Tyler Cowen's Blog, page 551

Assorted links

1. CBO lowers its estimate of the output gap (pdf), some explanation here.

2. Ongoing news about Greece, in English, at this link.

3. The economics of scalping for Burning Man festival.

4. Do people care more about absolute than relative status?

5. Paper robots, and text here.

6. The econ blogosphere, in a nutshell.

7. Fukuyama chats with Peter Thiel.

The rule of law?

Greece's largest police union has threatened to issue arrest warrants for officials from the country's European Union and International Monetary Fund lenders for demanding deeply unpopular austerity measures.

In a letter obtained by Reuters Friday, the Federation of Greek Police accused the officials of "…blackmail, covertly abolishing or eroding democracy and national sovereignty" and said one target of its warrants would be the IMF's top official for Greece, Poul Thomsen.

More here.  My best guess is that the deal has broken down!

Hat tip goes to the excellent @counterparties.

Paul Krugman vs. the World?

I got a kick out of this, good graphics.

Let's pick a rule for the comments on this post: you can only say nice things about people!

For the pointer I thank V.

From Facebook

"XXXX is becoming more and more convinced that Tyler Cowen and Alex Tabarrok's textbook is the big news in the field of economics education. Hope to use it for my class soon, wish I had it when I was a student."

The second editions are now out, Micro, Macro, and a consolidated book, more information here.

Rhino links

1. Fake rhino attempts zoo escape, in Japan.  Might the real rhino be more fierce?  Pointer from Ryan McCarl.

2. Killing a rhino by mistake in an anti-poaching demo.  Pointer from George Edwards.

3. South Africa sends rhino poachers to jail for twenty-five years each; a lot of the demand comes from here.  At $40,000 a kilogram, "Traffickers and gangs have been breaking into museums and auction rooms in Britain and Europe to steal rhino heads and horns."  It is now feared that the eighty-five rhinos housed in British zoos will be the next target and so a high alert has been called.

Email from Bruce Caldwell

The Center for the History of Political Economy at Duke University will be hosting another Summer Institute on the History of Economics this June. The program is designed primarily for students in graduate programs in economics. Students will be competitively selected and successful applicants will receive a $2000 stipend for attending, plus free housing and reading materials. Our line-up of speakers is, I think you will agree, impressive. The deadline for applying is March 2. More information on the Summer Institute is available at our website, http://hope.econ.duke.edu/summer2012

How large is the output gap really?

Via Mark Thoma, and drawing upon James Bullard at the St. Louis Fed, MacroMania writes:

I think that Bullard makes a persuasive case that the amount of household wealth evaporated along with the crash in house prices should likely be viewed as a "permanent" (highly persistent) negative wealth shock. Standard theory (and common sense) suggests a corresponding permanent decline in consumer spending (with consumption growing along its original growth path). The implication is that the so-called "output gap" (the difference between actual and "trend" GDP) may be greatly overstated by conventional measures.

There is still not enough talk of wealth effects in current macro debates, as they are invoked only selectively.  Note by the way that if you see the output gap is somewhat smaller, you will think today's recovery is somewhat better, not in absolute terms, but relative to potential.

Here are some interesting observations about  Bullard.

Addendum: Here is comment from Scott Sumner, and Matt Yglesias.  You'll note my post is itself non-committal, though I certainly do not dismiss this argument.  Simplest response to Sumner and Yglesias is that we may have had a biased estimate of the previous trend, for bubble and TGS-related reasons.

Failing versus Forgetting

Bryan Caplan has a very good post on the human capital and signalling models of education. The key point is this, under the human capital model someone who forgets knowledge is no better than someone who failed to learn the same knowledge. Under the signaling model, however, failing and forgetting are very different. Bryan illustrates:

If I'd failed Spanish, I couldn't have gone to a good college, wouldn't have gotten into Princeton's Ph.D. program, and probably wouldn't be a professor.  But since I've merely forgotten my Spanish, I'm sitting in my professorial office, loving life.

Simple truths about Greece

From Ricardo Hausmann:

Greece will have to bring its current account deficit down to zero at some point.

This can happen in two ways: either Greece exports more or spends less. Adjusting the current account by spending less would require an additional fall in GDP of 25 per cent, given that in Greece only one in four US dollars of spending cuts goes abroad. This is clearly not a pretty picture. But adjusting by raising exports would require they increase by 50 per cent, not an easy feat. Achieving it through tourism alone would require the industry to triple in size – an unlikely prospect.

And this:

Here's the bad news for Greece: in our sample of 128 countries, it had the biggest gap between its current recorded level of income and the knowledge content of its exports. Greece owes its income to borrowed foreign spending it cannot pay back. It produces no machines, no electronics and no chemicals. Of every 10 US dollars of worldwide trade in information technology, it accounts for one cent.

This problem cannot be addressed by fiscal Keynesian stimulus, by bland trade facilitation or by paying lip-service to structural adjustment as the November International Monetary Fund agreement implicitly assumes.

Assorted links

1. There is no great stagnation: the horizontal shower.

2. What if Star Trek had social networks?

3. The culture that is Iceland.

4. New economics blog from Phillips Exeter Academy.

5. TGS for musical instruments?

6. Profile of Scott Stern's work on the economics of science.

7. Kristof has quite a reasonable review of Murray; by the way if you think dysfunctional social mores all boil down to economics, how are those Albertan tribes with the oil revenues doing?  Ex football players in bankruptcy?  etc.  Here is more Krugman on Murray, now totally on the mark.  Matt nails it too.