Category: Uncategorized

Don Peck’s new book

by  Tyler Cowen in

It is Pinched: How the Great Recession has Narrowed Our Futures and What We Can Do About It.  Here is his Atlantic cover story on the future of the middle class, think of it as TGS from a more left-wing point of view, excerpt:

“I’m deeply concerned” about the prospects of less-skilled men, says Bruce Weinberg, an economist at Ohio State. In 1967, 97 percent of 30-to-50-year-old American men with only a high-school diploma were working; in 2010, just 76 percent were. Declining male employment is not unique to the United States. It’s been happening in almost all rich nations, as they’ve put the industrial age behind them. Weinberg’s research has shown that in occupations in which “people skills” are becoming more important, jobs are skewing toward women. And that category is large indeed. In his working paper “People People,” Weinberg and two co-authors found that interpersonal skills typically become more highly valued in occupations in which computer use is prevalent and growing, and in which teamwork is important. Both computer use and teamwork are becoming ever more central to the American workplace, of course; the restructuring that accompanied the Great Recession has only hastened that trend.

There is an Atlantic symposium on Peck’s issues, here is my opening contribution, and there is a link to the whole thing.

A new paper on the shadow banking system

by  Tyler Cowen in

If you’ve read Gorton, this is the next step, by Zoltan Pozsar.  It emphasizes demand-side motives, from large corporate and financial cash holders, for finding something safer than deposits, given the cap on the FDIC guarantee.  Here is one bottom line:

…if institutional cash pools continue to rely on banks as their credit and liquidity put providers of last resort, the secular rise of uninsured institutional cash pools relative to the size of insured deposits is going to make the U.S. financial system increasingly run-prone, not unlike it used to be prior to the creation of the Federal Reserve and the FDIC…

Another bottom line, my interpretation rather than any direct claim of the author, is that financialization of the economy, combined with some stagnation on the real side, may have led to permanently low rates on T-Bills, given their value as collateral.  Maybe that is what low rates of interest are telling us.

For the pointer I thank Jeff Downing.

China (U.S.) fact of the day

by  Tyler Cowen

Whereas goods labeled “Made in China” make up 2.7% of U.S. consumer spending, only 1.2% actually reflects the cost of the imported goods. Thus, on average, of every dollar spent on an item labeled “Made in China,” 55 cents go for services produced in the United States. In other words, the U.S. content of “Made in China” is about 55%.

Here is more, source is Doug Henwood on Twitter.

Daron Acemoglu on what to do

by  Tyler Cowen in

In a piece entitled “The Real Solution is Growth,” he makes many good points, here is one:

Foster the commercialization of innovation. Much more can be done to facilitate this process. The Bayh-Dole Act of 1980 was only a small step toward encouraging commercialization of academic research. Even as the U.S. government is trying to cut spending, commercialization of new research would be one area deserving of new funding, particularly to ensure that this process does not undermine the greatest virtue of academic research, its openness.

He is also very good on patents, see this earlier Will Wilkinson blog post too.

Hat tip goes to ModeledBehavior on Twitter.

The economics of riots

by  Tyler Cowen in

Has anyone linked to the DiPasquale and Glaeser 1996 paper on riots yet?

We examine the causes of rioting using international data, evidence from the race riots in the 1960s in the U.S., and Census data from Los Angeles, 1990.  We find some support for the notions that the opportunity cost of time and the potential costs of punishment influence the incidence and intensity of riots.  Beyond these individual costs and benefits, community structure matters.  In our results, ethnic diversity seems a significant determinant of rioting, while we find little evidence that poverty in the community matters.

Here is a well-known political science paper on economic conditions and riots in India.  Here is an economics paper on riots in India, AER 2008.  Here is Alex’s piece on riots (gated).  In London, the riots are getting closer to the LSE.

Which intellectuals have influence?

by  Tyler Cowen in

Ben Casnocha suggested to me that I have harsh standards.  I don’t mean “influencing lots of other minds,” I mean changing the world.  Here are a few intellectuals who have had real influence:

1. Jane Jacobs: City planners heed her strictures in many different locales, sometimes too much.

2. Rachel Carson, and numerous environmentalists: Obvious.

3. Milton Friedman: He inspired market-oriented reformers around the world, eased the way to floating exchange rates, helped legitimize early derivatives, and focused attention on monetary policy and away from fiscal policy, among other achievements.

What about today?

1. Peter Singer: Many fewer people eat meat and he has given the animal rights movement greater intellectual credibility.

2. Muhammad Yunnus: He popularized micro-credit and spread the notion to many countries, even though he is by no means its inventor.

3. Richard Posner: Many more judges use economic concepts when issuing judgments or writing up opinions.

Most of the people in this category have spent a big chunk of their lives pushing a single, fairly specific issue or method.  You could add Bernanke (a special case, but still a yes), Charles Murray on poverty, and Germaine Greer.  Art Laffer maybe.  Friedman is a throwback to the time when generalists could be quite influential.

Who hasn’t had much influence over events?  I would cite Jared Diamond, Richard Dawkins, Slavoj Žižek, Christopher Hitchens, Paul Krugman, Tony Judt, Noam Chomsky, Francis Fukuyama, Charles Taylor, Steven Pinker, Naomi Klein, and Niall Ferguson, among many others including virtually all economists.

Perhaps these individuals will have long-run influence on people’s broader views, and thus on longer-run events, but I wonder.  Not everything feeds into a long and powerful stream, and every now and then there is a reset.  We do not know, but we do know that some very focused individuals have had real influence.

I would put Esther Duflo, Jeffrey Sachs, Paul Romer, and Jacob Hacker (public option) in the “still have a good chance to have a big influence” category.

There is also the “futile crusaders” category, for instance Thomas Friedman for pushing for a centrist movement for green energy and Larry Lessig for IP reform and campaign finance reform, although of course subsequent events could upgrade them.  We may well end up with green energy and IP reform but more likely as the result of technologies and market prices, rather than from successful intellectual battles.

Overall it is very hard to have much influence.

Assorted links

by  Tyler Cowen

1. Can a woman lobby a guy she has already rejected?

2. The Baltimore Poe house might be closing.

3. What should Obama have done in 2009?

4. Are the Chinese liberals in decline? (link now fixed)

5. Scott Adams: “A lack of creativity always looks like some other problem. If no one invents the next great thing, it will seem as if the problem
is tax rates or government red tape or whatever we’re blaming this week.”

The ECB bond-buying plan

by  Tyler Cowen

“The ECB is once again intervening as the last line of defense,” said Jacques Cailloux, chief European economist at Royal Bank of Scotland in London. “The intervention will put a halt to the bond market crash that some member states faced. However, the ECB is now in for the long haul and will potentially have to buy up to half of the Italian and Spanish traded debt, the biggest risk-pulling effort ever engineered in Europe.”

Here is the article.  This analysis by Paul Krugman probably won’t be beaten, and more here.

Arguably it’s now a question of who stares down whom.  If you do not doubt German resolve, bet on the ECB and lend money to Italy fairly cheaply.  If you fear that Italy suffers from its own version of the great stagnation, and doesn’t have good enough political institutions to make decent reforms (and now the hammer of the private capital markets is partially removed), maybe the ECB will cry uncle at some point and give up.  Knowing that, confidence will not return and the speculators will continue to pounce.  We’ll see soon enough what the markets think.

As I am posting this, Dow futures are off about 250 points, although that bad news could be traced to numerous causes.

Speculative attack games can be hard to predict for the marginal cases (personally I am skeptical), but the general uncertainty resulting from the U.S. debt fight, and the resultant “flight to safety” isn’t helping matters.  It’s another way in which our fiscal nonsense brings some very real costs, and quickly.  Have you seen that France might suffer a downgrade from AAA?  In the abstract, that makes sense.  Why should they be safer than the US?  Again, our stupidity makes the European mess harder to resolve by shifting the focal equilibrium from a good outcome to a bad, scary outcome.

Assorted links

by  Tyler Cowen

1. Future behavior is seen as more intentional than past behavior.

2. In what field are blind mathematicians most likely to work?

3. Lessons for gift-giving: give cash and honor requests.

4. The silent bank run in Greece, continued, some amazing stories.

5. Via Chris F. Masse, the world’s safest asset class (and it is French, some explanation here).

6. Chileans throw fruit and small stones at the rescued miners.

7. Excellent Ezekiel Emanuel piece on cancer drugs and price controls.