Category: Uncategorized
Assorted links
1. A new paper on Japanese monetary policy and why it didn’t work better (pdf).
2. Markets in everything (disgusting).
3. Bob Frank summarizes his new book on Darwin > Smith.
4. How is tennis spin changing? And how much are the chess pieces really worth?
5. Sending children through the mail (not the worst thing we do with them).
Assorted links
1. Splendid Charles Mann review of Hugh Thomas, a real zinger.
2. Is it illegal for a customer to write down prices in a store?
3. Trade politics in Middle Earth.
4. New book: Timothy Besley and Torsten Persson, Pillars of Prosperity: The Political Economics of Development Clusters, web page for the book is here.
5. How some regions are successfully reforming education.
6. Are autistics more likely to be atheists and agnostics (pdf)?
The perspective of the statesman and the perspective of the blogger (or scholar)
Some of you have asked me what I think of the concerted central bank effort to flood European banks with dollars. Ed Harrison noted the Fed is playing it down (no press release, perhaps a fear of treason charges), I believe Roubini viewed it as a hidden forex move.
I find it a striking dilemma and here is why. The blogger in me thinks: “This just postpones all the major decisions. Once the loans are up the banks still will be strapped, and the longer you wait to resolve financial crises, the more they will cost. There is no eurobond and no rapid economic growth at the end of that tunnel.”
If I were Trichet, or some other involved statesman, I would have done what was done, albeit sooner. The statesman in me would think: “This just postpones all the major decisions. But I can’t send everyone to their doom just yet. Maybe there is some way I am wrong and a month or two from now things will look different and we can make another decision then.”
I am never sure how to reconcile these two perspectives. Of course, in real life I am a blogger and not a statesman, for good reasons I might add.
In the meantime, the banks are lobbying the BRICS.
Assorted links
Demystifying (mystifying?) small business
In BPEA, from Erik Hurst and Benjamin Wild Pugsley (pdf):
In this paper, we show that substantial differences exists among U.S. small businesses owners with respect to their ex-ante expectations of future performance, their ex-ante desire for future growth, and their initial motives for starting a business. Specifically, using new data that samples early stage entrepreneurs just prior to business start up, we show that few small businesses intend to bring a new idea to market. Instead, most intend to provide an existing service to an existing customer base. Further, using the same data, we find that most small businesses have little desire to grow big or to innovate in any observable way. We show that such behavior is consistent with the industry characteristics of the majority of small businesses, which are concentrated among skilled craftsmen, lawyers, real estate agents, doctors, small shopkeepers, and restaurateurs. Lastly, we show non pecuniary benefits (being one’s own boss, having flexibility of hours, etc.) play a first-order role in the business formation decision. We then discuss how our findings suggest that the importance of entrepreneurial talent, entrepreneurial luck, and financial frictions in explaining the firm size distribution may be overstated. We conclude by discussing the potential policy implications of our findings.
Assorted links
2. “This town lacks for nothing…”: automatic stabilizers in Italy, austerity edition.
3. The only industry in South Sudan.
4. Free Nollywood streaming on-line.
5. Almost three-quarters of the London rioters appearing in court already have had criminal convictions. “Those with criminal records have an average of 15 offences each.”
6. Now everything is super-correlated, super scary.
My favorite things South Carolina
This is a week belated but now I am in New York so here goes:
1. Music: James Brown was born in the state; my favorite James Brown song is Bewildered. Reverend Gary Davis is associated with North Carolina but he too was born in the state; try Sally Where’d You Get Your Liquor From? My favorite Dizzy Gillespie album is Dizzy’s Big 4.
2. Comedian: I’ve enjoyed a few clips of Stephen Colbert, though I do not pretend to have a good sense of his average quality.
3. Artist: Jasper Johns, though Georgia claims him too.
4. Political theorist: John Calhoun was brilliant, despite his repugnance on a number of obvious dimensions.
5. Federal Reserve chairman: Guess.
I can’t say I like Robert Jordan or Andrew Jackson or John Watson or John Edwards or Jesse Jackson. My father loved Barton MacLane but he never much registered with me.
This list is so thin I must be failing and forgetting people. I feel that many movies have been set in Charleston, or other parts of the state, but I can’t think of one of them, much less a good one. Nonetheless the peaks on the above list are high.
Assorted links
2. One year anniversary of IHS Kosmos video, podcast, and informational site. Here is my short video on academic publishing.
3. Are puffins a cyclical asset, attracted by undervalued real exchange rates? Sadly this piece never considers an economic explanation for the phenomenon under study.
4. Is Japanese health care falling apart?
5. Alesina and Giavazzi on Italy.
6. Who are the world’s biggest employers?
7. Time inconsistent budget agreements.
8. Be very careful comparing poverty line changes over time.
Assorted links
1. No Belgian government could turn out to be a problem.
2. The excellent Erik Angner will join GMU.
3. Dean and Cindy Karlan start blogging their year of travel and homeschooling.
4. How Slovenia switched from the former Yugoslav currency to the Tolar (pdf).
5. Lots of early articles now free access on JSTOR.
6. Uh-oh.
Assorted links
1. Business investment as a key to recovery, from Greg Mankiw. Lots of important truth in this piece.
2. Dalit classical liberalism, and here (pdf).
3. Robert Barro’s recipe for change.
4. Good analysis of how the second Greek bailout relates to the first, cynical piece. Here is an intelligent piece on doing the unthinkable for Europe.
5. Raghuram Rajan argues against a dose of inflation. And surprise as a reason to drink cheap wine, via The Browser.
Assorted links
1. Property value calculator for the board game Monopoly.
3. Excellent piece by Stephen King on our current economic predicament, highly recommended.
4. In defense of Georgia Work$.
5. How to get out of our mess, by Jim Manzi. Notice the emphasis on wealth creation. And are scientists well-suited to be entrepreneurs?
Assorted links
1. What’s not getting cheaper (best charts on the second page of the link).
3. U.S. individual stock correlations are running fearfully high.
4. New book on the economics of sex.
5. Alex on the Obama jobs bill, Bryan on the Obama jobs bill, I’ve been traveling.
Assorted links
A further note on the broken windows fallacy
I’d like to second the points by Alex and also Bob Murphy. An additional factor is that when a window breaks (never mind ongoing regulations and wealth taxes, which as Alex notes will be worse) wealth goes down. Keynesians tend to overestimate the importance of flows and underestimate the importance of stocks and sometimes they neglect the latter altogether. Just as there is a spending multiplier, there is also a multiplier from changes in wealth. For instance declines in perceived wealth will cause people to spend less. The Keynesian AD gains from a broken window have to stem from the difference between the spending multiplier and the wealth multiplier. Under the permanent income hypothesis, there’s not a lot of daylight here. Furthermore the perceived wealth decline, even if it doesn’t lead to immediate one-to-one reductions in spending, can persist over several periods. Granted, PIH is not exactly correct, but still the net impact of stimulus on current employment and income won’t be that large because of the negative wealth effects. Fiscal policy remains a weak pill. The declines in housing prices in recent years really have taken their toll on AD so the wealth multiplier is not to be ignored. The notion that a stable and sustainable restoration of AD actually requires some increases in perceived wealth is one of the most underrated ideas among today’s Keynesians.
I would make a few more general points:
1. It is possible that a broken window may increase employment and output and under sufficiently unusual assumptions it may also increase welfare. But it’s not likely. I think the point, showing the possibility of this exceptional case, should be a footnote in an intermediate macro text but no more.
2. The importance of wealth creation for human well-being is the more important lesson, by far, from economics. There are plenty of productive investments by which government can improve matters, starting with fixing escalators in the DC Metro system, not breaking them! Ultimately, in the Hansonian sense, the debate is about how much we should glorify wealth creators and in this regard Hazlitt not Keynes gets it right.
3. A more directly practical point is that tighter ozone regulation will spur some hiring but probably lead to labor market crowding out, rather than targeting the current unemployed. I don’t know if those regulations are a good idea or not but I do think the case for them has to stand on its own two feet and not on Keynesian principles.
Did Ron Paul call for bimetallism?
I didn’t watch the debate, but I see talk of Paul and bimetallism on my Twitter feed. Note that bimetallism is better than a pure gold standard, as it is less likely to bring dangerous deflation. Under bimetallism, you fix a gold-silver parity. Eventually the equilibrium price for gold and silver, vis-a-vis each other, will deviate from that parity. People will hoard the legally undervalued money, and the legally overvalued money will circulate as a medium of exchange (“bad money drives out good,” as they used to say). Think of it as randomizing your medium of account: you get whichever medium of account is more inflationary (less deflationary), gold or silver.
Here is Milton Friedman defending bimetallism.
Every now and then some joker comes along and wants to legally fix the price of forty different commodities and use that as money, etc. Think of it as another path to stimulus and maybe quite a credible one!