Category: Economics
How different professions try to predict and plan for the future
Here is Jessica Gigot, farmer:
We don’t really plan for the weather short-term. That makes me sound like a bad farmer, but I’ve been surprised so many times that I don’t want to get too attached to one scenario. That’s what old farmers tell you: Be open to unpredictability. The drought will continue, that seems to be the consensus. And I may adjust my planting dates, putting in crops early to harvest early, and putting more in late to harvest again late. I kind of go with instincts. There are great farm planners out there and a lot of spreadsheets to follow, but I honestly don’t do that for every crop. You just get in a time bind and could spend all winter doing that and nothing else. Sometimes, it’s scary looking forward as a farmer. From our farm, we can see Mount Baker and the Puget Sound, a volcano and a rising sea. We’re kind of living for the moment, in a geological sense.
The NYT story, by Ryan Bradley, also interviews an economist, a biologist, a musician, and others.
Coming Apart: The State of White England?
Some surprising findings from researchers at the Institute for Fiscal Studies about education in England:
All ethnic minority groups in England are now, on average, more likely to go to university than their White British peers. This is the case even amongst groups who were previously under-represented in higher education, such as those of Black Caribbean ethnic origin, a relatively recent change.
These differences also vary by socio-economic background, and in some cases are very large indeed. For example, Chinese pupils in the lowest socio-economic quintile group are, on average, more than 10 percentage points more likely to go to university than White British pupils in the highest socio-economic quintile group. By contrast, White British pupils in the lowest socio-economic quintile group have participation rates that are more than 10 percentage points lower than those observed for any other ethnic group.
Combined with the Case-Deaton results about rising/not falling death rates among middle aged white Americans and the other measures of increasing social polarization among white Americans that Charles Murray discusses in Coming Apart this may be signs of a trend.
Hat tip: Tim Harford.
The economics of diners in New York City
They are disappearing, though still with a cluster in Queens, here is one trouble they are having:
It costs as much as $4 million to open a new diner these days…compared to $500,000 for a higher-end restaurant, because diners require so much storage space for the inventory that their large menus require.
The full article, by Aaron Elstein, is here, it has numerous interesting bits.
Satoshi Nakamoto Nominated for Nobel Prize
Bhagwan Chowdhry, a professor of finance at UCLA, has nominated Satoshi Nakamoto, the creator of Bitcoin, for a Nobel prize in economics. It’s an excellent choice. Nakamoto made a fundamental breakthrough that combined cryptography and a distributed database to create the first decentralized cryptocurrency. Moreover, Nakamoto implemented his theoretical breakthrough to create a working cryptocurrency with real benefits to potentially billions of consumers.
Chowdry writes:
The invention of bitcoin — a digital currency — is nothing short of revolutionary….It offers many advantages over both physical and paper currencies. It is secure, relying on almost unbreakable cryptographic code, can be divided into millions of smaller sub-units, and can be transferred securely and nearly instantaneously from one person to any other person in the world with access to internet bypassing governments, central banks and financial intermediaries such as Visa, Mastercard, Paypal or commercial banks eliminating time delays and transactions costs.
But beyond demonstrating the possibility of creating a reliable digital currency, Satoshi Nakamoto’s Bitcoin Protocol has spawned exciting innovations in the FinTech space by showing how many financial contracts — not just currencies — can be digitized, securely verified and stored, and transferred instantaneously from one party to another.
…Not only will Satoshi Nakamoto’s contribution change the way we think about money, it is likely to upend the role central banks play in conducting monetary policy, destroy high-cost money transfer services such as Western Union, eliminate the 2-4% transactions tax imposed by intermediaries such as Visa, MasterCard and Paypal, eliminate the time-consuming and expensive notary and escrow services and indeed transform the landscape of legal contracts completely. Many industries such as Banking, Finance, Law will see a big upheaval. The consumers will be big beneficiaries and indeed the poor and marginal sections of the society will reap the benefits of financial and social inclusion in the coming decades. I can barely think of another innovation in Economic and Finance in the last several decades whose influence surpasses the welfare increases that will be engendered by Satoshi Nakamoto’s brilliant, path-breaking invention. That is why I am nominating him for the Nobel Prize in Economics.
Since no one knows who Nakamoto is it might seem difficult to award him a prize but Chowdry notes that bitcoin itself provides a solution:
The Nobel committee can easily buy bitcoins for the award money from any reputed online Bitcoin exchange and transfer it to him instantaneously. A very early bitcoin transaction suggests that the bitcoin address 1HLoD9E4SDFFPDiYfNYnkBLQ85Y51J3Zb1 likely belongs to him. Of course, he could easily and verifiably let the committee know which address he wants the money to be transferred to.
Does the Obamacare mandate actually make people better off?
Here is my latest NYT Upshot column, on the topic of the Affordable Care Act. Here is what is to me the key excerpt:
But there is another way of looking at it, one used in traditional economics, which focuses on how much people are willing to pay as an indication of their real preferences. Using this measure, if everyone covered by the insurance mandate were to buy health insurance as the law dictated, more than half of them would be worse off.
This may seem startling. But in an economic study, researchers measured such preferences by looking at data known as market demand curves. Practically speaking, these demand curves implied that individuals would rather take some risk with their health — and spend their money on other things — partly because they knew that even without insurance they still would receive some health care. These were the findings of a provocative National Bureau of Economic Research working paper, “The Price of Responsibility: The Impact of Health Reform on Non-Poor Uninsureds” by Mark Pauly, Adam Leive, and Scott Harrington; the authors are at the Wharton School at the University of Pennsylvania.
One implication is that the preferences of many people subject to the insurance mandate are likely to become more negative in the months ahead. For those without subsidies, federal officials estimate, the cost of insurance policies is likely to increase by an average of another 7.5 percent; even more in states like Oklahoma and Mississippi. The individuals who are likely losers from the mandate have incomes 250 percent or more above the federal poverty level ($11,770 for a single person, more for larger families), the paper said. They are by no means the poorest Americans, but many of them are not wealthy, either. So the Affordable Care Act may not be as egalitarian as it might look initially, once we take this perspective into account.
I should stress that, at this point, I don’t see any realistic alternative to trying to improve ACA. Still, I find it distressing how infrequently this problem is acknowledged or dealt with, probably from a mix of epistemic closure, a “health insurance simply has to make people better off” attitude, and a dose of “let’s not give any ammunition to the enemy.” In fact, I think a lot of Democratic-leaning economists and commentators are doing a real disservice to their own causes on this one.
It’s worth noting that Kentucky, one of the best-functioning ACA state exchanges, just elected a Republican governor who very explicitly pledged to tank the current set-up as much as possible, Medicaid too. I think it’s time to admit this is not just Tea Party activism or Hee Haw political stupidity, rather a large number of the people subject to the mandate simply are not better off as would be judged by their own preferences. And that is not a secondary problem of Obamacare, it is a primary problem.
Interestingly, I found the NYT reader comments on my piece to be fairly supportive, which is not always the case. There’s a good deal of “this happened to me, too,” and not so much raw invective about whatever defects I may have.
I think it is a big mistake to argue Obamacare is on the verge of collapse, or whatever other exaggeration of the day may be at hand. Still, I don’t find the current set-up of the exchanges to be entirely stable, at least not in terms of ongoing popularity, much less consumer sovereignty.
A key question is what happens moving forward. One option, which I had not initially expected, is for the exchanges to narrow and evolve into an expanded version of some of the earlier plans for a segregated high-risk pool. In that case, the argument would morph from “don’t worry, enough people will sign up for the exchanges” into “the welfare effects here are still positive, because fortunately not everyone signs up for the exchanges.” The high risk pool would then at some point require additional subsidies. In the past, I argued that the penalties for not signing up were too low, but under this scenario it may be desirable to lower rather than raise those penalties.
We’ll see. The piece covers other issues as well, do read the whole thing.
Here is Megan on the costs of ACA plans. Here are some interesting calculations from Jed Graham.
Bill Simmons estimate of the day
The trouble with podcasts is that they are difficult to grow: while text can be shared and consumed quickly, a podcast requires a commitment (which again, is why advertising in them is so valuable). Simmons, though, by virtue of his previous writing, is already averaging over 400,000 downloads per episode.
Podcast rates are hard to come by, but I’m aware of a few podcasts a quarter the size that are earning somewhere in excess of $10,000/episode; presuming proportionally similar rates (which may be unrealistic, given the broader audience) The Bill Simmons Podcast, which publishes three times a week, could be on a >$6 million run rate, which, per my envelope math in the footnote above, could nearly pay for a 50-person staff a la Grantland.
Most of the article, by Ben Thompson, is about the economics of Grantland.
Rural China worry about the human capital
This is from a recent paper by Stanford’s Scott Rozelle:
We also seek to explain why parents in rural China appear to be engaging in poor parenting practices. The paper brings together quantitative results from a survey of 1,442 caregivers of 18- to 30-month-old children in children in 11 nationally designated poverty counties as well as analysis of interviews with 20 caregivers in 8 rural villages. The results of the quantitative analysis demonstrate that 42 percent of children in the sample are cognitively impaired and 10.2 percent experience delayed motor development [emphasis added by TC]. According to the quantitative data, the poor cognitive development is not due to the fact that parents do not care for their children, as the majority reported that they enjoyed spending time with their child (88.6%). Nor are the delays due to a lack of a sense of parental responsibility, as almost all caregivers responded that they believed it was their responsibility to help their child learn about the world around them (94.6%). Yet poor parenting practices appear to be in part to blame: quantitative analysis shows a significant positive correlation between singing, reading, and playing with a child and their cognitive and psychomotor development. The empirical data shows, however, that 87.4 percent of parents do not read to their children; 62.5 percent do not sing to their children; and 60.8 percent do not play with their children. In the qualitative section of the paper we provide evidence suggesting that the prevalence of poor parenting practices does not stem from inadequate financial resources or parental indifference to the child’s development. Instead, the three main constraints influencing parental behaviors are (a) not knowing that they should be engaging in these parenting behaviors at this stage in the child’s development, (b) not knowing how to properly interact with the child, and (c) not having time to practice such behaviors.
Like all papers, this one is subject to various cavils and caveats, or perhaps the sample is not truly representative. Still, it is a useful antidote for assuming that factors of IQ and human capital necessarily give China a big growth advantage in the decades to come. Chinese test scores are good, but rural China does not always meet the Chinese average, and that is where much of the next wave of growth needs to come from.
Of course for more on these issues you need to read Garett Jones’s forthcoming The Hive Mind.
For the pointer I thank Christopher Balding, here is his new post on how stressed are the major Chinese banks?: “Chinese banks are slush funds to direct capital to preferred companies.”
Swiss Referendum on 100% Reserves
A Swiss group has collected the 100,000 signatures necessary to require a national referendum on requiring banks to hold 100% reserves.
In a nut shell, the proposal extends the Swiss Federation’s existing exclusive right to create coins and notes, to also include deposits. With the full power of new money creation exclusively in the hands of the Swiss National Bank, the commercial banks would no longer have the power to create money through lending. The Swiss National Bank’s primary role becomes the management of the money supply relative to the productive economy, while the decision concerning how new money is introduced debt free into the economy would reside with the government.
After interest in the 1930s Chicago plan of Fisher and Simons died off, Murray Rothbard and other libertarians were virtually the only people calling for 100% reserves. More recently, however, the idea has almost become mainstream. Consider Martin Wolf’s FT column:
Printing counterfeit banknotes is illegal, but creating private money is not. The interdependence between the state and the businesses that can do this is the source of much of the instability of our economies. It could – and should – be terminated.
…Banks create deposits as a byproduct of their lending. In the UK, such deposits make up about 97 per cent of the money supply. Some people object that deposits are not money but only transferable private debts. Yet the public views the banks’ imitation money as electronic cash: a safe source of purchasing power.
Banking is therefore not a normal market activity, because it provides two linked public goods: money and the payments network. On one side of banks’ balance sheets lie risky assets; on the other lie liabilities the public thinks safe. This is why central banks act as lenders of last resort and governments provide deposit insurance and equity injections. It is also why banking is heavily regulated. Yet credit cycles are still hugely destabilising.
What is to be done? A minimum response would leave this industry largely as it is but both tighten regulation and insist that a bigger proportion of the balance sheet be financed with equity or credibly loss-absorbing debt.
…A maximum response would be to give the state a monopoly on money creation. One of the most important such proposals was in the Chicago Plan, advanced in the 1930s by, among others, a great economist, Irving Fisher. Its core was the requirement for 100 per cent reserves against deposits. Fisher argued that this would greatly reduce business cycles, end bank runs and drastically reduce public debt. A 2012 study by International Monetary Fund staff suggests this plan could work well.
Similar ideas have come from Laurence Kotlikoff of Boston University in Jimmy Stewart is Dead, and Andrew Jackson and Ben Dyson in Modernising Money.
Hat tip on the Swiss proposal to Dirk Niepelt who offers further comment.
Minor Vapists
The Yale School of Medicine reports on some of the benefits of vaping and some of the costs of bans:
More than 40 states have banned the sale of electronic cigarettes to minors, but a new study out of the Yale School of Public Health indicates that these measures have an unintended and dangerous consequence: increasing adolescents’ use of conventional cigarettes.
Using data from the National Survey on Drug Use and Health, the research finds that state bans on e-cigarette sales to minors yield a 0.9 percentage point increase in rates of recent conventional cigarette use by 12 to 17 year olds, relative to states without these bans.
“Conventional cigarette use has been falling somewhat steadily among this age group since the start of the 21st century. This paper shows that bans on e-cigarette sales to minors appear to have slowed this decline by about 70 percent in the states that implemented them,” said Abigail Friedman, assistant professor of public health and the study’s author. “In other words, as a result of these bans, more teenagers are using conventional cigarettes than otherwise would have done so.”
The paper by Abigail Friedman is forthcoming in the Journal of Health Economics (working paper version).
Hat tip: Mitch Berkson.
*Hive Mind*, by Garett Jones
I am very excited to report that next week will see the publication of Hive Mind: How Your Nation’s IQ Matters So Much More Than Your Own, by my colleague Garrett Jones, with Stanford University Press. This will go down as one of the social science books of the year.
Here is Garett’s opening paragraph:
This isn’t a book about how to raise IQ: it’s a book about the benefits of raising IQ. And a higher IQ helps in ways you might not have realized: on average, people who do better on standardized tests are more patient, are more cooperative, and have better memories. But while dozens of studies by psychologists and economists have established these links, few researchers have connected the dots to ask what this means for entire nations. And since average test scores vary across nations—whether we’re talking about math tests, literacy tests, or IQ tests—an overall rise in national test scores likely means a rise in the number of more patient, more cooperative, and better-informed citizens. This in turn means that higher national test scores will probably matter in ways too big to ignore. And if education researchers and public health officials can find reliable ways to raise national test scores, productivity and prosperity will rise where poverty and disease now flourish.
Here is chapter one, here are Garett’s chapter summaries. Here is Garett’s home page. On Twitter, here you will find The Wisdom of Garett Jones.
The housing shortage and low real interest rates
The mystery of low natural interest rates has become the topic of the hour, and everyone is perplexed by the mystery. Why are interest rates so low? Has anybody mentioned housing? This virus infected everyone’s brain so that we can only believe houses are too expensive or too plentiful, but not the other way around. So, nobody seems to notice that the return on real estate investments is very high.
I have posted some version of this graph several times. In the 1970s & 1980s, its tough to get a read on it because there weren’t markets in inflation-adjusted treasury bonds at the time. But, there is clearly a relationship between real estate returns and real interest rates. Why wouldn’t there be?
And this relationship broke down at the end of 2007 when we shut down real estate credit markets. The lack of access to home ownership made real estate returns go up while bond yields were going down. This is an important signal of financial breakdown, and nobody seems to notice.
So, no. Natural interest rates are not low. The real long term natural rate right now is about 2.5%. If you have tons of cash or you can run the gauntlet and get a mortgage, or if you are an institituional investor going through the difficult organizational process of buying up billions of dollars of rental homes, you get the preferred rate of 4% real returns.
If you aren’t, then you get the “class B” shares of low risk fixed income, which pay about 1% real (3% nominal).
The real estate market is much larger than the treasuries market. This is a big deal. This should be just about the only thing anybody is talking about regarding natural rates. Household real estate is worth about $25 trillion. If we hadn’t stopped building homes a decade ago, and if home prices did not contain an access premium, there would be more than $40 trillion in real estate. It dwarfs the size of the treasury market. That’s why rates have not reacted to large deficits. The federal government couldn’t realistically accumulate enough debt to make up for the gaping hole we have created in real capital.
We need to make some mortgages and build some houses. We will not be doing that, because of the virus. So, it looks to me like we will be wondering about the big interest rate mystery for another decade.
That is all from the always-stimulating Kevin Erdmann, additional graph at the link.
Where to park your food truck?
Here is Eliot Abrams, doctoral student at the University of Chicago who is working on modeling food truck behavior:
As part of the same symposium, here is, Drew Davis, Booth MBA and most importantly a guy who runs food trucks:
In Wrigleyville, we ended up getting a lot of people out for Sunday strolls, running errands. We’re near a drugstore and a grocery store. By experimenting, we got to the right answer. We don’t want to be a destination in itself. We’d much rather make ourselves part of people’s everyday experience, a part of their lives.
At Booth, there’s always the question: Does the data exist and can I get it? I could generate data from our truck sales. But you can really only compare results if the day of the week was the same, the spot was the same, and the weather was the same. By the time you’ve made all those cuts in the data, the analysis would be horrendous. I work much better with stories.
Read the whole thing, Chad Syverson opines as well.
Free Market Food Banks
Feeding America, the third largest non-profit in the United States, distributes billions of pounds of food every year. Most of the food comes from large firms like Kraft, ConAgra and Walmart that have a surplus of some item and scarce warehouse space. Feeding America coordinates the supply of surplus food with the demand from food banks across the U.S..
Allocating food is not an easy problem. How do you decide who gets what while taking into account local needs, local tastes, what foods the bank has already, what abilities the banks have to store food on a particular day, transportation costs and so forth. Alex Teytelboym writing at The Week points out:
…Before 2005, Feeding America allocated food centrally, and according to its rather subjective perception of what food banks needed. Headquarters would call up the food banks in a priority order and offer them a truckload of food. Bizarrely, all food was treated more or less equally, irrespective of its nutritional content. A pound of chicken was the same as a pound of french fries. If the food bank accepted the load, it paid the transportation costs and had the truck sent to them. If the food bank refused, Feeding America would judge this food bank as having lower need and push it down the priority list. Unsurprisingly, food banks went out of their way to avoid refusing food loads — even if they were already stocked with that particular food.
This Soviet-style system was hugely inefficient. Some urban food banks had great access to local food donations and often ended up with a surplus of food. A lot of food rotted in places where it was not needed, while many shelves in other food banks stood empty. Feeding America simply knew too little about what their food banks needed on a given day.
In 2005, however, a group of Chicago academics, including economists, worked with Feeding America to redesign the system using market principles. Today Feeding America no longer sends trucks of potatoes to food banks in Idaho and a pound of chicken is no longer treated the same as a pound of french fries. Instead food banks bid on food deliveries and the market discovers the internal market-prices that clear the system. The auction system even allows negative prices so that food banks can be “paid” to pick up food that is not highly desired–this helps Feeding America keep both its donors and donees happy.
Food banks are not bidding in dollars, however, but in a new, internal currency called shares.
Every day, each food bank is allocated a pot of fiat currency called “shares.” Food banks in areas with bigger populations and more poverty receive larger numbers of shares. Twice a day, they can use their shares to bid online on any of the 30 to 40 truckloads of food that were donated directly to Feeding America. The winners of the auction pay for the truckloads with their shares. Then, all the shares spent on a particular day are reallocated back to food banks at midnight. That means that food banks that did not spend their shares on a particular day would end up with more shares and thus a greater ability to bid the next day. In this way, the system has built-in fairness: If a large food bank could afford to spend a fortune on a truck of frozen chicken, its shares would show up on the balance of smaller food banks the next day. Moreover, neighboring food banks can now team up to bid jointly to reduce their transport costs.
Initially, there was plenty of resistance. As one food bank director told Canice Prendergast, an economist advising Feeding America, “I am a socialist. That’s why I run a food bank. I don’t believe in markets. I’m not saying I won’t listen, but I am against this.” But the Chicago economists managed to design a market that worked even for participants who did not believe in it. Within half a year of the auction system being introduced, 97 percent of food banks won at least one load, and the amount of food allocated from Feeding America’s headquarters rose by over 35 percent, to the delight of volunteers and donors.
Teytelboym’s very good, short account is working off a longer, more detailed paper by Canice Prendergast, The Allocation of Food to Food Banks.
Canice’s paper would be a great teaching tool in an intermediate or graduate micro economics class. Pair it with Hayek’s The Use of Knowledge in Society. Under the earlier centralized system, Feeding America didn’t know when a food bank was out of refrigerator space or which food banks had hot dogs but wanted hot dog buns and which the reverse–under the market system this information, which Hayek called “knowledge of the particular circumstances of time and place” is used and as a result less food is wasted and the food is used to satisfy more urgent needs.
The Feeding America auction system is also the best illustration that I know of the second fundamental theorem of welfare economics.
Even monetary economics comes into play. Feeding America created a new currency and thus had to deal with the problem of the aggregate money supply. How should the supply of shares be determined so that relative prices were free to change but the price level would remain relatively stable? How could the baby-sitting co-op problem be avoided? Scott Sumner will be disappointed to learn that they choose pound targeting rather than nominal-pound targeting but some of the key issues of monetary economics are present even in this simple economy.
The choice channel for low real interest rates
There is a new NBER working paper by Iachan, Nenov, and Simsek on the question of why short-term real rates are so low. Their model is simple: the cost of financial intermediation is falling, and furthermore portfolio customization is much easier these days. Investors can buy many more distinct assets, and so they are more likely to find favorites. In general portfolio investments go up and asset prices go up, but yields on the low-risk assets go down. The more you can customize, the more assets you wish to buy, and as part of general portfolio offset/construction, the more of the risk-free asset you wish to hold as part of your efficient diversification strategy.
I think of it this way: the more easily you are able to collect beloved artworks, the less risk-sharing you are doing, and the more you will invest in some kinds of safety as a risk offset.
Pretty neat, we’ll see how it stands up (does it predict the behavior of real investment as well? and what does it imply for the predictability of returns?).
The authors, by the way, are claiming only that this is a contributing factor to low rates on low-risk assets, not the entire answer. And note that in their model, unlike in standard accounts, falling risk need not cause the short-run rate to rise again. Their model also predicts that falling securitization leads people to invest more in the very safest assets, causing those yields to decline further; that is consistent with the post-2008 world.
Greater market participation, taken alone, does decrease the risk-free rate in the model. And arguably greater market participation came along in the early 1980s, more or less when risk-free rates started to fall.
So how do you get out of a liquidity trap? Well, if the trap is not benign, either restrict portfolio customization or facilitate securitization, in other words enabling a greater number of secure intermediate assets. Who would have thought?
File under “Don’t think you understand the real interest rate.“
Why are short-term real interest rates so persistently negative these days?
Low productivity will get rates low but not consistently negative. Why might they be negative is a question raised by Brad DeLong and also Paul Krugman, in response to my earlier post about the natural rate of interest.
The most obvious answer is “risk,” but unfortunately that is directly contrary to the data. The domestic and global economies have become much less risky since 2008-2009, and yet if anything negative real rates for safe short term assets seem all the more ensconced.
VIX volatility indicators are down (admittedly there is a spike back up since August, but that is not going to do the trick, try the ten-year series too), consumer confidence is back up, and so are business confidence indicators. The TED spread, Krugman’s own previously favored index of extreme volatility, has been way down for years. The eurozone crisis of 2011 has passed, at least for the time being. Some of the emerging economies aside, most market prices are signaling low risk. So it is strange to invoke high risk to explain current asset prices, when the relevant prices and yields do not seem to be moving with that risk. If it is indeed risk, it is risk of a kind which we do not know how to measure or perhaps even conceptualize.
The other hypotheses are interesting but unproven, let’s take a look:
1. The Fed. There is a well-known liquidity effect on short-term real rates, but it is usually pretty small. Plus German real rates were negative well before the ECB started its QE. If there is something here, it remains to be shown.
2. Growing corporate demands to hold cash. This is a secular long-run trend, and most corporations wish to hold safe assets for agency reasons, and that will depress rates of return on those assets. Maybe there is something here, but again the connection remains to be shown. But do read Richard Koo from 2004 (pdf) and also see Ed Conard’s book, which discusses why cross-border investment tends to “go safe.”
3. Growing legal and institutional requirements for T-Bills as collateral. I have played around with this hypothesis, but still its relevance remains to be demonstrated empirically. Furthermore commercial paper rates may be too low, and that gap too small, for this to be a major factor.
4. CPI mismeasurement. Maybe the world is seeing more deflation than we are measuring, and short rates aren’t negative at all, as Arnold Kling has suggested. I’m not myself convinced, but this list is a survey, not a summary of my opinion.
5. Other???
Given those options, it seems to me highly premature to assume we know what is going on with short-term negative real rates. And it is all the more premature to imagine that a “more negative” set of rates is a solution to our remaining macro problems. I also am not sure which of the above factors should count as “natural” or “artificial” determinants of rates, so again I find it wiser to not build in those concepts as part of one’s opening terminological gambits. Most generally, if someone is telling you that the answer to a question about real interest rates is “simple,” they are likely wrong. Especially these days.
Addendum: You’ll find various perspectives on negative real rates here.
Second addendum: This is not my main point for today, but I consider all of the above further reason for monetary policy to focus on ngdp rather than interest rates.