This is quite long, so it goes under the fold…class starts tomorrow night! Read More →
This is quite long, so it goes under the fold…class starts tomorrow night! Read More →
2. How will European cinema fare under a single digital market? “Is he a collaborator?”
Here’s one bit from an excellent interview of Paul Romer on urban development:
Q. How are economics and planning and development of cities related each other?
Urban Expansion is an exception to the usual rule that an economy does not need a plan. Creating new built urban area requires a plan for the public space that will be used for mobility (sidewalks, bus lanes, bike lanes, auto lanes …) and for parks. At a minimum, this plan should provide for a network of arteries big enough to allow bus travel and dense enough that no location is more than 0.5 km from such an artery. This is the only thing that needs to be planned up front for land that is not yet developed. Everything else can wait. But if informal development comes first, it is too late. The area will never have enough public space to allow successful urban development.
I think Romer is correct. What surprised me most when studying Gurgaon in India was that despite strong demand, there wasn’t a lot of common infrastructure being built. The transaction costs of ex-post planning were simply too high.
In addition to transport arteries, I would also mention the importance of setting aside space and access points for sewage, electricity, and information arteries. It’s not even necessary that government provide these services or even the plan itself (private planning of large urban areas is also possible) but a plan has to be made. By reserving space for services in advance of development, developers and residents can greatly improve coordination and maximize the value of a city.
A simple, minimal urban plan is analogous to the rules of the game.
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.
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.
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.
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.
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.
Solve for the equilibrium, as they say, and please consider as many different variables as possible…
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.
…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.
7. “But we are not utilitarians. We are Americans.” Is there a coming car revolution?
The Democratic Party platform now calls for a $15 per hour national minimum wage for all hourly workers after delegates voted in an amendment proposed by progressive activists during the Democratic National Committee Meeting here on Friday.
The pointer is from Conor Sen.
Here is the academic paper, by William Easterly, and Laura Freschi, and Steven Pennings:
Economic development is usually analyzed at the national level, but the literature on creative destruction and misallocation suggests the importance of understanding what is happening at much smaller units. This paper does a development case study at an extreme micro level (one city block in New York City), but over a long period of time (four centuries). We find that (i) development involves many changes in production as comparative advantage evolves and (ii) most of these changes were unexpected (“surprises”). As one episode from the block’s history illustrates, it is difficult for prescriptive planners to anticipate changes in comparative advantage, and it is easy for regulations to stifle creative destruction and to create misallocation. If economic growth indeed has a large component for increases in productivity through reallocation and innovation, we argue that the micro-level is important for understanding development at the national level.
It is a block on Greene St., near NYU, and so a section of this paper focuses on whorehouses. History made them do it. Here is the interactive site. I am in general a big believer in this kind of micro-history, which remains undervalued in the economics profession.
The pointer is from Kottke.
Nuance is not a virtue of good sociological theory. Sociologists typically use it as a term of praise, and almost without exception when nuance is mentioned is is because someone is asking for more of it. I shall argue that, for the problems facing Sociology at present, demanding more nuance typically obstructs the development of theory that is intellectually interesting, empirically generative, or practically successful.