Month: March 2015
I agree with much of the economics in his post, though I would frame the points with a different kind of rhetoric. But I think Krugman is nonetheless wrong to oppose TPP. You will notice the word “China” does not appear in his argument. He closes with a question: “Why, exactly, should the Obama administration spend any political capital – alienating labor, disillusioning progressive activists – over such a deal?” The answer is simple: either this deal happens on American terms, or an alternative deal arises on Chinese terms without our participation. For rather significant foreign policy reasons we prefer the former, and the pragmatic side of President Obama understands this pretty well.
Addendum: Brad DeLong comments.
There are lots of those such securities these days, so what happens when a central bank buys up some with monetary reserves? An email from Scott Sumner prompted me to address this question more directly than my mere mention from yesterday. I see a few scenarios, none of which satisfy me:
1. Buying the securities lowers long rates further and depresses the value of the currency, which is broadly stimulatory. Arguably this would follow from a Keynesian model.
2. Currency determines the price level, not bonds, as in Fama (1980). Alternatively, old-style monetarists might believe that something like M2 determines the price level. Either way, we can expect the OMO to raise the price level and perhaps depress the exchange rate as well.
3. Portfolio theory means that the lower rate (indeed negative rate) instruments must have higher liquidity premia. Buying up higher liquidity instruments with lower liquidity instruments (i.e., currency) ought to be contractionary. Don’t be fooled by Fama and the monetarists, in a world of credit it is all about liquidity in the broad sense and that in this scenario is going down.
My intuitions are closest to number three, but I am not trying to claim that is being verified empirically. And oh, there is also #4:
4. If nominal rates are negative, all the action is in the risk premium. And the effect of this asset swap on the risk premium is????
I would gladly link to the first person to write a serious short paper on all of this.
After I requested requests, Trey Anastasio asked me:
If a parent were to pick a sport for their child to play competitively, what would you suggest? (factoring in cost, commitment, personal development, opportunities provided in life)
I take this to refer to stardom in high school or college, but not beyond.
I am inclined to select tennis. It doesn’t cost so much, and you can play for most of the rest of your life, without needing a team to back you up. It is unlikely to injure you very seriously, although arguably it cultivates an attitude of selfishness. Various areas of track would be reasonable picks too. If this is restricted to major team sports, I say baseball, mostly to minimize risk of injury or violence.
That said, my overall sense is that levels of competition in all of these areas have become higher than is socially optimal. Little League success will suffice for a lot of the gains in terms of learning leadership, discipline, and teamwork. So I would not wish any of these upon a child. These endeavors have become academic fundraisers where levels of competition are pushed as high as the talent allows, and too often they have become all-consuming pursuits, in violation of Aristotle’s edicts about moderation. Sports have gone from a very cheap way of educating your child to a very expensive way, yet another example of unmeasured declining productivity in education.
The newspaper header is:
Panos Kammenos, Greece’s defence minister, threatens to open country’s borders to refugees – including potential members of Islamic State of Iraq and the Levant (Isil) – unless Athens receives debt crisis support
The story is here, via Andrea Castillo. Whether it jives with your mood affiliation or not, it’s time to admit “these people simply don’t know what they are doing.” Fortunately, it does seem the Greek government has been walking back on this talk.
Corrado Gini, he of the Gini index, was a numbers man, at a time when statistics had become a modern science. In 1925, four years after Gini wrote “Measurement of Inequality of Incomes,” he signed the “Manifesto of Fascist Intellectuals” (he was the only statistician to do so) and was soon running the Presidential Commission for the Study of Constitutional Reforms. As Jean-Guy Prévost reported in “A Total Science: Statistics in Liberal and Fascist Italy” (2009), Gini’s work was so closely tied to the Fascist state that, in 1944, after the regime fell, he was tried for being an apologist for Fascism. In the shadow of his trial, he joined the Movimento Unionista Italiano, a political party whose objective was to annex Italy to the United States. “This would solve all of Italy’s problems,” the movement’s founder, Santi Paladino, told a reporter for Time. (“Paladino has never visited the U.S., though his wife Francesca lived 24 years in The Bronx,” the magazine noted.) But, for Gini, the movement’s purpose was to provide him with some anti-Fascist credentials.
There is more here at the Jill Lepore review of the new Robert Putnam book (and other books), via the excellent Kevin Lewis. And please no, I am not trying to suggest that an interest in inequality numbers is fascist in orientation, I simply find such historical tidbits fascinating. Here are further sources on Corrado Gini, not surprisingly he was into eugenics too.
Even though the Greek electorate has elected left-wing leaders, the “the Greek government” hasn’t actually changed all that much. It is still dysfunctional, corrupt, and very protective of special interests in nationally harmful ways. Yet I find that if I criticize the Greek government on Twitter I receive many angry, self-righteous comebacks, often but not always from Greeks and usually with a left-wing slant.
One reason the Greek government is so popular with “the Left” has to do, I think, with theories of social change. I often read or hear it suggested that, if only the truth is spoken in forthright, galvanizing terms, beneficial social change will follow. This was a common meme in Krugman’s columns for instance over the years. The claim was that Obama needed to be more like FDR and mobilize a coalition around a commonly articulated series of truths. I don’t think it was ever promised this would succeed right away, due to Republican intransigience, but it has been portrayed as a good long-run investment in political change through the education of the citizenry.
The new Greek government of course has done this and more. They have rather flamboyantly staked out extreme positions, insulted their opponents, and warned of the doom that will follow if renegotiations were to run along the lines of EU law rather than the New Old Keynesian economics. They told their citizenry how much they were standing up for them, and how much this was a moral clash of progressive good vs. austerity evil, with the values of democracy and national sovereignty (supposedly) on the side of good.
The thing is, it’s turned out to be a total catastrophe. As I had suggested early on, there is, in the ruling Greek coalition, no Plan B. Germany and especially Spain just held tight on the negotiations and the Greek government more or less had to fold, not even wanting to vote on the negotiated plan. That plan then failed to receive European approval, nor has Greece drummed up much general support from the other peripheral countries, and now no one knows what to do next. The ECB, IMF, and others still have Greece “by the balls,” to cite one colloquial expression. They’re still trying to spin that “the institutions” are not the Troika, but they don’t talk much about liberating the economy as a means of increasing exports. It seems Emergency Liquidity Assistance may be up for review. Oops.
The Greek government also riled up its citizens and now doesn’t know how to deliver anything satisfactory to them, to the detriment of political stability. The latest irresponsible plan is to threaten a referendum on a new government, a new economic plan, or in one case even a referendum on euro membership was mentioned. Message discipline is scarcely to be seen.
All of that is simply painting the Greek government into a corner all the more, since a referendum will simply heighten the demands for mutually inconsistent outcomes. Signs of broader eurozone recovery, and the relative success of QE in talking down the value of the euro, have almost completely removed the bargaining power of Syrizas, or so it seems as of early March.
As I’ve said before, these people ruling Greece are The Not Very Serious People, and they are increasingly acquiring a reputation as such within the rest of the EU and eurozone.
All of this reminds me of the wisdom of Dani Rodrik and his propositions about the incompatibility of democracy, national sovereignty, and global economic integration. Angry words won’t undo those constraints and they are not something you will hear the Greek government mention very often.
Krugman a few times has praised Syrizas for renegotiating the required primary surplus figures, but it seems this is hardly mattering. Due to plummeting tax collection, the primary surplus is gone in any case, and the agreement with “the institutions” [read: Troika] is not even the main driver of the action here. Greece needs to take steps to reestablish a higher [read: positive] primary surplus in any case.
The broader lesson is this: if politicians are not “speaking the truth to power,” there are usually some pretty good reasons for that. As a political strategy, it doesn’t typically work and it is worse than irrelevant as it very often backfires.
The situation is still not beyond repair, but the Very Serious People are serious for a reason.
Anthropologist Peter Frost and anthropologist and population geneticist Henry Harpending argue that killing murderers pacified the population eugenically.
At the beginning of … the English homicide rate was about 20 to 40 per year per 100,000 people. At the end [1750, AT], it was about 2 to 4 per 100,000, i.e., a 10-fold reduction (Eisner, 2001).
…Can this leftward shift be explained by the high execution rate between 1500 and 1750? During that period, 0.5 to 1% of all men were removed from each generation through court-ordered executions and a comparable proportion through extrajudicial executions, i.e., deaths of offenders at the scene of the crime or in prison while awaiting trial. The total execution rate was thus somewhere between 1 and 2%. These men were permanently removed from the population, as was the heritable component of their propensity for homicide. If we assume a standard normal distribution in the male population, the most violent 1 to 2% should form a right-hand “tail” that begins 2.33–2.05 SD to the right of the mean propensity for homicide. If we eliminate this right-hand tail and leave only the other 98-99% to survive and reproduce, we have a selection differential of 0.027 to 0.049 SD per generation.
…The reader can see that this selection differential, which we derived from the execution rate, is at most a little over half the selection differential of 0.08 SD per generation that we derived from the historical decline in the homicide rate.
Thus, the authors argue that it is possible that a substantial decline in criminality can be explained by the eugenics of execution. The authors, assume, however, that executed criminals have no offspring which is unlikely, especially if criminals have higher fertility rates.
Hat tip to PseudoErasmus on twitter.
1. A master’s in economics, or for that matter many other areas, is of considerable value if you are working in the DC bureaucracy and trying to scale the ladder.
2. A master’s in economics can be of value in a non-profit organization. It shows you understand the material, and can in some way help promote it, even if you are not producing the research yourself.
3. As Bryan Caplan will be chronicling, there is an increasing demand for degrees and advanced degrees in many endeavors, even when the degree appears irrelevant to the nature of the work. Having a Master’s can set you apart from the crowd.
4. If you study more economics, you actually learn something.
Those of you with the highest of elite aspirations should opt for a Ph.d of course, but still the Master’s in economics will be making somewhat of a comeback. I mean this as something above and beyond the terminal Master’s often given to those who, for whatever worthy reason, do not finish their Ph.d degrees.
I do not readily find good data on line about the economics Master’s, do any of you know of good sources?
This Neill Blomkamp (“District 9”) movie has received only lukewarm reviews, but while highly imperfect it is more interesting than most critics seem to realize. The initial premise is that in a few years’ time South Africa resorts to AI-driven, robot policemen. I see the film as revolving around three key questions:
1. What will a robot be like, if he grows up under rather brutal conditions? This is first and foremost a movie about education, and it could have been written by John Gray. Don’t assume that people (robots) have an irrevocable tendency to support liberal values, at least not when the chips are down and they have been beaten up. The gang motive is both popular and enduring.
2. Can a society dependent on robots for law enforcement become/remain a liberal society? Or will the “arms race” between the law and the criminals result in brutality and a loss of liberty?
3. How robust is a robot society to the eventual possibility of human error and depravity?
Along the way there are references to Asimov, “Silent Running,” Blade Runner, Verhoeven of course, and other android sources. I can’t endorse every angle of the ending, or every character decision, but still I didn’t consider leaving this one.
What is on your mind? I am happy to entertain requests for topics and questions for future blog posts…
Lars P. Feld, Sarah Necker, and Bruno S. Frey have done some new research on this question, I would say this is good news for us, and bad news for many of you, though apparently you are clawing back some of what you gave to us:
We study the importance of economists’ professional situation toward their life satisfaction based on a unique survey of mostly academic economists. On average, economists report to be highly happy with life. Satisfaction is positively related to spending more time on doing research. The lack of a tenured position decreases satisfaction. However, the extent to which the uncertainty created by the tenure system affects satisfaction varies with the contract terms. The effect is stronger if the contract expires in the near future or cannot be extended. Publication success has no effect if it is controlled for academic rank and the contract duration. The finding suggests that publications are rather a means to an end, e.g., to acquire a tenured position. While the perceived level of external pressure also has no impact, the perceived change of pressure in recent years is positively related to economists’ life satisfaction. An explanation is that economists have accepted a high level of pressure when entering academia but are not willing to cope with the recent increase.