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I have made clear before my high opinion of Paul Krugman - I do trade economics, he's a genius.

But it's top 0.1th percentile of arrogance to assume that just because someone doesn't change their mind in response to your argument, they must be made of wood.


It's not simply the fact that Tyler, Alex and a few other folks aren't persuaded by Krugman's argument. We've seen entire threads here ostensibly talking about a "liquidity trap" with almost no discussion of the zero short-run interest rate bound (the only person even mentioning it being yours truly). It's the fact that these gentlemen refuse to address the salient points that turns them into dining room tables.

Re: Largest city without a bookstore -

I notice that the "schoolchildren" of Laredo seem unusually active in lobbying corporate America and government. This crystallizes in my mind one of the fundamental flaws of the public education system: it exposes children at a young age and for a long time to the beliefs and opinions of relatively low-performing civil servants (who are not bound by the civil service's code of political neutrality). No doubt the "schoolchildren" would like the bookstore to operate at a loss in Laredo, or the government to publicly subsidize the store.

I note this, incidentally, as the child of two high school teachers who would probably agree with me.

The "time flies" study would be better if there were always ten real minutes and they varied expectations of time. Five minutes of anything with diminishing returns will be more fun, on average, than twenty minutes.

Roubini argues that the increasingly positive outlook for LA is due to (1) improving global conditions, and (2) the own resilience of LA countries. Let me provide some comments on his analysis.
1. On LA in general. Relevant global conditions are commodity prices and access to financial markets.
(a) In the past six years commodity prices have been very high, benefiting most LA countries. They reached their highest levels in mid 2008, and they declined sharply for a few months, but they remained well above their average level of 1950-99. In the past 6 months they have recovered high levels, between twice or three times higher than the average level of 1950-99. Raúl Prebish would have been very surprised by this performance. It has meant a much higher national income and a much higher government revenue (Note that in some countries the increase in national income has been much larger than the increase in GDP).
(b) Because of (a) access to financial markets have become less relevant to the performance of most LA countries. This has been true for at least the past five years and implied that they have been much less affected by the financial crisis in developed countries.
2. Resilience has varied greatly across LA countries and one has to be careful not to generalize. Although between mid-September 2008 and March 2009, there was a fear that the financial crisis and economic recession in developed countries could hit LA hard, by April 2009 it was clear that it was not going to happen. In those six months most LA currencies depreciated greatly, but since then they have appreciated. Governments accommodated the depreciation and only in a few cases they have prevented the subsequent appreciation.
3. In Chile, despite a very high price of copper economic growth had been low between 2004 and mid 2008 and since then it has been negative (in the last quarter of this year GDP growth rate may be positive again, albeit very low). Why? In my view there are two reasons. One is the strong bias against small-business of the Chilean economy--in the past 20 years succesive "Concertación" governments have been moving toward big-business capitalism and it is very expensive to run and undertake new small businesses (indeed the government says everyday that they are promoting small business). The other is the flexible exchange rate policy that has implied large variations in the domestic value of both the dolar and the euro. With respect to the dolar, the exchange rate that had been 750-800 Chilean pesos per dolar in 2003 dropped to around 450 Ch. pesos by early 2008, then increased up to 700 Ch. pesos in November 2008, and again declined to 490 Ch. pesos in the past two months. In the long run, with an exchange rate of less than 600 Ch. pesos per dolar, only copper and a few other exports may be profitable.
4. On the contrary, since 2003, Argentina has benefited greatly from high commodity prices. Despite one of the most inept and corrupt government of the past 60 years, Argentina was able to grow until mid 2008 (manipulation of most economic data makes difficult to conclude how high growth rates have been since 2003). And because of the cuasi-fixed exchange rate policy started in October 2008, it suffered little from the crisis at least until mid 2009. It's less clear what's been going on in the past six months because of the conflict between government and opposition. Most likely, the positive effect of high commodity prices has already been exhausted, increasing sharply the probability of a new fiscal crisis.

Re. Happiest States, here is the press summary of the paper with the full state list:

Isn't weakening super priority like the Tullock Effect, but with the stake aimed at the economy instead of at the individuals making the decisions? Even the shareholders incentive is to make money, not to minimize failure risk

The 'happiest states' results strike me as widely misinterpreted. The authors chose to "control" for things like household income and education, and report only the the residual effects of being in a particular State. Why control for things that are very much influenced by the infrastructure and policies of the state?

Since some states are much richer and have much more educated populations, and since income and education correlate with happiness, these states will be penalized in the regression, (which only reports the state dummy variables after these "controls").

The average person who makes $100K in Louisiana might be happier than the average person who makes $100K in New York. However, there are proportionately more high income people in New York.

One way to make your state "happy" in the world of Wu and Oswald is for its residents to be poorer and less educated than Americans in other states.

So what I've learned, again, today on MR is that otherwise educated (sounding) people are apparently wholly unaware of the idiotic and essentially bigoted nature of their beliefs about "red states."

Erik B.,

I have dug around and see no mention in any of the releases or abstracts that Oswald and Wu corrected for income and education as you claim. What is your evidence for that? They seem to be talking just plain raw results of happiness or satisfaction surveys and then comparing them to things like blood pressure and so on, finding strong correlations. I would not that "controlling for income and education" is a far from simple matter in any case.

Which makes the results more astounding. Connecticut is the highest income state in the US, and Louisiana is one of the three or four poorest. Indeed, out of the ten happiest, four are poor deep south states, including the poorest state of all, Mississippi. This rather raises doubts about recent lit touting that happiness and income are strongly related. Not in this study.

Re: Largest city without a bookstore -

The irony to me is that the 24hr Wal-Mart in Laredo is the busiest Wal-Mart in the World. Many of the Big Box stores do extremely well as many middle class Mexicans will drive Hundereds of miles to shop for a day in Laredo.

My Family is from Laredo but everyone else has fled since 9/11. The border and customs guys have made the smuggling so hard that there became a backup in Nuevo Laredo and that city has become ground zero for the wars between the drug cartels. All the rich Mexicans have moved back to the US side (anecdotal evidence) even though it is more expensive. We try to get my grandmother to move to San Antonio but she won't leave.

Well, Texas, as it would turn out, but yes, that's the reason, although without reading the article I'm also willing to bet that the words immigrant, English, and culture do not enter into the discussion. There will probably be some hints about the border, but you'll need to read between the lines.

ETA: Yes, pretty close to the truth. How come the average reader knows more about the subject than what can be gleaned from reading the actual researched article?

Still 250,000 people? Wow, I've seen small towns in Mexico with better coverage than that.

I live in Louisiana and I'm pretty happy.
When The Great State of Louisiana hits the bottom and top of so many lists (illiteracy, unmarried moms, welfare recipients, obesity, incarceration rates, uninsured drivers, convincted politicians, etc.), it lessens our stress levels and expectations so we can get to the important things like going to our local drive-thru daiquiri stands, buying toxic made-in-China Mardi Gras beads and eating polluted water crawfish.

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