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- 284 – The world food price crisis of 2007
by David Pannell in Pannell Discussions, 2015-10-05 15:00:23 UTC
In 2007, the world prices for a number of important food commodities suddenly increased dramatically. Many reasons for the price hike were proposed at the time, but some of them turned out to have little to do with it. One factor that did play a big role was American policy that mandates use of biofuels.
Between 2006 and 2008, the price of rice increased by around 200%, and the prices of maize, wheat and soybeans all increased by over 100%.
Figure 1. Index of food prices since 1990.
It was estimated that this big jump in food prices pushed an additional 130-155 million people into poverty. [...]
- Banks and interest rates: be careful what you wish for
by Steve Cecchetti and Kim Schoenholtz in Money, Banking and Financial Markets, 2015-10-05 14:36:54 UTC
Many people seem to think that – as a new BIS working paper concludes – banks benefit when monetary policy tightens and interest rates rise (especially from a low level). Do they? In some instances, perhaps, but as a general principle, surely not. A casual glance at recent U.S. stock market behavior seems to support the idea that higher interest rates would be good for banks now. When the Federal Open Market Committee decided not to hike interest rates on September 17, the S&P500 dropped by 1.85% over two days, while the KBW index of bank stocks fell by 4.85%. A week later, when Fed Chair [...]
- Measuring Business Practices in Small Firms
by David McKenzie in Development Impact, 2015-10-05 13:20:00 UTC
Chris Woodruff and I have a recent working paper in which we look at the importance of business practices for small firms in developing countries, using surveys administered to over 20,000 small firms in Bangladesh, Chile, Ghana, Kenya, Mexico, Nigeria, and Sri Lanka. [...]
- Why everybody knows CEOs are overpaid, but nothing happens
by David Peetz, Professor of Employment Relations, Griffith University in The Conversation, 2015-10-04 19:22:40 UTC
CEO pay is heavily influenced by comparisons. Image sourced from Shutterstock.com That CEOs are overpaid is something, as Leonard Cohen would say, “everybody knows”; including the directors and shareholders who ultimately decide their pay. Yet firms are unwilling to do anything about it, because to do so would damage internal relations, undermine status and run against the norms of the system.
Across Europe, the US and Australia, , four fifths of people believe business leaders in their countries are overpaid and/or that executive salaries should be capped .
In Britain, the head of the I [...]
- Virtual Frenzies: Bitcoin and the Block Chain
by Stephen G. Cecchetti in Huffington Post Business, 2015-10-01 18:03:16 UTC
Note to editors: This post is coauthored with authorized HuffPo blogger Kermit Schoenholtz . Bitcoin has prompted many people to expect a revolution in the means by which we make and settle everyday payments. Our view is that Bitcoin and other " virtual currency schemes " (VCS) lack critical features of money, so their use is likely to remain very limited. In contrast, the technology used to record Bitcoin ownership and transactions - the block chain - has potentially broad applications in supporting payments in any currency. The block chain can be thought of as an ever-growing public ledger [...]
- Lecture on Rationality, Utility, Value and Decision Making
by Liam Delaney in Economics, Psychology and Policy, 2015-09-30 22:41:00 UTC
I am currently giving a set of lectures as part of a module " Behavioural Economic: Concepts and Theories " in Stirling. I am posting brief informal summaries of some of these lectures on the blog to generate discussion. Fig 1. Overview Today's lecture was on Rationality, Utility, Value and Decision-making . The lecture consisted of six sections ( Fig. 1) : (i) concepts of rationality; (ii) rational choice in conditions of certainty; (iii) rational choice in conditions in conditions of uncertainty; (iv) challenges to rational choice (v) loss aversion and the endowment effect; and (vi) implicat [...]
- Why poor countries should try to avoid the SDGs
by Philipp Krause in Development Policy Blog, 2015-09-30 20:00:28 UTC
This weekend, the United Nations officially adopted the Sustainable Development Goals (SDGs), or Global Goals , as they now seem to be called. Judging from the congratulations emanating from New York, this is great news for the international aid community, who managed to replace the Millennium Development Goals (MDGs) with a new framework to cover the next 15 years until 2030. Unfortunately, they’re also bad news for developing countries.
It’s been widely reported that the process of tortured negotiations essentially turned into what political scientists call “logrolling”: everyone vot [...]
- Linearization about the Current State: A Computational Method for Approximating Nonlinear Policy Functions during Simulation
by Christian Zimmermann in NEP-DGE blog, 2015-09-30 18:56:23 UTC
By Ricard Evans and Kirk Phillips
This paper presents an adjustment to commonly used approximation methods for dynamic stochastic general equilibrium (DSGE) models. Policy functions approximated around the steady state will be inaccurate away from the steady state. In some cases, this does not lead to substantial inaccuracies. In other cases, however, the model may not have a well-defined steady state, or the nature of the steady state may be at odds with its off-steady-state dynamics. We show how to simulate a DSGE model by approximating ab [...]
by chris in Stumbling and Mumbling, 2015-09-29 12:19:43 UTC
Janan Ganesh interprets the rise of Corbyn as a sign of Britain's prosperity - that people "can afford to treat politics as a source of gaiety and affirmation":
A Corbyn rally is not a band of desperate workers fighting to improve their circumstances, it is a communion of comfortable people working their way up Maslow’s hierarchy of needs.
I fear this misses two points.
One is that twas ever thus. Left-wing movements have always contained - and often been led by - the well-off. Lenin, Trotsky, Mao and Castro were all nice middle-class boys. Several of the leaders of the 1945-51 Labour gove [...]
- A Pre-Protestant Ethic?
by shenderson97 in NEP-HIS blog, 2015-09-29 09:00:51 UTC
Breaking the piggy bank: What can historical and archaeological sources tell us about late‑medieval saving behaviour?
By Jaco Zuijderduijn and Roos van Oosten (both at Leiden University)
Using historical and archeological sources, we study saving behaviour in late-medieval Holland. Historical sources show that well before the Reformation – and the alleged emergence of a ‘Protestant ethic’ – many households from middling groups in society reported savings worth at least several months’ wages of a skilled worker. That these findings must be interpreted as an exponent of savi [...]
- Piketty's contribution to unpacking inequality: timely and relevant
by Vishnu Padayachee, Distinguished Professor and Derek Schrier and Cecily Cameron Chair in Development Economics, School of Economics and Business Sciences, University of the Witwatersrand in The Conversation, 2015-09-29 04:45:09 UTC
A view of Alexandra township, a slum
overlooking the Sandton skyscrapers in Johannesburg. Addressing inequality has been a major challenge for South Africa. Reuters/Juda Ngwenya Not many economists with something approaching a rockstar status visit South Africa. So the visit by French political economist Thomas Piketty, author of the bestselling Capital in the Twenty-first Century , appears to be eagerly awaited by academics, especially those broadly on the left, and by many South Africans.
In 1976, Milton Friedman , then the rising rockstar economist of the anti-Keynesian right wing in the U [...]
- The study of inequality has been mainstreamed – what now for the left?
by Edward Webster, Professor Emeritus, Society, Work and Development Institute , University of the Witwatersrand in The Conversation, 2015-09-29 04:44:52 UTC
The Global South is engineering new anti-poverty strategies, leaving traditional left analysts in a quandry. Reuters/Nacho Doce It could be said that mainstream economic research is informing the left’s long-term critique of trickle-down economics.
Three extensive pieces of research illustrate how the study of inequality has been mainstreamed. Thomas Piketty, in Capital in the Twenty-First Century , confirms that market-led growth deepens inequality and good redistributive policies improve growth. Tracing changes in inequality since 1921, Kate Pickett and Richard Wilkinson show that among t [...]
- Déjà vu in emerging markets
by Steve Cecchetti and Kim Schoenholtz in Money, Banking and Financial Markets, 2015-09-28 12:31:39 UTC
For decades a number of emerging markets have been evolving into advanced economies.�They have improved their financial systems, property rights, policy frameworks, and growth models. As it turns out, however, the evolution was going the other way, too: advanced economies were becoming more like emerging markets, too.�Debt was accumulating on household, corporate and bank balance sheets. Booms in real estate and parts of the corporate sector added to financial vulnerability.�And policymakers were inattentive to the risks or lacked consensus on how to address them. When the Great Financial Cris [...]
- Why England can't lose from hosting the Rugby World Cup
by Chris Brady, Co-Director, Centre for Sports Business, University of Salford in The Conversation, 2015-09-28 05:33:34 UTC
Reuters staff Tills are ringing in pubs and hotels all over London, Cardiff, Exeter and Newcastle as rugby fans in town for the 2015 World Cup toast victory or drown their sorrows, racking up a tidy bar bill as they go. At least that’s the happy picture being painted by promoters of the tournament who are keen to highlight the economic benefits of hosting it .
Those touting the Rugby World Cup’s benefits are quick to reference a report by the accountancy firm Ernst & Young , which asserts that the tournament will generate up to £2.2 billion of output into the [...]
- Influential Publications in Ecological Economics Revisited
by email@example.com (David Stern) in Stochastic Trend, 2015-09-27 22:34:00 UTC
Back in 2004 I published with Bob Costanza , Chunbo Ma , Brendan Fisher , and Lining He a paper that looked at the most influential publications on the field of ecological economics . Then, about this time last year Gaël Plumecocq contacted me about participating in a session he was organizing at the European Society of Ecological Economics meeting in Leeds on "ecological economics understood as an epistemic community". I had the idea of revisiting our 2004 paper a decade later and seeing how the field had changed in the meantime. Eventually, Gaël also came on board our author team, contribu [...]
- Optimally Sticky Prices
by Christian Zimmermann in NEP-DGE blog, 2015-09-25 15:05:46 UTC
By William Zame and Jean-Paul L’Huillier
We propose a microfoundation for sticky prices. We consider a an environment in which a monopolistic firm has better information than its consumers about the nominal aggregate state. We show that, when many consumers are uninformed (and for some ranges of parameters), it is optimal for the firm to offer contracts/prices that do not depend on the state of the world; i.e. optimal contracts/prices are sticky. We establish this result first in a general mechanism design framework that allows for non-linear p [...]
- The West is on fire – and the US taxpayer is subsidizing it
by John Rennie Short, Professor, School of Public Policy, University of Maryland, Baltimore County in The Conversation, 2015-09-23 09:36:34 UTC
Raging – and costly. US National Parks Service , CC BY-SA The western US is burning.
This year’s damaging experience is just the latest in a recent series of devastating wildfire seasons, a trend that will only likely increase over the coming years.
Over the last few decades, and especially since 2000, the wildfire season is getting longer, with more fires, bigger fires and more damaging fires . Even before the end of this year’s season, 600,000 acres have burned in California, and almost a million acres each in Oregon and Washington. More than five million acres were destroyed in the [...]
- Over consumption. A horse race of Bayesian DSGE models
by Christian Zimmermann in NEP-DGE blog, 2015-09-22 19:47:11 UTC
By Amedeo Argentiero, Maurizio Bovi and Roy Cerqueti
Standard dynamic stochastic general equilibrium (DSGE) models are populated by fully-informed-optimising Muth-rational agents. This kind of agent is at odds with well-known psychological biases, not to mention real life people. In particular, there are strong theoretical and empirical reasons to believe that consumers are overly optimistic. Also, the size of over optimism is likely to show cyclical features. In this paper we simulate two DSGE models, one standard with Muth-rational consumer [...]
- The Wicked Witch of the West Wing Brings on an SWP Acid Flashback Moment
by The Professor in Streetwise Professor, 2015-09-21 20:23:24 UTC
I hadÂ an acid flashback momentÂ when I read this :
Biotechnology stocks took a sharp dive Monday afterÂ Hillary Clinton Â said she wouldÂ propose a plan to counteract âprice gougingâ by drug makers.
Ms. Clinton, who is seeking the Democratic nomination for president, was responding to New York Times article published Sunday that told of a price increase for a drug used toÂ treat a life-threatening parasitic infection. The cost of the drug was recently increase fromÂ $13.50 a tablet to $750, Â the story said .
Why? Because Hillary wreaked havoc on pharmaceutical stock prices 23 years ago, [...]
- Monday assorted links
by Tyler Cowen in Marginal Revolution, 2015-09-21 16:26:22 UTC
1. Don Boudreaux responds to Dani Rodrik on free trade .Â And Arnold Kling responds .Â And Dan Klein reviews Charles C.W. Cooke’s The Conservatarian Manifesto .
2. A quick way to access what betting markets are telling us about the candidates .
3. The NBA is moving toward wearable tech — are you next?
4. More data on Chinese services, including telecom .
5. Should we adjust for this data, or learn from it?Â The temporal evolution of citation counts, across fields .
6. Generalized results about interest rates and banks profits, check out the Chicago Fed link here , Genay and Podjasek, it is [...]
- 283 – Whose environmental values matter?
by David Pannell in Pannell Discussions, 2015-09-21 15:00:53 UTC
One of my pet issues is how to decide which the environment projects should receive public funding. One of the factors influencing this decision is (or should be) the importance or value of the environmental outcomes that would be delivered. But whose judgements about importance or values should be taken into account?
There are at least three groups whose values might be influential:
The general public.
Environmental experts, such as ecologists, are crucial to decisions about environmental investments. We need their advice about threats to environmental as [...]
- Was Stalin’s Economic Policy the Root of Nazi Germany’s Defeat?
by emanuelefelice in NEP-HIS blog, 2015-09-21 13:38:02 UTC
Was Stalin Necessary for Russiaâs Economic Development?
By Anton Cheremukhin (Dallas Fed), Mikhail Golosov (Princeton), Sergei Guriev (SciencesPo), Aleh Tsyvinski (Yale)
Abstract: This paper studies structural transformation of Soviet Russia in 1928-1940 from an agrarian to an industrial economy through the lens of a two-sector neoclassical growth model. We construct a large dataset that covers Soviet Russia during 1928-1940 and Tsarist Russia during 1885-1913. We use a two-sector growth model to compute sectoral TFPs as well as distortions and wedges in the capital, labor and product market [...]
- The outcome bias
by chris in Stumbling and Mumbling, 2015-09-21 13:20:20 UTC
Diego Costa has something in common with George Osborne. I don't just mean the obvious . I mean that both could be beneficiaries of a common cognitive error - the outcome bias.
Some observers are praising Costa for engineering Gabriel's sending off. "There is barely a team on the planet who would not benefit from Costa's streetfighting approach" says Oliver Kay in the Times. "He deliberately and skilfully got an opponent sent off" says Barney Ronay in the Guardian. "This was wasn’t a mugging. It was a heist, and an expert one." And Arry Redknapp adds that "you would like to have him in your [...]
- Virtual Frenzies: Bitcoin and the Block Chain
by Steve Cecchetti and Kim Schoenholtz in Money, Banking and Financial Markets, 2015-09-21 13:11:12 UTC
Bitcoin has prompted many people to expect a revolution in the means by which we make and settle everyday payments. Our view is that Bitcoin and other “ virtual currency schemes ” (VCS) lack critical features of money, so their use is likely to remain very limited. In contrast, the technology used to record Bitcoin ownership and transactions – the block chain – has potentially broad applications in supporting payments in any currency. The block chain can be thought of as an ever-growing public ledger of transactions that is encrypted and distributed over a network of computers. Even as [...]
- The many faces of the federal funds rate
by ? in FRED blog, 2015-09-21 13:00:16 UTC
Itâs no surprise FRED has federal funds rate data. But these data aren’t as simple as you may think. They have changed form over time as the Federal Open Market Committee has changed the way it sets the funds rate: From 1982 through 2008, the target rate is a discrete number. For example, it is 9.5% on Oct. 1, 1982, 3% on Oct. 1, 1992, and 1.75% on Oct. 1, 2002. At the end of 2008 (i.e., since the financial crisis), the FOMC began setting a target range of 0.00 to 0.25%. And, to further complicate matters, the data prior to 1994 come from the working paper â A New Federal Funds Rate Targe [...]
- Financialisation makes income distribution more unequal
by Blog Admin in British Politics and Policy at LSE, 2015-09-21 06:00:29 UTC
Financialisation and increasing income inequality have been two of the most important developments in the last three decades. But what is the connection between the two phenomena? Does financialisation contribute to the increase in income inequality? Karsten KÃ¶hler , Alexander Guschanski and Engelbert Stockhammer provide evidence for a negative effect of financialisation on functional income distribution in OECD countries.
The last four decades have been characterised by drastic changes in the distribution of income between wages and profits. On average (in our sample of 14 OECD countries) th [...]