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2019-02-20

• Star Trek and the Economics of the Future (Part II): Programming versus Survival
  by Jason Barr in Building the skyline, 2019-02-20 13:04:54 UTC

  Jason M. Barr           February 20, 2019 Is it possible they built their machines too well…gave them pride and a desire to survive? Machines that wanted order and logic and found that frustrated by the illogical emotional creatures that built them? –Captain James T. Kirk to the ancient android, Ruk (TOS:S1:E7, What Are Little Girls Made Of? ) A Brief History of the Economic Revolutions of Homo Sapiens Our world is characterized by rapid technological change. The root cause of this is the need for economic growth. This quest for growth, however, is relatively new in the long history of homo sa [...]

• Method of the month: Permutation tests
  by Sam Watson in The Academic Health Economists' Blog, 2019-02-20 09:00:22 UTC

  Once a month we discuss a particular research method that may be of interest to people working in health economics. We’ll consider widely used key methodologies, as well as more novel approaches. Our reviews are not designed to be comprehensive but provide an introduction to the method, its underlying principles, some applied examples, and where to find out more. If you’d like to write a post for this series, get in touch . This month’s method is permutation tests . Principle One of the main objections to the use of p -values for statistical inference is that they are often misunderstoo [...]

2019-02-19

• Just Released: Introducing the SCE Household Spending Survey
  by Blog Author in Liberty Street Economics, 2019-02-19 16:00:00 UTC

  Gizem Kosar, Kyle Smith, and Wilbert van der Klaauw Today we are releasing new data on individuals’ experiences and expectations regarding household spending. These data have been collected every four months since December 2014 as part of our Survey of Consumer Expectations (SCE). The goal of this blog post is to introduce the SCE Household Spending Survey and highlight some of its features. While the SCE Household Spending Survey shares design features with the main SCE—both pose probabilistic questions to a rotating panel of respondents—the information it collects is unique in [...]

• Federalism Is a Condition for Better States
  by Dalibor Rohac in Cato Unbound, 2019-02-19 07:45:00 UTC

  Dalibor Rohac The libertarian distrust of government rests on solid empirical foundations. According to work by the late R.J. Rummel, after all, around 262 million unarmed people died at the hands of governments over the course of the 20 th century – six times as many as those who died in combat over the same period. Although Mark Koyama’s essay and the body of research on which it draws do not show that such distrust is completely unwarranted, they do qualify it in important ways. Mark’s findings establish links between state capacity and institutions on the one hand, and conflict and prospe [...]

• Energy Efficiency Improvements Do Not Save Energy
  by noreply@blogger.com (David Stern) in Stochastic Trend, 2019-02-19 00:58:00 UTC

  I have a new working paper out, coauthored with Stephan Bruns and Alessio Moneta , titled: " Macroeconomic Time-Series Evidence That Energy Efficiency Improvements Do Not Save Energy ". It's another paper from our ARC funded project: " Energy Efficiency Innovation: Diffusion, Policy and the Rebound Effect ". We estimate the economy-wide effect on energy use of energy efficiency improvements in the U.S. We find that the rebound is around 100%, implying that in the long run energy efficiency improvements do not save energy or reduce greenhouse gas emissions. At the micro level, we might naïvely [...]

2019-02-18

• Improving resilience: banks and non-bank intermediaries
  by Steve Cecchetti and Kim Schoenholtz in Money, Banking and Financial Markets, 2019-02-18 13:03:28 UTC

  Debt causes fragility. When banks lack equity funding, even a small adverse shock can put the financial system at risk. Fire sales can undermine the supply of credit to healthy firms, precipitating a decline in economic activity. The failure of key institutions can threaten the payments system. Authorities naturally respond by increasing required levels of equity finance, ensuring that intermediaries can weather severe conditions without damaging others. Readers of this blog know that we are strong supporters of higher capital requirements: if forced to pick a number, we might choose a leverag [...]

2019-02-17

• Science and Subterfuge in Economics
  by Jayati Ghosh in INET Blog, 2019-02-17 05:00:00 UTC

  This article originally appeared on Project Syndicate Mainstream economics has a tendency to decide on some “established” conclusions, and then hold to them, notwithstanding all evidence to the contrary. This is bad enough, but what may be worse for a discipline that lays claim to being a science is the lack of insistence on the replicability of empirical results. This is both standard and essential in most natural sciences; in economics, by contrast, there is mostly indifference and occasionally even fierce resistance to it. In so [...]

2019-02-15

• Non-expiring information
  by chris in Stumbling and Mumbling, 2019-02-15 13:44:47 UTC

  I liked this line from this piece at Farnam Street: A lot of us are on the treadmill of consuming expiring information. Expiring information is not the same as trivia, which can be useful and interesting. It is instead knowledge which has a short shelf-life. A lot of talk about Brexit has been expiring information. We are no nearer today to knowing what type of Brexit we’ll get (or even if or when we’ll get it) than we were on June 24 th 2016. All the effort expended over the last 32 months on wondering what will happen has therefore been largely wasted. News which looked useful at the time [...]

2019-02-14

• Science and Subterfuge in Economics
  by Jayati Ghosh in Project Syndicate, 2019-02-14 14:05:09 UTC

  NEW DELHI – Mainstream economics has a tendency to decide on some “established” conclusions, and then hold to them, notwithstanding all evidence to the contrary. This is bad enough, but what may be worse for a discipline that lays claim to being a science is the lack of insistence on the replicability of empirical results. This is both standard and essential in most natural sciences; in economics, by contrast, there is mostly indifference and occasionally even fierce resistance to it. In some cases, the data that must be used to replicate conclusions are denied to other researchers. The reason [...]

2019-02-12

• The forecasting record
  by chris in Stumbling and Mumbling, 2019-02-12 13:27:57 UTC

  The ONS says GDP grew by 1.4% last year. 1.4% is a significant number: it is exactly what the private sector economists surveyed by the Treasury predicted in December 2017 that growth would be in 2018. Granted, this bulls-eye might not survive future revisions to GDP estimates. But it reminds us that economists’ forecasts for growth are often not too bad. My chart shows the point. It compares forecasts made in December for growth the following year to actual growth since 2001. Most of the time, the forecasts aren’t too far out. Where they go badly wrong is in recessions. Economists don’t see [...]

2019-02-11

• Common Ownership: Back to Basics
  by Steve Cecchetti and Kim Schoenholtz in Money, Banking and Financial Markets, 2019-02-11 14:47:56 UTC

  “[I]f we suppose our contractors to be in a sensible degree not ‘economic’ agents, but actuated in effective moments by a sympathy with other’s interests […] we might suppose that the object which X (whose own utility is P) tends […] to maximize is not P, but P plus λ π , where λ is a coefficient of effective sympathy .” Francis Ysidro Edgeworth, Mathematical Psychics, An Essay on the Application of Mathematics to the Moral Sciences , London, 1881, page 53. “[I]ndex funds provide investors with the most effective stock-market strategy of all time: buy American business and hold it forever, and [...]

• Sam Watson’s journal round-up for 11th February 2019
  by Sam Watson in The Academic Health Economists' Blog, 2019-02-11 13:43:11 UTC

  Every Monday our authors provide a round-up of some of the most recently published peer reviewed articles from the field. We don’t cover everything, or even what’s most important – just a few papers that have interested the author. Visit our Resources page for links to more journals or follow the HealthEconBot . If you’d like to write one of our weekly journal round-ups, get in touch . Contest models highlight inherent inefficiencies of scientific funding competitions . PLoS Biology [ PubMed ] Published 2nd January 2019 If you work in research you will have no doubt thought to yourself at on [...]

2019-02-09

• Why MMT (Ultimately) Doesn't Matter
  by Tyler Durden in Zero Hedge, 2019-02-09 19:30:00 UTC

  Authored by Peter Earle via The American Institute for Economic Research, Last year, internet  searches  for Modern Monetary Theory ( MMT ) numbered approximately 100 per month; in the years and decades before that, the weekly total searches numbered mostly in single digits. Yet in the first few weeks of this year, searches have topped 100 per day and seem to be on an uptrend. People who’ve never heard the term “chartalism” are speaking — and acting — as if a new and groundbreaking discovery has been made; “a  new  kind of science” in the realm of economics, situated neatly upon the doorsill [...]

2019-02-08

• Research Review | 8 February 2019 | ESG Investing
  by James Picerno in The Capital Spectator, 2019-02-08 04:19:57 UTC

  Can Sustainable Investment Yield Better Financial Returns: A Comparative Study of ESG Indices and MSCI Indices Mansi Jain (Guru Gobind Singh Indraprastha University), et al. 2 February 2019 ‘Sustainable investment’ includes a variety of asset classes selected while caring for the  causes of environmental, social, and governance (ESG). It is an investment strategy that seeks to  combine social and/or environmental benefits with financial returns, thus linking investor’s social, ethical, ecological and economic concerns… The purpose of this paper is to study whether the sustainable investment al [...]

2019-02-07

• The costs of public sector patronage: lessons from the British Empire
  by Siobhan Miller in Microeconomic Insights, 2019-02-07 15:24:26 UTC

  Civil servants constitute a key element of state capacity, with the responsibility for raising government revenues, providing public services and implementing reforms. But what happens to their performance when they are appointed to office less on the basis of their talents than on their social connections to powerful patrons? This research examines the costs of patronage through the lens of a historical bureaucracy that spanned the globe: Britain’s Colonial Office. The research combines newly digitized personnel and public finance data from the administration of the British Empire over the pe [...]

2019-02-06

• Global poverty over the long-term: legitimate issues
  by Branko Milanovic in globalinequality, 2019-02-06 17:08:00 UTC

  I became somewhat peripherally involved in the debate on long-term trends in global poverty that is raging these days in the WebSphere, prompted first by some very strong claims by Steven Pinker and Bill Gates, and then by an equally strong rebuttal by Jason Hickel . Max Roser whose work is to be strongly commended became somewhat of a lateral casualty in this debate because it was his graph (based essentially on the work of Martin Ravallion and the World Bank) that Pinker and Gates quoted and Hickel disagreed with. Joe Hassel and Max Roser have now written a detailed explanation of the data [...]

• New working paper: "Willingness Toupee"
  by John Whitehead in Environmental Economics, 2019-02-06 16:13:08 UTC

  Willingness Toupee David M. McEvoy, O. Ashton Morgan and John C, Whitehead No 19-01, Working Papers from Department of Economics, Appalachian State University Abstract: In this paper we tackle the hairy problem of male pattern baldness. We survey balding men and elicit their willingness to pay to move from their current sad situation to a more plentiful one. Then we comb-over the results. What’s the average willingness to pay to move from a glistening cue ball to a luscious mane? About $30,000. Key Words: mullet, skullet, comb-over, ducktail, Beatlemania, buzz cut, whiffle, pageboy, attribute [...]

• The Fiscal Theory of the Price Level in Overlapping Generations Models
  by Christian Zimmermann in NEP-DGE blog, 2019-02-06 01:13:47 UTC

  By Roger Farmer and Pawel Zabczyk http://d.repec.org/n?u=RePEc:nsr:niesrd:498&r=dge We demonstrate that the Fiscal Theory of the Price Level (FTPL) cannot be used to determine the price level uniquely in the overlapping generations (OLG) model. We provide two examples of OLG models, one with three 3-period lives and one with 62-period lives. Both examples are calibrated to an income profile chosen to match the life-cycle earnings process in U.S. data estimated by Guvenen et al. (2015). In both examples, there exist multiple steady-state equilibria. Our findings challenge established views abou [...]

2019-02-05

• Obstacles to full employment
  by chris in Stumbling and Mumbling, 2019-02-05 15:54:14 UTC

  Is full employment sustainable? For me, this is one question posed by the row between Richard Murphy and Jonathan Portes and Simon Wren-Lewis over Labour’s proposed fiscal rule. Richard describes the difference between them thus: I am seeking a stable, sustainable economy with full employment. They are seeking the restoration of the model of central bank monetarism that existed from 1999 to 2008 in the UK, with well-known consequences. This is because Portes and Wren-Lewis want to use fiscal policy to inflate the economy away from the zero lower bound, so that interest rates can again be use [...]

• Book Review: Order without Design: How Markets Shape Cities by Alain Bertaud. The MIT Press, 2018
  by Jason Barr in Building the skyline, 2019-02-05 13:11:16 UTC

  Jason M. Barr       February 5, 2019 Today, just over half of the world’s population lives in cities. By the middle of the 21 st century this figure will likely be near 75%. The future is decidedly urban. Those who care about the well-being of humanity must naturally be concerned with how cities work; for when they function well, people are happier and healthier (and other species as well). The Dream of Urban Utopia At least since the early days of the Industrial Revolution, when the skies were black with coal dust, and poor factory workers huddled together in squalid housing, city planners an [...]

2019-02-04

• FOMC Communication: What a Long, Strange Trip It's Been
  by Steve Cecchetti and Kim Schoenholtz in Money, Banking and Financial Markets, 2019-02-04 13:27:50 UTC

  “Since becoming a central banker, I have learned to mumble with great incoherence. If I seem unduly clear to you, you must have misunderstood what I said.” Federal Reserve Board Chairman Alan Greenspan, September 22, 1987 ( The Wall Street Journal , as cited in Geraats ). “More recently, in the 1980s, policymakers, myself included, were concerned that being too explicit about short-run targets would make such targets more difficult to change, impeding necessary adjustments to evolving market and economic conditions.” Federal Reserve Board Chairman Alan Greenspan , October 11, 2001. Following t [...]

2019-02-02

• What Hides behind the German Labor Market Miracle? Unemployment Insurance Reforms and Labor Market Dynamics
  by Christian Zimmermann in NEP-DGE blog, 2019-02-02 22:34:10 UTC

  By Benjamin Hartung, Philip Jung and Moritz Kuhn http://d.repec.org/n?u=RePEc:iza:izadps:dp12001&r=dge A key question in labor market research is how the unemployment insurance system affects unemployment rates and labor market dynamics. We revisit this old question studying the German Hartz reforms. On average, lower separation rates explain 76% of declining unemployment after the reform, a fact unexplained by existing research focusing on job finding rates. The reduction in separation rates is heterogeneous, with long-term employed, high-wage workers being most affected. We causally link our [...]

• My favourite economics papers
  by chris in Stumbling and Mumbling, 2019-02-02 12:14:49 UTC

  Last week Chris Bertram asked me to tweet the covers of books I’ve enjoyed, which I interpreted for the most part as books which made a big impact upon me. This set me thinking: what academic papers have also done so? Here’s a list of 11 – an arbitrary number, in arbitrary order, E&OE. “The elasticity of demand with respect to product failures” by Werner Troesken (pdf) . This describes how Americans continued to buy snake oil for decades despite it being of dubious efficacy. It is of clear political relevance today: populists are using many of the tactics snake oil sellers used. But it has eve [...]

2019-02-01

• Endogenous forward guidance
  by Christian Zimmermann in NEP-DGE blog, 2019-02-01 17:39:39 UTC

  By Boris Chafwehé, Rigas Oikonomou, Romanos Priftis and Lukas Vogel http://d.repec.org/n?u=RePEc:nbb:reswpp:201810-354&r=dge We propose a novel framework where forward guidance (FG) is endogenously determined. Our model assumes that a monetary authority solves an optimal policy problem under commitment at the zero-lower bound. FG derives from two sources: 1. from commiting to keep interest rates low at the exit of the liquidity trap, to stabilize inflation today. 2. From debt sustainability concerns, when the planner takes into account the consolidated budget constraint in optimization. Our mo [...]

2019-01-31

• How to gauge the world’s banking markets? Look to the World Bank
  by ? in FRED blog, 2019-01-31 14:00:57 UTC

  How competitive are countries’ banking markets? It’s a complicated question that requires some thought and effort to answer: First, there are several ways to measure competition. One way is to measure the concentration of market shares. But this method isn’t perfect because there may still be substantial competition in a market with few players. Another way is to look at markups—that is, the difference between the price charged and the marginal cost (the cost of one additional produced item). The problem here is that it’s difficult to directly observe those costs, so the costs need to be [...]

• Wishful thinking: too much, & too little
  by chris in Stumbling and Mumbling, 2019-01-31 13:50:30 UTC

  There have been several excellent tributes to the great Erik Olin Wright , which I especially urge non-Marxists to read as insights into what it means to be a Marxist today. In a spirit of undue curmudgeonliness, however, there’s one point made by David Calnitsky I disagree with. He says :  For Marxists and fellow travelers, the power of wishful thinking is more seductive than it is for others without such normative commitments. I disagree. We Marxists have by now learned from that most effective of teachers, the school of hard knocks, that our hopes are often disappointed. Wishful thinking [...]

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