Month: March 2021
A question for econtwitter from my bartender. If the US government via deficit spending engages in economic development in other countries, does that increase inflation here?
I would approach this question as follows. Assume the government is running a foreign aid program that mostly makes purchases and investments abroad with non-U.S. suppliers, furthermore assume floating exchange rates.
The foreign aid, a kind of capital outflow, will induce the dollar to depreciate somewhat, a’ la “the transfer problem” of the 1920s. That will lead to a modest inflationary impact on imported goods, possibly of a one-off nature if the foreign aid is itself a one-off policy. American exporters will gain, noting that under some unusual assumptions about the terms of trade the U.S. domestic economy can end up better off. (Induced profits on the depreciation can in principle outweigh the initial loss from the transfer, though please “do not try this at home.”)
If the deficit is monetized, the exchange rate may depreciate all the more, as individuals shift their future expectations toward a more expansionary monetary policy. Furthermore, the higher global money supply of dollars would give foreigners a higher option value on making purchases in the United States, another form of (likely modest) inflationary pressure.
If the deficit is financed by borrowing, someday that debt must be repaid. If it is repaid by higher taxes, that has a deflationary effect on aggregate demand, though the incentive effects of the taxes will lower supply in the future, again creating a (probably modest) upward push on the price level as a further effect.
If you wish, you can toss in added second- and third-order effects on those taxes on exchange rates, terms of trade, and so on.
As an exercise to be performed at home, what if the U.S. sends aid to a dollarized economy, such as Ecuador or El Salvador?
‘Neither Israel nor Iran want to publicly take responsibility for the attacks because doing so would be an act of war with military consequences,’ Hossein Dalirian, a military analyst affiliated with Iran’s Islamic Revolutionary Guards Corps, told The New York Times in a Clubhouse discussion on Thursday.
Here is the full NYT article.
Another one from the Department of Uh-Oh:
Researchers make hundreds of decisions about data collection, preparation, and analysis in their research. We use a many‐analysts approach to measure the extent and impact of these decisions. Two published causal empirical results are replicated by seven replicators each. We find large differences in data preparation and analysis decisions, many of which would not likely be reported in a publication. No two replicators reported the same sample size. Statistical significance varied across replications, and for one of the studies the effect’s sign varied as well. The standard deviation of estimates across replications was 3–4 times the mean reported standard error.
2. Did life on earth start earlier than we had thought? (You will note this is an example of Cowen’s 17th Law, namely that origins of things go back earlier than you had thought.)
6. Charges against Foucault for abusing young boys in Tunisia (London Times, gated).
Khanna says these intricacies mean that brash political talk about reshoring operations is naive. “Even the supply chain has a supply chain,” he says.
A dose of the BioNTech/Pfizer vaccine, for example, requires 280 components from multiple countries, according to the company. The idea of moving from what Okonjo-Iweala calls “just in time to just in case to just at home” is harder than it looks.
In Maine it is legal to use and possess marijuana (within limits), but illegal to sell it or give it away. And so how might a transfer be consummated?:
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Here is more, via Jacob F.
Próspera is the first project to gain approval from Honduras to start a privately governed charter city, under a national program started in 2013. It has its own constitution of sorts and a 3,500-page legal code with frameworks for political representation and the resolution of legal disputes, as well as minimum wage (higher than Honduras’s) and income taxes (lower in most cases). After nearly half a decade of development, the settlement will announce next week that it will begin considering applications from potential residents this summer.
The first colonists will be e-residents. Próspera doesn’t yet have housing ready to be occupied. But even after the site is built out, most constituents will never set foot on local soil, says Erick Brimen, its main proprietor. Instead, Brimen expects about two-thirds of Prósperans to sign up for residency in order to incorporate businesses there or take jobs with local employers while living elsewhere…
After years of debate, Próspera will be the first real-world test of a divisive libertarian idea, says Beth Geglia, an anthropologist who studies charter cities. “There was a noticeable lull in the startup city movement in general until the Próspera Zede project got off the ground,” she says. “It’s ground zero.”
There is considerably more at the link, if this continues on track I will gladly visit and report back.
1. The breakthrough in computational biology (good long NYT feature).
5. Do Republicans look more alike? And is it voter-driven?
COVID cases are rising in New York, Michigan and New Jersey with most cases coming from the British and New York variants (B.1.1.7, B.1.526). It would be a good idea to flood these zones with vaccines. J&J production should hit 11 million doses this week. Send the J&J vaccine to pharmacies and clinics in these states that are capable of putting a lot of shots in arms quickly.
Morbidity and mortality have been increasing among middle-aged and young-old Americans since the turn of the century. We investigate whether these unfavorable trends extend to younger cohorts and their underlying physiological, psychological, and behavioral mechanisms. Applying generalized linear mixed effects models to 62,833 adults from the National Health and Nutrition Examination Surveys (1988-2016) and 625,221 adults from the National Health Interview Surveys (1997-2018), we find that for all gender and racial groups, physiological dysregulation has increased continuously from Baby Boomers through late-Gen X and Gen Y. The magnitude of the increase is higher for White men than other groups, while Black men have a steepest increase in low urinary albumin (a marker of chronic inflammation). In addition, Whites undergo distinctive increases in anxiety, depression, and heavy drinking, and have a higher level than Blacks and Hispanics of smoking and drug use in recent cohorts. Smoking is not responsible for the increasing physiological dysregulation across cohorts. The obesity epidemic contributes to the increase in metabolic syndrome, but not in low urinary albumin. The worsening physiological and mental health profiles among younger generations imply a challenging morbidity and mortality prospect for the United States, one that may be particularly inauspicious for Whites.
Here is the full article, via an excellent loyal MR reader.
The biggest question in the U.S. right now is how rapidly vaccinations will proceed. Yet only 8.5% of the new appropriations — under the most generous calculations — are directed toward vaccine supply and anti-Covid-19 efforts.
The biggest question for the world is whether the wealthier nations will put up the estimated $25 billion needed to jump-start a global vaccination campaign in a (relatively) timely manner. So far it appears that they will not — again, a supply-side issue. There did not seem to be much interest in putting such an expenditure into the American Rescue Plan, even though the resulting resumption of trade and migration would undoubtedly have benefited the U.S. by far more than $25 billion.
Major stories about supply-side problems receive only fleeting notice in the U.S. media. Poor infrastructure and distribution are making it difficult for the 270 million inhabitants of Indonesia to get vaccinated, yet very few Americans are paying attention. Indonesia is not usually the focus of attention — and people are not sufficiently obsessed with the supply side.
In the corporate world, there was the big announcement that Intel plans to move full speed ahead to produce more high-quality semiconductor chips and to put more chip factories in the U.S. That switch has come after years of disappointing results from Intel. Can it set things straight? Right now there is a chip shortage in automobile manufacturing, and given the potential fragility of Taiwanese chip supply, U.S. national security hangs in the balance…
Supply-side economics got a bad name because it was associated with too many economists who insisted that tax cuts would be self-financing, or who insisted on tax cuts above all other possible supply-side improvements. Yet all economists ought to proudly announce that they are supply-side economists, first and foremost. That is pretty far from the world we live in, especially as social media have made U.S. monetary and fiscal policies a touchstone for the entire world to debate, often in highly emotional terms.
Here is the rest of my Bloomberg column.
This coming Monday, 9 p.m. EST, 6 p.m. Pacific, here is the link. With myself, Jeff Holmes, Marc Andreessen, Hollis Robbins, and illustrious others, discussing the podcast and everything else too.
Please do join us, and if you have done a CWT as a guest we would love to call you up to the mike — please raise your hand to ensure we see you!
The Mayor of Charlottesville recently tweeted.
Please explain how building more market rate housing will free up the housing market for low-income citizens. Which low-income citizens will be able to afford to buy or rent a home that’s going to sell to $450,000? New construction will not lower the selling price of older homes….
Fortunately, Bryan Caplan has an excellent explanation, the game of reverse musical chairs.
New housing is usually nice housing, because over time technology improves and capital depreciates. Since richer people are more willing to pay the upcharge for nicer housing, the future residents of new construction are usually well-to-do.
So what do casual observers miss? They miss the big picture: People who move into new construction are moving away from older construction. When they move, those older units become available for others. While those others probably won’t be drastically poorer than those they replace, they tend to be slightly poorer. Think: “one rung down.” When these slightly poorer people move, their prior dwellings will tend to be taken over by those who are a further rung down. And so on, in a great chain reaction. Allowing new construction really does help the whole income distribution.
Since this is hard to visualize, picture a game of musical chairs. With one key difference. A normal game of musical chairs starts out with one chair per person, then subtracts a chair every turn. The result: Faster, aggressive kids push out everyone else, until the fastest, most aggressive kid wins. In my variant game, we start out with fewer chairs than people, then add a chair every turn. The result: Slower and more pacific kids start getting places to sit, until there are enough chairs for everyone.
Both games feature a competitive scramble. In conventional musical chairs, however, the competition gets more and more cutthroat and in the end almost everyone loses. In my reverse musical chairs, in contrast, competition gets milder and milder and in the end everyone wins.
Emmanuel Todd, that is. Here is a recent paper from Jerg Gutmann and Stefan Voigt:
Many years ago, Emmanuel Todd came up with a classification of family types and argued that the historically prevalent family types in a society have important consequences for its economic, political, and social development. Here, we evaluate Todd’s most important predictions empirically. Relying on a parsimonious model with exogenous covariates, we find mixed results. On the one hand, authoritarian family types are, in stark contrast to Todd’s predictions, associated with increased levels of the rule of law and innovation. On the other hand, and in line with Todd’s expectations, communitarian family types are linked to racism, low levels of the rule of law, and late industrialization. Countries in which endogamy is frequently practiced also display an expectedly high level of state fragility and weak civil society organizations.
Via the excellent Kevin Lewis.