1. New Carl Zimmer project on science eBook reviews.
2. Empirical tests of how much “cold start” is a problem in labor economics. From this general blog on on-line labor markets and their implications.
3. Markets in everything: dog TV.
4. NYT symposium on the farm bill, including yours truly.
6. CrookedTimber is running a symposium on Graeber’s debt book.
7. Early John Nash on cryptography, written to the NSA.
From Arnold Kling (and the graph is from Karl Smith):
I challenge any supporter of the sticky-wage story (Bryan? Scott?) to write a 500-word essay explaining how this graph does not contradict their view. If employment fluctuations consisted of movements along an aggregate labor demand schedule, then employment should be at an all-time high right now.
My view is “sticky nominal wages for some, negative AD shock, ongoing stagnation and thus low job creation, and the progress we have is in some sectors immense but typically labor-saving rather than job-creating, all topped off with a liquidity shock-induced revelation that two percent of the previous work force was ZMP.” (Try screaming that from the rooftops.) I read the above graph as consistent with that mixed and moderate view. As Arnold notes, it’s harder to square with an AD-only view. If I wanted to push back a bit on Arnold’s take, and save some room for AD stories, I would cite the “Apple Fact of the Day,” and also note that stock prices have not responded nearly as well as have measured corporate profits. Still, we economists are not taking this graph seriously enough.
Addendum: Arnold Kling responds to responses.
1. The Economists’ Voice: Top Economists Take On Today’s Problems, edited by Stiglitz, Edlin, and DeLong, useful excerpts from the journal.
2. Noam Scheiber, The Escape Artists: How Obama’s Team Fumbled the Recovery. I enjoyed reading this book very much, though I am not the one to judge its account of “inside baseball.” There is plenty on Geithner and Summers. Here is Warsh on Scheiber on Summers.
3. Matthew D. Adler, Well-Being and Fair Distribution: Beyond Cost-Benefit Analysis. A detailed examination and defense of social welfare functions, which I have not read.
4. Tyler Cowen, Crie sua Própria Economia, in Brazilian, reviews and the like are here.
5. Alan Beattie, illustrious FT correspondent, Who’s in Charge Here?: How Governments are Failing the World Economy, eBook only, due out in March.
Reading Scott’s post induced me to write down these few points. I have noticed that right-wing public intellectuals are skeptical of more expansionary monetary policy for a few reasons:
1. There is a widespread belief that inflation helped cause the initial mess (not to mention centuries of other macroeconomic problems, plus the problems from the 1970s, plus the collapse of Zimbabwe), and that therefore inflation cannot be part of a preferred solution. It feels like a move in the wrong direction, and like an affiliation with ideas that are dangerous. I recall being fourteen years of age, being lectured about Andrew Dickson White’s work on assignats in Revolutionary France, and being bored because I already had heard the story.
2. There is a widespread belief that we have beat a lot of problems by “getting tough” with them. Reagan got tough with the Soviet Union, soon enough we need to get tough with government spending, and perhaps therefore we also need to be “tough on inflation.” The “turning on the spigot” metaphor feels like a move in the wrong direction. Tough guys turn off spigots.
3. There is a widespread belief that central bank discretion always will be abused (by no means is this view totally implausible). “Expansionary” monetary policy feels “more discretionary” than does “tight” monetary policy. Run those two words through your mind: “expansionary,” and “tight.” Which one sounds and feels more like “discretion”? To ask such a question is to answer it.
Within these frameworks of beliefs, expansionary monetary policy just doesn’t feel right. Yet I still agree with the arguments of Scott (and others) that it would have been the right thing to do.
Here is my initial post on the fallacy of mood affiliation.
2. Markets in everything, honey trap edition, or should they call it something else?
3. Do hedge fund returns have lower volatility?
4. The still-underrated Dylan Matthews covers MMT, graphic here.
5. Remarkable Swedish rescue, but of what?
How can they beat the market consistently, especially if we take EMH seriously at all? And if they don’t beat the market, how is 2-20 to be justified? Here is a snippet from an interesting Amazon review:
…this kind of comparison misses the entire point of most hedge funds. A market-neutral fund is not designed as a stand-alone investment, but as a diversifier for an equity portfolio. It can have half the return of equities with the same volatility, and still be valuable. The question isn’t whether putting 100% of your money in hedge funds did better than putting 100% in stocks, it’s what portion of assets an investor should allocate to hedge funds. Using the author’s own numbers, an investor would have done best to have 30% of assets in hedge funds, rebalancing annually, from 1998 to 2010. That produced 4.2% annual alpha (return in excess of what you could have gotten investing in stock index funds and t-bills with the same volatility). That number is certainly overstated, hedge fund investors typically do worse than the index suggests, but it demonstrates that you can’t consider only stand-alone returns. This point is borne out by the finding that endowments and pension funds that make use of hedge funds have consistently better risk-adjusted performance than those that do not.
The review, by Aaron C. Brown, offers other points of interest. I’ve ordered the underlying asset itself (the book) and I will report back on it. It was reviewed in today’s FT, still no permalink.
Here is a recent story on hedge fund closures.
1. Measuring the output gap, an excellent post looking at capacity utilitzation and changes in inflation rates to back out an answer to this question. The bottom line is that the output gap probably isn’t nearly as large as is often claimed. And Karl Smith comments, I would note the connection between the ppf and trust.
2. Obama’s hardline turn against medical marijuana.
3. Markets between everything and everyone, and Literary Saloon reviews Allan Meltzer.
4. Testing Milton Friedman, new TV show with Caplan, Yglesias, Dalmia, Williams, others.
1. The internet as a driver of cognitive inequality?
2. Is Duck Duck Go a better search engine?
3. The collapse of EU emissions trading.
4. How to mobilize a bureaucratic glitch against yourself, and the demand for vanity license plates.
5. Angus on the Fed.
Here is a 2009 paper of mine with Sam Papenfuss (pdf), a later version of which was published in this book edited by Joshua Hall. The paper deliberately sidesteps the recent scandals and focuses on fundamentalist explanations of why higher education might be provided on a non-profit or for-profit basis.
The key stylized facts are this:
Two primary features characterize the observed educational for-profits. First, for-profits tend to specialize in highly practical or vocational forms of training. For-profits are especially prominent in areas where student performance can be measured by a relatively objective, standardized test. Nonprofits, in contrast, have a stronger presence in the liberal arts, although they are by no means restricted to that arena..
This is a general pattern, and not unique to the United States today:
A comparison of for-profit and non-profit institutions in the Philippines [in the 1970s] bears out many of the differences noted above. Filipino for-profits tend to charge lower fees, specialize in education of lower academic reputation, spend less on capital equipment, and serve students who plan on pursuing vocational careers or taking a standardized vocational test upon graduation…Students at for-profits are approximately ten times more likely to take the tests. Adjusting for the lower pass rate from for-profits, the for-profits are putting about five times the number of students through the tests as the non-profits, even though for-profits educated no more than three-fifths of all Filipino students at the time.
Here is one possible (partial) resolution:
Faculty governance implies that for-profits and nonprofits place different relative weight on reputation and profits. The for-profit selects students and faculty on the basis of how easily their reputational benefits can be captured by shareholders, whereas the non-profit places greater weight on the reputational benefits that are kept by faculty. The for-profit pursues “reputation as valued by students in dollar terms” and the nonprofit pursues “reputation with the external world,” or “reputation as a public good.” In the resulting equilibrium, for-profits achieve lower status.
…The hypothesis therefore predicts a segmented market for higher education. Students who seek the highest levels of certification and reputation will attend non-profit institutions, which are run by faculty and use their prestige to raise donations. Students whose quality can be certified by an outside vocational exam do not need the non-profit reputational endorsement. They will pursue the more efficient instruction offered by for-profits.
There is a good recent paper by David Deming, Claudia Goldin, and Lawrence F. Katz on educational for-profits, available here. Here is a 2010 Dick Vedder piece on for-profits, more positive than most recent accounts.
1. DasParkHotel, and claims about German humor.
2. A Joke.
3. Noah Smith has a new job, and the tale.
4. Model this: Edward Elgar prices are falling.
5. Sales of Charles Dickens books in his lifetime, and how much does movie piracy matter?
…when Prime Minister Mario Monti remarked that having a job for life in today’s economy was no longer feasible for young people — indeed, it was “monotonous” — he set off a barrage of protests, laying bare one of the sacrosanct tenets of Italian society that the euro zone crisis has placed at risk.
Reaction was fast, furious, bipartisan and intergenerational. “I think the prime minister has to be careful with the words he uses because people are a little angry,” Claudia Vori, a 31-year-old Rome native who has had 18 different jobs since graduating from high school in 1999…
This point is not irrelevant:
Debate has been especially intense over Article 18 of the 1970 Workers Statute, which forbids companies with more that 15 employees from firing people without just cause. The unions say that line cannot be crossed.
The article is here. How many years does it take to a) undo this, and b) have it kick in as a positive for growth? This again also gets back to the question of why Germany does not wish to pay for everything. By the way, is anyone writing a behavioral economics piece about how “crisis fatigue” increasingly is shaping eurozone policy?
