Results for “age of em” 17235 found
Best economics books for five- to ten-year olds
At FiveBooks, from Yana van der Meulen. The first pick is Cloud Tea Monkeys ("This book focuses on a woman who is very poor") and I have not heard of any of them so I cannot judge the list.
Between the ages of five and ten, I liked books on science, books with maps, and by age ten I liked books on chess and also on cryptography and mathematics, most of the Trachtenberg method of speed arithmetic. An alternative approach is to give your kid books which invest in analytical capacity, without trying to teach economics at all. Is economics a topic or a mode of thought? Perhaps it matters what age you are at.
By the way, did you know that the awesome FiveBooks has now merged with the awesome The Browser? Let's hope the antitrust authorities let that one proceed…
*Apollo’s Angels: A History of Ballet*
That is the new book by Jennifer Homans and it is one of the very best non-fiction works of the year, impeccably written and researched. Here is the excerpt of greatest interest to most economists:
None of the Russian ballet's many admirers, however, would be more central to the future of British ballet than John Maynard Keynes. Keynes is usually remembered as the preeminent economist of the twentieth century, but he was also deeply involved with classical dance and a key player in creating a thriving British ballet…
For Keynes…classical ballet became an increasingly important symbol of the lost civilization of his youth…With Lydia at his side, Keynes plowed his talent and considerable material resources into theater, painting, and dance, even as he was also playing an ever more prominent role in political and economic affairs on the world stage.
The couple's Bloomsbury home became a meeting place for ballet luminaries (Lydia's friends) and a growing coterie of artists and intellectuals who saw ballet as a vital art…When Diaghilev died in 1929, many of them joined Keynes in establishing the Camargo Society, an influential if short-lived organization devoted to carrying Diaghilev's legacy forward — and to developing a native English ballet. Lydia was a founding member and performed in many of the society's productions…Keynes was its honorary treasurer.
In the mid-1930s, Keynes also built the Arts Theatre in Cambridge, funding it largely from his own pocket…As Britain sank into the Depression, Keynes's interest in the arts also took on an increasingly political edge: "With what we have spent on the dole in England since the war," he wrote in 1933, "we could have made our cities the greatest works of man in the world."
I did, by the way, very much enjoy Black Swan (the movie), despite its highly synthetic nature, a few disgusting scenes, and its occasional over-the-top mistakes. So far it's my movie of the year along with Winter's Bone, the Israeli movie Lebanon, and the gory but excellent Danish film, Valhalla Rising.
My favorite recording of Swan Lake (and my favorite classical CD of 2010) is conducted by Mikhail Pletnev (controversial but there is a good review here), who was recently cleared of child abuse charges in Thailand.
Is RyanCare a version of Obamacare?
More or less, Ezra says:
The Ryan-Rivlin plan basically turns Medicare into Obamacare. And in that context, Republicans love the idea behind ObamaCare and think it'll save lots of money.
Under the Ryan-Rivlin plan, the current Medicare program is completely dissolved and replaced by a new Medicare program that "would provide a payment – based on what the average annual per-capita expenditure is in 2021 – to purchase health insurance." You'd get the health insurance from a "Medicare Exchange", and "health plans which choose to participate in the Medicare Exchange must agree to offer insurance to all Medicare beneficiaries, thereby preventing cherry picking and ensuring that Medicare’s sickest and highest cost beneficiaries receive coverage."
File under "True, True, True." My view is that when it comes to health care economics, just about everyone should have egg on their faces.
The wisdom of Jeff Ely
1. Is your marriage a repeated game? And if so, what kinds of things have you learned with each iteration?
It started out as a repeated game. Now it's a game of repeating. My wife repeats the same thing over and over and I always give the same response: ”take-out.” (alternatives: ”your hair looks great as it is,” “it wasn’t me,” etc.)
…5. Does being an economist make you better or worse at resolving conflict with your wife?
As an economist and game theorist I have a unique understanding of the secrets of conflict resolution. And my marriage will be peaceful and harmonious once my wife accepts that.
Here is more, including a loving photo. I wonder how Natasha would answer these same questions…
Who is going long on volatility?
Arnold re-asks Kevin Drum's question.
But this is mysterious. After all, not everyone is going short on volatility. In fact, by definition, only half of the punters on Wall Street are doing it. The other half are taking the other side of the bet.
A bank makes a mortgage to a potentially dubious borrower with little or no money down. The bank receives an upfront fee, and holds a potentially profitable loan, but accepts the obligation to buy the house at a forty or so percent discount to market value, should the borrower decide to, or have to, stop mortgage payments, thus inducing foreclosure. In the short run, the borrower is long volatility. A strong economy means "end up owning the house," while a very weak economy means "mail in the keys," no damage no harm.
In lots of world-states the buyers are better off and that is why it is politically popular to allow and indeed encourage banks to take on this kind of net position, however dangerous it may be in the longer run. The real scorpion's tail to this financial trick is that both special interests and populism will favor it, politically. Politicians, like banks, also prefer to go short on volatility and embrace the ticking time bomb. As with bankers, there is no "boil in oil" penalty worse than dismissal and the cost of that penalty does not vary much with the badness of the crisis.
The synthesis of CDOs out of tranches makes this basic logic much more intense, in a non-transparent way; read this post on the entire logic.
Of course this mechanism interacts with the real economy to (sometimes) help feed or encourage a real estate bubble, thus boosting systemic risk. This individual home buyer position, done collectively and in sufficiently large numbers, damages the interest of the buyers by inducing macroeconomic volatility and thus altering the distribution of their job market and equity market returns (note that in simple options pricing the overall distribution of returns is taken for granted).
It is appropriate to observe that many buyers are failing to cash in on the value of their "mail in the keys" option, perhaps for reasons of custom and conscience.
When various banks hedged their risk with AIG, they shifted some of the risk but most or all of them remained with net exposure to the real estate market and net exposure to volatility. AIG nonetheless played the same strategy as the banks did.
The newest and best data on income inequality
The paper is by Bakija, Cole, and Heim, find it here.
There is much to say about this paper, but first of all the Kaplan and Rauh work, which I have cited several times, seems to offer incorrect estimates of the professions of the higher earners. Here is the authors' corrective chart:
Here is a summary of their broader results:
Our findings suggest that the incomes of executives, managers, supervisors, and financial professionals can account for 60 percent of the increase in the share of national income going to the top percentile of the income distribution between 1979 and 2005. We also demonstrate significant heterogeneity in income growth across and within occupations among people in the top percentile of the income distribution, suggesting that factors that changed in the same way over time for all high income people are probably not the main cause of increasing inequality at the top. The incomes of executives, managers, financial professionals, and technology professionals who are in the top 0.1 percent of the income distribution are found to be very sensitive to stock market fluctuations. Most of our evidence suggests that financial market asset prices, corporate governance, entrepreneurship, and income shifting across corporate and personal tax bases may be especially important in explaining the dramatic rise in top income shares.
I would reword this as a) "it's complicated," and b) "a lot of them made the money in capital markets." It does remain the case that top incomes in finance rose by far most rapidly.
In this very careful and rigorous paper, here is a "scream it from the rooftops" result:
…we find that a one percent increase in the net of tax share is associated with an 0.7 percent reduction in incomes earned by people in the top 0.1 percent of the income distribution, which would imply that if we were to raise top marginal tax rates further on these taxpayers, the increase in deadweight loss would be substantially larger than the increase in revenue raised [emphasis added]. However, we find essentially no evidence at all of any responsiveness of people below the top 0.1 percent…
Better stock up on those cough drops.
For the pointer I thank Adam Looney.
Markets in everything, etc.
This piece builds a new impression with each paragraph:
A firm in eastern Ukraine has come up with a promising business idea — hiring out drinking buddies with whom clients can shoot the breeze on long evenings out in the industrial town of Dniprodzerzhynsk, presumably over a bottle or two of vodka.
For a fee of around €14 ($18), a company called "Kind Fairy" provides "a pleasant companion who can enliven a boring evening," manager Yulia Peyeva told AFP.
Dniprodzerzhynsk on the river Dnieper is known for its heavy industry and named after the founder of the Bolshevik secret police, Felix Dzerzhynsky.
"Virtually all of our people are talented. They can play guitar, sing or recite poetry. Today you may want to talk about art and tomorrow to read Faust," said Peyeva, adding that the firm does not encourage binge drinking.
She said the service is enjoying strong demand, and that the firm employs a number of psychologists among its staff of boozing partners.
For the pointer I thank Brian Wheeler and also Allison Kasic.
Writing naked puts and how the financial sector makes so much money
In part the financial sector does the equivalent of writing "naked puts," namely taking risks which usually yield extra income but occasionally blow up and bring large losses, part of which are socialized. Lending money to homeowners under relatively loose terms is one way of taking such a position but of course trading strategies can replicate related risk positions.
H. Peyton Young just wrote me that he and Dean Foster have a piece in the latest QJE on a closely related logic; I have yet to read it closely but it strikes me as a very very important article.
The key problem underlying all of this is we don't know how to punish people in a manner consistent with the rising size of absolute rewards. As I wrote:
Another root cause of growing inequality is that the modern world, by so limiting our downside risk, makes extreme risk-taking all too comfortable and easy. More risk-taking will mean more inequality, sooner or later, because winners always emerge from risk-taking. Yet bankers who take bad risks (provided those risks are legal) simply do not end up with bad outcomes in any absolute sense. They still have millions in the bank, lots of human capital and plenty of social status. We’re not going to bring back torture, trial by ordeal or debtors’ prisons, nor should we. Yet the threat of impoverishment and disgrace no longer looms the way it once did, so we no longer can constrain excess financial risk-taking. It’s too soft and cushy a world.
That’s an underappreciated way to think about our modern, wealthy economy: Smart people have greater reach than ever before, and nothing really can go so wrong for them. As a broad-based portrait of the new world, that sounds pretty good, and usually it is. Just keep in mind that every now and then those smart people will be making—collectively—some pretty big mistakes.
Matt is correct that the argument doesn't require bailouts, although bailouts make the problem much worse, by neutering creditors as a risk-reducing force.
Most likely, shareholders favor some but not all of these "going short on volatility" risks. To some extent they are ripping off the creditors by taking such risks, to some extent they are ripping off the public sector through an expected bailout (not true for most non-financial firms, of course), and to some extent the managers are pushing the risk beyond the point shareholders would desire, if they understood what was going on. Keep in mind that shareholders and bondholders are also potential market competitors, so the firm's trading book can't be completely open to even the owners of the firm (a neglected point, in my view).
One question, raised by Robin Hanson, is why everyone doesn't write these naked puts. You can introduce the "not everyone can expect a bailout" point here and it works fine. But there are other reasons too:
1. Large-scale banking involves economies of scale (after the few biggest U.S. banks, size drops off dramatically). You don't have to think these economies are socially productive; the point remains that Goldman can take positions which my local bank will not or cannot with equal facility, for a mix of institutional and expertise reasons. The prospect of bailouts, of course, cements concentration in the sector because everyone wants to lend to "Too Big to Fail."
2. Arguably every bank does write the equivalent of naked puts to a socially non-optimal degree. It is often homeowners on the other side of the market, arguably to an irrational degree. In any case the resulting price of the put can be actuarially fair and the basic mechanism still operates. If you play this strategy, you can expect (the mode) a bunch of years of multi-million returns, followed by an eventual unceremonious firing (if that) and life in the Hamptons. If you follow an efficient markets strategy, you can expect the going rate of return on the diversified market portoflio. Which sounds better?
Soon I'll write a post on whether vigilant creditors can neuter this risk-taking, so please hold off on that question for now.
Addendum: This "going short on volatility" risk strategy is receiving a good deal of attention from commentators on my piece, but I actually think "arriving there first with a good asset purchase," as I discuss in the article, is a somewhat more important mechanism for increasing income inequality among the top one percent. A lot of the rise in income inequality has come outside the financial sector narrowly construed, though it still is related to the existence of relatively open capital markets.
Assorted links
1. Is poverty the main problem behind U.S. education?
2. NHS reforms to proceed in the UK.
3. Peter Chang pops up in Atlanta with a new restaurant, joint venture in Charlottesville.
4. The Facebook thief: will he be caught?
5. Ten best data visualization projects.
6. Kim-Jong Il, Looking at Things.
7. Hyper-sensitivity training, funny.
8. The new museum in Tasmania: "The 49-year-old Tasmanian, who made his money by developing complex gambling systems, describes himself as a “full-on secularist.” “MONA is my temple to secularism,” he adds, explaining that he is interested in “talking about what we are”–in other words, what makes humans human. “People fucking, people dying, the sorts of things that are the most fun to talk about.""
Has knowledge capital been depreciating more rapidly?
The excellent Michael Mandel writes:
Over the past 10-15 years, the strengthening of information flows into developing countries meant that knowledge capital was being distributed much more quickly around the world. As a result, the normal process of knowledge capital depreciation greatly accelerated in the U.S. and Europe–beneath the radar screen, because no statistical agency constructs a set of knowledge capital accounts.
I agree with the conclusion but I am not sure that globalization was the mechanism. I sometimes think of an imaginary economy with two sectors: music and bathtubs. I believe that my bathtub is over thirty years old, yet for me it works fine and I have no desire to buy a new one. When it comes to music, most people want to listen to what is new and hot, not Bach's B Minor Mass. Furthermore, even within the music sector, acts seem to have declining longevity, in part due to the decline of the iconic album, the rise of the iTunes single, the fall of entry barriers, and the proliferation of genres. The Rolling Stones are still around, or U2, but more rapid turnover is the trend.
A while ago I read a good article about how few people on Netflix rent or stream the indie movies from the 1980s or 90s.
The more that your economy "looks like" the music sector, the more rapid the rate of depreciation for production capital and knowledge capital. This means we may be overestimating our national wealth.
Here is Michael on our aging capital stock.
The health care plan of Kim Meyers
If in a calendar year a person has in excess of $100,000 in medical expense they are transferred over to Medicare, regardless of age.
The remainder of the citizenry is able to choose from a competitive insurance market, which is essentially selling $100,000 “Term” health insurance policies.
That is from Kim Meyers of Northwestern. As she notes in an email to me, this can be combined with health savings accounts and various kinds of deregulation for the coverage of the lesser expenses. You also can raise the Medicare eligiblity age and I would say you could raise it to a very high level indeed.
I view this as the most plausible way of bringing a Singapore-like health care system to the United States.
Fill in the blank
Does this story sound familiar? Perhaps it is more familiar than you think. Which country is this article excerpt about?
Rising debt charges are forcing [???]…to reshape its…economy…[a] congress, scheduled for April, will discuss and likely ratify policies that are already starting to be implemented. These include cutting 20 per cent of state workers, cutting social benefits, eliminating state subsidies, improving [the] trade balance and liberalising rules for small business and foreign investment.
No peeking. The answer is here, the article is here, and the leading creditor is…here.
Brain teasers from monetary theory and Scott Sumner
First, here is Scott Sumner's ideal world:
In an ideal world, we’d remove all discretion from central bankers. The Fed would simply define the dollar as a given fraction of 12- or 24-month forward nominal GDP, and make dollars convertible into futures contracts at the target price. If the public expected NGDP to veer off target, purchases and sales of these contracts would automatically adjust the money supply and interest rates in such a way as to move expected NGDP back on target. It would be something like the classical gold standard, but with the dollar defined in terms of a specific NGDP futures contract, instead of a given weight of gold. The public, not policymakers in Washington, would determine the level of the money supply and interest rates most consistent with a stable economy.
To proceed, not everyone will understand this post, which is DeLong on Scott Sumner:
As I understand Scott's proposal, it is this: Nominal GDP in the fourth quarter of 2007 was $14.291 trillion. A 5% growth rate from that base would give us a value of $17.455 trillion for the fourth quarter of 2011. Add on another 3% for the average short-term nominal interest rate we would like to see, and we have $18.153 trillion. Therefore the Federal Reserve would, today, announce that it stands ready to buy and sell dollar deposits to qualified customers at a price of $1 = 1/18,155,000,000,000 of 2011Q4 GDP.
If investors thought that nominal GDP in the fourth quarter of 2011 was likely to be lower than $18.15 trillion, they would take the Fed up on its offer: demand the cash now, pay off the contract in a year by then paying 1/18,155,000,000,000 of 2011Q4 GDP, and (hopefully, if they were right) make money–thus the money stock would increase. If investors thought that nominal GDP in the fourth quarter of 2011 was likely to be greater than $18.155 trillion, they would take the Fed up on its offer: give cash to the Fed now, collect the contract in a year by receiving 1/18,155,000,000,000 of 2011Q4 GDP, and (hopefully, if they were right) make money–thus the money stock would fall.
If nominal GDP were expected to fall, the Federal Reserve would be shoveling money out the door at negative expected nominal interest rates. If his scheme were applied today it would be quantitative easing on a pan-galactic scale, as everybody would run to the Fed with bonds to use as collateral for their promises to pay the expected futures contract in a year in exchange for the cash now.
The Federal Reserve would then become truly the lender of not just last but first resort. Why would anybody borrow on the private market even at 0% per year when they could borrow from the Fed at -3%/year? Savers would simply hold cash rather than try to match the terms that the Fed was offering borrowers. Borrowing firms would borrow from the Fed exclusively. The Fed would thus create a wedge between the minimum nominal interest rate that savers would accept (zero, determined by the alternative of stuffing cash in your mattress) and the nominal interest rate open to borrowers.
I expressed related reservations about a related version of the idea in the 1997 JMCB. I am all for (rough) nominal GDP targeting, and considering the forecast, and for Scott's work in general, but I don't think the "automaticity" versions of it work. NGDP targeting does best as a general guideline for the central bank, which the central bank follows to make the world a better place, but without renouncing some ultimate degree of discretion with regard to timing and targeting and how good a deal they offer everyone at this new and somewhat unusual version of the discount window.
It's a general problem with strict pegging schemes that some prices (or pxq variables) adjust more quickly than others, or are better and more quickly forecast than others, and that means arbitrage opportunities against the pegger and/or very dramatic swings in nominal interest rates.
So on this question I agree with Brad and not with Scott.
Still, there is a general rule: when Scott Sumner says you are wrong, you are wrong (this is somewhat distinct from the claim that "Scott Sumner is always right," though if he worded all his pronouncements in a particular way I suppose it would not be).
So perhaps Scott will say that Brad and I are wrong. Or perhaps he will say that I am wrong about the general rule in the first place. Or perhaps he will say that we have misunderstood him.
The broader underlying question is how strict a nominal GDP target or NGDP forecast target can be and that question is not very well understood.
Assorted links
1. Why conservatives should embrace NGDP targeting, by Scott Sumner.
2. Megan McArdle's annual gift guide.
3. A new book on economic diagrams.
4. Interview with Edward Albee.
6. IBM computer vs. Jeopardy champs.
7. Did inequality cause the crisis?
8. Will Wilkinson is eloquent, on Orszag.
Querétaro, San Miguel Allende, and Guanajuato bleg
You know the deal: don't neglect the dining suggestions, or the possible day trips, and I thank you all in advance for the pointers. A high percentage of them end up being used!