Economic links
Suggesting ways in which the “brain drain” could be a benefit to Africa.
Looking at the path of economic policy during 1930 and in 1931 when the real disaster began to unfold.
Using the 1967-75 closing of the Suez Canal as a natural experiment of the effect of distance on trade.
Interview with the man who runs/owns about a third of the Palestinian economy.
As a result of the Madagascan government failing basic democratic criteria, the US is essentially destroying the local textile industry.
Apparently, it is possible to increase one’s return by only investing in stocks when Congress is not in session:
He says on days when Congress is in recess, the stock market has risen at an average annual rate of 16.3%. On days when Congress is in session, it has risen only one-third of 1%.
Graphing job loss in the US two different ways.
Due to technology changes, North Dakota looks like becoming a major oil-producing state.
Nomadic retirees work for rent at cash-strapped parks in the US. Part of a much bigger pattern of nomadic retirees. Then there are privately run parks who pay actual wages. And reminding folk that, provided they have contracts that are sufficiently long-term, private operators are better than government ones at maintaining assets. Interview about privatising park management. While badly privatising something may reflect more on lack of government competence than privatisation.
Meanwhile, the saga of Freddie Mac and Fannie Mae continues.
Looking back on the US fiscal stimulus one year later highly sceptically. Arguing that the evidence is that the mutliplier effect is less than one.
Considering the monetary causes of the Great Depression:
As everyone here knows, in their Monetary History Friedman and Schwartz made the case that the economic collapse of 1929-33 was the product of the nation's monetary mechanism gone wrong. …
The special genius of the Monetary History is the authors' use of what some today would call "natural experiments"--in this context, episodes in which money moves for reasons that are plausibly unrelated to the current state of the economy. …
If the Depression had been the product primarily of nonmonetary forces, such as changes in autonomous spending or in productivity, then the nominal exchange rate regime chosen by each country would have been largely irrelevant. The close connection among countries' exchange rate regimes, their monetary policies, and the behavior of domestic prices and output, is strong evidence for the proposition that monetary forces played a central role not just in the U.S. depression but in the world as a whole. …
Before the creation of the Federal Reserve, Friedman and Schwartz noted, bank panics were typically handled by banks themselves--for example, through urban consortiums of private banks called clearinghouses. If a run on one or more banks in a city began, the clearinghouse might declare a suspension of payments, meaning that, temporarily, deposits would not be convertible into cash. Larger, stronger banks would then take the lead, first, in determining that the banks under attack were in fact fundamentally solvent, and second, in lending cash to those banks that needed to meet withdrawals. Though not an entirely satisfactory solution--the suspension of payments for several weeks was a significant hardship for the public--the system of suspension of payments usually prevented local banking panics from spreading or persisting (Gorton and Mullineaux, 1987). Large, solvent banks had an incentive to participate in curing panics because they knew that an unchecked panic might ultimately threaten their own deposits.
It was in large part to improve the management of banking panics that the Federal Reserve was created in 1913. However, as Friedman and Schwartz discuss in some detail, in the early 1930s the Federal Reserve did not serve that function. …
In short, according to Friedman and Schwartz, because of institutional changes and misguided doctrines, the banking panics of the Great Contraction were much more severe and widespread than would have normally occurred during a downturn. …
We don't know what would have happened had Strong lived; but what we do know is that the central bank of the world's economically most important nation in 1929 was essentially leaderless and lacking in expertise. This situation led to decisions, or nondecisions, which might well not have occurred under either better leadership or a more centralized institutional structure. And associated with these decisions, we observe a massive collapse of money, prices, and output. Thus, it seems to me that the death of Strong does qualify as one more natural experiment with which to try to identify the effects of monetary forces in the Great Depression. …
Let me end my talk by abusing slightly my status as an official representative of the Federal Reserve. I would like to say to Milton and Anna: Regarding the Great Depression. You're right, we did it. We're very sorry. But thanks to you, we won't do it again.
Those remarks were made by then Fed Governor Ben S. Beranke in 2002. The Federal Reserve he is now Chair has just raised the discount rate after 24 months of steady job losses. The last time that was done was October 1931. The current travails of the US economy, and the “lost decade” of the Japanese economy, makes one wonder about the notion that central planning works just fine in monetary policy.
There is a bit of a John Kenneth Galbraith revival:
Galbraith has come back into fashion: not only his ideas, which imply the need for a huge and expanding class of redemptory politicians and bureaucrats to save people from a fate that would be wretched without them, but his aristocratic assumption of unchallengeable moral superiority, written in his prose as it appears to be written on President Obama’s face. How delightful to be so generous, so very right all the time, and yet make a fortune and stay at the Ritz!
Paul Krugman on what economists can learn from evolutionary theorists:
First, read a text on evoluationary theory, like John Maynard Smith's Evolutionary Genetics. You will be startled at how much it looks like a textbook on microeconomics. … both economics and evolution are model-oriented, algebra-heavy subjects that are the subject of intense interest from people who cannot stand algebra. And as a result in each case it is very important to distinguish between the field as it is perceived by outsiders (and portrayed in popular books) and what it is really like. … And I guess it is no secret that even John Kenneth Galbraith, still the public's idea of a great economist, looks to most serious economists like an intellectual dilettante who lacks the patience for hard thinking. Well, the same is true in evolution.
… Now it is not very hard to find out, if you spend a little while reading in evolution, that Gould is the John Kenneth Galbraith of his subject. …
The most telling example of this preference is the widespread use of John Maynard Smith's concept of "evolutionarily stable strategies". An ESS is the best strategy for an organism to follow given the strategies that all others are following - the strategy that maximizes fitness given that everyone else is maximizing fitness, with each taking the others' strategies into account. Does this sound familiar? It should: the concept of an ESS is virtually indistinguishable from an economist's concept of equilibrium.
How public sector workers are increasingly becoming a privileged caste in the US:
There was a time when government work offered lower salaries than comparable jobs in the private sector but more security and somewhat better benefits. These days, government workers fare better than private-sector workers in almost every area-pay, benefits, time off, and job security. And not just in California. …
In California unfunded pension and health care liabilities for state workers top $100 billion, and the annual pension contribution has shot up from $320 million to $7.3 billion in less than a decade. In New York state, local governments may have to triple their annual pension contributions during the next six years, from $2.6 billion to $8 billion, according to the state comptroller. …
t’s a two-tier system in which the rulers are making steady gains at the expense of the ruled. The predictable results: Higher taxes, eroded public services, unsustainable levels of debt, and massive roadblocks to reforming even the poorest performing agencies and school systems.
With unionism increasingly concentrated in the public sector, growing government has become a union priority. Meanwhile, there are fights over classifying of people as contractors or employees.
Asking the good question of why there were housing booms only in certain localities in the US.
An RBA view of the world economic situation and Oz’s comparative painless sailing through the recent unpleasantnesses with graphs.
About Oz’s foreign investment policy:
Foreign investors cannot be expected to understand a policy that the government itself cannot properly articulate.
A Kiwi TV piece on how small and how expensive apartments in central Auckland: a case of “shoebox living” and a product of land use control.
Looking at the path of economic policy during 1930 and in 1931 when the real disaster began to unfold.
Using the 1967-75 closing of the Suez Canal as a natural experiment of the effect of distance on trade.
Interview with the man who runs/owns about a third of the Palestinian economy.
As a result of the Madagascan government failing basic democratic criteria, the US is essentially destroying the local textile industry.
Apparently, it is possible to increase one’s return by only investing in stocks when Congress is not in session:
He says on days when Congress is in recess, the stock market has risen at an average annual rate of 16.3%. On days when Congress is in session, it has risen only one-third of 1%.
Graphing job loss in the US two different ways.
Due to technology changes, North Dakota looks like becoming a major oil-producing state.
Nomadic retirees work for rent at cash-strapped parks in the US. Part of a much bigger pattern of nomadic retirees. Then there are privately run parks who pay actual wages. And reminding folk that, provided they have contracts that are sufficiently long-term, private operators are better than government ones at maintaining assets. Interview about privatising park management. While badly privatising something may reflect more on lack of government competence than privatisation.
Meanwhile, the saga of Freddie Mac and Fannie Mae continues.
Looking back on the US fiscal stimulus one year later highly sceptically. Arguing that the evidence is that the mutliplier effect is less than one.
Considering the monetary causes of the Great Depression:
As everyone here knows, in their Monetary History Friedman and Schwartz made the case that the economic collapse of 1929-33 was the product of the nation's monetary mechanism gone wrong. …
The special genius of the Monetary History is the authors' use of what some today would call "natural experiments"--in this context, episodes in which money moves for reasons that are plausibly unrelated to the current state of the economy. …
If the Depression had been the product primarily of nonmonetary forces, such as changes in autonomous spending or in productivity, then the nominal exchange rate regime chosen by each country would have been largely irrelevant. The close connection among countries' exchange rate regimes, their monetary policies, and the behavior of domestic prices and output, is strong evidence for the proposition that monetary forces played a central role not just in the U.S. depression but in the world as a whole. …
Before the creation of the Federal Reserve, Friedman and Schwartz noted, bank panics were typically handled by banks themselves--for example, through urban consortiums of private banks called clearinghouses. If a run on one or more banks in a city began, the clearinghouse might declare a suspension of payments, meaning that, temporarily, deposits would not be convertible into cash. Larger, stronger banks would then take the lead, first, in determining that the banks under attack were in fact fundamentally solvent, and second, in lending cash to those banks that needed to meet withdrawals. Though not an entirely satisfactory solution--the suspension of payments for several weeks was a significant hardship for the public--the system of suspension of payments usually prevented local banking panics from spreading or persisting (Gorton and Mullineaux, 1987). Large, solvent banks had an incentive to participate in curing panics because they knew that an unchecked panic might ultimately threaten their own deposits.
It was in large part to improve the management of banking panics that the Federal Reserve was created in 1913. However, as Friedman and Schwartz discuss in some detail, in the early 1930s the Federal Reserve did not serve that function. …
In short, according to Friedman and Schwartz, because of institutional changes and misguided doctrines, the banking panics of the Great Contraction were much more severe and widespread than would have normally occurred during a downturn. …
We don't know what would have happened had Strong lived; but what we do know is that the central bank of the world's economically most important nation in 1929 was essentially leaderless and lacking in expertise. This situation led to decisions, or nondecisions, which might well not have occurred under either better leadership or a more centralized institutional structure. And associated with these decisions, we observe a massive collapse of money, prices, and output. Thus, it seems to me that the death of Strong does qualify as one more natural experiment with which to try to identify the effects of monetary forces in the Great Depression. …
Let me end my talk by abusing slightly my status as an official representative of the Federal Reserve. I would like to say to Milton and Anna: Regarding the Great Depression. You're right, we did it. We're very sorry. But thanks to you, we won't do it again.
Those remarks were made by then Fed Governor Ben S. Beranke in 2002. The Federal Reserve he is now Chair has just raised the discount rate after 24 months of steady job losses. The last time that was done was October 1931. The current travails of the US economy, and the “lost decade” of the Japanese economy, makes one wonder about the notion that central planning works just fine in monetary policy.
There is a bit of a John Kenneth Galbraith revival:
Galbraith has come back into fashion: not only his ideas, which imply the need for a huge and expanding class of redemptory politicians and bureaucrats to save people from a fate that would be wretched without them, but his aristocratic assumption of unchallengeable moral superiority, written in his prose as it appears to be written on President Obama’s face. How delightful to be so generous, so very right all the time, and yet make a fortune and stay at the Ritz!
Paul Krugman on what economists can learn from evolutionary theorists:
First, read a text on evoluationary theory, like John Maynard Smith's Evolutionary Genetics. You will be startled at how much it looks like a textbook on microeconomics. … both economics and evolution are model-oriented, algebra-heavy subjects that are the subject of intense interest from people who cannot stand algebra. And as a result in each case it is very important to distinguish between the field as it is perceived by outsiders (and portrayed in popular books) and what it is really like. … And I guess it is no secret that even John Kenneth Galbraith, still the public's idea of a great economist, looks to most serious economists like an intellectual dilettante who lacks the patience for hard thinking. Well, the same is true in evolution.
… Now it is not very hard to find out, if you spend a little while reading in evolution, that Gould is the John Kenneth Galbraith of his subject. …
The most telling example of this preference is the widespread use of John Maynard Smith's concept of "evolutionarily stable strategies". An ESS is the best strategy for an organism to follow given the strategies that all others are following - the strategy that maximizes fitness given that everyone else is maximizing fitness, with each taking the others' strategies into account. Does this sound familiar? It should: the concept of an ESS is virtually indistinguishable from an economist's concept of equilibrium.
How public sector workers are increasingly becoming a privileged caste in the US:
There was a time when government work offered lower salaries than comparable jobs in the private sector but more security and somewhat better benefits. These days, government workers fare better than private-sector workers in almost every area-pay, benefits, time off, and job security. And not just in California. …
In California unfunded pension and health care liabilities for state workers top $100 billion, and the annual pension contribution has shot up from $320 million to $7.3 billion in less than a decade. In New York state, local governments may have to triple their annual pension contributions during the next six years, from $2.6 billion to $8 billion, according to the state comptroller. …
t’s a two-tier system in which the rulers are making steady gains at the expense of the ruled. The predictable results: Higher taxes, eroded public services, unsustainable levels of debt, and massive roadblocks to reforming even the poorest performing agencies and school systems.
With unionism increasingly concentrated in the public sector, growing government has become a union priority. Meanwhile, there are fights over classifying of people as contractors or employees.
Asking the good question of why there were housing booms only in certain localities in the US.
An RBA view of the world economic situation and Oz’s comparative painless sailing through the recent unpleasantnesses with graphs.
About Oz’s foreign investment policy:
Foreign investors cannot be expected to understand a policy that the government itself cannot properly articulate.
A Kiwi TV piece on how small and how expensive apartments in central Auckland: a case of “shoebox living” and a product of land use control.