Here is the home page.  This is just getting started, but I predict it won’t take off.  The people who most care — shanty owners in the Caribbean — are unlikely to make bets or use the forecasts.  Nor will people find this fun betting as they did the Michael Jackson trial.  But I would be happy if you proved me wrong.

Thanks to Carrie Conko for the pointer.  By the way, go back to Alex’s addendum to his flu post, in case you missed it.

Should we include the financial sector?  Here is Daniel Gross on this debate:

In principle, economists say, the figure that represents the
broadest possible swath of the economy is preferable. That would seem
to weigh in favor of the more pessimistic nonfarm business number. But
there may be good reasons for giving careful weight to the measure of
productivity that excludes the financial world. In some ways, it may be
more accurate.

After all, it’s much easier to calculate
productivity for companies that produce widgets than it is for
companies that produce less tangible goods like insurance policies.
While the productivity of a factory worker doesn’t vary radically from
month to month, the productivity of a hedge fund manager can swing
wildly from week to week.

What’s more, it strikes some
economists as strange that including the dynamic financial sector would
somehow make the economy seem less productive. "If you see productivity
being dragged down by the inclusion of the financial sector, you have
to be a little suspicious," said David Altig, vice president and
associate director for research at the Federal Reserve Bank of
Cleveland. (Mr. Altig speaks for himself, not for the Fed.)

Read Brad DeLong for commentary. 

The bottom line: Productivity is doing better than we had thought.  The second bottom line is that the first bottom line could be wrong and productivity might be doing worse than we had thought.  The best guess, however, is that we are mismeasuring productivity in the financial sector.  Keep in mind, the rate of productivity growth is the critical variable for whether we will survive the coming Medicare fiscal train wreck, without entering the realm of perpetual economic stagnation and draconian tax rates.

Here is the abstract from the latest David Card paper:

Mexican immigrants were historically clustered in a few cities, mainly in California and Texas. During the past 15 years, however, arrivals from Mexico established sizeable immigrant communities in many "new" cities. We explore the causes and consequences of the widening geographic diffusion of Mexican immigrants. A combination of demand-pull and supply push factors explains most of the inter-city variation in inflows of Mexican immigrants over the 1990s, and also illuminates the most important trend in the destination choices of new Mexican immigrants – the move away from Los Angeles. Mexican inflows raise the relative supply of low-education labor in a city, leading to the question of how cities adapt to these shifts. One mechanism, suggested by the Heckscher Olin model, is shifting industry composition. We find limited evidence of this mechanism: most of the increases in the relative supply of low-education labor are absorbed by changes in skill intensity within narrowly defined industries. Such adjustments could be readily explained if Mexican immigrant inflows had large effects on the relative wage structures of different cities. As has been found in previous studies of the local impacts of immigration, however, our analysis suggests that relative wage adjustments are small. [emphasis added]

I encounter the anti-Mexican immigration segment of the blogosphere often, but I have yet to be convinced that the Mexicans are wreaking havoc on us.

Monsoon vacations. They are held in India, often Goa, during the rainy season.  "Come Feel the Rain" is the slogan.  The main customers?  Citizens from the United Arab Emirates (annual rainfall 120 millimeters).  They worry if they don’t get enough rain during their vacation.  Here is a hotel ad.  Here is one colorful travel journal from such a vacation.  I like this bit: 

Let the rains plan
Don’t force the pace. Meticulously planned tour itineraries can be reduced to paper-boats for your children to play with in muddy puddles. Let the monsoons dictate your schedule.

For more detail, see today’s Wall Street Journal, front page, center column.

Robert Shiller has put together the first, long, true index of home prices.  By true I mean that as much as possible it looks at repeated sales of the same or very similar houses over time.  Conventional indices confuse changes in size and quality with changes in the price of housing per se.

What the index shows is that real house prices have remained stable over the past 100 years.  The contrary impression is driven by inflation and as noted above, changes in what is being measured.  Stability, however, is what we should expect.  The United States remains a relatively unpopulated country.  When house prices in current population centers increase, suburbs and smaller cities expand.  People move to less populated areas and in so doing alleviate the press on house prices.  In the long run, the supply of housing is very elastic.

The glaring exception to stability is the last 6 or 7 years when house prices have skyrocketed far beyond where they have ever been before.  Can you hear the pop coming?

Graphic from the NYTimes (click to open in new window).

Bryan Caplan poses the question.  My answers:

1. This is a U.S. phenomenon, driven in part by framed photos of family members and regular turnover of decoration in one’s house.

2. The real value is often advice on which frame to buy.  This requires a reliable expert on hand and keeps framing shops small and artisanal in nature.

3. Frame shops lure people in to view and buy other overpriced items, such as pre-framed posters.  You need a separate shop for each variety of garish bad taste out there.

My puzzle is different: why is framing so expensive?  The frames are just finished wood, which you could import or buy cheap at a lumber yard.  The framing labor is often immigrants.  Yet a good framing job can cost more than a refrigerator or washer/dryer set. 

In January Alex wrote: "My own pick for undervalued nation was Germany…"

This week’s (August 20-26) cover in The Economist: Germany’s Surprising Economy 

Here is just one bit:

Thanks to the intense pressure that they have been under in the past few years,  Germany’s big companies have restructured and cut their bloated cost base. This process has for once been helped by the trade unions, which had been a stubborn obstacle to change. German workers have belatedly recognised that change has become essential, which is why they have been ready over the past year or so to accept such innovations as more decentralised pay bargaining, longer hours and even wage cuts. Thanks in part to this new flexibility, unit labour costs, a benchmark of competitiveness, have fallen sharply relative to other countries. In the past five years, Germany, long the most costly place in Europe in which to do business, has won a new competitive edge over France, Italy, the Netherlands and even Britain. That is a big reason why, last year, it regained its position as the world’s biggest exporter.

So what today looks like the most undervalued economy?  Can the lovely Croatia go so wrong?  Has everyone capitalized the commodities-driven recovery of Argentina?  Is it well understood how prepared Singapore is to complement the growth of China?  Aren’t Arab stock markets booming?  Comments are open…