That is the new Philip A. Wallach book and the subtitle is Legality, Legitimacy, and the Responses to the 2008 Financial Crisis. Philip is one of the underrated up-and-coming young policy economists, and this book focuses on the financial crisis and the law. It is original, a rare quality for books on the crisis at this point. My own blurb says: “Why did America respond to its recent financial crisis the way it did? And why did the bailouts so quickly become unpopular, even as the economy was recovering? How much did the law stop the government from doing more? Philip Wallach’s To the Edge is the very best book on all of these questions.”
Christopher DeMuth puts it well: “The financial crisis of 2008 was also a crisis of law and a crisis of government legitimacy,” and Wallach is now the go-to guy on that angle.
I was asked this this question on Quora. Here’s my answer:
Writing an original dissertation.
Anyone who makes it into graduate school has had at least 16 years of learning and, as a result, most graduate students are good learners. A dissertation, however, requires the creation or discovery of new knowledge. On the day you finish your dissertation you have to know something that no one else in the world knows. That is a tall order.
After their course work ends, many students find themselves at a loss. They have done a lot of learning and not much creating or discovering–skills that not only are different than learning but that may even be at cross purposes. A learner has to trust that what he or she is being taught is true and valuable. A learner with too much skepticism won’t pass the final. But a dissertation writer without enough skepticism will never advance beyond previous knowledge and never discover that something previously learned was false.
It’s an odd necessity that the more you know the more skeptical you must become to know more. Not every student navigates this evolution in attitude.
FYI, Quora seems to be growing very rapidly. I first noticed this when my followers on Quora started growing faster than and soon exceeded my followers on Twitter, a fact I found surprising. According to Alexa, Quora has leaped in the popularity rankings 42 places in just the last 3 months. It will be interesting to see how they handle the growth especially keeping the quality of the questions high.
Joshua Rothman writes in The New Yorker about a new book by H.J. Jackson, on the romantic poets:
Truly long-term literary endurance depends, Jackson writes, on “regular reinterpretation,” and, for that to happen, your writing has to be rich and multi-dimensional. That doesn’t mean, though, that other factors can’t help it along. Thanks to Wordsworth’s liberal, politically active youth, biographers were able to keep discovering previously-unknown political episodes in his early life; that allowed them to keep publishing controversial biographies, which kept him in the public eye long after his death. That distinction between youth and age was also useful for professors: it allowed them to keep arguing over who was better, the “early” or “late” Wordsworth. Even without all these factors, Jackson concedes, Wordsworth’s poetry would still be read today, especially in universities—but academic study alone could never have given him the high cultural profile that he enjoys now. “To sum up,” she writes, Wordsworth’s fame “is due to a concatenation of circumstances, most of which Wordsworth himself could not have foreseen, most of which he would have objected to if he could have foreseen them, and most of which had little to do with the communication of eternal truths.”
You can order the book here, the subtitle is Romantic Reputations and the Dream of Lasting Fame.
Mike Irvine is set to make a splash in the dry world of academe. The University of Victoria student is getting ready to defend his masters thesis in education from below the surface of the Salish Sea off the coast of British Columbia.
And lest you think he’s not taking his thesis defense seriously, he’ll be wearing a pinstripe suit over his wet suit.
…Irvine’s thesis, “Underwater web cameras as a tool to engage students in the exploration and discovery of ocean literacy,” will be streamed live on YouTube as well.
His thesis defense will take about 15 minutes and, following his presentation, he’ll face two rounds of questions from his advisors. He expects to be underwater for about an hour.
The link is here, with illustrative videos, via Jodi Ettenberg.
The link is here, more or less unedited I am told. Somewhere in there (Saturday, 11 a.m.) is a panel with myself, Kenneth Arrow, Sam Peltzman, Gary Libecap and others on how academia and publishing models are evolving.
There are very likely other good bits too, but I did not catch most of the conference. A while ago I was told a disaggregated series of videos would be produced. If those come my way I will let you all know.
That is the next (and for me final) NBER paper from the macro workshop, by Barnichon and Figura, the pdf is here. Their main claim is quite startling, and very important if true. Here is the abstract:
The US labor market has witnessed two apparently unrelated trends in the last 30 years:a decline in unemployment between the early 1980s and the early 2000s, and a decline in labor force participation since the early 2000s. We show that a substantial factor behind both trends is a decline in desire to work among individuals outside the labor force, with a particularly strong decline during the second half of the 90s. A decline in desire to work lowers both the unemployment rate and the participation rate, because a nonparticipant who wants to work has a high probability to join the unemployment pool in the future, while a nonparticipant who does not want to work has a low probability to ever enter the labor force. We use cross-sectional variation to estimate a model of nonparticipants’ propensity to want a job, and we find that changes in the provision of welfare and social insurance, possibly linked to the mid-90s welfare reforms, explain about 50 percent of the decline in desire to work.
Did you get that last bit? Wild. The Clinton-era welfare reforms lowered the incentive to work
. Another part of the paper explains the possible mechanisms in more detail:
We conjecture that two mechanisms could explain these results. First, the EITC expansion raised family income and reduced secondary earnersís (typically women) incentives to work. Second, the strong work requirements introduced by the AFDC/TANF reform would have, through a kind of “sink or swim” experience, left the “weaker” welfare recipients without welfare and pushed them away from the labor force and possibly into disability insurance.
The authors have strong reputations, but is it true? Stay tuned, and look for my live-blogging in the comments section of this post…
No. From Thomas J. Miles and Adam B. Cox in the JLE:
Prior research investigates whether immigrants commit more crimes than native-born people. Yet the central policy used to regulate immigration — detention and deportation — has received little empirical evaluation. This article studies a recent policy innovation called Secure Communities. This program permits the federal government to check the immigration status of every person arrested by local police and to take the arrestee into federal custody promptly for deportation proceedings. Since its launch, the program has led to a quarter of a million detentions. We utilize the staggered rollout of the program across the country to obtain differences-in-differences estimates of its impact on crime rates. We also use unique counts of the detainees from each county and month to estimate the elasticity of crime with respect to confined immigrants. The results show that the Secure Communities program has had no observable effect on the overall crime rate.
That is once again via the excellent Kevin Lewis.
That is the next NBER macro session, the authors are Acemoglu, Akcigit, and Kerr, the pdf is here, and here is the abstract:
The propagation of macroeconomic shocks through input-output and geographic networks can be a powerful driver of macroeconomic fluctuations. We first exposit that in the presence of Cobb-Douglas production functions and consumer preferences, there is a specific pattern of economic transmission whereby demand-side shocks propagate upstream (to input supplying industries) and supply-side shocks propagate downstream (to customer industries) and that there is a tight relationship between the direct impact of a shock and the magnitudes of the downstream and the upstream indirect effects. We then investigate the short-run propagation of four different types of industry-level shocks: two demand-side ones (the exogenous component of the variation in industry imports from China and changes in federal spending) and two supply-side ones (TFP shocks and variation in knowledge/ideas coming from foreign patenting). In each case, we find substantial propagation of these shocks through the input-output network, with a pattern broadly consistent with theory. Quantitatively, the network-based propagation is larger than the direct effects of the shocks, sometimes by severalfold. We also show quantitatively large effects from the geographic network, capturing the fact that the local propagation of a shock to an industry will fall more heavily on other industries that tend to collocate with it across local markets. Our results suggest that the transmission of various different types of shocks through economic networks and industry interlinkages could have first-order implications for the macroeconomy.
As I am doing today, my live-blogging will be in the comments of this post…
That is the next NBER macro paper at these sessions, by Fang, Gu, Xiong, and Zhou, here is the pdf. The abstract is this:
We construct housing price indices for 120 major cities in China in 2003-2013 based on sequential sales of new homes with the same housing developments. By using these indices and detailed information on mortgage borrowers across these cities, we find enormous housing price appreciation during the decade, which was accompanied by equally impressive growth in household income,e xcept in a few first tier cities. Housing market participation by households from the low-income fraction of the urban population remained steady. Nevertheless bottom-income mortgage borrowers endured several financial burdens by using price to‐income ratios over eight to buy homes, which reflected their expectations of persistently high income growth into the future. Such future income expectations could contract substantially in the event of a sudden stop in the Chinese economy and present an important source of risk to the housing market.
That sounds a bit ordinary, and I didn’t have much time to read through this one in advance, so let’s see from the presentation what is new in there, my live-blogging will be in the comments section of this post…
That is the NBER paper by Chang, Chen, Waggoner, and Zha, pdf here. Here is the abstract:
We make three contributions in this paper. First, we provide a core of macroeconomic time series usable for systematic research on China. Second, we document, through various empirical methods, the robust findings about striking patterns of trend and cycle. Third, we build a theoretical model that accounts for these facts. The model’s mechanism and assumptions are corroborated by institutional details, disaggregated data, and banking time series, all of which are distinctive of Chinese characteristics. The departure of our theoretical model from standard ones offers a constructive framework for studying China’s macroeconomy.
Not a very illuminating abstract, but I thought this was an important piece. There is now real and apparently reliable time series information for China! And with the accompanying model, the authors find there is low consumption growth and overcapacity of heavy industry with rising debt risks, both problems stemming from the preferential credit access given to large Chinese firms. That is hardly news, but it is nice to see it confirmed and measured, I call that Austro-Chinese business cycle theory
I’ll again be live-blogging the presentation and discussion once it is up and running, in the MR comments section to this post, feel free to add your own comments.
That is the Gennaioli, Ma, and Shleifer paper being presented at the NBER macro conference, pdf here. There are two key points to this paper. First, actual data on the expectations of corporate CFOs have predictive power for investment, even when Tobin’s Q is measured. Second, expectations about future earnings are not rational in the Lucasian sense. I’ll update with remarks in the comments section of this post as the discussion proceeds (feel free to leave comments on my comments), again note that I am not allowed to attribute specific comments to individuals other than the presentation itself.
Today I am at the NBER annual macroeconomics conference as an observer. The program and papers are here, and they look very interesting. You may be hearing more about this later; I am allowed to blog the presentations but not attribute specific comments to individuals. The Bernanke talk I cannot cover at all.