Sunday, August 29, 2010

Our Stationary Population

It’s an urban myth that Americans move more than ever.

In 2004 less than 14 percent of U.S. residents moved--the lowest figure since the Census Bureau began collecting the data in 1948 …

I seem to recall that getting people to settle down in stable neighborhoods was part of the reason our government pushed for more homeownership.

Wednesday, August 18, 2010

Why Didn’t Anyone Predict the Great Recession: Are Economists Dummies?

These are big (but not huge) name economists. Writing a paper as part of the NBER series confirms their elite status. Here’s what they did:

We …  search for simple quantitative models of macroeconomic and financial indicators of the “Great Recession” of 2008-09.

They were thorough:

We use a cross-country approach and examine a number of potential causes that have been found to be successful indicators of crisis intensity by other scholars. We check a number of different indicators of crisis intensity, and a variety of different country samples.

Here’s what they found:

… We find few clear reliable indicators in the pre-crisis data of the incidence of the Great Recession.

If it was easy figuring these things out, we wouldn’t need a college major to learn about it.

Wyclef Jean and Haiti

I bash Haiti a lot in this blog: it’s the closest example to SUU of how to do everything wrong with your country.

Now Wyclef Jean is running for president of Haiti.

The pros for this seem to be that he lived in Haiti until he was 9, that he speaks Haitian creole, and he’s famous.

The cons are best expressed by this quote from the comments to the linked article: “No experience. No plan. No education. Can’t speak the language let alone proper English plus a history of not being able manage his own personal affairs based on foreclosures, IRS tax liens and his nonprofit scandal.”

Via Marginal Revolution.

A History of Real GDP Around the World

There is always a lot of talk about “how this generation is different.” An extension of that is how “this new economy is different.” That’s all crap.

Being able to see similarities is a standard part of any IQ test – that’s why they give you so many analogy questions. Being unable to see similarities seems to me to be a hallmark of journalists. But, I digress.

Here. we do have a huge dissimilarity. China and India have always had the biggest economies. They stopped having the biggest economies because they fell behind in the well-being revolution of the 19th century. There is no reason to expect current economies to behave differently: so if we look at this diagram in 100 years (some of you will still be here), it will look like the left hand side, not the right hand side.

Saturday, August 14, 2010

Treasury Yields: The Movie

This video shows in detail what happened in the 2008 financial crisis.

What is show is the yield on different maturities of U.S. Treasury debt, against their maturity length.

A couple of points stand out:

  • Policy effects are mostly on short-term rates (the left side of the graph).
  • The long-run yield is fairly constant at just over 4% (the right side of the graph)
  • What happened with Bernanke-Paulson policy in 2008 was that they were pulling down short-term rates so hard and so fast that their link to medium-term rates was broken.
  • There never is much of a link of short-term rates to long-term ones, so there way nothing there to break.
  • Given the dependence of most firms on medium-term debt, it should be no surprise to anyone that when the benchmark of medium-term government debt lost its anchor, that commercial markets went nippy.

Via James Hamilton at Econbrowser who notes that the source authors (Gurkaynak and Wright) notice a breakdown in arbitrage: dots on the graph should not separate vertically. This is what is going on in my last bullet point.

Thursday, August 12, 2010

Canada: The Anti-Keynesian Case

Any Keynesian must be able to explain the case of Canada – where the fraction of GDP spent by the government has gone down by over 10% over the last generation … and the country has done better.

I would love to see a small-country Keynesian macroeconomic model explain that.

Tuesday, August 10, 2010

Where Does the Laffer Curve Bend? Survey Results

The lefties say 60-70%, and I think they’re right.

I also think Mankiw adds an important point: those numbers are based on elasticities, and in the long-run the behavior of elasticities is going to push that value downward. Since almost all taxes that we really care about are enacted with a view towards permanence, this is a huge point. Unfortunately, he doesn’t give a lower bound.

Tyler Cowen thinks that Mankiw’s response is the best, but I’ll go with Feldstein’s: this question isn’t really relevant. What we ought to be plotting is tax rates against some measure of well-being, like per capita real GDP (or even better, it’s growth rate).

Read Ezra Klein’s whole piece.

Sunday, August 8, 2010

Urban Myth: There Are No Job Openings


Complaints about there being no job openings are just whining.

Now, there are some caveats to that blue curve.

  • We’re only up to the level of Fall 2008, and the economy wasn’t great then.
  • The graph doesn’t go far enough back to show that we’re still off from, say, 2006.

But, if someone you know can’t pick up a job, chances are that they are sending out bad signals (or no signals at all) to potential employers.

Read the whole thing – in it, Casey Mulligan argues that this is because of the promotion of disincentives to work in public policy.

I prefer to think that what we’ve got here is a tailor-made excuse for collective laziness: I think there’s too many people complaining about the lack of programs to help them out … so they’re not even active enough to recognize the disincentive.

Thursday, August 5, 2010

A Challenge for Those Who Want More Government

Don Boudreaux wonders why those who want more government don’t point to the successes of the U.S. economy with the government programs we already have:

But if I were a pro-regulation and high-tax kinda guy, why would I dispute the claim that America’s economy has performed remarkably well for everyone even since 1973?  Why would I not say “See, the government programs enacted from the New Deal forward are working!”  At no time during the past 35 years has Uncle Sam’s budget been severely reduced.  During those years, some welfare programs have been scaled back, while others have been expanded and even newly created.  Trade is freer today, but the post-WWII trend toward freer trade began in the 1940s, long before those allegedly blissful years of the early 1970s.  Since the early 1970s, some regulations have been repealed, while others have been created at both the state and national levels.

In short, despite what some pundits mysteriously assert, America during the past twenty-five to thirty-five years has emphatically not been a laissez-faire society.  Not even close.  So why do so many persons on the political left see in the economic data of the past three decades a compelling case for even greater government control over our lives and pocketbooks?  And why don’t more of these same persons on the left respond to those of us who advocate less government by pointing to the evidence of continued and widespread growth in prosperity by saying proudly “See!  We’re right and you’re wrong: government intervention does work well!”

We have a lot of government programs already – either times were good and we need more of them, or they weren’t and we need less. Which is it?

I think that’s a fair question.

Quote About Economic Eschatologism*

Via Don Boudreaux:

I pose today …  the same question that Thomas Babington Macaulay posed in 1830 to the irrational pessimist Robert Southey:
On what principle is it, that when we see nothing but improvement behind us, we are to expect nothing but deterioration before us?

I think this is a worthwhile question for all economics students.

* Eschatologism is the belief that the study of the “end of days” of a particular religion is important for day to day decision-making in the here and now.

How’s Cuba Actually Done?

Matched pairs is a standard technique in statistics to reveal whether there are differences in behavior.

The key is, who to match. We probably shouldn’t match Cuba with Spain because the latter was its imperial owner for so long. So how about Cuba and Portugal – the latter was clearly worse off than Cuba when Castro took over, and had its own problems with dictators over the last 50 years.

Here’s a video  – move the slider to 1950 and click play.

It shows how life expectancy has gone up in both countries at about the same rate – that’s the vertical axis.

But, real GDP per capita – the variable most closely associated with quality of life – does not change at the same rate.

Via Cafe Hayek.

Wednesday, August 4, 2010

Evidence Against Price Stickiness

Alex Tabarrok points out that the there are far more unemployed houses than people, and that prices – while sticky for both – are less sticky for houses.

That’s an interesting idea to carry around for the next time sticky prices comes up in class.

Monday, August 2, 2010

There Are People Who Argue that Well-Being In the U.S. Has Not Improved In Their Lifetime

Take a look at this photo set from the early 1940’s – when the U.S. was by far the richest country in the world.

Respectfully, I think large fractions of people who voice the opinion in the title are either lying or mentally ill.

Video Showing the Unemployment Rate by County

A couple of years of monthly unemployment rate data, by county, shaded, and set to video.

What I really like is the way the recession starts out spotty, but then coalescences into two waves converging inwards from the coasts.