Category: Uncategorized
Assorted links
1. More on Milton Friedman and the Great Depression.
3. I actually want one of these.
4. Most consecutive yoga positions on a motorcycle.
5. Daytime raves, the culture that is Sweden, hat tip Caleb.
Me on Twitter
Recently accepted wage cut for new project, ngdp will go up not down. I am helping to manufacture ngdp, people get with the program.
What did *you* do for nominal gdp today? Just asking.
Non-Twitter note: If my action contributes to a downward spiral of ngdp, wages, and prices, I will be deeply sorry. Apologies in advance.
Assorted links
Why is unemployment so high in South Africa?
Ryan Cooper writes to me:
Hey Tyler, possible blog post topic: I’m wondering how you would explain the situation in South Africa (or other similar countries) with stupendous persistent unemployment–SA has been above 20% since 2000: http://www.tradingeconomics.com/south-africa/unemployment-rate
A few factors I imagine are important:
1) The education system is totally broken in a lot of places. As in, 12th graders can neither read nor write in any language nor figure out 3×3 in their heads.
2) Unions are crazy strong, and have been driving up wages like gangbusters, particularly in the public sector.
3) Minimum wage laws are stringent and have actually led to worker protests: http://www.nytimes.com/2010/09/27/world/africa/27safrica.html?pagewanted=all
4) Inflation hasn’t been TOO bad recently (~6%), but has seen spikes to almost 14 percent not long ago: http://www.tradingeconomics.com/south-africa/inflation-cpi
5) There’s a highly developed sector. On average, whites are far richer than blacks.6) Crime and inequality are incredibly bad.
7) The ANC has won every election in a landslide and is strongly allied with the unions.So how does it tie together? Lots of poorly-educated ZMP layabouts? Wages too high to start sweatshop-style development? Razor wire + electric fence + security guard costs deterring investment? The results of generations of systematic oppression and denial of education? All of the above, plus some?
Just trying to iron out a coherent story. I was a Peace Corps volunteer for two years there and I’m slowly building up my economics knowledge; this question has always fascinated me.
Assorted links
1. One constructive suggestion for the eurozone; there should be more of this. This is an actual situation requiring actual solutions, not a pond for fighting ideological battles.
2. My favorite Desmond Dekker compilation, and the fiscal effects of the Federal Reserve (significant).
3. Ask Cowen anything (on food), via Andrew Sullivan.
6. The rate of U.S. household formation seems to be rising again.
Assorted links
Claims about Latin America
More than two-thirds of Brazilians are likely to count themselves as middle class by 2030. In the same year, central and Latin America will have as many middle class consumers as North America.
Here is more. Of course that is a projection rather than a fact.
The cultures that is Europe
Many of the Spaniards say the work environment in Germany takes getting used to, with Germans far more direct than Spanish people and much quieter. No one makes personal calls during business hours, for instance. But the work day is much shorter.
They were surprised that they were expected to greet co-workers each morning with formal handshakes and to call colleagues “Herr” and “Frau” (Mr. and Ms.). Impromptu hallway conversations over work issues were cut off by Germans suggesting it would be more appropriate to schedule a formal meeting.
The German fondness for order, often joked about, has proved true, said Carlos Baixeras, 30, an engineer who started working near Frankfurt 18 months ago. “There are rules for everything,” he said. “There’s a trash police.”
There is also this demographic point:
Last year, though, even while deaths once again exceeded births, the German population grew for the first time since 2002, thanks to a net immigration of 240,000 people, nearly double the 128,000 net gain in 2010. Countries like Poland and Romania sent the most, but German government statistics showed thousands more coming from the crisis-stricken southern nations.
The full story is here.
Note that highly productive economic activity seems to be concentrating itself in the United States, in a smaller number of locations. Perhaps the same is happening in Europe too. That’s hardly Spain’s biggest problem right now, and migration can in some ways be a blessing for an economy with high unemployment. Still, when the debt overhang is so high, this is troubling news too.
From the comments, on downturns, fiscal policy, and multiple equilibria
We were less wealthy than we thought we were.
Call me an AD-denier, but I still think the basic issue here is that you can’t consume more than you produce. Production exists to satisfy demand, but at the same time demand is limited by production. We had a long boom built on the notion we could boost demand and thus supply and thus demand again in a virtuous cycle, and now we are seeing the cycle work in reverse as demand/supply seek their natural levels.
One way to justify this model is in terms of multiple equilibria, and that we have been walking (bouncing our heads?) back down the escalator. Arguably for the United States this downward bouncing is over. Along the way we are sending signals about the quality of our institutions and thus shaping the course of the future.
In this model there is still a useful role for fiscal policy. For one thing, fiscal policy can smooth that ride down the escalator, by spreading the losses out over time, at the cost of future debt of course. This may be needed if only to make the political economy of decline less bitter; see Spain and Greece. Nonetheless fiscal policy cannot make up for the output losses at will. We are not standing in an IS-LM diagram where the difference between “what we have” and “what we could have” is thwarted only by some supposed Austerians who won’t shift the proper curve and yet somehow have taken over some of the biggest spending social democratic, insider-leaning governments in world history. The IS-LM approach fits in nicely with the view that policy improvement is all about yakking about the obstructionists. Instead, policy is also about rebuilding trust, not just maintaining ngdp on a decent keel.
There is another possible role for fiscal policy, as there usually is in models of multiple equilibria. If you ran some super-duper fiscal policy, and invented the flying car, a cure for cancer, and other marvels, the market might suddenly latch its expectations on to a much more positive scenario. There could be a significant upward bounce to a much higher equilibrium of output and employment. In any case, the quality of fiscal policy matters, and Keynesian ditch digging probably doesn’t do much for inferences about institutional quality and for the selection of multiple equilibria. “Spend the money, anywhere” is in my view a deeply pernicious attitude, somewhat akin to thinking you can create a good NBA team, with a strong ethic for quality and work, by tanking for better draft picks at the end of every season. But no, the internal ethic matters and cannot be first destroyed and then recreated at will. Good teams don’t usually work that way, and neither do good fiscal policies.
Right now we Americans are building back up to better equilibria, slowly, by showing that our economic institutions are not totally crummy. This process can take a good while, but in fact our recovery is going better than many people believe. The eurozone is far — very far — from being on that kind of rebuilding track.
There is plenty of talk about various commentators don’t understand the lessons of Econ 101. There is a reason why we teach classes beyond 101, and why we spend so much time studying institutions and the theory and empirics of public choice.
Assorted links
1. Scott Sumner on his economic method (with a passing mention of ngdp).
3. How much does deleveraging matter?: a U.S.-UK comparison. And is the UK price behavior just due to the VAT?
4. Man’s best friend? Maybe Argentina can export these dogs to Spain soon, and what’s all this about the Michael Jensen/Werner Erhard connection?
Assorted links
1. From the Swiss anti-immigration movement.
2. Caplan on Cowen on government growth.
3. Interfluidity on the UK, and a response from Richard Williamson, who notes the UK has not really started deleveraging, and from him yet some more.
Is Africa the next big food trend?
Josh Schonwald says yes:
One night, after reading about sugar-cane drinks and fresh lobster skewers, I started cooking. I made a spicy okra salad, grilled shrimp piri piri and steamed vanilla pudding. The next night, Zanzibari pizzas—chapati stuffed with eggs, meat and spices. Later, I had a Mozambican seafood stew with Senegalese-style jollof rice. I started seeing it.
…As fast-growing African nations become more prosperous, they will develop something that is rare right now—a middle class with disposable time and income. Poverty, hunger, war and sickness are why Africans—from Cameroon to Mozambique to Namibia to Congo—have been unable to develop a baobab-infused vinaigrette.
I very much enjoyed Josh’s new food book The Taste of Tomorrow: Dispatches from the Future of Food, and I can recommend it for its pro-science stance, its interesting speculations, and its excellent reporting. My prediction, by the way, based on demographics, is that the next big food trend will be more from the Latino cuisines, fused with American ideas to appeal to the (North) American palate. Chipotle is but one step in this direction. Sadly, in my view most Americans have room for only a few foreign cuisines in their lives. Thai and Indian are knocking on the door of Mexican and Chinese (all in their American versions), but I do not see new contenders for that throne.
Amy Finkelstein wins the John Bates Clark award
Sorry to be late on this one, but here is the AEA take on her contributions, many of which involve health care economics and the study of health insurance. I am not sure she was considered an obvious front-runner from the beginning, but in my view it is an excellent pick (without intending any slight to the billions who were passed over). She is trying to understand the real world, and she is showing that policy economics should not have lower status in academia. Obviously her major areas of study are topical today.
She does, by the way, have several previous mentions on MR and in retrospect she should have more. Sarah Kliff adds a bit more.
Assorted links
1. Expressive driverless cars.
2. Open letter to Peter Beinart.
3. Burgess reviews a book on Kripke.
4. More Neal Stephenson on innovation.
5. The handstand in the water, and the flip and hoops shot, best is the slow motion take, and finally high wind in Bilbao, do you really need to see the Guggenheim?
More from Richard Williamson on the UK
Right now, unemployment remains at over 8% in the UK while real wages are lower than they were 7 years ago and are continuing to fall. Yes, you read that correctly. Which immediately leads one to ask: on this explanation of a recession as expounded by Karl, how much further do real wages have to fall to eliminate disequilibrium unemployment?
…I am finding the aggregate demand narrative an increasingly unsatisfying explanation of all that is happening in the British economy. Supply-side suffering is suffering too, and I think we need to take very seriously the chance that it is happening.
Here is his follow-up post. Do note there is no deflationary downward spiral in the UK. In a funny way, it is some of the more extreme Keynesian views which lead one to the most extreme stagnationist conclusions. I know, fiscal policy, fiscal policy, fiscal policy. But it can’t employ everyone forever. What does the level of real wages need to be?