Category: Uncategorized
Was Fischer Black right about monetary policy?
That is the topic of my latest Bloomberg column:
Paul Krugman has argued that there was not high inflation after 2008 because the U.S. economy was in a liquidity trap. Black’s rejoinder to the Keynesians was a subtle one: We are always in a liquidity trap. Since banks can bid for reserves, and reserves can pass in and out of banks freely, the net value of additional bank reserves must be equal to other uses of the funds. The monetary expansion of the U.S. Federal Reserve, which operates through banks, is thus like swapping two nickels for a dime. Whether or not nominal interest rates are zero, after the swap banks can still move back to whichever portfolio they wished to hold. Thus any Fed actions will prove neutral if that is what the banks, and the economy as a whole, desire.
And the accompanying footnote?
- Both market monetarists and Keynesians admit that in a traditional liquidity trap, monetary policy still can be effective if the Fed can make credible promises to inflate. I regard this as a substantive concession to the Fischer Black view, even if it is not usually presented as such.
And:
I can’t quite bring myself around to the Fischer Black view on inflation. I was brought up believing in a well-defined quantity of money that causally determines the price level, and I still see central banks commanding a lot of attention from the markets. Nonetheless, as central banks rely more on market expectations to orchestrate macroeconomic outcomes, I no longer see the Fischer Black views as so far from the current mainstream.
Black formulated his basic arguments to cover open market operations, as in his time such fine practices as tri-party repo did not have their current import. What exactly does the Black argument look like for current times? What are the exact mechanisms for “the market undoes the actions of the central bank” and how plausible are they?
Wednesday assorted links
1. Which are the billionaires that Democrats like?
2. “Thousands Pledge To Egg Jeff Bezos’s Mega-Yacht As It Passes Through Rotterdam Bridge.”
3. Award winners from new Mercatus project on pluralism and civil society, with an EV-like application structure (but not selected by me).
5. My podcast excerpt with Joe Lonsdale. And for the full output YouTube: https://www.youtube.com/watch?v=rnLPwI9taYA
6. Chatham University reinstitutes tenure after having abolished it.
Progresa after 20 Years
Remember the Mexican cash transfer program, sometimes used to support education? Some new results are in, and the program is looking pretty good:
In 1997, the Mexican government designed the conditional cash transfer program Progresa, which became the
worldwide model of a new approach to social programs, simultaneously targeting human capital accumulation
and poverty reduction. A large literature has documented the short and medium-term impacts of the Mexican
program and its successors in other countries. Using Progresa’s experimental evaluation design originally rolled out in 1997-2000, and a tracking survey conducted 20 years later, this paper studies the differential long-termimpacts of exposure to Progresa. We focus on two cohorts of children: i) those that during the period of differential exposure were in-utero or in the first years of life, and ii) those who during the period of differential exposure were transitioning from primary to secondary school. Results for the early childhood cohort, 18–20-year-old at endline, shows that differential exposure to Progresa during the early years led to positive impacts on educational attainment and labor income expectations. This constitutes unique long-term evidence on the returns of an at-scale intervention on investments in human capital during the first 1000 days of life. Results for the school cohort – in their early 30s at endline – show that the short-term impacts of differential exposure to Progresa on schooling were sustained in the long-run and manifested themselves in larger labor incomes, more geographical mobility including through international migration, and later family formation.
Here is the full paper by M. Caridad Araujo and Karen Macours from Poverty Action Lab.
What should I ask Thomas Piketty?
I will be doing a Conversation with him. So what should I ask?
Do note he has a new book coming out A Brief History of Equality.
Tuesday assorted links
1. Bob Solow making fun of Kydland and Prescott, via Dr. Ruth.
3. Craig Palsson, economics, and going viral on YouTube and TikTok.
4. AI and machine learning in economics.
5. Was the “Russian flu” in the late 19th century a rogue coronavirus? (NYT)
6. Twitter AMA with Marc Andreessen.
7. New Cecil Taylor jazz (NYT).
A blow to Canadian rule of law
Canada’s prime minister Justin Trudeau has invoked emergency powers in an attempt to quell protests against mandatory Covid-19 vaccinations that continue to grip the nation’s capital, drawing the ire of some provincial leaders.
Trudeau pledged at a press conference on Monday that use of the powers under the Emergencies Act — which gives the federal government broad authority, including the ability to prohibit public assembly and travel — “will be time-limited, geographically targeted, as well as reasonable and proportionate to the threats they are meant to address”. He also said the military would not be called in to deal with blockades.
Chrystia Freeland, finance minister, said Canadian banks and other financial service providers will be able to immediately freeze or suspend accounts without a court order if they are being used to fund blockades. She also warned companies that authorities will freeze their corporate accounts and suspend insurance if their trucks are being used in the protests.
Here is more from the FT. Should not the Canadian police be able to solve this issue on their own?
Monday assorted links
TechCrunch interviews me about crypto
TC is the interviewer, TechCrunch (John Biggs), not I, here is one bit:
TC: Folks liken this tech to cargo cults. You build the trappings of an economic system in hopes that one magically appears. Is this accurate?
Cowen: I think the crypto people are super, super smart on average. They’re smarter than economists on average. And they have skin in the game, right?
TC: Does the profit motive color the experience?
Cowen: Well, people in crypto want to build systems that work. It’s fair for all of us to have uncertainty about how that will go. But the price of crypto assets have been pretty high for a while now and they’ve taken big hits and come back. So I don’t think you can now say it’s just a bubble. So what exactly it would be is still up for grabs, but I think the bubble view is increasingly hard to maintain.
TC: Are we assuming this stuff is here to stay? That bitcoin won’t disappear in a decade?
Cowen: That is strongly my belief. Now, there’s a lot of other cryptoassets and I think most of those will disappear. There were many social media companies fifteen years ago also and many are not around but obviously social media is very much a thing.
TC: What’s your take on decentralized, from an economic perspective?
Cowen: I think we will end up with both centralized crypto and decentralized crypto, and they will serve quite different functions. So, obviously, there were advantages to centralized systems. You can change the more quickly, more readily. There’s someone to manage them, someone to oversee them. But you also pile up costs. So I think both will prove robust. But again, I would readily admit that still up for grabs.
There is much more at the link.
Bram Stoker, Dracula, and Progress Studies
The Dracula novel is of course very famous, but it is less well known that it was, among other things, a salvo in the direction of what we now call Progress Studies. Here are a few points of relevance for understanding Bram Stoker and his writings and views:
1. Stoker was Anglo-Irish and favored the late 19th century industrialization of Belfast as a model for Ireland more generally. He also was enamored with the course of progress in the United States, and he wrote a pamphlet about his visit.
2. From Wikipedia:
He was a strong supporter of the Liberal Party and took a keen interest in Irish affairs. As a “philosophical home ruler”, he supported Home Rule for Ireland brought about by peaceful means. He remained an ardent monarchist who believed that Ireland should remain within the British Empire, an entity that he saw as a force for good. He was an admirer of Prime Minister William Ewart Gladstone, whom he knew personally, and supported his plans for Ireland.Stoker believed in progress and took a keen interest in science and science-based medicine.
3. The novel Dracula contrasts the backward world of Transylvania with the advanced world of London, and it shows the vampire cannot survive in the latter. The Count is beaten back by Dr. Van Helsing, who uses science to defeat him and who serves as a stand-in for Stoker and is the de facto hero of the story.
4. One core message of the novel is “Ireland had better develop economically, otherwise we will end up like a bunch of feudal peasants, holding up crosses to fend off evil, rapacious landowners.” At the time, the prominent uses of crosses was associated with Irish Catholicism. And is there a more Irish villain than the absentee landlord, namely Dracula? Dracula is also the kind of warrior nobleman who, coming from England, took over Ireland.
5. In the novel, science and commerce have the potential to defeat underdevelopment. Stoker’s portrait of Transylvania, most prominent in the opening sections of the novel, also suggests that “underdevelopment is a state of mind.” And it is correlated with feuding sects and clans, again a reference to the Ireland of his time, at least as he understood Catholic Ireland. Here is more on Stoker’s views on economic development and modernization for both Ireland and the Balkans.
6. Stoker was obsessed with “rationalizing” (in the Weberian sense) the employment relation and also the bureaucracy His first non-fiction work was “The Duties of Clerks of Petty Sessions.” Progress was more generally a recurring theme in his non-fiction writings, for instance “The Necessity of Political Honesty.” He called for an Ireland of commerce, education, and without “warring feuds.”
7. For Stoker, sexual repression is needed to further societal progress and economic development, and in this regard Stoker anticipates Freud. Dracula abides by most laws and norms, except the sexual/cannibalistic ones. Dracula and Lucy, who give in to their individual desires, end up as the big losers. For the others, societal order is restored, and the lurid sexuality that pervades the book is dampened by the restoration of order.
8. Christ and Dracula are mirror opposites (the stake, the cross, resurrection at dawn rather than sunset, the role of blood drinking reversed, the preaching of immortality in opposite ways, the inversion of who sacrifices for whom, and more). A proper societal outcome is obtained when these two opposites end up neutralizing each other. Stoker’s vision of progress is fundamentally secular. (See Clyde Leatherdale on all this.)
9. From Hollis Robbins: “Britain’s economic prosperity in the nineteenth century was largely dependent on the adoption of international standards such as Greenwich Mean Time and the universal day, which ensured smooth coordination for trade, legal transactions, railroad travel, and mail delivery. Dracula, whose powers are governed by the sun and the moon rather than clocks and calendars, works to destabilize social coordination. His objective is not only literally to “fatten on the blood of the living,”6 but also more broadly to suck the lifeblood of a thriving commercial economy at the dawn of a global age. Under Dracula’s spell, humans forget the time, becoming listless, unproductive, and indifferent to social convention. At heart, the fundamental battle in Stoker’s Dracula is a death struggle between standard time as an institutional basis for world markets and planetary time governing a primitive, superstitious existence.”
10. In an interview Stoker once said: “I suppose that every book of the kind must contain some lesson, but I prefer that readers should find it out for themselves.” There are numerous ways to take that remark, not just what I am suggesting.
Sunday assorted links
1. Is the gene-sequencing company Illumina a monopoly? (NYT)
2. “In short: the more one’s intellectual contributions are defined by strengths, where those strengths also essentially depend on a broad base, the more your regional background is likely to shape your intellectual contributions.” More Nate Meyvis. And Nate on the value of T-shaped reading plans.
4. People on Twitter are using more political identifiers than before. And more yet if you count pronouns.
The Room
Has to be seen not to be believed.
Hat tip: Kottke via Joel Selanikio.
The Puzzle of Falling US Birth Rates since the Great Recession
That is a new JEP piece by Melissa S. Kearney, Phillip B. Levine, and Luke Pardue. The piece, while not easily summarized, is interesting throughout. Here is one bit:
The decline in birth rates has been widespread across the country. Birth rates fell in every state over this period, except for North Dakota. One possible explanation for the increase in North Dakota birth rates is the fracking boom that occurred in this state over those years, which has been shown in other research to increase the birth rate (Kearney and Wilson 2018). But as can be readily seen in the map, there is substantial variation in the extent of the decline across places.
Births fell the most in the South, in the West, and in the Southwestern and Mountain states. However, the set of states that experienced larger declines is varied, also including some Midwestern and New England states, notably Connecticut, Illinois, and Massachusetts. Births fell the most in the Southwestern and Western states. The sizable Hispanic population in much of this region is consistent with the particularly large decline in births among Hispanic women, driven by a decline in births among both native and foreign-born Mexicans. The fact that other states with smaller shares of Hispanic residents (like Georgia and Oregon) also experienced large declines, though, further clarifies the broad-based nature of the decline.
And this:
The percentage of sexually active women who report using long-acting reversible contraception (LARC) increased from 5.5 percent in 2004 to 10.7 in 2017 and could have contributed to declining birth rates. The simple correlation, though, between the percentage point change in LARC usage in a state and the change in birth rates is wrong-signed (that is, positive), albeit close to zero. This suggests that take-up of LARCs has likely not played an important role in explaining the decline in the aggregate birth rate over this period.
Overall it is interesting how many factors do not seem to matter much.
From the comments, on Putin and Russia
Saturday assorted links
1. Kelsey Piper on Progress Studies.
2. Was public health misinformation less of a problem in the past? (Bloomberg)
3. The Octopus plan.
4. Update on Slate (NYT).
5. The FDA still is not getting this stuff right. And Emily Oster on the same. And some game-theoretic analysis.
What does the Truckers Convoy want?
Freedom? Well, it depends what you mean by that concept. Here is one relevant bit from from The National Post, hardly a left-wing rag:
“Freedom convoy” supporters convinced that the Governor General can dissolve Parliament on a whim have “absolutely inundated” Rideau Hall with calls over the past week, National Post has learned…
The callers are participants and supporters of the so-called “freedom convoy” that has been occupying the streets around Parliament for a week, demanding that the Trudeau government put an end to all public heath measures (even though the majority of them are under the provincial government’s purview.)
Last week, organizers also published a manifesto billed a “memorandum of understanding” demanding that the Governor General and the Senate unite to force all levels of government to end any COVID-19 measures and vaccine passports, and re-instate all workers laid off due to vaccine requirements.
That has seemingly pushed protesters and their supporters to flood Rideau Hall’s phone and email lines demanding that Mary Simon act, going as far as demanding that she dissolve government and remove Prime Minister Justin Trudeau from power…
It’s useless for protesters to be “calling Rideau Hall or pressuring senators to do something, that’s not how things work,” he added. “It’s a democratic system, and neither the senate nor the Governor General are elected, so they don’t have the democratic legitimacy” to dissolve government.
Originally those memorandum demands came from a group called Canada Unity, a major force behind the Convoy. Canada Unity has since withdrawn their proposals for a non-democratic transfer of power. Good for them! Still, “we withdraw the demands for an anti-democratic coup d’etat that we were promoting a few days ago” is hardly a reason for enthusiastic affiliation.
By the way, here are the responsibilities of the Canadian Governor General.
I’m not suggesting that all of the Convoy members have this particular political vision (though 320,000 signatures on the memorandum were reported), or even that those promoting this idea necessarily “mean it.” Maybe for many of them it is just a way to stir up trouble. Still, you can take this as another sign of “incipient knuckleheadism” in the movement.
By the way, I am myself opposed to the idea of governmental mandates for Covid-19 vaccines. (In part because I feared exactly this kind of backlash, but for liberty reasons too.) But it is very far from the worst governmental mandate the Canadians have!
Do you know what those people in the trucks actually should do? Go get vaccinated.
A related group for a while shut down the Ambassador Bridge, which carries 30% of the U.S.-Canada trade. The Convoy and associated movements are doing a great deal to restrict the free movement of goods and of people, hardly my idea of freedom either.
So I am happy to double down on my previous post.
That is from J. Barkley Rosser, who has longstanding connections with Russia and the USSR.