Category: Uncategorized
Assorted links
1. Price collapse for Japanese watermelon, down to $4,000.
2. In many U.S. counties, life expectancy for women is declining.
4. UFM in Guatemala.
6. Meandering but interesting blog post, culminating in a discussion of “peak attention” and Coasean growth.
From the comments
Albert Ling writes:
How about this: Amy Chua’s method is better in raising successful kids career-wise, at the expense of emotional attachment, family warmth, etc. It’s a trade-off. If you envision your child’s future life to be of economic hardship and misery, maybe it’s a GOOD trade-off (as evidenced by the stricter methods of parenting on poorer societies, and also in the past when being poor really influenced your happiness).
If you already earn more than USD 25,000$ a year (which is the threshold after which income stops correlating positively with happiness), then it’s probably better to be a B.Caplan-style parent. (if your goal is to maximize your child’s total future happiness).
I think the answer is that simple.
Is information technology a general purpose technology?
Here is a 2006 paper by Susanto Basu and John Fernald, relevant to some current debates:
Many people point to information and communications technology (ICT) as the key for understanding the acceleration in productivity in the United States since the mid-1990s. Stories of ICT as a ‘general purpose technology’ suggest that measured TFP should rise in ICT-using sectors (reflecting either unobserved accumulation of intangible organizational capital; spillovers; or both), but with a long lag. Contemporaneously, however, investments in ICT may be associated with lower TFP as resources are diverted to reorganization and learning. We find that U.S. industry results are consistent with GPT stories: the acceleration after the mid-1990s was broadbased—located primarily in ICT-using industries rather than ICT-producing industries. Furthermore, industry TFP accelerations in the 2000s are positively correlated with (appropriately weighted) industry ICT capital growth in the 1990s. Indeed, as GPT stories would suggest, after controlling for past ICT investment, industry TFP accelerations are negatively correlated with increases in ICT usage in the 2000s.
This is further evidence for the view that we are in the preparatory stages of a longer-run boom, that many of the gains have yet to come, and the productivity-enhancing impact of IT so far has been overstated.
Assorted links
Another look at why both AD and AS matter
Often I read blog posts by other economists, using the AD-AS model. The implicit assumption is that there is either too little AD, or too little AS, but the two problems do not and indeed cannot exist together. If the economy is well-described by these two curves, that is indeed the implication: if AD is shifted in too far to the left, how can there be too little AS?
I suggest a slightly more complex model. During the financial crisis the American economy took a big AD hit due to debt overhang, falling asset prices, unemployment, imperfect monetary policy, credit contraction, and several other factors. After the peak of the crisis there were massive layoffs, largely because of these AD problems, toss in an increase in the risk premium and perhaps higher fixed costs of employing people. A lot of the labor market problems from this hit still have not been cleaned up, and furthermore with lower net wealth many of these jobs are never coming back, with or without monetary stimulus.
Now fast forward. These days, the layoffs are no longer so frantic, but the rate of new job creation is slow. Some of the unemployed (not all) could find new work by moving to North Dakota or Australian mining communities, but few of them will do so, mostly for the obvious reasons. They are waiting for good, new jobs in areas they are willing to live in. But slow underlying rates of innovation mean slow job creation and so many of these unemployed continue to wait. It also means a very low quit rate, which we have observed too, because employed workers can’t so easily step into new jobs.
The economy still has a problem with weak AD. The economy also has an ongoing problem from weak AS. Both are true, though you won’t see this if you think those two AD and AS curves sum up the whole picture. Again, it is about the disaggregated aggregate demand.
Thinking even a little bit hard about the derivation of the AD curve (especially in “p space” rather than “p dot space”) should cure one of the tendency to take these models too literally. Note also that most AD-As models are not integrated with growth theory, though the Modern Principles text with Alex is a big exception here.
Here is further simple proof, using seasonal data, that both blades of the scissors matter. Via Matt Yglesias, here is a iscussion of how productivity growth in the recovery — if you could call it that — is lagging behind other U.S. business cycles.
An outline of Austro-Chinese business cycle theory
Investment has indeed grown far faster than GDP. From 2000 to 2010, growth of gross fixed investment averaged 13.3 per cent, while growth of private consumption averaged 7.8 per cent. Over the same period the share of private consumption in GDP collapsed from 46 per cent to a mere 34 per cent, while the share of fixed investment rose from 34 per cent to 46 per cent.
Professor Pettis argues that suppression of wages, huge expansions of cheap credit and a repressed exchange rate were all ways of transferring incomes from households to business and so from consumption to investment. Dwight Perkins of Harvard argued at the China Development Forum that the “incremental capital output ratio” – the amount of capital needed for an extra unit of GDP – rose from 3.7 to one in the 1990s to 4.25 to one in the 2000s. This also suggests that returns have been falling at the margin.If this pattern of growth is to reverse, as the government wishes, the growth of investment must fall well below that of GDP. This is what happened in Japan in the 1990s, with dire results.
Sentences to ponder
So just because health-care benefit costs have been rising, pushing up total employer costs, does not mean that real wages, including benefits have been increasing. And if you take into account that defined benefit pensions were common in the past, whereas they are virtually non-existent in the private sector, then there is no reason to believe that benefits, in real terms, have been increasing. If anything, previous generations received more benefits, but the cost of those benefits, particularly in terms of pension plans and medical plans for retirees, are only being realized now.
Here is more, hat tip goes to Interfluidity.
Assorted links
1. Workers’ share of U.S. national income, over time.
2. Neuroskeptic is now on Twitter.
3. How is Cass Sunstein doing?
4. Indian hangmen: thwarted markets in everything.
A defense of Hungarian economic policies and prospects
It seems that Hungary has climbed out of its slump and it is now growing at 2.5 percent a year, at least during the last quarter. This interesting but self-serving editorial serves up a few reasons why:
We are increasing small- and medium-size businesses’ access to capital through grants and loan programs for product development, and reducing corporate-income taxes for these firms to 10% from 19%—among the lowest in Europe. These businesses are vital to Hungary’s export-driven recovery. As they continue to grow, so will private-sector employment, which in turn will reduce the heavy burden on our welfare system.
We would rather receive the same total tax revenues from a larger number of employers—each paying less tax—and have more employed Hungarians spending their wages and driving consumption. We’ve significantly lifted the tax burden off consumers by slashing the personal income-tax levy to a flat rate of 16%, from a tiered system where the highest rate was 32%.
We are also tackling welfare reform. Our government-run system has been plagued by spiralling costs, systemic abuse and inefficiencies that were exposed by the deteriorating economic conditions after the financial crisis. We believe that any welfare cuts should aim to boost employment and embed a work ethic among Hungarians. So we have reduced unemployment and disability benefits and pharmaceutical subsidies, and are in the process of reducing back the red tape that makes employing workers complicated and expensive.
I would stress caution is interpreting these arguments and note they are from a member of the current government. Luck, positive real shocks (agriculture), and mean reversion are also at work. Still, it is interesting to see that the Hungarian recovery is far outpacing that of the PIIGS countries; Hungary of course is not on the euro and it has avoided wrenching deflation, instead experiencing mild inflation. Furthermore the Hungarians seem to be putting a spending freeze into operation and they are addressing pension liability problems. It is unlikely that is the cause of their recent turnaround, but it hasn’t hindered it either.
All this is true:
Our economy has grown for six consecutive quarters, unemployment levels are falling and the Hungarian forint is one of the world’s strongest-performing currencies this year.
Budapest is now an expensive city, and it no longer makes for a good cheap vacation.
Favorite Hungarian composers
1. Franz Liszt: The “late, serious” pieces are important but I don’t think they are much fun to listen to. I recommend the Transcendental Etudes, performance preferences here. “Funerailles,” played by the young Lazar Berman. “Years of Pilgrimage, the Swiss years,” by Aldo Ciccolini. The Hungarian Rhapsodies, played by Cziffa or Robert Szidon. Many of the opera transcriptions are subtler than they are made out to be, as creative examples of early mash-ups. The B Minor Sonata is a bit too long but Clifford Curzon has a lovely version. The organ music remains undervalued and the instrument well suited the composer’s chromatic tendencies.
2. Bela Bartok: The orchestral music is easier to enjoy live, when the different colors and melodic strands stand out more. Concerto for Orchestra is a good place to start (for a Hungarian conductor try Fritz Reiner) and also Piano Concerto #1, get both Pollini/Abbado and Barenboim/Boulez for contrasting interpretations, both brilliant. The six string quartets, by the Emerson Quartet. The piano sonata by Youri Egorov and “Out of Doors” and “Allegro Barbaro.” The Sonata for Two Pianos and Percussion, by Bartok himself if you wish.
3. Gyorgy Ligeti. My favorite piece is Lux Aeterna but that is best heard in concert, like a lot of choral music. On disc the horn trio works best. The Sony collection volumes are uniformly excellent and perhaps the piano music is the easiest place to start.
Other notable Hungarian composers are Kodaly and Péter Eötvös, sorry that I have not in every case mastered the diacritical marks. Most Kurtag leaves me cold but the Kafka Fragments are one place to start. There are many fine Hungarian film music composers.
The silent ongoing run on Greek banks
The Greek banking system has a relatively low loan-to-deposit ratio of about 120%, well below Irish and Portuguese levels. But over the last year, deposits have fallen by €44 billion, and Greek banks have been shut out of the repo market, the interbank market and bond markets. That has left a €135 billion funding gap, mostly filled by the European Central Bank.
Here is more. Here is a good Irish analysis. And this:
Greece is now the lowest-rated sovereign in the world, having fallen below Ecuador, Jamaica, Pakistan and Grenada.
An ideal partner for a currency union with the Germans, no?
Assorted links
1. Ganz, of Budapest, should be a household word. Here is an image from the impressive Hungarian Museum of Elektrotechnics, which by the way doesn’t seem to have a working website.
2. Felix Salmon on Stanley Fischer.
3. Salman Rushdie to write science fiction drama for television.
4. Ferris Bueller critique makes the movie sound better than it is.
Assorted links
2. Health care in twenty years’ time? Forty?
3. Useful history of the debt ceiling (pdf); it started during WWI.
4. Paul Romer’s charter city TEDtalk.
5. New Larry Summers column at the FT, seems it will be regular.
My favorite things Hungary
The Austro-Hungarian empire does not count per se, so I will use the Hungarian language for demarcation. As you might expect, there is lots:
1. Author: Peter Nadas, A Book of Memories, is a classic novel of ideas which is under-read in the United States. Nadas has a new book coming out this fall. Imre Kertesz doesn’t do much for me.
2. Movies: Bela Tarr, Satantango. It’s over seven hours long, but don’t be put off. It has some of the best shots of grazing cows and angry peasants committed to reel, and I wanted it to be longer. It’s mesmerizing in a way that makes it one of the film classics of the new century. I find Werckmeister Harmonies too corny but it has some fine scenes. Less traditionally thought of as Hungarian is the great Emeric Pressburger, who collaborated with Michael Powell on numerous fine films. Alexander Korda did The Thief of Baghdad.
3. Actor, Peter Lorre is the obvious choice, plus Bela Lugosi made the best Frankenstein ever, forget about Dracula.
4. Conductor: You have George Szell, Antal Dorati, Georg Solti, and Eugene Ormandy. Szell was so often perfect, Dorati cut some of the best sounding records of all time, Solti’s whiplash style was either offputting or splendid, and Ormandy was deeper than he was given credit for. Ivan Fischer is a more recent contender, for instance his Mahler’s 4th reflects a scrupulous concern with rehearsals. Péter Eötvös is an excellent conductor of contemporary music.
5. Pianist: Gyorgy Cziffra and Ervin Nyiregyhazi are two memorable eccentrics. Solti and Szell were underrated as pianists and Zoltan Kocsis is very good. Don’t forget Franz Liszt, even though no recording has survived.
6. Scientist: There is Szilard, Teller, and von Neumann and many many others but can they come close to this top tier? The options for Hungarian mathematicians defy belief. Hungarian inventors were critical to the “great non-stagnation” of 1870-1940, including for the all-important electrical transformer; few if any of those names have survived much into general Western history which I suppose says something.
7. Artist: Victor Vasarely is the obvious choice, but I don’t like him so much. This area seems oddly weak. Am I forgetting something? Mihaly Munkacsy anyone?
8. Economist: Janos Kornai comes to mind, and Melchior Palyi remains underrated. I believe Milton Friedman’s parents were from Hungary.
The bottom line: You can’t gush enough about music and math and physics and science and invention. The achievements from a small country are staggering and unprecedented. Yet literature and painting are relatively weak. Hungarian composers will get a post of their own, but there is a strong line-up of Liszt, Bartok, and Ligeti. What else am I forgetting? I can’t think of major films set in Hungary and I don’t count the Hollywoodesque The Shop Around the Corner even though nominally it is Budapest.
Assorted links
2. Interview with Ricardo Caballero.
3. There is no great stagnation. Here is even more, and better, proof.
4. Are children an inferior good? And Caplan’s response. Is it possible that education is a form of real income, and so using education and real income variables — unadjusted — picks up real income better than stand-alone “real income” does?