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- Agribusiness trade as a pillar of development: Measurement and patterns
by Fabian Mendez Ramos in Let's Talk Development, 2017-02-23 15:35:00 UTC
Agribusiness is en vogue , fostered by a new understanding of the agricultural sector as a major contributor to overall growth and poverty reduction and through its linkages with the manufacturing and services sector .
In order to efficiently link farmers and consumers across countries and regions, quantifying and analyzing agribusiness trade flows is key. But how can we measure international agribusiness trade flows in a systematic way to identify important patterns?
- An Economy of Meaning â or Bust
by ? in Naked Capitalism, 2017-02-23 09:05:00 UTC
Can one really create "an economy of meaning"? [...]
- Basil Halperinâs critique of NGDP targeting
by ssumner in The Money Illusion, 2017-02-22 23:59:10 UTC
Lots of people have tried to find flaws in NGDP targeting, but most of these posts are written by people who have not done their homework. Basil Halperin is an exception. Back in January 2015 he wrote a very long and thoughtful critique of NGDP targeting. A commenter recently reminded me that I had planned to address his arguments. Here’s Basil:
Remember that nominal GDP growth (in the limit) is equal to inflation plus real GDP growth. Consider a hypothetical economy where market monetarism has triumphed, and the Fed maintains a target path for NGDP growing annually at 5% (perhaps even wi [...]
- Missing markets
by chris in Stumbling and Mumbling, 2017-02-22 14:33:44 UTC
Why is there such a long lag between good economic ideas and their implementation? I’m prompted to ask by the death of the great Kenneth Arrow .
He showed (pdf) that, under certain conditions, it was possible for competitive markets to achieve an optimal allocation of risk. One of these conditions is that there exist securities which pay out in all possible states of the world, so that we have in effect complete insurance markets. But, he concluded:
Many of the economic institutions which would be needed to carry out the competitive allocation in the case of uncertainty are in fact lacking.
- The Greatest Living Economist Has Passed Away: Notes on Kenneth Arrow Part I
by afinetheorem in A Fine Theorem, 2017-02-22 06:09:43 UTC
It is amazing how quickly the titans of the middle of the century have passed. Paul Samuelson and his mathematization, Ronald Coase and his connection of law to economics, Gary Becker and his incorporation of choice into the full sphere of human behavior, John Nash and his formalization of strategic interaction, Milton Friedman and his defense of the market in the precarious post-war period, Robert Fogel and his cliometric revolution: the remaining titan was Kenneth Arrow, the only living economist who could have won a second Nobel Prize without a whit of complaint from the gallery. These fi [...]
- Why mandate young borrowers to contribute to their retirement accounts?
by Christian Zimmermann in NEP-DGE blog, 2017-02-21 21:27:57 UTC
By Troebn M. Andersen and Joydeep Bhattacharya
Many countries, in an effort to address the problem that too many retirees have too little saved up, impose mandatory contributions into retirement accounts, that too, in an age-independent manner. This is puzzling because such funded pension schemes effectively mandate the young, who wish to borrow, to save for retirement. Further, if agents are present-biased, they disagree with the intent of such schemes and attempt to undo them by reducing their own saving or even borrowing again [...]
- Would Jim Morrison Recognize the New Venice Beach? Internet Billionaires Replace Bongs and Muscle
by Matthew Kahn in Environmental and Urban Economics, 2017-02-21 18:26:00 UTC
I live seven miles from Venice Beach. �While there are still many eccentric people walking along the beach paths, the area is gentrifying as leading Internet Startups take root. � The New York Times has writte n a great piece about Snap and its upcoming IPO that will mint many new super-rich people. As an environmental and urban economist, permit me to pose a riddle for you. �Why have these "hot startups" located near the beach? �Is there anything inherently productive about being in the sunshine in 75 degree warmth in winter with blue skies and clean air and close to the beach? � No! �Milton [...]
- How do we eliminate wealth inequality and financial fragility?
by chechurris in NEP-HIS blog, 2017-02-21 08:41:59 UTC
The market turn: From social democracy to market liberalism
By Avner Offer, All Souls College, University of Oxford ( email@example.com )
Abstract: Social democracy and market liberalism offered different solutions to the same problem: how to provide for life-cycle dependency. Social democracy makes lateral transfers from producers to dependents by means of progressive taxation. Market liberalism uses financial markets to transfer financial entitlement over time. Social democracy came up against the limits of public expenditure in the 1970s. The ‘market turn’ from social democracy [...]
- On the Political Nature of Monetary Policy
by Francesco Saraceno in Sparse Thoughts of a Gloomy European Economist, 2017-02-20 18:10:54 UTC
I was intrigued by Munchau’s editorial on central bank independence, that appeared on today’s FT . Munchau argues that central banks’ choices are increasingly political in nature, especially if their mandate is broad, as is the case for example of the Fed. His argument is that a broad mandate implies tradeoffs, and as such it does not go well with central bank independence.
I must say I am unconvinced to say the least, on at least two levels.
First, I do not see how a strict mandate would make central bank choices less political in nature. It makes them more opaque, but by no means less poli [...]
- Liquidity Transformation and Open-end Funds
by Steve Cecchetti and Kim Schoenholtz in Money, Banking and Financial Markets, 2017-02-20 12:14:26 UTC
“A key structural vulnerability from asset management activities is the potential mismatch in open-ended funds between the liquidity of fund investments and daily redemption of fund units.” Financial Stability Board , January 2017 In the aftermath of Britain’s July 2016 vote to exit the European Union, six U.K. open-end property funds with nearly £15 billion in assets suspended redemptions. These funds had routinely engaged in an extreme version of liquidity transformation : offering investors the ability to convert their shares into cash daily on demand, while holding highly illiquid commerci [...]
- Can we attract good political leaders? Hint â yes
by Nicholas Gruen in Club Troppo, 2017-02-20 09:01:40 UTC
Can a democracy attract competent leaders, while attaining broad representation? Economic models suggest that free-riding incentives and lower opportunity costs give the less competent a comparative advantage at entering political life. Moreover, if elites have more human capital, selecting on competence may lead to uneven representation. This paper examines patterns of political selection among the universe of municipal politicians and national legislators in Sweden, using extraordinarily rich data on competence traits and social background for the entire population. We document four new fact [...]
- How Do Environmental Economists Know that the Social Cost of Carbon is $42 a Ton?
by Matthew Kahn in Environmental and Urban Economics, 2017-02-19 17:43:00 UTC
The National Academy of Sciences has released a brand new report that you can download here that has a definitive feel on stating the academic environmental economics' community consensus on the social cost of carbon. In this blog post, I will clearly state that I do not believe this number nor do I believe that such a number can be estimated. It is a moving target that changes every day and it may be actually declining over time. My recent NBER Paper offers one induced innovation theory for why this can happen. Here is the citation; Suggested citation: National Academies of Sciences, Eng [...]
- Replacing Wenger
by chris in Stumbling and Mumbling, 2017-02-17 14:13:39 UTC
Should Arsene Wenger go? If so who should replace him? In considering these questions we must remember three important economic principles.
One is that in hiring someone what matters is putting round pegs into round holes. Productivity often results not from the intrinsic quality of a worker, but from the match between his skills and the job. What matters is getting the right man for the job, not necessarily the best.
Boris Groysberg has shown this (pdf) . He looked at 20 former managers of General Electric – a company with a reputation for producing good bosses – who moved to senior positions [...]
- My Recent Writing on Climate Economics
by Matthew Kahn in Environmental and Urban Economics, 2017-02-17 00:19:00 UTC
Here is my new piece about the Economic effects of California's AB32. � � Here is m y Harvard Business Review piece that dusts off the Porter Hypothesis and applies its logic to corporate climate change adaptation. � Finally, here is my new co-authored NBER working paper on the adaptation effects of climate skeptics. � This paper was stimulated by my interest in J ohn Campbell's Ely Lecture.� [...]
- Jobless Recoveries: The Interaction between Financial and Search Frictions
by Christian Zimmermann in NEP-DGE blog, 2017-02-16 16:31:53 UTC
By Dennis Wesselbaum
This paper establishes a link between labor market frictions and financial market frictions. We present empirical evidence about the relation between search and financial frictions. Then, we build a stylized DSGE model that features this channel. Simulation excercises show that the model with this channel generates a strong internal propagation mechanism, replicates stylized labor market effects of the Great Recession, and, most importantly, creates a jobless recovery.
Nice to see a paper that ties together the jobless rec [...]
- How Do Skeptics Affect Our Collective Ability to Adapt to Climate Change?
by Matthew Kahn in Environmental and Urban Economics, 2017-02-16 15:12:00 UTC
Daxuan Zhao and I have just released a new NBER Working paper on climate change adaptation. �Recall that climate change mitigation focuses on slowing down and even reducing our production of greenhouse gas emissions. Adaptation refers to how an economy's growth and individual well being is affected by the stock pollutant externality. Many "climate warriors" such as Joe Romm rail against climate skeptics because such individuals vote against carbon taxes. �Our paper has nothing to say about this topic because there is no government in our paper. Instead, we study how an economy's ability to ada [...]
- Triskaidekaphobia When People Buy a House (podcast 102)
by Marc Abrahams in Improbable Research, 2017-02-15 15:40:36 UTC
*** NEWS!! This podcast episode is the FINAL episode that we’ll be doing together with CBS. After this, the Improbable Research podcast will have a NEW broadcast collaborator! (You will always be able to find it here at Improbable.com, of course!) We’ll have details for you soon, about that. ***
IN THIS EPISODE: Does a house fall in value if its street address includes the “unlucky” number 13? A research study explores that very question, and we explore that study, in this week’s Improbable Research podcast .
This week, Marc Abrahams discusses a published triskaidekophobia study. Physicis [...]
- House prices as leaky bucket
by chris in Stumbling and Mumbling, 2017-02-14 14:04:49 UTC
The Resolution Foundation says (pdf) that the typical pensioner now has a higher income, after housing costs, than the typical worker. Which poses the question: do younger people have a legitimate complaint here? I think the answer’s yes.
First, though, let’s see what their grievances are not.
They can have no complaint about rising pension incomes because of the triple lock. Quite the opposite. The power of compounding means this will benefit tomorrow’s pensioners – ie today’s youngsters – more than it helps today’s old folk. (Those who complain that the lock won’t last ignore the fact that i [...]
- Balance Sheet Blues
by Stephen Williamson in Stephen Williamson: New Monetarist Economics, 2017-02-14 00:04:00 UTC
We're starting to hear some public discussion about Fed balance sheet reduction. For example, Jim Bullard has spoken about it, and Ben Bernanke has written about it. Balance sheet reduction is part of the FOMC's "Policy Normalization Principles and Plans. Quoting from scripture: The Committee intends to reduce the Federal Reserve's securities holdings in a gradual and predictable manner primarily by ceasing to reinvest repayments of principal on securities held in the SOMA. The normalization plan also states that balance sheet reduction will occur after interest rate increases happen, and tha [...]
- The trouble with experts
by chris in Stumbling and Mumbling, 2017-02-13 14:13:28 UTC
Paul raises an important issue: what’s wrong with experts? I suspect the answer is: plenty.
These many faults, however, don’t include the failure to foresee the financial crisis. It’s not the job of economists to act as soothsayers, any more than we expect mechanics to predict the next fault with our car, or doctors our next illness. There’s a lot of good economists can do without prophecy.
Instead, one problem is that experts – in public at least – don’t sufficiently identify what Charlie Munger called the edge of their competence: they don’t say what they don’t know. The problem with economi [...]
- The Future of the Euro
by Steve Cecchetti and Kim Schoenholtz in Money, Banking and Financial Markets, 2017-02-13 13:27:17 UTC
“Within our mandate, the ECB is ready to do whatever it takes to preserve the euro. And believe me, it will be enough.” ECB President Mario Draghi, 26 July 2012. In 2012, the ECB faced down a mortal threat to the euro: fears of redenomination (the re-introduction of domestic currencies) were feeding a run away from banks in the geographic periphery of the euro area and into German banks. Since Mario Draghi spoke in London that July, the ECB has done things that once seemed unimaginable, helping to support the euro and secure price stability. For example, since March 2015, the ECB has acquired [...]
- On the Origins and Consequences of Racism
by Nicholas Gruen in Club Troppo, 2017-02-13 06:08:00 UTC
We use a novel method to measure racism at both the individual and the country level. We show that our measure of racism has a strong negative and significant impact on economic development, quality of institutions and education. We then test different hypotheses concerning the origin of racism and its channels of impact in order to establish causality. We find that racism is not correlated with any possible measure of coexistence of different racial or ethnic groups, like ethno-linguistic fragmentation, share of migrants, or ethnically-motivated conflicts among others. Racism has a negative e [...]
- The Economics of One California Coastal Commission Ruling
by Matthew Kahn in Environmental and Urban Economics, 2017-02-11 18:42:00 UTC
Economists talk about trade-offs quite often. Read this case study about the Newport Beach Banning Ranch Development project. Here is the developer's webpage. A Direct Quote from the OC Register NEWPORT BEACH – After a more than 13-hour marathon meeting of the California Coastal Commission, a room packed with some 100 demonstrators exploded in cheers Wednesday when commissioners voted to deny a proposed development in Newport Beach on Banning Ranch, an oil field covered in vernal pools, scrub and grassland and home to endangered species. “This is a project we have to get right,” said Commi [...]
- Flipping in the Housing Market
by Christian Zimmermann in NEP-DGE blog, 2017-02-09 22:07:43 UTC
Charles Ka Yui Leung and Chung-Yi Tse
We add arbitraging middlemen — investors who attempt to profit from buying low and selling high — to a canonical housing market search model. Flipping tends to take place in sluggish and tight, but not in moderate, markets. To follow is the possibility of multiple equilibria. In one equilibrium, most, if not all, transactions are intermediated, resulting in rapid turnover, a high vacancy rate, and high housing prices. In another equilibrium, few houses are bought and sold by middlemen. Turnover is slow, fe [...]
- Extra innings start with a runner on second base
by Tyler Cowen in Marginal Revolution, 2017-02-09 14:40:47 UTC
Here is a description of the proposed rule change . Felix Salmon asked :
I know nothing about baseball, but wouldn’t this give even more of an advantage to the team batting first?
I would expect the opposite (NB: I am not suggesting a weakness in Felix’s analytical abilities, only that British people don’t usually “get” baseball). The team batting second in the inning always has more information than the team batting first, because the home team (which bats second) knows what the visitors scored in their half of the inning.
The closer you are to “runs,” the more valuable is this differential [...]
- "Incentives" as bigotry
by chris in Stumbling and Mumbling, 2017-02-09 13:44:12 UTC
Amber Rudd says she’s stopping child refugees entering the country because “we do not want to incentivise perilous journeys to Europe particularly by the most vulnerable children.” This should remind us of an old trick of the Tory party – the ideological misuse of the language of incentives to justify their own prejudices.
For example, we’ve been told for years that the rich need high pay and low taxes to incentivize effort. This, though, is deeply doubtful. Financial incentives can crowd out intrinsic motivations : bankers’ serial criminality (rigging Libor and FX markets; PPI mis-selling; an [...]