Month: March 2013

Assorted links

Beppe Grillo’s new advisor?

It would appear to be Joseph Stiglitz (link is in French, or try this link in English), but do we know?  Here is Grillo discussing the situation in English (translated).  The link includes a dialogue between the two.  Yet here (in Italian) is already some discord between the two, with Stiglitz accusing Grillo of lying by claiming that his party’s platform is based on Stiglitz’s ideas.

I cannot be sure which of these links to believe in its entirety, but at the very least there is an ongoing exchange between these two men.

I wish to thank numerous sources on Twitter.

The more things change…

Malthus argued that redemption of the public debt wold be unwise given England’s economic circumstances, which were characterized by an excess of capital relative to aggregate demand and, consequently, a low rate of profit.

That is from Nancy Churchman, her full piece is here.  Referring to the early 19th century, she also writes:

There was broad agreement that the debt had reached a dangerously high level and that action of some sort should be taken to address it.

There is good ‘ol Lord Lauderdale, circa 1803:

He constantly links the welfare of the country with the continuance of a high rate of yield to holders of the public debt.

(Source here, jstor)  How about J.B. Say?  From Wikipedia:

Say himself advocated public works to remedy unemployment, and criticized Ricardo for neglecting the possibility of hoarding if there was a lack of investment opportunities.

And turning to Ricardo:

Ricardo’s theory of public loans then was based on an emphasis of the fact that the primary burden to the community was derived from the wasteful nature of public expenditure itself rather than from the methods adopted to finance such expenditure.

I like this one from Ricardo, in favor of tax rather than debt finance, from his Essay on the Funding System:

When the pressure of war is felt at once, without mitigation, we shall be less disposed wantonly to engage in an expensive contest.

Ho hum, ho hum.  Go back and read the classics, and hang your heads in despair.

As I’ve mentioned, it sometimes feels like we are living in the early 19th century.

Facts about doctors

…new M.D.s per senior fell by about a third over the last three decades.

Much as I sometimes mistrust doctors, that is not good news.  And I find it sad how infrequently this number is discussed.  There is more from Bryan Caplan here.  And get this:

New male M.D.s per person are down by over 45%.

That is a sign of rising female prominence when it comes to educational success, but there is no good reason why the flow of male doctors should be falling so rapidly; it’s not as if men suddenly have lost the ability to doctor.

Assorted links

What Italian political stability looks like

If you are looking to believe in a positive scenario, here is perhaps the most likely candidate:

…there is the massively unknown variable of the new M5S legislators, now 24 hours into their new roles. Might these, both the elected ones and their many supporters, put enough pressure on Grillo and Casaleggio so that they give in and authorize a limited-term vote of confidence around a strictly delineated program of reforms? As Bersani and Vendola have been insisting, the working majority that exists for that program is the electorate’s gift to the nation, and it would be a shame to squander it. With a more equitable electoral law, the M5S could compete some months from now, and might indeed win a legitimate majority. But along the way they might also confer legitimacy on the Democrats, and thus undermine not just Grillo’s political advantage but–apparently–his entire world view. If taking that chance represents Italy’s only way out of its intractable stalemate–and it may well–will the M5S go ahead and take it? And if not, what?

That is from Brent Wheelan.

Are we living in the early 19th century?

I frequently make this reference in talks, though I can’t recall having blogged it yet.

Here is one report from the front today:

Corporate earnings have risen at an annualized rate of 20.1 percent since the end of 2008, he said, but disposable income inched ahead by 1.4 percent annually over the same period, after adjusting for inflation.

“There hasn’t been a period in the last 50 years where these trends have been so pronounced,” Mr. Maki said.

If we turn to the industrial revolution, what do we see?  Relatively high productivity from “restructuring,” (machinery replacing labor) but relatively low productivity from innovation or total factor productivity.  Robert C. Allen, in his “Engels’ pause: Technical change, capital accumulation, and inequality in the British industrial revolution” (pdf, the final version is in Explorations in Economic History, 2009) estimates TFP from the time at about 0.69% a year, hardly a stunning number (the number runs in the 2%-3% range for the 1920s and 1930s) and actually that early number is close to what we are seeing today for TFP.

From 1780 to 1840, output per worker rose 46% and the real wage index rose by only about 12%, noting that none of these numbers are close to exact.  (Contra Ricardo, the share going to land is declining steadily and capital is capturing the gains.)  The significant real wage gains come after 1840 and — in my view — even more after 1870.  After 1830 TFP is growing at the higher rate of about 1% a year, still not impressive by the standards of the early 20th century however.

During the early 19th century, there is much creative ferment, but much less in terms of products which translate into gains in living standards for the average person.

By the way, you also have theorists — Malthus, Lauderdale, Chalmers, Attwood, and others — who thought the main problem was simply lack of aggregate demand, which Malthus called effectual demand.  They were absolutely right about part of the picture in the short run but missed most of the larger truths.

Eventually all of the creative ferment of the industrial revolution pays off in a big “whoosh,” but it takes many decades, depending on where you draw the starting line of course.  A look at the early 19th century is sobering, or should be, for anyone doing fiscal budgeting today.  But it is also optimistic in terms of the larger picture facing humanity over the longer run.

The privatization of law enforcement in Melbourne and the restriction of entry

THE new sex industry police unit – created by the Baillieu government one year ago in a bid to crack down on crime in the sex industry – is hamstrung by lack of resources and has not charged any illegal brothel operators since its inception.

The unit has managed to shut down one illegal parlour but is not directly policing them – instead focusing its enforcement and monitoring activities on licensed brothels.

Frustrated licensees of legal brothels have resorted to vigilante action, sending spies into illegal parlours. They have given police statutory declarations swearing they received sexual services at five illegal brothels around Melbourne – all of them close to police or politicians’ offices, including Premier Ted Baillieu’s office in Camberwell.

Police are also understood to have been provided last year with a further list of 62 premises suspected of providing illegal sex – all of which are believed to be still operating.

Here is more, and for the pointer I thank David H.

Very good sentences

…the more formidable the paywall, the more money you might generate in the short term, but the less likely it is that new readers are going to discover your content and want to subscribe to you in the future. Amazing offline resources like the Oxford English Dictionary and the Encyclopedia Britannica are facing existential threats not only because their paywalls are too high for people to feel that they’re worth subscribing to, but also because their audiences are not being replaced at nearly the rate at which they’re dying off. The FT, for instance, has discovered that its current subscriber base is pretty price-insensitive, and has taken the opportunity to raise its subscription prices aggressively. That makes perfect sense if Pearson, the FT’s parent, is looking to maximize short term cashflows, especially if it’s going to sell off the FT sooner rather than later anyway. But if you’re trying to build a brand which will flourish over the long term, it’s important to make that brand as discoverable as possible.

That is from Felix Salmon and here are other good sentences too.  You can, by the way, check out our MRU class on the economics of the media here, class-specific link here.

Good or bad news for Bitcoin?

You tell me:

After hitting bottom at $1.994 in November [2011], however, Bitcoin simply refused to die. The price bounced back to a high of $7.22 in January 2012 before settling down at $4.90, and news slowly began to once again turn positive…

The Bitcoin price has just broken the all-time high of $31.9099 that it set on June 9, 2011 on MtGox. After a persistent, one-and-a-half month rally from $13 to $28, followed by nearly two weeks of bumping up against $30 and then hovering around the $28-$31.5 range, the bulls have finally won…

With apologies to Scott Sumner, I say Bitcoin is a bubble.  Outside of war and rebellion, do “normal” new currencies behave this way?


The full story is here.  For the pointer I thank Mark Thorson.

Addendum: Scott Sumner comments.