1. When it comes to South Carolina, he is a cornball, but a likable one.

2. He played Strato-O-Matic baseball as a kid.  No mention of Jim Bunning in that context.

3. After two years at Harvard, he had taken only Econ 101.  Later Dale Jorgensen became his mentor.

4. He is a fan of Borges, with the influence coming from his wife, who has taught Spanish literature.

5. He regrets his earlier tough rhetoric on the Japanese central bank.

6. Greenspan’s marriage proposal to Andrea Mitchell was riddled with his trademark ambiguity.  Bernanke, in contrast, proposed after two months of courtship.

7. Bernanke underestimated the extent of the housing bubble.  Various negative consequences were to ensue from the collapse of housing prices.

8. “I had never gone overboard on libertarianism…”

9. Ben got really, really mad at the AIG chief executives, in fact he “seethed.”

10. The Fed did not have a good, legal way to bail out Lehman.  It needed a buyer, and no buyer was to be found.  A short-term infusion of cash would not have sufficed.  And Ben was afraid at the time that if he confessed the Fed’s impotence in this regard, the market reaction would have been negative.

11. The idea of a mortgage cram down made good sense but was never politically feasible.

12. “So, by setting the interest rate we paid on reserves high enough, we could prevent the federal funds rate from falling too low.”

13. I found the discussions of Wachovia and WaMu came the closest to offering new perspective and information.  Perhaps he was able to say more because these actions did not skirt the possibility of the Fed exceeding its mandate.

14. He had a favorable impression of the frankness of John McCain.

15. He thought QE should been done through the purchase of corporate bonds, but the Fed didn’t have the right kind of authority at that time.

16. He argues that the idea of ngdp targeting is too complicated and could not easily be made credible, given that the Fed has built up its reputation as an inflation fighter.  It also raises the risk that a non-credible ngdp target wouldn’t boost output, but would deliver price inflation, thereby resurrecting stagflation as a potential problem.  (By the way, here is Scott’s response.)

17. He is still upset at the coverage he received from Paul Krugman.

18. In Nunavut he passed on raw seal meat and a dogsled ride.

The bottom lines: This book has way, way more economics than I expected and probably more than the publisher wanted.  It really is Ben’s attempt to defend his place in history, and yes the book does deliver a huge dose of Bernanke.  This is not ghostwritten fluff.  It does not however dish much “dirt” or shed much new light on the key episodes of the financial crisis.  Both in public and in the book Ben has been extremely gentlemanly.  Still, as I kept on reading I could not escape the feeling that he is deeply, deeply annoyed by many of his critics, and very much determined to tell the story from his point of view.  That is what you get from this book.

France fact of the day

by on October 4, 2015 at 3:10 pm in Economics, History, Uncategorized | Permalink

…mergers aside, the youngest firm in the CAC 40, the main stock index, was founded in 1967.

That is from The Economist., via James Pethokoukis.

I have been predicting this, Emma Jacobs covers it in the FT:

This new breed of tutors catering to undergraduates is growing (admittedly from a low base). Once the guilty secret of schoolchildren seeking to get into selective schools or gain top marks in exams, private tutors are now helping British undergraduates and even postgraduates at universities. As many teenagers and twenty-somethings start their new university terms, some will be seeking the help of tutors, like Ms Kasson. Some even assist graduates applying for jobs in banks and professional services firms.

Edd Stockwell, co-founder of Tutorfair, a non-profit organisation that also provides tutoring to children whose parents cannot afford the fees, has seen the number of requests for degree-level tutorials double in the past year. Luke Shelley, director of Tavistock Tutors, says its services for undergraduates have grown “rapidly” in the past six years.

There will be very large classes, such as MOOCs and based on the kind of resources you find on  And there will be very small classes, perhaps of one or two.  It’s the in-between class size, of say two hundred students, that doesn’t always make sense.

Do however note this:

In Ms Mali’s experience it is the parents that are driving the undergraduate tuition business. “Sometimes you do wonder if [the child would be more successful] if they allowed them to fail.”

This is an under-discussed point in today’s ideological environment.

The incompetence of thieves

by on October 4, 2015 at 2:07 am in Economics, Education, Law | Permalink

I investigate self-reported theft data in the NLSY 1997 Cohort for the years 1997–2011. Several striking patterns emerge. First, individuals appear to be active thieves for extremely short periods – in most cases in only one year, and fewer than 5% of thieves for more than three years out of the 15 years of data. Second, self-reported earnings from theft are generally very low and there is little evidence of “successful” criminals or consistent earnings from theft. Third, measures that proxy impatience (smoking, for example) are highly correlated with theft. Fourthly, thieves and non-thieves have similar earnings during the years of peak theft activity, but thieves have lower earnings in their late 20s (after most have long since stopped committing theft). Attrition of survey respondents, underreporting and incapacitation effects do not appear to explain this. There may be “professional thieves” too rare to show up in even large samples such as the NLSY. Theft in the United States thus appears to be substantially a phenomenon of individuals entering a temporary period of intensified risk-taking in adolescence.

That is from a new Geoffrey Fain Williams paper in JEBO, via the excellent Kevin Lewis.  Kevin also links to new evidence that concealed carry laws are orthogonal to crime rates.

Despite the cloud cast by the Volkswagen scandal, automakers are proposing that they be allowed a 70 percent increase in the nitrogen oxides their cars emit, unreleased documents show, as part of new European pollution tests.

Under the new plan, cars in Europe would for the first time be tested on the road, using portable monitoring equipment, in addition to laboratory testing.

The automakers, which include Volkswagen, General Motors, Daimler, BMW, Toyota, Renault, PSA Peugeot Citroën, Ford and Hyundai, are essentially conceding what outside groups have said for some time — that the industry cannot meet pollution regulations when cars are taken out of testing laboratories.

Here is the Danny Hakim NYT story.

Japanese females quietly overtake American females in terms of #labor force participation.


Noah writes: Note the big jump and trend break when Abe took office.

This paper presents novel evidence on the role of credit scores in the dynamics of committed relationships. We document substantial positive assortative matching with respect to credit scores, even when controlling for other socioeconomic and demographic characteristics. As a result, individual-level differences in access to credit are largely preserved at the household level. Moreover, we find that the couples’ average level of and the match quality in credit scores, measured at the time of relationship formation, are highly predictive of subsequent separations. This result arises, in part, because initial credit scores and match quality predict subsequent credit usage and financial distress, which in turn are correlated with relationship dissolution. Credit scores and match quality appear predictive of subsequent separations even beyond these credit channels, suggesting that credit scores reveal an individual’s relationship skill and level of commitment. We present ancillary evidence supporting the interpretation of this skill as trustworthiness.

That is a new Fed working paper (pdf) by Jane Dokko, Geng Li, and Jessica Hayes.

1. Labor force participation is down once again, and we cannot dismiss the notion that a new recession may be starting.  That said, at current margins I am not sure the traditional distinction between cyclical and structural factors still makes sense, so that word “recession” may be more misleading than illuminating.

2. Scott Sumner noted: “Some die hard opponents of “The Great Stagnation” had held out hope that a fall in U-6 unemployment (the broadest measure) would propel future growth.  Now even that option is mostly gone, as it plunged to 10.0% in September, the same level as in February 1996.)  It will go a bit lower, but it no longer represents a large cache of workers waiting in the wings to propel us forward.  Get ready for the new normal—3.0% NGDP growth—it’s coming soon.”

3. There is no wage acceleration gain to be seen in the report.

4. Paul Krugman is (correctly) morphing back into more of a supply-side interpretation of secular stagnation: “Second, secular stagnation — persistent difficulties in achieving full employment — is a real concern if potential growth is slowing due to a combination of demography and weak technological progress, which seems to be happening. Lower growth means lower investment demand, so getting the private sector to spend enough gets harder.”

5. The case for a Phillips curve appears weaker than ever.

6. There is more and more evidence that we’ve shifted into a new regime where wage growth for most income classes simply doesn’t happen to any significant degree.  This may not last forever, but it remains the status quo and too many people find it too hard to wrap their heads around that.  That to me is the single biggest takeaway.

Neil Irwin at the NYT summarizes the report.

Corporate Prediction Markets Work Well

by on October 2, 2015 at 7:27 am in Economics | Permalink

Prediction markets predict public events such as election outcomes better than do polls or other forecasting mechanisms. Internal corporate prediction markets in events such as sales forecasts, product launch times, and product feature demand have been less well studied. Internal corporate markets tend to have fewer participants than public markets and the participants often have strategic interests and biases. Thus, it has been an open question how well these markets operate.

Cowgill and Zitzewitz report on a number of different types of prediction markets run by Google, Ford and Firm X and although they find evidence for some biases they also find that corporate prediction markets also work better than alternative forecasting methods.

Despite large differences in market design, operation, participation, and incentives, we find that prediction market prices at our three companies are well calibrated to probabilities and improve upon alternative forecasting methods. Ford employs experts to forecast weekly vehicle sales, and we show that contemporaneous prediction market forecasts outperform the expert forecast, achieving a 25% lower mean-squared error (p = 0.104).

…The strong relative predictive performance of the Google and Ford markets is achieved despite several pricing inefficiencies. Google’s markets exhibit an optimism bias. Both Google and Ford’s markets exhibit a bias away from a naive prior (1/N, where N is the number of bins, for Google and prior sales for Ford). However, we find that these inefficiencies disappear by the end of the sample. Improvement over time is driven by two mechanisms: first, more experienced traders trade against the identified inefficiencies and earn higher returns, suggesting that traders become better calibrated with experience. Secondly, traders (of a given experience level) with higher past returns earn higher future returns, trade against identified inefficiencies, and trade more in the future. These results together suggest that traders differ in their skill levels, they learn about their ability over time, and self-selection causes the average skill level in the market to rise over time.

Addendum: It’s an interesting commentary on academic publishing that Marginal Revolution first covered this paper in a working version in 2008! An extended version was received by the Review of Economic Studies in 2010 which accepted a final version in 2014 and then published the paper in 2015.

Here is a pdf of his remarks, with useful graphs, excerpt:

So in recent quarters, the investment story has been about oil. But drilling cannot explain the broader trends over the past five years. Since 2010, most of the step down in investment growth was attributable to reduced growth in equipment investment, as shown in Figure 6. At the same time, intellectual property products investment has been accelerating and over the last four quarters it grew 7.3 percent, the fastest pace since 2005. In fact, stronger growth in intellectual property products investment has partially offset the slower growth in equipment investment over the past two years. Intellectual property products consists of about 45 percent research and development (R&D) investment, 45 percent software investment, and 10 percent artistic originals.

Yet if you look to Figure 8 on p.7, you can see that the overall trajectory for fixed business investment is not entirely positive, even worse if Figure 11 on p.10 (alas I cannot get them to reproduce in this post).  The bottom line is this:

…today’s gross investment is 2.3 percentage points lower than its historical average…Investment net of depreciation as a share of GDP was already lower than its historical average going into the recession and today remains well below its historical average…

You will find many (appropriate) caveats in the study itself, most of all that investment in software may be different, although this can cut either way.  Software has been improving rapidly, but it is also not very durable as business investments go.

Addendum: Paul Krugman comments.

Are free trade agreements contagious?  The negotiations for TPP seem to be coming to a close, but there is the potential for a much more beneficial arrangement, namely for the subcontinent and thereabouts, can we toss in Ethiopia too?

India has said that all South Asian economies need to speedily work towards a free trade area within the region with a defined time-line, preferably 2020, as the first step towards achieving the joint vision of a South Asian Economic Union.

“I am confident that consensus can be achieved for a defined time-line for 100 per cent tariff liberalisation with special and differential treatment for Least Developed Countries (LDCs) and vulnerable economies,” Commerce & Industry Minister Nirmala Sitharaman said at the South Asia Economic Conclave organised by the Commerce Ministry and industry body CII on Tuesday.

While India has already allowed duty-free access to goods from LDC countries of South Asia as part of the South Asia Free Trade Agreement (SAFTA), it is ready to go to 100 per cent for non-LDCs, too, as per the Safta roadmap agreed by India with Pakistan in November 2012, Sitharaman said.

At least four of the eight SAARC countries — which include India, Pakistan, Sri Lanka, Maldives, Nepal, Bhutan, Bangladesh and Afghanistan — are looking at a free trade area by 2020. India is willing to take asymmetric responsibility towards achieving the goal, she added.

The full story is here.

Here you will find the transcript, video, and podcast.  The summary is this:

Tyler and Harvard economist Dani Rodrik discuss premature deindustrialization, the world’s trilemmas, the political economy of John le Carré, what’s so special about manufacturing, Orhan Pamuk, RCTs, and why the world is second best at best.

Here is one excerpt from Rodrik, on why Turkey and some comparable countries did not fully modernize:

my general sort of question would be 50 percent structure, 50 percent agency, which is to say you start with a lot of initial conditions that aren’t very favorable. Going back to the 19th century, you start on the wrong end of the global division of labor. Everybody else is industrialized and you’re not, plus, then, the British come and they open up your trade regime and all the craft industries you have in the 18th century are just decimated because of imports from Britain and other Western Europeans.

Then you get defeated in a world war. You start in very inauspicious circumstances.

Then agency. What happened, for example, under Mustafa Kemal Atatürk, who was the leader who made Turkey, who took Turkey from the ashes of the Ottoman Empire, erected the Turkish republic on top of that. He did a lot of very good things and a lot of very silly things, and we’re still living with the consequences of many of those things, including the good things.

I asked him this:

You were born in Turkey, you grew up in Turkey. I have so many questions about Turkey to ask you, but let me just try two or three. Let’s take the Turkish city of Konya. I’ve been to Konya. Outsiders sometimes call Konya the bible belt of Turkey. I’m not sure that’s a good comparison, but it’s a more religious city than Istanbul. It’s a kind of heartland city in Turkey.

Just a little simple question. I would put it this way. Do you trust the median voter in Konya?

And a short one from Rodrik again:

Culture is back in economics. I still have to be convinced that it’s actually adding a significant amount to what we learn.

In terms of economic prospects, he picks Brazil as the most underrated country and India as the most overrated.  And you can see what he thinks of the idea of an independent Catalonia…

You should all buy and read Dani’s new book, Economics Rules: The Rights and Wrongs of the Dismal Science, which I can recommend wholeheartedly and which I wrote a blurb for.

You can already rate restaurants, hotels, movies, college classes, government agencies and bowel movements online.

So the most surprising thing about Peeple — basically Yelp, but for humans — may be the fact that no one has yet had the gall to launch something like it.

When the app does launch, probably in late November, you will be able to assign reviews and one- to five-star ratings to everyone you know: your exes, your co-workers, the old guy who lives next door. You can’t opt out — once someone puts your name in the Peeple system, it’s there unless you violate the site’s terms of service. And you can’t delete bad, inaccurate or biased reviews — that would defeat the whole purpose.

Imagine every interaction you’ve ever had suddenly open to the scrutiny of the Internet public.

The piece is by the excellent Caitlin Dewey.  Currently the company is valued at $7.6 million.


by on October 1, 2015 at 12:35 am in Economics | Permalink

Described as A Luxury Day Care Service for Pet Chickens in Brooklyn, San Francisco and Portland, Oregon

At first I thought it was a joke, but I can’t find evidence of fraud and the phone number checks out.  Still I wonder.

In the meantime, file under Markets in Everything.

The pointer is from Kate Darling, Mistress of Machines.

Transport for London is preparing to launch a crackdown on Uber, proposing a series of new rules that will hit the popular minicab-hailing app in one of its most popular cities.

…The proposals include a minimum five-minute wait time between ordering a private hire vehicle and it arriving, and banning operators from showing cars for hire within a smartphone app – a hallmark of the American company’s service.

No, this is not from an Ayn Rand novel.

These proposed rules so nakedly protect rent-seekers and make life worse for consumers that I don’t think they will succeed. Even if the rules fail, however, we shouldn’t be complacent about the dangers to innovation.

What made Uber different and controversial is that their Ayn Rand loving CEO followed the adage that it’s better to ask for forgiveness than permission. Uber skirted the law and went to consumers directly about whether they wanted transportation innovation. Consumers around the world responded with a resounding Yes to the Uber-referendum so regulators and rent-seekers who want to control Uber now must also fight Uber-consumers. That genie won’t go back into the bottle.

In the usual scenario, however, innovation can be quashed before consumers have a chance to know what they are missing. Had the taxi companies had an inkling of what was coming it would have been easy to to pass stricter laws in advance that would have made Uber impossible to get off the ground. Of course, in many industries today the old guard does have an inkling of what is coming and that should frighten anyone who wants to see greater innovation.