Tyler Cowen's Blog, page 222
February 25, 2014
What would Fedcoin look like?
JW, a loyal MR reader, writes to me:
It’s 2018, Janet Yellen has been renominated to be Fed Chair by President Walker having served a successful first term of solid growth and low inflation. However, to achieve such growth Yellen has had to maintain very low interest rates. Then, disaster strikes. France leaves the Euro unexpectedly and causes a world wide credit crunch. It’s 2008 all over again. President Walker is unwilling to do any stimulus. Yellen decides that a regime change is necessary at the Fed.
Taking to heart MMT, Keynes, Bernanke, Yellen merges Keynes’ idea of burying money in jars with Helicopter Ben’s idea of dropping money from the sky. The Fed announces that the United States is going to create its own cryptocurrency, which can be exchanged for US dollars at any US regulated depository institution. No or minimal fees can be charged by the banks for this exchange. They will be created just like Bitcoin, decentralized and according to a mining algorithm. American citizens can mine them, create businesses to do so, and put people to work. Unlike Bitcoin, the supply of DollarCoin will not be finite, capped at 21 million. Instead, DollarCoin will be targeted to grow at an inflation rate consistent with an NGDPLT of 20 trillion US dollars. Liquidity is restored. No QE is necessary. CNBC starts cheerfully referring to DollarCoin as YellenCoin.
Meanwhile, Bitcoin plummets in value. With the US Government now accepting a cryptocurrency, its advantages vanish. People’s belief in its value goes away, and looking down, it crashes. Remittances are now sent to relatives in Africa and Latin America by YellenCoin, just as people once did briefly in Bitcoin.
It is interesting to think about why this is so implausible. There are a few reasons:
1. YellenCoin would be a means of payment but not the medium of account. This would move the economy into a currency substitution model, a’la Girton and Roper, but would not have the effects of a straightforward monetary expansion.
2. Cryptocurrencies are much more likely to be used for some kinds of transactions than others. So this act of “monetary policy” would be very much non-neutral.
3. Central banks are not supposed to be seen as taking major risks or overturning the established order of things. They are highly risk-averse when it comes to their public reputations, and their very much prefer sins of omission to sins of commission. If the Fed established Fedcoin and something went wrong with the idea, they would be subject to especially heavy blame. In the meantime, few people (are there exceptions?) are blaming them for not establishing a cryptocurrency.
Childhood obesity is falling
Federal health authorities on Tuesday reported a stunning 43 percent drop in the obesity rate among 2- to 5-year-old children over the past decade, the first broad decline in an epidemic that often leads to lifelong struggles with weight and higher risks for cancer, heart disease and stroke.
The drop emerged from a major federal health survey that experts say is the gold standard for evidence on what Americans weigh. The trend came as a welcome surprise to researchers. New evidence has shown that obesity takes hold young: Children who are overweight or obese between age 3 and 5 are five times as likely to be overweight or obese as adults.
There is more here, via Charles C. Mann.
Why many government jobs are a bad idea for many academics
When the Obama White House requested that I serve on the National Council on the Humanities, I agreed to have my name put forward. I went through the lengthy FBI check, including repeated probing of friends about my nonexistent drug use.
But in the end the White House decided not to move my nomination forward. There were two reasons. First, taxes. In 2009 and 2010, the years of my divorce, I filed my taxes late — four weeks and 10 days, respectively. Second, I was not willing to commit to never criticizing the administration, nor to restricting my publishing agenda to topics that were unlikely to be controversial. There is just no point trying to be a public intellectual if you can’t speak your mind. This requirement was conveyed and discussed through phone calls; I have no written record to prove it. But that was how it went.
Why did the White House want such restrictions? Lawyers told me that the administration didn’t want to have to deal with even one news cycle being overtaken by media frenzy about something some low-level official had said. The administration was trying to survive in our 21st-century media environment.
That is from Danielle Allen.
Markets in Everything: Protest Rights
At the Olympics if you want to protest a decision, you must have cash:
The reason that Mathieu — and many other coaches across most Olympic sports — make certain they always have a specific amount of cash on hand is that if they want to protest an official decision during competition, they need more than just a strong opinion and an angry yell.
They also need money.
…Depending on the sport, the fee varies: for luge, it is 50 euros (about $67). Cross-country skiing, like snowboard and Alpine skiing, demands 100 Swiss francs (about $112) but stipulates that all protests must be submitted in English. Bobsled and skeleton are among the most expensive: they require a deposit of 100 euros before any protest will even be considered. If multiple countries want to make a similar protest, sharing the tab is allowed.
Hat tip to the excellent PriorProbability who also points out that if your protest is successful you get your money back so these payments are also protest bets.
*The Tyranny of Experts*
The author is William Easterly and the subtitle is Economists, Dictators, and the Forgotten Rights of the Poor.
This is Easterly’s most libertarian book, self-recommending. It is due out March 4.
Swear words on Twitter
In daily life it is thought that between 0.5% and 0.7% of the words we use are swearwords, but the proportion on the site is roughly twice this, at 1.15%. According to this study, about one in every 13 tweets contains a swearword of some kind.
Intriguingly, swearing also seems to be an early-week thing. Tweets become more and more likely to contain a swearword as the day progresses, perhaps reflecting the accumulation of things we have to swear about, and peak profanity is reached between midnight and 1.30am, suggesting that people who are awake at that time are, let’s say, the least inhibited. Yet Friday, Saturday and Sunday are consistently the least sweary days of the week.
Please note there are specific swear words (with data) at this link. And there are lulls during lunch time.
For the pointer I thank Michelle Dawson.
When was money less important than we thought?
ModeledBehavior tweeted:
Name the period or event in economic history where we looked backed and said “hmm, money was less important than we thought at the time
I would nominate much of the 19th century. To be sure, distribution in those times really did matter, more so than today because overall levels of income and wealth were much lower. And monetary policy redistributes wealth. But the overall story of the century is one of European peace (mostly but not entirely), economic growth, and the unfolding of various industrial revolutions. Yet monetary policy was very much in the public eye, including in the United States. Monetary economics develops much more rapidly than does, say, law and economics or the economics of how to boost innovation. By the time you reach 1820, monetary economics in Great Britain is quite sophisticated, even though they lacked good data.
In the 1920s and 30s, monetary economics mattered an enormous amount — a world changing, World War-creating amount, I would say. That alone makes it worthy of very very serious study. But most important economic stories are about the long run, and if anything the human tendency is to fixate on the short run too much.
Monetary policy also did not matter so much for the East Asian economic revolutions of the postwar era. No one looks back and worries how often South Korea had double digit inflation, sometimes over twenty percent. And here is a recent inflation index for some emerging economies.
February 24, 2014
A new instrument suggests that foreign aid boosts growth
There is a new paper by Sebastian Galiani, Stephen Knack, Lixin Colin Xu, and Ben Zou, and the results are intriguing:
The literature on aid and growth has not found a convincing instrumental variable to identify the causal effects of aid. In this paper we exploit an instrumental variable based on the fact that since 1987, a major criterion for IDA (International Development Association) eligibility has been whether or not a country is below a certain threshold of per capita income. This threshold is predetermined and arbitrary, so it is plausibly exogenous to recipient countries in a model that conditions on initial income levels, country and period fixed effects. We find evidence that other donors tend to reinforce rather than compensate for reductions in IDA aid following threshold crossings. Overall, the aid to GNI ratio drops by about 60% on average after countries cross the threshold. Focusing on the 35 countries that have crossed the IDA income threshold from below between 1987 and 2010, we find a positive, statistically significant, and economically sizable effect of aid on growth. A one percentage point increase in the aid to GNI ratio from the sample mean raises annual real per capita GDP growth by approximately 0.6 percentage points. We also demonstrate that an important reason for underestimating aid effects is the attenuation bias associated with measurement errors in aid that the literature has ignored so far. Finally, there is some evidence that our results may apply to the other low-income countries that are still below the threshold.
Have stuff delivered to your car
In a ground-breaking technology move for the automotive industry, Volvo Cars demonstrates the world’s first delivery of food to the car – a new form of ‘roam delivery’ services. The service will allow consumers to have their shopping delivered straight to their car, no matter where they are. Volvo’s new digital keys technology means that car owners will be able to choose their car as a delivery option when ordering goods online. Via a smartphone or a tablet, the owner will be informed when a delivery company wants to drop off or pick up something from the car.
Having accepted the delivery, he or she then hands out a digital key and can track when the car is opened and then locked again. Once the pick-up or drop-off is completed, the digital key ceases to exist.
For the pointer I thank Samir Varma.
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