Menger vs. MMT on the Origins of Money
1 day ago
Thursday, May 31, 2012
Wednesday, May 30, 2012
Tuesday, May 29, 2012
David Schmidtz of the University of Arizona talks with EconTalk host Russ Roberts
David Schmidtz of the University of Arizona talks with EconTalk host Russ Roberts about the work of John Rawls and Robert Nozick. The conversation covers the basic ideas of Rawls and Nozick on inequality and justice and the appropriate role of the state in taxation and property rights.
Monday, May 28, 2012
Sunday, May 27, 2012
Saturday, May 26, 2012
When Prices Are Wrong, Markets Don't Work
This article appeared in The New York Times on March 19, 2012.
The one concept that all students, even those sleeping in the back of the lecture hall, learn from an introductory economics class is that prices matter. And more particularly, students learn that as prices increase, the quantity consumed goes down. So if fossil fuel combustion produces byproducts that cause negative health effects on third parties as well as changes in the temperature of the atmosphere, the obvious lesson from economics is to increase fossil fuel prices enough through taxation to account for these effects. Then firms and consumers will react to these prices in thousands of different ways, the net result of which is less aggregate fossil fuel combustion.
The one concept that all students, even those sleeping in the back of the lecture hall, learn from an introductory economics class is that prices matter. And more particularly, students learn that as prices increase, the quantity consumed goes down. So if fossil fuel combustion produces byproducts that cause negative health effects on third parties as well as changes in the temperature of the atmosphere, the obvious lesson from economics is to increase fossil fuel prices enough through taxation to account for these effects. Then firms and consumers will react to these prices in thousands of different ways, the net result of which is less aggregate fossil fuel combustion.
Friday, May 25, 2012
Thursday, May 24, 2012
Wednesday, May 23, 2012
America’s Hidden Government
America’s Hidden Government:
Suzanne Mettler's The Submerged State shows that executing policy through tax breaks and other indirect measures encourages Americans to think that they do not rely on the government for help, even when they do. The result is a distorted public discourse and an erosion of democratic legitimacy.
Suzanne Mettler's The Submerged State shows that executing policy through tax breaks and other indirect measures encourages Americans to think that they do not rely on the government for help, even when they do. The result is a distorted public discourse and an erosion of democratic legitimacy.
Tuesday, May 22, 2012
deLong writes . . .
Four times in the past century, a large chunk of the industrial world has fallen into deep and long depressions characterized by persistent high unemployment: the United States in the 1930’s, industrialized Western Europe in the 1930’s, Western Europe again in the 1980’s, and Japan in the 1990’s. Two of these downturns – Western Europe in the 1980’s and Japan in the 1990’s – cast a long and dark shadow on future economic performance.
In both cases, if either Europe or Japan returned – or, indeed, ever returns – to something like the pre-downturn trend of economic growth, it took (or will take) decades. In a third case, Europe at the end of the 1930’s, we do not know what would have happened had Europe not become a battlefield following Nazi Germany’s invasion of Poland.
In only one instance was the long-run growth trend left undisturbed: US production and employment after World War II were not significantly affected by the macroeconomic impact of the Great Depression. Of course, in the absence of mobilization for WWII, it is possible and even likely that the Great Depression would have cast a shadow on post-1940 US economic growth. That is certainly how things looked, with high levels of structural unemployment and a below-trend capital stock, at the end of the 1930’s, before mobilization and the European and Pacific wars began in earnest.
In the US, we can already see signs that the downturn that started in 2008 is casting its shadow on the future. Reputable forecasters – both private and public – have been revising down their estimates of America’s potential long-run GDP.
For example, labor-force participation, which usually stops falling and starts rising after the business-cycle trough, has been steadily declining over the past two and a half years. At least some monetary policymakers believe that recent reductions in the US unemployment rate, which have largely resulted from falling labor-force participation, are just as valid a reason for shifting to more austere policies as reductions in unemployment that reflect increases in employment. And much the same processes and responses are at work – with even greater strength – in Europe.
Most important, however, has been what looks, from today’s perspective, like a permanent collapse in the risk-bearing capacity of the private marketplace, and a permanent and large increase in the perceived riskiness of financial assets worldwide – and of the businesses whose cash flows underpin them. Given aging populations in industrial countries, large commitments from governments to social-insurance systems, and no clear plans for balancing government budgets in the long run, we would expect to see inflation and risk premiums – perhaps not substantial, but clearly visible – priced into even the largest and richest economies’ treasury debt.
In both cases, if either Europe or Japan returned – or, indeed, ever returns – to something like the pre-downturn trend of economic growth, it took (or will take) decades. In a third case, Europe at the end of the 1930’s, we do not know what would have happened had Europe not become a battlefield following Nazi Germany’s invasion of Poland.
In only one instance was the long-run growth trend left undisturbed: US production and employment after World War II were not significantly affected by the macroeconomic impact of the Great Depression. Of course, in the absence of mobilization for WWII, it is possible and even likely that the Great Depression would have cast a shadow on post-1940 US economic growth. That is certainly how things looked, with high levels of structural unemployment and a below-trend capital stock, at the end of the 1930’s, before mobilization and the European and Pacific wars began in earnest.
In the US, we can already see signs that the downturn that started in 2008 is casting its shadow on the future. Reputable forecasters – both private and public – have been revising down their estimates of America’s potential long-run GDP.
For example, labor-force participation, which usually stops falling and starts rising after the business-cycle trough, has been steadily declining over the past two and a half years. At least some monetary policymakers believe that recent reductions in the US unemployment rate, which have largely resulted from falling labor-force participation, are just as valid a reason for shifting to more austere policies as reductions in unemployment that reflect increases in employment. And much the same processes and responses are at work – with even greater strength – in Europe.
Most important, however, has been what looks, from today’s perspective, like a permanent collapse in the risk-bearing capacity of the private marketplace, and a permanent and large increase in the perceived riskiness of financial assets worldwide – and of the businesses whose cash flows underpin them. Given aging populations in industrial countries, large commitments from governments to social-insurance systems, and no clear plans for balancing government budgets in the long run, we would expect to see inflation and risk premiums – perhaps not substantial, but clearly visible – priced into even the largest and richest economies’ treasury debt.
Monday, May 21, 2012
Sunday, May 20, 2012
Europe's Crisis: A Roadmap From the Past
Saturday, May 19, 2012
Friday, May 18, 2012
Thursday, May 17, 2012
Wednesday, May 16, 2012
EHA 2012 Meeting Program Now Available
EHA 2012 Meeting Program Now Available
The registration system for the meeting will open at the end of May. Note that applications to present at poster sessions are still open (deadline, May 16), as are submissions for the Nevins and Gerschenkron dissertation prizes (deadline, May 15). See the"Graduate Student" section of the meeting website for complete application details.
Tuesday, May 15, 2012
Spanish bonds
Might this be a preview for the US to consider?
Following Wednesday’s auction the yield of a composite of Spanish 10-year bonds jumped 24 basis points to 5.69 per cent, the highest since early January, while the premium demanded by investors to hold Spanish debt over that of Germany rose to 388 basis points, the highest since November.
Spain’s borrowing costs initially tumbled from more than 6 per cent after the European Central Bank late in December, and then again in February, offered unlimited cheap three-year loans to continental banks.
However, the scale of the government budget deficit and Spain’s economic malaise has spooked investors and pushed up bond yields. Spanish 10-year bonds have now traded at a higher yield than Italy’s since early February, after trading at a lower yield during the second half of last year
Following Wednesday’s auction the yield of a composite of Spanish 10-year bonds jumped 24 basis points to 5.69 per cent, the highest since early January, while the premium demanded by investors to hold Spanish debt over that of Germany rose to 388 basis points, the highest since November.
Spain’s borrowing costs initially tumbled from more than 6 per cent after the European Central Bank late in December, and then again in February, offered unlimited cheap three-year loans to continental banks.
However, the scale of the government budget deficit and Spain’s economic malaise has spooked investors and pushed up bond yields. Spanish 10-year bonds have now traded at a higher yield than Italy’s since early February, after trading at a lower yield during the second half of last year
Sunday, May 13, 2012
DeLong, Friedman and Maximal Government
http://thinkmarkets.wordpress.com/2012/05/03/delong-friedman-and-maximal-government/
Saturday, May 12, 2012
Tabarrok's new book
We like to think of ourselves as an innovation nation but our government is a warfare-welfare state. To build an economy for the 21st century we need to increase the rate of innovation and to do that we need to put innovation at the center of our national vision. Innovation, however, is not a priority of our massive federal government.
Nearly two-thirds of the U.S. federal budget, $2.2 trillion annually, is spent on just the four biggest warfare and welfare programs, Medicaid, Medicare, Defense and Social Security. In contrast the National Institutes of Health, which funds medical research, spends $31 billion annually, and the National Science Foundation spends just $7 billion.
That’s me writing at The Atlantic drawing on Launching the Innovation Renaissance. Here is one more bit:
Our ancestors were bold and industrious–they built a significant portion of our energy and road infrastructure more than half a century ago. It would be almost impossible to build that system today. Could we build the Hoover Dam today? We have the technology but do we have the will? Unfortunately, we cannot rely on the infrastructure of our past to travel to our future. Airports, an electricity smart grid that doesn’t throw millions into the dark every few years, ubiquitous Wi-Fi — these are among the important infrastructures of the 21st century, and they are caught in the regulatory thicket.
Putting innovation at the center of the national vision is not simply about spending more, it’s about how we approach all problems. Read the whole thing for more discussion of regulation and other issues.
Friday, May 11, 2012
Thursday, May 10, 2012
Tyler Cowen on education
A sobering thought
by Tyler Cowen on April 10, 2012 at 10:08 am
The United States circa 2012 is one of the most productive economies of all time, arguably the most productive if you take into account size and diversification (rules out Norway, etc.). Internationally speaking, in the richest and most productive global economy of all time, which is our most competitive sector?
Hollywood? Maybe, but it could well be higher education. Students from all over the world want to go to U.S. higher education. If we had nicer immigration authorities, this advantage would be all the more pronounced.
In other words, I work in what is perhaps the most competitive and successful sector in the most competitive and successful economy of all time.
And yet what I see around me is a total, total mess. And I believe my school to be considerably above average in terms of how well it is run.
by Tyler Cowen on April 10, 2012 at 10:08 am
The United States circa 2012 is one of the most productive economies of all time, arguably the most productive if you take into account size and diversification (rules out Norway, etc.). Internationally speaking, in the richest and most productive global economy of all time, which is our most competitive sector?
Hollywood? Maybe, but it could well be higher education. Students from all over the world want to go to U.S. higher education. If we had nicer immigration authorities, this advantage would be all the more pronounced.
In other words, I work in what is perhaps the most competitive and successful sector in the most competitive and successful economy of all time.
And yet what I see around me is a total, total mess. And I believe my school to be considerably above average in terms of how well it is run.
Wednesday, May 9, 2012
Concern About The Decline in Manufacturing in the United States? Becker
Becker and Posner use the "special" attention to manufacturing by politicians to underscore the net cost generated by protectionism and rent seeking by special interests.
http://www.becker-posner-blog.com/2012/04/concern-about-the-decline-in-manufacturing-in-the-united-states-becker.html
http://www.becker-posner-blog.com/2012/04/concern-about-the-decline-in-manufacturing-in-the-united-states-becker.html
Tuesday, May 8, 2012
Monday, May 7, 2012
Sunday, May 6, 2012
Saturday, May 5, 2012
Friday, May 4, 2012
Social Security, Savings and Stagnation
Here is Evans, Kotlikoff, and Phillips making the case that transfers to the elderly, such as Social Security and Medicare, have dramatically lowered the US savings rate, the investment rate and real wage growth:
http://marginalrevolution.com/marginalrevolution/2012/05/savings-and-stagnation.html
http://marginalrevolution.com/marginalrevolution/2012/05/savings-and-stagnation.html
Thursday, May 3, 2012
Monetary Policy
James Hamilton writes of monetary policy:
"But unlike many of my fellow academics, I worry about those logistics and am convinced that it is a mistake to ask too much from monetary policy."
http://www.econbrowser.com/archives/2012/05/should_the_fed_3.html
"But unlike many of my fellow academics, I worry about those logistics and am convinced that it is a mistake to ask too much from monetary policy."
http://www.econbrowser.com/archives/2012/05/should_the_fed_3.html
Is It True that Economists Often Mistake Beauty for Truth?
Pete Boettke writes:
In fact, I'd argue that in puzzle selection, that economists choose puzzles to work on that excite their intellectual imaginations and among those, they work on those they think they can solve with the tools and techniques they deem as scientific. A lot of presuppositions (some explicit, some tacit) go into that exercise. Furthermore, ideology (or what Schumpeter termed our pre-analytic cognitive act of vision which provides the raw material for analysis) exists across all economists, even those who believe themselves above such biases. In fact, it is probably the case that ideological bias is strongest in those who think themselves most immune from ideological influence.
The economist as social engineer is different from the economist as student of society, and the perception of the state as an active player in the economic game is different from the perception of the state as a referee in the economic game. The (tacit or otherwise) presuppositions of political economy matter for the puzzles one works on, and the evidence one finds telling.
The entire post is well worth a read.
http://www.coordinationproblem.org/2012/04/is-it-true-that-economists-often-mistake-beauty-for-truth.html
In fact, I'd argue that in puzzle selection, that economists choose puzzles to work on that excite their intellectual imaginations and among those, they work on those they think they can solve with the tools and techniques they deem as scientific. A lot of presuppositions (some explicit, some tacit) go into that exercise. Furthermore, ideology (or what Schumpeter termed our pre-analytic cognitive act of vision which provides the raw material for analysis) exists across all economists, even those who believe themselves above such biases. In fact, it is probably the case that ideological bias is strongest in those who think themselves most immune from ideological influence.
The economist as social engineer is different from the economist as student of society, and the perception of the state as an active player in the economic game is different from the perception of the state as a referee in the economic game. The (tacit or otherwise) presuppositions of political economy matter for the puzzles one works on, and the evidence one finds telling.
The entire post is well worth a read.
http://www.coordinationproblem.org/2012/04/is-it-true-that-economists-often-mistake-beauty-for-truth.html
Wednesday, May 2, 2012
Tuesday, May 1, 2012
He Was a Crook - The Atlantic
He Was a Crook - The Atlantic
Hunter S Thompson on Richard Nixon. Thompson is at his prime and this is a delightfully savage obituary.
Hunter S Thompson on Richard Nixon. Thompson is at his prime and this is a delightfully savage obituary.
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