Month: October 2023
Wednesday assorted links
The Great Depression is Over!
Throughout the 20th century, the Great Depression dominated macroeconomic discourse, engaging prominent economists such as Keynes, Hayek, Friedman, Lucas, and Prescott. Most 
principles of macroeconomics textbooks spend considerable time analyzing the Great Depression as it was this event which galvanized thinking about aggregate demand, bank runs, fiscal policy and money policy. However, the Great Depression occurred nearly a century ago and in a vastly different world, rendering its analysis more relevant to economic history than contemporary macroeconomics. We think it’s time to revise.
In the forthcoming edition of Modern Principles we excise the Great Depression and focus instead on the Great Financial Crisis and the Pandemic Recession as exemplifying the core of macroeconomics and policy. These events showcase a demand-driven recession followed by a supply-driven one, well illustrated by our dynamic AD-AS model. Focusing on these recessions also moves the lessons beyond the shifting of curves and towards important discussions of shadow banking, securitization, the microeconomics of externalities, and how monetary and fiscal policy must change when the goal – as during a pandemic — is not to get people back to work!
The lessons drawn from these significant and more recent recessions will inform policymakers as they deal with future recessions and will be the subject of analysis by economists for generations to come. A textbook for the 21st century must analyze the macroeconomics of the 21st century.
Claims about the future
DALL•E3 is America-pilled
"Please make me an image of the best possible future for humanity" pic.twitter.com/NGk08NcSww
— Packy McCormick (@packyM) October 14, 2023
*China’s World View: Demystifying China to Prevent Global Conflict*
That is a forthcoming book by David Daokiu Li. Perhaps it is the very best book explaining “how China works today?”
“What should I read on China? Which single book?” — those are two of the most common questions I receive. There are plenty of perfectly fine history books, but I am never sure what I should recommend. Now I have an answer to that question. Here is one short excerpt from the text:
Many people in China are concerned with the side effects of the massive anticorruption campaign. The first side effect is that government officials, especially those dealing with economic affairs, have now become inert. The reason is that active officials almost surely create enemies or grumbling groups, such as through the demolition of an old building to make room for new investments. These groups would bring their cases, and perhaps even historical cases, to the party discipline committee. On their path to promotion and their current positions, most officials have either intentionally or unintentionally engaged in practices that are not in compliance with today’s tighter government rules. In the Chinese reform process, laws and regulations are gradually implemented and then tightened. The anticorruption campaign is using today’s tighter regulations to judge the past conduct of officials, which occurred when the rules were either looser or entirely unclear. As a result, officials today are extremely hesitant to take any action that would make them stand out or draw extra attention, even if those actions are in the best interests of the locale or department they serve.
The author covers much more, including the importance of history, how the CCP works, local governments, SOEs, education, media and the internet, the environment, population, and much more.
There should be a book like this about every country.
I should note that the author lives in Beijing, so he soft pedals some of the more negative interpretations of the data, but ultimately I think this is much more fruitful than the books by journalist outsiders. The analysis is here, and you can do the moralizing on your own, if that is how you want it.
Definitely recommended, a very real contribution.
Tuesday assorted links
1. Can a political candidate promise “no taxes”? (The culture that is Argentina)
2. Embryologists inundated with requests for sperm retrieval from the fallen and dead.
4. Does free play for kids lead to happier adults?
5. New science blog by Ulkar Aghaeva, first post on Merton and multiple discoveries. NB: Proper link here: https://measureformeasure.co/blog/multiple-discoveries/
The Effect of Organizations on Physician Prescribing Opioids
Here is one of the more important IO papers in recent times:
In theory, there are several reasons why physician organizational form might affect the price, quantity, and quality of physician services. In this paper, we examine the effect of three aspects of physician organizational form on opioid prescribing: the number of physicians in the physician’s group (if any); the physician’s integration with or employment by a hospital or hospital system; and the average age of the other physicians in the physician’s group. We present three key findings. First, all else held constant, group physicians prescribe far fewer opioids, and prescribe them more appropriately, than do solo physicians. Second, although physicians who are employed by a hospital or practice in a hospital-owned group prescribe fewer opioids than do independent physicians, there is evidence that this difference may be due to differences in the other characteristics of physicians who are hospital-integrated rather than a causal effect. Third, we find substantial peer effects on opioid prescribing. Physicians in groups with a higher average age (excluding the physician him- or herself) prescribe more intensively and are more likely to write inappropriate opioid prescriptions than physicians in younger groups – holding constant the physician’s own age and other characteristics of his or her group.
That is from a new NBER working paper by M. Kate Bundorf, Daniel Kessler, and Sahil Lalwani.
The Calverts Cliff Decision
By the early 1970s, Atomic Age dreams of ubiquitous nuclear power were evaporating as fast as those Space Age fantasies of humanity soon spreading out into the solar system. The data show a clear break in nuclear reactor construction in 1971 and 1972, which suggests the decline in reactor construction is likely attributable to a confluence of regulatory events, perhaps creating uncertainty about the future cost of safety regulations. Two of the most important events happened in 1971: the creation of the Environmental Protection Agency and the Calvert Cliffs decision, in which the DC Circuit Court ordered federal regulators to comply with the National Environmental Policy Act of 1970, widely considered the “Magna Carta” of federal environmental laws. Basically, NEPA and related executive orders require federal agencies to investigate and assess the potential environmental costs, if any, of its projects and solicit public input. (At least twenty states and localities have their own such statutes, known as “little NEPAs.”) The following passage from the Calvert decision gives a good feel for the era’s Down Wing attitude: “These cases are only the beginning of what promises to become a flood of new litigation…seeking judicial assistance in protecting our natural environment. Several recently enacted statutes attest to the commitment of the Government to control, at long last, the destructive engine of material ‘progress.’”
Wow. They wanted to stop the the engine of material progress and they did. Right out of Atlas Shrugged.
This is from The Conservative Futurist: How to Create the Sci-Fi World We Were Promised, James Pethokoukis’s cheery introduction to ending the great stagnation. Pethokoukis ably covers all the big debates about the causes, consequences and solutions to the great stagnation and does so briskly, with optimism and covering culture as well as economics. Recommended as a one-stop shop for ending the great stagnation and as a pick-me-up.
Response functions for Israeli-Palestine conflict
A VAR is a clever way to model whether the Israeli-Palestinian conflict is tit-for-tat.
Here is much more by Cremiaux, with some simple statistics, controversial obviously. Via N.A.
The Great Spanish Estancamiento (from my email)
I’ve read an interesting article over at “El Pais” on the Spanish stagnation ( https://cincodias.elpais.com/opinion/2023-10-10/por-que-no-cambia-el-modelo-productivo-espanol.html , paywalled). Some interesting bits:
– Spain’s GDP per capita, measured at constant prices in 2022, has shown minimal growth compared to 2007, with just a 0.8 per cent increase over 15 years. Meanwhile, other European countries have seen significant growth: France by 7 per cent, the Netherlands by 10.7 per cent, and Germany by 13.7 per cent.
– Spanish productivity is being dragged down by small businesses, while medium and large companies perform closer to the EU average.The article claims that “la particularidad española es que el peso relativo de estas empresas pequeñas en el tejido productivo es mucho mayor que en los países vecinos”.
My digression: some (https://cepr.org/voxeu/columns/italys-productivity-conundrum-role-resource-misallocation) point out that in Italy TFP is declining because of large firms.
– In 2022, the rate of “early leavers from education and training” has reached 13.9 per cent. In the EU only Romania surpasses Spain in this regard. The authors point to tourism as the main culprit. But in the two EU countries where tourism contributes the largest share to GDP – Croatia and Greece – the percentage of such young people is the lowest ( https://ec.europa.eu/eurostat/statistics-explained/index.php?title=File:V2-early-leavers-230523.png ).
The authors support some sort of industrial policy for Spain as a way to overcome the stagnation. Even with the changing climate of opinion in Brussels and a more mercantilist mindset, I doubt that a full-blown, national industrial policy is possible within the EU. Probably, as with Italy (see: https://www.tandfonline.com/doi/full/10.1080/09538259.2022.2091408 ), without constraints imposed by Brussels, the stagnation wouldn’t be as deep as it is.
It would be great to see a comparative analysis of TFP stagnation in the European South!
That is from Krzysztof Tyszka-Drozdowski.
That was then, this is now, Maori fashion edition
The outfit is distinctly Victorian. A high, vintage lace collar with ruffles cascades over the lapel of a black tailcoat. But it is not meant to be a throwback.
For Debbie Ngarewa-Packer, the co-leader of Te Pati Maori, a New Zealand political party, it is a reclamation of the era when her ancestors first engaged with the British, who began colonizing New Zealand in the early 1800s. She has worn this attire, plus a top hat, in Parliament.
“When you want to get a message out fast, fashion is a way to do it,” she said.
Here is the full NYT story. Here are further NZ fashion pictures. I told you the new world was going to be strange…
Monday assorted links
1. Those new service sector jobs. East vs. west coast money.
2. Scottish NIMBY vs. Stella McCartney. Environmental review is out of control.
3. 104-year-old woman jumps from plane, dies in her sleep a week later.
4. Why not look at fake views in your digital windows?
5. Should Britain “outsource” by sending prisoners abroad to other nations? If so, to which ones?
6. “One thing that the rise of social media (particularly Twitter) did is to suddenly put Americans in direct contact with people from all over the world, without Americans realizing this. A lot of the radicalization of Americans over the last decade came from overseas.” From Noah Smith.
A variety of very recent electoral results
From Australia (WSJ):
…voters in Australia easily rejected a proposal to give indigenous people a special place in the country’s constitution. The vote was about 60% in opposition, and the referendum lost in all six states. It had to win in four of six to prevail.
The referendum was pitched as an attempt at “reconciliation” with Australia’s Aborigines and Torres Strait Islander people, who make up about 3.8% of the population. Labour Prime Minister Anthony Albanese campaigned on the idea in 2022 and urged a yes vote. Most conservative politicians opposed it.
Opponents said that adding the indigenous Voice to Parliament into the constitution was divisive and would create a special racial status in advising Parliament on indigenous matters that would complicate the job of the elected executive government. The proposal is part of the identity politics that has become a preoccupation of the global left.
I do think Australia should treat its indigenous groups better, but not through that mechanism, so I am happy. The results in New Zealand were positive too. Ecuador opted for the pro-business candidate rather than the pro-Venezuelan socialist. And most importantly, in Poland it is likely that the liberal, pro-EU forces are going to win. So good news all around, and all just in a few days time.
From the comments, what will happen in New Zealand edition?
The economics of collegiate sports participation
That is the topic of my latest Bloomberg column, here is one excerpt:
As for the students themselves, recent research indicates that sports performance makes former student athletes more valuable in the workplace. Former college athletes are much more likely to enter the high-earning fields of business and finance, relative to their non-athlete classmates. That can benefit the former students, their alma mater and the overall economy.
The research also shows that student athletes are less likely to get a doctoral degree or become a medical doctor, or to enter STEM fields. Might it be that the STEM jobs will become the province of the less athletic?
Looking at just Ivy League graduates, former athletes do better in the labor market — that is, they earn more money — than non-athletes. This result holds even when controlled for school attended, year of graduation, field of study and first job. Those same athletes are also more likely to hold senior positions. That could be evidence of leadership skills, or of their ability to learn and improve over time, as indeed good athletes must do. After five years, the earnings of the former college athletes start to outperform their non-athletic peers.
It is hard to avoid the conclusion that college athletes actually learn something useful. And what they learn, in many cases, is probably leadership skills. It is also possible that their athletic experiences sharpen their wits, their competitive sense, their problem-solving acumen and their ability to work with others.
Interestingly, the same study shows that athletes in more socioeconomically diverse sports, such as track and field, also earn more than their non-athletic peers. This suggests that their advantage comes not from having attended some fancy prep school.
Here is the original work by One broader lesson is that colleges and universities should encourage more “hands on projects.”
That is from Ben Smith. For the interested, here is some New Zealand election coverage.