central bankers’ ability to be effective in stimulating money and credit growth or b) the dollar is the world’s reserve currency and that the world needs easier rather than tighter money policies, then one would hope that the Fed will be very cautious about tightening.”
Martin Wolf on related topics is also instructive. I see a few possibilities:
1. Stock and bond markets are at all-time highs, and we Americans are not so far away from full employment, so if we don’t tighten now, when? Monetary policy is most of all national monetary policy.
2. It’s all about sliding along the Phillips Curve. Where are we? Who knows? But risks are asymmetric, so we shouldn’t tighten prematurely. In any case we can address this problem by focusing only on the dimension of labor markets and that which fits inside the traditional AD-AS model.
3. The Fed’s monetary policies have created systemic imbalances, most of all internationally by creating or encouraging screwy forms of the carry trade, often implicit forms. A portfolio manager gains a lot from risky upside profit, but does not face comparable downside risk from trades which explode in his or her face. The market response to the “taper talk” of May 2013 (egads, was it so long ago?) was just an inkling of what is yet to come. There is no way to avoid that problem, no one ever will be readier for the adjustment than they are now, so we have to get it over with and take the (international) pain sooner rather than later. So what if a bunch of foreign companies go bankrupt because of dollar-denominated debt? They are insolvent anyway.
4. The Fed’s monetary policies have created systemic imbalances, most of all internationally by creating or encouraging screwy forms of the carry trade, often implicit forms. Fortunately, we have the option of continuing this for another year or more, at which point most relevant parties will be readier for a withdrawal of the stimulus. That is what patience is for, after all. To get people ready. To allow prudent Indonesian, Chinese, and Brazilian foreign companies to unwind or hedge their positions in a careful and measured manner, as they are wont to do. After all, the taper talk of May 2013 was just talk, so a little more talk, and a little more time, is needed.
5. We should continue current Fed policies more or less forever. Why not? The notion of systemic imbalances is Austrian metaphysics, so why pull the pillars out from under the temple? Let’s charge straight ahead, because at least we know the world has not blown up today.
There’s rather a lot at stake here, isn’t there?
Here is Edward Hugh on when the ECB might start to think about tapering. Johannes, we hardly knew ye!
Our social and political life is awash in unconsciously held Christian ideas broken from the theology that gave them meaning, and it’s hungry for the identification of sinners—the better to prove the virtue of the accusers and, perhaps especially, to demonstrate the sociopolitical power of the accusers.
That is from Joseph Bottum, via PW.
In some recent talks I’ve argued that the future may be coming first to both Israel and Singapore. Today let’s consider Israel by listing a few features of that country:
1. The tech sector is important, and, partially as a result of that, income inequality is very high; see Paul Krugman’s post on the latter.
2. There is a large segment of lower middle class, intelligent bohemians, whose low incomes do not reflect their real standard of living and orderly lives. Many of them study Torah, and receive a kind of (selective) guaranteed annual income.
3. The rent is too damn high, and that won’t be changing anytime soon, due to building restrictions. The bohemian class generally chooses lower rent venues to pursue its preferred lifestyle.
4. Unlike most current North Americans, Israelis do not take geopolitical stability for granted.
5. There is intense and widespread concern with demographics and the economics of population.
Here is Ezra on TPP:
5. Here’s how the White House sees it: there will either be a trade deal with America at the core of it that forces countries like Vietnam and Malaysia to live up to labor and environmental standards the Obama administration finds acceptable, or there will be a trade deal with China at the core of it that forces countries like Vietnam and Malaysia to live up to labor and environmental standards China finds acceptable. Which would you prefer?
6. There’s also a bigger foreign policy objective here. TPP is central to the Obama administration’s long-heralded “pivot to Asia.”…
Do read the whole thing, to not pursue some version of TPP is basically to turn our backs on much of Asia. Or think of TPP as an attempt to cartelize ASEAN nations and others in the region against Chinese one-by-one bilateral bargaining, most of all on geopolitical issues, not just labor and environmental standards.
Matt Yglesias comments, he says beware of economists (i.e., me) bearing foreign policy arguments. And here are Autor, Dorn, and Hanson on TPP, as Dani Rodrik pointed on on Twitter they offer a relatively mercantilist argument in favor of the agreement.