Interesting links

Each year The Economist does a Christmas issue, which is usually my favorite. One article shows some surprising parallels between the Holy Roman Empire circa 1650-1800 and the EU.

Another good article points to a hopeful sign for France.  The most popular politician in France is Manuel Valls, who wants to reform the Socialists as Tony Blair reformed Labour.

But their best articles tend to be on non-economic topics.  This issue contains two gems; little three page articles that succeed in making Okinawa and Paraguay seem like some of the most fascinating places on Earth.

Another article shows huge gains for libertarianism in America:

Three decades ago home schooling was illegal in 30 states. It was considered a fringe phenomenon, pursued by cranks, and parents who tried it were often persecuted and sometimes jailed. Today it is legal everywhere, and is probably the fastest-growing form of education in America. According to a new book, “Home Schooling in America”, by Joseph Murphy, a professor at Vanderbilt University, in 1975 10,000-15,000 children were taught at home. Today around 2m are—about the same number as attend charter schools.

Matt O’Brien shows that easy money often raises interest rates.

James Pethokoukis discusses an interesting article on the importance of monetary policy, by Romer and Romer.

Commenter Daniel finally found a news article (in the WSJ) that seems to accurately describe the recent tax changes in Washington.  He wins my contest.

Gary Becker and Kevin Murphy want to legalize drugs, all drugs.

The Economist is not infallible.  The Christmas issue also contains one of the worst sentences ever written:

A further monetary boost may help add zip to the recovery, but risks producing asset bubbles.

Yes, and giving food to starving refugees in Darfur might help, but risks producing obesity.

PS.  I just got a call from Clark Johnson, with a report on the AEA meeting.  He says someone asked Paul Krugman about monetary stimulus, and Krugman said something to the effect that the idea is popular in the blogosphere but not among academic economists.   I suppose Krugman’s observation is partly true, although of course one can find academics who support monetary stimulus.  The Romer and Romer paper cited above was an example, Woodford’s recent paper is another.  Clark indicated that the Romers were asked in their seminar how it would help, given the recent 4% NGDP growth trend, and they responded in terms of the need for level targeting.  He heard second hand that Melzter was pretty disappointing, wondering how monetary stimulus could help given that policy is already so expansionary.  Otherwise not much discussion of monetary policy at the meetings.  Of course this is all second or third hand, so don’t quote anything I say here.

[Note: the previous paragraph was edited to fix a mistaken impression in the wording.]



21 Responses to “Interesting links”

  1. Gravatar of Jonathan M.F. Catalán Jonathan M.F. Catalán
    6. January 2013 at 19:41

    Reading Boom and Bust Banking clarified why it’d be difficult to categorize 2007–09 monetary policy as expansionary. Rather than saying “low interest rates doesn’t mean easy money,” it could be equally as effective to say that you can’t judge how easy monetary policy is by looking only at policy. You also have to look at the ideal, and see how they compare. When the Fed did much to sterilize changes in the monetary base, it’s easier to understand why monetary policy wasn’t so expansionary. (I’d add the caveat that not all monetary policy is made equal.)

  2. Gravatar of Full Employment Hawk Full Employment Hawk
    6. January 2013 at 20:08

    “The Romer and Romer paper cited above”

    Are you referring to Romer and Romer’s new paper “The Most Dangerous Idea in Federal Reserve History: Monetary Policy Doesn’t Matter?” presented at the AEA meeting on Saturday?

    It is available at the following link:

  3. Gravatar of Saturos Saturos
    6. January 2013 at 20:35

    What do you think about this study?

  4. Gravatar of Jon Jon
    6. January 2013 at 21:30

    “Yes, and giving food to starving refugees in Darfur might help, but risks producing obesity.”


    “Commenter Daniel finally found a news article (in the WSJ) that seems to accurately describe the recent tax changes in Washington. He wins my contest.”

    Scott, that’s the WSJ editorial page.

  5. Gravatar of Saturos Saturos
    6. January 2013 at 23:16

    Matt O’Brien says, “In other words, the expectation of lower interest rates leads to higher interest rates.” That’s not quite right, is it?

  6. Gravatar of Saturos Saturos
    6. January 2013 at 23:21

    “But everybody can’t save at the same time. Your spending is my income, and vice versa, so if we all try to save at once, the unhappy result will be less income for us all — and less income means less overall saving than we would have otherwise had.”

    That’s not quite right either. Consider households purchasing investment properties, or accumulating their own capital in some other way. Outside of a “liquidity trap” it is certainly possible to collectively save resources – we do it all the time.

    But it’s still a good piece.

  7. Gravatar of Saturos Saturos
    7. January 2013 at 00:29

    From the Economist HRE piece:

    Even the problems sound familiar. Property values had crashed, as the depopulated land vastly exceeded tenants. And many princes, after years of paying mercenaries, were drowning in debt. As Mr Whaley explains, these debts were dealt with through a combination of moratoria and debt commissions. The emperor sent administrators to negotiate restructurings, rather as today’s “troika” of European Commission, European Central Bank and International Monetary Fund does. These bail-outs became a recurring feature, with 57 over the next century.

    Clearly what they really needed was a higher rate of nominal GDP growth…

  8. Gravatar of Tim Tim
    7. January 2013 at 03:20

    Drugs are pretty much legal in Prague already. People use them openly in the clubs. Obviously it’s against the law, just no one cares.
    That’s what I like about the Czech republic. It’s quite wealthy, especially for central Europe, but it also seems very unregulated. All the bars are open late, people only go out at midnight. Drinks are cheap as well (at least for a tourist, I don’t know what Czech wages are like).

    Maybe the Index of Economic Freedom should take into account how lax the regulations in a country are enforced. I think some countries would seem a lot more libertarian if you took that into account.

  9. Gravatar of ssumner ssumner
    7. January 2013 at 06:17

    FEH, Yes, That one.

    Saturos. Data mining, “significance” should be at a 0.01 cutoff, not 0.05.

    Expectations of lower rates in the short run can produce higher long term rates.

    And yes, everyone can save more at the same time.

    Tim, That’s good to hear.

  10. Gravatar of Greg Ransom Greg Ransom
    7. January 2013 at 07:18

    You’re got no analogy here, ie you’ve got no argument.

    Try again.

    Scott writes,

    ” .. and giving food to starving refugees in Darfur might help, but risks producing obesity.”

  11. Gravatar of Greg Ransom Greg Ransom
    7. January 2013 at 08:03

    Scott, Jonathan Catalan has some very solid points to make about your explanatory project:

  12. Gravatar of Saturos Saturos
    7. January 2013 at 09:14

    Matt Yglesias weighs in on Romer & Romer:

  13. Gravatar of ChargerCarl ChargerCarl
    7. January 2013 at 11:04

    The way the economist frames the euro crisis makes me want to tear my hair out. It’s the same VSP crap that the Germans want us to believe, that the naughty south must be sacrificed at the altar to appease the mighty bond markets. Even more frustrating is the way they glorify Draghi, ugg.

  14. Gravatar of Catherine Catherine
    7. January 2013 at 11:19


    GOOD ONE!!

    re: homeschooling, I am all in favor

    Have recently discovered Gordon Neufeld & Gabor Mate’s HOLD ON TO YOUR CHILDREN: WHY PARENTS NEED TO MATTER MORE THAN KIDS, which provides a whole other rationale for homeschooling.

  15. Gravatar of Mike Sax Mike Sax
    7. January 2013 at 11:38

    If someone wants to homeschool their kids I have no problem-though hopefully they teach them properly. No dbout many do and we’ve seen home shcoolers often more advanced than those in public school.

    Still I cant but note the correlation we see between a rise in home schooling and a drop in the performance of the public schools. So is this at the expense of all the kids who stay in public schools?

  16. Gravatar of Mike Sax Mike Sax
    7. January 2013 at 11:40

    It’s also true that liberals like me-as Scott has suggested-wonder if this isn’t been driven by religious schools and those who don’t like racial integration in the schools.

  17. Gravatar of Becky Hargrove Becky Hargrove
    7. January 2013 at 11:51

    In David Beckworth’s first post of the New Year, and the first two comments, one almost has to wonder – did he set that “trap” intentionally? :)

  18. Gravatar of Bababooey Bababooey
    7. January 2013 at 12:25

    That WSJ article didn’t mention the 3.8%, it only covered the loss of the personal exemption and return of the Pease limit on deductions. Your contest should still be open.

    The best historical comparison to modern societies is to the 3 rings of Ancient Rome: the inner ring (Rome, D.C., Brussels, Beijing) sucks in massive taxes and redistributes it among its residing factional interests; with just enough sent to the armies policing the outermost ring, who held and and expanded the middle ring; where the rest of the population labored to survive and feed the tax collectors sent by the inner ring rulers under guard of the outer ring enforcers. That situation lasted a very long time, actually.

  19. Gravatar of FXKLM FXKLM
    7. January 2013 at 12:29

    There is one particularly accurate sentence in the WSJ article (though I’m not sure if it’s intentional):

    “But with PEP and Pease these Democrats are hammering their own constituents via the backdoor.”

  20. Gravatar of Peter N Peter N
    7. January 2013 at 14:11

    My nominee for interesting link from

    “What is Economics Studying?

    By John Myles White on 12.10.2012

    Having spent all five of my years as a graduate student trying to get psychologists and economists to agree on basic ideas about decision-making, I think the following two pieces complement one another perfectly:

    Cosma Shalizi’s comments

    on rereading Blanchard and Fischer’s “Lectures on Macroeconomics”:

    Blanchard and Fischer is about “modern” macro, models based on agents who know what the economy is like optimizing over time, possible under some limits. This is the DSGE style of macro. which has lately come into so much discredit — thoroughly deserved discredit. Chaikin and Lubensky is about modern condensed matter physics, especially soft condensed matter, based on principles of symmetry-breaking and phase transitions. Both books are about building stylized theoretical models and solving them to see what they imply; implicitly they are also about the considerations which go into building models in their respective domains.

    What is very striking, looking at them side by side, is that while these are both books about mathematical modeling, Chaikin and Lubensky presents empirical data, compares theoretical predictions to experimental results, and goes into some detail into the considerations which lead to this sort of model for nematic liquid crystals, or that model for magnetism. There is absolutely nothing like this in Blanchard and Fischer — no data at all, no comparison of models to reality, no evidence of any kind supporting any of the models. There is not even an attempt, that I can find, to assess different macroeconomic models, by comparing their qualitative predictions to each other and to historical reality. I presume that Blanchard and Fischer, as individual scholars, are not quite so indifferent to reality, but their pedagogy is.

    I will leave readers to draw their own morals.

    Itzhak Gilboa’s argument

    that economic theory is a rhetoric apparatus rather than a set of direct predictions about the world in which we live.”

    Both of these views are defensible. What isn’t is to argue from both sides at once.

  21. Gravatar of ssumner ssumner
    8. January 2013 at 07:05

    bababooey, I guess it didn’t cover everything, but it got the hardest part right.

    Good historial analogy.

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