Results for “countercyclical asset”
45 found

Assorted links

1. Via Jura Stanaityte, Ten simple rules for choosing industry vs. academia.  More simple rules here.

2. Is Bayh-Dole a "drug tax"?

3. "Tell-all" book about IKEA.

4. Countercyclical asset: haunted house novels?

5. China's empty city (of the day).  YouTube.  At about 1:20 you will see that a city built for one million residents remains empty, a' la Austro-Chinese business cycle theory.  "Ordos was a government idea, an infrastructure project taken to its limits, the motivation was likely gdp…"  — can you get better than that?  After the first minute or so the video is stunning.

Assorted links

1. Via Chris Masse, one account of life as a fashion model.

2. Countercyclical asset of the day: building sheds.

3. Me, on the future of libraries and related matters.

4. NeighborhoodEffects, a blog.

5. How much should blog writers disclose about their personal lives?

6. Old people are less interested in health care reform: the numbers.

7. Markets in everything: de-baptism, done with a hair dryer.

The library regulators also missed the boat

Prince William County is looking at 33 percent reductions. Loudoun is
considering program cuts of 5, 10 or 15 percent. Fairfax agencies have
been ordered to find cuts worth 15 percent, which would mean closure of
14 community libraries on Fridays, elimination of two hours of Sunday
service at eight regional libraries and reduction of new materials by
25 percent. Fairfax libraries would eliminate 305 jobs and purchase
70,000 fewer materials annually if these recommendations are followed,
according to a county report.

Fairfax, the region’s largest jurisdiction and one of the country’s
wealthiest, had taken an aggressive approach to maintaining and
expanding its library system before the downturn. The county opened
three new branches in the past year — in Oakton, Fairfax City and
Burke Centre — where soaring, spacious architecture and an abundance
of computer stations, meeting space and comfortable chairs have
attracted brisk business and happy customers.

Here is the story.  New library books will not, alas, be a countercyclical asset.  Comovement is a bitter pill to swallow. 

Paul Krugman on Austrian trade cycle theory

Here’s the problem: As a matter of simple arithmetic, total spending in
the economy is necessarily equal to total income (every sale is also a
purchase, and vice versa). So if people decide to spend less on
investment goods, doesn’t that mean that they must be deciding to spend
more on consumption goods–implying that an investment slump should
always be accompanied by a corresponding consumption boom? And if so
why should there be a rise in unemployment?

Here is the link once again.  But I think the point is more effective in reverse.  Why should the boom be a boom in the first place?  The shift toward investment goods, and thus away from consumption goods production, should mean falling real wages, not rising real wages.  In other words, the Austrian theory doesn’t generate the very high degree of comovement found in the data.  Or, in other words, there aren’t that many countercyclical assets.

One MR commentator suggests this, this, and this as responses.  They make various points against Krugman (who I might add is not as clear as usual in this piece) but they don’t solve this central problem of generating the amount of comovement found in the data.  The best shot is to relax the Austrian-favored methodological assumption of full employment; I leave it as an exercise for the reader whether that could work and what other problems for the theory it might create. 

I should add that Gordon Tullock has made much the same point, as has Bob Lucas or for that matter Piero Sraffa in 1932.

My Fall 2016 Industrial Organization reading list, Ph.d class

This is tentative, and I still will make further changes, so by all means please leave your suggestions in the comments.  The list is long, so I am putting it under the fold…

  1. Competition

Einav, Lira and Levin, Jonathan, “Empirical Industrial Organization: A Progress Report,” Journal of Economic Perspectives, (Spring 2010), 145-162.

Bresnahan, Timothy F. “Competition and Collusion in the American Automobile Industry: the 1955 Price War,” Journal of Industrial Economics, 1987, 35(4), 457-82.

Bresnahan, Timothy and Reiss, Peter C. “Entry and Competition in Concentrated Markets,” Journal of Political Economy, (1991), 99(5), 977-1009.

Berry, Steven and Reiss, Peter, “Empirical Models of Entry and Market Structure,” Handbook of Industrial Organization, vol.III, chapter 29.

Asker, John, “A Study of the Internal Organization of a Bidding Cartel,” American Economic Review, (June 2010), 724-762.

Fontanella-Khan, James and Arash Massoudi. “Megadeals for 2015 hit record high.” The Financial Times, September 18, 2015.

Whinston, Michael D., “Antitrust Policy Toward Horizontal Mergers,” Handbook of Industrial Organization, vol.III, chapter 36, see also chapter 35 by John Sutton.

“Benefits of Competition and Indicators of Market Power,” Council of Economic Advisors, April 2016.

Klein, Benjamin and Leffler, Keith.  “The Role of Market Forces in Assuring Contractual Performance.”  Journal of Political Economy 89 (1981): 615-641.

Breit, William. “Resale Price Maintenance: What do Economists Know and When Did They Know It?” Journal of Institutional and Theoretical Economics (1991).

Bogdan Genchev, and Julie Holland Mortimer. “Empirical Evidence on Conditional Pricing Practices.” NBER working paper 22313, June 2016.

Sproul, Michael.  “Antitrust and Prices.”  Journal of Political Economy (August 1993): 741-754.

McCutcheon, Barbara.  “Do Meetings in Smoke-Filled Rooms Facilitate Collusion?”  Journal of Political Economy (April 1997): 336-350.

Crandall, Robert and Winston, Clifford, “Does Antitrust Improve Consumer Welfare?: Assessing the Evidence,”  Journal of Economic Perspectives (Fall 2003), 3-26, available at

FTC, Bureau of Competition, website,  Read about some current cases and also read the merger guidelines.  You’ll also find four antitrust cases discussed at the top here:

Parente, Stephen L. and Prescott, Edward. “Monopoly Rights: A Barrier to Riches.”  American Economic Review 89, 5 (December 1999): 1216-1233.

Demsetz, Harold.  “Why Regulate Utilities?”  Journal of Law and Economics (April 1968): 347-359.

Armstrong, Mark and Sappington, David, “Recent Developments in the Theory of Regulation,” Handbook of Industrial Organization, chapter 27, also on-line.

Shleifer, Andrei. “State vs. Private Ownership.” Journal of Economic Perspectives (Fall 1998): 133-151.

Farrell, Joseph and Klemperer, Paul, “Coordination and Lock-In: Competition with Switching Costs and Network Effects,” Handbook of Industrial Organization, vol.III, chapter 31, also on-line.

Xavier Gabaix and David Laibson, “Shrouded Attributes, Consumer Myopia, and Information Suppression in Competitive Markets,”

Strictly optional: Ariel Pakes and dynamic computational approaches to modeling oligopoly:

2. Organization

Gibbons, Robert, “Four Formal(izable) Theories of the Firm,” on-line at

“Make Versus Buy in Trucking: Asset Ownership, Job Design, and Information,” by George P. Baker and Thomas N. Hubbard, American Economic Review, (June 2003), 551-572.

Van den Steen, Eric, “Interpersonal Authority in a Theory of the Firm,” American Economic Review, 2010, 100:1, 466-490.

Miller, Merton, and commentators.  “The Modigliani-Miller Propositions After Thirty Years,” and comments, Journal of Economic Perspectives (Fall 1988): 99-158.

Myers, Stewart. “Capital Structure.” Journal of Economic Perspectives (Spring 2001): 81-102.

Hansemann, Henry.  “The Role of Non-Profit Enterprise.” Yale Law Journal (1980): 835-901.

Optional: Charness, Gary and Kuhn, Peter J. “Lab Labor: What Can Labor Economists Learn From the Lab?” NBER Working Paper, 15913, 2010, Lazear, Edward P. “Leadership: A Personnel Economics Approach,” NBER Working Paper 15918, 2010, Oyer, Paul and Schaefer, Scott, “Personnel Economics: Hiring and Incentives,” NBER Working Paper 15977, 2010.

Cowen, Tyler, Google lecture on prizes, on YouTube.


3. Production

American Economic Review Symposium, May 2010, starts with “Why do Firms in Developing Countries Have Low Productivity?” runs pp.620-633.

Dani Rodrik, “A Surprising Convergence Result,”, and his paper here

Mandel, Michael and Houseman, Susan, “Not all Productivity Gains are the Same,”

Michael Spence and Sandile Hlatshwayo, “The Evolving Structure of the American Economy and the Employment Challenge,” Council on Foreign Relations working paper, March 2011,

Serguey Braguinsky, Lee G. Branstetter, and Andre Regateiro, “The Incredible Shrinking Portuguese Firm,”

Nicholas Bloom, Raffaella Sadun, and John Van Reenen, “Recent Advances in the Empirics of Organizational Economics,”

Nicholas Bloom, Raffaella Sadun, and John Van Reenen, the slides for “Americans do I.T. Better: US Multinationals and the Productivity Miracle,”, the paper is here but I recommend focusing on the slides.

Bloom, Nicholas, Raffaella Sadun, and John Van Reenen. “Management as a Technology?” National Bureau of Economic Research working paper 22327, June 2016.

Syerson, Chad “What Determines Productivity?” Journal of Economic Literature, June 2011, XLIX, 2, 326-365.

New firms and an employment puzzle,

David Lagakos, “Explaining Cross-Country Productivity Differences in Retail Trade,” Journal of Political Economy, April 2016, 124, 2, 1-49.

Casselman, Ben. “Corporate America Hasn’t Been Disrupted.” FiveThirtyEight, August 8, 2014.

Decker, Ryan and John Haltiwanger, Ron S. Jarmin, and Javier Miranda. “Where Has all the Skewness Gone?  The Decline in High-Growth (Young) Firms in the U.S. National Bureau of Economic Research working paper 21776, December 2015.  NB: This paper and the three that follow have some repetition, so read them selectively rather than exhaustively.

Decker, Ryan and John Haltiwanger, Ron S. Jarmin, and Javier Miranda. “The Secular Business Dynamism in the U.S.” Working paper, June 2014.

Haltiwanger, John, Ian Hathaway, and Javier Miranda. “Declining Business Dynamism in the U.S. High-Technology Sector.” Ewing Marion Kauffman Foundation, February 2014.

Haltiwanger, John, Ron Jarmin and Javier Miranda. Where Have All the Young Firms Gone? Ewing Marion Kauffman Foundation, May 2012.

Song, Jae, David J. Price, Fatih Guvenen, and Nicholas Bloom. “Firming Up Inequality,” CEP discussion Paper no. 1354, May 2015.

Furman, Jason and Peter Orszag. “A Firm-Level Perspective on the Role of rents in the Rise in Inequality.” October 16, 2015.

Andrews, Dan, Chiara Criscuolo and Peter N. Gal. “Frontier firms, Technology Diffusion and Public Policy: Micro Evidence from OECD Countries.”  OECD working paper, 2015.

Mueller, Holger M., Paige Ouimet, and Elena Simintzi. “Wage Inequality and Firm Growth.” Centre for Economic Policy Research, working paper 2015.

Berger, David W. “Countercyclical Restructuring and Jobless Recoveries.” Yale University working paper, 2012.

Furman, Jason. ”Business Investment in the United States: Facts, Explanations, Puzzles, and Policy.” Remarks delivered at the Progressive Policy Institute, September 30, 2015, on-line at

Scharfstein, David S. and Stein, Jeremy C.  “Herd Behavior and Investment.”  American Economic Review 80 (June 1990): 465-479.

4. Incentives

Carola Frydman and Dirk Jenter, “CEO Compensation,” NBER Working Paper 16585.

Conyon, Martin J. “Executive Compensation and Incentives.” Academy of Management Perspectivse, 2006.

Kaplan, Steven N. “Executive Compensation and Corporate Governance in the U.S.: Perceptions, Facts and Challenges.” Working paper, July 2012.

Robert J. Gordon and Ian Dew-Becker, “Unresolved Issues in the Rise of American Inequality,”

 Acemoglu, Daron and Autor, David, “Skills, Tasks, and Technologies: Implications for Employment and Earnings,”

Stein, Jeremy C. “Efficient Capital Markets, Inefficient Firms: A Model of Myopic Corporate Behavior.” Quarterly Journal of Economics 104 (November 1989): 655-670.

Ben-David, Itzhak, and John R. Graham and Campbell R. Harvey, “Managerial Miscalibration,” NBER working paper 16215, July 2010.

Glenn Ellison, “Bounded rationality in Industrial Organization,”

5. Sectors: finance, health care, others

Gorton, Gary B. “Slapped in the Face by the Invisible Hand: Banking and the Panic of 2007,”, published on-line in 2009.

Erel, Isil, Nadault, Taylor D., and Stulz, Rene M., “Why Did U.S. Banks Invest in Highly-Rated Securitization Tranches?” NBER Working Paper 17269, August 2011.

 Gompers, Paul and Lerner, Josh.  “The Venture Capital Revolution.” Journal of Economic Perspectives (Spring 2001): 145-168.

Paul Graham, essays,, and on Google itself,

Strictly optional but recommended for the serious: Ponder reading some books on competitive strategy, for MBA students.  Here is one list of recommendations:

Kotchen, Matthew J. and Moon, Jon Jungbien, “Corporate Social Responsibility for Irresponsibility,” NBER working paper 17254, July 2011.

Healy, Kieran. “The Persistence of the Old Regime.” Crooked Timber blog, August 6, 2014.

From the comments, on the economics of food stamps

In response to my earlier food stamps post, here is Brian Donahue:


Economic conditions have been improving, grudingly, for three years now. But between October 2010 and October 2013, the cost of the program has risen 25%. I understand the concept of ‘countercyclical stabilizers’. This is something else. The idea of a 10% cut in this context…ok.

Food stamps aren’t being singled out here. Just because entitlement reform is paralyzingly hard, it doesn’t mean we don’t keep moving on the other stuff. Summing up 2013: fiscal cliff tax increases on rich, medicare investment tax on the rich, ending payroll tax holiday, sequester (half defense.) Republicans are playing ball – at some point along the way, food stamps get a look. If a 10% cut here is a sacred cow, we’re not close to having the stomach for the real fights to come.

And here is PLW:

Explaining the Rs food stamp focus is a little more complicated. First of all, labeling the House nutrition title of the Farm Bill as “going after” the program seems unfair. The House food stamp proposals include uncoupling categorical eligibility for food stamps with receipt of a trivial non-cash TANF benefit (a technique used by many states to waive all asset requirements for food stamps and raise the net income test to twice the poverty line), getting rid of a loophole (i.e., “LIHEAP loophole”) that a small number of states in the (primarily in the Northeast) use to artificially reduce the net income of food stamp beneficiaries in order to raise their level of benefits, and taking away the Secretary of USDA’s work requirement waiver authority for non-disabled adults without dependents.

Second (and this is where it gets complicated), many of the policies that the Rs are pushing in the context of the Farm Bill are going after policies that were put in place as direct result or an unintended consequence of other R policies. For instance, the coupling of categorical eligibility to non-TANF cash benefits is the result of the 1996 welfare reforms which ended AFDC (how one used to become categorically eligible for food stamps) in replace of a much less clear TANF benefit (rather than cash linked to AFDC, one might receive a service in the form of a 1-800 hotline for pregnancy prevention linked to TANF), but continued to bestow eligibility for food stamps to the recipients of AFDC’s successor. At the same time, the 2002 Farm Bill streamlined eligibility by creating a number of state options for food stamps with the intention of pacifying the states who were getting penalized for having high food stamp error rates (those same error rates the USDA now brags about) as the result of having more food stamp participants with earned income as the result of the 1996 welfare reforms (i.e., administratively, it’s more difficult to assign benefits to people with earned income rather than unearned income… especially if those low-income people are in and out of work through the course of a month).

Can a zero lower bound on price movements generate positive inflation during a recession?

From the comments, Ano writes:

I think an additional factor contributing to the “why is there 1.6% inflation” question is the following: The “right” wage offer for each individual worker varies from worker to worker. The distribution of wage offers gets trimmed at zero. So even a distribution that would have a mean below zero in a non-rigidity world can have a positive mean if the distribution gets trimmed at zero. It’s another zero lower bound at work in the labor market!

There is a related Paul Krugman blog post here.

I have several worries about this approach, but my biggest one is this.  Even with truncation, where are so many inflationary pressures coming from in the first place?  Let’s say for instance (to make it easy) that half of the economy is subject to (stifled and truncated to zero) deflationary pressures, and the other half is subject to (non-stifled) inflationary pressures of 3.2%.  To make this easy to talk about, imagine those halves average out to 1.6% inflation.

What does it say about your economy — vis-a-vis the all-important business cycle fact of comovement — if half of the sectors are seeing inflationary pressure at 3.2%?

One option is that those sectors are the victim of negative supply shocks.  I am comfortable with a comparable conclusion, namely that both AD and AS shocks have been important in a variety of recent economic downturns, although I would not use this chain of reasoning to get there.

Another option is that these non-stifled sectors have seen big boosts in demand and thus their prices are rising.  Again, that violates the strong empirical regularity of business cycle comovement.  In a traditional deflationary downturn, virtually all sectors are negatively affected, with a few notable exceptions.  What kind of business cycle would this be, if half the economy is seeing a positive 3.2% worth of demand-side pressures?

Of course the number 3.2%, the division of the economy into halves, and the like are artifacts, to make this easy to discuss on a blog.  But to the extent you make the non-stifled sector of the economy smaller, the shocks hitting it have to be larger, and so on, so that is no easy way out of the basic dilemma.

Here is a detailed look at why eurozone inflation rates are not lower than they are.  Here is a brief look at United Kingdom inflation rates:

1. CPI annual inflation stands at 2.9% in June.

2. Core inflation stands at 2.3% and has not been below 2% in some time.

3. The producer price index is showing 4.2% inflation (see the first link).

Is that being driven by the zero point truncation of nominal wages?  I don’t think so.  By the way, that is about as a clear of a refutation of liquidity trap models as one could expect to find.

Addendum: Arnold Kling offers comment.

A simple model of China’s model of China

Compared to the U.S. economy, the Chinese economy has fewer automatic stabilizers, such as welfare programs and unemployment insurance.  That implies their fiscal policy should, if possible, be especially countercyclical, compared to what is called for in most richer countries.

Chinese leaders view volatility as serially correlated and increasing from the source outwards.  Given Chinese history, they expect that shocks grow and spread rather than dampening down.  So when a shock comes, the demand to hold and indeed hoard very safe assets increases rather than decreases.  Chinese fiscal policy ends up being pro-cyclical rather than countercyclical.  And it is hard to succeed with fiscal policy in the first place.

Fortunately, I’m just making that model up.  Why should we expect lots of mistakes to be made?