Results for “age of em” 16718 found
Jim Hamilton on Real Shocks
Hamilton hits the nail on the head:
…[I] disagree with some of my colleagues is in their presumption that wage or price rigidities are the core frictions that are responsible for producing the present situation. I have in my research instead stressed technological frictions. For example, when spending on cars abruptly falls, there is a physical, technological challenge with getting the specialized labor and capital formerly employed in manufacturing cars into some alternative activity. In my mind, it is a mistake to pretend that any federal program is capable of immediately re-employing those resources into an alternative, equally productive enterprise. More fundamentally, I have suggested that our present situation is as if someone had quite successfully sabotaged the basic functionality of our financial system. Until we once again have a financial sector that can successfully allocate credit to worthy projects, we're not possibly going to be able to produce as much in the way or real goods and services, no matter what the level of aggregate demand or stimulus package might be. In terms of the textbook Keynesian models that people play with, I'm suggesting that "potential" GDP growth for 2009:Q1– that growth rate which, if we try to exceed it by stimulating aggregate demand, we primarily just get more inflation– is in fact a negative number. I do not accept the proposition that there is a level of government spending– however large a number you choose to suggest– that will prevent the unemployment rate from rising above 8%. But I do believe that if the government borrows a sufficiently large amount, we will have to worry in a very concrete way about what will sustain the foreign demand for U.S. assets.
Hamilton continues by noting that such a position is quite compatible with spending to maintain state and local government expenditures with block grants, fundamental infrastructure spending on things like the electric grid and working hard to restore the financial sector.
But rushing through new government spending plans, just for the sake of spending? Count me off of that bandwagon.
Keynes on consumption, chapters eight and nine
There are many lovely and insightful discussions in these two chapters; it should be enough to persuade anyone that the GT is fun to read.
For instance Keynes's discussion of the interest elasticity of savings on p.93 persuaded a whole generation of economists. Or on p.95 he references theories of spending based on expectations about the future; only in their most extreme form will they render Keynesian results impossible.
Much of these chapters are dedicated to the simple idea that consumption does not rise indefinitely with income (and other influences). The ultimate point is to establish how much aggregate demand relies on investment demand, which it turns out is, to Keynes, highly unstable.
Keynes's continuing allegiance to some elements of classical (!) economics pops up in chapter eight (e.g., pp.100, 105), specifically his view that a society can run out of profitable investment opportunities. He feared secular stagnation and thought that government management of investment might be needed to stave off this possibility. We hear all about Keynesian economics and the short run but in reality part of Keynes was still under the spell of Ricardo and Malthus and the idea of the classical stationary state (p.106).
For the same reason Keynes thought the private sector would run out of good investment opportunities, he also thought that by 2009 (what exactly was the date he gave? Brad DeLong knows) the problem of scarcity might be largely overcome. It hasn't worked out that way.
A number of commentators keep on bringing up Henry Hazlitt's book on Keynes in the comments section. Hazlitt's book makes many good points and has many "gotchas" on Keynes's errors. Still, Hazlitt cannot bring himself to see or admit there are conditions under which Keynes can be right and thus I don't regard it as a convincing critique. The best critical approaches to the GT are those which figure out under which conditions it might be correct and then examine empirically whether those conditions in fact hold.
The paradox of thrift
Matt Yglesias offers a clear, non-technical explanation. I would add a few points:
1. If wages are relatively flexible in the downwards direction, it is easier to avoid the downward spiral from falling aggregate demand. There is an odd tension (though not contradiction) between the view that a stimulus is necessary and the Progressive view that workers don't have much bargaining power and that bargaining power really matters.
2. Savings are especially likely to fail to translate into investment when the banking system is messed up. That applies today, but Keynes was not sufficiently aware of the importance of this condition.
3. Prior to the collapse, savings out of income in this country were approximately zero. So the notion of "people ending up saving less" has to mean a rising ratio of debt to gdp. That's OK for the argument, but now it gets complicated.
For instance, instead of "saving more" the core action under consideration might be to pay down some debt instead of spending money on consumption. But what does the creditor do with those funds? Are dollars sent to creditors "low velocity dollars" rather than "high velocity dollars"? Maybe, but of course they don't have to be. If the citizenry is paying back to creditors who engage in active lending (or for that matter rapid consumption), and make new loans rapidly, things can be OK. If the citizenry is paying money back to zombie banks, maybe those banks just sit on the cash. (How much of the money is going to zombie banks?)
A lot of claims about the paradox of thrift depend on having a good handle on which micro-sectors of the economy breed high vs. low velocities of money. We don't always have such information. The whole notion of how money can get trapped in "low velocity circuit," beyond simple observations about first-round effects (the poor spend a higher percentage of their incomes than the rich), is receiving insufficient attention.
The "Treasury view" that you can treat monetary velocity as constant is wrong. But there's a lot about monetary velocity which we don't understand, or at least which we have not yet applied to the current problems at hand.
The World Between the Wars, 1919-1939: An Economist’s Perspective
I don't know why this book, by Joseph C, Davis, isn't cited more often, as it's one of the best on this period. Here is one small bit:
In the spring of 1933 a mock-trial of "the economists" was staged at the London School of Economics, Robert Boothby, M.P. representing "the state of the popular mind," charged the economists with "conspiring to spread mental fog," declaring that they "were unintelligible; that they had in general proved wrong; and that in any case they all disagreed." Four men of high standing (Sir William Beveridge, Sir Arthur Salter, Professor T.E. Gregory, and Hubert Henderson) discussed Boothby's charges without wholly refuting them. It was sagely observed: "Much of the public's distrust of economics arises from the fact that the economist is compelled to act both as physiologist and doctor at once." In fact, economists had not been trained to be "economic doctors" or "social engineers," and very few persons had acquired such competence.
I wonder if anyone will restage such a trial today…
Stimulus update
This,
by the way, is the most pernicious effect of the entire financial
meltdown on fiscal policy. When $100 billion no longer seems like a
significant sum of money, it's time for a good stiff drink.
Yes a slightly cheaper version of the stimulus is about to pass. Here is some detail on the composition of the Senate bill. The final combined bill,as it will come out of conference, might be worse yet. And here are details of the new banking plan.
Salsa Dancing Into the Social Sciences
The author is Kristin Luker and the subtitle is Research in an Age of Info-Glut. I enjoyed this book very much and I thought it was one of the best books on the philosophy of the social sciences I have read, ever. In part it is good because it ignores philosophy of science (and Continental philosophy gobbledy-gook) and focuses on the anthropology of how research is actually done. Here is the author's summary of her message
Let's review the state of play. I've told you that "methods" in the social sciences are historically, socially, and politically located in both time and place. I've also told you that the methods most commonly taught (canonical social science, "normal science") grew out of a particular time and place, namely postwar America. I've tried to convince you that in this new postmodern, globalizing world, those old methods don't work as well as they used to, at least not for the kinds of problems that most of us are interested in these days. Finally, I have argued that a whole set of "practices," that is, taken-for-granted ways of doing things that aren't even at the level of consciousness most of the time, grew out of those old methods and now must be rethought by those of us whose contributions will consist of making connections across boundaries, rather than following the normal-science way of making incremental contributions to a deep but narrow part of our fold.
There's much more to the book than that quotation indicates. Recommended.
Tax break for homebuyers?
I'm not sure I understand the proposal, but here is what the NYT says:
with a tax credit for homebuyers of up to $15,000, a provision
championed by Republicans as addressing a root cause of the recession.
Like Arnold Kling, I wish to shift the economy out of housing, not into it again. I also believe that the supply of homes is relatively elastic right now. The tax credit will subsidize the new buyers without propping up the price of homes. Demand will go up, supply will go up, price will stay more or less on the same trajectory, and banks won't be any healthier. The subsidy goes to new home buyers and why should we be helping them above all others? Aren't they relatively wealthy on average? (Not that there's anything wrong with that.) Aren't some of them the dreaded "flippers" and speculators for that matter? (Can we really enforce the primary residence requirement?) Do we really want to push people into being less diversified and less geographically mobile in the labor market? And here's Alex's post from earlier today.
There's a whole other debate you could have on whether we should be encouraging people to buy outputs which are already produced.
So far I say boo to the Republicans. It could be I don't understand the proposal; if that is so please correct me in the comments. Here are further discussions of what is going on.
The difficulties of a housing stimulus
Ed Olsen, one of the nation's foremost housing experts, points out that it's much harder to stimulate housing than many people think because you have to take into account the rental market.
The primary effect of many proposals directed at the housing market would be to decrease the demand for rental units by about the same amount as they would increase the demand for owner-occupied units. This would be the effect of the proposed tax credits or loans at below-market interest rates to new homebuyers.
…The impact of preventing foreclosures on housing prices is overstated for the same reason. The overwhelming majority of families who default on their mortgages move to another unit that they do not share with others. Therefore, preventing foreclosures would have little effect on the total demand for dwelling units and hence little overall effect on market prices.
…Subprime mortgages did induce some people to buy houses beyond their means, and foreclosures would decrease the demand for the types of houses bought by these people. This would decrease the prices of similar houses. However, when they default on their mortgages, the families involved move to more modest houses or apartments, thereby increasing the demand for other types of units in other locations and the prices of units of these types. Preventing foreclosures would lead to higher prices for some properties and lower prices for others.
Read the whole thing (doc).
Odd terms
Isn't it funny how they call them the "toxic assets"? OK, a lot of them aren't worth very much. But would it not be better to speak of the "toxic liabilities"? This may sound like a semantic point, but the toxic assets terminology breeds the idea that the mere creation of a "bad bank," built from these assets, will boost the financial system. It won't.
Overpaying for the toxic assets is another matter entirely. Yves Smith, by the way, has a good critique of current bank aid proposals and of course Paul Krugman has been making related arguments. The frightening thing is that many brilliant people — such as those on the Obama team — think this is the best we can do, all constraints taken into account. We'll see, as they say.
The other development is the proposal to limit executive pay to $500,000 for any bank taking "large amounts" of bailout funds; maybe that is the secret plan for keeping the bailout plan affordable. The drawback is that it discourages relatively healthy banks from using the funds to buy out the sick banks which, although it sounds inappropriate, is actually one of the better chances for making the program work.
I am surprised no one has complained about this yet
MissMarketCrash sent this along to me:
pitch to the laid-off American workers it's offering to place in India.
The catch: Wages in the country are pennies-on-the-dollar compared to
U.S. salaries.
Under a program called Project Match, IBM will help workers laid off
from domestic sites obtain travel and visa assistance for countries in
which Big Blue has openings. Mostly that's developing markets like
India, China, and Brazil.
NB: The program is limited to "satisfactory performers."
Do people get more depressed in winter?
Some people do, but is it true on average? Maybe not, says Ben Goldacre (via Andrew Sullivan):
Back in 1883
Esquirol commented on the higher incidence of suicide in spring and
early summer. Swinscow showed the same thing with all UK suicides from
1921-1948. So that’s not really winter blues. A study in 2000 looked at all UK suicide data from 1982-96 and found that even this seasonal pattern had pretty much disappeared.
What about elsewhere? A 1974 study on all suicides in North Carolina
(3,672) and admissions to their Veterans Hospital Psychiatry Service
(3,258) from 1965 to 1971 showed no seasonal variation. A 1976 Ontario
study found peaks of suicide and admissions for depression in spring
and autumn. Suicide is highest in Summer, says a paper from Australia in 2003. I’m really not getting this Blue January thing.
Maybe you want data from the general population on mood. A study in 1986
looked at 806 representative males from Finland and found low mood more
common in the summer. Some studies do find higher rates of depressive
symptoms in the winter (Nayyar and Cochrane, 1996; Murase et al.,
1995), but then, some find the opposite results, like a peak in the
spring (Nayham et al., 1994) or summer (Ozaki et al., 1995). One study
from just last month proactively asked 360 patients to rate
their mood regularly, rather than waiting for an event, and found no
relationship, again, between mood and season.
Maybe there are other sources of data you could explore? A paper
looking at GP prescriptions for antidepressants in 1984 found a spring
peak. An earlier paper from 1981 (Williams and Dunn) looks at
prescriptions from 1969-75 and finds peaks in February, May and
October. Another
from the same year looked at GP consultations for depression and found
peaks in May-to-June and November-to-January (they found similar
results for osteoarthritis, oddly).
Hail Ben Goldacre! Here is my previous post on Ben Goldacre.
Would you rather have electricity or an internet connection?
Entasopia is a cool name for a place in Kenya:
The outpost, with about 4,000 inhabitants, is at the end of that road and beyond the reach of power lines. It has no bank, no post office, few cars and little infrastructure. Newspapers arrive in a bundle every three or four weeks. At night, most people light kerosene lamps and candles in their houses or fires in their huts and go to bed early, except for the farmers guarding crops against elephants and buffalo.
Entasopia is the last place on earth that a traveler would expect to find an Internet connection. Yet it was here, in November, that three young engineers from the University of Michigan in Ann Arbor, with financial backing from Google, installed a small satellite dish powered by a solar panel, to hook up a handful of computers in the community center to the rest of the world.
Here is the full story. Here is a landing strip in Entasopia. Here are Entasopia girls reciting an AIDS poem. Here are the local hills.
Government and the cost-disease — provoking you
Matt Yglesias writes:
it tends to go away. Consider agriculture. Our modern-day agricultural
technology is way better than what was available 200 years ago. But
agricultural progress hasn’t meant that everyone goes to work in the
super-charged high-tech agriculture of the future. It’s meant that more
food than ever is grown with fewer person-hours of labor than ever. We
should expect this to continue apace. For all the talk of trade’s
impact on American manufacturing, the bigger issue has been automation
and robots. But either way, even though people will continue to consume
manufactured goods–just as we still eat–manufacturing will be a
less-and-less important part of the economy. Not because manufacturing
“isn’t important” but because it’ll get more efficient. And that’s how
the whole private sector part of the economy will go. Markets, doing
their work, will make those sectors more and more efficient leading
them to shrink as a share of the overall economic pie.
What will be left is big government. Or, rather, bigger and bigger government.
I would make a few points. First, some progressives wish to argue that government is fairly efficient (low Medicare overhead costs is a common observation here); in those sectors this argument won't apply. Second, if a given activity could go to either the private or public sector, we might be reluctant to stick it in the less-productivity-enhancing public sector. Third, many government activities should benefit greatly from private sector technological advancement (electricity, cars, internet, etc.), yet we don't usually observe those sectors shrinking rapidly, as a percentage of gdp, as a consequence. This should worry us. Still, there is truth in Matt's basic observation.
The social changes brought by recessions
Here is my column on the social changes occasioned by recessions. Of course recessions are mostly bad and this one is no exception. Still, one underappreciated fact is that health outcomes appear to improve in recessions, not get worse (even though health care access and coverage decline):
Sure, it's stressful to miss a paycheck, but eliminating the stresses of a job may have some beneficial effects. Perhaps more
important, people may take fewer car trips, thus lowering the risk of
accidents, and spend less on alcohol and tobacco. They also have more
time for exercise and sleep, and tend to choose home cooking over fast
food. In a 2003 paper, “Healthy Living in Hard Times,” Christopher J. Ruhm, an economist at the University of North Carolina
at Greensboro, found that the death rate falls as unemployment rises.
In the United States, he found, a 1 percent increase in the
unemployment rate, on average, decreases the death rate by 0.5 percent.
In this recession the consumption of the wealthy is taking a bigger hit than is usually the case in a downturn:
In any recession, the poor suffer the most pain. But in cultural
influence, it may well be the rich who lose the most in the current
crisis. This downturn is bringing a larger-than-usual decline in
consumption by the wealthy.
The shift has been documented by Jonathan A. Parker and Annette Vissing-Jorgenson, finance professors at Northwestern University, in their recent paper,
“Who Bears Aggregate Fluctuations and How? Estimates and Implications
for Consumption Inequality.” Of course, people who held much wealth in
real estate or stocks
have taken heavy losses. But most important, the paper says, the labor
incomes of high earners have declined more than in past recessions, as
seen in the financial sector.
Popular culture’s catering to the
wealthy may also decline in this downturn. We can expect a shift away
from the lionizing of fancy restaurants, for example, and toward more
use of public libraries. Such changes tend to occur in downturns, but
this time they may be especially pronounced.
Markets in everything, book lovers’ edition
only $7,000 so I feel like it was a HUGE bargain. What value! First let
me say that the book does start off a little slow but once you get into
the third chapter, "Silicon Molecules: We Hardly Knew Ye'", you just
can't put this book down. It isn't without it's moments though. The
contrast between antagonist and protagonist is just simply fantastic. I
highly suggest reading this book by flashlight under the covers or in a
homemade fort/tent in your bedroom. A+ and Highly recommended!
And:
in. I mean, "Chemical Shifts of P-31 Compounds" had me on the edge of
my seat, and "Hyperfine Coupling Constants of the Pnictogens" had a
little something for everybody. I can say this with the conviction that
only comes with love when I say that "Chemical Shifts and Coupling
Constants for Silicon-29" is total crap.
And:
think "for the cost of $8000, one better be able to do rocket science
after reading." Well, I have even better news. After I closed this
book, I realized I had gained the knowledge to spontaneously teleport!
That's right! I don't even need this junky telepod anymore.
And:
I clicked on the "I'd like to read this book on Kindle" link. Can't wait to hear from Springer.
And:
Fascinating, witty, and very subtle in it's criticisms of our modern
times. It's an intensely moving story about how a young Nepalese boy
"Silicon" (age 29) struggles to get by in a city that offers no support
for immigrants as he works a meaningless job to get by. The woman he
loves is a violent criminal, and this book chronicles his struggle to
hold on to his righteousness while simultaneously trying to woo her and
become a couple.
But I won't spoil the ending! Buy this book and you won't be disappointed!
I liked this one-star review:
year grad student knows that you can't manipulate subvolume III/35A
with nuclei B-11 without first lowering the magnetic replicator to -300
ohms! Not to mention that unless you lower the cylindrical volume 4
quarks you'll freeze 90% of the atoms! And don't get me started on
nucleus Si-29, you can't…
Finally: