Tyler Cowen's Blog, page 527

Why is the UK economy failing?

Do not heed those who paint with a limited palette and speak only of fiscal austerity.  Via Scott Sumner, Britmouse has one report:

The Office for National Statistics' current data on quarterly UK nominal GDP growth in 2008 is as follows, at Seasonally Adjusted Annual Rates:

Quarter 1: 4.3%
Quarter 2: -1.7%
Quarter 3: -5.2%
Quarter 4: -3.4%

That collapse in nominal spending has no precedent in the data, and is certainly worse than anything since the 1930s. . . .

There was by the way no liquidity trap, as rates were often at five percent and in general not close to zero.  Britmouse now has his (her?  its?) own blog.

Going back in time a bit further:

The stark generational rift emerging in Britain is highlighted by a Financial Times analysis showing that the real disposable household incomes of people in their 20s have stagnated over the past 10 years just as older households are capturing a much greater share of the nation's income and wealth.

…The FT analysis of 50 years of official data also shows that the living standards of Britons in their 20s have been overtaken by those of their 60-something grandparents for the first time, with the household incomes of pensioners in their 70s and even 80s also catching up rapidly.

The data, which underpins government publications on living standards, takes no account of housing costs or wealth. Had it done so the results would have been even more dramatic, showing median living standards of people in their 20s have now slipped below those of people in their 70s and 80s.

The problems over there are deeply rooted.

Nonetheless, via David Harbottle, we learn that during the Olympics there is a home in London for rent for about $412,646 per month.  So far there appear to be no takers.  The price is listed as negotiable.

Assorted links

1. I don't actually deserve to make Italian Vogue.

2. The culture that is America (Sweden).  A short comparative video.

3. How corruptible is New Jersey anyway?

4. Most popular art exhibitions of 2011 (pdf), discussion here.  The winner is Brazil.

5. How Fred Astaire's dancing changed the movies.

6. What is driving increasing African migration to the U.S.?

The book truck

Sometimes the number of books arriving at the house each day exceeds my ability to carry them away (not a complaint), in part because I am not always in town to bring them to the office.  Kathleen Fasanella suggests the book truck:

I have a Bretford, 36″ long shelves (6 sloped shelves), 18″ deep, 43″ or so high, 5″ Casters. 2 swivel, 2 lock. It is a welded frame so there is nothing to put together (except to snap in the casters)This model is available at highsmith…http://www.highsmith.com/Bretfordreg-...

The model no is L3W-H10251, bottom of the page at the above link.

This is the least expensive price I found but I don't know if this company is any good:

http://www.worthingtondirect.com/scho...

Here is her blog post on how to organize books.

I am going to buy the book truck.

"Foreign" Aid

Astute piece in the NYTimes by Steven Lee Myers on military aid to Egypt Florida.

An intense debate within the Obama administration over resuming military assistance to Egypt, which in the end was approved Friday by Secretary of State Hillary Rodham Clinton, turned in part on a question that had nothing to do with democratic progress in Egypt but rather with American jobs at home.

…"In large part, there are U.S. jobs that are reliant on the U.S.-Egypt strong military-to-military relationship," a senior State Department official said, speaking on condition of anonymity under rules set by the department.

…"Lockheed Martin values the relationship established between our company and the Egyptian customer since the first F-16s were delivered in the early 1980s," said Laura F. Siebert, a spokeswoman for the company, which is based in Fort Worth.

…The M1A1 components are built in factories in Alabama, Florida, Michigan, Ohio and Pennsylvania, several of them battleground states in an election that has largely focused on jobs. Because the United States Army plans to stop buying new tanks by 2014, continued production relies on foreign contracts, often paid for by American taxpayers as military assistance.

The real competitor to driverless cars

Enter the Tacocopter.  It does not seem to be a hoax:

The Internet is going wild for Tacocopter, perhaps the next great startup out of Silicon Valley, which boasts a business plan that combines four of the most prominent touchstones of modern America: tacos, helicopters, robots and laziness.

Indeed, the concept behind Tacocopter is very simple, and very American: You order tacos on your smartphone and also beam in your GPS location information. Your order — and your location — are transmitted to an unmanned drone helicopter (grounded, near the kitchen where the tacos are made), and the tacocopter is then sent out with your food to find you and deliver your tacos to wherever you're standing.

You pay online, so the tacos are simply dropped off at your feet by the drone helicopter, which then flies back to the restaurant to pick up its next order.

The article is here. And yet there is bad news afoot, and it is no surprise:

The U.S. government is single-handedly preventing you from ordering a taco and having it delivered to you by a totally sweet pilot-less helicopter.

For the pointer I thank @ModeledBehavior.  I believe that drone delivery is an idea worthy of further consideration; imagine delivering medicines to the elderly.

Europe fact of the day

European households will spend close to 11 per cent of income on heating, lighting, cooking and personal transport this year, compared with the historical average of 6-7 per cent and 9 per cent last year, Mr Birol said.

Here is more.

Three new additions to my pile

Jonathan Schlefer, The Assumptions Economists Make.

James K. Galbraith, Inequality and Instability: A Study of the World Economy Just Before the Great Crisis.

Abhijit V. Banerjee and Esther Duflo, Poor Economics: A Radical Rethinking of the Way to Fight Global Poverty.  Not their only co-authorship, now out in paperback.

Corruption and the history of development economics

A few observations, based on some recent reading:

1. It is remarkable how little the topic is discussed in the mainstream literature before the 1990s.  Gunnar Myrdal to his credit does discuss it a bit in his Asian Drama.

2. I have seen more than a few articles suggesting Anne Krueger showed that rent-seeking accounted for 7.3 percent of Turkish gdp (in the 1960s).  That's not what Krueger said.  Rather she showed that import licenses were equivalent to this value, and that this provided an upper bound for the amount of rent-seeking.

3. The real costs of rent-seeking and corruption are the "limits to technology transfer" argument of Parente and Prescott, not the standard rent-seeking box.  That paper alone could bring a Nobel Prize, and yet it's hardly ever mentioned in assessments of Prescott.

Jim Yong Kim nominated to head World Bank

Of course he is likely to get the nod.  He is currently president of Dartmouth, and Wikipedia tells us this about his public health background:

Over the past few years, Kim has been involved in the development of a new field focused on improving the implementation and delivery of global health interventions. He believes that progress in developing more effective global health programs has been hindered by the paucity of large-scale systematic approaches to improving program design. This new field will rigorously gather, analyze, and widely disseminate a comprehensive body of practical, actionable insights on effective global health delivery. In order to develop this field, Kim co-founded the Global Health Delivery Project, a joint initiative of Harvard Medical School's Department of Social Medicine and the Harvard Business School's Institute for Strategy and Competitiveness. The global health field case studies produced by this project form the core of a new global health delivery curriculum now taught at Harvard School of Public Health. Kim's team has also developed a web-based "community of practice", GHDonline.org, to allow practitioners around the world to easily access information, share expertise, and engage in real-time problem solving. Kim is on the Advisory Board of Incentives for Global Health, the NGO formed to develop the Health Impact Fund proposal.

And:

Kim has 20 years of experience in improving health in developing countries. He is a founding trustee and the former executive director of Partners In Health, a not-for-profit organization that supports a range of health programs in poor communities in Haiti, Peru, Russia, Rwanda, Lesotho, Malawi and the United States.

From 2004 to 2006, Kim served as Director of the World Health Organization's HIV/AIDS department, a post he was appointed to in March 2004 after serving as advisor to the WHO Director General. Kim oversaw all of the WHO's work related to HIV/AIDS, focusing on initiatives to help developing countries scale up their treatment, prevention, and care programs, including the "3×5" initiative designed to put three million people in developing countries on AIDS treatment by the end of 2005.

He was born in Korea but is an American citizen.  He is an expert on tuberculosis.  Here is a video of Kim as a rapping spaceman.  Here is one good Twitter comment.

James Stock and Mark Watson on the Great Recession

Binyamin Applebaum summarizes their new paper:

The paper, entitled "Disentangling the Channels of the 2007-2009 Recession," will be posted on the general conference Web site Thursday afternoon.

The authors argue that the slow pace of recovery reflects a long-term deterioration in economic prospects. Specifically, they estimate that the trend growth rate of gross domestic product fell by 1.2 percentage points between 1965 and 2005.

…the key reason for the faltering pace of growth is that the work force is expanding more slowly. Population growth has slowed, and so has the pace at which women are entering the labor market.

"These demographic changes imply continued low or even declining trend growth rates in employment, which in turn imply that future recessions will be deeper, and will have slower recoveries, than historically has been the case."

Indeed, recent growth has actually outpaced their expectations.

"The current recovery in employment is actually faster than predicted," they write. "The puzzle, if there is one, is why the recovery was as strong as it has been."

This general theory about the power of women has been propounded before, notably by the economist Tyler Cowen in his recent book "The Great Stagnation."

The paper itself can be found here (pdf). By the way, for market monetarists, equity markets seem to agree.  Stock and Watson, of course, are two of the most technically accomplished macroeconometricians.  This is further evidence — perhaps the most thorough empirical paper on the topic to date — that the Great Recession has been about the interaction of cyclical and structural forces.

Other interesting papers from that symposium are here, including a DeLong-Summers defense of stimulus as possibly self-financing.