Tuesday, May 25, 2010

Ideas Having Sex (Lots of It, with Multiple Partners)

The legacy media is catching the idea from new growth theory that the key to civilization is the creation of enough ideas, and the recombination of existing ideas.

If your society isn’t big enough to create enough new ideas, it won’t flourish.

If your society doesn’t encourage the synthesis of new ideas from old ones, your society won’t flourish.

The author of the piece — Matt Ridley — has a passable metaphor for this: ideas having sex.

Better ones are “ideas hooking up” or “ideas getting promiscuous”. The key is that there needs to be a lot of this going on, and it has to have some random aspect to it.

Read the whole thing in the May 22 issue of The Wall Street Journal entitled “Humans: Why They Triumphed”.

Thursday, May 6, 2010

The Web of PIIGS Debt

A fascinating, but largely useless, PIIGS debt graphic from The New York Times:

The big problem with this graphic is that it goofs in a serious way. The focus of this graphic is how much the PIIGS owe to each other (the pentagon and its interior), when in fact the real problem is how much they owe – and might not repay – to the more stable economies (these are the arrows going to the outside).

A secondary problem is that those outgoing arrows are gross totals – there’s nothing here that shows, say, that France probably owes something to Italy – and that this should be netted out.

A third problem is the lack of scaling. These debt figures are stocks, and are not due all at once. For scale, these should be compared to some measure of national assets. Unfortunately, they’re usually compared to GDP – although not at all in this diagram. That’s a bad move because it compares stocks to flows. If they really wanted to solve this problem, they’d compare debt payments to GDP.

To draw an analogy, the circles are college students, the pentagon and its interior lines are how much you owe to each other, and the outgoing arrows are how much you owe to your parents, banks, and Sallie Mae. The big questions for a college student are not how much they owe to other students, but rather how much they owe to non-students, what is their ability to pay depending on their future prospects, and how much inflow can they expect to get from their parents (say through a will or trust). This graphic focuses on how much college students owe each other.

Via Marginal Revolution.

PIIGS and Sovereign Debt Crises

Ken Rogoff is the expert on this, and here’s what he thinks about Greece (right now) and other countries more generally.

Economists have only a limited understanding of why sovereign nations ever repay their external debt, given the lack of any supranational legal authority that might force them to do so. It is very rare for a country to default because it literally cannot pay. In most cases, and certainly in southern Europe today, the issue is willingness to pay.

Via Marginal Revolution.

Monday, May 3, 2010

AP Economic Stress Index

A cool graphic from the Associated Press that shades counties by various economic criteria.

It will shade states too. You can also “play” the data as a movie through 2007-9. Unfortunately, it doesn’t seem to be updated for 2010.

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