Month: April 2005

On net, yes, but it is not simple:

…institutions such as NAFTA are problematic for many of the indigenous groups in Mexico.  While the economic case for free trade is a strong one, politics matters as well.  The long-run benefits of NAFTA, most of all for Mexico, are likely to dramatically outweigh the costs, but trade can worsen some political problems in the shorter run.

…greater wealth sometimes brings greater confiscation in response.  NAFTA, and economic development more generally, has attracted much foreign investment to Mexico.  The land in Guerrero is suddenly more valuable than before, or at least potentially so.  If better roads were in place, Oapan [the village] would be no more than two and a quarter hours from Mexico City.  The Mexican government therefore would like to get the villagers off the land, whether by legitimate means or not. 

The Mexican state and federal governments also favor foreign investment when the villagers do not.  Any foreign investment that came into Guerrero would likely involve significant payoffs, of one form or another, to the various levels of government involved.  The villagers would not expect to see any of this money.  NAFTA therefore has increased the conflict of interest between the villagers and higher levels of Mexican government. 

Here is my previous post on my new book, Markets and Cultural Voices: Liberty vs. Power in the Lives of Mexican Amate Painters.  You can (and should) buy it here.

Are you worried about a housing bubble?  Go buy that house anyway.

Let’s say you buy and the price of housing then goes up.  Surely you are happy.

Let’s say the price of housing, including your house, falls.  Well, in absolute terms that is not so bad either.  You can simply stay put.  Even better, you might buy another house.  Consider the polar case where houses fall to a nickel a piece.  Yes you wasted 600K on an overpriced big box.  But now you can buy your favorite mansion for a dime.

In technical terms, consider the changing price as a budget constraint rotating around a fixed status quo point (you can always stay in the house you bought).  The rotating budget constraint will put you on a higher indifference curve.

So go ahead and buy that house.  Yes, you might be better off by waiting for the price to fall.  But don’t worry about bursting bubbles, you won’t end up worse off.

And let’s assume you won’t have to move anytime soon.

So buy, buy, buy.  And don’t stop at homes.

I’ve opened up the comments section, and don’t forget the title of this post.

In a written statement, the [American Economic] association praised Mr. Acemoglu, 37, as a "broad and productive economist" who has made "valuable contributions" in the fields of labor economics, macroeconomics, institutional economics, and political economy. "Especially innovative," the statement says, is his recent work on the role of institutions in development and in political economy.

Mr. Acemoglu was one of the authors of a paper, "Reversal of Fortune: Geography and Institutions in the Making of the Modern World Income Distribution," that appeared in the Quarterly Journal of Economics in 2002. The authors argue that among countries colonized by European powers, those that were relatively rich in 1500 are now relatively poor because of colonial policies — an argument against the notion that geography is destiny.

In a working paper published in March by the National Bureau of Economic Research, Mr. Acemoglu and other authors argue that there is no evidence that countries that increase their levels of education are likely to become more democratic.

That is from the Chronicle of Higher Education, through the Division of Labor blog. 

This is a very good choice.  Acemoglu is an economist who starts with, and sticks with, the critical questions about development and institutions.  He does not let himself get distracted by a model he knows he can solve or a technique he knows he can use.  Here is his home page, with links to research.  Here is an earlier MR post on his work.  Here is David Warsh on Acemoglu.