Category: Uncategorized
Karl Smith on aggregate demand
It is an excellent post, read the whole thing. To pull out one point, here is the hospitality sector, expressed in levels:
It’s clearly below trend, had there been no financial crisis. But will sticky nominal wages cause significant unemployment? In terms of absolute levels, business is above where it was before the crisis. At first glance, that should seem enough to support the nominal wage levels of 2007. You also can see that the initial downward dip really doesn’t last for long (two months?) before the older absolute level of business activity is restored.
One approach is to place a lot of the explanatory power in the labor market lags, thereby invoking real variables, above-average risk premia and option values, zero marginal product workers, credit constraints, and so on.
To save an AD story for this sector, one might try the “wandering relative prices” add-on. This graph shows an aggregate. As time passes, especially when AD is relatively stagnant, some prices in this sector fall quite a bit, more so than is indicated by measures of totals or averages. The more that some prices are otherwise inclined to “wander” quite low, the more that rising nominal expenditure flows are required to keep demands high enough so that those sectors aren’t faced with having to cut nominal wages.
The funny thing is, the data on relative prices don’t exactly fit the standard Keynesian story; read this excellent post by Stephen Williamson.
Basically, it’s complicated.
Assorted links
TEDx talk on Monday
My TEDx New York talk is sometime right at or slightly after 4:50 p.m. Monday, EST. I will cover The Great Stagnation. You can watch on-line the other talks too, the link, which includes a list of speakers, is here.
The new Florida Medicaid plan
It has passed the legislature, there is a 1/20 summary here, and an ungated piece here. Here are a few salient points:
1.Most of the patients will be moved into managed care.
2. In most cases malpractice awards — for Medicaid patients only — will be capped at $300,000.
3. “Last month, the federal government advised legislators to choose the payment system that would guarantee that a percentage of the money, in this case 90 percent, would go to patient services. Instead, the Legislature chose the other option: to share profits with managed-care companies.”
By what percentage will the real value of Florida Medicaid benefits be eroded? What does this imply about the future political equilibrium of where spending cuts will come? Will Medicaid as we know it survive?
It remains to be seen whether the Federal government, which has the ability to veto the plan, will approve the proposal.
Robert Clower passes away at 85
First mentioned by Brad DeLong, it is now confirmed by Wikipedia. Here is an obituary, and another from UCLA. Clower is well known for rethinking the microfoundations of macroeconomics, assigning a primary role to money as a medium of exchange and the double coincidence of wants, liquidity constraints, and emphasizing the coordination problems behind Keynesian economics. He showed how a lot of Keynesian concepts made microeconomic sense, even without invoking the macro notion of aggregate demand or IS-LM analysis. He opposed what is now called “hydraulic Keynesianism” and was a wise man for doing so.
He was part of the UCLA department in its glory years and for several years in the early to mid 1980s he was the main editor of the American Economic Review, the flagship journal of the profession. During those years, he favored and published many unorthodox economists, often disgruntling the more mainstream members of the economics profession. He was good to me.
Here is Clower on whether economic theory is an inductive science (pdf), and Clower on axiomatics (pdf). Here is his famous paper with Leijonhufvud on Keynes and coordination (pdf). Here is his famous paper with Howitt on the microfoundations of monetary theory (pdf). For a full view of his work, you need to search scholar.google.com for both “Robert Clower” and “Robert W. Clower.”
Assorted links
1. I have not yet been assimilated.
3. Ecological footprint feedback can discourage people.
5. Perception vs. reality in NBA ref bias, with reference to Pat Riley.
Assorted links
1. Watch markets in everything, why not just run faster?
3. The macro learned in economics grad school, though I disagree that ideology is the reason for RBC popularity.
4. Singapore allows political competition on the internet (1/20), ungated version here.
Assorted links
1. When should we tax goods with inelastic demand?
3. Will on the new Jerry Gaus book; Kevin Vallier’s summary is intended as positive, but it reflects my reservations about the book: “In sum, OPR defends public reason liberalism without contractarian foundations. It is Kantian without being rationalistic. It is Humean without giving up the project of rationally reforming the moral order. It is evolutionary but not social Darwinist. It is classical liberal without being libertarian. It is Hegelian and organicist without being collectivist or statist.” Too much engagement with macro-positions of philosophic others, too many strung together, semi-empirical casual observations, not enough focused, narrowed down progress on the knotty particular problems of social choice and aggregation and whether rules are simply an arbitrary category. The argument takes on too many moving pieces — not quite empirical, not quite theoretical — in a way which is to this reader was not persuasive.
In my pile
1. Food Trucks: Dispatches and Recipes from the Best Kitchens on Wheels, by Heather Shouse. I’ve read enough of this book to know it is true to its title.
2. The Moral Lives of Animals, by Dale Peterson. It looks like Adam Smith’s TMS applied to the moral sense of non-human animals, making the point that the moral sense is not unique to human beings.
3. Music for Silenced Voices: Shostakovich and his Fifteen Quartets, by Wendy Lesser.
4. Zoo City, by Lauren Beukes; so far I love it, imagine a mix of Raymond Chandler, near-future science fiction, and South African grit.
All are worthy of purchase, we will see how they develop. I found The Windup Girl, by Paolo Bacigalupi, the most enjoyable science fiction novel I’ve read in a few years, and it should appeal to fans of Thailand too.
The AV (alternative vote) electoral reforms
The UK is voting on this today. Here is a good survey of social choice approaches to the question, and here is a survey of how AV systems work. The basics are this:
Alternative vote (AV) is a type of preferential voting in which voters are asked to rank the candidates from first to last. The basic idea is that if no candidate is the first choice of 50% + 1 voters, then the candidate who received the fewest first place votes is eliminated. This candidate’s voters then have their votes reallocated to the candidate they ranked second. This reallocation process continues until one candidate achieves 50% + 1 votes (more on this later).
Too often the social choice approaches focus on the formal properties of the voting and do not capture the actual political incentives of electoral systems, which tend to follow from imperfect information and the behavioral tendencies of voters. In this case the key change is that competition for votes becomes messier and less clearly linked to major party identities.
A long time ago I wrote this analysis of related (but not always identical) systems:
Electoral systems based upon the single transferable vote tend to produce the
following effects:
• voters can express preferences for more than simply their favourite candidate
or party;
• representatives are focused towards constituency service and district policies,
rather than national policies;
• political parties are weak, non-ideological, and subject to frequent infighting;
• the ability of the legislature to check the executive is weak;
• most voters are confused by the mechanics of the single transferable vote;
and
• sophisticated voters have an incentive to manipulate the system and vote an
order which is not their true preference.
That is followed by a much more detailed analysis, scroll to p.56 for more. At best such systems are workable, but it is hard to see why they should bring any major advantages.
Assorted links
The culture that is Japan there is no great stagnation
Japanese invent a box that can simulate a kiss over the Internet:
The device looks like an ordinary box attached to a computer with a rotating straw. A closer look reveals otherwise. Students at Japan’s Kajimoto Laboratory at the University of Electro-Communications have created a small device that uses motor rotations with the aim to simulate the feeling of a kiss over the Internet. Warning: this might be the most disturbing thing you’ll see today.
Upon closer inspection, we learn that the kissing device responds directly to a person’s tongue. On one end, a person rotates the “straw” in one direction and the “straw” on the other end will rotate in the same direction. The result is a powerful tactile response that feels like you’re giving or receiving a kiss. From the demonstration video, the device looks a lot more effective than that concept cellphone that uses a wet sponge to transmit moisture onto a person’s lips.
For the device’s creators at Kajimoto Laboratory, the kissing device has a lot of potential, “The elements of a kiss include the sense of taste, the manner of breathing, and the moistness of the tongue…
But where is the demonstration video? Can you find it on the site or elsewhere?
For the pointer I thank Natalie B.
Secrecy markets in everything how to know you are living next door to OBL edition
The neighbor said if local children kicked a ball into the compound, someone from inside would pay the children for the ball rather than let them step onto the grounds.
From CNN, via MonkeyCage.
From the comments: “Not surprisingly, the kids understood incentives. The lead audio report now on the NYT says that the kids would be given 50 rupees (about $1.12 USD according to x-rates.com) and that they would therefore repeatedly kick the ball over the fence.”