Econoblog

2002-06-13T06:39:00.000-07:00

Nouriel Roubini's Global Macroeconomic and Financial Policy Site is one of the best portals for economic info. I've seen.

2002-06-06T13:24:00.000-07:00

Mr. David Warsh of Economic Principals:

In the case of the Blogosphere, the qualities that are evaluated are the elusive constellation of traits that, taken together, add up to good journalism. And when a new blog comes up -- one of my favorites is a quantitative survey of partisanship among op-ed columnists called Lying in Ponds -- it rises or fall on the strength of the links (the citations) it is able to attract from others. The Alphonse-Gaston effects here can be quite intricate -- just the sort of thing that economists are good at figuring out.

2002-06-05T14:57:00.000-07:00

If, for some reason, you have an urge to study the asset allocation of the U.S. insurance industry (or some sub-sector thereof) you can "roll-your-own" graphical analysis on this site. Cool forward-looking things businesses can do on the web...

2002-05-17T11:06:00.000-07:00

I too, take issue with Krugman's assumption that having a private body fulfill a role previously filled by the government is a bad thing.

2002-05-17T11:05:00.000-07:00

Ever heard someone complain that the problem with development aid is that it doesn't stay in the developing country? But of course it doesn't; it flows back out, and knowledge, skilled advice, and capital goods come back in its place. I explain why this argument is so silly.

2002-05-16T23:20:00.000-07:00

Krugman prefers government regulation over the free market

2002-05-16T07:47:00.000-07:00

Capital flows and the Great Depression -- and why you should be worried about the same thing happening today.

2002-05-13T11:12:00.000-07:00

Are unwanted deep linkers communists? You decide. See My Tech Central Station article Deep Links? No Way and Arnold Kling's article.

2002-05-11T08:29:00.000-07:00

Maureen Culhane's report on global aging is now available on-line. A must read for retirement system discussions, not to mention the best economic reason for the UK to stay out of the EU.

I have also recently downloaded a study from the NBER on savings habits. Early reading suggests that income has no effect on propensity to save. Distribution of savings is as dramatic in the bottom income decile as the top. Wow.

2002-05-11T07:32:00.000-07:00

KrugmanWatch is up at Live from the WTC. Complete with long rant about the power market.

2002-05-10T18:54:00.000-07:00

Legal Arbitrage?

Instapundit points to this commentary about the Enron documents.

But FERC also knows that Enron's supposedly evil "market manipulation" mostly involved the pursuit of legal "arbitrage" opportunities (in which traders exploit short-term price differences to buy low in one market and sell high in another). Such arbitrage is widespread and considered beneficial in commodity markets everywhere - including energy markets in other states.

...But because experts parsing the details in court will show these practices are largely legal and common, they'll never work as a basis for getting California's money back.

Of course, Krugman can reprocess the memos into mudballs regardless.

2002-05-10T11:38:00.000-07:00

Krugman Insinuates Again

As one might expect, Paul Krugman reacted to the Enron memos by insinuating that they prove that the private sector was guilty and California's energy regulators were innocent in the California energy crisis. The evidence that he extracted from the Enron memos consists of the following:

schemes that had smart-alecky nicknames like Fat Boy, Death Star and Get Shorty.

That's it. Krugman does not need to undertake any analysis. The mere fact that the traders used colorful nicknames to describe trades is all the evidence he requires.

As I said in my post below, you should read the memos. To me, they sound like arbitrage trades. The arbitrage is created by the regulatory structure. In a free market, arbitrage is a good thing. Only in a badly-regulated market can arbitrage make things worse.

It would be really interesting to have the trades carefully spelled out and then analyzed by economists. If I am correct, and they are arbitrage trades, then they implicate the state of California, not the private sector. Before he started writing for the New York Times, I would have trusted Paul Krugman to delve into the issue and reach an objective conclusion. But having watched his column evolve, I cannot make that kind of assumption.

2002-05-09T14:17:00.000-07:00

Another Government-run Market

Brad DeLong reprints this analysis of India's government food program.

These households, in other words, effectively gain nothing from subsidised PDS sales; on the other hand, they bear the burden of high food prices on the market as a result of the FCI's hoarding operations.

You need to read the entire article to grasp the cruelty of the way in which the program's procedures keep food away from the people that it is supposed to help. My guess is that if you were to examine the California energy agency closely, the picture would be equally galling.

2002-05-09T13:24:00.000-07:00

Read the Enron Memos

If you read the actual Enron memos, you get a picture not of a dark conspiracy on the part of Enron but of an attempt to respond in rational, economic ways to a Rube-Goldberg energy contraption created by the state of California. My guess is that the media will successfully spin this as misdeeds by Enron. But I do not think you can come away from reading the actual memos with the view that Enron is the villain here.

2002-05-09T09:44:00.000-07:00

Simplifying income taxes: pragmatic possibility or pipe dream? Well, we can hope, anyway.

2002-05-08T23:55:00.000-07:00

S.E.C. Adopts New Rules for Analysts (NYT) Here is a much better rule that would guarantee consumers were fully informed about their stock market analysts:

All stock market analysts must offer their services exclusively through psychic hotlines.

2002-05-07T12:44:00.000-07:00

We applauded Paul Krugman for returning to economics and explaining the inventory-rebuilding component in the first quarter GDP numbers, and we ignored (sort of) his obvious hopes for a double dip. We applaud him as he deplores huge farm subsidies, and ignore the Begala/Moore-style undercurrents about "Red States". But I have one more criticism to level - shouldn't an economist be discussing the implications of the curiously, persistently strong productivity numbers?

Productivity in the business sector increased at an 8.5 percent annual rate from the fourth quarter of 2001 to the first quarter of 2002, as output increased 6.5 percent and hours of all persons engaged in the sector declined 1.8 percent (seasonally adjusted annual rates). This was the largest increase in business sector output per hour since the second quarter of 1972, when it rose 9.1 percent. Revised data for the fourth quarter of 2001 show that output per hour increased 5.4 percent, as output increased 1.6 percent and hours of all persons fell 3.6 percent (table 1).

Short-term productivity statistics are notoriously polluted and should not be extrapolated, but the increasing productivity story has held now throughout 2001 and into the first quarter of 2002. If you allow yourself to think it might keep up, we have to reevaluate our ideas about sustainable levels of economic growth.

2002-05-06T21:36:00.000-07:00

Liberate young doctors from collusion

2002-05-06T14:16:00.000-07:00

Some Good Comments

Zimran Ahmed's winterspeak has had some good posts recently. On the controversy over ad-skipping, he writes

in the TiVo future, viewers will choose between paid-programming or programming with unskippable ads. Ad supported broadcast TV, a long-time political sacred cow, no longer has any economic rationale (unless viewers keep watching ads).

On spectrum allocation, he writes

strong spectrum property rights are still the answer. If you bought 50Mhz of spectrum, and receiver technology improves so now you only need half that much, you can simply sell off the unneeded remainder. But for this to work you must own the spectrum in perpetuity and be able to use it for anything.

And on the relationship between the copyright regime and the incomes of artists he writes,
Artists are poor because 1) they're common as muck and 2) no one pays much for content. Labels are rich because 1) their distribution channels are scarce and 2) promotion is costly. While web radio and the Internet reduce label's ability to make money, artists are as fungible as they ever were and no law can overcome these basic economics.

On the latter issue, I've written Equilibrium in the Market for Rock 'n' Roll, which made the point at more length.

2002-05-05T22:16:00.000-07:00

The Saudis are running those commercials claiming to be our friend in the war against terrorism. Let them prove it by selling terrorism insurance to U.S. companies. I bet the Saudis would put far more effort into stopping terrorism if their billions were at risk.

2002-05-05T16:51:00.000-07:00

Why it's better to give college students loans rather than grants.

2002-05-04T16:02:00.000-07:00

Spam Tax?

I agree in principle with the idea of charging for email. In fact, my twist on it is to give recipients the right to waive the charge. I would waive charges on all emails that I wanted to receive, and refuse to waive it for spammers.

However, I think all such ideas tend to run afoul of the principle of keeping the Internet simple. I am persuaded by the Internet's hippie fringe that a simple Internet is best.

What I don't understand is why email filters aren't better. I would like a filter that learns while I use it. If I had an email program that watched what I deleted without reading vs. what I read, and then applied elementary statistical modeling, I would soon have an effective spam filter.

2002-05-04T15:57:00.000-07:00

Deep Linking Restrictions?

Speaking from my experience running the Homefair site, I cannot believe that you would send lawyers out to do this.

I have more to say here

2002-05-04T11:23:00.000-07:00

Abolish Farm Subsidies and Instead Give Every American $700

2002-05-03T12:29:00.000-07:00

A new post on Live From the WTC

In which I predict a dim future for the stock market. Should be viewed if only for the fun of watching my ham-fisted attempts to explain a DCF in one paragraph.

2002-05-01T14:51:00.000-07:00

A Conservative is a Liberal Who Has Been Mugged...

...by the nonprofit sector. If only this would happen to Doc Searls.

2002-05-01T03:53:00.000-07:00

Better Environmental Policy

Two recent N.Y. Times op-ed pieces point out that the Bush Administration's "Clean Skies Initiative" represents an improvement in environmental policy. Paul Krugman says so grudgingly, but then catches himself and recycles the usual innuendo that the Bush administration is incompetent and beholden to evil corporate interests. A. Danny Ellerman and Paul L. Joskow just stick to the core issue of whether the new proposal is better than the policy it replaces.

2002-04-30T22:40:00.000-07:00

Racial Bias in Home Mortgages?

2002-04-30T18:19:00.000-07:00

Private Sector Encroachment

The private sector is encroaching on what rightfully belongs to the government, according to this new book, which was recommended by Doc Searls.

Government R&D laid the groundwork for some of the most significant innovations in computing - the original Internet architecture and protocols, e-mail, the Mosaic software that gave rise to the Netscape browser, among others -- but these investments have essentially been privatized and recast as the singular product of entrepreneurial vision.

And we know what privatization leads to, don't we: PROFITS (boo, hiss!); PERSONAL WEALTH (horrors!); ECONOMIC GROWTH (how threatening!). What we need to do is shrink the private sector so that THE PEOPLE can be rich(hooray!).

Basic economics is not all that difficult, but people would prefer to wallow in juvenile preconceptions. Hence, a book like this likely will be a hit.

2002-04-30T13:31:00.000-07:00

More on the IPO Game

I got three emails related to the IPO game.

Steve Kuhn agrees with my conjecture.
Tom Maguire says more:

...you are just baiting me. I know that it is painfully obvious to you that this is a variation of the old martingale /
anti-martingale trading strategies. And I know that you realize that an anti-martingale approach applied to a game with a positive expected value results in a huge probability of a small win.

er, maybe I should know that, and I'm sure that some of my former classmates know it, but the truth is that Tom kinda one-upped me there.
Finally, the Dreckmeister himself mentioned a Harvard Business Review article (summarized here) about the distribution of income. The article purports to explain why that distribution is so skewed--lots of poor folks and a few very tich folks.
I don't have the patience to follow the math in the original research paper (maybe Tom can handle it), but it looks suspiciously to me like the Paulos IPO game. That is, if people's wealth comes from a sequence of bets (investments), and they make bigger bets as they get wealthier, then you can wind up with a Paulos-game style result. The lucky bettors wind up very rich, and most bettors end up with nothing. There are hard-core stock speculators and serial entrepreneurs who fit that model. The story line "he made and then lost a fortune, then made it back, then lost it again" sounds to me like the Paulos game.

2002-04-29T20:51:00.000-07:00

Good Krugman column about why the 5.8% first quarter growth numbers might not be that impressive. As he writes, the stock market reacted badly to the growth figures. This means either, as Krugman points out, that the stock market doesn't think that the high growth will continue or that the stock market predicted the high growth and had already factored it into its valuations. If you are seriously interested in economics, you should read the column to learn about the importance of inventories.

2002-04-29T14:40:00.000-07:00

Comments on MHD's simulation of the Paulos IPO game

In the game, you make a sequence of bets. At each turn, you bet everything. Each turn like a coin flip, where heads means that you win 80 percent and tails means that you lose 60 percent.

Winning 80 percent multiplies your stake by 1.8, and losing 60 percent multiplies your stake by 0.4. So, one win and won loss together gives you 1.8 times 0.4, or .72. If you play the game 2n times, and you get an equal number of wins and losses, your stake will be (.72)^n, which approaches zero as n gets large. In other words, the modal outcome is that you lose your shirt. In fact the probability of not losing your shirt gets close to zero as n gets large.

But the expected value of the game is still positive! That's because you win so much when you have spectacularly good luck. For example, a sequence of 1000 turns where you manage to win 625 times gives you over $11 million.

In the multi-turn game, a player can make the distribution of outcomes more attractive by having a rule that reduces the size of your bet whenever you're ahead. This reduces your winnings from a hot streak, but makes you less likely to go bust. My conjecture is that with the right rule (which might involve betting much less than $10,000 if you start with a $10,000 stake), there is a way to play the game that gives you a very high probability of coming out ahead.

2002-04-29T07:48:00.000-07:00

Caroline Baum cites data suggesting the productivity boom is continuing:

the profit outlook is brightening, according to economists at Salomon Smith Barney. Using first- quarter GDP data and previously reported statistics on hours worked, they calculate that productivity, or output per hour worked, rose more than 7 percent in the first quarter. The projected 5 percent decline in unit labor costs augurs ``an expansion in margins, allowing sales to flow directly to the profit column,'' the economists wrote in Comments on Credit. ``Economic profits rose by an estimated 30 percent for the quarter,'' they said. (The Commerce Department's measure of economic profits measures income from current production with an adjustment for the value of inventories.)

Two years ago this would have sparked a huge rally.

2002-04-27T17:24:00.000-07:00

Introduction to Macroeconomics

I tried to cram all of macro into a single essay. Kind of like the off-Broadway show that purports to be the complete works of Shakespeare, only the essay is not meant to be funny.

2002-04-27T09:53:00.000-07:00

More Argentina on Live from the WTC.

2002-04-25T23:19:00.000-07:00

Takeovers and Poison Pills

2002-04-25T11:17:00.000-07:00

Simulating the Paulos IPO game.

2002-04-24T23:50:00.000-07:00

How the U.S. could get really cheap oil.

2002-04-24T07:52:00.000-07:00

Reader Dave Wasser sends a link to this site dedicated to an interesting idea: fostering development of space through property ownership.

Path Risk

2002-04-23T19:39:00.000-07:00

In which Dreck meanders around (pursued by Jane) path risk, expected return, fat tails, and other things the New Yorker's Malcolm Gladwell laudably raised this week.

Update: Jane says "Great piece, Mindles!" and urges all readers to go thither forthwith.

2002-04-23T10:43:00.000-07:00

Worth Worrying About?

From an otherwise upbeat issue of Fortune, a list of the top ten macroeconomic worries, which are explained in the article..

Middle East Turmoil
Soaring Oil Prices
Climbing Interest Rates
Shopped-out Consumers
Vanishing Profits
Deflation
Inflation
The Current Account Deficit
The Strong Dollar
The Return of Irrational Exuberance

Only the last two are a source of concern, in my opinion. My view is that macroeconomic fragility comes from financial market fragility. It takes something like a stock market collapse or a banking system collapse, or both, to make a sufficient mess to cause a serious downturn. A sudden adverse shift in expectations for U.S. assets would pose problems for our financial system.

My assessment is that as soon as President Reagan got rid of price controls on oil, the U.S. became insulated from energy shocks. That leads me to have no worries about the Middle East (as an economic issue) or rising oil prices. The other items on the list all move slowly, which means that there is plenty of time for the Fed to make adjustments as needed.
If there is a panic, it won't come from consumers. The only folks crazy enough to stampede are speculators. So the only thing to worry about is a stampede to sell U.S. securities.

2002-04-22T09:45:00.000-07:00
Lost Trust: Billions Go Uncounted Indians in Century-Old Fight to Tally Money Owed for Land Use. The government has lost billions in money kept in trust for American Indians. Those who favor privatizing social security should use this example to counter Enron. Do you want the same federal government that runs the Bureau of Indian Affairs to manage your retirement savings?

2002-04-21T07:51:00.000-07:00
Can Argentina be saved? If it can, no one's yet figured out how.

2002-04-19T22:56:00.000-07:00
Extremadura Measures: Linux
"Following the lead of poorer countries worldwide, Spain's Extremadura region adopts Linux as the official operating system of public schools and offices."

This is very significant. An operating system becomes more valuable the more people who use it, because the more users there are of a given operating system the more software will be written for it. If many poorer regions adopt Linux, than Linux gains strength relative to Windows even in rich markets where price is not a major factor in operating system purchase decisions.

2002-04-18T22:02:00.000-07:00
Why Krugman's Argument Is Too Powerful

2002-04-18T17:20:00.000-07:00
ArabNews: Boycott America? What a joke! (From a Saudi Paper.) As the author explains, it's not that they don't want to it's just that Arab countries are economically insignificant compared to the U.S. It's a good sign for freedom of the press, however, that this article could be published in a Saudi paper.

2002-04-18T10:02:00.000-07:00

Imagining the Music Industry

Suppose that the music industry wanted to use the best technology, rather than fight it. I argue that they could make money, perhaps more than they make today.

2002-04-18T09:53:00.000-07:00
Plane Crash Probably Not An Accident

Using simple probability analysis we can determine that the crash was probably intentional. Imagine if yesterday you were asked to estimate the following two variables:

X = the probability that a plane will accidently crash into the most significant building in Milan.
Y = the probability that terrorist would deliberately crash a plane into the most significant building in Milan.

My guess is that most people would estimate that Y was much higher than X. This means that even without any other evidence we can assume that the attack was most likely deliberate.
[It now seems likely that the crash was an accident. Given the initial information, however, I still believe it was reasonable to initially assume that the crash was probably intentional.]
[Perhaps I was right.]

2002-04-18T03:44:00.000-07:00

Health Care Costs

The New York Times reports on rising health care costs for employers. I can understand the nation spending more on health care, because the population is aging. But why are employer health care plans under such pressure? My guess is that we will see dramatic improvements in health care productivity in the next decade, due to new discoveries. Meanwhile, as Robert Solow once said about computers, you can see biotech advances everywhere but in the productivity statistics.

2002-04-17T20:02:00.000-07:00
When To Drill in ANWR

It seems likely that Congress won't approve drilling in ANWR. Bush should propose a trigger that would allow drilling if oil prices go above some level. It would be difficult for Democrats to argue against such a trigger, and the trigger would provide a disincentive for OPEC to raise prices.

2002-04-17T18:27:00.000-07:00

The Law of Demand

Dr. Bonzo (who I found following a link from winterspeak) shows how music consumers obey the Law of Demand: when the price of CD's is high, they consume less.

2002-04-17T10:54:00.000-07:00

Policy to Prolong the Recession

Extending unemployment benefits helps to prolong recessions, according to Brad DeLong. In an April 16 comment on the Industrial Production index, he throws off this parenthetic remark.
Whenever the President and Congress agree in a recession to extend the duration of unemployment benefits for an additional 13 weeks, they virtually guarantee themselves a half a percentage point rise in the unemployment rate over the ensuing six months.

Not that DeLong is against extending unemployment benefits.

2002-04-17T08:30:00.000-07:00
Why Blogger is not like Napster

Inflation Squirrely

2002-04-17T06:38:00.000-07:00
Caroline Baum thinks core inflation is running higher than consensus. She and Joe Carson parse the CPI components in her column.

It is interesting that ten year Treasury Inflation-Indexed Securities have been yielding around 3.2% while the consensus inflation estimates have been been averaging 2.5%. That implies that TIIS will provide a total nominal return of about 5.7% compared to a ten year treasury rate of 5.22%. This certainly suggests that the bond market is pricing in a 0.5% lower inflation rate than economists, including the Fed. Baum appears to be on the high end of the economists, as she sees a 3.5 - 4% core inflation rate. Accepting her view suggests TIIS are a screamin' buy.

2002-04-17T05:11:00.000-07:00

More Krugmanwatch Material

from Random Jottings.
Krugman is becoming quite adept at smearing people with little more than innuendos and third party rumors.

If Krugman's academic writing is analagous to John "beautiful mind" Nash's professional work, then Krugman's Times columns are analagous to Nash's mad ravings.

2002-04-16T22:32:00.000-07:00
(BBC News) Israel under hack attack
Prediction: The hack attack will continue, but it will make Israel the best in the world at Internet security. Internet security will consequently become a major service export for Israel

New Rules

2002-04-16T18:45:00.000-07:00
An unwelcome development in the post-Enron era is the way regulators are feeling their oats. That means new rules:

As most of you may know, securities professionals have their personal trading closely supervised. The intent is to prevent securities professionals from trading on inside information or "front-running" trades done for clients. The latter is avoided by restricting securities for a period after they are purchased for client accounts or funds. Employers maintain lists of securities that representatives cannot buy or sell, and pre-approve (it used to be monitor) trades. This is all well and good.

Here's one of the new bright ideas: Now you can't buy a security for seven days before it is purchased or sold for client accounts. Which begs the question, how do you know a security is going to be purchased or sold a week from now? Purchases are sometimes premeditated for weeks, although managers tend to buy a small subset of purchase candidates. The decision to sell can happen immediately on an earnings announcement or change in the investment thesis.

Here's another: All associated persons, meaning the family of the employee or anybody living with her, must also have their trades pre-approved. The firm can be fined if it does not prevent its employees spouse or live-in family member from trading restricted securities (or following other trading rules).

Of course the immense practical problems of implementing such rules should not be an obstacle to such overreaching. And compliance monitoring must, of course, be fully automated. Everybody overhaul your systems budget. Well, at least the good times are rolling in the stock market...oops, you mean they aren't?.

2002-04-16T02:34:00.000-07:00

Cost-benefit Analysis and Security

Security expert Bruce Schneier always uses economic analysis, which helps keep his ideas well grounded. In his latest newsletter, he writes

This five-step process works for any security measure, past, present, or future:

1) What problem does it solve?
2) How well does it solve the problem?
3) What new problems does it add?
4) What are the economic and social costs?
5) Given the above, is it worth the costs?
When you start using it, you'd be surprised how ineffectual most security is these days. For example, only two of the airline security measures put in place since September 11 have any real value: reinforcing the cockpit door, and convincing passengers to fight back. Everything else falls somewhere between marginally improving security and a placebo.

2002-04-15T21:57:00.000-07:00
The Economics of Rational Suicide-Homicide Bombers

A Mind is Hollywood's Beautiful Thing To Waste

2002-04-15T19:52:00.000-07:00
John Nash and Adam Smith. The Nash Equilibrium (as pointed out by Arnold Kling below).

Executive Compensation According to Mindles Dreck

2002-04-15T19:47:00.000-07:00
My cranky contribution to the executive compensation discussion.

2002-04-15T06:12:00.000-07:00

The Happy Taxcutter

NRO's James Robbins has a different reaction to tax day. He propose to eliminate the income tax for the lower half of the income distribution.

The standard argument against having the income tax rate be zero for most people and then phase in suddenly at, say, $26,500 a year is that this creates a high marginal tax rate at the point that the income tax phases in. But Robbins wants that to happen--he figures that most people want higher incomes, and if they were aware of high marginal tax rates they might be less supportive of big government.

2002-04-14T05:53:00.000-07:00

The Happy Taxpayer

On April 13, Brad DeLong looked at all the taxes he pays, and he counted his blessings.
Our laws, our courts, our police, and most of all our democracy itself are items of extraordinary value bought by our taxes...

Then comes the meat and fish of the government: social security, medicare, medicaid, veterans' administration and the other social insurance programs; Burton Valley Elementary School; roads, traffic lights, bridges, and tunnels; the National Science Foundation, the National Institutes of Health, the Center for Disease Control, the Advanced Research Projects Administration, and the National Institutes of Science and Technology; the National Park Service. It is easy to convince yourself that one-third of government spending is wasted. I, at least, also find it easy to convince myself that the other two-thirds of government spending buy capabilities and accomplishments that the private market--which could not exist without the institutional underpinnings provided by the government--would never provide at all.

I am to the right of DeLong on education and Social Security. I would feel better if my school taxes were used for vouchers, rather than to entrench the educrats. And I see Social Security as creating excessive and ever-increasing dependency on government, because we have failed to adjust the retirement age to match the increases in longevity.

2002-04-14T05:39:00.000-07:00

The Case for Data Mining

Should the government use databases to help screen for terrorists? Many net-heads say "no," but I see data mining as a Nash equilibrium.

2002-04-14T04:43:00.000-07:00

Free Trade: What we say and what we do

Chief trade negotiator Bob Zoellick says we are for free trade. George Will points out examples of inexcusable protectionism.
I thought that Zoellick should have resigned to protest the steel tariffs. But reading his op-ed article, I can see where he is coming from. As a trade negotiator, he measures success by the number of agreements signed.
It seems to me that trade agreements are neither necessary nor sufficient to promote free trade. We can, and should, get rid of trade barriers unilaterally.
We need officials who will stand up for free trade. We don't need no stinkin' trade negotiator.

2002-04-13T23:40:00.000-07:00
The Economics of Augmented Reality

2002-04-13T20:59:00.000-07:00
Young America (economist.com)
Interesting chart showing that the percentage of people over 60 is lower in the U.S. than in any other major industrialized nation. Since, alas, productivity declines rapidly with old age, this is yet another reason why America will sustain her position as the world's dominant economic power.

2002-04-12T18:07:00.000-07:00
And now, a little bit on the effects of the progressive income tax on labor force participation.

2002-04-12T15:51:00.000-07:00
KrugmanWatch is up!

2002-04-12T14:54:00.000-07:00
Hoy on Krugman. Ouch.

Did putting so much executive compensation in stock cause the Enron crisis?

2002-04-12T06:19:00.000-07:00
I say yes. No charts, but a nifty explanation of the agency problem.

2002-04-12T04:18:00.000-07:00

Did the Internet Kill Profits?

Apparently, Ed Leamer thinks so, but I don't think he has a strong case.

MatthewYglesias on Taxes

2002-04-11T21:08:00.000-07:00
Yglesias on "wealth taxes" and the Laffer Curve:
my personal take on it is that there's no real point in debating the merits of the tax rates in isolation, the question is what we're spending the money on.
While I'd be one of the first to see the merits in a tax cut constraining congress, I'd say the important question is what taxation policy is likely to maximize long-term economic growth and raise all boats - not equality or inequality per se. Matt's right that fairness (the tendency of one consistituency to benefit from a policy change) shouldn't be the central argument in public debate. Unfortunately, Andrew Sullivan or Ted Kennedy, fairness always seems to be the issue in political debate of taxes.

2002-04-11T18:31:00.000-07:00
The economic consequences of an exercise pill.

2002-04-11T15:23:00.000-07:00
How does the used book market influence the price of new books?

Ferguson on Social Security

2002-04-11T06:49:00.000-07:00
Andrew Ferguson at Bloomberg.com:
While the ideological foes sputter and snarl and divert everyone's attention with sham arguments about ``privatization'' and ``bold change,'' future taxes will be quietly raised, future benefits will be quietly cut, and Social Security will survive, as it always does.

NGO now pro-trade

2002-04-11T04:19:00.000-07:00
Oxfam, in a break with the anti-globalization movement, is now pro-trade. See this report. While they do not support completely free markets, it is nice to see a bit of the sun of rationality shine through.

Bloggers and Making Money

2002-04-11T04:16:00.000-07:00
My view is that blogging "professionally" is like participating in an open source software project. The economic benefit consists of an enhanced reputation that could be used in other ways.

2002-04-10T19:06:00.000-07:00
How Bloggers Can Make Money
I have figured out how successful Bloggers can cash in. People are willing to pay a lot for well developed online characters in games like Everquest. Imagine how much someone would pay to take over a popular site like instapundit? If any of the popular Bloggers decides to leave, they should auction off the rights to maintain their site. True, the new blogger would have to prove himself, but he would be starting from the top so if he were talented he could remain popular.

2002-04-10T15:38:00.000-07:00
Brad DeLong is very optimistic about productivity. His point is that if you hold the amount of nominal spending on information technology constant, this implies sharp increases in real spending, because prices are declining so rapidly. Thus, if information technology has any productivity benefit at all, we should see major benefits as we keep using it more intensively.

2002-04-10T12:03:00.001-07:00
Whoa. Just when Paul Krugman was getting back to economics, Caroline Baum of Bloomberg (one of my favorites) rips him to shreds:
While Krugman has the same right to express his views in his column as I do in mine, he has turned his valuable real estate -- his op-ed colleague, Tom Friedman, just snagged one of the Times's record seven Pulitzer Prizes -- into a toxic waste dump.

2002-04-10T06:32:00.000-07:00
The Front-Loaded Economy

Information wants to be free, but people still need to get paid.

2002-04-10T05:07:00.000-07:00
TCS: Tech - Blogging: An Economist's View
Will the blogging boom be beaten back by big business? See my article in Tech Central Station.

2002-04-09T17:44:00.000-07:00
Krugmanwatch, Adam Smith, and silly boycotts on Live from the WTC.

Stopping the Senseless Partisanship in the West 40s

2002-04-09T09:16:00.000-07:00
Tuesday is Krugman Spaghetti day, and he delivers (surprise!) an economics column, complete with a recorded prediction. His first in a few weeks.
Are world oil markets that tight? Not yet — the world still has about seven million barrels' worth of spare capacity each day. So Iraq, by taking away its two million barrels a day, cannot create a crisis by itself. But the remaining slack in the system is just about equal to the combined production of Iran and Libya, which have also proposed an embargo.

The point is that it would not take much worsening in the political situation to produce markets so tight that the logic of market power kicks in and countries decide that, quite aside from politics, their financial interest lies in reducing, not increasing, their output.

Arnold Kling has further questions, particularly about the role price controls played in prior oil shocks.

2002-04-08T19:44:00.000-07:00
A Market Solution to the Oversupply of Historians (Chronicle of Higher Education) Great Article!

2002-04-08T18:07:00.000-07:00
What? No Pulitzer for Krugman? Musil has the goods.

2002-04-08T14:15:00.000-07:00
Want to tie your broker up in knots? Ask him what his firm's return expectations are for the equity market and have him run an asset allocation on it complete with projections of your net worth in 15-40 years. Then send him this article by Bob Arnott and ask him to reconcile it to what he just gave you. Throw in this article for good measure.

I have a chart on my desk showing the inflation adjusted real return of the Dow Jones from November of 1903 to 1.31.2002. The average annual real return is 4.3%, but the best fitting trendline suggests about 3.3%. Brokers, almost without exception, will show you real return assumptions of 5%-8%. Arnott demonstrates those returns have been exceedinly rare, and only accurate when made in the depths of a bear market. Have fun.

2002-04-08T07:00:00.000-07:00
Michael Lewis on the new and redundant regulatory environment:
Across America companies are scrambling to comply not with the law but with investors' need for trust. Wall Street analysts are falling over themselves to downgrade companies. CEOs are pulling all-nighters to make sure every last number makes it into their financial statements. Everyone inside the money culture is probably behaving more honestly now than he has in years. Who needs cops?

...like second-rate matadors, they wait until the bull has been poked and prodded to the brink of death before they enter the ring, whereupon they wave their cape over the carcass and wait for the bouquets to land. The effect of their crowd-pleasing is to exacerbate the market's natural manic-depressive tendencies. They raise the cost of doing business at exactly the moment when doing business is most costly.

2002-04-07T20:40:00.000-07:00
Cybersmut and Debt Undermine Penthouse
Interesting nugget: "[The publisher of Penthouse] spent millions on an unsuccessful attempt to develop small nuclear fusion reactors."

I wonder what synergies he was trying to capture?

2002-04-07T18:59:00.000-07:00
Who wants to give 401k advice? - on More Than Zero

2002-04-07T17:18:00.000-07:00
A little love note on the efficacy of commodity boycotts up on Live from the WTC.

2002-04-07T14:52:00.000-07:00
More social security and a long piece about the importance of price elasticity when talking about CAFE on Live From the WTC.

2002-04-06T14:40:00.000-08:00
Video Games and Central Planning on More Than Zero Today.

2002-04-05T17:33:00.000-08:00
The latest Krugmanwatch is up!

2002-04-05T07:09:00.000-08:00
Just the facts: NIPA provides national income tables that can be customized and downloaded.