January 28, 2008
Stigler vs. Chamberlain
Don't know why I hadn't read it before, but I just finished Monopolistic Competition in Retrospect (1949), the short essay in which Stigler martyred Chamberlain's theory of monopolistic competition. At its core, Stigler's paper is methodological: for practical problems, use the economic theory appropriate to answer the question -- just not Chamberlain's. Stigler insists that Chamberlain's economic theory is incoherent, except for the analytically proper situation where you have multiple firms, all producing the same product, and all facing decreasing demand curves. That was pretty good.
And it's good that Chamberlain's influence has refocused serious research interest on trademarks and advertising product structure and evolution.
That's what a martyr is for.
[Update 1]: Hammond and Hammond dug into the Early Stigler-Friedman Correspondence. There's much on point starting on page 13, but on page 17 we get Friedman's statement of Stigler's Laws:
Stigler's Law: The gorgeousness of a theory varies with the range of phenomena it embraces and inversely with the number of its constants.Stigler II: If businessmen deliberately adopt and persistently retain a practice, that practice is explicable in terms of maximum profits.
Stigler's Razor: In dealing with economic theory, always use the most advanced branch of mathematics you can apply.
[Reformatted from original]
I must note that the paper is online, for free, but the authors have marked every page "Not to be quoted". I take it they actually mean "Not to be quoted by scholars in serious, respectable publications". Hence I feel perfectly fine linking and quoting from T&B.
June 6, 2007
You don't say...
What do you mean, municipal wi-fi networks aren't the unalloyed good they were sold as?
Across the United States, many cities are finding their Wi-Fi projects costing more and drawing less interest than expected, leading to worries that a number will fail, resulting in millions of dollars in wasted tax dollars or grants when there had been roads to build and crime to fight.
I was recently in Pittsburgh, PA. Which has a downtown network that can be used "free" for two hours. I say "free", since I had to register. For the benefit of sending my info to the city, which I assume logged my IP and thus knew roughly where I was and more...I got slow service that could only be used in certain positions since the repeaters were weak and stationed poorly for coverage.
But, you know, it's hard to tell how these things will pan out.
May 30, 2007
Returns to being an Economist
It must be good being an economist these days. As Chris Hayes details in his re-cast Nation article (re-cast, that is, from essentially the same framework of this one: rationality isn't perfect, the models don't explain everything, people are taught only one thing from the start, other opinions get too little notice, etc. etc., so on and so forth) there are a lot of people who, while arguing that economics is built on a cracked and crumbling foundation, wish desperately to be considered economists themselves.
Clearly, these are people who could be anthropologists, sociologists, demographers, public policy analysts, or any number of other things. But they are fighting tooth and nail with the economic establishment, and obviously wish to be part of a new generation of economists. Some are established names, some are names from outside the academy, some are newer names looking for recognition.
So why not go off to be something other than an economist? After all, political science has seen a dramatic turn to the quantitative and empirical over the past decades. Perhaps that would be a better perch from which to lob critiques.
Since so many people still wish to lay claim to the title "economist" (or some modified version thereof, like Social Economist Economic Sociology; the real crux being that the word appear somewhere in the title), but have such fundamental problems with the establishment, I can only conclude that there are greater returns to being known by others to have a command of economics or, even better, be an economist than they are to being known as something else.
Aside: The major problem I have with people arguing that the "neoclassical consensus" is manipulating the system is that they all seem to assume that there is value in a critique simply because it is a critique. Chris Hayes' article(s) are wonderful demonstrations that a critique may exist and yet provide absolutely no value to the overarching argument. End Aside
January 16, 2007
Question of the Day
My answer: nothing. I get some marginal benefit from seeing people get annoyed that self-satisfied movie stars pretend that they have any sort of insight on anything except, say, playing make believe in a social bubble for vast sums of money.
December 1, 2006
Social Networks and Country-Wide Content Filtering
Apropos of nothing really, via Slashdot I see that a fascinating new product to route around country-wide internet filters, called Psiphon, has been released for public download.
NB: Amusingly, the actual Psiphon site is actually blocked by a number of corporate filtering programs. To learn about a few details, take a read through either this article, or the Wikipedia entry on it.
The idea really isn't new, as pointed out by the Slashdot posting, and Psiphon is just another in a line of proxy and filter avoidance technology. Just another step in the arms race between those looking to keep tight control over internet access and those who want to get around it. Now, if only there were a good, analytical way to study the process of interactions in arms races.
November 29, 2006
Assorted and Interesting
Are The Big Four Econ Errors Biases?
A bird's eye view of econometrics
Is democracy good for the poor?
Numbers Guy on Armenian Genocide
The importance of a good analogy
Political Price Cycles in Gasoline Markets?
Wading in waste
Downshifting and Reversion in Forecasts
I Want It Now!The Curious Economics Of Temptation By Tim Harford
The Exceptionally Entrepreneurial Society
For Better or For Worse: Entrepreneurs, Families, and Inequality
Does America need a draft to win the war on terror?
Why understanding economics is hard
St Lucia best in Caribbean for Doing Business
God made Indonesia for free trade
Economics: The Invisible Hand of the Market
Dasgupta on the Stern Review
A Cool Calculus of Global Warming by Joseph E. Stiglitz
A call to arms- Anthony Giddens
Should Congress Raise the Federal Minimum Wage?—Posner
Iraq in Fragments (from the latest Foreign Exchange show)
Fed Chairman’s Daybook
A giant's strength is valuable - if not used like a giant by John Kay
Ivy League Investors by Robert Schiller
Globalization Makes an Easy Scapegoat by Robert Samuelson
Making fine distinctions in understanding hereditability of attitudes
What We Learn When We Learn Economics
Why Oh Why Can’t We Have Better Economists?
Can foreign aid work?
Uninsurable
Are Husbands really like potatoes?
Settling the New Continent by David Warsh
Syntax and flow
Getting it Wrong by David Friedman
Was Friedman a "Great Conservative Partisan"?
Milton Friedman: The Methodology of Positive Economics
Friedman On Growth Measurements and Immigration
The fading of Friedman by Paul Ormerod
European Cities Do Away with Traffic Signs
Secrets of the Cave Paintings
How I learnt to walk tall at 5ft 5in
The Paradox of Military Technology
Velvet Revolution in Iran?
Less Faith, More Reason by Steven Pinker
Mahfouz’s grave, Arab liberalism’s deathbed
Free Speech, Israel, and Jewish Illiberalism
The Myth of Thomas Szasz
Mirror, Mirror
Evidence that psychology, like biology, is conserved between human and nonhuman species augurs a shake-up for science and society
Conspicuous Proliferation
Just their type
Our appetite for literary gossip is insatiable, but great writers aren’t mere fly-by-night celebs, argues Bryan Appleyard
Bush, Maliki, and Lots of Questions
What is a Civil War?
Henry Kissinger says what he means, whatever that means
November 27, 2006
Podcasts- Intelligent Design, God and Style
Nature and Religion
Marine scientist Walter Stark, a pioneer of coral reef research who believes the modern view of nature is religious. It holds that nature is pure and perfect, while humans are separate and soiled. He argues that urban Australians' view of nature is problem-obsessed, because problems offer magnificent opportunities to politicians, academics, the media, and of course professional activists
A new branch of moral philosophy
Nick Drayson is a zoologist and a spinner of yarns. His outrageous book, Confessing a Murder, explains the stunning coincidence of Wallace and Darwin 'discovering' natural selection. Now he is in search of platypus memorabilia for the National Museum in Canberra.
Moral Minds: The Evolution of Human Morality
Note; A lot of these podcasts are available for limited time, so download now.
Politics give you Gas
A recent working paper from the IMF- Political Price Cycles in Regulated Industries: Theory and Evidence. Here’s the conclusion;
“This paper presented a model of industry regulation where information asymmetries and the government-regulator’s interest in being re-elected may generate a political cycle in the regulated price. Quarterly data covering 32 countries during 1978–2004 provided strong evidence of the occurrence of a political cycle in gasoline prices.Our model characterizes the behavior of the government-regulator as an attempt to maximize an objective function comprised of the social welfare in the regulated market and the government’s chance of being reelected. The social welfare function follows a stochastic process in which the weights attributed to consumers’ utility and firms’ profits are determined by a shock at the beginning of an election period. This shock may reflect changing political alliances or economic conditions exogenous to the regulated market. Because this shock is not immediately observable to consumer-voters, the incumbent government-regulator may have incentives to set a price below the welfare-maximizing price to signal its pro-consumer nature and thus attract more votes in the upcoming election. In fact, our model derives equilibrium regulation strategies in which some types of government-regulator will lower the regulated price in an election period, thus generating a political price cycle in the regulated industry.
We tested the implications of our model for the gasoline market in the 32 industrial and developing countries for which data were available. The choice of the gasoline market is justified by the impact it has on consumers’ utility, the visibility that fluctuations in gasoline prices have, and the various ways—besides direct price determination—through which governments can influence domestic gasoline prices. Simple statistical analysis revealed that changes in gasoline prices were, on average, 1.4 percent above changes in domestic oil costs during “normal” quarters and 0.4 percent below during periods immediately preceding an election. Focusing on real gasoline prices alone, we observed that they declined 0.3 percent, on average, during “normal” quarters and about 0.7 percent during quarters of electoral campaign. Moreover, in 15 countries of the sample, this difference exceeded 2 percentage points, whereas it exceeded 6 percentage points in seven countries.Econometric modeling also point toward the existence of a political cycle in gasoline prices. Simple equations linking gasoline prices to changes in the cost of oil to domestic gasoline producers (which is assumed to be driven by international oil prices and the exchange rate) and dummy variables indicating periods of electoral activity were estimated using panel data techniques. Our estimates consistently yielded negative and significant coefficients on the electoral dummy variable, suggesting that after controlling for cost changes, gasoline prices are reduced during periods of electoral activity. In fact, point estimates suggest that the real price of gasoline declines by at least 0.8 percent and up to 1 percent, on average, during each of the two quarters of election campaign in the 32 countries covered by our sample, a relatively sharp decline compared to the average reduction of 0.3 percent in the entire sample period. These results were robust across various model specifications. Since we do not expect the occurrence of political price cycles in all countries at all times, it is reasonable to assume that the decline in real gasoline prices would be significantly more pronounced in the countries where a cycle is in fact observed.
Capitalism, not democracy leads to peace?
Don Boudreaux links to an interesting working paper by Columbia University political scientist Erik Gartzke; The Capitalist Peace.
The following is the conclusion of the paprer.
“This study offers evidence suggesting that capitalism, and not democracy, leads to peace. Additional research is needed to corroborate, extend, and even refute the findings reported here. One must be circumspect in questioning a body of evidence as large and as carefully constructed as that on the democratic peace. Still, economic liberals have long seen in free markets and prosperity the potential to discourage war. A century ago, the “conventional wisdom” looked more like this study and less like that of democratic peace researchers. While past arguments were clearly simplistic and overblown, there does now seem to be grounds for reconsidering liberal economic peace theory.Critics can differ with my revision of classical arguments, or can plausibly challenge the assumptions on which my version of the capitalist peace is built. The statistical models I develop, and the findings that I present, can be altered, possibly in ways that again show that democracy matters. For now, I hope my claims are coherent, empirically plausible, and at the very least intellectually provocative. What is the “larger” relationship between development, capitalism, and democracy? It might be that democracy actually lies behind the apparent impact of capitalism on peace. Still, the world was not always made up of 50% democracies. Little attempt has been made to rule out the possibility that democracy and peace have common causes. A logical extension of this study is the exploration of determinants of political and economic liberalism, though resolving these more complex causal arrows would seem to require a far more profound set of conclusions about the world, ones that are still under construction in comparative politics, economics, and other fields.
The collapse of the Soviet Union in the early 1990’s gave new impetus to the exploration of domestic determinants of international relations. Today, political revolution from without is being attempted in the Middle East, in no small part because policy makers believe that peace can be had through regime change. If the imposition of liberal politics offers a domestic paradox, at the international level coercing democracy is an extreme, though arguably logical, extension of democratic peace theory. At the same time, allowing people freedom to choose implies that they will sometimes choose to disagree. A growing number of popularly elected leaders oppose the interests of established democracies. If democracy reflects the popular will, and many people in the world are unhappy, we should perhaps not expect that all new democracies will like the old ones.”
Related;
The Democracy Advantage: How Democracies Promote Prosperity and Peace (chapter 1 of the book)
R.J. Rummel's blogs; Freedom's Principles and Democratic Peace
The Declining Advantages of Democracy: A Combined Model of War Outcomes and Duration D. Scott Bennett, Allan C. Stam III
Economic Freedom of the World 2005 Annual Report; Chapter 2 - Economic Freedom and Peace
Book review of Alexis de Tocqueville: Prophet of Democracy in the Age of Revolution—A Biography By Hugh Brogan -Alexis de Tocqueville's strong views on demagoguery and citizenship are worth remembering, as is clear from a splendid new biography
Democracy pays off in the long run...
Economic and Political Freedom: Does One Lead to the Other?
Podcasts;
Niall Ferguson: The War of the World
Private Equity- the purest capitalism
November 26, 2006
Cost Benefit of Bikini Waxes
Tim Harford has put online a recent column of Dear Economist not available on the FT site.
Dear Economist, Bikini waxes: boyfriends seem to like the results, but they hurt. What would you say were the costs and benefits? Yours, Sylvia, via email
Related; Cost Benefit of Circumcision
November 23, 2006
Economists and blogs
Greg Mankiw links to an article in LA Times on economics blogs (the article mentions that Lawrence Summers writes a blog- I’m not sure whether this is the case).
Recently The Economist had two articles on economics blogs; Pigou or NoPigou? and Economists' blogs; The invisible hand on the keyboard.
As for me one reason why I blog relates to the fact in high school the economics teacher we had showed up to class for about 3 months of the two year period. I wish we had access to economics blogs or for that matter the internet. If I had been of any help to any student in similar circumstances I would have achieved my main objective.
My challenge for Econ bloggers; To sponsor a student (high school or undergraduate) in a developing country, be a tutor and mentor for him/her and be a personal guide till the student finishes school.
Podcast of the Day- Islamic Finance for US
Marc Chandler, global head of currency strategy at Brown Brothers Harriman & Co., talks about opportunities in Islamic finance and the outlook for the U.S. dollar and euro (Bloomberg podcast).
Related;
Britain can be gateway to Islamic finance- Gordon Brown (earlier post)
The State of Islamic Finance in Australia
Short Selling and the Travesty of Islamic Finance
Cayman Islands Emerge As Leading Islamic Finance Domicile
Islamic Finance podcast
Fund for Shariah Scholars in Islamic Finance
Islamic Finance isn’t Islamic
Islamic Finance (World Bank portal on the topic)
Popularity Of Islamic Finance Market On The Rise
“Not surprisingly, the jump in popularity of sukuks has drawn the interest of institutions outside the Middle East.Two years ago, the German state of Saxony Anhalt sold the first sukuk from the West. IFC is the first supranational to issue Islamic securities in the Malaysian market, and the first supranational to issue domestic Islamic bonds in any market”
Islamic Banking (transcript of a program at Radio National)
Two stories on Islamic Finance
Blogs related to Islamic Economics and Finance; Islamic Finance Blog, Islam and Economics
Bibliography on Islamic Banking
Working Papers
Corporate governance in institutions offering Islamic financial services : issues and options
Corporate governance and stakeholders' financial interests in institutions offering Islamic financial services
Regulating Islamic financial institutions : The nature of the regulated
Mapping the possibilities for Islamic microfinance
November 20, 2006
This and That
Some articles worth reading;
The Great Liberator- Lawrence Summers on Freidman
On Milton Friedman's Ideas—BECKER
Milton Friedman's Case- Arnold Kling
The Young Economist by Lizbeth Scordo
Three Things You Don't Know About Aids In Africa by Emily Oster
Methodology Matters by Edward L. Glaeser
Economics focus- Third thoughts on foreign capital
How last century's money wars may lead to healthcare, pension reform
Managing Change; Is the Penny Worth Keeping?
The Flintstone EffectTracing wealth back to the Stone Age by Joel Waldfogel
My Boss Is 65 and Pregnant; How fertility advances could allow women to take over the boardroom By Tim Harford
The New Baby Boomers by Francois Bourguignon
The Zigzag of Politics- David Warsh
DEAL SWEETENERS- James Surowiecki
More Things Economists Don't Say
Patriots vs. Redskins
Beyond Insurance: Weighing the Benefits of Driving vs. the Total Costs of Driving- VARIAN
Want world peace? Support free trade. By Donald J. Boudreaux
The Undercover Economist: Round numbers By Tim Harford
Who's Counting: Which 'Experts' Make Better Political Predictions?
Grading the Pollsters
Why the successful prefer being average to extreme
America’s Anti-Environmentalists
It's time for truth in property taxation
The Social Responsibility in Teaching Sociobiology
Tracing the divine obsession; Also known as `the game of games,' chess has seduced kings and queens, beggars and madmen for 1,500 years.
When Legal Meets Marketing
How the Web Prevents Rape
Murphy’s law
What did Descartes really know?
November 17, 2006
Carnival of Podcasts
The Peasants' Revolt
But who were the rebels and how close did they really come to upending the status quo? And just how exaggerated are claims that the Peasants’ Revolt laid the foundations of the long-standing English tradition of radical egalitarianism?
A bit more of British history podcasts via Brad DeLong. See also British History blog.
Heritage
In this four-part Heritage series Malcolm Billings explores the archaeology of patriotism in the USA; Part One, Part Two.
Air Taxi!
Recently the market for air taxis has really taken off but can this expensive form of personal transport really fly?
Crusading
What exactly were Crusades and how useful are they as a metaphor in the twenty first century?
Interview with John Emsley
If you are really keen to murder a spouse, which chemical element would you choose? Arsenic is SO last year. Mercury is so - well, mercurial. Cambridge chemist John Emsley offers informed advice for anyone contemplating homicide who would like to show a little flair and impress the team from CSI.
Flat Tax Reform in Slovakia: Lessons for the United States
The Liberal Roots of the American Empire
Michael Desch, Professor and Robert M. Gates Chair in Intelligence and National Security Decision-Making, George Bush School of Government and Public Service, Texas A&M University
Talking to terrorists
A discussion about an ongoing dialogue with several groups officially deemed terroist organisations. 'We don't talk to terrorists, full stop' - that is one end of the spectrum of approaches to dialogue. The other end might be: 'We'll talk to anyone, anywhere, anytime, if we think its going to lead to a resolution'. Related - Conflicts Forum
More upheaval in the US newspaper industry
How is technology changing our world?
Today we take stock of these and other questions, have a look at what has and what hasn't changed with respected authors Joel Kotkin and Bill Eggers.
The mystery of Linear B, the script that pre-dated alphabetic writing in Greece. Listen to the podcast.
Interview with Mark Thompson
Dr. Moira Gunn speaks with career entrepreneur and author Mark Thompson, who is currently a visiting scholar at Stanford Business School. Thompson talks about some 200 people he spoke to who have either built organizations or launched crusades – personal success built for a lifetime.
S.H.A.M.
The Self Help and Actualisation Movement is worth more than $8.5 billion U.S. in America alone. From Anthony Robbins getting his clients to run over hot coals to Marianne Williamson teaching that money is energy, and energy is infinite in the universe, it's getting hard to tell the difference between spruikers and sages. But according to investigative author, Steve Salerno, the happiness industry is banking on keeping us unhappy.
The Omidyar Network
In conversation with John Battelle, legendary technologist Pierre Omidyar explains the philosophy and business plan underlying his new network for investment in for-profit ventures which foster economic, social, and political self-empowerment. Applying lessons learned from his founding of eBay, this new investment strategy is based on the belief that people are basically good, and that connecting them with the right tools can build trust and opportunity.
November 14, 2006
Podcast of the Day- Political Economy of Bad Regulation
Russ Roberts talks with Sam Peltzman at Econ Talk.
Listen to the podcast.
Also have a look at a selection of articles by Tim Harford and Jamie Whyte, a freelance writer published in The Times (London), this year’s Bastiat Prize winners and other finalists.
November 13, 2006
Quote of the Day- Stocks and flows of economics
“The stock of economic knowledge based on centuries of thinking is great. The flow of new knowledge is meager. Your past coursework was based on the stock. Conferences are based on the flow. So conferences always seem thin cruel compared with well-run courses.”
- Greg Mankiw
November 10, 2006
Not all breast-feeding is equal
“Let’s be honest: if the only adverse consequence of not nursing is that babies get a few more colds, we could leave the decision making to the parents. The real question is whether there are dangerous or potentially long-term damaging illnesses (such as ear infections that lead to hearing loss) for babies who aren’t nursed versus babies who are. And how long (or how much) should a baby be nursed in order to keep his or her risk down?One of the big problems in trying to assess this question is that not all nursing is equal. There are mothers who nurse exclusively, mothers who use expressed breast milk (delivered in bottles), mothers who freeze milk, or use pasteurized (donated) milk, or use some breast milk and some formula, and a combination of all of the above.
Then there are the babies, some of whom are premature, or have low birth weight, or have other health issues that could make nursing harder; there are some babies who are nursed until they are four-years old, and others who nurse until they are six-weeks old.
Finally, we must add a complicating factor that it’s virtually impossible to carry out the gold standard of research on this issue – a randomized controlled study in which mothers are randomly assigned whether to nurse or not. Our observational power may also be limited; at least in principle, because women (and families) who nurse are not the same as those who don’t, making any comparison of the outcomes extremely difficult.”
For a lay person’s guide to how economists think about such issues read, Trade-Offs: An Introduction to Economic Reasoning and Social Issues by Harold Winter.
Here’s a review of the book at Newmark’s Door.
September 26, 2006
The Debates
Miscellaneous interesting links;
Will Microcredit reduce poverty
Philanthropy Smackdown-GOOGLE VS. GATES
Citywide Minimum-Wage Rules: Living Wages or Killing Jobs?
Department of Economic Illiteracy: Special Victim's Unit
'A man with little sympathy for other faiths'
See a response at TCS; The Pen, the Sword and the Pontiff
Poverty is so Hot for Fall (and Why That's a Good Thing)
Making tracks through policy space
September 24, 2006
A Pilgrimage that led to Inflation
“Mansa Moussa brought the Mali Empire to the attention of the rest of the Muslim world with his famous pilgrimage to Mecca in 1324. He arrived in Cairo at the head of a huge caravan, which included 60,000 people and 80 camels carrying more than two tons of gold to be distributed among the poor. Of the 12,000 servants who accompanied the caravan, 500 carried staffs of pure gold. Moussa spent lavishly in Egypt, giving away so many gold gifts—and making gold so plentiful—that its value fell in Cairo and did not recover for a number of years!
In Cairo, the Sultan of Egypt received Moussa with great respect, as a fellow Muslim. The splendor of his caravan caused a sensation and brought Mansa Moussa and the Mali Empire fame throughout the Arab world. Mali had become so famous by the fourteenth century that it began to draw the attention of European mapmakers. In one map, produced in 1375, Moussa is shown seated on a throne in the center of West Africa, holding a nugget of gold in his right hand.”
- Mansa Moussa: Pilgrimage of Gold (History Channel)
September 23, 2006
The Cost of Living Extremely Well
“Over the past 12 months, our Cost of Living Extremely Well Index (CLEWI) climbed 7%, keeping pace with the Consumer Price Index's 4%”
-Forbes magazine
Related;
Zero Sum Economics
Who Suffers From Inflation?
September 22, 2006
Phantoms in the Brain
An interesting study- Brain electrodes conjure up ghostly visions;
“Simple stimulation of the brain can cause the mind to play complex and creepy tricks on itself, neurologists have discovered. They found that, by inserting electrodes into a specific part of the brain, they could induce a patient to sense that an illusory 'shadow person' was lurking behind her and mimicking her movements.
Doctors treating the patient, a 22-year-old woman with epilepsy, found that when they stimulated a brain region called the left temporoparietal junction, the patient sensed the presence of a sinister figure behind her who copied her actions. They suspect that the effect is due to the mind projecting its own movements onto a phantom figure conjured up by the brain, an effect that is seen in some patients with serious psychiatric conditions….”
Via Mind Hacks
Related;
Mind Games; What neuroeconomics tells us about money and the brain.
Multimedia;
In the Family - A Journey through Madness
The Dancing Mind
Death; An exploration of the cultural construction of death: the way it's changed in English-based society from rich Victorian ceremony to the simple ritual of today; the difference in response from culture to culture, i.e. Mexico, Ireland and Australia.
The dream debate
Chris Turney on Time, author of Bones, Rocks and Stars: The Science of When Things Happened
Podcasts –Heavy Weight Economics
Steven Levitt and Malcolm Gladwell at TED
Economics of Paternalism- Edward Gleaser (at Econ Talk)
John Quiggin at Business Matters
The greatest gift
Donating your body, or the body of a child, to medical research is a great gift to mankind. Most of you can be recycled: your eyes, your skin, your bone or even a little piece of your heart. Now they want to grind your bones for surgical putty. Then, your dead bits will be helping a biotech company's bottomline too. Can altruism and commerce live side-by-side when it comes to giving "the greatest gift of all"?
Dr. Diane Coyle discusses with James Reese several of her books and her recent research on mobile phones in Africa. Books include Paradoxes of Prosperity, The Weightless World and her bestseller Sex, Drugs and Economics. The Soulful Science will be published by Princeton University Press in spring 2007. Listen to the podcast.
See also her book recommendations
September 21, 2006
Pocket Guide to Asian Think Tanks
From Asian Development Bank Institute;
“This is a handy guide to the leading Asia-Pacific think tanks working on development and economics. Each entry
- provides web links to the think tank and its research staff,
- describes the current research program,
- lists if visiting researcher or internship programs are offered, and
- states whether online publications are freely available."
Related; Think Tanks and Policy Advice in Countries in Transition
September 20, 2006
Events, Interviews, Discussions- Making Globalization Work
Making Globalization Work; Lee C. Bollinger, Tina Rosenberg, Nancy Birdsall, George Soros, and Joseph E. Stiglitz discuss solutions for some of the world's most pressing problems, such as debt, unfair trade, the "resource curse", the need to curb harmful emissions and world poverty at Columbia University.
Clinton Global Initiative 2006
IMF-World Bank Program of Seminars at annual meeting –Singapore (not yet online)
New Foundations of Cost-Benefit Analysis (not yet online)
How Nations Prosper: Economic Freedom and Doing Business in 2007 (tomorrow)
James Galbraith, an economist at the University of Texas, talks on the outlook for the U.S. economy (podcast)
Related;
Discussions about the IMF-World Bank annual meetings issues at PSD Blog;
Private sector public goods
Business takes on the poverty penalty
Can the World Bank fight corruption?
Economists debate financial sector in India and China
Reforming collateral laws
Roubini has a couple of posts on the IMF-World Bank annual meeting
FT special coverage of Clinton Summit
The latest Foreign Exchange show;
“The World Bank and the IMF are getting together for their annual meeting in Singapore. This year it's not just talk of exchange rates and balance of payments - the United States is pushing hard to give greater weight to Asian and other emerging market economies. To help us understand the dynamics at play, we're joined by Zanny Minton-Beddoes, Washington Economics Editor from The Economist.”
September 18, 2006
World Economic Outlook- podcasts
Saul Estrin, professor of management and head of the department of management at the London School of Economics and Political Science, talks with Bloomberg's Tom Keene from London about the study of economics and its impact on managers, the outlook for emerging-market economies, and the differences in productivity and lifestyles between the U.S. and Europe. Listen to the podcast.
Lord Meghnad Desai, a professor of economics at the London School of Economics, talks with Bloomberg's Tom Keene in London about the outlook for the Group of Seven nations, the impact of globalization on the world's economy and U.S. foreign policy in the Middle East. Listen to the podcast
A discussion with Pam Woodall, Asian Economics Editor of The Economist;“World growth, world inflation, world interest rates, wages, profits, oil prices and even house prices are all now being influenced by China, India and other developing economies”
World Economic Outlook press conference -webcast
or read the transcript of a Press Conference on the World Economic Outlook Report (Singapore, September 14, 2006)
Karl P. Sauvant discusses with James Reese "World Investment Prospects to 2010: Boom or Backlash?" a joint report from the Economist Intelligence Unit and the Columbia Program on International Investment
Can the IMF Avert a Global Meltdown?- Keneth Rogoff
See also Economonitor blog. Also Nouriel Roubini's Blog- has a couple of recent posts on the IMF annual meetings in Singapore
More readings on the world economic outlook
September 13, 2006
Some Podcasts
The history of scientific discoveries; The author of a book called 'Who Discovered What When', David Ellyard, discusses the history of discoveries in science
TCS podcasts- the latest is with Dierdre McCloskey
Regaining confidence in western culture
Facing the evidence - part one; Only one in two patients receives the healthcare they should receive according to the evidence. One in ten patients receives care that isn't recommended and which is potentially harmful. In the first part of this series about getting health professionals to practice with evidence, Associate Professor Alex Barratt takes a close look at the catastrophic errors that have occurred when evidence has been ignored, and why evidence based practice is still not being implemented in consultation rooms near you. Read the transcript.
Drug-driving; why Australia is the world's leader when it comes to random saliva drug testing for drivers
Free Gardeners, Odd Fellows and Druids: a history of health insurance in Australia
Celebrating 50 years of television
Gaia and accelerating climate change; It was in the late 1960s that James Lovelock first suggested the Earth acted as a single organism. He named his observation, Gaia. He was ridiculed and the idea was ignored for decades. It wasn't until the end of the 90s that a new branch of science grew out of his theory; that of Earth System Science. Now, as the effects of climate change have become obvious for all to see, James Lovelock has taken his theory further in a book, The Revenge of Gaia. Lovelock claims we've passed the point of no return with climate change.
Peter Singer, Professor of Bioethics at Princeton University, debates his views on life and death with a panel of experts
How can we resolve the tensions between the different communities in Europe in the light of the growing threat from Islamic extremists, sometimes dubbed the 'Enemy Within'? Hisham Hellyer is a policy analyst, academic and commentator, based at the University of Warwick as an Associate Fellow, the American University in Cairo as a Visiting Professor and Trinity College in Dublin as a Senior Research Fellow. His research interests include European Muslim communities, the interplay between Islam and modernity, European social policy and political philosophy. In his latest book on European Muslims (due to be published by IB Tauris in March 2007 under the title of ''Islam in Europe: Multiculturalism and the European 'Other'), he argues that Europe must come to terms with all of her history, past and present, and that Muslim communities should work to be integral to, rather than simply 'integrated' parts of, Europe.
History of Israel-Palestine conflict
September 10, 2006
Economics of Duty Free Shops
Just re-watched Seinfeld’s The Airport episode;
Kramer: If anything, we'll probably get there early. I'll have a chance to
go to the Duty Free shop.
George: The Duty Free Shop? Duty Free is the biggest sucker deal in retail.
Do you know how much duty is?
Kramer: Duty.
George: Yeah, "duty". Do you know how much duty is?
Kramer: No, I dunno how much duty is.
George: Duty is *nothing*. It's like sales tax...
Kramer: I still like to stop at the duty free shop.
George: I like to stop at the duty free shop.
Related;
Seinfeld Classic Kramer & George – clip from The Airport
The Economics of Duty-Free Shopping
Duty Free at Baghdad International Airport
A Dilemma for Duty Free Shops
September 8, 2006
Free Reads from The Economist
Free reads from latest edition of The Economist;
Climate change- The heat is on; The uncertainty surrounding climate change argues for action, not inaction. America should lead the way. Editorial on a survey of the topic.
A discussion with Emma Duncan, Deputy Editor of The Economist; “We need to think about climate change maybe as individuals think about insuring their houses: you spend maybe 1% of your annual income insuring your house not because you think it's going to burn down, but because if by any chance it did burn down, the consequences for you would be disastrous.” Listen to the podcast
Doing business; Singapore took first prize as the easiest place to do business in the World Bank's “Doing Business 2007” report. The Democratic Republic of Congo is the hardest place. Reform was the theme and Georgia the quickest reformer, leaping to 37th place in the rankings from 112th last year. China became one of the top-ten reformers by improving investor protection, cutting red tape and establishing credit history for loans
India's rupee- A disappointment for those hoping capital controls might ease soon; “THE chapter on the Fall of the Rupee you may omit,” counselled Oscar Wilde's prudish governess in “The Importance of Being Earnest”. “It is somewhat too sensational.” A new work on the rupee, in contrast, has set few pulses racing. A report by a committee set up in March by the Reserve Bank, India's central bank, to “revisit” the question of full convertibility of the currency recommends only slow change—too slow, for two of the committee's members, who have dissented from some of its cautious conclusions.
Business in Africa-Once again, Africa is listed as the most difficult place in the world to do business. So why are some businessmen happy to be there?; Foreign investors are governed by trust. India and China also rank relatively poorly in the World Bank survey, but are nonetheless investment magnets. Mr Klein argues this is because investors are confident that these countries are going in the right direction and they want to tap into their large markets early. Africa will have to prove itself through years of good performance and sustained reform before it can gain such confidence. But if it does, those who are already betting on the continent will be miles ahead.
Globalisation- Joe has another go; But if the writing is crisp, the arguments are a little soggy. Mr Stiglitz assumes the worst of markets, the best of governments—except, of course, his own. Too often, he wants to have it both ways: his distaste for the IMF has made him suspicious of all technocratic bodies, even to the point where he questions the case for independent central banks. But at the same time he wants to set up international tribunals to rule on unfair tax competition, for example, or health standards. He says that debt relief for the poorest countries is “simply a matter of accounting”, because they could not repay anyway. But he also wants to argue that the burden of red ink has crippled them.
Dismal science, dismal sentence-The efficient markets hypothesis can land you in jail
Can America's farmers be weaned from their government money?
Mexico's presidential election
Japan- The imperial imperative
Qatar-A bouncy bantam
The French presidency
Charlemagne-Europe's tentative reformers; In Germany it has long been customary for the government, in the interests of consensus politics and social stability, to give “the social partners”—the catch-all name for employers' associations, trade unions and other interest groups—special privileges when writing new laws. On occasion, governments have even asked specific groups to draft legislation. But in drawing up health-care and tax reforms, Angela Merkel's grand coalition has tried to shut health insurers and other lobby groups out of the decision-making process, refused to listen to mere objections and demanded that, if a lobby group has a criticism, it must come up with an alternative way of meeting the government's aim (one reason why the lobbies have turned on the government with offended fury). At the same time, two members of parliament who are also heads of employers' federations (and thus personify Germany's close ties between lobbies and government) have had to choose between their business jobs and their parliamentary seats. Oh, the indignity.
Bagehot-The sands run out ; Labour MPs may come to regret their attempt to force Tony Blair from office
Steve Irwin, crocodile hunter, died on September 4th, aged 44
Economic forecasts-The panel now expects America's GDP growth to slow to 2.5% in 2007, compared with August's prediction of 2.7%. The soothsayers think that the euro area will grow by 2.3% this year (up from 2.2% in August), then slow to 1.8% next year. Germany's growth in 2006 has been revised up from 1.7% to 2.0%. But Japan is now tipped to grow by 2.8%, down from August's prediction of 3.0%. The biggest upward revision is in Sweden's growth this year: it is now forecast to be 4.1%, the fastest of all the economies in the table
Cancer genetics-Variations on a theme; There are a lot more cancer genes around than were previously known
An explanation of how the Atkins diet works
A promising new artificial heart wins regulatory approval
Pluto fights back
Europe's financial sector is ill prepared for a coming upheaval
A row breaks out over the future of Japan's consumer finance
Banks in developing countries
The global housing market
Business Section; Mobile phones on planes / Pharmaceuticals / Drug patents / Viacom / Corporate corruption in Germany / Japan's basic industries / Mobile telecoms
Alan Mulally jumps from Boeing to rescue America's troubled carmaker
August 31, 2006
Podcast of the Day- Gene Sperling’s Labor Market
Gene Sperling, senior fellow at the Center for American Progress talks with Bloomberg's Tom Keene from Washington about his approach to analyzing the strength of the labor market and the outlook for the midterm elections. Listen to the podcast.
Related;
Pro-Growth Progressive-book presentation at Google
Sperling interview with Charlie Rose
Could I ever become a Democrat?-Tyler Cowen
A article on the book by Sperling
Authors, Books, Reviews, & Chapters
A collection of links on books and reviews.
Books Online
Trigonometric Delights
U.S. Trade Strategy -Free Versus Fair by Daniel W. Drezner,
Chapters Online
The Next Great Globalization: How Disadvantaged Nations Can Harness Their Financial Systems to Get Rich by Frederic S. Mishkin
Chapter 1 - THE NEXT GREAT GLOBALIZATION: A FORCE FOR GOOD?
Expert Political Judgment: How Good is It? How Can We Know? By Philip E. Tetlock
CHAPTER 1 Quantifying the Unquantifiable
John Kay review of the book
Economics and the Law, Second Edition: From Posner to Postmodernism and Beyond
By Nicholas Mercuro & Steven G. Medema
Chapter 2 CHICAGO LAW AND ECONOMICS
The State of Working America 2006/2007
Book Reviews
Reviews of Good and Plenty-The Creative Successes of American Arts Funding by Tyler Cowen at Weekly Standard and by Donald Boudreaux
Review of Claus Offe, REFLECTIONS ON AMERICA-Tocqueville, Weber and Adorno in the United States Translated by Patrick Camiller
Brain Science and the Moral Order
Interview with Mark Hauser
What Do Animals Think About Numbers?
A Universal Moral Grammer: a case for Intention Predicates, Consequence Predicates and Action Predicates?
Review of Judith Harris’ No Two Alike: Human Nature and Human Individuality
Review of ‘The White Man's Burden-Why the West's Efforts to Aid the Rest Have Done So Much Ill and So Little Good’ at IMF and CATO
Review of The Moral Consequences of Economic Growth, Benjamin M. Friedman,
Institutions and the Path to the Modern Economy: Lessons from Medieval Trade by Greif, Avner
Glyn Morgan, The Idea of a European Superstate: Public Justification and European Integration (Princeton University Press 2005), at Crooked Timber and John Quiggin
Review of Unspeak
DEEPAK LAL'S REVIVING THE INVISIBLE HAND: A REVIEW
Review of THE WAGES OF DESTRUCTION: The Making and Breaking of the Nazi Economy by Adam Tooze
Book Quotes from Fischer Black and the Revolutionary Idea of Finance by Perry Mehrling at Voluntary Exchange
Random Book Quotes at Core Economics.
Review of Mao's Last Revolution By Roderick MacFarquhar and Michael Schoenhals
Naguib Mahfouz obituary
More on Amartya Sen’s Illusions of Identity by Fazeer
August 23, 2006
This and That
Some articles worth reading;
Don’t box yourself in when making decisions by John Kay
“For people in business and in financial services it might be a disturbing conclusion, but even in very simple cases, it is impossible to be certain that a particular mathematical representation of a real problem is a correct description.”
Tourists tell Britain: you’re a rip-off
Forget the World Bank, Try Wal-Mart
The American Standard of Whining by Virginia Postrel
Airports debacle worsened by greed and neglect by Joseph Stiglitz
Seven Questions: Somalia’s Struggle
Multiculturalism: unfolding tragedy of two confusions By Amartya Sen
"The history of multiculturalism offers a telling example of how bad reasoning can tie people up in terrible knots of their own making. The importance of cultural freedom, central to the dignity of all people, must be distinguished from the celebration and championing of every form of cultural inheritance, irrespective of whether the people involved would choose those particular practices given the opportunity of critical scrutiny, and given an adequate knowledge of other options and of the choices that actually exist in the society in which they live. The demands of cultural freedom include, among other priorities, the task of resisting the automatic endorsement of past traditions, when people – not excluding young people – see reason for changing their ways of living."
The 9/11 ReportA GRAPHIC ADAPTATION BY SID JACOBSON AND ERNIE COLÓN
The Preservation Paradox By Tim Harford
Iraq Runneth Over What Next? By Daniel L. Byman and Kenneth M. Pollack
"The debate is over: By any definition, Iraq is in a state of civil war. Indeed, the only thing standing between Iraq and a descent into total Bosnia-like devastation is 135,000 U.S. troops -- and even they are merely slowing the fall. The internecine conflict could easily spiral into one that threatens not only Iraq but also its neighbors throughout the oil-rich Persian Gulf region with instability, turmoil and war."
Most Expensive Rental Markets In America 2006
"As in 2005 (see " Most Expensive Rental Markets In America 2005"), the New York metropolitan area, which includes New York City and its surrounding counties, topped our list, with an average price of more than $27 per square foot for a high-end apartment.
In Manhattan specifically, the average rent came in at a whopping $48.33 per square foot--an estimate supported by July figures from Citi Habitats, a New York City-area real estate agency. The median monthly rent for a studio apartment in Manhattan is more than $1,900, according to Citi Habitats. If it's a three-bedroom spread that you're after, prepare to fork over somewhere in the neighborhood of $5,000."
Personality Traits of the Best Software Developers
Writing about your relationship could help it last
The Female Brain By Louann Brizendine-Chapter One
The Birth of the Female Brain
On the Web, Pedophiles Extend Their Reach
Sane Mutiny: The Coming Populist Revolt
August 21, 2006
Podcasts Carnival –From BBC
Inside the World of Google
The Communications Revolution
Getting back to business in Somalia
Russia's thirst for imported alcohol
Battle for Mexico's democratic soul
Lifting Europe's 'historic curse'
Piracy on the streets of Peru
Intercontinental Cops; Part One: Fraud and Corruption, Part Two: Stolen vehicles
'Trust Me I'm an Economist', discussion with Tim Harford about his new show; a related article, All is fair in love, war and poker
In the Beginning was the Sound- Reith Lecture
August 16, 2006
This and That across the Web
Some things that caught my eye across the web;
F. A. Hayek, intellectual father of the Wikipedia
Getting Things Done Software Systems
Fallacious arguments for low levels of tariff protection
Southern bluefin tuna & Japan
Double-Tongued Dictionary
Jill Carroll's story
Some TV is worth watching
The Relentless Application of Self-Interest
Survey of Professional Forecasters
Supply-side Economics at 25
WATCHING LEBANON-Washington’s interests in Israel’s war by SEYMOUR M. HERSH
Albert Hirschman
What an Electric Vehicle Costs
How do oil price shocks affect the economy?
An update on the Chicago Climate Exchange
Excel in-cell bar graph
Errors in economics a reason for modesty: Baumol
Health Care Costs
The trade balance, the current account balance, and other definitions
A Roundup of Interesting Economics Links
Liberal agonies
Oil Shock; Micro and Macro
Retail Sales and Nominal GDP
Times Cover Art
August 10, 2006
Outsourcing- America’s gift to the world?
The latest edition of Foreign Exchange is up, this week focus is on outsourcing in the medical practice;
“Are you going in for X-rays any time soon? Well, guess where they're probably being read? Potentially across the world in Bangalore, India. If you worry about outsourcing, bear in mind that it can save Americans as much as 25% on their hospital bills. You will hear the views of two Indian doctors serving American patients from India.”
Other guests on the show include Clyde Prestowitz and Martin Baily.
Related;
How Long Will America Lead the World?
Accelerating the Globalization of America: The Role for Information Technology
The Economist reviews World Bank’s recent publication of India Development Policy Review.
Interview with the man who told Thomas Freedman that the world is flat.
The wired man of Bangalore;In his latest innovation, N.R. Narayana Murthy, founder of Infosys, retires this month-
"Infosys, he says, is at the top of the tree. It attracts 1.4m job applicants a year. Wages make up just 14% of its costs, so even an annual increase of 15%, say, would reduce margins by only 2.1 percentage points, which can be matched by productivity improvements."
Economic Strategy Institute Blog
August 7, 2006
Trade and CGE Models
The Economist a couple of weeks back had a good article on economic models;
“Economic models fall into two broad genres. Macroeconomic models, the distant descendants of Phillips's machine, belong mostly in central banks. They capture the economy's ups and downs, providing a compass for the folks with their hands on the monetary tiller. The second species, known as computable general equilibrium (CGE) models, largely ignore the vagaries of the business cycle. They concentrate instead on the underlying structure of production, shedding light on the long-term repercussions of such things as the Doha trade round, a big tax reform or climate change…Trade's virtuous effects are of two distinct kinds. First, trade helps countries make the most of what they already have. It frees countries to allocate their resources—whether they be cheap labour, fertile land or educated minds—as efficiently as possible. But, secondly, trade can also allow countries to accumulate resources more quickly. Indeed, the biggest prizes lie in faster growth, not heightened efficiency; in accumulation and innovation, not allocation.
By their nature, CGE models are better suited to capturing the first effect than the second. They provide “before and after” snapshots of the economy at two points in time. They are therefore good at capturing the one-off gains that might arrive from a redeployment of the economy's resources. They are much less good at capturing the continuing gains that result from a faster accumulation of capital, or a quickened pace of productivity growth. Most trade models, indeed, hold productivity fixed…”
Oxfam recently had a new paper up critiquing the CGE modelling in trade- Modelling the Impact of Trade Liberalisation; A Critique of Computable General Equilibrium Models, by Lance Taylor and Rudiger von Arnim, New School for Social Research;
The paper presents a review and critique of the most widely used trade models based on computable general equilibrium (or CGE) models. The emphasis throughout is on methodology. The paper provides concise analytical arguments explaining the fundamental weaknesses of CGE models, paying particular attention to the way that CGE models conceptualise and measure welfare. The authors also show that the manner in which the World Bank uses CGE modelling is highly problematic, making implausible assumptions about elasticities, the exchange rate, and macro causality. World Bank models assume that the most central macro-economic indicators do not change in response to any liberalisation scenario. The authors argue that this is negligent, especially in developing countries with historically large trade deficits, significant debt problems, and a large informal economy with underemployment in modern sectors. The authors also identify a particular inconsistency inherent in the use of ‘Armington’ specifications of elasticities in CGE models. They show that, even if the Bank’s welfare measures and macro causal scheme are accepted, the welfare gains that liberalisation is supposed to induce are estimated incorrectly in LINKAGE, GTAP, and other trade models that adopt the popular Armington specification of imperfect competition between trading partners…CGE models can be useful quantitative supplements to experimental thinking about the importance of different potential causal linkages among economic variables at the country or world level. However, mechanically churning out ‘projections’ of welfare gains or any other indicator subject to one single set of causal assumptions and parameter values is a fundamental misuse of a sometimes helpful tool.”
Related;
Economic modeling and trade negotiations
World trade; In the twilight of Doha
Weighed in the balance; The Doha round of world trade negotiations was supposed to lift many millions out of poverty. It looks unlikely to do so
F&D edition focusesd on Trade
Demystifying Modelling Methods for Trade Policy
Assessing World Bank Support for Trade 1987-2004: An IEG Evaluation
The Future of Trade after Doha: What’s in It for Developing Countries?- video presentation
EcoMod has short training courses on CGE
August 6, 2006
The Herd Instinct and the rise of SUVs
Robert Frank tries to explain the rise of fall of SUVs- to a lot of people it will seem quite obvious;
“Economists increasingly recognize the importance of herd behavior in explaining ordinary purchase decisions. A case in point is the sport utility vehicle. Herd behavior helps us understand not only the explosive rise of this market segment in the 1990’s, but also its imminent collapse…The conventional determinants of consumer demand cannot explain this astonishing trajectory. Cheap fuel was a contributing factor, but clearly not an adequate explanation, because fuel had also been cheap in earlier decades. Similarly, rising average incomes cannot have been decisive, because the pre-S.U.V. decades had experienced even more rapid income growth…
To understand the explosive growth of S.U.V. sales, we must look first to changes in demand caused by new patterns of income growth and then to how others responded to those changes in demand. Unlike the three post-World War II decades, when incomes grew at about the same rate for people at all income levels, the period since the mid-1970’s has seen most income growth accrue to the wealthy…
An important feature of the herd instinct is that people are more likely to emulate others with higher incomes. Seeing a wealthy studio executive behind the wheel of a Range Rover instantly certified it as a player’s ride. As more and more high-income buyers purchased these vehicles, their allure grew. And when other automakers began offering similar vehicles at lower prices, S.U.V. sales took off…”
For Comment; Do readers of newspapers really appreciate economists telling them things that appear ‘common sense’? How does topics for op-eds get decided? Does the writer get paid or tipped to write about certain products and issues?
Via Michael Blowhard
August 1, 2006
Podcasts on Two Outlooks- Global Economy and Information Economy
Kenneth Rogoff, a professor of economics at Harvard University and former chief economist at the International Monetary Fund, talks about the outlook for global economic growth, Treasury Secretary Henry Paulson and the IMF's role in global economics at Bloomberg. Listen to the podcast.
Graham Vickery gives an overview of the information and communication technologies (ICT) industry for the OECD countries for 2006. Topics discussed amongst others; Market growth across the OECD and Non-OECD ICT markets, Top 250 ICT firms, World semiconductor market 1990-2005, Structural change in the ICT sector, ICT globalisation and trade, New trade competition, ICT-enabled service globalisation and offshoring; China and ICTs; ICT skills and employment; IT policy in OECD countries. Podcast from Radioeconomics.
July 31, 2006
The Academy of Economic Blogs
A worth reading list of recent posts for economics students from across the blogs;
What future for European jobs?
Advice for taking economics exams – for high school students.
Fridays Academy from Poverty and Growth Blog; the latest is on Inflation
From Mahalanobis; Measuring Sector TFPs, Podcasts- Economic Growth, Schooling, Random Lecture Notes; Hypothesis Testing
The Fight Against Global Poverty
"Comparative Advantage, Comparative Advantage, Wherefore Art Thou, Oh Comparative Advantage?"
How Would You Solve the Deficit Problem?
McCloskey: "The Bourgeois Virtues"
A Tale of Two Dragons- China’s Trade Surplus and Inflation
Related; Econ4u
July 23, 2006
Carnival of Podcasts
Ray Canterbery, an author and economics professor emeritus at Florida State University, talks with Bloomberg's Tom Keene about economic theory, Canterbery's book "A Brief History of Economics: Artful Approaches to the Dismal Science" and U.S. economic policy.
Dan Griswold, director of the Cato Institute's Center for Trade Policy, talks with Bloomberg's Tom Keene from Washington about China's currency policy, the benefits of imports from China to the U.S. economy and the need for increased national savings in the U.S.
James Galbraith on economics and contributions of his father.
How many logics? If we think about logic at all, we probably think of it as one and indivisible - truth is truth and an argument is either valid or it isn't. But perhaps we need a logic that is more subtle than that, one that allows for degrees or truth. This, it turns out, is the Australian way. For more see the blog of the guest.
Hearing Voices - the invisible intruders
Around 10% of the population hear voices that aren't there. Some people can live harmoniously with them, but for those whose voices are associated with a psychiatric illness, they can be frightening and menacingly real. We discuss the latest research on how auditory hallucinations occur in the brain, what it's like to live with voices in your head - and the healing power of the international Hearing Voices Network
U.S.-China Trade, Exchange Rates, and the U.S. Economy
Featuring Nicholas Lardy, Institute for International Economics; Frank Vargo, National Association of Manufacturers; and Daniel Griswold, Cato Institute; One year after China’s modest currency reforms, the issue remains a sticking point in U.S.-China trade relations. Critics argue that China’s yuan remains grossly undervalued, bestowing an unfair advantage on imports from China at the expense of U.S. producers. Other observers contend that benefits from trade with China far outweigh any concerns about its currency. Policy options range from doing nothing to aggressive diplomacy to imposing steep tariffs on Chinese imports. Three experts on U.S.-China trade will discuss the status of reform in China, the impact of U.S.-China trade and exchange rates on our economy, and what change, if any, should be made in U.S. economic policy toward China
Myths, Lies, and Downright Stupidity: Get Out the Shovel—Why Everything You Know is Wrong
Two Views on Global Development: Revive the Invisible Hand or Strengthen a "Society of States"? Deepak Lal and Ethan Kapstein.
U.S. Trade Policy in the Wake of Doha: Why Unilateral Liberalization Makes Sense
Featuring Jagdish Bhagwati, Professor of Economics and Law, Columbia University, Senior Fellow in International Economics, Council on Foreign Relations and Daniel Ikenson, Associate Director, Center for Trade Policy Studies, Cato Institute
Israel, Lebanon and Palestine
Ross Burns; Former Australian Ambassador to Lebanon and Syria in the 1980s, South Africa and Greece in the 1990s and in Israel until 2003'
Human Betterment Through Globalization by Vernon Smith
Via Café Hayek
Christian Emissary of Kublai Khan
Before Marco Polo plied the Silk Route to visit the great Khan in the 13th century, the Mughal Emperor sent out a Christian emissary to retrieve relics from Jerusalem and send a message to the Pope. His name was Rabban Sawma and his story is told by Professor Sam Lieu
The Prophet Muhammad He came from desert obscurity in the sixth century, to become a leading figure in the prosperous Arabian town of Medina. The Prophet Muhammad went on to found a religion that would dominate the Middle East in just a century after his death. Interview with Reza Aslan
Coping by cutting
The incidence of self harm is rising and there's a search for understanding and solutions. Princess Di admitted to it. As many as 1 in 5 young people are likely to deliberately hurt themselves to release internal tension and pressure. What is it, and how can parents handle it? Reporter, Jane Shields
Bird flu: risks, laws and rights
Scientists, lawyers, politicians, security forces—everyone's walking a fine line with avian flu, between the rights of the individual and the rights of the wider public. When a pandemic happens each of us will be on our own, as the authorities look at the big picture. Reporter, Ian Townsend
Business, design and Innovation
By Design is intrigued by the connection between design and the marketplace. To look at how design and economics are further embedding themselves in our cultures and what inhibits this if the connection is not happening, our discussion this morning focuses on design and innovation
British ex-ambassador discusses US role in Middle East
Defining obesity; A powerful expert committee in the US has plans to alter the definition of healthy weight levels, which will result in almost 40% of children aged 6 to 11 years being defined as 'overweight'. We speak to Ray Moynihan and Michael Gard on how the West got so worried about being fat
Darwinian aesthetics
When Darwin first published Origin of Species back in the middle of the nineteenth century, it was, to put it mildly, a revelation. His theories radically altered our perceptions of ourselves and the world around us...and it seems the aftershocks are continuing to this day. There is a growing academic movement that aims to apply Darwin's theories to the study of art and literature. But what does the survival of the species have to do with art? Professor Dennis Dutton is a philosopher at the University of Canterbury in New Zealand. He is interested in the study of evolutionary psychology, or Darwinian aesthetics, so he's bound to know the answers.
Listen online
Anwar Ibrahim - Shakespeare, Islam and Democracy
Anwar Ibrahim is a guest of the World Shakespeare Congress in Brisbane and he lectures there on Shakespeare this week. What does the former Deputy Prime Minister of Malaysia have to say about the Bard's influence on him, especially during his years of imprisonment? Anwar Ibrahim also lectures this week at the University of Queensland on Islam and Democracy in Asia and other parts of the world. These two subjects are disparate but their common ground is a world recognised scholar and political thinker. Find out more on Encounter this week
Design island; For its size, Tasmania can boast a disproportionately high number of creative people, and at a recent design forum the mostly Tasmanian-based designers and craftspeople discussed the challenges many artists in far-flung places face; of isolation, and of regional identity versus international style.
Adult Attention Deficit Hyperactivity Disorder - what is it and what can be done about it? We'll also look at some assumptions and controversies surrounding this condition. One of the commonly asked questions is whether adult ADHD really exists
‘You Must Use The Bath' is an exploration of a little-known part of Australia's Colonial history - the emergence and widespread 'take up' of Turkish Baths. It's a tale of entrpreneurial spirit and, at the time, many claimed 'whacky vision'. However, the larger-than-life Turkish Bath devotees were not to be diverted and there were soon baths in all major cities and regional centres
Behind The News - a profile of Dr Peter Russo
For 50 years journalist and academic Dr Peter Russo told Australians about Asia and about themselves, but it was often not what they wanted to hear.
Free to learn - the history of progressive education in Australia
If the words progressive education mean anything to you at all, they may well conjure up the name Summerhill—probably the most famous progressive school in the world—in England, where children can choose whether or not they go to lessons, and are free to do pretty well what they want
Joel Shurkin, biographer of William Shockley
Robyn's guest this week is author Joel Shurkin, who's written a biography of William Shockley, the Nobel prize winning inventor of the transistor. Shockley was an extraordinary man whose work gave birth to modern electronics, yet on a personal level, his colleagues felt he was deeply flawed. It's suggested that he had reverse charisma; he'd walk into a room and engender instant dislike! We take a look at Shockley's fascinating and tragic life
Barbara Biggs has been a journalist, a prostitute and a property developer. She has written three books about her remarkable experiences. She talks to Robyn Williams about why she chose to expose the man who abused her when she was young. What was the point of enduring public attention and the law courts so long after the event? Do victims need to revisit distress in this way?
Dr Jim Cotter and the 100 hour challenge; The 100 hour challenge is not for most of us. You run for that length of time, across country, with hardly any sleep. Dr Jim Cotter has done it and studied the physiological implications. How much water do you need to keep going? Do branded sports drinks help? How do you prepare for such an ordeal - or for regular jogging that normal people do?
Defecation, Copulation and Exclamation: A Social History of Swearing
Six hundred years ago the English were known to the French as "les goddems" due to their propensity for foul language. English-speakers' long-standing partiality to oaths, profanity and ethnic slurs reveals much about our shifting understandings of sexuality, class, race and humour
Lifetime Economics; Bob Blain is one of the world's leading economic reformers. He believes that today's monetary system has stalled and has failed to complete its evolution. He proposes developing a more sustainable world economy by adopting an "hour of work" as the world monetary standard, a way to share work and wealth more equitably.
Which lies matter - which ones don't? Are some lies now so much a part of daily life that they've lost their sting? Today on Life Matters we look at how we deceive and are deceived on a daily basis
Listing love's loves; Peta Logan unpacks tales of unrequited love in one of the many lists in James Joyce's novel, Ulysses
Correspondents and Fixers
Have you ever wondered how foreign correspondents fly into the latest disaster zone and instantly report with authority? The answer is The Fixer, a local, often taking extraordinary risks
The Strange Case of Dr John Bodkin Adams
Medical historian Dr Jim Leavesley from Margaret River in Western Australia tells us the story of the medical murder trial of Dr John Bodkin Adams, who practiced in the English seaside town of Eastbourne and who was beneficiary to no less than 132 wills
Green Power; Author Christine Williams has written a book called 'Green Power'in which she tells the story of environmentalists who have changed the face of Australia.
We the People
The Constitution of the United States of America, adopted in 1788, became the first formal blueprint for a modern democracy. What happened to the expression of those democratic ideals during the twentieth century - the American century
The creative brain; Stephanie White studies Australian zebra finches and how they sing. They learn a standard song but need to maintain it and add creative flourishes. In research just published in The Journal of Neuroscience she reveals that the gene linked to this singing may well be the same as those involved in human speech. Not only does this have relevance for investigating speech disorders, it may also have implications for creativity. Stephanie White is a professor at UCLA (University of California, Los Angeles).
An Inconvenient Truth
David Fisher reviews director David Guggenheim's film, An Inconvenient Truth, which features former US Vice President Al Gore's 'travelling global warming show'. In the wake of defeat in the 2000 election, Al Gore re-set the course of his life to focus on a last-ditch, all-out effort to help save the planet from human-induced irrevocable change
Dark Paganism and Deep Blue Religion; Witches' Sabbats that include death rituals are frightening, but they have a therapeutic value, says PhD student Marian Dalton, a witch who practices Dark Paganism. And strong communal values are also evident, says paganism researcher Dr. Douglas Ezzy from the University of Tasmania. Paganism's earth-based spiritualities often exclude the importance of the sea but sociologist Sylvie Shaw has discovered that "deep blue religion" is alive and well
The New Animism; The oldest living religion, Animism, has a new advocate in pagan expert, Graham Harvey. We also hear from practising pagans in South Australia
Mentoring and sport; For some young athletes negotiating the off field demands of expectation and celebrity can be a difficult part of the game, so who's there to guide them?
The New Arab World; Dubai, Oman, Qatar
A Witch's Brew; It is barely fifteen years since Kazakhstan, Kyrgyzstan, Uzbekistan, Tajikistan and Turkmenistan emerged from the shadows of the Soviet Empire and all now find themselves facing enormous environmental problems
GREEK COMEDY
But how did Greek comedy evolve? Why did its subsequent development differ so radically from that of Greek tragedy? To what extent did it reflect the anxieties and preoccupations of a nascent democracy? And can it be said to have left any lasting legacy? Listen online
India struggles to catch China
The rapid growth of the Indian and Chinese economies have transformed the two countries in recent years. But this prosperity has also brought other problems.
A review of developments in Latin America over the past year, particularly the Bolivian and Mexican elections
Nature Podcast; untangling foodwebs, our Neanderthal heritage, lungfish dammed, military secrets, graphene hits the scene, the origin of the ocean floor, and paramutational phenomena
More on science; Brain-computer interfaces, science and the battle of the sexes, human transmission of H5N1, science and religion, deep sea secrets, the unshelled mollusc, tropospheric radicals, and atomic tweasers
Forensic Economics 101
An interview with Forensic Economist Don Frankenfeld
From Google Authors; Gene Sperling, Hal Varian, Seth Godin, John Battelle, Barry Swartz,
Charlie Rose Show; with Fouad Ajami, Christiane Amanpour
Other videos; Investment Opportunities in China, Leveraging India as India Stands Up, Our Lives Our Facebooks, The Next Fifty Years of Science
July 7, 2006
The Economics of France's attempt to open up iTunes
The Economist’s Economic Focus column looks at French attempt to allow customers to play music bought from iTunes on one of the iPod's rivals;
“Put these practical difficulties aside, and ask whether France's policymakers identified a real problem. Are they right to worry about the inseparability of Apple's store and its player?Such controversies normally turn on the analogy chosen to illuminate them: is the iPod like a CD or cassette player, or an inkjet printer? Since it appeared in 2001, the iPod has become this decade's answer to the Sony Walkman. Supporters of the French law point out that if you buy a music cassette at a shop, you can listen to it on any cassette player that takes your fancy. You do not have to play it on a Walkman. Why then can customers not listen to songs from Apple's music store on whatever player they like? Surely Apple is guilty of exploiting the popularity of its store to stifle rivals to its iPod?
The law's opponents reach for different analogies. They compare the iPod not to the Walkman, but to printers, games consoles and razors. Buy an inkjet printer, for example, and you must buy the manufacturer's cartridges to be sure that it will work properly. (Although French parliamentarians will not come to your rescue, European regulators might.) Indeed, manufacturers make much of their money from the cartridges, not the printer itself, which is often sold cheaply. Economists explain this business model as a clever way for companies to “meter” their customers, charging them according to use. If they could not tie their customers to their cartridges, they would charge more for the printer itself, and the kind of person who now uses his printer rarely would not buy one at all.
Apple's business model, however, turns this on its head. Apple makes its money from sales of the iPod, not sales of music; the printer, not the cartridge; the razor, not the blade. As Bill Shope, an equity analyst at JPMorgan, puts it, the music store is a “loss leader” that serves only to boost sales of the iPod. It is as if record stores existed only to sell record players.”
Other free-reads from the latest Economist;
The trouble with Pakistan; An unstable, nuclear-armed Pakistan, intertwined with a chaotic and Taliban-dominated Afghanistan: it is not a settling prospect. It has all happened before, of course. The result was September 11th, swiftly followed by a terrorist outrage in Delhi that came close to provoking full-scale war between Pakistan and also-nuclear India. What will happen next time?... A Survey of Pakistan, here’s a podcast of the interview with the author.
Lexington- Faith, race and Barack Obama
HOW can Americans overcome their divisions? Barack Obama, the son of a lapsed Kenyan Muslim, has some arresting thoughts. On the subject of tackling head-on “the mutual suspicion that sometimes exists between religious America and secular America”, the junior senator from Illinois delivered last week one of the best speeches of his brief career.
Genetics-The genetics of mammoth coat colour
“ICE AGE”, a film about the antics of a group of prehistoric mammals, was such a hit that Regent Street in London was festooned with Christmas lights in honour of its stars: Manny the mammoth, Sid the sloth, Diego the sabre-tooth and an irritating squirrelly creature called Scrat.
Memory formation- There may be a link between the way memories are formed and the adverse effects of sleep deprivation
Dr Tononi's hypothesis is, it must be said, controversial. Many researchers hold almost precisely the opposite opinion—that sleep serves to re-activate synapses that were strengthened during the day, and thus reinforces their strength rather than diminishing it. There is, however, a certain logical sense to the Tononi view of the world. It is impossible to remember everything, so a process of winnowing must take place somehow. The idea that, after a period of expansion, the brain pares back its workforce to become leaner and meaner is somehow rather appealing
Face value-The business of persuasion
Erel Margalit, an Israeli venture capitalist, dreams of using his dealmaking skills to revitalise Jerusalem
High-tech industries now provide around 55% of Israel's exports, and in the past ten years accounted for about 40% of its growth. Mr Margalit argues otherwise. The city's reservoir of intellectual and creative life can be tapped, he insists. A few elite institutions—the Hebrew University, the Bezalel art academy, the state-run Israel Broadcasting Authority, the hospitals, even the government—that now function largely in isolation from the city could become “a cluster of creative elements, a cohesive arena.”
Internet advertising- The ultimate marketing machine
Thanks to the power of the internet, advertising is becoming less wasteful and its value more measurable.
Within a year, however, Messrs Brin and Page changed their minds and came up with AdWords, a system based on Overture's idea of putting advertising links next to relevant search results and charging only for clicks (but with the added twist that advertisers could bid for keywords in an online auction). Google soon added AdSense, a system that goes beyond search-results pages and places “sponsored” (ie, advertising) links on the web pages of newspapers and other publishers that sign up to be part of Google's network. Like AdWords, these AdSense advertisements are “contextual”—relevant to the web page's content—and the advertiser pays for them only when a web surfer clicks. Together, AdWords and AdSense produced $6.1 billion in revenues for Google last year.
Kenneth Lay- founder of Enron, died on July 5th, aged 64
July 2, 2006
Carnival of Podcasts
Alan Krueger, a professor of economics at Princeton University, talks with Bloomberg's Tom Keene from Princeton, New Jersey, about President George W. Bush's selection of Columbia University scholar Frederic S. Mishkin as a Federal Reserve governor, Mishkin's relationship with Fed Chairman Ben S. Bernanke, and inflation targeting.
Former U.S. Treasury Secretary John Snow talks with Bloomberg's Tom Keene from Washington about the results of a Bloomberg/Los Angeles Times poll that finds more than six in 10 Americans say the country is on the wrong track and that more than half disapprove of President George W. Bush's handling of the economy, Snow's disappointment at not gaining enough support for changes in Social Security and future career plans.
U.S. Trade Policy in the Wake of Doha: Why Unilateral Liberalization Makes Sense; Featuring Jagdish Bhagwati, Professor of Economics and Law, Columbia University, Senior Fellow in International Economics, Council on Foreign Relations and Daniel Ikenson, Associate Director, Center for Trade Policy Studies, Cato Institute
World Economic Update ( a discussion at CFR, June 27,2006)
A Conversation with Hoshyar Zebari, Minister of Foreign Affairs, Republic of Iraq
Brazil's law-enforcing buffaloes ; Police have taken to an unusual form of locomotion in the Brazilian city of Belem
Behavioural Economics: Fear, Anxiety, Overconfidence, and the End of the Financial Year
Philanthropy; The world's two richest individuals are set to give away most of their money to the needy. The personal philanthropy of Bill Gates and Warren Buffett will amount to tens of billions of dollars - so are they setting a trend - will others follow? And just how generous are Australian companies and individuals when it comes to charitable acts?
Emotions at work; This week we hear about some learnable techniques that might help people be more self-aware at work, allowing them to use their emotions as a positive force.
The 'curse' of having a girl ; India might be a country rushing headlong into 21st century but every year thousands of babies are aborted or killed at birth because they are girls
Higher Education Hype and the myth about Chinese engineers
Give Me Land ; Across the world millions of people have no land that they can call their own. Many have been made landless from great injustices. As populations grow and property prices rise the struggle for land becomes more difficult every day. This four-part series travels to China, India, South Africa and Brazil to see how people are fighting for land.
Peter Day looks at the long-running battle between Airbus and Boeing
The Enlightenment Is Not Godless; The 17th Century philosophers in England, France and Germany have been roundly criticised for being anti-religious. Professor of Philosophy at Griffith University, Wayne Hudson, resurrects their different understandings of God and argues they have been ignored in the rush to rubbish the Enlightenment as a den of unbelievers
Zen Brush, Zen Mind; A thousand years after Buddhism arose in 550 BC, Japanese Zen developed zenga - ink painting - which included calligraphy as a way of communicating its message
Interiors - how we 'invented' them; The interior of a house is always undergoing 'renovation' - not only physically, but also within our imagination. Charles Rice is an architect with a theory on how our significant philosphers and psychoanalysts, people like Freud, have shaped not only our sense of self, but the interior of our homes and the settings of most television shows. In fact media and self are now dependent on one another.
Computers and new ways of thinking; Computers are more than an extended drawing tool, or just a way of imaginging 3D. Now they are forging new ways of thinking, and offering ways of imaging the world that would be impossible without a computer. Hear how computers are changing engineering and architecture - indeed blurring the two.
Nutrition for children in Sub-Saharan Africa; In Sub-Saharan Africa malnutrition, particularly in babies and toddlers, is part of every day life. However, there may be some help available through some dietary intervention
Chris Turney; This week, Paul Willis takes the chair and goes dating with Chris Turney. Chris's specialty is carbon dating. He explains how this area of science has been called upon to solve some long-standing mysteries. When did the Minoan civilisation of Europe collapse and why? When did various groups of people arrive on the major continents? These are questions that can now be answered quite accurately using carbon dating, which looks at ratios of radioactive carbon in organic samples and compares the amounts present to the known rate of decay
The Political Speeches of Cicero; Dr Kathryn Welch on the rhetorical brilliance of the master orator of the Roman Republic
Faux Pas; Robert Dessaix on Philip Gooden's no-nonsense guide to words and phrases from other languages.
Those who have ears; Former Queensland teacher Jennifer Riggs looks at an extensive study by the Australian Council for Education Research which identifies serious problems with auditory processing in a high proportion of children
The future for manufacturing in Australia
Putting Ethics First; This year sees the hundredth anniversary of the birth of the philosopher Emmanuel Levinas, who died in 1995. A survivor of the Holocaust, Levinas was a philosopher of ethics who insisted that all human beings, whoever they may be, and he was thinking of Nazis, have a claim on our respect
The philosophy in Tristram Shandy; In 1904, Ivan Pavlov received the Nobel Prize for medicine for his work on the phenomenon he called the conditioned reflex. He had applied stimuli - aural, visual, tactile - to dogs and then fed them. After a while the association in their minds between the stimulus and food was so strong that they'd salivate at the application of the stimulus, even if there was no food around
Cosmopolitanism; It's not about being worldly and sophisticated and it's not about cocktails. Cosmopolitanism is a very old philosophical idea that is coming back into favour. The cosmopolitan believes that each person has a moral responsibility towards each other person, no matter where that person lives or their nationality, religious commitment, ethnic affiliation, socio-economic class, or gender might be. It's a moral virtue for a global age
Developing Australia; This month, federal and state governments bowed to public pressure and abandoned plans to privatise the Snowy Mountains Hydro-Electric Scheme. Rear Vision looks at the history of government involvement in Australia's big projects
East Timor Since Independence; What has happened in East Timor since independence to give rise to the violence, turmoil and political upheaval that culminated this week in the resignation of Prime Minister Mari Alkatiri?
Computer games are not childsplay; Do you remember Donkey Kong, Pacman and Super Mario? Computer games now have names like Doom and Grand Theft Auto, and it's the extreme violence in these games that concerns computer science lecturer Simon McCallum, especially as they are often available to children.
Maternal Health and Foreign Policy Symposium; Session 1 and Session 2
A Conversation with James Baker
Water in India; The cost of boom times in India is a surge in demand for everything - and top of the list is water. Industry, agriculture, households in middle class suburbs and global corporations all want as much as they can get. Is privatisation the answer when governments are struggling?
Workers of the world; Whether you call them guest workers or skilled immigrants, they're part of a globalising workforce
June 28, 2006
Podcast of the Day- OECD Employment Outlook 2006
Latest podcast from RadioEconomics. Raymond Torres, Head of the Employment Analysis and Policy Division, OECD (Paris), discusses the “
Related around the blogs;
German Business Optimistic, While Individual Germans Save Rather Than Spend
British Success in Employment Rate
Intricate workings- summary of the Employment Outlook from The Economist
June 22, 2006
Islam, America and other free reads from The Economist
Islam, America and Europe; Why so many Muslims find it easier to be American than to feel European; The difference between America and Europe in dealing with Islam reaches down to some basic questions of principle, such as the limits of free speech and free behaviour. America's political culture places huge importance on the right to religious difference, including the right to displays of faith which others might consider eccentric. In the words of Reza Aslan, a popular Iranian-American writer on Islam, “Americans are used to exuberant displays of religiosity.” So the daily prostrations of a devout Muslim are less shocking to an American than to a lukewarm European Christian. American society is open to religious arguments—and to new approaches to old theological questions—in a way that Europe is not.
The West and Islam; Tales from Eurabia
How to save the world- Bolton v Gore; A question of priorities: hunger and disease or climate change?
Africa's economy; A glimmer of light at last? Nor have Africa's faster-growing economies done much yet for Africa's millions of poor; about half of sub-Saharan Africa's 750m-plus people still live on less than a dollar a day, a figure that has been pretty static since 1990, whereas in South Asia it dropped from 39% in 1990 to 30% in 2001 and is dropping further, while in eastern Asia (mainly China) it fell from 33% to 17% in the same period and is now falling faster still. Most foreign investment in Africa still goes to oilfields or mines, rather than factories, services or farming. Mineral riches provide governments with cash but do not create many jobs. Most people in Africa still work in the informal sector, while unemployment is rife. With a few exceptions in Africa, private business, especially the job-creating small and medium sort, is weak. Even South Africa, with its diverse economy, has failed to create jobs fast enough: at least a quarter of its people have no work.
Face value- Bill Gates replaces himself as Microsoft's software boss with Ray Ozzie; The first signal that Mr Gates had tapped Mr Ozzie to lead Microsoft into this new world of internet services and advertising came last October, when Mr Ozzie, rather than Mr Gates, wrote a lengthy internal memo called “the internet services disruption”. In it, Mr Ozzie politely but ruthlessly analysed how Microsoft had wasted opportunities to come to grips with the new environment, how it was losing ground to rivals (“Google is obviously the most visible here”) and what it would take to avoid disruption
Brazil's elections; An outsider with a (slight) chance
China's next building site; Building the nation
German history; Still haunted by a communist spectre
Prisons; The British government has been accused of both stuffing prisons and letting too many convicts out. Oddly, both accusations are true
Newspapers; The Tribune Company is in trouble with some powerful shareholders
Chinese tourism; Last year more than 31m Chinese travelled outside mainland China and the World Tourism Organisation expects this number to grow to 50m by 2010 and 100m by 2020
American inflation; The problem is that the Fed's stern talk may backfire. The statistical nuances of owners' equivalent rent suggest that core inflation may rise further and will remain above Mr Bernanke's boundaries for the rest of the year, even as the economy slows. If they are to avoid pushing up interest rates too far, Fed officials may soon have to explain why figures they now regard as “troubling” and “corrosive” are not so worrying after all. That task would be easier if their rhetoric had been more boring in the first place
Fundamental physics; Gravitational waves were predicted by Einstein's general theory of relativity in 1916. This theory views gravity not as a force but as a consequence of the curved geometry of space and time. Space-time, as it is known, has four dimensions: the three familiar spatial ones of length, breadth and height, and time
Agriculture; An international seed bank is being set up in the Arctic
Tintin and the broken metaphor
Charles Haughey, four times taoiseach of Ireland, died on June 13th, aged 80
Part-time work; In the past decade there has been a sustained increase in the importance of part-time work, notably in the Netherlands, where it now makes up 36% of total employment. Mostly it is done by women, who account on average for 73% of such work across the OECD. Many governments are taking steps to promote part-time jobs as a means of raising overall employment rates
Oil reserves; The world had 1.2 trillion barrels of proven oil reserves at the end of 2005, according to BP. If overall production continues at last year's rate, known oil will last for 41 years. But it will run out more slowly in some countries than in others. At today's extraction rate, Saudi Arabia's reserves, which account for more than a fifth of the world total, will last for 66 years.
Staffing globalisation;As companies send more employees abroad, they are offering fewer perks and finding more recruits in developing countries ($ required)
Economics focus; The euro and trade; IN THE continuing controversies about Europe's bold experiment in monetary union, there has at least been some agreement about where the costs and benefits lie. The costs are macroeconomic, caused by forgoing the right to set interest rates to suit the specific economic conditions of a member state. The benefits are microeconomic, consisting of potential gains in trade and growth as the costs of changing currencies and exchange-rate uncertainty are removed… A new study by Richard Baldwin, a trade economist at the Graduate Institute of International Studies in Geneva, scythes through these and earlier, even higher, estimates….($ required)
Muslims and the West; FOUR authors of recent books about America's conflict with Islamism are like blind men feeling an elephant—each one describes the problem in a slightly different way. What unites them, though, is a single, overarching question: if the jihadists are just a bunch of bloodthirsty, head-chopping, woman-haters, why does the West have such a hard time gaining the moral high ground in what America persists in calling the “war on terror?” ($ required). The four books reviewed are below;
While Europe Slept: How Radical Islam is Destroying the West from Within By Bruce Bawer
Menace in Europe: Why the Continent's Crisis is America's, Too By Claire Berlinski
Storm from the East: The Struggle Between the Arab World and the Christian West By Milton Viorst
The Islamic Challenge: Politics and Religion in Western Europe By Jytte Klausen
June 18, 2006
Is 'Chalk and Talk' the Best Way to Teach Economics?
The following paper suggests that the ‘chalk and talk’ is still the preferred option for educating budding economists- the median of 83 percent remaining almost the same over the last 10 years.
A Little More Than Chalk and Talk: Results from a Third National Survey of Teaching Methods in Undergraduate Economics Courses by Michael Watts and William E. Becker. Here’s the abstract;
“In 1995, 2000, and 2005 the authors surveyed U.S. academic economists in the United States to investigate how economics is taught in four different types of undergraduate courses at postsecondary institutions. They looked for any changes in teaching methods that occurred over this decade, when there were several prominent calls for economists and post-secondary instructors in other fields to devote more attention and effort to teaching, and to make greater use of active, student-centered learning methods, with less use of direct instruction or “chalk and talk.” By 2005, although standard lectures and chalkboard presentations were clearly still the dominant teaching style in all types of economics classes, there was evidence of slow growth in the use of other teaching methods, including classroom discussions (especially teacher-directed discussions) and computer-generated displays (such as Power Point). A growing number of instructors provided students with a prepared set of class notes. Computer lab assignments were increasingly common in econometrics and statistics courses, and Internet database searches were used by a growing (though still small) minority of instructors in all types of classes. Classroom experiments were used by a small share of instructors in introductory courses, but almost never in other kinds of courses. Assignments or classroom references to the popular financial press, sports, and literature, drama, or music were used somewhat more often. Cooperative learning methods were rarely used in most types of courses.”
For Comment; How would economics teaching be like a decade from now? What incentives can we give for instructors to move away from the ‘chalk and talk’ style of teaching?
June 17, 2006
Economists and Journalists
“Report on government as you would report to your siblings on the rental agent your mother hired to handle her Florida condo.”
I found Susan Rasky and Brad De Long’s list of advice to economists and journalists quite interesting. Federal Reserve Bank of Minneapolis also conducts a course for journalists- Supply, Demand & Deadlines – which I think is a great idea for other central banks to follow.
The best thing may be to just read op-eds and columns written by economists and well known economic columnists. I’ve tried to give a sample below;
Tyler Cowen’s latest Economic Scene column - Investing in Good Deeds Without Checking the Prospectus.
John Quiggin’s -When co-operation trumps competition- explains how the internet is changing our ideas about innovation
Virginia Postrel- Cash for kidneys -Legalizing incentives could encourage transplant donations, says a healthy donor.
Thomas Sowell , Random thoughts- When you have 90 percent of what you want, think twice before insisting on the other 10 percent.
John Kay- The Magic Kingdom could save Venice from destruction. If Venice were owned by the Disney Corporation, Venice would not be in peril
Paul Krugman- The Phantom Menace
Truth, bullshit and economics - Samuel Brittan
Edward Lotterman- Supply and Demand Effects Vary by Market
Arnold Kling- Are You a Conservative? Try this test.
Steven E. Landsburg- How Much Should Hotel Web Access Cost? Sometimes it's free. Sometimes it's $20 a day. Why?
Tim Harford- Buy! Buy! Buy! Sell! Sell! Sell! The rational explanation for stock market frenzies and crashes.
Yahoo Finance has columns by Charles Wheelan
Martin Wolf , David Warsh,, Daniel Gross, Sebastian Mallaby are also good.
Steven Levitt- Freakonomics
Sachs, Rogoff, Stiglitz, Schiller and Brad De Long have columns at Project Syndicate.
Rogoff’s open letter to Stiglitz is a classic.
Andrew Liegh has some advice for budding op-ed writers.
Let us know your favorite columnists.
June 14, 2006
Journal Editors and Book Editors
Every edition of the Australian Economic Review has a section called ‘For The Student’- the latest one looks at the world of economic publishing ; From Manuscript to Publication: A Brief Guide for Economists (freely available online for now) by John Creedy;
“Journal editors are not selected according to their knowledge of the printing and publishing business, or even their administrative abilities. Many therefore know little, and care even less, about those aspects. If journal editors face no sanctions, have little knowledge of the technical and commercial aspects of publishing, and have no financial incentives regarding outcomes, it is inevitable that factors such as power, influence and ego play a role, thereby damaging the selection process. Many editors nevertheless do provide a valued and disinterested service to the scholarly community. It is perhaps surprising how well the system generally works, though there are huge variations in editorial standards.Book editors are, in contrast, paid professionals whose remuneration depends on the sales of books they commission. There is thus a clear market sanction. There is indeed much mobility within the industry, as successful editors are ‘headhunted’. Book editors typically know the publishing business well from many points of view, having often ‘worked their way’ through a number of departments.
The behaviour patterns of the different editors are therefore, not surprisingly, quite distinct. Journal editors simply wait for submissions to arrive. With limited space available, emphasis is given to the selection process involving the rejection of a large proportion of submitted papers. Editors are generally, though not always, well known and often highly regarded academics. They are confident of their own ability to make judgements regarding the quality of papers submitted, though an important role is played by referees, as discussed below. Furthermore, an editor may consult an editorial board before making a final decision, but this is not common. Journal editors have little, and merely distant, contact with authors. Given the search for original highquality papers, past reputations of authors typically count for little.”
Related;
What are the top economics journals? The American Economic Review and Journal of Political Economy are the two most important journals according to Tyler Cowen.
Broader, Deeper; But four new journals will appear, about two years from now. Their titles have only just been announced (pending a copyright check). The plan is to call each the American Economic Journal: the subtitle to follow the colon. It's clear that the formulators hope the new "aggregate field journals" will render old boundaries more porous, and cause new distinctions to evolve.
Tom Maschler - the writer's business; Today, what do publishers want, or the secrets of the book trade. Tom has been a publisher all his working life—revered for being chairman of Jonathan Cape when it was the best literary publishing house in Britain. He introduced Gabriel Garcia Marquez, Thomas Pynchon, Joseph Heller, Tom Wolfe and Kurt Vonnegut to British readers. Doris Lessing, John Fowles, Arnold Wesker, Roald Dahl, Ian McEwan, Julian Barnes, Martin Amis, and Salman Rushdie were also part of the Cape line-up during his reign. As the story goes, booksellers would simply buy whatever he had to offer just because of his reputation. But since he retired from the publishing world he for the first time went over to the other side of the fence and wrote a book. It's called Publisher and he wrote it because he was recruited by an agent. Listen to the podcast.
Book Recommendation; Writing for the Information Age: Elements of Style for the 21st Century by Bruce Ross-Larson
Note: I’ve classified this post under a new category called ‘Academy’ with a view to present primers and ‘explainers’ to Econ 101 students. I would also suggest reading regularly the 5 blogs - Greg Mankiw’s, Austrian Economists, Aplia Econ blog and EconLog.
June 9, 2006
Podcasts Carnival – Economics Edition
Nouriel Roubini, an economist at New York University and a former U.S. Treasury official, talks with Bloomberg's Tom Keene in New York about the impact of monetary policy on the stock market, global economic growth risks and the outlook for the meeting of finance ministers from the Group of Eight nations in St. Petersburg, Russia.
Two Views on Global Development: Revive the Invisible Hand or Strengthen a "Society of States"? Deepak Lal, (Reviving the Invisible Hand: The Case for Classical Liberalism in the Twenty-first Century ), and Ethan Kapstein, (Economic Justice in an Unfair World: Toward a Level Playing Field) debate at Cato
Foreign Aid and Developing Economics
The Undercover Economist; Tim Harford acknowledges that Oscar Wilde's famous definition of a cynic - 'someone who knows the price of everything and the value of nothing' - is now commonly applied to economists (discussion starts later in the program)
Myths, Lies, and Downright Stupidity: Get Out the Shovel—Why Everything You Know is Wrong; Featuring John Stossel, Co-Anchor of ABC's 20/20
A New Era at the Federal Reserve: Some Challenges and Opportunities for Change; Featuring Shadow Open Market Committee members: Charles Plosser, Cochair; Anna Schwartz, Cochair; Gregory Hess; Lee Hoskins; Alan Stockman; Bennett McCallum; and Mickey Levy.
Harvard Kennedy School of Government Professor George Borjas, often called America’s “leading immigration economist,” discusses with James Reese the American immigration situation.
Dr. Roszbach, is a research economist at The Riksbank in Stockholm, the oldest central bank in the world, founded in 1668. He discusses with James Reese the banking systems in Sweden and Europe.
What IN: Inside Innovation Is All About (Business Innovation).
Mr. Risk Goes to Washington;Why Paulson will make a difference at Treasury
Medical Guesswork; when the effectiveness of most treatments cannot be demonstrated
Business in India; discussion with Simon Long, South Asia bureau chief of The Economist.
Science fiction and reality; a discussion about the latest Technology Quarterly in The Economist.
Making Poverty History: Slogan or Reality? Charles MacCormack, President, chief operating officer, and member of the board, Save the Children Federation
TCS Daily Hayek Series Event: The Creative Class vs. Capitalism (video)
Professor James Robinson, Harvard University, discusses the nature of institutional persistence and examines the mechanisms whereby elite minorities are able to manage the distribution of economic and political authority. See also an earlier post about him; Politician Proof Policy.
Happiness and Economics; Research by Professor Andrew Oswald has questioned the supposed link between economic growth and happiness and indicated that it may not be in our national interest to continue our focus on increased consumption
Melissa Hageman on Open Access; Information technology isn’t just for surfing the web and listening to audio. Developing countries can take advantage of ICT to increase transparency in governance, improve their financial infrastructure, or reduce waste. By linking people together across borders, information technology can also serve as a cheap way for sharing knowledge. Melissa Hageman of the Open Society Institute discusses open access initiatives in this podcast.
Anderson and Hoekman on International Trade; In this session, we step past our borders toward the question of international trade. Because it is the most basic unit of interaction between countries, trade is one of the building blocks for the development process. Kym Anderson, Lead Economist, and Bernard Hoekman, Research Manager, comment on trade liberalization and international negotiations
Robert Bates on Governance Systems and Political Effectiveness
Water Management in Australia; A new study by the CSIRO says the cost of water is set to rise dramatically, while politicians are arguing over who should have the ultimate responsibility for water management. So have the states neglected our water infrastructure? Should there be more water trading between regions? And will it take higher prices to finally force consumer change and less wastage?
The Wal-Mart Effect; Author Charles Fishman calls the giant US retailer Wal- Mart the world's most powerful company. He argues that it has had a profound effect on America - it has transformed its economy, its working life and the way it sees the world.
Torn Curtain - The Secret History of the Cold War; Episode 1, Episode 2, Episode 3, Episode 4.
The politics of abuse, and the abuse of politics; Spiked.com columnist Mick Hume says that the more acrimonious an argument or election contest appears to be, the less likely it is that anything of principle is really at stake. He says the current leadership battle at the top of British politics is evidence of this
Nine Lies about Global Warming; Are we being lied to about Global Warming? In a new publication Ray Evans argues that we are told nine big lies about Global Warming. We discuss the evidence and consensus on Global Warming with two scientists; Dr Michael Manton and Dr Vincent Gray.
Some more; Brad De Long has now started a series of podcasts- Afternoon Tea Podcasts.
Radio Economics is also starting a new series of podcasts.
World Bank News Podcasts and their other more useful podcasts.
University Warwick has more podcasts including the World Cup specials which I linked before.
And finally Microeconomics Lectures from a Berekely course (via Harry Clarke).
June 8, 2006
A Puzzle for Freakonomics Fans
I’ve often wondered how does street musicians outside major metro stations decide on who should be the one to play on a given day. Does it work on a first come basis? I doubt it. How does a Chinese, an African American and a white country singer coordinate to play on alternative days?
June 7, 2006
IMF on the US External Balance, again
“The ease with which the United States has financed its record current account deficit has been remarkable, but is unlikely to be sustained indefinitely. A number of (possibly temporary) factors, such as short-term interest rate differentials and increasing demand for long-term bonds, have helped support the U.S. current account deficit and dollar over the past year. However, most forecasters project that the current account deficit will rise further in coming years, which may begin to strain the global appetite for U.S. assets. Delaying the inevitable multilateral adjustment will mean continued increases in U.S. external indebtedness, magnifying the potential for disruption to exchange rates, financial markets, and growth, both domestically and abroad.”
- United States of America—2006 Article IV Consultation, Concluding Statement of the IMF Mission
Related Audio Links:
The U.S. Current Account Deficit Once Again- Brad De Long’s Afternoon Tea.
Allen Sinai chief economist at Decision Economics, talks with Bloomberg's Tom Keene about stagflation risk in the U.S. and Federal Reserve Chairman Ben S. Bernanke's comments about monetary policy..
June 3, 2006
Which Econometrics textbook did Robert Engle use?
Nobel laureate Robert Engle, talks about his analysis of equity market volatility, quantitative finance and more in this podcast.
In an earlier interview Engle says;
“Well, it was very interesting, because Ta Chung was a real dynamo. The year when I was taking econometrics he was in Taiwan helping reform the tax system, and so I took my first econometrics class with Berndt Stigum. It was a very small class, and we went at a high level using Malinvaud’s text, which had just appeared in English. The following year when T.C. came back from Taiwan I took the course again, and that time we used Goldberger. Those two books back to back provided a great econometrics background.”
Related Link;
A profile in the Economist; Mr Engle's approach, ARCH (for autoregressive conditional heteroscedasticity, should you insist on knowing) gave researchers the power to test whether and how volatility in one period is related to volatility in earlier times. There often is a link, as casual observation suggests. After several days of stockmarket upheaval, there may be several days of calm. A 3% rise or fall in shares is often heralded by increasing volatility, much as an earthquake is preceded by tremors. Mr Engle's high-powered maths has made market risk easier to forecast. Thus banks and investors who use “value at risk” techniques to analyse their portfolios owe much to Mr Engle. So does the Basel committee which is drawing up new rules for banks' capital requirements.
Risk and Volatility: Econometric Models and Financial Practice (Nobel Lecture of Engle)
GARCH 101: The Use of ARCH/GARCH Models in Applied Econometrics
What Good is a Volatility Model
Managing Volatility and Crises: A Practitioner's Guide
June 2, 2006
First Kill All Economists!
Satoshi Kanazawa at LSE in a recent paper titled, “First Kill All Economists…”
“Microeconomics and its model of the singular and unitary actor can no longer adequately explain organizational behavior now that there are men and women in corporations. Evolutionary psychology, with its premise of fundamental and inherent sex differences, is necessary to replace microeconomics as the predominant theoretical perspective in business and management schools. The recent Safeway fiasco illustrates the danger of continuing to use microeconomics in the study of management in the 21st century.”
He has also made other predictions as well;
"The productivity of male scientists tends to drop right after marriage,…Scientists tend to 'desist' from scientific research upon marriage, just like criminals desist from crime upon marriage…Men conduct scientific research (or do anything else) in order to attract women and get married (albeit unconsciously),.. "What’s the point of doing science (or anything else) if one is already married? Marriage (or, more accurately reproductive success, which men can usually attain only through marriage) is the goal; science or anything else men do is but a means. From my perspective, scientists are no different than anybody else; evolutionary psychology applies to all humans equally,"
Unsolicited advice to Kanazawa, paraphrasing Hayek, “an evolutionary psychologist who’s only an evolutionary psychologist cannot be a good evolutionary psychologist”. For some pitfalls of evolutionary psychology read the book Ramachandran's Phantoms in the Brain.
Some related posts;
Linguistics and Cultural Roots of Innumeracy
Why Do Magicians Hate Children?
Intellectual Trespassing and Socratic Humility
June 1, 2006
Raising Children for Dummies
“A new website was launched this month to explain the science of bringing up baby. It is the brainchild of Divonne Holmes á Court , who with Warren Cannon, director of the Victorian parenting centre, explains why we need such a free service.”
Here is the podcast and the transcript of the discussion.
Links; Raising Children Network and ABC Parents
I would also recommend Landsburg’s book, Fair Play: What Your Child Can Teach You About Economics, Values, and the Meaning of Life
A couple of more articles from him; The economics of spanking, Do daughters cause divorce?, Maybe Parents Don't Like Boys Better
GDP and Wellbeing
"Work may drive growth, but for most people, more free time contributes to well-being, as long as it is not accompanied by lower income. Still, one often-heard remark about the gap in economic performance between OECD countries is that US workers may earn more money but they work longer hours, whereas Europeans prefer more leisure to more work, or indeed, more money, and so are better off. But would ascribing monetary values to leisure time, however arbitrarily, alter GDP per head rankings in favour of European countries? Not by much, according to the latest Going for Growth report. By estimating workers’ time devoted to personal (unpaid) activities, it reports that leisure-adjusted GDP per capita relative to the US is higher for most countries than for the normal measure. But the ranking of OECD countries stays broadly unchanged, with the US still in the top five.
Separately, the OECD Factbook 2006 reports that US household spending on leisure has risen faster than the OECD average over the last decade. It measures spending on recreation and culture by households and government on a range of items from music, show business and sport to pets and photography. Gardening and gambling are also included, but restaurants, hotels and most travel are not. By this measure, the US spends more than France, but less than Spain or the UK."
-OECD Observer
Why is GDP not the best possible indicator of well-being?
- GDP is a production concept, whereas well-being depends more on income and
consumption of individuals and households.
- GDP is a “gross” concept: It makes no allowance for the using-up of capital equipment in
the production of goods and services, and the corresponding need to re-invest part of the
output to maintain production capacity unchanged.
- GDP makes no allowance for the using-up of non-renewable resources, which will
impact on the well-being of future generations.
- GDP excludes leisure, which is clearly of value to society and contributes to well-being.
- GDP does not distinguish between different varieties of income distribution. A society in
which there were a few colossally wealthy families, but the bulk of the population lived
in abject poverty, would presumably enjoy a lower level of “general well-being” than one
with the same GDP but where there was no acute poverty.
- Production might entail the co-production of “bads” (e.g. pollution and deterioration of
the environment). These are rarely taken account of in the GDP accounts.
May 28, 2006
One million dollars or all the world's knowledge of economics?
A friend asked about videos available on the internet useful for teaching Econ 101. Here is my list.
On top would be the Video Economics and Brad De long’s Morning Coffee Videocasts.
University of Munich has a great series of video lectures including this debate between James Buchanan and Richard Musgrave.
World Bank and IMF have a series of webcasts; their book presentations and special lecture series like the Global Seminar Series are quite good.
The UN also a series of videos like U-Thant lecture series, WIDER Annual Lecture, and Global Seminar Series.
Various events at places like Cato and AEI are great. Here’s just a sample; Undercover Economist, Moral Consequences of Economic Growth, How Economics Can Help Courts Devise Legal Standards for Dismissing Claims and Summary Judgment, Myths, Lies and Downright Stupidity.
University events are another source of material; start with University Channel, Princeton University webcasts, Harvard’s JFK School of Government’s video archive, MIT’s OpenCourseWare also has some of its lectures in video like this course in Differential Equations. Remember to visit MIT World™ ; free and open site that provides on-demand video of significant public events at MIT.
University of California Television is another great source; see under Teacher's Pet On-Demand Programs which includes Principles of Economics section. I didn’t quite understand why they included Jared Diamond’s presentation on Collapse under the ‘Principles of American Democracy’ category.
On world development themes there’re various events and series on the web; World Bank is best starting point, OECD has some webcasts (it’s not easy to find it on their website, they don’t even have an index on the website), World Economic Forum.
Miscellaneous; Some Economic principles books come with videos nowadays like Krugman’s, Hoover’s Uncommon Knowledge series, PBS programs like the Beautiful Mind, Foreign Exchange TV, A World Connected.
In case you need to convince students to study economics here’s initiative started by a UK group; “we challenged groups of students around the country (and beyond!) to make short films about what economics means to them, and to show us a glimpse of university life.”
One short film asks the question in the title; what would be your reaction? Would welcome comments, additions and thoughts.
May 25, 2006
In the Beginning was the Sound
Economics poetry by David Rossie;
To attempt a PhD, or not to attempt a PhD:
That's a really good question.
Whether 'tis advisable to tackle the math
And statistics from outrageous curricula,
Or to accept a lucrative job offer,
And by avoiding those rigours,
Make a good income? To play, to relax:
No more; and by finishing to say we end
The fatigue and social-isolation
That an industrius student is heir to, 'tis a relief
An object of our lust.
Mr Romer compared the building of economic models to writing poetry. But what has mathematics to do with music. The latest BBC series, ‘In Our Time’ talks about Mathematics and Music;
The seventeenth century philosopher Gottfried Leibniz wrote: 'Music is the pleasure the human mind experiences from counting without being aware that it is counting'. Mathematical structures have always provided the bare bones around which musicians compose music and have been vital to the very practical considerations of performance such as fingering and tempo.
But there is a more complex area in the relationship between maths and music which is to do with the physics of sound: how pitch is determined by force or weight; how the complex arrangement of notes in relation to each other produces a scale; and how frequency determines the harmonics of sound.
How were mathematical formulations used to create early music? Why do we in the West hear twelve notes in the octave when the Chinese hear fifty-three? What is the mathematical sequence that produces the so-called 'golden section'? And why was there a resurgence of the use of mathematics in composition in the twentieth century?
Contributors include Marcus du Sautoy, Professor of Mathematics at the University of Oxford, Robin Wilson, Professor of Pure Mathematics at the Open University and Ruth Tatlow, Lecturer in Music Theory at the University of Stockholm.
Related;
This year's Reith Lecturer is the distinguished musician Daniel Barenboim. A child prodigy as a pianist, Barenboim has since branched out into conducting and matured to become one of the foremost musical figures of his age. The lectures are ongoing.
Formal Economic Theory; Beautiful but Useless?
How Economists Use Literature and Drama by Michael Watts, author of The Literary Book of Economics
May 14, 2006
Introducing some new and old blogs
Robert Reich has started a blog; I wish he started podcasting, he’s always interesting to listen to like in this podcast with the title How Unequal Can America Get Before We Snap?
The Aussie Econ Bloggers; You all know John Quiggin; I once tried following his ‘what am I reading’ posts, I came to conclusion he must be speed reading champion economist. Other Aussie bloggers worth visiting regularly Harry Clarke, Andrew Leigh, Joshua Gans and group blog Catallaxy.
Environmental bloggers; Oikos (an Aussie), Ecological Economics and Environmental Economics.
Health related; Healthcare Economist, Food Policy blog
Libertarians; Jeffrey Alan Miron and Mike Munger
Information Visualization; Assemble Me
Econ 101; Aplia Econ Blog, Beat the Press
Others; Risk Markets and Politics, Organizations and Markets
Development and Governance Blogs; Hans Rossling (founder of Gapminder), The Nata Village Blog, Development Researcher, Development Bank Research Bulletin, Next Billion, Our Word is Our Weapon, Adam Smithee, Go Figure, Talk About Corruption, Governance Focus.
David Warsh- blog discussing his book Knowledge and the Wealth of Nations
May 11, 2006
Quote of the Day- Economists are not boring
“Incentives do matter, although the obsession of many economists with this idea can become tedious. It is important to stop short of the barmy extremes of some Chicago economists – who would get married to derive economies of scale in household production and commit suicide when the net present value of future utility becomes non-positive (after allowance for the value of future options to commit suicide, calculated using the Black-Scholes formula). They discredit the profession as much as the “up and down” economists do. The ordinary business of life must keep some room for love and soul.”
-John Kay, of whom I commented in this post- Armchair Economics Reading List
The Role of Government in Reducing Poverty
Video Economics has an interview with Diana Furchtgott-Roth, Director, Center for Employment Policy, Hundson Institute on the role of government in social policy and the rising inequality.
Related:
- De Long also has a couple of video’s on his class blog.
- Bloomberg Podcast; interview Michael Darda, chief economist at MKM Partners LP, about gold prices, currency valuations and the outlook for the U.S. economy, interest rates and the housing industry. Gold rose to $700 an ounce in New York for the first time since October 1980, as tensions increased over Iran's nuclear-research program
- The Trouble with Oil;the first in a two part series looks at the Oil Crisis of 1973, when OPEC's demand for a better return for its valuable resource combined with the Arab Oil Embargo to quadruple the price
May 7, 2006
Iraq's Trade Unions and other Free Reads from the latest Economist
At university one professor cautioned me not to quote so much from The Economist and another professor advised me to keep on reading The Economist. I chose to take the advice of the latter. It’s quite remarkable the number of posts in the bloggersphere that comments about either The Economist or links to its articles. Here’s a sample; Economist Advertising Tactic, Why The Economist is so successful, Cross-Country Relationship Between Wage and Price Inflation, How to Save The Economist and The Journal from Irrelevance, The Design Evolution of The Economist, Facts from the Economist, Lunch with Finance Editor, Burgernomics- a favourite of bloggers, academics and radio stations. Former staff turned bloggers- Chris Anderson and Keith Hart.
Keith Hart, an anthropologist credited three years at The Economist for for teaching him to not only talk about economics as if he knew what he was talking about, but also to do so with unwavering confidence and assurance. Be sure to check The Economist’s style guide.
Iraq's trade unions;According to the Iraqi Workers' Federation (IWF), more than 2,000 of its members have been killed as a direct result of the economic scorched-earth policy waged by the insurgency.
Galbraith Obituary; A decade ago, Mr Galbraith lamented that old age brought an annoying affliction he called the “Still Syndrome”. People would constantly note that he was “still” doing things: still “interested in politics” when he showed up at a meeting, “still imbibing” when he had a drink and “still that way” when his eyes lit up on seeing a beautiful woman. The Still Syndrome lasted an immodestly long time. Its passing has left America poorer
Health in America and Britain; Americans spend far more on health care than the inhabitants of other rich countries, but their life expectancy is below the wealthy world's average. Annual medical costs, measured by the Organisation for Economic Co-operation and Development using purchasing-power parities, which take account of price differences, amount to $5,635 per person in America compared with $2,231 in Britain. Yet an American's life expectancy at birth is 77.2 years compared with 78.5 for a Brit
Iran and the Bomb; He has been greatly helped by the rise in oil prices—propelled, in part, by the worries about Iran. The country's oil revenues for the Iranian year that ended in March were in the region of $50 billion, nearly twice the figure of two years earlier.
Petrol Prices; Many Americans are furious at high petrol prices, but low taxes mean that they get a better deal at the pump than motorists do in most other countries. High taxes make Turkey the most expensive place to fill up, followed by Norway and Britain. The IMF says that higher gasoline taxes in America, which consumes a quarter of the world's oil, would help to curb excessive consumption
Metal prices continue to soar. Copper, nickel, zinc and platinum have all hit record levels. Copper has risen by 60% so far this year; nickel by 45%. Gold is at a 25-year high; silver, a 23-year high
Alternative energy; The notion of American farmers defying the tide of capitalism to grow their own fuel is a glorious delusion. But Mr Schweitzer is right that Congress has some big decisions to make about biofuels. To what extent, if any, should government subsidise this nascent industry? Already it has received plenty of help. Ethanol producers get a tax credit worth 51 cents a gallon, much to the delight of industry powerhouses such as Archer Daniels Midland. There is also a 54 cents-a-gallon tariff on imports of ethanol from Brazil
Japanese toys; Toys that help people to relax have also boosted sales. Primo Puel, a cuddly doll version of a five-year old boy, is fitted with sensors and five levels of happiness, can talk a bit and needs care. It has been a big hit with women over 40, whose own children have left home. “Little Jammer”, a toy jazz band, is also a hit—this time with men. Hidamari no tami (sunshine people), plastic dolls with simple smiley faces, are hot, not just in Japan but in America too. Other local successes include Sega's Homestar Planetarium, which brings the wonders of the night sky into the living room
Flight 93; The film has stirred an angry debate. Isn't Hollywood hijacking the hijacking for its own money-grubbing purposes? Isn't life hard enough without watching people hurtle to their death in a metal tube? And—the most insistent question of all—isn't it too soon for America to relive the horror of September 11th? Trailers for the film were greeted with boos in New York and Los Angeles, and were subsequently pulled. Fully 60% of people tell pollsters that they will not see the film.
Microsoft; The business and regulatory challenges facing Microsoft are related, because the firm needs to be free to compete against rivals in nascent markets on the one hand, yet almost anything it does will invite antitrust concerns on the other. Microsoft's Internet Explorer holds roughly 85% of the market, while the rival Firefox browser boasts 10-15%. But Microsoft lags behind in search. Worldwide, Google has around 50% market share, Yahoo 28% and Microsoft's MSN 13%. The stakes are huge: online advertising in America, today estimated to be worth $12.5 billion, is expected to double by 2010.
Americans Without Bank Accounts; In America at least 12m households have no bank account—are “unbanked”, in the industry's ugly jargon. Once unnaturalised immigrants and the “underbanked”—an even uglier term for those with a low credit score or none—are added, some estimates exceed 40m.
Quantum Computing; Quantum theory allows subatomic particles to exist in more than one state simultaneously, a phenomenon known as superposition. An electron, for example, has a property called spin that can be “up” or “down”—or a bizarre combination of the two. Using the spin of an electron to represent a bit of data would allow it to be both up and down (ie, zero and one) at the same time. Instead of being a bit it is, in the jargon, a qubit
Current Account Balances; Spain's current-account deficit is bigger than America's, relative to the size of the Spanish economy, and it is deteriorating faster. But Spain is in no danger of suffering a run on its currency, which it shares with 11 other countries. Switzerland's current-account surplus, of more than $50 billion, reflects depressed investment rates in the country. Swiss savers are pursuing more lucrative opportunities abroad
Canadian Economy; On April 27th, Mr Harper announced a surprise settlement of a protracted trade war with the United States over softwood lumber….In 2002, for the fourth time since 1982, the United States levied countervailing duties on exports of wood from Canada, its partner in the North American Free Trade Agreement (NAFTA). The American government has mainly failed to persuade NAFTA (and other) panels of its case that Canada subsidises lumber. …But Mr Harper is eager to improve relations with George Bush's government. After a week of talks, both sides agreed a draft deal which in essence returns to the previous regime of managed trade. The Americans will drop the sanctions, and return $4 billion of the $5 billion they have collected in duties. Canada accepted that its share of the American market be capped at 34%. It agreed to impose export taxes and limit shipments if prices in the United States fall much below their current—unusually high—levels. ….Philip Cross, the chief economist of Statistics Canada, reckons that while Americans are paying over 70% more for gasoline than three years ago, prices in Canada are up by only about a third.
French Corruption; The story orginates in a judicial investigation, launched in 2001, into kickbacks, linked to the 1991 sale of six French frigates to Taiwan, that were allegedly channelled through Clearstream accounts.
City of London’s History; AT THE end of the 19th century, an intrepid social scientist visited Stockwell, in south London. He was involved in an ambitious project, led by the shipping magnate Charles Booth, to colour-code every street in the capital according to its social make-up. In general, the area struck him as comfortable. But just east of Stockwell Road he found a pocket of filth and squalor, with rowdy residents and broken windows. It was, he believed, “far the worst place in the division”.
MUSIC company bosses always get a terrible rap…In contrast to many fellow execs, Mr Iovine has musical talent. And although he works for Universal Music Group, the biggest music firm in the world, which is in turn owned by Vivendi, a French conglomerate, artists regard him as much more than just another “suit”. Rappers have even incorporated Jimmy Iovine approvingly into their lyrics. Mr Iovine has street credibility. And—ironically enough—that may be the key to his success as a businessman.
A discussion with Andreas Kluth, Technology Correspondent of The Economist;
“In the participatory era, media will no longer be delivered one way from a media company to an audience...but by audience members to other audience members. The distinction between content creators and consuming audiences first gets blurry and then disappears completely...Instead of media being delivered as a sermon or lecture, it becomes a conversation among the people in the audience”
Lawmakers tell FTC to Define Price Gouging
What would the Congress be up to next;
“In a measure passed overwhelmingly by the House this week, lawmakers proposed penalties for price gouging -- to $150 million for wholesalers, $2 million for retailers and two years in jail for either -- and ordered the Federal Trade Commission to put a stop to it. The House measure also called for the FTC to define price gouging...."Many economists cringe when they hear politicians talk about price gouging," said N. Gregory Mankiw, an economics professor at Harvard University and former chairman of President Bush's Council of Economic Advisers. "To economists, the price system is central to how market economies allocate resources. Sometimes prices need to rise to balance supply and demand, even if that outcome is politically unpopular."...
"Beyond this, all is the fog of bad and devious legislation," said William D. Nordhaus, a professor of economics at Yale University. He said that for the FTC to come up with a price gouging definition "will presumably involve rule-making, which will require all kinds of cost and benefit inquiries, and will not emerge until after the election, or even after gas prices have declined."
This might fit the criterion for ‘Bad Economics’, a book idea David Friedman is contemplating;
“I have an idea for a book, although I'm not sure if I will write it. The title is "Bad Economics." To write it, I make a large collection of examples of economic errors--get rich quick schemes, news stories, political speeches, et. al. Then explain why they are wrong and in the process teach the relevant principles.Any opinions on whether it would work? If you like the idea, feel free to contribute examples of bad economics, either as comments to this post or as emails to me. And if you happen to find bits of good economics by non-economists with good economic intuition, send them in too--I'm thinking of a short bit at the end of each chapter labelled "Diamonds from the Dungheap."
Debate between Solow, Bhagwati and Krugman on Globalization
“Right now we’re engaged in a veritable orgy of regressive re-distribution of income… we have an administration whole-heartedly dedicated toward giving more power to the powerful and more wealth to the wealthy..” - Robert Solow
There is great webcast of a recent discussion between Bhagwati, Solow and Krugman on the globalization and the human cost of trade liberalization.
Sylvia Nasar introduced the professors and commented a little bit on the history of globalization; this lecture by Anne Krueger can be said to be an expanded version of Nasar’s comments.
Solow focused more on the distributional aspect of globalization;
"The scenario begins with the discovery of a giant pool of labor -- much like the discovery of a natural resource -- in a foreign country. This discovery, Solow said, is probably good for the world and even for the United States, where consumers will enjoy lower prices. But it might not benefit all Americans, he noted. Unskilled workers could find themselves without even low-paying jobs. Of course, the country could redistribute the wealth from those who benefit to those who don’t. “The normal answer given by economists is that there will be winners and losers, but the winners will be able to compensate the losers,” he explained."
Bhagwati pointed out that these days every trader all over the world is worried about competition from overseas; even as far as in Ghana they’re are worried about cheap Chinese texttile imports. Bhagwati doubts we could deal with the issue through distribution alone.
Krugman admitting being a “tortured soul” on the subject of globalization and talked about different experiences of trade liberalization outcome in Latin America and East Asia; ‘in Mexico trade liberalization has been associated with increased inequality’.
During the discussion period, one student questioned given the “race to the bottom” that occurs when countries try to produce goods at the lowest possible cost, “I fail to understand why some degree of protectionism is a bad thing”.
Well even in the US the experience is very mixed as Bradford Plumer points out;
“According to a 1999 report, the vast majority of garment shops in San Francisco, despite being mostly non-unionized, still manage to pay the city minimum of $8.15 an hour and comply with labor laws, while in New York unionized workers were making under $5.15 an hour and repeatedly subject to wage and hour violations. The United States, meanwhile, imports billions of dollars of clothes from Northern Italy each year, where garment workers make two or three times what their counterparts in New York make. So it's not clear that globalization always has to create a race to the bottom.”
An earlier related post; Going to Harvard Can Lead to Rising Inequality
April 14, 2006
Where do Norms come from?
Here’s an interesting webcast of a speech of George Akerlof;
"Akerlof spoke on how inclusion of certain norms changes our view of macroeconomics, by negating the concept that decision makers are utility maximizers. He put forth a view of motivation that involves individual dignity and behavioral expectations, the use of which broadens the application of the utility function for each individual. The implication of these motivations is that it is not only outcomes that lead to certain behavior, but also expectations about what should occur. These missing motivations give us a better understanding of why people make economic decisions, and may recommend a more naturalistic and observational approach for understanding decision-making processes. "
As Akerlof says;
“This lecture has shown that the early Keynesians got a great deal of the working of the economic system right in ways that are denied by the five neutralities. As quoted from Keynes earlier, they based their models on “our knowledge of human nature and from the detailed facts of experience.” They used their intuitions regarding the norms of how consumers, investors, and wage and price setters thought they should behave. There is a systematic reason why such knowledge and experience is likely to be accurate: by their nature norms are generated and known by a whole community. They are known to those who abide by them, and those who observe them as well.
We have shown ways in which macroeconomic variables will be affected by norms. The five neutralities, which deny a role for norms systematically suggest that the Keynesians got it wrong. Consumption should have no special dependence on current income; investment should be independent of current cash flow; wages and prices should not depend on nominal considerations. But the Keynesians. initial intuitions got it right because they included norms whose implications are widely understood. This understanding yielded insights into behavior that must be absent from the five neutralities, whose very construction denies the possibility that people’s decisions might be influenced by their views regarding how they, and others, should behave. In this broader view it is then no theoretical surprise that in consumption, investment, and wage and price determination, macroeconomists have found excess sensitivity to variables that the five neutralities say should play no role at all.
It is time to restore the missing motivation to macroeconomics.”
Related Links:
- A non-human example of the cultural transmission of social norms
- An earlier post related to norms in society
April 10, 2006
An Overdose of Happiness
“That’s one reason why I think that public policy, and even how we spend our time, should be more devoted to trying to help people who are very unhappy. There’s another reason there actually, which is in the research and has not been pointed out very much. We know a lot more about what makes the difference, what causes the difference between the misery and average happiness. Knowing what causes the difference between average happiness and great happiness, we have it more in our power (as well as it being a duty) to do more about the least happy.”
….Unfortunately this is not the way the government has been thinking up till now. Psychiatry and psychology have been Cinderella sections of the NHS. If you have blood pressure (I have) or a skin problem, or asthma, or diabetes, or whatever, you will almost automatically, at some point, see a specialist. But not if you have a crippling depression which is stopping you from working for a year; you’re extremely unlikely to see a specialist. Not more than 10% of people in that condition will see a specialist, and this reflects I think our obsession at the moment with ‘objective indicators’ rather than the feelings of people, which are what I believe matter most of all. So it’s encouraging that by pointing out some of these facts, there is now a move going on in the government to provide more psychological therapy, which is of course what these patients want, they just don’t want to be put on a few pills by the GP and sent off home."
- Richard Layard, Economist
“Now the intellectuals, who are more happiness pessimists, come up with a different argument. They say maybe why you’re detecting all this happiness out there, is because when you ask people how happy they are, when they respond, they’re not really thinking very clearly or sensibly about their answer. They’re not giving you really a very profound answer, and there’s a clue that that might be right from another interesting study done recently by a psychologist. They engineer a situation where people have to go and make some photocopies from a photocopying machine. Unbeknownst to these people, they don’t know the experimenter has engineered it, but they will discover a 10-cent dime on the photocopying machine, an ‘unexpected’ discovery. So one group find the 10-cent dime, the other group who are photocopying don’t find anything. Then they’re interviewed shortly afterwards about how happy they are. But the happiness question doesn’t ask them how happy you are right now, it asks them ‘Tell us how you evaluate how happy your whole life has been.’ In other words, they ask people to evaluate happiness over their whole lifetime.
The amazing result is the discovery of a 10-cent dime piece on a photocopying machine statistically significantly raises your assessment of how happy your whole life has been. The implications are dramatic for government policy. It suggests the cheapest and most effect public policy measures imaginable.
-Raj Persaud, Psychiatrist
I’m a little bit confused here; the psychiatrist seems to be making more sense than the economist. Another little bit from Raj’s talk;
“Harold McMillan, a former British prime minister from several decades ago, was visiting France on a state visit, and happened to find himself with a few private moments with the wife of President Charles de Gaulle, Madame de Gaulle. He asked her what she was most looking forward to on the retirement, the imminent retirement of President Charles de Gaulle.
He was somewhat startled and shocked at her reply. When asked what she was most looking forward to on President de Gaulle’s retirement, she said, ‘A penis.’..”
For what actually happened see the rest of the talk.
Related Links;
- The Scientist's Pursuit of Happiness
- Finding Happiness in the Pursuit
- Interview with Layard (mp3) and the Annex to his book on happiness
- Can Money Buy Happiness- Arnold Kling
- Here is a Philosopher talking about Happiness (here is transcript).
- Happiness Research (webcast of a lecture)
- The Libertarian Vision of Life, Liberty, and the Pursuit of Happiness (Cato event webcast)
- A review of the ‘Happiness: A History’ by Darrin M. McMahon
- Chasing the Dream- Economic Focus column from The Economist
- Happiness and Public Policy blog
- Happy Economists; Richard Layard, Andrew Oswald and Richard A. Easterlin
April 7, 2006
The Real Problem with the French
“A GlobeScan poll of 20 countries around the world conducted between June and August 2005 showed that the French public is unusually skeptical about the free enterprise economic system. A majority or plurality of all of the other 19 countries polled agreed with the statement “The free enterprise system and free market economy is the best system on which to base the future of the world.” France alone had a minority, 36 percent, agreeing with the statement, while 50 percent disagreed.
Ironically China had the largest majority, with 74 percent agreeing. Turkey (47%), Russia (43%) and Argentina (42%) each had just a plurality agreeing.
The same poll found that the French are unusually high in their mistrust of large companies. Fifty-five percent said they did not trust large French companies to operate in the best interest of society (compared to an average of 47 percent among the 20 countries polled), and 61 percent said they did not trust global companies operating in their country (compares to a global average of 52 percent). Eighty-six percent also said that large companies have too much influence over their national government (compared to 73 percent globally).
Perhaps most significant, an overwhelming 79 percent favored more government regulation of large companies to protect the rights of workers. The global average was 74 percent.”
Links:
- World Bank Receives Good Marks in World Poll
March 26, 2006
Darwin’s Nightmare
Evolutionary biology works in mysterious ways in affecting economic outcomes. Look at the following paper on the effect of orphanhood in a poor region of Tanzania ;
“This paper provides unique evidence on the long-term impact of orphanhood in a region of Tanzania, near Lake Victoria in an area ravaged by HIVAIDS….
We find significant permanent effects. Children who become maternal orphans before the age of 15 are 2 cm shorter in adulthood than similar children whose mother did not die during this age interval, representing 22 percent of one standard deviation of height in the sample. We also find that maternal and paternal orphanhood results in substantially lower educational attainment, each lowering years of education by adulthood by about a quarter of one standard deviation of educational attainment in the sample…”
In another study Estho Duflo finds peculiar evidence related to health outcomes of children living with grandmothers;
“In the early 1990's, the benefits and coverage of the South African social pension program were expanded for the black population. In 1993, the benefits were about twice the median income per capita in rural areas. Over a quarter of black South African children under age five live with a pension recipient. My estimates suggest that pensions received by women had a large impact on the anthropometric status of girls (it improved their weight given height by 1.19 standard deviations, and their height given age by 1.16 standard deviations), but little effect on that of boys. In contrast, I found no similar effect for pensions received by men. This suggests that the household does not function as a unitary entity, and that they efficiency of public transfer programs may depend on the gender of the recipient.”
In Europe the Dutch are considered the giants, men being on average 6 feet tall; they used to be only about 5 foot 4 in the mid 19th century.
So what does this all mean for economics; biology and neuroscience needs to be seriously studied by economists. As Hayek had once said, ‘an economist who is only an economist cannot be a good economist.’
Related Links:
- Foreign Exchange TV, hosted by Fareed Zaakaria, reviews the recent documentary Darwin’s Nightmare. All the programs are available on the web and are highly recommended focusing mainly on current affairs and development.
- The latest Science Show from Radio National discusses economics and brain science and the relations between spoons and human nature. The podcast is available for a few weeks, so download now.
- Can studying the human brain revolutionise economics?
- Two related blogs posts that I wrote earlier; Phantoms in the Mind and Why Do Magicians Hate Children.
March 18, 2006
Weekend Economics Puzzle 3, Are Teachers Underpaid?
“With the possible exception of prostitution, teaching is the only profession that has had absolutely no advance in productivity, in the 2400 years since Socrates taught the youth of Athens.”
- Richard Vedder, in a lecture discussing the performance of the US economy.
I was astonished after watching the ABC documentary, ‘Stupid in America: How Lack of Choice Cheats Our Kids Out of Good Education’- especially the flow chart showing the processes needed to fire a union teacher (hat tip: Thinking on the Margin). That being said we come to the third paradox of our series;
Entertainers and sports stars earn million dollar annual incomes while the very best teachers earn considerably less. Were a survey to be taken almost all people will agree that ‘education is more important than entertainment’. Are then teachers underpaid?
If one were to look at the data, teachers does not appear to be underpaid;
"Consider data from the National Compensation Survey of the Bureau of Labor Statistics, which computes hourly earnings per worker. The average hourly wage for all workers in the category “professional specialty” was $27.49 in 2000. Meanwhile, elementary-school teachers earned $28.79 per hour; secondary-school teachers earned $29.14 per hour; and special-education teachers earned $29.97 per hour. The average earnings for all three categories of teachers exceeded the average for all professional workers. Indeed, the average hourly wage for teachers even topped that of the highest-paid major category of workers, those whose jobs are described as “executive, administrative, and managerial.” Teachers earned more per hour than architects, civil engineers, mechanical engineers, statisticians, biological and life scientists, atmospheric and space scientists, registered nurses, physical therapists, university-level foreign-language teachers, librarians, technical writers, musicians, artists, and editors and reporters. Note that a majority of these occupations requires as much or even more educational training as does K–12 teaching"
I don’t know anything about the American high school education. I think the US had come a long way (as of 1900 only 3 percent of Americans had graduated from high school) and in higher education the US has no match in the world; seventeen of the top 20 universities are American indeed, so are 35 of the top 50. American universities currently employ 70% of the world's Nobel prize-winners. They produce about 30% of the world's output of articles on science and engineering, according to a survey conducted in 2001, and 44% of the most frequently cited articles.
The point about the ‘underpaid teacher’ is that are teachers being paid what they are worth to the society? Everybody have met great teachers and lousy ones and I’ve often wondered whether there would be any way that great teachers could be better compensated and not in effect be subsidizing the stupid ones.
Related Links:
- They're Not Stupid—They're Lazy
- Testing Student Learning- Evaluating Teaching Effectiveness (an online book on the issue at Hoover)
- Why Quality Matters in Education, Eric A. Hanushek (this edition of F&D is focused on the role of education in economic development)
- Other interesting articles from Hanushek; The Economics of Education Quality, Measuring Investment in Education, The Market for Teacher Quality, Interpreting Recent Research on Schooling in Developing Countries
- US Education Statistics- A summary
- The Education Podcast Network
- The Racial Gap in Education and Making the Grade (podcasts from Hoover Institute)
- Educating by the Numbers (webcasts)
- The Education Myth, Alison Wolf
- The Economics of Knowledge: Why Education is Key to Europe’s Success
- Attracting, Developing and Retaining Effective Teachers
- Measuring Student Knowledge and Skills: The PISA 2000 Experience (a statistical brief from OECD)
- To Catch a Cheat, Steven Levitt and Brian Jacob (Education Next is interesting journal on education from Hoover)
- My favoruite blogs on education; Joannejacobs, Crankyprofessor, Number 2 Pencil and Eduwonk
March 16, 2006
IMF worried about the US Fiscal Policy
The Japanese Deputy Managing Director of IMF is worried about global imbalances;
"Regarding risks and vulnerabilities, the IMF sees the widening global imbalances as a substantial risk to global growth. The current equilibrium is unstable, as it rests on the capacity of the United States to continue to attract foreign savings. Foreign investors may become unwilling to hold increasing amounts of U.S. financial assets and demand higher interest rates, especially if Asian countries recover from the investment drought that they have experienced since the Asian crisis. A depreciation of the U.S. dollar may be necessary to induce U.S. domestic demand to contract. However, if this or other adjustments occur abruptly, it could cause a slowdown in demand and output, as well as financial market disruptions, at the global level.
Therefore, the IMF has underscored the urgent need to use the current favorable environment to address vulnerabilities arising from growing imbalances. It has repeatedly called for coordinated multilateral policy actions to help bring about a gradual and orderly unwinding of those imbalances—unfortunately, there has been at best a limited progress to date. Action is needed in all the main blocs, including (i) tighter fiscal policy in the U.S.; (ii) greater exchange rate flexibility in Asia; and (iii) structural reforms to improve productivity and medium-term fiscal sustainability in Europe and Japan. High and volatile oil prices are likely to complicate the adjustment, so IMF advice has focused on the appropriate policy response."
Mankiw, author of most popular economics principles textbook, in his resignation letter from the Chairman of the Council of Economic Advisors praises the fiscal policy of the administration he served;
“Your leadership has preserved and strengthened the American dream by guiding the economy through difficult times and by laying the foundation for a growing and expanding prosperity. You appreciate the power of economic liberty and have worked to create an environment where all Americans can realize the potential with which their creator has endowed them. You understand that free enterprise system works best under a policy of low taxes, fiscal discipline, and open markets…”
Related Links:
- Examining Global Imbalances
- Perspectives on Global Imbalances
- Global Imbalances: A Saving and Investment Perspective
- Latest US Article IV consultation report and Selected Issues
- The Global Saving Glut and the U.S. Current Account Deficit, Ben Bernanke speech
- The Unsustainability of U.S. Trade Deficits, John Quiggin
- Divergent Views on the Coming Dollar Crisis, Bradford DeLong
- Outlook for the Global Economy, Robert Rubin (podcast)
March 11, 2006
Weekend Economics Puzzle 2, The Feckless Forecast
British economist John Kay reminds us that half and hour before Bureau of Economic Analysis issued its official estimate of US GDP growth in the third quarter of last year, the Bloomberg financial information service carried 67 different predictions of US gross domestic product.
Though such forecasts are frequently wrong, they are regularly made in the media by economists. They tend to overstate the extent of knowledge we have about the economy which leads to undermining the credibility of economists. Why does it persist?
John Kay thinks it’s useless form of economic research;
“Correctly predicting the official estimate 30 minutes before its release may be profitable but contributes nothing to our understanding of the economy. The private value of such information is large but its social utility is zero, which is why procuring it is at once the best-paid and most futile form of economic research.Keynes likened professional investment to a beauty contest, in which “it is not a case of choosing those which are really the prettiest, nor even those which average opinion genuinely thinks the prettiest. We have reached the third degree where we devote our intelligence to anticipating what average opinion expects the average opinion to be”.
Business of estimation could even be a very dangerous business if you happen to be in wrong place. Stalin had the organizers of first post-war Soviet census shot for ‘violation of elementary statistical principles’. Their figures revealed the full extent of the Soviet war dead plus the famines and terror of the 1930s.
Now economists are venturing into predicting other areas as well; an economist at Dartmouth predicted Olympic medals and Oscar nominees.
Relate Links:
- Welcome to the World of Bloomberg TV, by John Kay (video)
- Misuse of Economic Data by Government Officials
- When Genius Failed: The Rise and Fall of Long-Term Capital Management by Roger Lowenstein
-The Death of Economics, Paul Ormerod
- Irrational Exuberance, Robert Schiller
- The Economics of Fickleness and How We Guess What Others Will Do by John Allen Paulos
- Morgan Stanley economics commentary and Bloomberg Podcasts
- Regressions: Why Are Economists Obsessed with Them?
March 8, 2006
Why Do Magicians Hate Children?
“..in some of my work I went around and talked to magicians and asked them about things – they actually hate doing magic shows with children under the age of three. And one of the reasons for that is that the children haven’t had as many experiences in the world and they are not quite so amazed by some of the things the magicians do…it’s the idea that children have to learn something about the world before they can see that there’s a violation. Though in a sense magic can exist because children see a violation of the natural world and adults and the culture label these events as either fantastic or magical. According to Piaget there was all this blurring of magic into the real world and actually a lot of my own research suggests that children – their default is kind of a natural physical mechanical causality. And it’s only in a certain kind of context, like talking about Santa Claus or being around the holiday season, that they begin to bring in this kind of magical thinking in a particular kind of situation. And that’s one of the things I find very fascinating; it’s that the default is not magic, the default is kind of a rational, natural causality.”
That’s psychologist Karl Rosengren talking about the role of imagination in a child’s cognitive development. ( Radio Nationals All in the Mind programme, The Imaginative Child – it was podcast sometime back but they only keep a couple of the most recent podcasts). It also talks about how children think about things like death and the role of parents.
But does parents matter. If you ask Judith Harris;
"….Harris argues that we have been in the grip of what she calls the "nurture assumption," a parent-centered bias that has blinded us to what really matters in human development. Consider, she says, the seemingly common-sense statements "Children who are hugged are more likely to be nice" and "Children who are beaten are more likely to be unpleasant." Sure enough, if you study nice, well-adjusted children, it turns out that they generally have well-adjusted and nice parents. But what does this really mean? Since genes account for about half of personality variations among people, it's quite possible that nice children are nice simply because they received nice genes from their parents--and nice parents are going to be nice to their children. Hugging may have made the children happy, and it may have taught them a good way of expressing their affection, but it may not have been what made them nice. Or take the example of smoking. The children of smokers are more than twice as likely to smoke as the children of nonsmokers, so it's natural to conclude that parents who smoke around their children set an example that their kids follow. In fact, a lot of parents who smoke feel guilty about it for that very reason. But if parents really cause smoking there ought to be elevated rates of smoking among the adopted children of smokers, and there aren't. It turns out that nicotine addiction is heavily influenced by genes, and the reason that so many children of smokers smoke is that they have inherited a genetic susceptibility to tobacco from their parents. David C. Rowe, a professor of family studies at the University of Arizona (whose academic work on the limits of family influence Harris says was critical to her own thinking), has analyzed research into this genetic contribution, and he concludes that it accounts entirely for the elevated levels of cigarette use among the children of smokers. With smoking, as with niceness, what parents do seems to be nearly irrelevant.”
The point she was trying to make was that peer influence are more important than family influence in determining how children turn out. David Friedman, son of Milton Friedman, has been giving Judith’s book The Nurture Assumption to friends as Christmas presents;
"The origin of Harris's book makes an interesting story. It started as an article published in The Psychological Review. The article provoked a lot of mail–partly about the controversial argument, partly asking who the author was, since nobody in the field had ever heard of her.Judith Harris had gotten a masters in psychology from Harvard and been discouraged from going further by a professor who assured her that she did not have the makings of a successful scholar. She left academia, married, and helped support her family by coauthoring child development textbooks. Eventually she concluded that a good deal of what those textbooks said was not supported by the evidence. The result was the article–which received the journal's prize for the year's best.
The prize is named after the Harvard professor who told her that she had no future as an academic. God, Judith Harris concluded, has a sense of humor
."
Now she has written a new book; No Two Alike.
Other related links:
-Ten questions for Judith Harris
- Nature via Nurture, Matt Ridley
- Chimpanzee Politics by Frans de Waal
-The Work of Imagination by Paul Harris
- What does all this mean for economists. Listen to ‘role of biology in economics’
March 7, 2006
Bananas and Potatoes: A Solution to the Weekend Puzzle
Paul's weekend puzzle below requested answers to the question "What would happen if a community that only produces bananas decides to save more?" It's no longer the weekend, so I figured I'd answer separately:
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Forgive my ignorance, but exactly how does one "save" a banana?
It's not durable; once picked, it must be consumed within seven days. Now potatoes kept in premium conditions can last about six months. So, in order to save for the future, banana growers have to buy more potatoes; to finance their purchases, they try to sell more of their fruit to potato-growing communities. They've been selling fruit for some time, I gather, and market prices have been at an equilbrium for ages, say at 2 bananas for 1 potato.
Let's use the elementary economics of a barter economy -- that way relative prices incorporate interest rates: What happens first? Banana growers preferences change, though potato growers preferences remain the same. Let's assume that B-growers' discount rates decrease -- that is they value utility in the future more than before. Yet quantity currently available of B and P are fixed. Banana growers, wanting potatoes, reduce their own banana consumption, and increase the supply of bananas on the market. That is, banana growers begin to offer more bananas for every additional potato to entice potato growers to exchange further, and finding it worthwhile, the potato growers agree to these exchanges.
The equilibrium market price (of potatoes per banana) falls; to get one potato, B-growers must give up now, say 3 bananas for one potato. Quantity exchanged increases. For banana growers, present consumption of B decreases, consumption of P decreases (they've become more expensive relative to B), and saving of P increases. Potato growers consume more B, decrease consumption of P (again, substitution-price effects), and we don't know about the net effect on saving of P (they can get more B for them, but they're decreasing consumption of P).
Now, we know potato growers are better off, or they wouldn't trade for more bananas. But banana-growers had a change in preferences, so it's unclear if they are better off or worse off; while the new market order has made them better off than immediately after their preferences changed, it is impossible to say (without examinining specific forms of the before and after utility functions) whether they have higher utility after the change in preferences than before. Do they really do valuing saving that much???
This is a four-part model:
1) Evenly-rotating old market order: 2 B for 1 P
2) Change in B-prefs
3) Short-Term New Market Order: 3 B for 1 P *P growers better off
4) Long-Term New Market Order
How do B and P growers respond to the short-term new market order? That all depends on the marginal cost of producing additional potatoes. The greater number of bananas per potato available in the market means some P growers see an opportunity to profitably produce more; they set higher future yeilds so that their own marginal cost is lower than the expected future market price of potatoes to bananas. However, the lower number of potatoes per banana hits the high-cost marginal banana producer hard; he leaves the farm and works as a middle-man facilitating the burgeoning banana-potato trade.
And "interest rates"? They're the differential you have to pay in order to acquire command of resources now instead of later. Hence they're directly related to consumption preferences.
[Present Value] = [Future Value]/(1+r)^n
In our model, both bananas and potatoes can be consumed, but only potatoes can be saved. B growers decide to consume more later and less now. They want more potatoes, less bananas. The change in preferences increases the present value of future consumption, decreasing the cost of current consumption (bananas). Interest rates decline.
Extra: Let's say banana-growers want to save LESS. They decrease banana supply. Quantity exchange decreases, and prices for bananas rise (number of potatoes per banana). Potato growers are made worse off because the cost of eating bananas has risen, but again, we can't see what happened to banana-growers.
March 5, 2006
Weekend Economics Puzzle- Keynes Banana Plantation
This is a new series we’ll be featuring at T&B; short series of puzzles and questions on economics for readers to comment and think about on the weekends. Feel free to comment on it. Most of it will be based on Mark Skousen’s book Puzzles and Paradoxes in Economics.
What would happen if a community that only produces bananas decides to save more? The same number of bananas is produced, but people spend less money on bananas. Prices fall, profits turn to losses, workers are laid off, income drops, and even fewer bananas are sold. Eventually, the community starves to death. How can you resolve Keynes’s dilemma?
Related Links:
- A recent discussion at Brad de Long’s blog, ‘We Leave Savings to the Private Investor’
- Keynes, The General Theory of Employment, Interest and Money
- Keynes, A Treatise on Money
- Vulgar Keynesians