Month: March 2009

What I’ve Been Reading

by  Tyler Cowen in

1. The Enormity of the Tragedy, by Quim Monzó.  Originally written in Catalan, this short novel is popular throughout Europe for its priapic good humor.

2. Imagining India, The Idea of a Renewed Nation, by Nandan Nilekani.  An excellent study of the microeconomics of entrepreneurship in India; I thank Carl Schramm for the pointer.

3. Richard A. Posner, A Failure of Capitalism: The Crisis of '08 and the Descent into Depression.

4. The "hot hand" hypothesis is hurting, according to John Huizenga.

5. Bonsai, Alejandro Zambra, 83 pp., the next literary rage to come from Chile since Roberto Bolaño.

Creeping fear of bank nationalization

by  Tyler Cowen in

The blogosphere is starting to realize how difficult it would be for the government to "take over" the largest banks, even if those banks are insolvent by various measures. Here is Justin Fox, who considers the size of Citi liabilities relative to FDIC assets.  Ezra Klein considers the fate of the progressive agenda if a bank goes on the government's balance sheet and voters start to blame Obama for what they don't like about banks; the email he reproduces is excellent.  Matt Yglesias considers the fiscal implications.  Plus nationalization can prove contagious.  A related issue (I forget where I saw the link) is whether it is legal to nationalize a multinational bank in light of varying national regulations.

That all said, it is an entirely coherent position to wish the government could take over the largest banks.

Here you will find Krugman defending the nationalization idea.

Why aren’t non-parametric statistics more popular in economics?

by  Tyler Cowen in

Abel, a loyal MR reader from Valencia, asks:

I've recently been reading an introductory book on nonparametric models (Nonparametric and Semiparametric Models: an Introduction – Härdle et al) and the apparent flexibility of the approach makes me wonder why aren't those models more used in empirical economics.

¿Are their drawbacks too big? (The so-called "curse of dimension")
¿Perhaps it's just economist's community lack of knowledge or willingness to learn?
¿Are they perceived as a threat to conventional or more established estimation methods?

I would be really glad to hear your opinion and also the feedback in the comments.

He could have added "signalling" to the list, since many non-parametric methods are relatively easy and thus do not demonstrate the skill of the researcher.  But the fundamental reason I think has to do with the nature of economics: non-parametric methods are most likely when you don't have a well-defined, formal structural model in mind.  But many MR readers know more about this than I do, so please offer us your opinions…

Fiscal and monetary policy during World War II

by  Tyler Cowen in

Returning now to our pretax inflationary gap, summing to $290 billion, we may estimate how that excess income was "absorbed."  We can roughly account for about $269 billion of it:

inflation took $84 billion, or 29 percent;
personal taxes took $67 billion, or 23 percent;
net increase in individual's holdings of government securities took $49 billion, or only 17 percent;
the increase in individuals' nominal money stocks, M2…took $69 billion, or 24 percent.

In other words, monetary policy had a great deal to do with the wartime expansion.  I have yet to see a good study of wartime price controls, but if you have rising M and fixed P and market power, some of the Q's will go up (with quality going down also).

That is from Harold G. Vatter's The U.S. Economy in World War II, one of the better treatments of that era.

Note also that the wartime expansion was built upon several years of preceding economic growth, not contraction.  This point is overlooked in many current discussions of fiscal policy.

Insurance markets in everything

by  Tyler Cowen in

Hyundai is gaining market share:

Besides the Genesis, Hyundai is also benefiting from a novel scheme,
launched in January, in which it offers to buy back cars from customers
who lose their jobs within a year of their purchase. (The company
essentially offers a smaller discount and then uses the money to buy an
insurance policy.) This has proved so successful in stimulating sales
that General Motors said on March 3rd that it was considering a similar
scheme.

Counter-cyclical asset: Safes

by  Alex Tabarrok in

Here is the anecdote:

…sellers of safes said that business was up as customers confront new fears, be they losing money in failing banks or being robbed by desperate fellow New Yorkers. …”We’ve had customers come in who are putting half a million to a million dollars in cash in a safe in their home,” said Richard Krasilovsky, 58, of Empire Safe in Midtown…

and here is the data.  (Paul Krugman pointed out this data in a very good talk (slides) he gave at a symposium in CA on Friday (Larry Ball and myself also spoke).)

Cash

What is driving the eBooks boom?

by  Tyler Cowen in

Via Yves Smith, here is one hypothesis:

What's popular on Fictionwise? Well, once again it seems like
porn is blazing a path to a new media format. Of the top 10 bestsellers under the "Multiformat" category, nine are tagged "erotica" amd the last is "dark fantasy"…People who read erotic romance and 'bodice rippers' love
ebooks because of the privacy they offer, both during purchase and when
reading.

By the way, Andrew Sullivan asks how one is to post 250 times a week and read Ulysses.  The answer is simple: one page at a time. 

One advantage of Kindle is that it provides a new tool for mental accounting.  Call me irrational but formerly I could not read more than seven or eight books at a time without abandoning some of them midway.  Kindle (like Netflix, I might add) gives me a new queue and allows me to have more "hanging," partially unread books at any point in time, yet without disrupting my mental equilibrium.  I'm rereading Moby Dick, one chapter at a time, on plane trips, and next in line are Middlemarch and…Ulysses. 

The evolution of 100 percent reserve banking

by  Tyler Cowen in

Mark Thoma directs us to the following:

So, for these folks: good news! We don't have fractional reserve banking
anymore.

In statistics-speak, since last November, the monetary base has exceeded M1,
which means, more or less, that bank reserves (plus surplus vault cash) exceed
liquid deposits.

In fact, as of December it seems we had 121 percent reserve banking, give or take.

Obama on blogs

by  Tyler Cowen in

Maybe he should be reading MR:

“Part of the reason we don’t spend a lot of time looking at blogs,” he
said, “is because if you haven’t looked at it very carefully, then you
may be under the impression that somehow there’s a clean answer one way
or another – well, you just nationalize all the banks, or you just
leave them alone and they’ll be fine.”

It does seem, however, he has been reading some other blogs, or at least he is told about them.

Addendum: Alan Blinder has a very good column on the topic.

Eskimo ice cream

by  Tyler Cowen in

The Inuit people of Alaska have a distinct version of ice cream. It's not creamy
ice cream as we know it, but a concoction made from
reindeer fat or tallow, seal oil, freshly fallen snow or water, fresh berries, and sometimes ground fish. Air is
whipped in by hand so that it slowly cools into foam.
They call this Arctic treat akutaq, aqutuk, ackutuk, or
Eskimo ice cream. Akutaq is a Yupik word that means mix
them together.

Here is the link.  Nowadays Crisco Oil often substitutes for animal fat.

Here is a picture of Eskimo ice cream.

The original tip is from 1001 Foods You Must Taste Before You Die, an excellent book for reading or browsing.