ROME — Giuseppe Toniolo, a renowned late 19th and early 20th century lay Italian economist and political theorist, was beatified on Sunday in Rome’s Basilica of St. Paul Outside the Walls, the final step before a formal declaration of sainthood. Among other claims to fame, Toniolo is now the first economist ever beatified by the Catholic church.
Of course many of the early Church fathers, some of whom have become saints, also can be considered to have been economists. In any case, here is the story, and this piece sets him in the context of the German economists of the late 19th century.
That’s Ron Paul vs. Paul Krugman, the video and transcript is here, here are a few comments under the fold…
1. RP: I don’t understand RP’s claim “I want a natural rate of interest.” Even gold standards allow for monetary influences (distortions? …depends on your point of view) on interest rates. RP has not fully absorbed Myrdal (1930) and Sraffa (1932).
2. K’s response to RP: Numerous good points, but Christie Romer (!) has shown that economic volatility was not higher before WWII. (Somehow that’s one Romer paper which isn’t discussed so much anymore.) That’s a major hole in K’s argument. Relative to the evidence, he is overreaching when a more modest point would suffice.
3. RP: The transcript may be garbled here. In any case, the Fisher effect is imperfect and so inflation does to some extent tax savings, also through interaction effects with the tax system. That said, I don’t see that two to four percent inflation has unacceptable costs, especially when AD is otherwise weak. On Diocletian, via Matt, here is a good recent paper.
4. K’s response: Modern liberals have a bad and selective case of 1950s nostalgia. Krugman is significantly overrating the role of policy here. More overreaching. He should stick to analyzing the “no bailout in 2008-2009” scenario, and how much worse it would have been, including for RP’s preferred ends. On earlier time periods, he should reread his own writings from around the time of The Age of Diminished Expectations. There is very little in The Conscience of a Liberal which actually trumps or overturns the earlier book and its focus on productivity rather than politics.
5. RP: I don’t understand his discussion of the liquidation of debt. Perhaps the transcript is garbled again. He is correct that the massive spending cuts which followed WWII brought no depression but rather the economy boomed. Keynesians have a hard time explaining that episode without recourse to Ptolemaic epicycles, etc., or without admitting the importance of real shocks.
6. K’s response: On Friedman, correct and on target. That said, K’s blogged claim today — that Friedman misrepresented his own views — lacks a quotation or citation altogether; furthermore it is contradicted by this excerpt from Free to Choose, which was Milton at his most popular but still he represented the truth correctly (ignore the heading, which is not from Friedman). K won’t address the WWII point, although he could if he revisited his earlier writings on changing rates of productivity growth.
7. RP’s response: The decline in the value of the dollar since 1913, or whenever, has not been a major economic cost. No one has had such a long planning horizon, for one thing. We don’t see much indexation, for another.
8. RP on the Fed: If we had “real monetary competition,” dollars still would reign supreme. Who now is opening up U.S. bank accounts in other currencies? Or using gold indexing? It is allowed.
9. K’s response: Mostly I agree, though it is odd to think of shadow banking as “currency competition.” It is more akin to “not explicitly regulated banking, with stochastic under-capitalization, and with bailouts in the background and largely driven by regulatory arbitrage.” That makes it less of a counter to RP than PK is suggesting.
10. RP: Equating inflation with “fraud” is an excessive moralization of the issue. The point remains that gentle inflation is usually a good thing, and that the money supply under free banking, or a gold standard, would be excessively pro-cyclical. The best shot is to hope that a natural monopoly private clearinghouse would institute nominal gdp targeting in terms of levels and perhaps “targeting the forecast” too.
11. The exchange about Bernanke: I don’t know whether Krugman literally has “printing money” in mind, so this is hard to interpret. They are stuck in the vernacular, when a more precise economic language would allow for more targeted commentary.
12. PK: Demographics, plus government gridlock and lower productivity growth, make a higher debt-gdp ratio more problematic than Krugman admits.
13. RP: Polemics from RP.
14. K’s response. Very short. But if he likes the market so much, why does he so often seem to be pushing for much higher taxation and higher government revenue? I understand why he wants single payer, but he also seems to favor direct government provision of health care itself.
15. RP: The discussion of debt doesn’t make sense, though it is correct to argue that eight percent measured unemployment underestimates the depth of our labor market problems. I fear, though, that he may be holding an exaggerated version of this point. U6 matters, but it should not be taken as the correct measure of unemployment.
16. RP: Seigniorage isn’t a major source of government revenue, and in general it is worth thinking about why corporate profits are so high and why the stock market, at least in recent times, has done OK. Is it really all about policy uncertainty? Lots of polemic here. Still, RP raises the point that Fed purchases of T-Bills may be helping to keep rates artificially low. This remains unproven, but it is also unrebutted.
17. RP (again): There is no credible alternative to the dollar as reserve currency today. On Spain, it is nonetheless a good point that spending cuts in a dysfunctional economy don’t help very much if at all.
More RP: Doesn’t PK get to speak again? Did Austerians suddenly cut the funding for his part of the transcript? (Had I watched the video, I wouldn’t have had time to write this post.) In any case, pegging the dollar to gold in an era of commodity price inflation would be a disaster and lead to massive deflationary pressures or more likely a complete abandonment of the gold peg rather quickly.
In sum: There were too many times when RP simply piled polemic points on top of each other and stopped making a sequential argument. He overrates the costs of inflation, including in the long term, and for a believer in the market finds it remarkably non-robust in response to bad monetary policy. Still, given that Krugman is a Nobel Laureate in economics, and Paul a gynecologist, the score could have been more lopsided than in fact it was.
Exceeding all expectations, Paul Romer convinced the Honduran government to authorize a charter city. Now Romer is encouraging Canada to export its institutions. Here is Romer and Octavio Sanchez, chief of staff to the President of Honduras, writing in Canada’s most important newspaper, The Globe and Mail:
http://www.crossed-flag-pins.com
With the near unanimous support of its Congress, Honduras recently defined a new legal entity: la Región Especial de Desarrollo. A RED is an independent reform zone intended to offer jobs and safety to families who lack a good alternative; officials in the RED will be able to partner with foreign governments in critical areas such as policing, jurisprudence and transparency. By participating, Canada can lead an innovative approach to development assistance, an approach that tackles the primary roadblock to prosperity in the developing world: weak governance.
…According to Gallup, the number of adults worldwide who would move permanently to Canada if given the chance is about 45 million. Although Canada can’t accommodate everyone who’d like to move here, it can help to bring stronger governance to many new places that could accept millions of new residents. The RED in Honduras is the place to start.
…By participating in RED governance, Canada can make the new city a more attractive place for would-be residents and investors.
…The courts in the RED will be independent from those in the rest of Honduras. The Mauritian Supreme Court [!, AT] has agreed in principle to serve as a court of final appeal for the RED, but Canada can play a strong complementary role. Because the RED can appoint judges from foreign jurisdictions, Canadian justices could hear RED cases from Canada and help train local jurists.
Oversight, policing and jurisprudence are just a few of the ways in which Canada can help.
…The world does not need more aid. As the Gallup numbers show, it needs more Canada – more of the norms and know-how that lead to the rule of law, true inclusion and real opportunity for all.
Mr Hollande says that he will replace austerity with growth. Why didn’t anybody think of that before?
…If building great roads and trains were the route to lasting prosperity, Greece and Spain would be booming. The past 30 years have seen a huge splurge in infrastructure spending, often funded by the EU. The Athens metro is excellent. The AVE fast-trains in Spain are a marvel. But this kind of spending has done very little to change the fundamental problems that now plague both Greece and Spain – in particular, youth unemployment.
Worse, in some ways, EU funding for infrastructure has created problems. In Greece, milking the EU for subsidies became an industry in itself: and political connections were a surer route to wealth than entrepreneurial flair.
…Even in France, the centre of the revolt against austerity, it is hard to argue that the problem is that the state is not doing enough. This is a country where the state already consumes 56 per cent of gross domestic product, which has not balanced a budget since the mid-1970s, and which has some of the highest taxes in the world.
Mr Hollande, who is not an idiot, knows all this. That is why, behind all the feel-good rhetoric about ending austerity, the small print is less exciting. In fact, all the Socialist candidate is promising to do is to take a year longer than President Nicolas Sarkozy to balance France’s budget. In Europe, even the left cannot pretend that deficit-spending can continue for ever. So they are reduced to arguing that governments are cutting, “too far and too fast”, in the words of Ed Balls, Britain’s shadow chancellor. This is small-scale quibbling – masquerading as a major doctrinal dispute.
Over the span of our data, health IT inputs increased by more than 210% and contributed about 6% to the increase in value-added. Virtually all the increase in value-added is attributable to the increased use of inputs…
Here is much more. Can anyone find an ungated copy?
…the levees broke and the city was devastated, and out of that destruction came the need to build a new system, one that today is accompanied by buoyant optimism. Since 2006, New Orleans students have halved the achievement gap with their state counterparts. They are on track to, in the next five years, make this the first urban city in the country to exceed its state’s average test scores. The share of students proficient on state tests rose from 35 percent in 2005 to 56 percent in 2011; 40 percent of students attended schools identified by the state as “academically unacceptable” in 2011, down from 78 percent in 2005.
….Most of the buzz about the city’s reforms focuses on the banishment of organized labor and the proliferation of charter schools, which enroll nearly 80 percent of public school students, up from 1.5 percent pre-Katrina. But what really distinguishes New Orleans is how government has redefined its role in education: stepping back from directly running schools and empowering educators to make the decisions about hours, curriculum and school culture that best drive student learning. Now, state and school-district officials mostly regulate and monitor — setting standards, ensuring equity and closing failing schools. Instead of a traditional school system, there is a system of schools in what officials liken to a fenced-in free market. Families have more choice about where their children can best succeed, they say, and educators have more opportunity to choose a school that best aligns with their approach.
The population of New Orleans changed pre and post-Katrina so it’s difficult to compare pre and post-Katrina test scores; although given the state of the schools pre-Katrina it’s hard to believe that the schools have not greatly improved. What really drives innovation, however, is not a simple substitution of private for public but a system substitution of competition for monopoly. The key therefore is to expand charters and voucher programs.
The state of Louisiana just passed a voucher program that although limited to poor and middle class students in failing schools will offer as many as 380,000 vouchers to be used at private schools or apprenticeships. Indiana has passed a potentially even larger program that would make about 500,000 students voucher-eligible. Keep in mind that at present there are 50 million public school students and only 220,000 voucher students nationwide.
My ideal program would fund students not schools and would make vouchers available to all students on a non-discriminatory basis. We are far from that ideal but we are slowly moving in the right direction. Charters and the expansion of voucher programs around the country are starting to bring more competition, dynamism and evolutionary experimentation to the field of education.
I have to give this movie an A+. It is an outstanding treatment of the history of Jamaica, the Caribbean cultural blossoming after World War II, possible equilibria in individual human affairs, and of course the protagonist Bob Marley himself, as well as much much more. Marley by the way does not come off as a sympathetic character. The scenes from Zimbabwe and Germany are remarkable. The director is Kevin Macdonald, who also created The Last King of Scotland.
There are trailers here. Here is one good review. If you are seeking to normalize my review, in general I am not fond of “musical documentaries” and I do not consider Marley the peak of Jamaican music (I prefer Lee Perry, Desmond Dekker, and King Tubby, for a start). Think of this as a movie flat out and go see it on a large screen.
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.
Economic theory predicts that you are not enjoying this book as much you thought you would.
I laugh every time I read that line and I think what a brilliant opening to an essay on auction theory and the winner’s curse! And then I think, but in fact I am enjoying this book more than I thought!
I first read Landsburg’s book some twenty years ago and dipping into the revised edition over the weekend I can see how influential The Armchair Economist has been on my own teaching and writing, particularly Landsburg’s wonderful and deep essay, Why Prices are Good: Smith v. Darwin. Around 1997, the Armchair Economist also inspired my (now) colleague Bryan Caplan to create a listserv to discuss economics with a small cadre of like minded readers. Many of the people on that listserv would later become well-known econ bloggers. My history makes me assume that everyone has read The Armchair Economist, after all, all my friends have read The Armchair Economist! More rational reflection tells me that time and the flowering of popular economics means that there is a whole new generation of readers ready to be delighted and inspired.
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.
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.
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.
Data available from the UC Office of the President shows that there were 2.5 faculty members for each senior manager in the UC system in 1993. Now there are as many senior managers as faculty. Just think: Each professor could have his or her personal senior manager.
And there is this:
A report on administrative growth by the UCLA Faculty Association estimated that UC would have $800 million more each year if senior management had grown at the same rate as the rest of the university since 1997, instead of four times faster.
What could we do with $800 million? That is the total amount of the state funding cuts for 2008-09 and 2009-10, and four times the savings of the employee furloughs. Consider this: UC revenue from student fees has tripled in the last eight years. The ratio of state general fund revenue to student fee revenue in 1997 was 3.6:1. Last year it was 1.9:1. If we used that $800 million to reduce student fees, the ratio would go back to the 1997 value. To put another way, it could pay the educational fees for 100,000 resident undergraduates.
