Month: December 2007

Is factor productivity due to revert to its long-run mean?

Peter Ireland and Scott Schuh write:

A two-sector real business cycle model, estimated with postwar U.S. data, identifies shocks to the levels and growth rates of total factor productivity in distinct consumption- and investment-goods-producing technologies.  This model attributes most of the productivity slowdown of the 1970s to the consumption-goods sector; it suggests that a slowdown in the investment-goods sector occurred later and was much less persistent.  Against this broader backdrop, the model interprets the more recent episode of robust investment and investment-specific technological change during the 1990s largely as a catch-up in levels that is unlikely to persist or be repeated anytime soon.

Here is the paper, have you noticed that NBER working papers seem to have been freed from the gate? 

On questions like this I prefer to be "judgment-driven" rather than model-driven, and judgment says "who knows?"  Plus two-sector calibrated RBC models are not in every regard a smashing success.  Yet why should the rate of productivity growth remain permanently higher?  At the very least, this is an admonition to be sober and modest in our economic judgments.  The rate of productivity growth is a fundamental determinant of long-run living standards.  Yet when it comes to understanding or predicting this variable, economics has been sadly deficient, especially at the turning points.  Commentators of various political persuasions rail against taxes, tax cuts, spending, spending cuts, poorly thought deregulation, whatever, but might they be chomping at gnats?

A very good two sentences

Back in 1970, the economist Harry G. Johnson pointed out that all
successful founders of schools not only are geniuses with profound
insights but also provide a road map that tells their followers and
successors what to do to make a successful academic career within the
school. Schumpeter did not do that second part.

Here is the full review, Brad DeLong on Thomas McCraw and Schumpeter.

The Commanding Heights

Australian bloggers Andrew Norton and Andrew Leigh will debate public education in a series of posts.  Judging by Andrew Norton’s first missive it will be a good debate.

People are used to the idea of state schools, so they don’t think about how
uneasily government-controlled education fits with liberal democracy. If someone
said that Australia’s media should be owned by the state, with journalists told
by the state what they should say, with media audiences examined to make sure
they had absorbed the official line, there would be predictable and justifiable

Yet public education means essentially that for Australia’s young people. The
government owns most schools, employs most teachers, tells them what to teach
through state-set curricula, and examines students to make sure they have it
right–even kids escaping to private schools can’t avoid these last two aspects
of state-run education. And unlike state-owned media, there are severe
consequences for ignoring state education….

Hat tip to New Economist.

Addendum: Andrew Leigh’s first reply is here.

Honduran thoughts

The best food is cooked in people’s homes, sold on the highways, or
on the beach.  I recommend grilled corn on the cob with chile and lime,
baleadas, which are fresh corn tortillas stuffed with beans and
sometimes cheese or avocado or pork, any tamales, and of course
seafood, most of all the conch ceviche (I did dare to eat it, in a
small village), and the Garifuna seafood dishes and soups cooked in
coconut milk.  Honduras is not known as a food country but that is because North American visitors take their meals in restaurants.

It is said that Honduras is too poor to afford its own oligarchy,
and the infrastructure here is poor, even by Central American
standards.  The rate of AIDS is supposed to be very high.

Natasha and I debated whether the upscale shopping mall in San Pedro
Sula — CityMall — seemed so U.S.-American because a) Honduras is
becoming so Americanized, or b) American shopping malls now attract so
many Latinos; that discussion is ongoing.  We also seem to export gang criminality to Honduras, which is no longer a fully safe
country.  Overall Honduras gets high marks on friendliness (especially
if you aren’t mugged; we weren’t), and on capturing the old feel of
Central America and the Caribbean, but there are few sights of the
traditional kind.  The country is recommended for the experienced traveler
looking for a change of pace, and luxury living at bargain prices, but
most people should try Costa Rica or Panama first.

Tela was a lovely beach community, if you are on the north Honduran
coast visit a Garifuna village and make sure you eat a home-cooked meal under the palm leaves.  Every
journey has an emotional and narrative center at its core and that was
it for us.  The way the kids play almost naked in the dirt you can see
why the rate of dengue fever is so high.

Skipping through the blogosphere (when I could connect) I saw horrified reactions to my anthropological suggestion, especially from Felix Salmon and Kevin Drum
plus many MR commentators.  Apparently I hit a nerve.  Contrary to their summaries, I am not saying that
anthropology is required for good commentary, rather than commentary
should disclose how much anthropology went into it.  Can that be so

And here’s Michael Blowhard on KindleCraig Newmark linked to this good post on the economics of the writer’s strike, see also here.  Who knows what else I missed?

Should we be happy with the low U.S. dollar?

Here is my latest column:

A low dollar simply looks bad. We are, after all, used to judging ourselves against others – comparing our salaries with the earnings of our peers, and our homes with those of our neighbors. We’re used to thinking it is a big advantage to stand at the top of a numerical list.

But when it comes to currencies, a higher value neither brings national success nor predicts future prosperity. The measure of a nation’s wealth is the goods and services it produces, not the relative standing of its currency. Take a look at 1985-88, when the dollar lost more ground than in the last few years. Those were good times, and the next decade was largely prosperous as well.

Most of the piece is standard economics, not far from recent writings by Krugman or DeLong.  The more interesting question is which measures of a national economy we, for reasons of pride, inefficiently attach too much importance to.

A second interesting question is: if we should not be worried about a low dollar, what should we be worried about?  I see two answers at the current time.  First, if a negative shock hits China, or perhaps some other negative shock hits the U.S. or Europe, we have precious little room to maneuver.  Second, there remains some chance of a cascading credit crunch.

Addendum: Here is Brad DeLong’s new piece.

Unusual thoughts about contemporary art

Contemporary art is highly individualistic.  It is about freedom of
expression, the chance to make one’s mark and to speak with a
distinctive voice – all characteristics of the right, rather than the
left.  Contemporary artists are entrepreneurs in every sense of the
word. The Brit Artists of the 1990s have turned themselves into brands,
selling a luxury commodity to a group of discerning purchasers.  The Damian Hirst skull,
retailing at £50 million, could not remotely be described as a leftwing
statement, except in the sense that, like many projects of the left, it
is massively over-priced and a colossal waste of money (only kidding

Here is more, hat tip to

Is there a “marriage premium” for gay men?

Data on cohabitation suggest that the answer is no, whether for gay men or cohabiting heterosexuals.  The standard selection story is that women are more likely to choose the high earning men and marry them.  But why don’t women live with these men too?  Does living together not transfer enough resources?  Could it be that real legal marriage is proxying for the ability to commit, which is positively correlated which other determinants of job success?


The voting weights implied by the estimated model demonstrate that
early voters have up to 20 times the influence of late voters in the
selection of candidates, demonstrating a significant departure from the
ideal of "one person, one vote."

Here is the paper, I cannot find non-gated versions.  If we were aiming for efficiency, and the saving of time, rather than democratic equity, in which state should the first primary or caucus be held?

Garifuna fish soup

Base: one to two cups coconut milk, four cups chicken stock, a tablespoon of achiote [Annatto] paste, the seed is available in Latino markets.

Take some robust fish pieces, cod or monkfish will do, and roll them in beaten eggs, along with minced garlic, freshly minced ginger, coriander, cumin, chili powder, and Mexican oregano, maybe a bit of salt and pepper too.  Fry the fish in vegetable oil until cooked, making sure the oil is properly hot.  Put the resulting fish chunks into the soup.

Or something like that.  Serve with a baguette.  Very yummy.