Tyler Cowen's Blog, page 460
September 5, 2012
MRU’s First Course: Development Economics
The first course from Marginal Revolution University is Development Economics and it will be taught by Tyler Cowen and myself. Development Economics will cover the sources of economic growth including geography, education, finance, and institutions. We will cover theories like the Solow and O-ring models and we will cover the empirical data on development and trade, foreign aid, industrial policy, and corruption. Development Economics will include not just theory but a wealth of historical and factual information on specific countries and topics, everything from watermelon scale economies and the clove monopoly to water privatization in Buenos Aires and cholera in Haiti. A special section in this round will examine India. There are no prerequisites for this course but neither is it dumbed down. We think there will be material in Development Economics that will be of interest to high school students in the United States and Bangladesh and also to PhDs in economics, even to those who specialize in this field.
Development Economics covers all the major topics of a sit-down class but because we have built it to be on online course from the ground up–no videos of us talking to a classroom–it will take less than half of the time of a sit-down class, plus no need to search for parking!
Our motto at MRU is “Learn, Teach, Share” so we will be inviting the world not just to learn but also to teach and share their knowledge. GMU is a very entrepreneurial university and we think we can be a world leader in online education.
Please do go to MRU and submit your email to be notified about our start date and registration which will allow you to contribute in our forums and online events. Development Economics is free to the world.
Stay tuned for more!
An announcement is coming later today
From us, a short bit before noon. Today’s posts will go up at that time!
September 4, 2012
John Cochrane on precommitment
A very interesting post. Here is one excerpt:
Mike’s enthusiasm for deliberate inflation is even more puzzling to me. Mike uses the word “stimulus,” never differentiating between real and nominal stimulus. Surely, we don’t want to cook up some inflation just for its own sake — we want to cook up some inflation because we think it will goose output. But why? Why especially will increasing expected inflation help? Because that is the aim of all the policies under discussion here — promising to keep rates low even once inflation rises, adopting “nominal GDP targets,” helicopter drops, or similar policies such as raising the inflation target.
I don’t put much faith in Phillips curves to start with — the idea that deliberate inflation raises output. I put less faith in the idea floating around Jackson hole that a little inflation will set us permanently back on the trend line, not just be a little sugar rush and then back to sclerosis.
But nobody has a Phillips curve in which raising expected inflation is a good thing. It just gives you more inflation, with if anything less output and employment. Read Mike’s book!
Higher education prices are too high
I know all about the literature on the rising returns to higher education. But there are two blades to the Marshallian scissors! Supply needs to do its job here.
What counts as progress in North Korea
Some analysts say they have been surprised at the new leader’s [Kim's] willingness to criticize the status quo, most notably during a visit four months ago to an amusement park.
Although state media normally describe the North as a socialist paradise, they portrayed Kim touring the park grounds and grumbling about the state of disrepair. He spotted chipping paint, cracks in the pavement and sprouting weeds, which he plucked one by one “with an irritated look,” one media account said.
During the visit, Kim chided officials for letting the park fall into such a sorry state and for their “outdated, ideological” way of thinking. He appointed a top deputy to oversee improvements.
A follow-up report two weeks later said that “soldier-builders” were “now waging an all-out drive to turn the above-said [amusement park] into a more modern recreation ground.”
The article outlines some agricultural reforms as well.
Sentences to ponder
Apple became the world’s most valuable-ever company two weeks ago. It is worth $624bn, more than all the listed companies in Portugal, Ireland, Greece and Spain together. The employer of 63,300 people – each valued at $10m – is more valuable than all the shares available to investors in the MSCI China index, the international benchmark.
Apple is not as big as the domestic Chinese market. But the comparison is not silly: it is more than half as big as the free float of A shares, where foreign investment is restricted.
Here is more.
September 3, 2012
Nick on Chinese stimulus
He emails me:
Why isn’t China post-2008 considered a great real world experiment of Keynesian stimulus?
-It was large enough (roughly 3x US stimulus as % of GDP iirc)
-The govt was starting from relatively low levels of public debt (reported anyway) so there wasn’t a crisis of confidence issue as in Europe today
-It was invested heavily into infrastructure and projects (like solar) slated to improve long run efficiency in an economy that arguably had room to increase capital stock per capita
-The political leadership directing the stimulus spending is made up of engineers, scientists, and other highly educated politicians who did not need to run for public election and thus could focus on longer run trade-offs
-The goal was to bridge a period of weak external demand rather than fundamentally alter the economy
Is this not a Keynesian’s dream scenario? My guess is that now Keynesians would say the spending was misguided and wasteful. But that’s the point! Western elites constantly praise Chinese leadership for their acumen — even today there’s an incredible amount of faith inside and outside the country that they will thread the needle — but they too were wasteful when it came to rapidly expanding government spending.
I have greatly enjoyed the recent pieces on China as I currently live in REDACTED…Fwiw, my take is that yes, the 2009 Chinese stimulus was a great test of large-scale govt stimulus and that we are seeing the results of what this looks like *in practice* rather than *in theory*. In practice, large-scale government stimulus is an invitation for corruption and a diversion of resources that builds up knowledge and capital in unproductive areas. As Obama said after the US stimulus package: there’s “no such thing as shovel ready projects.” Even in China.
Addendum: Matt Yglesias comments.
The forward march of progress
The California state legislature just moved that dream a little closer to reality by approving a bill paving the way for driverless cars to be allowed on Golden State freeways.
The bill, authored by State Senator Alex Padilla (D-Van Nuys), was passed by the state Assembly on Wednesday and then given the overwhelming thumbs up by the state Senate the following day.
If signed by Governor Jerry Brown, Padilla’s bill would legally allow autonomous vehicles on the road and charge the state’s Department of Motor Vehicles with determining the standards for self-driving cars, rules which current do not exist under the present vehicle code.
Here is more, and for the pointer I thank Mark Thorson. By the way,
Hawaii, Florida, Arizona and Oklahoma are all also considering similar legislation.
A short note on the gold standard
I do not favor a gold standard, nor do I for that matter favor price stability, nor do I think a gold standard brings short-run price stability. I think a gold standard today would be much worse than the 19th century gold standard, in part because commodity prices are currently more volatile and may be for some time. I do not favor commodity bundle standards. I favor some amount of ongoing inflation, and my reasons for this view are close to those of Larry Summers.
That all said, when I read recent critiques of the gold standard, occasioned by recent GOP debates on the topic, I feel I am living in a different universe than those who wrote them. A few points:
1. Jim Hamilton aside, hardly anyone has reported the denouement: “…the final document [the GOP platform] makes no mention of gold, and instead seems to have settled on a proposal that is unlikely to do any harm…”
2. Why is no one mentioning Christina Romer’s work on how discretionary macroeconomic management does not have a totally superb comparative historical record in lowering volatility? Start here, but there is more in this literature. She is still a prominent economist.
3. Dare anyone critical of the gold standard bring themselves to utter these (roughly true) words?: “For the Western world, the gold standard era, defined say as 1815-1913, was arguably the greatest period of human advance ever, at least in matters of economics, culture, and technology.” Chunks of the post-WWII era contend for this designation, but still this sentence is not a crazy one.
4. I remain baffled by treatments of Japan’s slow growth era as primarily a monetary phenomenon. Under such a view, how was Europe’s 19th century possible at all? Why wasn’t it a total economic disaster? Data from government bonds show that “expected inflation” across the period was close to zero, yet somehow “For the Western world, the gold standard era, defined say as 1815-1913, was arguably the greatest period of human advance ever, at least in matters of economics, culture, and technology.”
Good economics is to integrate #2 and #3 with the fact that one need not favor a gold standard. I’ve been seeing a lot of arguments against gold standards, many of which I agree with. What I haven’t been seeing is the integration with the broader set of relevant facts, which of course present a more complicated picture.
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