Monty Python to end the year

The Path of Economic Recovery from Superstorm Sandy - Liberty Street Economics

The Path of Economic Recovery from Superstorm Sandy - Liberty Street Economics
Not all disasters are created equal.

Via Cafe Hayek - amen

Here’s the full text of a letter, in today’s Wall Street Journal, written my and Russ’s friend Dave Rose:

In his Dec. 20 op-ed “America’s Dangerous Powerball Economy,” Arthur Brooks quite correctly points out that earned income, indeed earned success generally, affects our happiness very differently than unearned income or success.

I would like to extend his point further with something I’ve told my college students for years.

In general, the creation of wealth is edifying. When only voluntary transactions are permitted, the creation of wealth requires cooperation, and this brings out the best in us.

Piles of wealth, however, tend to be corrupting. The fixed nature of a pile is all about apportionment, not cooperation, and this zero-sum game tends to bring out the worst in us.

It follows directly that no matter how noble the ends, government redistribution (which is hardly voluntary) tends to bring out the worst in us. Rising government redistribution over the past 75 years has produced ample evidence of this point.

We are in this mess because we have allowed our culture to be dominated by those who are bent on spreading the false and self-serving narrative that our economy is a giant zero-sum game.

As such, we might as well have the government do the dividing.

Small wonder why our politics have become increasingly about who you are for rather than what you are for.

David C. Rose

Department of Economics

University of Missouri-St. Louis

St. Louis, Mo.

David Wessel Looks at Taxing the Rich

Albert O. Hirschman: Life and Work

http://marginalrevolution.com/marginalrevolution/2012/12/albert-o-hirschman.html

I'd love to discuss his work in bookclub.

What is useful and not so useful in economics.

A recent post at Econ Browser analyzes unemployment using Okun's law - a topic usually found in introductory macro courses. The useful . . . from the conclusion:

This leads us to conclude that there has been indeed an effect of the Great Recession on the long-term employment. Specifically, on average, since the exit of the recession (2009q2), we get that the employment is 2.7 % below its potential level (according to the non-linear ECM), meaning that, from a structural point of view, around 3 millions of jobs have been lost after the recession.

OK, a nice conclusion and useful information to consider - a number of interesting questions are raised.

OK, not so useful.

Additional remark:

As in the linear framework, it is noteworthy that a non-linear model estimated in differences, that is without integrating a long-term relationship, also leads to unrealistic results. This underlines the usefulness of having the long-term relationship into the model.

2012: The Year in TV Moments

Entry 13: Breaking Bad: The kid on the motorbike.

My wife and I began this show on Netflix this year and loved the first 2 seasons. Then . . . things turned bad in the 3rd season, and this comment in Slate resonated with my wife and I after the death of Jesse's girlfriend earlier in the run of the show:

Slate writes:

Why were we still watching? Had we in some measure adopted Walt’s point of view, and given his slide into evil, did that make us, as Nussbaum put it, “not merely fans but enablers?”

http://www.slate.com/articles/arts/television/features/2012/best_tv_2012/best_tv_2012_walt_jesse_and_the_kid_on_the_motorbike.html

Interests are More Powerful than Ideas?

http://thinkmarkets.wordpress.com/2012/12/09/interests-are-more-powerful-than-ideas/

Mario Rizzo:

To make a long story short: I believe that intellectuals (including economists) need to be more ideological, not less. They ought to convince the general public to think in terms of big issues and big decisions. The idea of evaluating each issue on its own merits is profoundly unscientific as Herbert Spencer taught. Slippery slope mechanisms are all around us. When people begin to think of specific, narrow policies they cannot help but think in terms of their own particular interests.

It is not enough to win the battle for ideas among intellectuals. We must win in a way that makes a practical difference. Showing the limitations of case-by-case analysis of policy is important. The special interests do not care about the damage done to the general welfare. We must instruct the public that policies that benefit their own particular interests do and will generate policies that hurt them. There truly is no free lunch.

From Reason

Chicago Fed National Activity Index (CFNAI)

Economic Activity Increased in November

The Chicago Fed National Activity Index was +0.10 in November, up from –0.64 in October.

More about the CFNAI

The Chicago Fed National Activity Index (CFNAI) is a monthly index designed to gauge overall economic activity and related inflationary pressure. The CFNAI is released at 8:30 a.m. ET on scheduled days, normally toward the end of each calendar month.

A zero value for the index indicates that the national economy is expanding at its historical trend rate of growth; negative values indicate below-average growth; and positive values indicate above-average growth.

Richard B. McKenzie, Popcorn As Political Pork | Library of Economics and Liberty

Richard B. McKenzie, Popcorn As Political Pork | Library of Economics and Liberty

What is the Best History Book of 2012? | History News Network

What is the Best History Book of 2012? | History News Network

MCC Center for Economic Ed names 2012 Teacher of the Year

Pictured left to right: Ardie Sturdivant, Greg Pratt, Michelle Barton, John Balentine

Ms. Michelle Barton, Math Instructor at Ward Traditional Academy has been named the 2012 Middle School Teacher of the Year by the MCC Center for Economic Education.

Typically, this recognition is awarded to a social studies teacher. This year, our center is pleased to recognize Ms. Barton for integrating the standards based Stock Market Game in her math curriculum. Ms. Barton has creatively integrated standards based instruction across disciplines both in her classroom and for the entire Ward community. Beyond her creativity in applying a social studies based activity to mathematics instruction, Ms. Barton models collaboration and community building though her work with colleagues at Ward in language arts and social studies.

Barton explained her rationale for utilizing the stock market game in her class and her motivation for sponsoring the Economics Club at Ward: "Integrating economics into my curriculum has allowed me to bring math to life. Students always used to ask me, "When will I ever use this?" Introducing concepts like slope, graphing, and linear equations using the Stock Market Game allowed me to show students a real life application before they even thought to ask."

The results of Ms. Barton’s mentoring are reflected in the results of the Fall, 2012 Arizona Stock Market Game - Ward student teams captured first and second place in the elementary division and swept first, second and third places in the middle school division.

Ward Traditional Academy is a k-8 traditional school in the Tempe Elementary School District. The school has received an A grade as an excelling school and attracts students from across the valley.

Ms. Barton attended training sponsored by the Center for Economic Education in August, 2012 to implement The Stock Market Game in her math curriculum. She is one of a small number of math instructors who has taken advantage of the Center for Economic Education programming to address the emergence of common core requirements in the middle school curriculum. Ms. Barton is a graduate of Arizona State University and has taught pre-algebra, algebra and geometry at Ward since 2009.

The Center for Economic Education at MCC supports innovation in economics instruction across the curriculum and across grade levels in Arizona. John Balentine Director, K-12 Social Studies at the Arizona Department of Education reflected on the work of the Center and our partner the Arizona Council on Economic Education:

“Today’s employers are seeking graduates that have key skills of critical thinking, problem-solving and collaboration. Arizona’s teachers and students are fortunate to have a cross-curricular resource, The Stock Market Game, hosted by the Arizona Council on Economic Education, develops these skills and helps ensure all of our students are prepared for college, career and civic life”

Ms. Barton was honored December 17, 2012 at Ward Traditional Academy. . Debbie Henney, Executive Director of the Arizona Council on Economic Education, John Balentine, Director of K-12 Social Studies, Ardie Sturdivant, Principal Ward Traditional Academcy and Greg Pratt, Director of the Center for Economic Education presented the 2012 Middle School Teacher of the Year award to Ms. Barton.

Immigration and American Power

http://www.project-syndicate.org/commentary/obama-needs-immigration-reform-to-maintain-america-s-strength-by-joseph-s--nye

While too rapid a rate of immigration can cause social problems, over the long term, immigration strengthens US power. It is estimated that at least 83 countries and territories currently have fertility rates that are below the level needed to keep their population constant. Whereas most developed countries will experience a shortage of people as the century progresses, America is one of the few that may avoid demographic decline and maintain its share of world population.

For example, to maintain its current population size, Japan would have to accept 350,000 newcomers annually for the next 50 years, which is difficult for a culture that has historically been hostile to immigration. In contrast, the Census Bureau projects that the US population will grow by 49% over the next four decades.

Today, the US is the world’s third most populous country; 50 years from now it is still likely to be third (after only China and India). This is highly relevant to economic power: whereas nearly all other developed countries will face a growing burden of providing for the older generation, immigration could help to attenuate the policy problem for the US.

A Nation of Takers: America's Entitlement Epidemic - Society and Culture - AEI

A Nation of Takers: America's Entitlement Epidemic - Society and Culture - AEI

In "A Nation of Takers," author Nicholas Eberstadt draws on an impressive array of data to detail the exponential growth in entitlement spending over the past fifty years. As he notes, in 1960, entitlement payments accounted for well under a third of the federal government’s total outlays. Today, entitlement spending — everything from Medicare to disability payments — accounts for a full two-thirds of the federal budget. While these economic developments are indeed astonishing, the cultural costs of this epidemic are equally troubling, and Eberstadt shows in unflinching detail how this run-away spending is making a very real, long-lasting, negative impact on the character of our citizens.

The Declining Work and Welfare of People with Disabilities: What Went Wrong and a Strategy for Change

The U.S. disability insurance system is an important part of the federal social safety net; it provides financial protection to working-age Americans who have illnesses, injuries, or conditions that render them unable to work as they did before becoming disabled or that prevent them from adjusting to other work. An examination of the workings of the system, however, raises deep concerns about its financial stability and effectiveness. Disability rolls are rising, household income for the disabled is stagnant, and employment rates among people with disabilities are at an all-time low. Mary Daly and Richard Burkhauser contend that these outcomes are not inevitable; rather, they are reflections of the incentives built into public policies targeted at those with disabilities, namely the SSDI, SSI-disabled adults, and SSI-disabled children benefit programs. The Declining Work and Welfare of People with Disabilities considers how policies could be changed to improve the well-being of people with disabilities and to control the unsustainable growth in program costs.

http://www.amazon.com/Declining-Work-Welfare-People-Disabilities/dp/0844772151

Profiting From a Child’s Illiteracy

By NICHOLAS D. KRISTOF

In the New York Times?

This is painful for a liberal to admit, but conservatives have a point when they suggest that America’s safety net can sometimes entangle people in a soul-crushing dependency. Our poverty programs do rescue many people, but other times they backfire.

Some young people here don’t join the military (a traditional escape route for poor, rural Americans) because it’s easier to rely on food stamps and disability payments.

Antipoverty programs also discourage marriage:

http://www.nytimes.com/2012/12/09/opinion/sunday/kristof-profiting-from-a-childs-illiteracy.html

CEI: Tell Americans NOW How Much Time Govt. Workers Spend On Union Duties | Competitive Enterprise Institute

CEI: Tell Americans NOW How Much Time Govt. Workers Spend On Union Duties | Competitive Enterprise Institute


Federal employees spent about 3.4 million hours performing union duties while on the clock in 2011, according to an unreleased Office of Personnel Management (OPM) report made public in a November 26 Federal Times article. This amount of time, referred to as “official time,” cost the federal government $155 million. It represents an 11 percent increase in the amount of official time in 2010.

Unfortunately, the problem is not exclusive to federal employees. State and local governments all across the country also allow workers to labor for union bosses on taxpayer time, at an incalculable cost. Part of the problem, as Mallory Factor noted recently in The Wall Street Journal, is that ”states and municipalities don’t generally track official time for their employees, much less disclose it, so data on the subject are hard to come by.” However, Factor hazards an educated guess as to the extent of the problem:

http://www.openmarket.org/2012/12/03/official-time-officially-outrageous/

Econ TV -

Mary Meeker - internet trends

2012 KPCB Internet Trends Year-End Update from Kleiner Perkins Caufield & Byers

6 Illusions about Government

Bloomberg Notable books

Gratifying to see the number of ASET book club reads made this list.

“Thinking, Fast and Slow” by Daniel Kahneman,

“Why Nations Fail: The Origins of Power, Prosperity and Poverty” by Daron Acemoglu and James Robinson

“Lords of Finance: The Bankers Who Broke the World” by Liaquat Ahamed.

“Coming Apart: The State of White America, 1960-2010” by Charles Murray

Looks like some other interesting titles on this list for our group to consider.

http://www.bloomberg.com/news/2012-12-05/gorman-skips-business-jain-likes-faulks-best-books-of-2012.html

2012 Notable Books

The Economist List

http://www.economist.com/node/21541386

Library Journal

The Hanukkah Song for Economists

Federal Government Loses Big in Supreme Court Property Rights Case

Federal Government Loses Big in Supreme Court Property Rights Case

The federal government suffered a major defeat today at the U.S. Supreme Court in the case of Arkansas Game & Fish Commission v. United States. In their unanimous decision, the justices rejected the government’s sweeping claim that a series of recurring floods induced by the U.S. Army Corps of Engineers did not qualify as a taking of property under the Fifth Amendment because the flooding was only temporary in duration. As Justice Ruth Bader Ginsburg wrote for the majority:

Because government-induced flooding can constitute a taking of property, and because a taking need not be permanent to be compensable, our precedent indicates that government-induced flooding of limited duration may be compensable. No decision of this Court authorizes a blanket temporary-flooding exception to our Takings Clause jurisprudence, and we decline to create such an exception in this case.

The Court also rejected the government’s assertion that the Army Corps of Engineers needed to be free from the constraints of the Takings Clause in order to effectively do its job:

Time and again in Takings Clause cases, the Court has heard the prophecy that recognizing a just compensation claim would unduly impede the government’s ability to act in the public interest. We have rejected this argument when deployed to urge blanket exemptions from the Fifth Amendment’s instruction.

As for the surprising claim made during oral argument by Deputy Solicitor General Edwin Kneedler, who told the justices that no property owner whose land lay below a government dam could ever bring suit under the Takings Clause in response to a government-induced flood, the Court observed that because this novel argument “was not aired in the courts below, and [was] barely hinted at in the brief the Government filed in this Court...we express no opinion on the proposed upstream/downstream distinction.”

I’m a little surprised the Supreme Court didn’t reject Kneedler’s bogus upstream/downstream distinction outright, given that most of the justices seemed so dismayed by it during oral argument (Justice Anthony Kennedy likened Kneedler’s position to the “old moral refuge” of German rocket scientists who said “I make the rockets go up; where they come down is not my concern”), but perhaps the justices opted for a unanimous ruling against the government rather than a divided opinion where the majority delivered an even more forceful denunciation.

Bottom line: The federal government went to court in the hopes of restricting property rights and came up short.

David Warsh on The Race Between Education and Technology

The Race Between Education and Technology

The ASET Book club will discuss The Race Between Education and Technology on December 6, 2012.

At our meeting we will also schedule 2013 meetings days and books. (See end of this post.

Possible questions for our discussion:

1. Daron Acemoglu, author of a previous ASET book club read - Why Nations Fail? Describes Goldin and Katz’s The Race between Education and Technology is a monumental achievement that supplies a unified framework for interpreting how the demand and supply of human capital have shaped the distribution of earnings in the U.S. labor market over the 20th century. What did you learn about the supply of labor from reading this book? In what ways did this information about the supply of labor challenge your previously held views or beliefs about education?

2. Goldin and Katz describe an evolution (deterioration) in the supply side of the labor market beginning in 1970? How convincing was their argument – do you view that these is in fact a deterioration and if so, how persuasive is the author’s explanation for this change?

3. In the current issue of The Journal of Economic Perspectives Martin West summarizes “Global Lessons for Improving U.S. Education.” “. . . Rigorous studies confirm that students in countries that for historical reasons have a larger share of students in private schools perform at higher levels on international assessments while spending less on primary and secondary education.. . . In addition, the achievement gap between socioeconomically disadvantaged and advantaged students is reduced in countries in which private schools receive more government funds. . . .”

The authors find a similar outcome as they describe the virtues of the American education system (130+) and contrast American higher education with other countries (last paragraph of page 283) with the observation: “the enormous competition between and within the public and private sectors, and its laissez faire orientation.” (see page 64 for example) What other evidence to you find for this within the text and your reading and how does this evidence challenge or contradict your experience as an educator. How might your resolve any conflict between your reading of the book and your beliefs.

4. Where you surprised by the finding that historically “the supply of quality teachers was extremely elastic”(240)? Might this still be the case and account for the status of teaching wages?

5. Goldin and Katz write: “Education was also a form of insurance . . . (192). How might this account for the historic and contemporary incentives in the labor market, specifically the supply side?

6. What insight did the analysis of technology skill complementarity (121) offer and did this insight broaden your understanding of the demand for labor over the period of this economic history?

7. What is your view of the contention: “Two factors appear to be holding back the educational attainment of American youth: college readiness and finances”(347)?

8. Relative demand and relative supply of labor analysis – “Technology has been racing ahead of education in recent years because educational growth has been sluggish, not because skill biased educational change has accelerated.”(303). Did you find this conclusion surprising and, more importantly, does this provide a satisfactory explanation for the rising college wage premium?

Claudia Goldin speaking on the book. http://libertyandresponsibility.blogspot.com/2012/12/claudia-golden-on-race-between.html

Reviews of the book - http://libertyandresponsibility.blogspot.com/2012/12/reviews-race-between-education-and.html

Teaching the History of Capitalism

In November 2011, the conference on Teaching the History of Capitalism gathered a small group of scholars in the field at Harvard University to reflect on their own teaching, learn from the wisdom and experience of our colleagues, and develop a clearer sense of the field’s pedagogical aims. The conversation focused on how the history of capitalism might enhance college curriculums. Several scholars who could not attend in person also sent their syllabi and suggestions.

http://studyofcapitalism.harvard.edu/teaching-resources

Reviews - The Race Between Education and Technology

Daron Acemoglu, author of a previous ASET book club read - Why Nations Fail?

Goldin and Katz’s The Race between Education and Technology is a monumental achievement that supplies a unified framework for interpreting how the demand and supply of human capital have shaped the distribution of earnings in the U.S. labor market over the 20th century. This essay reviews the theoretical and conceptual underpinnings of this work and documents the success of Goldin and Katz’s framework in accounting for numerous broad labor market trends. The essay also considers areas where the framework falls short in explaining several key labor market puzzles of recent decades and argues that these shortcomings can potentially be overcome by relaxing the implicit equivalence drawn between workers’ skills and their job tasks in the conceptual framework on which Goldin and Katz build. The essay argues that allowing for a richer set of interactions between skills and technologies in accomplishing job tasks both augments and refines the predictions of Goldin and Katz’s approach and suggests an even more important role for human capital in economic growth than indicated by their analysis.

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1987249

The New York Times -

The authors skillfully demonstrate that for more than a century, and at a steady rate, technological breakthroughs — the mass production system, electricity, computers — have been increasing the demand for ever more educated workers. And, they show, America’s school system met this demand, not with a national policy, but in grassroots fashion, as communities taxed themselves and built schools and colleges.

Beginning in the 1970s, however, the education system failed to keep pace, resulting, Ms. Goldin and Mr. Katz contend, in a sharply unequal nation.

The authors allow that a decline in union membership and in the inflation-adjusted minimum wage also contributed to the shift in who partook of a growing pie. But they rule out the usual suspects — globalization (trade) and high immigration — as significant causes of rising inequality. Amid the current calls to restrict executive compensation, their policy prescription is to have more Americans graduate from college.

If only it were that easy.

The authors’ argument is really two books in one. One offers an incisive history of American education, especially the spread of the public high school and the state university system. It proves to be an uplifting tale of public commitment and open access. The authors remind us that the United States long remained “the best poor man’s country.” A place where talent could rise.

The other story rigorously measures the impact of education on income. The authors’ compilation of hard data on educational attainment according to when people were born is an awesome achievement, though not always a gripping read.

http://www.nytimes.com/2008/10/05/business/05shelf.html?_r=0

History Net and Peter Linkert write:

Where next for research in the economic history of American education? This is the perfect time to ask, now that Goldin and Katz have achieved closure on so many questions. The view from their shoulders reveals two key areas to explore.

First, who was it that under-invested in education? Did private individuals pass up money lying on the sidewalk, or was it the political process failing to realize high social rates of return that took into account both fiscal effects and knowledge externalities? For the purposes of their book, Goldin and Katz are able to finesse these tough questions. By focusing on contrasts between American epochs, they successfully explain the contrasts in “returns” in terms of movements in wage ratios that were dramatic enough to drive movements in all definitions of the rate of return on education. Yet we still need to explore the separate levels of the private versus “social” (private and fiscal only) versus overall rates of return, the last being the one that draws on the recent literature on externalities. Only then can we distinguish private irrationality, or private capital constraints, from a failure of policymakers to capture high societal returns to extra years of education. The new research will have to proceed on different levels for different time periods. For the present day debate, scholars will have to jump the higher econometric hurdles imposed by Heckman, Lochner, and Todd in their rejection of the convenient Mincer return analysis. For earlier periods, it should suffice to make rougher contrasts between the likely private and fiscal returns for different eras and different places.

A related frontier is the political economy of education finance. Who voted for or against taxes for schools, in which states, and why? Goldin and Katz have advanced the political economy agenda with econometric evidence on the determinants of high school and college attendance, and the funding for public state universities. Yet there is much more to be done.

On both these research frontiers, our progress will be accelerated because Goldin and Katz have paved the way.

http://eh.net/book_reviews/race-between-education-and-technology

Claudia Golden on The Race between Education and Technology

Best Books of the Year

Best Books of the Year

I.Pencil - the movie

ASET Book Club

Thursday, December 6, 2012: The Race Between Education & Technology by Goldin and Katz

Table of Contents

Introduction

I: Economic Growth and Distribution

1. The Human Capital Century

2. Inequality across the Twentieth Century

3. Skill-Biased Technological Change

II: Education for the Masses in Three Transformations

4. Origins of the Virtues

5. Economic Foundations of the High School Movement

6. America’s Graduation from High School

7. Mass Higher Education in the Twentieth Century

III: The Race

8. The Race between Education and Technology

9. How America Once Led and Can Win the Race for Tomorrow

2013 ASET Bookclub dates and books

2013 Book Club Titles for Consideration 

Finalize book selections and spring meeting times at our next meeting: 

Our next meeting is December 6 to discussion The Race Between Education and Technology 

Thursday evenings 5:45 – 7:00 

January 18, 2013 

February 15, 2013 

March 28, 2013 

April 25, 2013 

May 16, 2013 

A Capitalism for the People: Recapturing the Lost Genius of American Prosperity 

A Revolution of the Mind: Radical Enlightenment and the Intellectual Origins of Modern Democracy 

Constitution 3.0: Freedom and Technological Change 

Currency Wars 

 “Economic Incentives and Social Preferences: Substitutes or Complements” – JEL article 

Fairness and Freedom 

Finance and the Good Society 

How Children 

Succeed Stealth of Nations: The Global Rise of the Informal Economy 

The Land of Promise 

The Moral Molecule: The Source of Love and Prosperity 

The Revenge of Geography: What the Map Tells Us About Coming Conflicts and the Battle Against Fate 

Unchecked and Unbalanced –Kling will be honors speaker at MCCD – Phoenix College Feb. 20, 2013 

Why Capitalism 

Summaries of some of the above can be found at the Blog site: http://libertyandresponsibility.blogspot.com/2012/09/2013-book-club-titles-for-consideration.html

Two legends in economics wrestle over the euro's future

In one corner, Robert Mundell, 79. In the other, 84-year old Allan Meltzer. Two respected economists on opposite sides of the euro debate.

http://finance.fortune.cnn.com/2012/08/09/robert-mundell-allan-meltzer/

Spontaneous or Planned: A Sharp Dichotomy, or a Gradient?

http://thinkmarkets.wordpress.com/2012/07/18/spntaneous-or-planned-a-sharp-dichotomy-or-a-gradient/

This blog post is well worth a read, it helped inform my view of social orders and society as found in our book club book - Why Nations Fail.

The first thing of importance I have noted is Klein, at least in the opening chapter, seems to posit a sharp dichotomy between spontaneous orders and planned orders. He uses the example of roller skaters in a rink: either they are each skating purely as they wish, or their movements are entirely planned by a “wise” planner. (This may well be modified by Klein later, but even if so, I have seen others treat this topic as if this was a simple dichotomy, so my remarks are, I think, worth making anyway.)

But real social orders are rarely (ever?) of either extreme. The extremes are ideal types, and real orders more or less instantiate the types. Take musical groups, a social structure with which I have fair familiarity. Even in an orchestra, which is well towards the planned end of the range, the individual musicians still have room for individual creativity and expression. (Otherwise it is hard to imagine anyone spending their life playing in orchestras.) And even the most free-form, improvisational jazz group needs some planning: “OK, we’ll start at eight, and end at about eleven.” Spontaneous or Planned: A Sharp Dichotomy, or a Gradient?

Moral Paper Route

The Mismeasure of Inequality

http://www.hoover.org/publications/policy-review/article/123566

Rent seeking and the political process . . .

There are only a few dozen Americans who have given at least $1 million to super PACs this election cycle, and Kareem Ahmed is one of them. If you manage to talk to him, he’ll tell you a lot. He’ll tell you all about a class of pharmaceuticals, called compound drugs, which he is in the business of promoting, and which have been the subject of a contentious debate in California, where he lives and works. He’ll tell you to read ProPublica’s reporting about Big Pharma. He’ll tell you House Minority Leader Nancy Pelosi is his best friend. He’ll tell you about his dream to someday take the proceeds of his business and build the largest non-profit children’s hospital in the world in Southern California’s Inland Empire. He’ll tell you how he fixed Democratic political strategist Paul Begala’s knee. He’ll tell you how much he loves President Barack Obama, whom he has met on a number of occasions.

http://tpmmuckraker.talkingpointsmemo.com/2012/10/kareem_ahmed_priorities_usa_action_landmark.php

10 Ways Walmart Changed the World

Everyday Low Prices

Selection

The Retail Landscape (Literally)

The Decline of the Labor Movement

Supplier Partnerships

The Cult of Walmart

Data-Driven Management

The Culture of Overconsumption

Sustainability

The Power of Access

Read more:

http://business.time.com/2012/07/02/ten-ways-walmart-changed-the-world/#ixzz28znKywnK

Experimental economics

Great interview with John List>

http://www.richmondfed.org/publications/research/region_focus/2012/q2-3/pdf/interview.pdf

FiveBooks Interviews > Eric Foner on the Evolution of Liberalism

http://thebrowser.com/interviews/eric-foner-on-evolution-liberalism

The Race Between Education and Technology

Receiving a better education than one’s parents sounds like a tenet of the American Dream, but it’s a reality more commonly achieved in other developed nations.

The U.S. ranked fourth-worst among 29 developed countries for children obtaining a higher level of education than their parents, according to a report released Tuesday by the Organization for Economic Cooperation and Development.

US Country report

https://www.dropbox.com/sh/1t6vr94no2c7pcy/7_K_oAkAjg/Country%20Notes/EAG2012%20-%20Country%20note%20-%20United%20States.pdf

Robber Barons

Well worth a read:

J. Bradford DeLong

University of California at Berkeley, and NBER

first draft October 13, 1997; second draft January 1, 1998

I. Introduction

"Robber Barons": that was what U.S. political and economic commentator Matthew Josephson (1934) called the economic princes of his own day. Today we call them "billionaires." Our capitalist economy--any capitalist economy--throws up such enormous concentrations of wealth: those lucky enough to be in the right place at the right time, driven and smart enough to see particular economic opportunities and seize them, foresighted enough to have gathered a large share of the equity of a highly-profitable enterprise into their hands, and well-connected enough to fend off political attempts to curb their wealth (or well-connected enough to make political favors the foundation of their wealth).

Matthew Joshttp://www.uni-muenster.de/PeaCon/eliten/Robber%20Barons.htm

The Meaning of Cheating, Bryan Caplan | EconLog | Library of Economics and Liberty

The Meaning of Cheating, Bryan Caplan | EconLog | Library of Economics and Liberty

For many students, college is less about providing an education than a credential--a certificate testifying that they are smart enough to get into college, conformist enough to go, and compliant enough to stay there for four years.
 

When I was a senior, one of my professors asked wonderingly, "Why is it that you guys spend so much time trying to get as little as possible for your money?" The answer, Caplan says, is that they're mostly there for a credential, not learning. "Why does cheating work?" he points out. If you were really just in college to learn skills, it would be totally counterproductive. "If you don't learn the material, then you will have less human capital and the market will punish you--there's no reason for us to do it." But since they think the credential matters more than the education, they look for ways to get the credential as painlessly as possible.

Sheila Bair’s new book

Tyler Cowen ends his review:

This tract is a performance of terror, in good and bad ways.  Few books will teach you more about the politics of bureaucracy and regulation, though not exactly as the author intends

Sheila Bair’s new book

Possible Book Club Book?

http://www.amazon.com/Constitution-3-0-Freedom-Technological-Change/dp/0815722125/ref=sr_1_1?ie=UTF8&qid=1346704185&sr=8-1&keywords=constitution+3.0+freedom+and+technological+change

Table of Contents

1 Introduction Technological Change and the Constitutional Future Jeffrey Rosen

part one 2 Is the Fourth Amendment Relevant in a Technological Age? Christopher Slobogin

3 Use Restrictions and the Future of Surveillance Law Orin S. Kerr

4 Cyberthreat, Government Network Operations, and the Fourth Amendment Jack Goldsmith

part two

5 The Deciders: Facebook, Google, and the Future of Privacy and Free Speech Jeffrey Rosen

6 Is Filtering Censorship? The Second Free Speech Tradition Tim Wu

7 A Mutual Aid Treaty for the Internet Jonathan Zittrain

part three

8 Neuroscience and the Future of Personhood and Responsibility Stephen J. Morse

9 Cognitive Neuroscience and the Future of Punishment O. Carter Snead

part four

10 Reproductive Rights and Reproductive Technology in 2030 John A. Robertson

11 The Problems and Possibilities of Modern Genetics: A Paradigm for Social, Ethical, and Political Analysis Eric Cohen and Robert P. George

12 Endowed by Their Creator? The Future of Constitutional Personhood James Boyle

13 Innovation’s Darker Future: Biosecurity, Technologies of Mass Empowerment, and the Constitution Benjamin Wittes

14 epilogue

Translating and Transforming

Technological changes are posing stark challenges to America's core values. Basic constitutional principles find themselves under stress from stunning advances that were unimaginable even a few decades ago, much less during the Founders' era. Policymakers and scholars must begin thinking about how constitutional principles are being tested by technological change and how to ensure that those principles can be preserved without hindering technological progress.

Constitution 3.0, a product of the Brookings Institution's landmark Future of the Constitution program, presents an invaluable roadmap for responding to the challenge of adapting our constitutional values to future technological developments. Renowned legal analysts Jeffrey Rosen and Benjamin Wittes asked a diverse group of leading scholars to imagine plausible technological developments in or near the year 2025 that would stress current constitutional law and to propose possible solutions. Some tackled issues certain to arise in the very near future, while others addressed more speculative or hypothetical questions. Some favor judicial responses to the scenarios they pose; others prefer legislative or regulatory responses.

Here is a sampling of the questions raised and answered in Constitution 3.0:

• How do we ensure our security in the face of the biotechnology revolution and our overwhelming dependence on internationally networked computers?

• How do we protect free speech and privacy in a world in which Google and Facebook have more control than any government or judge?

• How will advances in brain scan technologies affect the constitutional right against self-incrimination?

• Are Fourth Amendment protections against unreasonable search and seizure obsolete in an age of ubiquitous video and unlimited data storage and processing?

• How vigorously should society and the law respect the autonomy of individuals to manipulate their genes and design their own babies?

Individually and collectively, the deeply thoughtful analyses in Constitution 3.0 present an innovative roadmap for adapting our core legal values, in the interest of keeping the Constitution relevant through the 21st century.

Contributors include Jamie Boyle, Erich Cohen, Robert George, Jack Goldsmith, Orin Kerr, Lawrence Lessig, Stephen Morse, John Robertson, Jeffrey Rosen, Christopher Slobogin, O. Carter Snead, Benjamin Wittes, Tim Wu, and Jonathan Zittrain.

Race Between Education and Technology

Economic liberty = civil liberty

http://knowledgeproblem.com/2012/08/26/economic-vs-civil-liberties/

That Blurry Line Between Makers and Takers

That Blurry Line Between Makers and Takers

By TYLER COWEN

Published: October 13, 2012

OF MAKING AND TAKING The correct distinction is not “makers versus takers.” The problem is that taking, rather than making wealth, appears to be growing in relative influence.

Most of us are actually both makers and takers. Consider farmers who produce food and favor agricultural subsidies. The question is whether the role of wealth maker has more influence over our politics, at any given time, than does the taker role. Is public policy being adjudicated on grounds of ethics and efficiency, or is the real story about lobbying and the relative power of different interest groups?

http://www.nytimes.com/2012/10/14/business/the-role-of-politics-in-wealth-distribution.html?ref=business&_r=0

Randy Newman

The Race Between Education and Technology

Part one of Goldin and Katz's book - Economic Growth and Distribution is a focus on understanding the causes and consequences of economic change. In the introduction to their book, the authors write:

The connection between the American Century and the Human Capital Century concerns the role of education in economic growth and individual productivity. (2)

I found the method of argument in this book fascinating. The authors use the prism of the labor market to better understand US economic change - the demand for labor being influenced by technological change and the supply of labor being influenced by education. They also make an observation and pose a question:

In sharp contrast to economic growth, (over the period of the 20th century) which was relatively continuous, economic inequality was discontinuous. (3)

Belief confronts reason - a story of tragedy . . .

The story of Michael Quinn is, I think, an important one that reveals a great deal about the tension between faith and reason in our society. The tenant of tolerance is a bedrock foundation for liberty and responsibility. Our country has historically struggled with a resolution for this tension, this story is one that provides insight into that struggle.

http://www.slate.com/articles/life/faithbased/2012/11/d_michael_quinn_and_mormon_excommunication_the_complicated_life_of_a_mormon.html

The Meaning of Cheating, Bryan Caplan | EconLog | Library of Economics and Liberty

The Meaning of Cheating, Bryan Caplan | EconLog | Library of Economics and Liberty

Great post - unfortunate, but true.

The Legacy of Cesar Chavez - Murray N. Rothbard - Mises Daily

The Legacy of Cesar Chavez - Murray N. Rothbard - Mises Daily

What really happened - a book recommendation.

Much the best economics book on the fall calendar therefore (to be published next month) is a slender account about the circumstances that led to that near meltdown in September 2008, and an explanation of why they were not apparent until the last moment.  Misunderstanding Financial Crises: Why We Don’t See Them Coming (Oxford University Press), by Gary Gorton, of Yale University’s School of Management, mentions hardly any of the firms involved in the 2008 smash-up; it spends little time explaining the overnight repurchase agreements that were at the center of the bank funding crisis (his earlier book, Slapped By the Invisible Hand: The Panic of 2007, did that).
http://www.economicprincipals.com/issues/2012.10.07/1424.html

Shakespeare muse may have been prostitute

Shakespeare muse was prostitute

Tax Level Comparison

http://keithhennessey.com/2012/08/28/tax-levels-cheat-sheet/

This is hilarious - EconoTrolls: An Illustrated Bestiary

Noahpinion: EconoTrolls: An Illustrated Bestiary: In your journey through the Econ Blogosphere, you will be beset by a great many curious and interesting species of EconoTroll. At first y...

Why aren’t we doing the maths?

This nice piece by Tim Hartford resonates with the noise in the media over polls and who will win the upcoming election.

I was discussing numeric literacy with a colleague and Hartford's story and conclusion is sobering:

An article published in the Annals of Internal Medicine in March put these questions to a panel of more than 400 doctors with relevant clinical experience. Eighty-two per cent thought they’d been shown evidence that test “A” saved lives – they hadn’t – and of those, 83 per cent thought the benefit was large or very large. Only 60 per cent thought that test “B” saved lives, and fewer than one-third thought the benefit was large or very large – which is intriguing, because of the few people on course to die from cancer, the test saves 20 per cent of them. In short, the doctors simply did not understand the statistics on cancer screening.

The practical implications of this are obvious and worrying. It seems that doctors may need a good deal of help interpreting the evidence they are likely to be exposed to on clinical effectiveness, while epidemiologists and statisticians need to think hard about how they present their discoveries.

http://timharford.com/2012/10/why-arent-we-doing-the-maths/

Gender Wage Gap May Be Much Smaller Than Most Think

Economists Eric Solberg and Teresa Laughlin applied an index of total compensation, which accounts for both wages and benefits, to analyze how these benefits would affect the gender gap.7 They found a gender gap in wages of approximately 13 percent. But when they considered total compensation, the gender gap dropped to 3.6 percent.

http://www.stlouisfed.org/publications/re/articles/?id=2160

bleeding heart libertarianism

What Austrian Economics IS and What Austrian Economics is NOT

MR University

An example of the material that Cowen and Tabarrok include in MR University.

http://mruniversity.com/

Sentences to ponder

From Sober Look:

Starting January 1 of 2013 the top tax rate on dividends in the US will officially become the highest in the developed world. If you live in NY for example, the top rate on stock dividends will be close to 50% – which is significantly higher than France. Sentences to ponder

ASET Bookclub Oct. 24 - possible discussion questions

The Next Convergence – by Michael Spence

1. What is your reaction to “Our natural instincts to look for a villain, some human constraint that held in place . . ." (17) provides an insight into a question that our book group has raised during a number of meetings and that continually reflect upon - How do beliefs persist that seem to be in conflict with the world, for example, minimum wage other price controls effectively address questions of economic welfare.

2. Chapter 6 is, important, for the reinforcement of William Easterly's critique of the mainstream foreign aid thesis. Thinking back to the end of chapter 2, I wonder how effective the analysis in this chapter would be to an audience that is primarily operating with a "snapshot" perspective that generates a belief in the efficacy of policies such as aid.

3. What was your evaluation of Spence's treatment of comparative advantage in chapter 10 in contrasting the dynamic nature of comparative advantage with the static view of the world held by some, including many public leaders? How well does Spence support his conclusion that the consequence of this dynamic comparative advantage is "Sustained growth and structural change go hand in hand?" (67).

4. I am looking forward to our discussion of chapter 11 and the role of government is supporting growth. That discussion will be, I hope, informed by the first two paragraphs on page 71 as well as the contentions outlined in the past paragraph on page 105.

5. What is your reaction to the role that Spence outlines for the public sector in the investment areas of education and infrastructure? Public education is at the center of our next book The Race between Education and Technology.

6. Spence finds 4 attributes of government involvement in society that is positively related to growth (106): How would you evaluate point 4 and critique Spence's chapter 17 analyses.

7. I also wonder, to what extent, there are constructive responses to what Spence sees (third paragraph of page 113) as the common causes of poor economic performance. 8. On pages 134-5 Spence roughly outlines an emergence in the interplay between domestic and global financial regimes that seems to be shaped by state action and regulation. What is your view of this presentation?

9. The hot button that I suspect will generate significant levels of conversation in October is found on page 145 - "The prevailing view now is that this [financial crisis] was largely a failure of regulation. Regulatory failures surely contributed, but it was more than that." I wonder how our group will react to the discussion of the role of "regulatory and self-regulatory components"(146).

Book Review: Sheila Bair's "Bull By the Horns"

A succinct description of "Bull By the Horns" is that lots of mistakes were made during the crisis - by others. Current Treasury Secretary Timothy Geithner receives particularly vivid criticism, a feature of the book that is not surprising in light of the widely-known animus between the two officials.Book Review: Sheila Bair's "Bull By the Horns"

George Takei on Big Government, Democrats, and Republicans

Really powerful and personal perspective on government, power and freedom.

George Takei on Big Government, Democrats, and Republicans

US Income distribution

http://mjperry.blogspot.com/2012/08/pew-research-calls-it-hollowing-out-of.html

Our buddy Merle Hazard is back with a new, animated version of his surf-music take on the Fiscal Cliff.

The half-life of an economics book

The half-life of an economics book

Possible Discussion Questions for The Next Convergence

The Next Convergence

Tyler Cowen writes: I don’t understand what the book is supposed to be signaling.” What do you think the book is “signaling”?

“Prof Spence believes, for example, that emerging market economies have insured themselves by accumulating the liabilities of western governments.” How well is this argument advanced in the text and what is your view of the argument.

Spence concludes chapter 2: "Our natural instincts to look for a villain, some human constraint that held in place . . . He seems to be saying that the belief mechanism that seems to underlie the instinct for blame is based upon a static or "snapshot" perspective that dominated historical belief systems and continues today. What is your view of this perspective?

What is your reaction to Spence’s assertion in light of his analysis of the role of government - "Sustained growth and structural change go hand in hand." (67).

I am looking forward to our discussion of chapter 11 and the role of government in supporting growth. That discussion will be, I hope, informed by the first two paragraphs on page 71 as well as the contentions outlined in the past paragraph on page 105.

Spence outlines the role that the public sector can play in the investment areas of education and infrastructure. Public education is at the center of our next book The Race Between Education and Technology

Returning to Spence's book, he finds 4 attributes of government involvement in society that are positively related to growth (106):

1. The government takes economic growth seriously.

2. The governing group has values that cause it to try to act in the interest of the vast majority of the people.

3. The government supports open trade, high levels of investment and a future orientation.

4. Economic freedom is supported by the legal and regulatory policy.

I am looking forward to both the discussion and reaction to point 4 above and an examination of Spence's chapter 17 analysis.

Spence asks, at the bottom of page 109, ". . . what could be done about failing states."(109). This question bedevils social scientists and policy makers and I wonder, after reading Douglass North, Daron Acemoglu, Michael Spence and other contemporary thinkers and reflecting on Adam Smith's analysis of the causes and conditions of the wealth of nations, what really can be done? I also wonder, to what extent, there are constructive responses to what Spence sees (third paragraph of page 113) as the common causes of poor economic performance.

The Next Convergence - Part 4

Part 4. The future of growth:

Can the emerging economies sustain high growth?;

China and India;

China's structural challenges;

India's growth, diversification and urbanization;

Brazil's growth reset; Energy and growth;

The challenge of climate change and developing-country growth;

Information technology and the integration of the global economy;

European integration and transnational governance;

Global governance in a multispeed world;

The G20, the advanced countries, and global growth;

Sustaining growth: the second half century of convergence.

A Nobel for Planning?

Very thoughtful set of comments.

he use of the word "market" in describing exchanges of every sort has become ubiquitous, even in cases where there is no actual price that helps clear the market or channel information. Perhaps due to this slippage, an interesting fact about the work receiving the award has been largely ignored. The concrete applications that are discussed as ways of "improving the performance of many markets"--such as matching residents to hospitals, matching donors to organs, and students to schools--are not really "markets." At least not if we think of markets as institutions where prices help clear supply and demand. Instead, they involve non-market interactions, where the matches are actually formed by centralized exchanges.

http://economistsview.typepad.com/economistsview/2012/10/a-nobel-for-planning.html

The Prize in Economic Sciences 2012

The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2012 was awarded jointly to Alvin E. Roth and Lloyd S. Shapley "for the theory of stable allocations and the practice of market design"

The Prize in Economic Sciences 2012

Recommended New Books with Hayekian Themes

Recommended New Books with Hayekian Themes

Is US economic growth over?

Is US economic growth over? Faltering innovation confronts the six
Robert J. Gordon, 11 September 2012

• There was virtually no growth before 1750;
• There is no guarantee that growth will continue indefinitely.

This column introduces my CEPR Policy Insight, which argues in detail that the rapid progress made over the past 250 years could well turn out to be a unique episode in human history (Gordon 2012).
The data I use only concern the US and view the future from 2007 while pretending that the financial crisis did not happen. The focus is on per-capita real GDP growth in the frontier country since 1300, the UK until 1906 and the US afterwards. Growth in the frontier economy gradually accelerated after 1750, reached a peak in the middle of the 20th century, and it has been slowing since. The paper is about 'how much further could the frontier growth rate decline?'

Nice explanation of the difference in the reported unemployment measures for 3Q 2012

In fact, in a directional sense, both the household and payroll surveys are giving the same signals. In the table below, we compare the recent trends in monthly job gains measured in both surveys. The coverage in the two reports is slightly different. Unlike the payroll count, the household survey includes the self-employed and counts multiple jobs held by a single person as a single instance of employment. Because of this, the BLS also reports an adjusted version of the household survey, called the payroll concept adjusted employment measure. This payroll-consistent measure is designed to control for definitional differences across the household and establishment reports and also makes statistical adjustments for changes to the population controls in various years. So we include the data from this measure in the last column of the table.

Overall, all three measures suggest a weaker trend over the last six months than over the last nine months. All three measures also indicate that things were somewhat stronger on average in the last three months than in the prior three months. The bottom line in our view is that, though the employment levels can be quite different across the three measures, all suggest that the jobs picture has improved somewhat in the past three months.

http://macroblog.typepad.com/macroblog/2012/10/divergent-jobs-reports-will-the-real-state-of-the-labor-market-please-stand-up.html

UNWRAPPING THE ADAM SMITH AT THE CORE OF FRIEDRICH HAYEK

UNWRAPPING THE ADAM SMITH AT THE CORE OF FRIEDRICH HAYEK

The Next Convergence - Part 3

Part 3. The crisis and its aftermath:

Emerging markets during and after the global crisis;

Instability in the global economy and lessons from the crisis;

Stimulus in the crisis and the need for cooperative behavior;

Rebalancing the global economy and its consequences for growth;

The excess-savings challenge in China; The openness of the global system and the WTO;

Legacies of the crisis: slow growth and sovereign-debt issues in advanced countries;

Periodic systemic risk and investment behavior

Spence presents three categories of challenges confronting growth in the 21st century:

1. Instability and volatility

2. Re balancing

3. Adding up problems

Of these three issues I see the last, perhaps better defined as the coordination problem, as the one that may present significant headwinds for what Spence calls sustainable growth. Given the speed of change and increasing complexity of global relationships, the first two issues, which I see as consistent historical challenges will interact with the coordination problem to present obstacles to transition for emerging economies and a force that may reinforce vicious circles for the bottom billion.

On pages 134-5 Spence roughly outlines an emergence in the interplay between domestic and global financial regimes that seems to be shaped by state action and regulation. I am looking forward to whatever attention our book club devotes to these ideas and the consequences of either this type of model or alternative developments.

Spence underscores both the importance of open trade and the emerging forces that may act to shape the path toward increased openness. In particular, he takes about both the US and China (137) and the potential future impact on bond and money markets. This concern has been raised by participants in our book club and, without positive attention to the US deficit and debt the likelihood of both increased volatility in money and debt markets as well as unpleasant re balancing in the US seems to be probable.

In writing about the 2009 world wide financial crisis, Spence writes (139):

"Here we have an example of two things. One is that policies can have unintended consequences. The second is that the response driving by national priorities differed from a cooperative global response."

This last observation, it seems to me, continues to characterize the contemporary intersection of domestic and global policy making around the globe.

The hot button that I suspect will generate significant levels of conversation in October is found on page 145 - "The prevailing view now is that this [financial crisis] was largely a failure of regulation. Regulatory failures surely contributed, but is was more than that." I wonder how our group will react to the discussion of the role of "regulatory and self regulatory components"(146). I couldn't help but think of Smith's analysis of behavior, first in The Theory of Moral Sentiments and later in The Wealth of Nations. In particularly, the institutional framework that both reflects and shapes these two manifestations of control are important. As inclusive institutions (to use the language from last month's book) incentivize other thinking, the presence of individual impartial spectators shape a broader view of costs and benefits. That is, perhaps the self regulation that Spence hopes for is rooted in Smith's mechanism of self reflection and self control. The virtues of beneficence and prudence (informal institutions) emerge in those open access societies that develop inclusiveness.

Hayek on Buckley’s Firing Line Nov 7, 1977 ‘Is There a Case for Private Property’

Hayek on Buckley’s Firing Line Nov 7, 1977 ‘Is There a Case for Private Property’

Possible Book Club Selections

One of the recommendations is by our October special speaker - The Standup Economist. Another is a book our ASET group has already read.

FiveBooks Interviews > Tim Harford on Unexpected Economics

The Undercover Economist himself, Tim Harford, says you can find economics lessons in the most unlikely places, including the virtual world of computer games You’ve chosen books that contain economic lessons, but are outside the mainstream of pop-economics literature. Tell me why? Do you feel it’s important that people are better informed about economics?

Yes, and your first choice is seemingly not about economics at all. It’s called Normal Accidents and is by Charles Perrow. He is, I believe, an expert on the safety of systems and, in this book, argues that as technology gets more complex, the odds of tragic accidents occurring are increasing.

Yes. Charles Perrow is still going strong: I think he is now in his eighties. He is a sociologist, but got very interested in unintended consequences, and from looking at those, got very interested in technological disasters.

Let’s move onto For The Win. I was intrigued to see this was classified as young adult fiction, and the assurance that it would “appeal to any enthusiastic player of MMO [Massively Multiplayer Online] games.”

Yes. The author, Cory Doctorow, is a really interesting guy. He is one of the founders of [the blog and former magazine] Boing Boing. He’s a campaigner for internet freedom and fair dealing in intellectual property rights. And he’s also an author – writing these young adult novels. I read this book because I was writing a column about the economies inside computer games – because these games are now so complex they do have their own economies. I read the novel for background, but I really grew to admire it.

Next on your list is a book that certainly is an economics lesson, but takes the form of a cartoon.

This is by Yoram Bauman, who is perhaps better known as the stand-up economist. He sprang to fame because of this lecture – you can see it on YouTube – which was a stand-up comedy routine, based on a parody of one of the most famous economics textbooks, Greg Mankiw’s Principles of Economics. Bauman has a PhD in economics, so he knows a lot of economics, and there’s actually quite a lot of wisdom woven into the comedy routine, but he just lays into economics.

Which takes us onto your next book, The Big Short by Michael Lewis.

This is probably the most popular book on my list, and many people will already have read it.

Lastly, you’ve chosen the Bad Science book by Ben Goldacre. Again, not obviously to do with economics. He’s a medical doctor who also writes a column for the UK newspaper The Guardian.

This is really one of the best books I have ever read. It’s been hugely successful in the UK, and has now been published in the US as well. I thought it was just going to be Ben laying into silly tabloid newspaper stories about how everything in the world either cures cancer or causes it. And he does do that. But if you go through the book as a science writer, which I am (I’m writing about the science of economics, and what economists do) I started becoming increasingly ashamed of myself, at the standards that Ben holds up for writing about what’s going on in academia, versus the standards that I was holding myself up to. You read a paper, you understand a paper, you write a paper up. Ben is saying, “What about the contrary papers? What about the research that contradicts it? How is it that you found this particular piece of research? Have you looked widely enough? Have you thought about publication bias?” He is really thinking about all the different ways we can deceive ourselves that something is true when it really isn’t.

The Next Convergence - Part 2

Sustained high growth in the developing world

7. The high growth developing countries in the post-war period

8. The opening of the global economy

9. Knowledge transfer and catch-up growth in developing countries

10. Global demand and catch-up growth

11. The internal dynamics of sustained high growth

12. Key internal ingredients of sustained high growth recipes

13. Opening up : an issue of speed and sequencing

14. The Washington consensus and the role of government

15. Managing one's currency in the course of growth

16. The middle income transition

17. The political, leadership and the governance underpinnings of growth

18. Low growth economies in the developing world

19. Natural resource wealth and growth

20. The challenge for small states

21. The adding up problem

Part 2 is an extension of the analysis we considered in our previous book club book - Why Nations Fail.

This section of the book considers 2 questions:

Why did this process of rapidly expanding modernization and growth state in the postwar period?

What do developing economies to (and not do) to sustain the high rates of growth and poverty reduction? (55)

In answer to the first, Spence advances: globalization and increased openness and participation to international trade (57)and knowledge transfer (59). These factors lead to the familiar catch up effect that is a mechanism for the convergence that Spence sees as portions of the developing world achieve high growth rates and move from low levels of GDP per capita to higher levels.

The analysis invites a consideration of the problems of transition and last month our work in considering Acemoglu and Robinson's institutional argument seems in line with Spence's view in chapter 17. The scaffolding necessary to support policies of trade openness, knowledge transfer and the incentives to integrate the results of these policies into, what Acemoglu called the "virtuous circle" must support and incentive change. Using China as an example we are told, ". . . the central task for development and growth was learning at all levels, in the private sector and the government."(61) This assertion seems to be to exemplify the notion of emergent order - that the institutions of a society must encourage trial and error and overcome the natural resistance to a dynamic process of exploration. Very Schumpeterian and when Spence writes of "high-speed learning environment" he is hitting on a key element in the process of change.

I very much appreciated Spence's treatment of comparative advantage in chapter 10 was his clarity in contrasting the dynamic nature of comparative advantage with the static view of the world held by some, including many public leaders.

Spence clearly presents the consequence of this dynamic nature: "Sustained growth and structural change go hand in hand." (67).

I am looking forward to our discussion of chapter 11 and the role of government is supporting growth. That discussion will be, I hope, informed by the first two paragraphs on page 71 as well as the contentions outlined in the past paragraph on page 105.

Spence outlines the role that the public sector can play in the investment areas of education and infrastructure. Public education is at the center of our next book The Race Between Education and Technology.

This book provides a careful historical analysis of the co-evolution of educational attainment and the wage structure in the United States through the twentieth century. The authors propose that the twentieth century was not only the American Century but also the Human Capital Century. That is, the American educational system is what made America the richest nation in the world. Its educational system had always been less elite than that of most European nations. By 1900 the U.S. had begun to educate its masses at the secondary level, not just in the primary schools that had remarkable success in the nineteenth century.

The book argues that technological change, education, and inequality have been involved in a kind of race. During the first eight decades of the twentieth century, the increase of educated workers was higher than the demand for them. This had the effect of boosting income for most people and lowering inequality. However, the reverse has been true since about 1980. This educational slow-down was accompanied by rising inequality. The authors discuss the complex reasons for this, and what might be done to ameliorate it.

The recent Institution for International Economics Studies conference had a presentation on point with a comment on the presentation by Claudia Goldin, co author of The Race Between Education and Technology.

Presentation

Comment by Goldin

Returning to Spence's book, he finds 4 attributes of government involvement in society that are positively related to growth (106):

1. The government takes economic growth seriously.

2. The governing group has values that cause it to try to act in the interest of the vast majority of the people

3. The government supports open trade, high levels of investment and a future orientation.

4. Economic freedom is supported by the legal and regulatory policy.

I am looking forward to both the discussion and reaction to point 4 above and an analysis of Spence's chapter 17 analysis.

Spence asks, at the bottom of page 109, ". . . what could be done about failing states."(109). This question bedevils social scientists and policy makers and I wonder, after reading Douglass North, Daron Acemoglu, Michael Spence and other contemporary thinkers and reflecting on Adam Smith's analysis of the causes and conditions of the wealth of nations, what really can be done?

I also wonder, to what extent, there are constructive responses to what Spence sees (third paragraph of page 113) as the common causes of poor economic performance.

Book review of Popper, Hayek and the Open Society by Calvin Hayes

http://defenseofcapitalism.blogspot.com/2011/12/open-societies-and-spontaneous-orders.html

The Next Convergence - Part 1

Part 1 The global economy and developing countries
1. 1950: the start of a remarkable century
2. Static views of a changing world
3. Postwar changes in the global economy
4. The origins of the global economy
5. Economic growth
6. Common questions about the developing world and the global economy

Part 1 is an excellent introduction and framing of the questions posed in the introduction. In particular, chapters 2 and 5 are important and presented in an accessible manner for students of social sciences.
The final paragraph on page 17 provides an insight into a question that our book group has raised during a number of meetings and that continually reflect upon - How do beliefs persist that seem to be in conflict with the world, for example, minimum wage other price controls effectively address questions of economic welfare.

Spence concludes chapter 2:

"Our natural instincts to look for a villain, some human constraint that held in place . . ." I do think that he is on to something here, the notion that there is someone or some organization to blame and the natural follow on to this belief is that there can be a correcting agent - the state, other institutions, or an individual or group of enlightened elites - that can slay the villain and "fix" the problem.

Spence goes on to make an assertion that is attractive to me and I wonder how valid it is. He seems to be saying that the belief mechanism that seems to underlie the instinct for blame is based upon a static or "snapshot" perspective that dominated historical belief systems and continues today. That seems to align with a view that belief systems tend to change very slowly, if at all. The concluding sentence to chapter 2 seems to me to be very true in general and would challenge educators to consider our own process of perspective and belief formation and consider how this might inform our instruction.

Chapter 6 is, important, for the reinforcement of Easterly's aid thesis - that is that foreign aid provides long term (or even short term) benefit to developing countries. Thinking back to the end of chapter 2, I wonder how effective the analysis in this chapter would be to an audience that is primarily operating with a "snapshot" perspective that generates a belief in the efficacy of policies such as aid.

Great Podcast by Michael Spence - The Next Convergence

http://www.international.ucla.edu/burkle/news/article.asp?parentid=125911

Nobel Laureate Michael Spence: The Next Convergence: Developing Country Growth & the Transformation of the Global Economy

The 2012 Arnold C. Harberger Distinguished Lecture delivered by Michael Spence, Nobel Laureate & Professor of Economics at New York University.

This 1 hour 30 minute podcast is a great overview of our October book club book.

Nobel Laureate Michael Spence joined New York University's Leonard N. Stern School of Business as a professor of economics in September 2010. He is a senior fellow at the Hoover Institution and the Philip H. Knight Professor Emeritus of Management in the Graduate School of Business at Stanford University.

Professor Spence, whose scholarship focuses on economic policy in emerging markets, the economics of information, and the impact of leadership on economic growth, was chairman of the independent Commission on Growth and Development (2006-2010), a global policy group focused on strategies for producing rapid and sustainable economic growth, and reducing poverty. He also serves as a consultant to PIMCO, a senior adviser at Oak Hill Investment Management, and as a member of the board of the Stanford Management Company as well as a number of public and private companies. A Rhodes Scholar and the recipient of many honors and awards, Professor Spence was awarded the Nobel Memorial Prize in Economic Sciences in 2001 and the John Bates Clark Medal from the American Economic Association in 1981. He is the author of three books and 50 articles, and is a member of the American Economic Association and a fellow of the American Academy of Arts and Sciences and the Econometric Society.

Professor Spence served as Philip H. Knight Professor and dean of the Stanford Business School from 1990 to 1999. Before that, he was a professor of economics and business administration at Harvard University, chairman of its economic department, and dean of its Faculty of Arts and Sciences.

Professor Spence earned a Ph.D. from Harvard University in 1972, a B.A./M.A. from Oxford University in 1968 and a B.A. (summa cum laude) from Princeton University in 1966.

Hayek on Intellectuals

Econ Talk - Bruce Caldwell on Hayek

This is a must listen podcast.

http://www.econtalk.org/archives/2011/01/caldwell_on_hay.html

Bruce Caldwell of Duke University and the General Editor of the Collected Works of F. A. Hayek, talks with EconTalk host Russ Roberts about Hayek, his life, his ideas, his books, and articles. The conversation covers Hayek's intellectual encounters with Keynes, Hayek's role in the socialist calculation debate, Hayek's key ideas, and a discussion of which of Hayek's works are most accessible.

From the end of the interview - Roberts asks Caldwell where one would begin in reading Hayek:

Let's talk about what should people read to get started. "Use of Knowledge in Society." "Individualism, True and False"--article, essay published in 1946, lecture delivered in 1945, lays out contrast between the Scottish enlightenment version of individualism that we've been discussing in terms of unintended consequences, versus individualism that is atomistic. In some ways you can view this as a critique of socialism. But it also could be a criticism of ideas that underly economic theory. This book, Individualism and Economic Order contains a number of great essays. "The Meaning of Competition" is one, where he says: Anyone who has studied microeconomics has learned about perfect competition and the way decisions are made and he says the worst thing you can do is to think that what you want to do is make the world look like that, because actually, where real competition occurs is not equilibrium but out of equilibrium--it's rivalrous competition. So those are three nice essays. Movement from the Road to Serfdom to the Constitution of Liberty can be viewed as a step. If you didn't want to read The Road to Serfdom you could take a look at "The Economic System," his 1939 essay in which he articulates some of the ideas. I would just add "The Pretence of Knowledge," his Nobel Prize lecture, accessible. Then, in the books, what would you read. All of them of course! Some order? The Road to Serfdom because it's so much in the news,

The Next Convergence

Short interview with Foreign Affairs

Globalization and Unemployment: The Downside of Integrating Markets

By Michael Spence

July/August 2011

Foreign Affairs

http://www.viet-studies.info/kinhte/MichaelSpence_Globalization_Unemployment.pdf

Reviews - The Next Convergence

Tyler Cowen

http://marginalrevolution.com/marginalrevolution/2011/05/the-next-convergence.html

I enjoyed reading this book. It is an entirely sensible take on catch-up growth, a topic which is lacking a good popular treatment and yet deserves one. I found each of the short chapters well-written and to the point. Yet I came away from the work with a strange feeling: I don’t have a good sense of why Spence wrote the book. It doesn’t flex his Nobel-quality analytic mental abilities (unlike this recent piece he wrote), nor is it a rank popularization. It doesn’t promote a “big idea” that his name will be attached to, nor is Spence moving in the Stiglitz or Krugman directions, either politically or in terms of level of pitch. I don’t understand what the book is supposed to be signaling.

Washington Post

Spence’s use of data and history is as impressive as his avoidance of empty sloganeering. Rather than offer deterministic and hopelessly naive bromides, Spence offers deep insights with a winning, refreshing humility rarely seen in Nobel Prize-winning economists. He seems to have taken to heart the advice of another Nobel laureate, the Danish physicist Neils Bohr, who famously said, “Prediction is very difficult, especially about the future.” While Spence has written a book about what will happen in 2050, he concludes by similarly conceding that all crystal balls are hazy. “We do not know, and probably cannot calculate, what the medium-term destination will be,” he writes. “It is not that the principles and forces aren’t understood. It is rather that the system is too complex to lend itself to forecasting.”

http://www.washingtonpost.com/entertainment/books/michael-spences-the-next-convergence-the-future-of-economic-growth-in-a-multispeed-world/2011/06/27/gIQAagtU9I_story.html

Financial Times

http://www.ft.com/cms/s/2/32fb8a62-9a59-11e0-bab2-00144feab49a.html#axzz252xpBjhX

I greatly admire the lucidity, scope and tone of the book. Readers will learn a great deal. But that does not mean I agree with everything.

Prof Spence believes, for example, that emerging market economies have insured themselves by accumulating the liabilities of western governments. This is a strange form of insurance! He also underplays the role of such reserve accumulations in the imbalances that helped create the conditions for the financial crisis.

More important, the analysis of the resource requirements of a world in which 6bn-7bn people live as 1bn people do now is superficial and over-optimistic. True, he is in good company. But I wonder whether such a world will prove sustainable. Certainly, far more rigorous analysis is needed.

Finally, while I want to be optimistic about the capacity of emerging countries to sustain rapid growth and of high-income countries to accommodate their rise, much can go wrong. As the book concludes: “We, and future generations, will have to invent our way through and around the potential roadblocks along the way.” Is humanity capable of such wisdom? I too hope so. But hope is very far indeed from confidence.