Month: January 2013
This old idea from Alan Peacock will be implemented:
Despite the economic crisis, Brazil announced Thursday it planned to give workers here a 50-real ($25) monthly stipend for cultural expenses like movies, books or museums. “In all developed countries, culture plays a key role in the economy,” Culture Minister Marta Suplicy said in an interview on national television. She recalled that popular former president Luiz Inacio Lula da Silva created “Bolsa Familia” (Family Grant), the program of conditional cash transfers to the poor which his successor, President Dilma Rousseff, expanded. “Now we are creating food for the soul; Why would the poor not be able to access culture?” the minister said. Suplicy said the new incentive, approved by Congress and endorsed by Rousseff late last month, is expected to be introduced some time this year.
Via Felix Salmon, it appears Cyprus is going to default. However small a country it may be, does anyone at this point want to be on record setting any number of precedents, one way or the other?
So even if Europe has made its first big decision — to force Cyprus to default — it still faces many more. Should it amend the ESM treaty to make any restructuring easier? Should it impose a haircut on Cyprus’s uninsured depositors? And how can it structure the process to minimize the chances of a messy bank run, default, and possibly even exit from the euro? It’s easy to dismiss Cyprus as too small to worry about. But it’s still an important sovereign state. And if the EU missteps on Cyprus, that would bode very ill for any similar problems in bigger eurozone countries in the future.
“Creative ambiguity” is getting harder to manage all the time. What would a depositor haircut here imply for Greek and Spanish banks?
…educators in Wisconsin are offering a possible solution by decoupling the learning part of education from student assessment and degree-granting.
Wisconsin officials tout the UW Flexible Option as the first to offer multiple, competency-based bachelor’s degrees from a public university system. Officials encourage students to complete their education independently through online courses, which have grown in popularity through efforts by companies such as Coursera, edX and Udacity.
No classroom time is required under the Wisconsin program except for clinical or practicum work for certain degrees.
In other words, you just have to pass the tests. The full story is here, and for the pointer I thank Brent D.
Critics of “austerity” are often weak or a bit mumbly on what is the relevant alternative or counterfactual. When it comes to the U.S., the relevant alternative is borrowing more, but in many cases, such as in the European periphery, the alternative is/was more aid.
So, in these cases, a multiplier of one means that a dollar of aid — the alternative to the fiscal consolidation — is worth a dollar. I find that easy to believe. It’s not really a claim about fiscal policy or Keynesian economics.
A multiplier of 1.4 means that a dollar of aid brings $1.40 in benefits. Imagine receiving aid, and not just benefiting from the dollar, but avoiding a fire sale of your assets or investing the money wisely or maybe just avoiding a civil collapse. That’s more of a stretch, but also not outside the realm of the possible.
As the IMF becomes more critical of austerity, the IMF therefore should believe in higher rates of return to aid. But does it?
@Yannikouts nailed it here:
It’s one thing IMF economists to argue for softer austerity and a totally other thing to convince IMF Board members to commit to extra funds
Few people believe in austerity when it is someone else’s money on the line. Here is my earlier post How emigrants try to run their fiscal policies.
Academic hiring committees play a role:
Robert Oprisko of Butler University found that half of the jobs in university political science programs went to graduates of the top 11 schools. That is to say, if you have a Ph.D. from Harvard, Stanford, Princeton and so on, your odds of getting a job are very good. If you earned your degree from one of the other 100 degree-granting universities, your odds are not. These other 100 schools don’t even want to hire the sort of graduates they themselves produce. They want the elite credential.
That is from David Brooks.
That is the new venture from Dubner and Levitt and John List, and the web site is here. Dubner describes it to me as “…a crowd-sourced research project that tries to learn something about decision-making.” The FAQ is here and it states:
Sometimes in life you face one of these decisions, and you just don’t know what to do. In the end, whatever you decide will essentially be a flip of a coin. Freakonomics Experiments helps you make the decision by flipping that coin for you. Over the next few months, we’ll then check in with you with surveys and other materials. In turn, you’ll help further scientific research. Unlike most games of chance, participating in this experiment is win-win.
I look forward to seeing what they come up with.
That is the new eBook by Marcus Nunes and Benjamin Mark Cole, preface by Scott Sumner, and the link to it is here.
5. DNA bullets.
The non-binding and largely symbolic resolution – which states that the people of Catalonia have a democratic right to decide on their sovereignty – was passed with 85 votes for, 41 against and two abstentions in the 135-seat legislature. Two deputies were absent and five refused to vote.
Elsewhere in the news, Spanish joblessness has risen from 25 to 26 percent.
- What could a very clever person in 1500 (not a monarch) have done if they wanted to make the future better and help people living today?
- Which avoidable/contingent event in history did the greatest harm? (e.g. the burning of the library of Alexandria)
- If you wanted to push history in a positive direction, which contingent event from the past would be best to be a participant in, and what could you have done? (e.g. support Deng Xiaoping inside the Chinese Communist Party in the 70s)
It’s tough to have an impact from 1500, but better monetary policy in the 1930s — across the world — would be one place to start for the second part of the question. Yet I worry that any pre-Manhattan Project intervention could end up upsetting the order in which various countries come to obtain nuclear weapons. What if a non-Hitlerized Germany built them first? How does that turn out relative to the status quo? Does avoiding 9/11 mean we are victimized by a larger and more serious attack later on? Safe bets in this game are hard to find.
Emi Nakamura and Jon Steinsson ask exactly that question:
Figure 2 plots a typical price series for a grocery product in the United States. This figure illustrates a central issue in thinking about price rigidity for consumer prices: Does this product have an essentially flexible price, or is its price highly rigid? On the one hand, the posted price for this product changes quite frequently. There are 117 changes in the posted price in 365 weeks. The posted price thus changes on average more than once a month. On the other hand, there are only 9 regular price changes over a roughly 7 year period. Which of these summary measures of price rigidity is more informative?
Here is their new paper (pdf), which is an excellent survey of what we know about price (as opposed to wage) stickiness.
You will note is that we know more about price stickiness in times of inflation rather than deflation, if only because we have more of the former. Intuitively, one might expect greater flexibility of prices in the downward direction, for prices that is. Why are bosses afraid to cut nominal wages? It will disrupt worker morale and prompt shirking and sabotage. Why might suppliers be reluctant to raise prices? They might not wish to upset long-term relationships and expectations with customers. But customers would love nominal price declines, or so it would seem.
Less-than-fully-flexible nominal prices may follow from sticky nominal wages, to be sure. But absolutely sticky nominal prices? The supplier still can cut price by a bit. By construction of the problem, these are sectors which are not perfectly competitive and thus we are not at P = MC. If demand goes down, and one of your main costs is sticky, you still can shade price a bit rather than say raising it. Since “menu costs” appear refuted by the data, small price changes should not be so costly.
Yet, in reality, we don’t actually know much about what happens and why.
In The Economist’s Pocket World in Figures, 2013 Edition, in which category/table does the United States rank between North Korea and Greece?
Least trade dependent as % of GDP, 2010
Bermuda is #1 at 9.2%
Is it because of the heavy weight of their International Business Centre? I do not know.
My advice for young researchers at the start of their career is… Work on your own ideas, not your advisor’s ideas (or at least in addition to her ideas). And spend more time thinking and less time reading. Too much reading leads people to think of small variations on existing studies. Admittedly my strategy of writing the paper first and only then reading the literature (or, more likely, letting the referees tell me what they think I should have read) is an extreme one, but it is better than trying to read everything. Try writing the first paper on some topic, not the tenth, and never the 50th.
Here is the rest of the interview.
5. Is the Zara guy the third richest man in the world? On average they open a new store every day.