Month: November 2008
Harvard University professor
Lawrence Summers will join the Obama administration with a
ready-made sales pitch for substantial economic stimulus and a
chance that the role springboards him to the Federal Reserve. Summers, 53, was Bill Clinton’s last Treasury secretary. He
will have a wide-ranging portfolio and help craft Obama’s
economic policies, a Democratic aide said…It also positions him to
succeed Fed Chairman Ben S. Bernanke, whose term at the helm of
the central bank expires in January 2010, said Vincent Reinhart,
former director of the Fed’s Division of Monetary Affairs.
Here is the story.
The Dow is up 6.5 percent. And Tim Geithner will be Treasury Secretary. That’s the two pieces of good news. The bad news is that the market is up because of a political appointment. That’s really very bad news, especially since the other logical candidates for the post were extremely competent.
From Megan McArdle. Austan Goolsbee may be going elsewhere. This could be either good or bad news; in any case the goal is to maximize his influence. The name Cecilia Elena Rouse is being floated for the CEA position.
Addendum: Alex posted earlier this year about Rouse’s important paper finding that education vouchers increase the quality of public schools. Rouse was also an adviser for Kerry. MR archives know all!
Yes, it’s that time of year again: they named the winners of the Sacred Defense Book of the Year awards in Iran…
Yet in ten major categories, including "Fiction," no books were deemed worthy of the honor. The category "Children’s War Poetry" was left open as well. Here is further information. Here is a photo of the event, plus a list of the books that were honored. Numerous second prizes were given even though no first prizes were awarded.
Goldman is now below its IPO price.
Via Mark Thoma, here is what the 15-year stock price bubble has looked like.
…there are two ways to give directions. One is using a so-called "route
perspective", as in the example above. This adopts a first-person
spatial perspective and is characterised by references to turns and
landmarks. The other is a so-called "survey perspective", which gives
directions as if looking down upon a map. This type of direction giving
is characterised by references to cardinal directions (North, South,
East and West) and precise distances.
And which is better?
When Hund’s team used a fictitious model town made of plywood to test
the ability of undergraduates to follow directions, they uncovered a
curious anomaly. The students reported finding route perspective
directions easier to follow and yet they steered a toy car to a
destination more quickly and effectively when they were following
Here is further analysis. I prefer the survey perspective. Maybe it is a language issue, but I find it very difficult when most Europeans give directions. Too often they cite concepts such as "up," "down," "over," "beyond," and the like. Is it really necessary to say "hoch fahren"? NESW, please. Which method do you prefer or perhaps some other?
One explanation of higher fertility in the U.S. than in other developed
countries is that its institutions have adapted better to rising
relative wages for women and the attendant increase in women’s labor
Here is more.
Here is a run-down from Brad DeLong. In addition to the analyses of particular names (I generally agree in the cases I can judge, though I would reappoint Bernanke, if only to limit market uncertainty), get this:
Trade Czar-nominee-designate-leekee. This will, I think, turn out to be
a much more important job in the Obama-Biden administration than people
recognize. Trade agreements are a principal way that we deploy our
foreign policy soft power. And trade sanctions are, I think, going to
be a principal tool in the construction of the system of global
governance to fight global warming.
Via Angus (and do read his snark on TFP), here is Paul Samuelson:
Libertarians are not just bad emotional cripples. They are also bad advice givers.
(Are there "good" emotional cripples?) Four points should be noted:
1) Paul Samuelson is one of the truly great economists of the 20th century.
2) Hayek did in fact underestimate the robustness of liberty in social welfare states, though it is worth noting that his Constitution of Liberty very much endorses a social safety net and many other policies of the German FDP of that time.
3) This is the same Paul Samuelson who argued, as late as 1989, that the performance of the Soviet economy was a refutation of Hayek’s critique of central planning.
4) When I see people writing sentences of this kind, I imagine them pressing a little button which makes them temporarily less intelligent. Because, indeed, that is how one’s brain responds when one employs this kind of emotionally charged rhetoric.
As you go through life and read various writers, I want you to keep this idea of the button in mind. As you are reading, think "Ah, he [she] is pressing the button now!"
The new claim is that a woolly mammoth could be regenerated for as little as $10 million. The basic technique, as I understand it, is reconstructing the genome of the mammoth and modifying the DNA in the egg of a modern elephant and bringing the final-stage egg to term in an elephant mother. It is noted that the same will be possible with Neanderthals, as it is expected that their genome will be recovered and sequenced shortly.
Didn’t I read as recently as ten years ago that "Jurassic Park" scenarios were more or less impossible? I don’t expect Neanderthal man to reappear soon, but assuming the world stays (relatively) peaceful and wealthy, what is the chance of seeing one or more such beings within the next two hundred years? Yes I know all about the law, eventual demographics, and the fear of planet-wide interspecies war, but at $10 million and over one hundred countries in the world, is not private philanthropy robust?
As one commentator asks, if we humans killed them off in the first place, does that mean we have any obligation to revive them now?
Paul Krugman presents a frightening figure.
The figure [below] shows the real interest rates on corporate bonds, with
the expected rate of inflation from the spread between 20-year TIPS and
20-year Treasury rates. All data monthly, from St. Louis Fed.
I’ve been saying for some time that one of the signs of a credit crunch has got to be rapidly rising real rates – in very recent weeks, that appears to be happening. The timing suggests to me that this is more of a deflation problem than a banking-credit problem per se but at this point who cares – we can probably all agree it’s more bad news.
Addendum: Greg Mankiw is also troubled by what this figure means.
Exports constitute nearly 40 percent of China’s GDP–far too high a figure. (By comparison, in the U.S., exports account for about 10 percent of GDP most years.) And the global financial slowdown is already taking a terrible toll. Some 10,000 factories in southern China’s Pearl River Delta area had closed by the summer of 2008. Gordon Chang, a leading China analyst, estimates that 20,000 more will shutter by the end of this year. In the third quarter of 2008, Beijing also reported its fifth consecutive quarterly drop in growth,
and several private research firms expect a sharper slowdown next year.
Additionally, unemployment is skyrocketing; in Wenzhou, one of the main
exporting cities, about 20 percent of workers have lost their jobs, Reuters recently reported.
Here is more. By the way, here is an article on China’s retreat from environmental concerns.
I thank Clifton Chadwick for the pointer.
Spending [on infrastructure] is up 50 percent over the last 10 years, after adjusting for inflation. As a share of the economy, it will be higher this year than in any year since 1981.
That’s from another excellent column by David Leonhardt. The real problem, of course, is the quality of our decisions on infrastructure.
Singapore is to allow compensation for kidney transplants and for eggs.
A government proposal has been approved by a bioethics committee and
legislation will be introduced early next year.
to the BMJ, a sum of S$10,000 was mentioned. According to the Straits
Times, the health minister, Mr Khaw Boon Wan, mentioned "at least a
five-figure sum, possibly even six-figure" as appropriate
reimbursement. This would include expenses, such as transport and
medical costs, as well as loss of earnings. Also, the donor should be
covered for follow-up medical costs and higher insurance premiums as a
result of losing a kidney.
In other big news the National Kidney Foundation (NKF) is reconsidering their long-held opposition to compensation for organ donors. The NKF is surveying people on financial compensation. Marginal Revolution readers can raise the level of discussion and perhaps help save some lives by answering the survey here (it’s very short).
Thanks to Lloyd Cohen and Richard Darling for the pointers.