Assorted links
2. How does competency-based learning work?
3. Are the Chinese switching out of Hollywood movies because the movies are too stupid? It seems so. And at what rate does popular culture depreciate?
4. James Hamilton on Reinhart-Rogoff, and a good overview/scoring of the overall controversy.
5. “Dwight Howard missed more free throws this season (366) than Lakers teammate Steve Nash has missed in his 17-year NBA career (322). Howard: 355 for 721 this season, 49.2 percent; Nash: 3,038 for 3,360 from 1996-97 through 2012-13, 90.4 percent.” Link here.
Why are younger Americans driving less?
Brad Plumer considers several good hypotheses, including the recession, gas prices, student debt, tougher legal requirements, and a stronger desire to live in places such as Brooklyn. I would add one other factor to his list: because they are working less. A more speculative additional hypothesis would be “because it is easier to have sex without driving to get it.”
Why no gdp-indexed bonds?
Might some eurozone nations benefit from gdp-indexed bonds? Imagine if required bond payments went down when your gdp went down, thereby providing some insurance against bad economic times. Here is a good summary blog post of the idea. Here are other writings on the idea. Alternatively, you might also ask why governments don’t find ways, indirect ways if necessary, to issue equity shares.
Yet we hardly ever see these instruments, although Argentina and Greece have tried what are arguably variants on the idea (pdf.) Why not? I can think of a few reasons:
1. Nations might falsify their gdp figures. Yet I am not sure it is the fundamental reason, since you can imagine the contracts based on more objective gdp correlates, such as prices taken from securities markets or prediction markets.
2. Signaling and adverse selection reasons make large, highly scrutinized entities reluctant to buy explicit, blatant insurance against their own failures.
3. There is no missing market here, because governments could always — either directly or indirectly — short themselves in the CDS market. See #2 for a caveat.
4. Prosperous and creditworthy nations do not need the bonds, and the less secure nations will encounter costs from splitting the liquidity of their government bonds market.
5. Most governments do not run big budget surpluses in good times, even though they should. The absence of gdp-linked bonds is a corollary of this failure and the consumption return profiles of those two options are remarkably similar. In any case if a government has the discipline to forsake cash in good times, to save it up for bad times, as for instance Chile and Norway have shown, savings are easier than the gdp-indexed bonds. Alternatively a profligate will neither save nor buy insurance.
Most of all, I say #5.
Contemporary macroeconomics and the phrase “aggregate demand”
Without meaning to take sides in the controversy, I got a kick out of this sentence, which describes the attitudes of contemporary macroeconomists:
Even something anodyne like “demand might also play a role” would come across like the guy in that comic who asks the engineers if they’ve “considered logarithms” to help with cooling.
The blog post, by JW Mason, is interesting throughout. I liked this bit too:
Only conservative economists acknowledge this theoretical divide. You can find John Cochrane writing very clearly about alternative perspectives in macro. But saltwater economists — and the best ones are often the worst in this respect — are scrupulously atheoretical. I suspect this is because they know that if they wanted to describe their material in a more general way, they’d have to use the language of intertemporal optimization, and they are smart enough to know what a tar baby that is. So they become pure empiricists.
This is a useful and fun piece for sorting out different attitudes, methods, and terms in contemporary macroeconomics. Hat tip goes to the excellent Interfluidity.
Assorted links
Two excellent books
Lawrence Wright, Going Clear: Scientology, Hollywood, and the Prison of Belief.
Fredrik Logevall, Embers of War: The Fall of an Empire and the Making of America’s Vietnam, recently a Pulitzer Prize winner for non-fiction.
The first of these is good enough to fall into the “worth reading even if you don’t think you want to read a book about this topic” category.
Why did Cuba become healthier during the economic meltdown of the 1990s?
One should interpret anything about Cuba, or coming out of Cuban data, with extreme caution. Nonetheless I thought this was interesting enough to pass along:
The economic meltdown should logically have been a public health disaster. But a new study conducted jointly by university researchers in Spain, Cuba, and the U.S. and published in the latest issue of BMJ says that the health of Cubans actually improved dramatically during the years of austerity. These surprising findings are based on nationwide statistics from the Cuban Ministry of Public Health, together with surveys conducted with about 6,000 participants in the city of Cienfuegos, on the southern coast of Cuba, between 1991 and 2011. The data showed that, during the period of the economic crisis, deaths from cardiovascular disease and adult-onset type 2 diabetes fell by a third and a half, respectively. Strokes declined more modestly, and overall mortality rates went down.
This “abrupt downward trend” in illness does not appear to be because of Cuba’s barefoot doctors and vaunted public health system, which is rated amongst the best in Latin America. The researchers say that it has more to do with simple weight loss. Cubans, who were walking and bicycling more after their public transportation system collapsed, and eating less (energy intake plunged from about 3,000 calories per day to anywhere between 1,400 and 2,400, and protein consumption dropped by 40 percent). They lost an average of 12 pounds.
It wasn’t only the amount of food that Cubans ate that changed, but also what they ate. They became virtual vegans overnight, as meat and dairy products all but vanished from the marketplace. People were forced to depend on what they could grow, catch, and pick for themselves– including lots of high-fiber fresh produce, and fruits, added to the increasingly hard-to-come-by staples of beans, corn, and rice. Moreover, with petroleum and petroleum-based agro-chemicals unavailable, Cuba “went green,” becoming the first nation to successfully experiment on a large scale with low-input sustainable agriculture techniques. Farmers returned to the machetes and oxen-drawn plows of their ancestors, and hundreds of urban community gardens (the latest rage in America’s cities) flourished.
And this:
During the special period, expensive habits like smoking and most likely also alcohol consumption were reduced, albeit briefly. This enforced fitness regime lasted only until the Cuban economy began to recover in the second half of the 1990s. At that point, physical activity levels began to fall off, and calorie intake surged. Eventually people in Cuba were eating even more than they had before the crash. The researchers report that “by 2011, the Cuban population has regained enough weight to almost triple the obesity rates of 1995.”
That is by Richard Schiffman, the full article is here, and for the pointer I thank Jim Oliver.
David Burliuk, father of Russian futurism
Assorted links
Robots are making a movie about humans, sort of
…the BlabDroids are attempting to make what could be the first documentary ever filmed and directed by robots.
Created by artist and roboticist Alex Reben for his master’s thesis at MIT, the BlabDroids are tiny, adorable robotic cinematographers who will be filming interviews at this week’s Tribeca Film Festival in New York as part of the the film festival’s transmedia Storyscapes program. At least 20 BlabDroids will zip around to attendees–they’re self-propelled via motorized wheels– and ask them often very personal questions like, “Tell me something that you’ve never told a stranger before,” “What’s the worst thing you’ve done to someone,” and “Who do you love most in the world?”
Each droid carries a digital camera, a speaker that asks a series of pre-programmed questions to ask whomever it encounters and a button to be pushed to prompt new queries.
For the pointer I thank Michelle Dawson.
Is this as good as it gets? How much can social risk ever decline?
Karl Smith reports:
Are we so sure there is a better way?
Real interest have famously been on the decline for thirty years. A rougher historical record suggests that English real interest rates may have been in decline since at least 1600.
The standard explanation here is better governance and lower systemic risk.
Yet, lets imagine a simple model where we have two sources of risk. There is background you cannot avoid. And, there is personal risk that you create by through your own choices.
Policy makers have since Thomas Hobbes been attempting to drive down background risk. They have larger been successful. As a result our lives are getting more and more stable.
As that happens, however, folks are going to tend to take on more personal risk. There is a tradeoff between risk and reward. As you face less background risk, for which you not rewarded it makes sense to go for more personal risk for which you are rewarded.
When I take on more personal risk, however, it bleeds over slightly into everyone else’s background risk. People depend on me. If I take risks and lose so big that I debilitate myself then my family and my friends will surely suffer. But, so will my employer, my creditor and the businesses who count on me as a regular. When I go down, they go down.
So, putting it all back together and we come up with something of a risk floor, if you will.
Policy makers drive down systemic background risk. This makes everyone safer. In response, each individual takes on a little more personal risk and contributes slightly to the general background risk.
Eventually we will reach a point where policy makers have driven out so much systemic background risk that any marginal decrease systemic background risk will simply induce individuals to take on more personal risk until they raise the total risk level back up to where it was before.
Safer policy then has little net effect.
Said another way, attempts to prevent bubbles from forming will only make folks more complacent about bubbles. Eventually, a bubble will slip through the cracks. However, folks will deny it’s a bubble, because don’t you know, bubbles are a thing of the past. Even as it grows to massive proportions the smartest minds will argue that it only looks like a bubble. If it were a real bubble, surely the Fed would have popped it by know.
And, so it grows larger and larger and larger. When it pops the downdraft is so great that policy makers don’t have the tools to deal with it. Perhaps, in a technical sense they do. They could stand firm on an NGDP target or pass the mother of all stimulus bills.
However, emotionally they are at a loss. They have never seen anything like this and until recently thought it was impossible. Now, they are being asked to approve policies that no one has used since the dark ages, while in the middle of a crisis no living person understands.
This is a task few people have the nerve to handle. And, so they don’t handle it and the downdraft smashes the entire global economy to bits.
Such, is often the problem of “over-solving” the problems of the past.
Paul Krugman on fame and economics
Do read the whole post (in response to mine here), here is one excerpt:
And the trouble with where I think Cowen, at least, is going is the apparent suggestion that everyone who develops a prominent public profile in economics has to do it by pandering. No, they don’t — and specifically, I don’t think that’s what I do. I’ve taken very strong positions over the years; I’ve been wrong on some occasions; but I can’t think of any cases where I took a stronger position than my actual beliefs warranted.
In particular, my hard-line views on policy in the current crisis — it’s a demand problem not a structural problem, there is no risk of crowding out, there is no risk of inflation from aggressive monetary expansion, there are large negative effects from austerity — aren’t simplifications of some more complex story, they are what my basic model and the lessons of history teach. Where there are things my “base” would like to believe but I’m not convinced, I say so — e.g., on the issue of whether inequality is a key factor holding back recovery.
German markets in everything
Responding to an order from above, a Munich court has reopened the media accreditation process for reporters covering the biggest neo-Nazi trial in German history. Seats will now be allotted by raffle, with several being reserved for the Turkish, Greek and other foreign press.
Here is more, note there are several reserved for Persian, Greek, and Turkish media.
A new paper on the causality of debt and growth
By Ugo Panizza and Andrea Filippo Presbitero, I have not had a chance to read through this paper but thought I should pass it along:
This paper surveys the recent literature on the links between public debt and economic growth in advanced economies. We find that theoretical models yield ambiguous results. Whether high levels of public debt have a negative effect on long-run growth is thus an empirical question. While many papers have found a negative correlation between debt and growth, our reading of the empirical literature is that there is no paper that can make a strong case for a causal relationship going from debt to economic growth. We also find that the presence of thresholds and, more in general, of a non-monotone relationship between debt and growth is not robust to small changes in data coverage and empirical techniques. We conclude with a discussion of the challenges involved in measuring and defining public debt and some suggestions for future research which, in our view, should emphasize cross-country heterogeneity.
We interrupt your regularly scheduled programming…
Given the ongoing events in Boston and Cambridge, it is hard to know what else to post. My first intuitive thought, by the way, is to think hired agents are involved, but of course this is speculative (note this update). I also would think this raises the chance of the fertilizer explosion being a terrorist attack. Just last night some of us were talking and discussing the question “what is your most surprising prediction?” No one predicted these new developments. There is a good chance these events doom immigration reform, by the way.