Tyler Cowen's Blog
November 28, 2014
We were talking about this at lunch the other day, and now Josh Barro steps forward with the numbers:
The average price of an individual New York City taxi medallion fell to $872,000 in October, down 17 percent from a peak reached in the spring of 2013, according to an analysis of sales data. Previous figures published by the city’s Taxi and Limousine Commission — showing flat prices — appear to have been incorrect, and the commission removed them from its website after an inquiry from The New York Times.
In other big cities, medallion prices are also falling, often in conjunction with a sharp decline in sales volume. In Chicago, prices are down 17 percent. In Boston, they’re down at least 20 percent, though it’s hard to establish an exact market price because there have been only five trades since July. In Philadelphia, the taxi authority recently scrapped a planned medallion auction.
November 27, 2014
Is this information about the work week good news or bad news?
But in reality, France’s 35-hour week has become largely symbolic, as employees across the country pull longer hours and work more intensely, with productivity per hour about 13 percent higher than the eurozone average. And a welter of loopholes lets many French employers outmaneuver the law.
All told, French workers put in an average of 39.5 hours a week, just under the eurozone average of 40.9 hours a week, according to the Organization for Economic Cooperation and Development.
That is from Liz Alderman.
“Ghost cities” lined with empty apartment blocks, abandoned highways and mothballed steel mills sprawl across China’s landscape – the outcome of government stimulus measures and hyperactive construction that have generated $6.8tn in wasted investment since 2009, according to a report by government researchers.
In 2009 and 2013 alone, “ineffective investment” came to nearly half the total invested in the Chinese economy in those years, according to research by Xu Ce of the National Development and Reform Commission, the state planning agency, and Wang Yuan from the Academy of Macroeconomic Research, a former arm of the NDRC.
…The bulk of wasted investment went directly into industries such as steel and automobile production that received the most support from the government following the 2008 global crisis, according to the report.
Mr Xu and Ms Wang said ultra-loose monetary policy, little or no oversight over government investment plans and distorted incentive structures for officials were largely to blame for the waste.
Don’t forget this part:
Misallocation of capital and poor investment decisions are not the only explanation for the enormous waste in China’s economy. A significant portion of China’s post-crisis stimulus binge was simply stolen by Communist Party officials with direct responsibility for boosting growth through investment, according to separate estimates by Chinese and overseas economists.
Addendum: Here is a criticism of how that estimate was made.
Merkel, in her early thirties, was looking forward to 2014—when she would turn sixty, collect her state pension, and be allowed to travel to California.
That is from the George Packer profile of Angela Merkel, which I will recommend to you all once again, do note it starts a bit slowly but picks up.
November 26, 2014
FDR once tried to move Thanksgiving, as an act of economic stimulus. If Putin is going to recreate some version of a non-communist yet Soviet-like empire in his part of the world, perhaps he could also bring back the 24-game world chess championship match? Season four of Homeland is in fact remarkably good, after I had written the show off. When will everyday flying feel like Thanksgiving travel? I am teaching myself Yucatán-style cooking, which involves lots of achiote. sour orange juice (naranja agria), Mexican oregano, and white vinegar. Cass Sunstein argues that nudging is philosophically defensible (at the very least); I would like to read a paper on friendship and nudging — how much would I want democratically elected friends to nudge me and why exactly might I object? Macro is the one field which has lost relative attention since 1970, perhaps gathering new data there is so tough. Here are four animals that lie, including moths. Why is more than seven percent of the industrial space in Kansas City, Missouri underground in former limestone mines? There is a consumption boom in the Philippines, I will visit there again next summer. The George Packer New Yorker profile of Angela Merkel was one of the best articles of the year.
I am thankful and grateful for many things, Happy Thanksgiving everyone…!
Paul Krugman has an interesting blog post arguing that Keynes is slowly winning. But, I must admit, I find it dismaying how little of the contrary evidence is considered. Let’s say you set out to write a blog post about Keynes losing, what might you cite?:
1. Keynesians predicted disaster following the American fiscal sequester, and the pace of the recovery accelerated.
2. Even Obama and the Democrats are writing down, and seeing through, budgets with declining levels of discretionary spending.
3. The UK saw a rapid recovery, and the BOE kept nominal gdp growing at a good pace, even in the presence of a so-called “liquidity trap.” This is not mainly due to the UK having “stopped tightening,” nor did the Continental economies which let up on austerity see similar recoveries. Nor had the Keynesians predicted that letting up on tightening would bring such a strong recovery, Summers for instance had predicted exactly the opposite.
4. Rate of change recoveries in the Baltics — which really did try a kind of radical austerity — have been stronger and more rapid than Keynesians were predicting, even if absolute levels remain less than ideal.
5. France doesn’t seem to have much interest in trying additional government spending, even though their economy is flailing and no other attempted remedies have been successful.
6. Ireland finally is seeing a rapid recovery, albeit one with highly uneven distributional consequences and possibly another real estate bubble. The “get the pain over with” approach is looking better right now than it did say two years ago.
7. It is the ECB which seems to hold all of the levers in the eurozone, and the Japanese central bank which is making the (possibly failed) splash in Abenomics. That may be anti-anti-Keynesian, but it’s not exactly Keynesian either.
8 The Chinese have moved to discount rate cuts, and they seem to realize that more fiscal spending will only postpone their day of reckoning in terms of excess capacity. That’s not an “anti-Keynesian” attitude, given the current features of their economy, but it’s not exactly screaming the relevance of Keynes’s GT either.
9. It looks like Germany actually will support some additional infrastructure spending. You could call that a Keynesian victory, but more likely it also will be used to shut down further debate. Here is one estimate of what will be done. It’s not that much.
10. Japan is in a (supposed) liquidity trap, but negative real shocks have not in fact helped their economy, contra to the predictions of that model (start with here and here). Nor does anyone think that the bad weather in the first quarter of U.S. 2014 was good for us, although a basic liquidity trap model implies it will boost inflation (beneficially) because the supply restrictions lead to price hikes which tax currency holdings and thus boost AD. Come on, people, that is weak.
11. A lot of the cited predictions of the Keynesian or liquidity trap model are in fact simple predictions of efficient markets theory (such as on interest rates), predictions of market monetarism or credit-based macro theories (low inflation), or regularities that have held for decades (budget deficits not raising real interest rates). It’s just not that convincing to keep on claiming these predictions as victories for Keynesianism and in fact I (among many others) predicted them all too. I never thought I was much of a sage for getting those variables right.
12. Whether we like it or not, large chunks of Asia still seem to regard Keynesian economics with contempt. They prefer to stress supply-side factors.
13. At the Nobel level, Mortensen, Pissarides, and Fama do not exactly count as Keynesian material, admittedly Shiller is on the other end of the scale, though even there I am not aware he has a strong record of speaking out on behalf of activist fiscal policy.
14. It is now widely acknowledged that there has been a productivity problem in recent times (or maybe longer), and thus those measurements of “the output gap” are looking smaller all the time. Again (a common pattern in these points), nothing there implies “Keynes is wrong,” but it does make Keynes less relevant.
15. Where Keynesian views have looked very good is that government spending cuts do — these days — bring steeper and rougher gdp tumbles than was the case in the 1990s. That is very important, but a) it is increasingly obvious that there is catch-up for countries with OK institutions, and b) correctly or not, the world really hasn’t been convinced there is major upside to expanding fiscal policy.
The point is not that these citations give you a fully balanced view — they don’t! And it would be wrong to conclude that Keynes was anything other than a great, brilliant economist. Rather these citations, plus many of Krugman’s points, give you some beginnings for this issue. It’s not nearly “Keynes’s time” as much as many people are telling us, after all his biggest book is from 1936 and that is a long time ago. Keynes is both winning and losing at the same time, like many other people too, fancy that.
…of those in middle-skill occupations who remain in a full-time job, about 83 percent are still working in a middle-skill job one year later. … What types of jobs are the other 17 percent getting? Mostly high-skill jobs; and that transition rate has been rising. The percent going from a middle-skill job to a high-skill job is close to 13 percent: up about 1 percent relative to before the recession. The percent transitioning into low-skill positions is lower: about 3.4 percent, up about 0.3 percentage point compared to before the recession. This transition to a high-skill occupation tends to translate to an average wage increase of about 27 percent (compared to those who stayed in middle-skill jobs). In contrast, those who transition into lower-skill occupations earned an average of around 24 percent less.
The most contentious may be one put forward by a group called Ecopop, which would limit immigration to 0.2 per cent of the resident population. That has alarmed businesses, who worry it would make it harder to hire skilled staff and sour relations with the EU, which is Switzerland’s largest export market.
Another initiative would force the central bank to hold 20 per cent of its assets in gold, as well as ban it from selling any of its holdings of the metal. Gold bug supporters say it would strengthen Switzerland’s independence but the central bank has warned it will make harder its job of ensuring economic stability.
And the third would scrap the system of tax privileges for wealthy foreigners that prompted such people as Michael Schumacher, German Formula 1 racing driver, and Ingvar Kamprad, Swedish Ikea founder, to call Switzerland home.
The full FT story is here. I am hoping they all fail, although the social scientist in me is curious about #2.