Month: April 2012
Sorry to be late on this one, but here is the AEA take on her contributions, many of which involve health care economics and the study of health insurance. I am not sure she was considered an obvious front-runner from the beginning, but in my view it is an excellent pick (without intending any slight to the billions who were passed over). She is trying to understand the real world, and she is showing that policy economics should not have lower status in academia. Obviously her major areas of study are topical today.
Right now, unemployment remains at over 8% in the UK while real wages are lower than they were 7 years ago and are continuing to fall. Yes, you read that correctly. Which immediately leads one to ask: on this explanation of a recession as expounded by Karl, how much further do real wages have to fall to eliminate disequilibrium unemployment?
…I am finding the aggregate demand narrative an increasingly unsatisfying explanation of all that is happening in the British economy. Supply-side suffering is suffering too, and I think we need to take very seriously the chance that it is happening.
Here is his follow-up post. Do note there is no deflationary downward spiral in the UK. In a funny way, it is some of the more extreme Keynesian views which lead one to the most extreme stagnationist conclusions. I know, fiscal policy, fiscal policy, fiscal policy. But it can’t employ everyone forever. What does the level of real wages need to be?
Some bits from his new book:
The original transit plan…was to place the subway line underground. That didn’t happen….So rail transit will come to Tysons in the form of a seventy-foot-high elevated track along Route 123 [TC: does he mean Route 7?], with disembarking passengers required to go down to the street and then climb back up a bridge to get to the plaza and the towers. It’s not exactly the best way to signal the presence of an urban village.
…the hardest part…is the grid…retrofitting seventeen hundred acres of suburban asphalt with a network of walkable streets will be an enormous challenge…The plain truth is that nobody has ever done this before — not on the scale that is being called for at Tysons Corner.
…The residential, retail, and office developers had all delayed their plans for the new walkable city, a casualty of the national bank lending crunch and a glut of suburban office space. But the county board had just reaffirmed its support for the entire project, residential towers, gridded streets, and all.
Ehrenhalt does suggest that Tysons has a very good chance of succeeding as “retrofitted suburbia,” but not as a “green pedestrian oasis.”
I think there has been a lot missing from the discussion of the UK in the blogosphere. We are a bit of a puzzle on a purely AD-based explanation of the recession.
1) We didn’t have deflation (on annual basis at least), and even stripping out the effect of the VAT rise in 2011 should still show persistent inflation over 3% since 2010
2) UK inflation expectations seem to be significantly higher here (if falling away a little recently)
3) If you look at table EMP02 here, you can see that the public sector as share of total employment the same in the UK today as in Q1 08, and almost all the decline in *total* employment has been in the private sector (the increase in public sector employment in Q4 08 was due to bank nationalisations)
I’m not really sure what is going on. But based on my twitter feed today, a lot of other people seem to be. If we were to just look at inflation (at expectations thereof), the country that ought to be having an AD-driven double-dip recession would appear to be the US.
Richard writes again to me:
I would also like to add that any demand issue we have would not appear to be due to ‘austerity’, but rather that we are explicitly targeting inflation in the context of some (as-yet unspecified) supply side problems…
Ps I also think there’s a weird thing about the ‘confidence fairy’ rationale for austerity, where we might expect a government that believes this to tactically *exaggerate* the amount of actual cutting they’re doing, a reversal of usual government incentives.
Cowen fears the effects of gentrification, which tends to drive up real estate rates and drive out ethnic restaurants. It can also lead to blander food. But if defense funding is cut, and the impact is felt locally, that would be a good thing for ethnic restaurants, if not for the populace in general, Cowen said.
And finally, some more helpful tips for ethnic restaurant exploration: ”It’s all about the ordering,” Cowen said. The best places have smaller menus, so they aren’t trying to please everyone, and likely do several things very well. Don’t ask the waiter what’s good, “that will only confuse them.” Instead, ask, “What dish do you have here which is special?” or “What are your regional specialties.”
The author is the excellent Alan Ehrenhalt, here is one bit:
Walking the streets of the Financial District today, one can’t help but think that it is, indeed, a throwback to an earlier version of the city’s life. But not to the Wall Street of a century ago: That was an economically segregated one-use neighborhood, with offices and virtually nothing else, no residents, hardly a place to shop, only a handful of restaurants to cater to the financial workforce.
But look back farther than that, and you begin to see a resemblance. In some ways, lower Manhattan in the early twenty-first century has come to resemble lower Manhattan in the late eighteenth and early nineteenth: brokers, investors, and insurance agents who live in the neighborhood and walk to work; a social life that does not disappear at quitting time, the way it did twenty years ago; a modest but growing number of families with young children. Ron Chernow offers a picture of this early lower Manhattan in his biography of Alexander Hamilton, who lived there both as a college student and as a young lawyer.
Recommended, you can buy it here.
He has started with a post on Glenn Hubbard and the budget. He closes with this:
I agree with Glenn that one of the key debates in the election should be about how America should deal with our long run budget challenge (that comes from the aging of our population).
And that debate is coming down to one camp saying let’s have cuts to spending and interest around $3 trillion and tax revenue of $1 trillion to hit the deficit cutting target and the other camp saying let’s have cuts of$7 trillion to hit the deficit target plus pay for $3 trillion of tax cuts.
Hubbard closed his op-ed by saying that he just wants people to see the prices on the menu. Well then, next item: The Romney Budget. Glenn, you may want to practice your Heimlich maneuver.
From Garett Jones, now guest-blogging (!):
…the idea of a durable is more important than any official definition: And memory, wholly intangible, is quite durable.
People often shrink from driving to a distant, promising restaurant, flying to a new country, trying a new sport–it’s a hassle, and the experience won’t last that long. That’s the wrong way to look at it. When you go bungee jumping, you’re not buying a brief experience: You’re buying a memory, one that might last even longer than a good pair of blue jeans.
Psych research seems to bear this out: People love looking forward to vacations, they don’t like the vacation that much while they’re on it, and then they love the memories. Most of the joy–the utility in econospeak–happens when you’re not having the experience.
Vacation purchases jump around just the way you’d expect if they were a durable: People spend a lot less on them during recessions, about 15% less in the Great Recession. Food spending, by contrast, only fell 5%.
Read the whole thing.
Enrico Moretti, The New Geography of Jobs.
Steven E. Landsburg, The Armchair Economist: Economics and Everyday Life, revised and updated for the 21st century.
Zimbabweans call it “the coin problem.” Simply put, the country hardly has any. Coins are heavy, making them expensive to ship here. But in a nation where millions of people live on a dollar or two a day, trying to get every transaction to add up to a whole dollar has proved a national headache.
Still, the new predicament is an improvement. By virtually wiping out inflation, analysts say, use of the United States dollar saved Zimbabwe from total economic collapse and brought the country back from the brink. The country’s political future remains deeply unsettled since the disputed 2008 election gave way to a shaky power-sharing government. But its economy is growing, if from a very low base.
Zimbabweans have devised a variety of solutions to get around the change problem, none of them entirely satisfactory. At supermarkets, impulse purchases have become almost compulsory. When the total is less than a dollar, the customer is offered candy, a pen or matches to make up the difference. Some shops offer credit slips, a kind of scrip that has begun to circulate here.
The story is here, and they need to issue commercial scrip. Is anyone trusted enough to do that?
I’m not there yet, but pretty soon. I haven’t spent serious time in the city since about twenty years ago. What do you all recommend? Thanks in advance. My talks are through the Bruno Leoni Institute, one in Milan, one in Ravenna.