Macroeconomics is complicated and bewildering, installment #386

by  Tyler Cowen in

Andrew Rose and Mark Spiegel report:

We update Rose and Spiegel (2009a, b) and search for simple quantitative models of macroeconomic and financial indicators of the "Great Recession" of 2008-09. We use a cross-country approach and examine a number of potential causes that have been found to be successful indicators of crisis intensity by other scholars. We check a number of different indicators of crisis intensity, and a variety of different country samples. While countries with higher income seemed to suffer worse crises, we find few clear reliable indicators in the pre-crisis data of the incidence of the Great Recession. Countries with current account surpluses seemed better insulated from slowdowns.

There are ungated versions here.

What I’ve been reading

by  Tyler Cowen in

1. John Carey, William Golding: The Man Who Wrote Lord of the Flies.  The subtitle gets at the point and I still can't finish his other books.  Much of his life he wasted in a state of repression.  Alcohol and boarding schools play roles in this story.  Recommended.

2. Why Europe: The Medieval Origins of its Special Path, by Michael Mitterauer.  How many of the preconditions for the European miracle were in place by the Middle Ages?  This isn't a fun book (translated from the German), but specialists should pick it up.  Here is one very serious review of the book (JSTOR).

3. Being Wrong: Adventuers in the Margin of Error, by Kathryn Schulz.  Why do we so enjoy being right and thus so often end up being wrong?  This is a good book for many people, but if you've been following Robin Hanson, you won't find it novel or rewarding.

4. Debra Satz, Why Some Things Should Not be for Sale: The Moral Limits of Markets.  How many books are there now on this topic?  Lots.  How many of them take seriously the notion that our moral intuitions can be badly misguided for judging the operation of an impersonal market economy in the modern world?  Not so many, though all seem to think they do.  

5.  Let me get this straight.  You, the beautiful and brilliant Hannah Arendt, are courted by a German philosopher, he writes lots of gobbledy-gook, becomes a Nazi, refuses for decades to apologize for his complicity, and, after the war, you dedicate books to him and arrange for translations of his work?  Here is a new book on this romance, Stranger from Abroad: Hannah Arendt, Martin Heidegger, Friendship and Forgiveness, by Daniel Maier-Katkin.  Is there perhaps a word missing from that title?  Who is it that buys the Heidegger-Arendt books, men or women?

6. Super Sad True Love Story, by Gary Shteyngart.  I didn't like his previous two books and I usually dislike pomo novels about cool-talking young people in major U.S. cities.  Still, the flood of very good reviews nudged me to read this and I'm glad I did.

Don’t obsess over interest rates

by  Tyler Cowen in

After doing an extensive quantitative study, Glaeser, Gottlieb, and Gyourko report (ungated here):

Interest rates do influence house prices, but they cannot provide anything close to a complete explanation of the great housing market gyrations between 1996 and 2010.  Over the long 1996-2006 boom, they cannot account for more than one-fifth of the rise in house prices.  Their biggest predictive influence is during the 2000-2005 period, when long rates fell by almost 200 basis points.  That can account for about 45 of the run-up in home values nationally during that half-decade span.

The second strangest headline I read today

by  Tyler Cowen in

Or is it the strangest?  In any case, I never thought it would be so close:

Mongolian neo-Nazis: Anti-Chinese sentiment fuels rise of ultra-nationalism

Don't neglect the photo.  The subheader is:

Alarm sounds over rise of extreme groups such as Tsagaan Khass who respect Hitler and reject foreign influence

Tsagaan Khass, by the way, means, rather incongruously, "White Swastika."  I wonder if they know that Hitler was an Austrian ruling Germany?  And, excuse me for sounding silly, but isn't respecting Hitler, in addition to all of its other problems, accepting foreign influence?  I guess "foreign" here means "Chinese."

The strangest headline I read today

by  Tyler Cowen in

Monkeys hate flying squirrels, report monkey-annoyance experts

Yet the subheader is arguably yet stranger:

Japanese macaques will completely flip out when presented with flying squirrels, a new study in monkey-antagonism has found. The research could pave the way for advanced methods of enraging monkeys.

That is from the Christian Science Monitor.  Hat tip goes to Andrew Sullivan.

*Risk and Business Cycles* is now available in paperback

by  Tyler Cowen in

That is my 1998 book on business cycles.  Mario Rizzo writes:

I am happy to report that Tyler Cowen’s book, Risk and Business Cycles: New and Old Austrian Perspectives  is now available, as of July 15th, in a reasonably-priced paperback edition from Routledge…

This is not an orthodox Austrian approach. In fact, Cowen criticizes that version. However, the “new Austrian” inspired version he presents seems especially relevant in view of the widespread, but not uiversal, agreement that the pre-recession period of very low interest rates contributed to the search for yield and greater risk taking. As the title indicates, Cowen’s theory emphasizes the importance of low interest rates on risk-taking.

This book appears in the Routledge series, “The Foundations of the Market Economy” edited by Larry White and me. Tyler’s book is well worth reading as are many books in this series (now approaching thirty books).

Here is another blog post discussing the book.  Here is the Amazon listing.  At the time this book was published, it was unpopular to suggest that everyone simply might take too much risk at once, leading to an eventual overextension and collapse.  Yet theories of that nature have held up relatively well, in light of the financial crisis.

My one-sentence summary of the book is that it offers various accounts of how an economy might end up in the position of taking too much risk and how that can help explain business cycles.  And since these scenarios involve risk, rather than direct negative productivity shocks, they can look fairly innocuous in advance.

Elephant Jumps, Thai food in Merrifield

by  Tyler Cowen in

8110 A Arlington Blvd, Falls Church, 22042, (703) 942-6600, in the Yorktowne Center, more on Gallows than Route 50, home page here.

Home-style Thai food, with four levels of spicy, culminating in “Thai spicy.”  It’s not as good as Thai X-ing, but it’s probably better than any other local Thai competitor.  They will watch you sweat and they will giggle.


Here is one good review of the restaurant.  Here is a short bit on how elephants were viewed in antiquity.  Here is my favorite book on elephants. 


After we exchanged impressions of the other local Thai restaurants, the proprietor said to me: “You know a lot about food and you get around — you should be a food critic.  You could write up what you think about all these places!”


If we’re not going to have much more economic growth, we can at least have a few locales like this.  

Health care and revenue competition in Britain

by  Tyler Cowen in

Elite NHS foundation trusts are gearing up to lure private patients from home and abroad as health budgets are squeezed – a decision made possible after health secretary Andrew Lansley said he would abolish the cap limiting the proportion of total income hospitals can earn from the paying sick…

With a £20bn black hole opening up in NHS budgets, a group of top performing trusts are seeking to profit from paying patients and use the money to fund public healthcare in Britain.

Previously,

Labour's cap had meant most hospitals were unable to generate more than 2% from private income.

Here is more, although full details are not yet clear, it seems doctors will be much more in charge, in a decentralized manner.  Here's one opinion:

"What's to stop US healthcare companies coming over here to poach patients. Or GPs sending patients to India for cheap operations? Or English hospitals raiding Scotland for sick people?" said Alan Maynard, professor of health economics at the University of York. "It could be a real mess."

How long will it be before the entire NHS, as it was known, goes down as a collapsed model?  What exactly caused the collapse?  (I was surprised to read that Labour had tripled the budget since 1997.)  Will "the line" be that evil ideologues are dismantling a working system?  How will greater competition for patients alter our assessments of various national health care systems?  Is empowering doctors going to cut costs?  How much loyalty will patients, and voters, show to the old NHS model?

Haiti facts of the day

by  Tyler Cowen in

Here's how the public sector is doing:

…one-sixth of its staff died, virtually all its buildings were damaged, and its meagre tax revenues fell by 80%.

Here's how the private sector is doing:

…over 1m people are still packed into 1,300 tent cities in and around the capital. The camps’ population is rising. Haitians who fled to the countryside after the disaster have returned in search of jobs and services. And soaring property prices–inevitable after the ruin of so much of the country’s housing–have put rents beyond the reach of most of the displaced.

That's a heap of bad news, but the part about the growing tent cities is perhaps the worst bit.  It means that whatever you read about the tent cities is reflecting the more desirable side of life in Haiti.

Robert Shiller on direct government employment

by  Tyler Cowen in

Big new programs to create jobs need not be expensive. Suppose the cost of hiring a single employee were as high as $30,000 a year, several times typical AmeriCorps living allowances. Hiring a million people would cost $30 billion a year. That’s only 4 percent of the entire federal stimulus program, and 0.2 percent of the national debt.

There is more here.  Do any of you know of a policy paper on whether any labor market deregulation (e.g., Davis-Bacon?) would be required for this to happen?  Davis-Bacon did precede some of the major Roosevelt jobs programs, so I've never understood how this fits together.  How was it ruled that the relatively low-paying jobs of the WPA satisfied the Davis-Bacon requirement?

*Agora*

by  Tyler Cowen in

I am surprised this film, set in ancient Alexandria, has not occasioned more controversy.  It is the most pro-science, pro-rationalist, anti-Christian movie I have seen — ever. — and it does not disguise the message in the slightest.  The director and scriptwriter is Spanish and Chilean, namely Alejandro Amenábar.  It offers a Voltairean portrait of Judaism, as an oppressed rabble, most of all responsible for the crime of having birthed Christianity.  There are some not-so-subtle parallels shown between the early Christians and current Muslim terrorists.  

The visual rendering of antiquity is nicely done and without an excess of CGI.

Here is a positive New York Times review.  Here is a positive Guardian review.  Not everyone will like this movie.

Earl Thompson has passed away at 71

by  Tyler Cowen in

Scott Sumner offers a tribute.  Earl Thompson was one of the most genuinely creative economic minds of his generation.  In my view he was often wrong, such as when he argued that markets would overproduce (excludable) public goods.  Nonetheless his work always inspired fruitful thought, even if one did not accept his conclusions.  Here is his famous paper on taxation and national defense.  He used "national defense" arguments to try to explain the pattern of government subsidies and taxes.  His paper on monetary theory will make your head spin.  Here is his paper on the economics of charity.

Here is Earl offering advice to Obama and sounding like Scott Sumner.  He attributed excessively tight monetary policy to banker (i.e., creditor) control of the Fed.  Read this too; he disliked the Bernanke reappointment.

Here is my review of Earl's book; read the first six lines.

Here is his home page, with many more links to articles.  Here is a UCLA obituary:

Earl Thompson was an eccentric in an age of conformity. He kept odd hours: he was alone in his office in Bunche Hall at 4:31 AM on January 17, 1994 when the Northridge earthquake hit, where he found himself unharmed but covered with fallen books. He loved muscle cars, dressed as if the 1950s were just yesterday, and always had a sneaky grin on his face. He will be missed by his colleagues, his students, his friends and his family.

Earl Thompson was an American original.