Odds and ends

Here are some recent links:

1.  Ryan Avent notices something that I also discovered when studying the Great Depression; history seems very different when it is being made, as compared to in retrospect.

2.  Wages are stickier than ever.

3.  David Beckworth on why the Euromess is (mostly) falling NGDP, not rising debt.  (Also Ezra Klein.)  And Beckworth on the BBC.

4.  Apocalypse later?  Read Tyler Cowen, Karl Smith and  Barry Eichengreen.

5.  I wonder if my ideas make more sense in Romanian.

6.  I no longer trust Robin Hanson.

7.  John Cochrane is surprisingly persuasive, even when he is wrong.

8.  If NGDP targeting boosts RGDP by a trillion, is it unreasonable for me to ask for a million?

9.  Everywhere you look, history is ending.

10.  My daughter has the best of both worlds; a Chinese mom and an American last name.

11.  Yet life is as unfair for my daughter as for P.J O’Rourke’s daughter.

12.  Institute for Justice is my favorite libertarian group.



28 Responses to “Odds and ends”

  1. Gravatar of marcus nunes marcus nunes
    11. December 2011 at 11:53

    Cochrane´s openning on “In the US” is fantastic!
    Why are we stagnating? I don’t know. I don’t think anyone knows, really. That’s why we’re here at this fascinating conference.

    Nothing on the conventional macro policy agenda reflects a clue why we’re stagnating. Score policy by whether its implicit diagnosis of the problem makes any sense.

    So nobody should worry too much; If I don´t have a clue, I don´t expect anyone else to have one either.

    As I showed, despite two very different settings – EZ and US – it´s hard to distinguish between them. So the problem is more basic, even “pedestrian”. What about “deficiency of AD”. Would Cochrane agree. Probably not. “Too easy”!

  2. Gravatar of Daniel Daniel
    11. December 2011 at 12:54

    I have no idea who (or what) is responsible for that Romanian translation … but as a native Romanian myself, I had to read the original English version to make sense of it.

  3. Gravatar of Benjamin Cole Benjamin Cole
    11. December 2011 at 14:59

    Re Institute for Justice, also one of my face outfits.

    Here is an idea that gives American “libertarians” fits (and I have mostly libertarian impulses):

    How about freedom to operate push-cart businesses, such as hot-dog stands, vegetable stands, even clothing stands?

    In Thailand, certainly in most Thai cities, anybody who wants to can buy or build a push-cart, an voila! A business is born. BBQ, fruits, CDs, vegetables etc. Sometimes a “push-cart: is a platform attached to the back of a motorcycle.

    So, can public spaces, such as sidewalks, medians, plazas, be used for private businesses?

    I say yes, go for it. However, that might mean (in a libertarian world) people selling drugs, porno tapes and sexual services in front of your house. Suddenly, no one is a libertarian anymore. This is why I say American libertarians are frauds, by and large.

    I say sidewalk vendors are wonderful, and provide an avenue for an average guy to start his own business–often the food is excellent.

    The people against sidewalk vendors are retailers (who admittedly pay taxes, etc) and others who find the idea of sidewalks as bazaars to be offensive.

  4. Gravatar of Becky Hargrove Becky Hargrove
    11. December 2011 at 17:00

    A national campaign to loosen restrictions, zoning and other irrational laws might just do the trick for greater employment, because it is not always easy for individuals to make progress in this regard at either local or state levels.

  5. Gravatar of Benjamin Cole Benjamin Cole
    11. December 2011 at 17:17


    I am afraid this is a nut that will never be cracked.

    The right-wing—the ones who might be expected to be libertarian or pro-business—is addicted to the mantra, “state and local rights.”

    State and local governments are usually the pawns of unions and business groups—and neither is happy with the prospect of new competition from street vendors.

    Imagine being able to buy a good drink from a roadside vendor for $1.50. That is what would happen in true free enterprise. And that is what will never happen at the state or local level.

  6. Gravatar of c8to c8to
    11. December 2011 at 17:23

    yes, yes, post a detailed response to cochrane..

    just because theres micro problems doesn’t mean we shouldn’t solve the macro problem!

    puns intentional

  7. Gravatar of Morgan Warstler Morgan Warstler
    11. December 2011 at 17:40

    Scott, you better be nice to your daughter, or when you are 65 she’ll grab up your finances and put you in a home where green Jello with marshmallows is a luxury.

    There are ice floes in the future of Baby Boomers. Don’t kid yourself.

  8. Gravatar of Morgan Warstler Morgan Warstler
    11. December 2011 at 17:52


    If I were in the market for drugs, whores, and porno “tapes” (whatever those are, is there some kind of new sticky boomer fetish?)…

    I’d prefer to have them sold INSIDE my home, so having them nearby where I might get quick delivery seems ok.

    Real libertarians want private roads, so your concerns are unwarranted.

  9. Gravatar of Brett Kirkland Brett Kirkland
    11. December 2011 at 19:00

    What an interesting article about bone marrow transplants. The argument used by the government is ridiculous

  10. Gravatar of Peter N Peter N
    11. December 2011 at 19:46

    Very facile of Mr. O’Rourke. There’s no evidence that OWS believes in zero sum. What they believe is that there must be some limit to the concentration of income. Just as it’s absurd to say that reducing taxes always increases government revenue (just ask what the revenue is for a tax rate of 0%), so there has to be a point beyond which concentration has negative effects.

    While it’s amusing to see macro models with one consumer who sells to and borrows from himself or identical clones, real businesses need customers. The economy is currently organized to be driven by middle class consumption. As I’ve said before, Bill Gates won’t buy 1 million cars just because he has the income of 1 million people.

    For the last 20 years the consumption shortfall has been made up for by borrowing. That’s over. The aggregated US debt is frightening, and the government can no longer take private sector debt onto its balance sheet.

    It might be a good idea to look at where the money will go if the Fed takes up your NGDP plan. The Chinese didn’t, and now they’re in trouble. It’s not enough to pump money into the system (and it will take money, not just expectations). The money has to go to those who need it in order for them to participate in the economy.

    For instance, someone with an underwater mortgage can’t take a good job in another state. That’s currently 28% of US mortgages. People are reluctant to buy houses out of foreclosure because the prices are still falling (and, of course, they may not be getting good title).

    The Fed will have to buy another trillion or two of something. It will matter what it buys and how it does it.

  11. Gravatar of Morgan Warstler Morgan Warstler
    11. December 2011 at 20:34

    “As I’ve said before, Bill Gates won’t buy 1 million cars just because he has the income of 1 million people.”

    Who cares?

    His money properly invested goes into start up companies that:

    1. hire the new best people.
    2. drive down the price of something for the whole world.

    You are not even coming CLOSE to getting the point… what Bill Gates doesn’t earn doesn’t go to 1M others as higher wages.

    Pay the employees more, stock price falls, investors lose money, they buy less stuff, and on and on and on… thinking through all the permutations is too much for the unaccomplished left… they just aren’t smart enough to know it.

    Peter, FOCUS, technology AMPLIFIES the difference in competency and productivity between an A player and a B player.

    What is NOT ACCEPTABLE is trying to weaken the A player for your greater cause. It obviously hurts the whole. Don’t fight the new world.

    You need to stop demanding and start asking what the A players would like to see the B players and C players deliver on.

    This isn’t about 1% yada yada, its about not structuring policy to fight the technology gods.

    Let the best go big, and figure out the most frugal way to take care of those who cannot take care of themselves. A players are not merciless, but if you are honest with yourself, you’ll admit they have a veto on any and all of your grand designs, and they know it.

    Court them, take half a loaf. it is your destiny.

  12. Gravatar of Bonnie Bonnie
    11. December 2011 at 20:39

    From the wage stickiness link (Krugman):

    “Basically, European experience is very consistent with a Keynesian view of the world, and radically inconsistent with various anti-Keynesian notions of expansionary austerity and flexible prices.”

    *Gasp!* Would Keynes really have supported a government borrowing until debt IS the problem and threatens the institutions of government themselves? Probably not.

    Although, I think neither generalized view is the correct one when monetary policy is a disaster. There is plenty to quibble about after we get stabilized to historic trend NGDP. Until then, neither view, government spending vs. private growth, adds much to solving the core issue.

  13. Gravatar of Peter N Peter N
    11. December 2011 at 22:28


    I’m not opposed to Bill Gates or Warren Buffet getting rich. They are, indeed A players. However there’s earning, and then there’s rent. The people who caused the mess in 2008 are not A players. They contribute nothing. They pump up bubbles, take their cut from them and leave taxpayers to clean up the mess. They get to keep everything they’ve “earned”.

    LLoyd Blankfein isn’t an A player – He’s a crook.

    In any case we currently have a consumer economy, so we currently need consumers who have money to spend. The future may indeed be wonderful (I’m a believer with respect to health care and energy), but in the meantime we need to eat.

    Since it appears that a bunch of European A players are going to get Fs on their next report card, it doesn’t look good.

  14. Gravatar of Neal Neal
    12. December 2011 at 03:42

    RE the tyranny of state and local governments: during a property-rights seminar a few years ago, one of the professors attending made an off-the-cuff remark that he’d seen research indicating most of the gains during US history from free trade across state borders were offset by local protectionism.

    Ironic, isn’t it, that a truly libertarian federal government would have to deprive state and local governments of their power? The government can’t guarantee rights unless it has the power to destroy them.

  15. Gravatar of Morgan Warstler Morgan Warstler
    12. December 2011 at 05:17

    Rent comes exclusively from big government being paid off by big business.

    If one wants to see big business fail, the government must be a small one, without the ability to choose winners or guide the economy.

  16. Gravatar of Vivian Darkbloom Vivian Darkbloom
    12. December 2011 at 06:34

    “In any case we currently have a consumer economy, so we currently need consumers who have money to spend.”

    Have you ever stopped to think that one of the problems with the US economy is that it is driven by a (too) great extent by consumption rather than (forgive my naivete) investment? Why would you want to perpetuate an imbalance that has reached the point that it is obviously not sustainable?

    And, where are those consumers going to get that money to spend? Simply from other consumers in a virtuous cycle of consumption? If they are lucky, perhaps Mr. Gates will given them a job.

  17. Gravatar of ssumner ssumner
    12. December 2011 at 07:22

    Marcus, Yes, 11% NGDP growth coming out of the 1982 recession, and 4% coming out of this one–that can’t possibly be a factor in the slow recovery, can it?

    Daniel, Sorry to hear that.

    Ben, Good point.

    C8to, Perhaps I’ll do it later.

    Morgan, I’ll still be supporting her when I’m 65, so she won’t be putting me on any ice flows.

    Brett, I agree.

    Peter N, Actually there’s already enough money out there to support an NGDP three times current levels, what we need is higher NGDP expectations.

    I’d didn’t link to O’Rourke because of his views on taxes.

    Bonnie, Good point.

    Neal, Good point. I think the US should be more like the EU.

    Morgan, I totally agree about rents to big business.

  18. Gravatar of StatsGuy StatsGuy
    12. December 2011 at 07:55

    Amusing Read:


    Really, the core point is the last line: “There were no losses.”

    And yet, the company was annihilated. Welcome to mark to market oblivion.

    Now, expand this to a national scale… And you basically get the liquidity side of Beckworth’s NGDP vs. Debt argument. The RGDP effect occurs when MF Global assets go into liquidation and all hell breaks loose in the ‘real’ world (aka, farmers in Kansas).

    BTW, Beckworth and Krugman are basically saying the same thing about Spain, and even to a lesser extent Italy.

  19. Gravatar of Peter N Peter N
    12. December 2011 at 14:28

    “Peter N, Actually there’s already enough money out there to support an NGDP three times current levels, what we need is higher NGDP expectations.”

    This is true. There are tens of trillions of dollars available depending on specified degree of liquidity. But as long as it’s unclear how the worldwide war between debtors and creditors is going to turn out, there will be an understandable reluctance to end up being some of its collateral damage.

    At current prices the claim debt represents on future assets and services exceeds the market’s estimate of what will be available at those prices.

    It’s like Crete, where you sell the same house to 2 or 3 people. Something has to give, maybe there’s a winner and two losers; maybe they timeshare; maybe they all end up losing in one way or another. The Pauli exclusion principle prevents bosonic solutions.

    The Fed can set and NGDP target, but lack of faith among investors indicates they’ll have to use live ammo, not promises and blanks. A large part of the Republican party will go berserk about a Fed with a $4 trillion balance sheet.

    If the Fed wins and we’re back on trend, we still have a price mismatch problem, which we could easily have exacerbated by reflation. There’s truly no free lunch, even if you’re talking bratwurst.

  20. Gravatar of Winton Bates Winton Bates
    12. December 2011 at 14:45

    Cochrane might be wrong about the inflation risk, but I think he is on the right track with this idea:

    “What financial system will we reconstruct from the ashes? The only possible answer seems to me, to go back to the beginning. We’ll have to reconstruct a financial system purged of run-prone assets, and the pretense that nobody holds risk. Don’t subsidize short-term debt with a tax shield and regulatory preference; tax it; or ban it for anything close to “too big to fail.” Fix the contractual flaws that make shadow bank liabilities prone to runs.
    Here we are in a golden moment, because technology can circumvent all the standard objections. It is said that people need liquid assets, and banks must borrow short and lend long to provide such assets. But now, you could pay for coffee with an electronic transfer of mutual fund shares. The fund could hold stocks, or mortgage backed securities. Nobody ever ran on a (floating-NAV) mutual fund. With instant communication, liquidity need no longer coincide with fixed value and first-come first-served guarantees.”

  21. Gravatar of Scott Sumner Scott Sumner
    12. December 2011 at 18:33

    Statsguy, That last line is hilarious. Corzine thinks that bond positions haven’t lost money unless there is a default? That pretty much explains everything. I’m amazed that someone so clueless could have held so many important jobs (Goldman-Sachs, Governor, Senator.) My plumber knows more about finance than Corzine.

    Peter, What lack of credibility? The Fed has a great deal of credibility. The market fully believes them when they insist that they will continue to run an incredibly inept monetary policy. I see no lack of credibility.

    Winton, That’s right, we could certainly solve these problems, but too many special interest groups would get in the way.

  22. Gravatar of StatsGuy StatsGuy
    13. December 2011 at 05:13

    Scott, yes, that’s the funny part, but there’s a serious lesson re Beckworth in this. Remember, it turned out Corzine would have won his bet. It also turned out that the Treasury lost very little money on TARP, and almost all of that due to AIG which was a direct handout (the big mortgage CDO buyers may prove different).

    Point is:

    Banks are insanely leveraged, and due to margin call effects it doesn’t matter whether a price move is temporary and someone truly believes it’s temporary. Here is the causation:

    Spike in volatility ==> increase in reserve requirements/collateral to cover margined/levered bets as perceived risk increases ==> (simultaneous) demand for money from several institutions with correlated assets (asset correlations now at record highs, again) ==> shadow banking run / spike in money demand.

    Even if one sees this is happening, what is a major financial institution going to do? Not too much…

    Remember this: http://www.nber.org/papers/w5167

    Limits on Arbitrage

    These limits encounter structural strengthening precisely when the greatest opportunities emerge.

    Corzine’s gambit the same mark-to-market vs. hold-to-maturity controversy that killed the US banking system.

    Also, you can hate ZeroHedge, but they occasionally put out a really nice chart:

  23. Gravatar of StatsGuy StatsGuy
    13. December 2011 at 05:21

    zero hedge link:


  24. Gravatar of Scott Sumner Scott Sumner
    13. December 2011 at 05:32

    Statsguy, No, it doesn’t turn out that Corzine would have won his bet, where’d you get that idea?

  25. Gravatar of StatsGuy StatsGuy
    13. December 2011 at 09:02

    The bonds were short term – they redeemed without default. Position closed.

    Three months ago, however, there was a large mark to market loss due to speculation of default.

    Did you read the case?

  26. Gravatar of ssumner ssumner
    13. December 2011 at 14:45

    Statsguy, Yes, I read the case, but I don’t believe it. It makes no sense.

    Corzine had to sign statements attesting to the fact that customer money was safe, under criminal penalty if he was wrong, even unknowingly wrong. (Sarbannes-Oxley.) When that customer money shows up I’ll start believing Corzine.

  27. Gravatar of Robin Hanson Robin Hanson
    2. November 2015 at 06:55

    So I know it has been a few years, but what about my list of quotes on creativity made you not want to trust me?

  28. Gravatar of ssumner ssumner
    2. November 2015 at 07:36

    Robin, That was actually a joke, in response to this:

    “Participants with creative personalities tended to cheat more than less creative individuals”

    You are one of the most creative bloggers in the world, so consider it a weird sort of compliment.

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