January 09, 2004
One of the Facts of the Millennium

Ronald Lee (2003), "The Demographic Transition: Three Centuries of Fundamental Change," Journal of Economic Perspectives 17:4 (Fall), pp. 167-190. In 1800, women spent about 70 percent of their adult life bearing and rearing young children, but that fraction has decreased in many parts of the world to only about 14 percent... Before the start of the demographic transition, life was short, births were many, growth was slow, and the population was young. During the transition, first mortality and then fertility declined, causing population growth rates first to accelerate and then to slow again, moving toward low fertility, long life, and an old population. The transition began around 1800 with declining mortality in Europe. It has now spread to all parts of the world and is projected to be completed by 2100. This global demogaphic transition has brought momentous changes, reshaping the economic and demographic life cycles of individuals and restructuring populations. Since 1800, global population szie has already increased by a factor of six and by 2100 will have risen by a factor of ten. There will then be 50 times as many elderly, but only 5 times as many children.... The length of life, which has already more than...

Posted by DeLong at 06:10 AM

January 07, 2004
Two of the Most Benificent Transformations in Human History

The Financial Times's Martin Wolf writes about how the crisis of Europe's social-insurance state is but the flip side of an extraordinary revolution in human welfare: FT.com Home US: We are enjoying two of the most beneficent transformations in human history: a revolution in life expectancy and the liberation of women.... [H]ow do we respond? We mope about imploding pension schemes. The worries are not unjustified. But let us for a moment enjoy the achievement. Two centuries ago, life expectancy in today's high-income countries was 36 years; today, it is nearly 80. In the early 19th century, French mortality in the first year of life was 181 per 1,000; today, it is four. Today, parents can expect their children to survive them and both men and women have hopes of living lives that are long, varied and fulfilling. We can even hope for that comfortable extended holiday we call retirement. Or can we? What has been liberating for individuals creates challenges for collectives. The nature of that challenge was spelt out by Adair Turner, former director-general of the Confederation of British Industry and currently chairman of the UK's commission on pension policy, in a lecture last autumn.* Europe, observes Mr...

Posted by DeLong at 09:43 AM

December 29, 2003
Fuel Economy

John Irons points to a new Congressional Budget Office study saying that auto fuel-economy standards are a much worse policy than a gasoline tax....

Posted by DeLong at 05:21 AM

December 27, 2003
High and Mighty

I have Keith Bradsher's book about SUVs in the to-be-read pile. But meanwhile Hal Varian writes about the costs of SUVs: Economic Scene: The True Costs of S.U.V.s: ...Michelle White, an economist at the University of California, San Diego, estimates that for each fatality that light-truck drivers avoid for themselves and their passengers, they cause four fatalities involving car occupants, pedestrians, bicyclists and motorcyclists. "Safety gains for those driving light trucks," Ms. White said, "come at an extremely high cost to others." Being larger than ordinary vehicles, S.U.V.'s and light trucks cause more damage to upper bodies and heads in collisions. Furthermore, their bumpers do not always align with automobile bumpers, and their body structure is stiffer, transferring more force to other vehicles during impact......

Posted by DeLong at 04:27 PM

December 22, 2003
Policy Markets

Daniel Davies rants about how the tradesports.com policy markets are inefficient: Crooked Timber: Actually Existing Terrorism Futures : I'd also point out that if any CT readers fancy having a punt that the threat will stay Orange for the remaining nine months of the year, they certainly should not buy Orange at 88; selling Red at 5 and Yellow at 10 gives you a better profit if Orange persists, plus a free bet on Blue and Green. It doesn't say wonders about the efficiency or liquidty of the market that it has glaring anomalies in it like that (it's also possible to bet on the Lord of the Rings film taking more than $116m over the weekend, which it did, and you can also have a look at a US Economic numbers book in which the probability of the Personal Incomes number being above 0.4% is quoted at 55-65, while the probability of it being above 0.7% is quoted 61-70. (Update: Or at least it was before I took out some sucker's bid; if you want to fact-check my ass, email me and I'll send you the screenshot). But he cannot resist trying to profit from the inefficiency--and so pushes...

Posted by DeLong at 09:46 AM

December 15, 2003
Daniel Davies Defends "Theory"

Daniel Davies comes up with the most eloquent and insightful justification for the heavy use of mathematical tools within academic economics that I have ever seen: Crooked Timber: The War On (some kinds of) Theory : ...And the point I'm trying to make is this; in the construction of arguments of this kind [within economics], there are certain kinds of mistake which it is fearfully easy to make. It's easy to spot particular benefits and miss the fact that their counterparts are costs elsewhere in the system. To come up with arguments which, if true, would imply that people systematically allowed others to impoverish them without changing their behaviour. To miss the fact that your model requires the build-up of debts forever that never get repaid. Etc, etc. The bestiary of really bad economic commentary is full of all sorts of logical howlers. And the good thing about building mathematical models is that, in general, it acts as a form of double-entry book-keeping, to make sure that, if you've followed the rules of the game, your economic argument will not have any of these most common and most egregious flaws. It doesn't mean that it won't be bad or misleading...

Posted by DeLong at 11:33 AM

December 08, 2003
A Look Back at Deregulation

Alfred Kahn argues that airline and telecommunications deregulation was a very good idea: Economist.com | Economics focus: ...Not so, as Mr Kahn's methodical analysis makes plain. Deregulation of the airline industry has been, he says, "a nearly unqualified success, despite the industry's unusual vulnerability to recessions, acts of terrorism and war." The benefits to consumers have been estimated at in excess of $20 billion a year, mainly in the form of lower fares and huge increases in the availability of fast one-stop services between hundreds of cities. Consumers do complain that standards of service have fallen. So they have--because passengers are unwilling to pay for them. Through competition, the market has discovered that consumers prefer cheap tickets to frills. Such discoveries are the whole point. American telecoms deregulation is a more complicated tale, but here, too, Mr Kahn draws attention to several large and clear benefits: much cheaper rates for long-distance calling; vastly cheaper cellular and other wireless services; and, in both cases, correspondingly hug increases in usage. Reluctant as consumers may be to believe it, competition is far and away their best friend in economic policy... http://www.aei-brookings.org/admin/authorpdfs/page.php?id=303...

Posted by DeLong at 09:29 AM

November 22, 2003
Robert Dixon on the "Dismal Science"

Robert Dixon from Melbourne writes about the phrase, "dismal science": Thomas Carlyle attacking the 'political economists': ...The second of the two references to Malthus in Carlyle's works is in a pamphlet titled Chartism first published in late 1839. Carlyle writes: "The controversies on Malthus and the 'Population Principle', 'Preventative Check' and so forth, with which the public ear has been deafened for a long while, are indeed sufficiently mournful. Dreary, stolid, dismal, without hope for this world or the next, is all that of the preventative check and the denial of the preventative check" (Volume 10, p 419). Taken in its context, it is clear that Carlyle is not so much objecting to Malthus's views in particular, but to any debate which focuses only the material conditions of life. Carlyle, here and elsewhere, objects to that way - what he claims is political economy's way - of looking at 'man'. Notice also that, although the word "dismal" is used, Carlyle does not here (or anywhere else where he talks about Malthus) use the phrase "dismal science". Well, if not in relation to Malthus, in what context did Carlyle (first) use the phrase "dismal science"? It made its appearance in an...

Posted by DeLong at 02:35 PM

November 16, 2003
Notes: Eric Verhoogen

Eric Verhoogen is on the junior economics job market from Berkeley this year. He's not my student, but he has what is by all accounts a great job market topic with real, very interesting results: Eric Verhoogen: Eric Verhoogen (2003), "Trade, Quality Upgrading and Wage Inequality in the Mexican Manufacturing Sector: Theory and Evidence from an Exchange Rate Shock" (Berkeley: U.C. Berkeley xerox). Abstract: This paper proposes a new explanation of the coincidence of expanding trade and rising wage inequality in developing countries, and investigates its causal implications in a panel of Mexican manufacturing establishments. In a theoretical setting with heterogeneous firms and quality differentiation, only the most productive firms in a developing country like Mexico enter the export market, and they produce a better-quality good for export than for the domestic market in order to appeal to richer developed-country consumers. An increase in the incentive of developing-country producers to export to a developed country generates differential quality upgrading within industries, as more-productive firms increase exports and produce a greater share of high-quality goods, while less-productive firms remain focused on the domestic market. Producing high-quality goods in turn requires paying high wages both to white-collar and to blue-collar -- but...

Posted by DeLong at 12:27 PM

October 27, 2003
Greg Mankiw and Seatbelt Sam

"Huh," says the Thirteen-Year-Old. "Do you think this is true?" He is on page 7 of Greg Mankiw's Principles of Economics. He reads: Now consider how a seat belt law alters the cost-benefit calculation of a rational driver. Seat belts make accidents less costly for a driver because they reduce the probability of injury or death. Thus a seat belt law reduces the benefits to slow and careful driving. People respond to seat belts as they would to an improvement in road conditions--by faster and less careful driving.... Drivers who wear their seat belts are more likely to survive any given accident, but they are more likely to find themselves in an accident. The net effect is ambiguous.... [E]conomist Sam Peltzman showed that... [seat belt] laws produce... fewer deaths per accident and more accidents... little change in the number of driver deaths... "Oh God!" I think to myself. First of all, Seatbelt Sam's regressions always seemed to me to be sensitive--the kinds of results you get when you are trying too hard and have argued yourself into believing the right specification is the one that is friendliest to your prior beliefs. Second, whoever is buckling or not buckling the seatbelt...

Posted by DeLong at 12:32 AM

Principles of Economics

The Thirteen-Year-Old has found Greg Mankiw's Principles of Economics. "Gosh. If this is what you teach, it sure is complicated, Dad," he says. "But that's because the economy is complicated," I say. "We have a very sophisticated division of labor and a very complex economy--that's what makes us civilized," I say. You mean that back before civilization economics was much simpler?" asks the Ten-Year-Old. "Yes," says the Thirteen-Year-Old. "Back then, Principles of Economics books were really simple. They said: '(1) Find a rock. (2) Throw the rock to kill some small furry creature. (3) Eat the small furry creature.' That was it." "But then things became more complicated. People invented farming, and some people became peasant farmers who grew the crops." "And other people became workers who made pots," says the Ten-Year-Old. "And other people became blacksmiths who made spears." "And," says the Thirteen-Year-Old, "then the people who got the spears told the peasants and the workers to give them half their crop--or else!" "But," says the Ten-Year-Old, "the peasants and the workers made an alliance with the small furry animals. And then one night while the spear-chuckers were all asleep they raised the banner of revolution!" "Now wait a...

Posted by DeLong at 12:15 AM

September 16, 2003
You Need to Listen Carefully

Ah. Here's something interesting: Rapid Growth Seen for U.S. Economy: The reason for the bleak outlook on jobs boils down to basic math. The number of new workers is climbing about 1 percent a year. If productivity increases by an annual rate of 3 percent -- and the rate has been above 5 percent both this year and last -- economic growth, as measured by gross domestic product, needs to be significantly more than 4 percent next year before there is drastic improvement in the unemployment rate. "I don't see where the demand is going to come from to produce a falling unemployment rate," said J. Bradford DeLong, an economist at the University of California at Berkeley. "Very few people are predicting real G.D.P. growth of more than 4 percent." White House officials dispute that prognosis. If productivity and growth are rising, they contend, then new jobs will follow. "There is a very strong correlation between real G.D.P. growth and developments in the labor market," said N. Gregory Mankiw, chairman of the White House Council of Economic Advisers. "We will see employment picking up by the end of the year, and we will see very strong advances in employment in...

Posted by DeLong at 10:44 AM

September 12, 2003
Notes: Stigler on Seminars

It's time for someone to make George Stigler Recommended Seminar Remark #3: "Isn't the first variable on the left-hand side of your equation endogenous?"...

Posted by DeLong at 10:08 AM

September 03, 2003
Econ 101b: Fall 2003: The Erosion of Okun's Law

We used to have considerable confidence in Okun's law: that an extra one percentage point rise (or fall) in the unemployment rate over a year would reduce (or boost) that real GDP growth by an extra 2.5 percent over that year because a rising (or falling) unemployment rate would also be accompanied by a falling (rising) share of the population in the labor force and by falling (rapidly rising) productivity. Productivity would fall when the unemployment rate rose for two reasons: first, even when factories are not running at full capacity they still incur substantial setup and maintenance costs; second, even when there isn't enough work for them to do firms would rather hold onto skilled workers than watch them drift away and have to pay to train their replacements the next time the wheel of the business cycle turns. Things have been different, however, in this recession (and to a lesser extent in the preceding early-1990s recession. The standard relationship between output growth and hours worked has gone substantially awry. See that branch poking out of the scatter diagram on the left side? That's the most recent data. (The smaller twig pointing out below and to the left...

Posted by DeLong at 04:22 PM

September 01, 2003
When Does Inflation Begin to Do Serious Damage?

Stan Fischer: :Saying that 40% per year is the inflation rate at which inflation starts to seriously reduce economic growth--that is much too high. Think 10% per year as the rate instead."...

Posted by DeLong at 08:36 AM

August 30, 2003
Jackson Hole Conference

The AP's Martin Crutsinger writes about the Federal Reserve Bank of Kansas City's Jackson Lake Lodge conference: Boston.com / Business / Federal Reserve economic conference ends: Take Ph.D. economists from some 20 countries, add the world's most powerful central banker and spice things up with white water rafting and horseback rides... the 27th annual symposium on economic policy, sponsored by the Kansas City Federal Reserve Bank. In the rarefied world of monetary economics, it is the hottest ticket around. Foreign central bank officials from Argentina to Japan vied with top private sector economists for one of the 137 coveted invitations to this year's event. The lucky ones got to hobnob with officials from the current Bush administration and the past Clinton administration as well as top Wall Street financiers, not to mention the prize attraction -- Federal Reserve Chairman Alan Greenspan.... Greenspan, perhaps with an eye on his legacy, used this year's symposium to defend his record, arguing that if the Fed had tried to prick the market bubble sooner, it would have had to drive interest rates so high as to bring on a recession. He also said the Fed's comments about the possibility of deflation and the use...

Posted by DeLong at 09:16 PM

August 27, 2003
The Pfizer Review

Browsing National Review Online... fourth in their list of headings, after "WAR", "WORLD", "CRIME & LAW", is "TRADE AND DEVELOPMENT"... Under the trade and development heading is "Special: Top authors report on global trade policy."... Click... Why, it's Brink Lindsey giving an overview of Bush Administration trade negotiations, such as they are. Brink is brilliant, and almost always fair. This is a great improvement over National Review's standard economics coverage... He hits the right points (although his critiques of the Bush Administration are softer than I would have made them): glaring sellouts... tariffs... on imported steel... atrocious farm bill... market-distorting subsidies... effect of the administration's... protectionist moves was to swing only a very few votes into the pro-T[rade ]P[romotion ]A[uthority] column; other vote-buying strategies--corporate welfare for import-competing industries, or added subsidies for their dislocated workers--could have brought in as many votes with less damage to U.S. trade policy... How could the United States lecture the world on the virtues of free trade, when it couldn't even stand up to 200,000 steelworkers?... The achievement of a real and lasting trade legacy will require threading the needle with often-fractious trading partners and an always demanding Congress.... For now, give the Bush trade...

Posted by DeLong at 08:41 PM

August 01, 2003
Why Is Our Press Corps So Bad? Part CCCXIV

Excuse me while I go bang my head against the wall in despair at the quantitative illiteracy--the innumeracy--of those who feel appointed to try to contribute to the debate on economic policy. What is it this time? This time it is that Andrew Sullivan thinks that federal spending jumped by 25 percent between the first and the second quarters of 2003: www.AndrewSullivan.com - Daily Dish: HEY, BIG SPENDER: In one quarter, federal spending jumped 25 percent. As often, wars are good for economies... Of course it did not. U.S. federal spending is currently running at $500 billion a quarter. It did not suddenly jump to $625 billion a quarter. What happened instead was that federal government purchases of goods and services (a much smaller total, running at $180 billion a quarter or so) grew at a 25 percent per year annual rate--which means that in a quarter it grows at a hair over 6 percent. 25% of $500 billion is $125 billion. 6% of 180 billion is about $11 billion. What does the difference mean? The first is enough spending to put about 10 million people to work for three months (to put this in perspective, note that total U.S....

Posted by DeLong at 09:53 AM

July 30, 2003
More on DARPA's Policy Analysis Market

Alex Tabarrok from George Mason gives some details on the DARPA Policy Analysis Market proposal: Moral hazard in these information markets is a non-issue. First, these markets were intended for information gathering and aggregation and not for insurance and thus positions were to be limited to relatively small amounts. Second, if terrorists want to make money from terrorism there are far better ways than investing in the DARPA market - for example, by shorting airline stocks, taking various positions in oil, shorting nuclear energy companies, agricultural companies (e.g. shorting beef and then threatening to introduce mad cow disease) etc. These markets are more anonymous than the DARPA market and you can take much larger positions without calling attention to one's self. The bubble issue is real but 1) the issue is comparative - how do information markets compare with say "experts" in forecasting? Evidence from the stock markets and betting markets indicate that markets perform better than the experts. HP used a market to predict future printer sales and found that it outperformed traditional methods (see Charlie Plott's Presidential address to the SEA.) Note that the experts are also subject to herd behaviour, irrationality etc. 2) There are things one...

Posted by DeLong at 10:57 AM

July 26, 2003
Notes: In the Shadow of Malthus

Begin with the shape of the demographic transition since 1820, with population growth rates plotted as a function of levels of guestimates of levels of real GDP per capita (measured in Maddison's 1990 "International Dollars") for the world's various regions for six irregular (but sensible) subperiods.* The figure shows how population growth rises rapidly as societies progress and grow their annual per-capita incomes from a Malthusian near-subsistence level of $400 (1990 International Dollars) per person per year up to $1,100 or so. Then population growth levels off--typically at 1.75% per year or so--as fertility restriction becomes widespread. Once societies pass $4,000 per capita a year or so, the demographic transition proper sets in, and population growth rates start to decline markedly. Underlying data source: Angus Maddison (2001), The World Economy in Millennial Perspective (Paris: OECD). Raw preliminary spreadsheet at: http://www.j-bradford-delong.net/movable_type/data-TCEH/Maddison_Millennial_Numbers.xls. Let's concentrate on the left-hand side of the figure--the one that lets us hypothesize that human population growth rates are essentially zero when annual GDP per capita levels (guessed-at in 1990 international dollars) are around $400, and that each ten percent increase in living standards above that subsistence level boosts population growth rates by about 0.2 percentage points per year:...

Posted by DeLong at 07:26 AM

July 24, 2003
Notes: Time to Learn About the Asbestos Cluster****

One of the most mammoth of the many failures of our common law-based legal system has been the extraordinary mess created by asbestos litigation. Large numbers of victims who have died, are dying, or will die in agony coughing up quarts of blood who receive little or nothing from the legal process. Huge transactions costs. Enormous amounts of valuable working time dissipated in legal battles where there are no facts in dispute to be found. A refusal by righty-wing courts to impose any rationality or coordination upon the process, out of a fear that doing justice on this issue would set a dangerous precedent. Large-scale semi-corruption in states where judges' funds for their future reelection campaigns are paid out of those portions of victims' settlements that wind up in the hands of lawyers. It is time for me to learn something about all of this... Senate Testimony by Steven Kazan. Before the Committee on the Judiciary, U.S. Senate, March 5, 2003 Senate Testimony by Steven Kazan. Before the Committee on the Judiciary, U.S. Senate, September 25, 2002 (see also: Senate Judiciary Committee ) Report by the Rand Institute for Civil Justice.... Both the Rand study and the actuarial study support...

Posted by DeLong at 12:00 PM

July 20, 2003
Why Oh Why Can't We Have a Better Press Corps? Part CCCXXIV

In "The Deficit Is Big, but Is It Bad?" Alex Berenson of the New York Times fails to make the distinction between big short-run deficits (good when the economy is depressed and unemployment is high) and big long-run deficits (simply bad, slowing capital formation, slowing economic growth, and raising the risk of economic crisis). As a result, his article turns into hopelessly-confused "he said, he said" mess. It's not a hard distinction to grasp, or a hard distinction to remember. Is it asking too much to expect the New York Times to find reporters to cover the economy who are capable of thinking analytically to the extent of making such distinctions?...

Posted by DeLong at 08:42 AM

July 16, 2003
A Brief Hayekian Moment

Excuse me while I have a brief Hayekian moment Clementines. From Australia. Big juicy sweet--amazingly sweet--Australian clementines... Isn't the world market marvelous! Nobody human knows--no machine has in its memory banks--the knowledge that an extra clementine tree should be planted in Australia in order to provide J. Bradford DeLong, a U.C. Berkeley professor, with big, sweet, juicy clementines in the northern-hemisphere summer. But the world market--our system of economic interrelationships considered as a social mechanism for guiding the production, transport, distribution, and allocation of goods and services--knows this. How wise it is! How fortunate the catallaxy! How big, juicy, and sweet the Australian clementines are! Clementines!...

Posted by DeLong at 04:44 PM

July 14, 2003

Since the courts refused to gather all asbestos lawsuits into one giant class action, the situation has turned into a total mess: extremely high transactions costs--that is, lots of money for lawyers (accompanied by lots of work for lawyers)--accompanied by a totally random division of payouts: very sick people whose lives have been ruined by asbestos exposure get little, while others with better lawyers or better legal strategies do much, much better. Why the courts refused to use our class-action legal tools to pursue a just resolution of asbestos claims is a mystery to me. But now the Senate Judiciary Committee is trying to fix the mess. My assessment, however, is that its chances of success are still low... Economist.com: ...America's Senate Judiciary Committee approved a bill that would establish a fund for asbestos compensation and bring to an end decades of damaging litigation that has already cost American business many billions of dollars and led to several bankruptcy filings. For months Orrin Hatch, a Republican from Utah and the committee’s chairman, had been negotiating an end to the lawsuits over asbestos, scourge of both the physical health and the financial health of America’s insurers. The draft bill proposes to...

Posted by DeLong at 10:50 AM

July 13, 2003
From the Economist This Week

A whole bunch of interesting things from the Economist this week: http://www.economist.com/finance/displayStory.cfm?story_id=1908016: ...You might suppose all this to be more than enough to test the faith of believers in the wisdom of the single currency.... Oddly, that faith is burning as brightly as ever. Despite the euro area's weak performance, enthusiasts are still expecting higher growth in the long run, because they think trade within the single-currency area will explode.... Andrew Rose.... Mr Rose's innovation was to add membership of a currency union as a possible influence on trade.... Currency unions should boost internal trade because companies and individuals no longer incur costs for changing money and because uncertainty about exchange rates within the union is eliminated. That said, the costs of currency transactions are small, and previous research has established that exchange-rate volatility reduces trade only marginally. A recent review of the evidence by the British Treasury concluded that joining the single currency would eventually boost Britain's trade with the euro area by between 5% and 50%, without diverting trade from non-euro countries... http://www.economist.com/World/europe/displayStory.cfm?story_id=1908370: ...Making doctors cross may be no bad thing in the producer-dominated NHS. But Dr Bogle has a point. Targets are a crude managerial tool that...

Posted by DeLong at 08:08 PM

July 08, 2003
Notes: Blanchard on Transition

Olivier Blanchard's view on the transition from communism to capitalism as of the mid-1990s. If I read his Economics of Post-Communist Transition right, the key problem was the absence of a Marshall Plan to keep demand high and employment high during transition. In the immediate aftermath of World War II in Western Europe, the Marshall Plan allowed countries to maintain high aggregate demand without worrying about balance-of-payments constraints. There was no similar inflow of hard currency in the early 1990s to allow transition governments to create the demand to rapidly reemploy those laid off from state industries. The Bush I Administration had, because of the Reagan deficits, "more will than wallet." As a result, Blanchard argues, high unemployment led to a fear of reallocation and restructuring, and the slowing of the entire process of reform down to a glacial pace. If only demand and employment could have been kept high during the initial stages of transition... And since the mid-1990s? Since Blanchard wrote his book, what has happened? If I read the data right, economic progress in Central Europe has been slow, in Eastern Europe has been very slow, and in the former Soviet Union (where there never was the...

Posted by DeLong at 03:28 PM

July 06, 2003
Piketty and Saez (2001), "Income Inequality in the United States, 1913-1998"

Thomas Piketty and Emmanuel Saez (2001), "Income Inequality in the United States, 1913-1998" (Cambridge: NBER Working Paper No. w8467)....

Posted by DeLong at 07:03 PM

June 10, 2003
OMB Watch

The thoughtful and prolific John S. Irons is moving from Amherst College to OMB Watch. Too bad. The Thirteen-Year-Old will be heading off to college in five years. My wife wants him to go to Amherst. I was looking forward to telling him to take Irons's courses......

Posted by DeLong at 09:59 AM

June 09, 2003
New Online Column From the Economist

The Economist is starting a new online column about the daily ticking and tocking of financial markets. Economist.com: AN ODD thing is happening in the market for risk and the market of the riskless, also known as the equity and government-bond markets: prices are rising in both. The S&P 500 share index, up by over 20% from its low earlier this year, continues to soar. Meanwhile, rising prices in the bond market have driven yields on the ten-year note down to 3.35%--a level last seen when Elvis Presley was a youngster. The same, broadly, is true in Europe: both stocks and government-bond prices are up. It has happened before, of course; indeed, there have been long periods where the two have moved in tandem, in part because lower interest rates reduce the financial burden on companies and make investment cheaper. But the coupling is a perplexing one right now, nonetheless, because the reasons that investors are buying the two markets appear to be diametrically opposed: in effect, bond-market investors seem fearful that the American economy will remain sluggish, while the equity market thinks it is over the worst... Such a column is a hazardous exercise to undertake. It violates Bob...

Posted by DeLong at 03:26 PM

June 05, 2003
Gains From International Trade and Investment

An Irish-Arizonian-Australian cross-disciplinary alliance of Kieran Healy and John Quiggin is thinking about Pierre-Olivier Gourinchas and Olivier Jeanne's brand-new "The Elusive Benefits of International Financial Integration"--the conclusion of which is that in standard neoclassical models freeing up capital flows across nations has the capability to boost economic welfare by an amount on the order of magnitude of one percent: John Quiggin: (Small) gains from trade: (Small) gains from trade: Kieran Healy links to a paper by Pierre-Olivier Gourinchas and the missing-from-the-web Olivier Jeanne in which a calibrated growth accounting model is used to show that the gains from unrestricted capital mobility are likely to be of the order of 1 per cent of GDP. Gains from risk sharing aren't mentioned but other papers are cited to say that these are of a similar magnitude. Those who listen to the general pronouncements of economists might be surprised by the modest size of the estimated gains. But for those who have looked at similar exercises in the past there is no surprise here. One of the better-kept secrets of economics is the fact that most studies suggest that the replacement of a typical high-tariff regime (say Australia's in the 1960s) will yield...

Posted by DeLong at 07:09 AM

May 24, 2003
A Question About the Zero Bound on Nominal Interest Rates

Kevin Drum asks what he describes as a "really dumb question": CalPundit: Interest Rates: Now, I know this is a really dumb question (and yes, contrary to popular wisdom, there is such a thing as a dumb question), but why is this so? Why can't the Fed have negative interest rates? Walk up to the discount window, borrow a million dollars, and next month when it comes due you only have to pay back $900,000. Banks would then have an incentive to loan out this money at a negative rate too. As long as their rate was less negative than the Feds, they'd make money on the deal... The problem comes at the second stage of your thought experiment. Yes, the Fed can loan money at negative nominal interest rates to banks. But the banks then have an incentive to simply put the cash in their vaults and keep it there. They could loan it out at negative interest rates and make money (as long as there was a spread), but they would make more money if they did not lend it out and just squirreled it away. To break this greater incentive for banks not to squirrel the cash...

Posted by DeLong at 10:46 AM

The Grapes of Wrath

Our Business School Dean, Tom Campbell, spoke at the Berkeley Economics Department commencement yesterday. The hinge of the talk was the quote below from chapter 25 of Steinbeck's The Grapes of Wrath: The little farmers watched debt creep up on them like the tide. They sprayed the trees and sold no crop, they pruned and grafted and could not pick the crop. And the men of knowledge have worked, have considered, and the fruit is rotting on the ground, and the decaying mash in the wine vats is poisoning the air. And taste the wine--no grape flavor at all, just sulphor and tannic acid and alcohol. This little orchard will be part of a great holding next year, for the debt will have choked the owner. This vineyard will belong to the bank. Only the great owners can survive, for they won the canneries too. And four pears peeled and cut in half, cooked and canned, still cost fifteen cents. And the canned pears do not spoil. They will last for years. The decay spreads over the State, and the sweet smell is a great sorrow on the land. Men who can graft the trees and make the seed fertile...

Posted by DeLong at 07:42 AM

May 14, 2003
Notes: Chiaki Moriguchi: Last Economic History Seminar: "Did American Firms Break Their Welfare Capitalist Promises During the Great Depression?"

Chiaki Moriguchi from Northwestern. Here to talk about welfare capitalism--or maybe better to call it corporate welfarism--in the U.S. in the 1920 and 1930s. Vibrant, growing movement in the 1920s: corporations to provide social welfare benefits that the state would have provided in Europe. Collapse in the 1930s. Corporations wanted to cut costs, and with unemployment so high why bother on programs to attach workers to the firm? Loss of trust thereafter hard to regain--workers turned to CIO instead to negotiate for benefits, et cetera. Did the NLRA foreclose a return of corporate welfarism? Survival in high-wage high-skill firms: IBM, GE, Proctor and Gamble. Foreshadowing of modern HRM for skilled high-wage workers? Chiaki approaches the topic from a perspective that treats Japan--not the U.S., not western Europe--as the typical case. Very refreshing and instructive approach: to presume that welfare capitalism and company unions a la post-WWII Japan should be the rule in mass-production high-skill manufacturing, and to search for explanations for American divergence from the "natural" pattern... Great, great topic!...

Posted by DeLong at 05:22 PM

Notes: Grigore Pop-Eleches, "Refracting Conditionality: IMF Programs and Domestic Politics During the Latin American Debt Crisis and the Post-Communist Transition"

I have to read a political science dissertation tonight. It's very good... Grigore Pop-Eleches (2003), "Refracting Conditionality: IMF Programs and Domestic Politics During the Latin American Debt Crisis and the Post-Communist Transition" (Berkeley, CA: U.C. Berkeley Ph.D. Diss.). To the extent that neoliberal reforms are consolidated in any but the most developed countries of the two regions, the relative success stories discussed in this dissertation (Bolivia and Bulgaria) revealed a highly contingent pattern of deep initial economic crisis, skillful political coalition building, and generous Western support... the importance of taking advantage of the initial economic crisis... to forge a more durable political coalition in support of economic reforms. While.. the importance of such coalitions is easy to ignore during the post-electoral honeymoon period, governments that succumb to the temptation of insulated economic policy decision-making have a much more difficult time sustaining economic reforms once their popularity is undermined by the sometimes sizeable social costs of such reforms.... another interesting dilemma... the statistical results and the discussion of Bolivia's unlikely neoliberal reform coalition confirm the importance of rent sharing as the glue that binds together social and political actors.... On the other hand, the increasing neoliberal emphasis on privatization, deregulation,...

Posted by DeLong at 05:18 PM

May 12, 2003
Notes: Polanyi: Aristotle Discovers the Economy

Karl Polanyi, "Aristotle Discovers the Economy," in Trade and Market in the Early Empires... A whole bunch of this article is simply wrong: the claims that "in the fourth century... Greeks initiated the gainful business practices that in much later days developed into the dynamo of market comnpetition" are false. This means that Polanyi is wrong when he says that Aristotle is examining a new phenomenon when he looks at the economy. Aristotle is examining an old phenomenon from the point of view of an Athenian aristocrat. But there is much of value in Polanyi's exposition of what Aristotle says... p. 79: Trade is "natural" when it serves the survival of the community by maintaining its self-sufficiency... the operation of giving a share... from on's surplus. The rate... follows from the requirement of philia, i.e., that the goodwill among the members persist.... The just price, then, derives from the demands of philia as expressed in the reciprocity which is of the essence of all human community... p. 80: Trade... is "natural" as long as it is a requirement of self-sufficiency. Prices are justly set if they conform to the standing of the participants in the community, thereby strenghening the goodwill...

Posted by DeLong at 04:14 PM

Notes: The Character of the Absolutist State in Western Europe

Perhaps the most interesting argument about why the demographic crisis produced by the Black Death did not lead to the reemergence of serfdom in Western Europe (as lords discovered that, with population down by 1/3, they would rather be labor lords than landlords) is that made by Perry Anderson in his book Lineages of the Absolutist State. Anderson argues, first, that the particular role of Western European towns made a formal reimposition of servile bondage impossible: "...the aristocracy had to adjust to a second antagonist: the mercantile bourgeoisie... towns... the intercalation of this third presence... prevented the Western nobility from settling its accounts with the peasantry in Eastern [European] fashion, by smashing its resistance and fettering it to the manor. The medieval town... hierarchical dispersion of sovereignties... feudal mode of production... freed urban economies from direct domination by a rural ruling class.... [Urban] economic and social vitality acted as a constant, objective interference in the class struggle on the land, and blocked any regressive solution to it by the nobles." Feudal lords could agree among themselves and with the king to reimpose serfdom, but they lacked the power to do so if peasants could still (as they could in Western...

Posted by DeLong at 02:02 PM

Paul Krugman's "Thinking About the Liquidity Trap"

Paul Krugman's "Thinking About the Liquidity Trap": Thinking about the liquidity trap: We live in the Age of the Central Banker - an era in which Greenspan, Duisenberg, and Hayami are household words, in which monetary policy is generally believed to be so effective that it cannot safely be left in the hands of politicians who might use it to their advantage. Through much of the world, quasi-independent central banks are now entrusted with the job of steering economies between the rocks of inflation and the whirlpool of deflation. Their judgement is often questioned, but their power is not. It is therefore ironic as well as unnerving that precisely at this moment, when we have all become sort-of monetarists, the long-scorned Keynesian challenge to monetary policy - the claim that it is ineffective at recession-fighting, because you can?t push on a string - has reemerged as a real issue. So far only Japan has actually found itself in liquidity-trap conditions, but if it has happened once it can happen again, and if it can happen here it presumably can happen elsewhere. So even if Japan does eventually emerge from its slump, the question of how it became trapped and what...

Posted by DeLong at 07:28 AM

May 10, 2003
The Causes of Slavery or Serfdom: A Hypothesis

Paul Krugman's post, Serfs Up!, reminds me of one of my major sins this spring (for which I must atone): my cutting Evsey Domar (1970), "The Causes of Slavery or Serfdom: A Hypothesis," Economic History Review 30:1 (March), pp. 18-32, from my spring 2003 Economics 210a reading list. As Krugman summarizes Domar's main point: Domar was motivated by his knowledge of Russian history. Serfdom in Russia, he knew, wasn't an institution that dated back to the Dark Ages. Instead, it was mainly a 16th-century creation, contemporaneous with the beginning of the great Russian expansion into the steppes. Why? He came up with a simple yet powerful insight: there's no point in enslaving or enserfing a man unless the wage you would have to pay him if he was free is substantially above the cost of feeding, housing, and clothing him. Imagine a pre-industrial society where population is pressing on limited land supplies, and the marginal product of labor - and hence the real wage rate under competitive conditions - is barely at subsistence. In that case, why bother establishing property rights in human beings? It costs no more to hire a free worker than to feed an indentured laborer. Indeed,...

Posted by DeLong at 10:08 PM

May 07, 2003
Notes: World Bank Private Sector Development Forum

PSD FORUM History--JMK and HDW. Feared a world in which the capital requirements of development were immense (think Alex Gerschenkron), and in which sovereigns had a very difficult time borrowing. When you think about it, after all, given experience from start of WWI, why should sovereigns have been able to borrow on a large scale? Bulow and Rogoff. Hence World Bank. Broadly speaking, belief in the US during the 1930s and 1940s that successful growth and development required three things: Public investment in infrastructure. Social democracy--understood as full employment, safety net, income distribution sufficiently equal to make politics a positive rather than a zero-sum game in which, say, rich in U.S. inheritance taxes poor in Ghana take the cocoa export revenues fron the Ashantl. Third: market competition: Low tariffs, stable currencies, exports, comparative advantage, markets, and private businesses. Extraordinary success in nw and s europe. Extraordinary success in East Asia. Had you asked people in 1945 economic destiny of France... One of my teachers, David Landes, reputation France family capitalism... Italy... Argentina. Elsewhere. Disappointing. Glass half-empty. Indicative planning administrative guidance seemed to work fine in France and East Asia--for a while at least. Elsewhere... Infrastructure... Exchange rates... Regional development... If...

Posted by DeLong at 09:45 PM

May 04, 2003
Executive Pay

The argument used to be that executives needed to be paid very well on average because that was the only way to keep their own personal well-being hostage to the good performance of the firm--that executive pay needed to involve enormous amounts of risk to give executives the right incentives. And now the argument is? Economist: ...Last week, compensation arrangements claimed a rare victim: Don Carty, head of American Airlines, resigned after failing to tell its beleaguered unions that the company made a $41m pre-tax payment last October to a trust fund to protect the pensions of 45 executives if the company went bust. Last year Delta, another floundering airline, put $25.5m in a protected pension trust for Leo Mullin, its chief executive, and 32 other executives. Lucky Mr Mullin was credited for 22 years of service, entitling him to a much larger pension. Again, the aim was clearly to make sure that the chaps at the top have lifebelts if the ship sinks. Increasingly, bosses' pay is structured to protect them from risk.... Pensions are emerging as the perk of choice. "Pensions, remember, are guaranteed pay," says Steven Hall of Pearl Meyer?especially when they are put in special trusts...

Posted by DeLong at 07:44 AM

May 01, 2003
Principles of Macroeconomics

Paul Krugman previews the macro chapters of the forthcoming Krugman and Wells Principles of Economics textbook:  Even more about jobs (4/29/03)  Fiscal policy and employment (4/28/03)  Jobs, jobs, jobs: a followup (4/24/03)...

Posted by DeLong at 03:04 PM

April 30, 2003
Paul Krugman Must Be Punished Severely and Mercilessly!

What punishment could possibly be severe and brutal enough for Paul Krugman and Anthony Venables? They have used the letter "Q" to stand for a price index in their 1995 paper, "Globalization and the Inequality of Nations" (QJE 110:4, 857-880). In economics, "Q" always stands for quantity, and P always stands for price. To make "Q" stand for price is unforgivable! (Plus there's the fact that I'm still not sure whether the quantity of manufactured goods bought is E/Q or E/p, and I've just read the paper three times.)...

Posted by DeLong at 03:39 PM

April 20, 2003
Future Consequences of High Wealth Inequality

Thomas Piketty thinks that the U.S. is headed down a destructive road that will rob it of many of its social and economic advantages: a road in which family- and inheritance-driven wealth inequality gives the relatively-feckless children of the rich advantages that mere merit cannot outweigh--a society with a true aristocracy. I don't think he is right, largely because I don't see current trends as continuing, but as highly likely to be reversed in the next generation. On the other hand, America is a society where one-fifth believe their incomes are in the top 1%, and where another fifth believe their incomes will be in the top 1%. Perhaps American society will continue to move in a direction in which are institutions are tuned to suit the convenience of those at the very top of the pyramid. Daniel Altman: ...The shares of income controlled by the highest-earning Americans are already higher than at any time since the 1920's, according to Thomas Piketty, a former professor of economics at M.I.T. who is now the director of studies at the École des Hautes Études en Sciences Sociales in Paris. In an e-mail message last week, he predicted severe effects from the further...

Posted by DeLong at 08:26 PM

April 17, 2003
Uncle Milton

Just spent an hour and a half being interviewed for a documentary about Milton Friedman to air (hopefully) sometime in 2004... Some after-the-fact notes: Friedman... how great an influence on my thought? Let me think who has had more... Smith, Keynes, Summers, Shleifer... I would put Friedman fifth: only four other economist have had a greater influence on how I think... I'm not atypical at Berkeley in finding myself moving under the influence of the intellectual field generated by Milton Friedman--at least, I don't think I am... Friedman as a pragmatic libertarian, perhaps: believing that market failures are atypical, tending to generate profit opportunities and creating institutions to route around them, and that government failure is pervasive--that any expansion of government beyond the classical liberal state is likely to cause more troubles than it solves... Thus a big difference with Arrow, Samuelson, Akerlof, and company: who see market failure as much more common and hard to route around, and democratic governments as much more competent... One problem for us American liberals is certainly that Republican administrations tend to provide excellent demonstrations of Friedman's claim of governmental incompetence/capture/counterproductive behavior--massive government failure that outweighs probable estimates of market failure and creates a...

Posted by DeLong at 12:59 PM

Comparative Advantage Creeps Into the White-Collar Service-Sector World

Comparative Advantage Creeps Into the White-Collar Service-Sector World The invention of the iron-hulled steam-powered ocean-going freighter in the mid-nineteenth century transformed transoceanic international trade from an exchange of low-weight high-value manufactures and agricultural products with interesting flavor or neurological properties into an exchange of nearly all goods--even high-weight low-value ones. As the price of ocean transport dropped through the floor, even small differences in nation-specific prices could drive large amounts of trade. Today we are going through something similar, but this time it is the price of sending bits--information--around the world that is dropping through the floor. This means that tomorrow's international trade may well be about performing information-processing tasks in whatever country, far from the ultimate client, the task can be performed most cheaply. Here (sent to me via Dave Farber's IP mail list) Chidanand Rajghatta looks at India's growing potential comparative advantage in the preparation of U.S. IRS Forms 1040. Every industry facing foreign competition finds some reason that the presumption in favor of free trade does not apply to them, and international trade in tax preparation is no exception. Mr. Rajghatta finds Lloyd Caroll, who claims that the "very notion of transmitting confidential tax data... to any...

Posted by DeLong at 11:17 AM

Jeff Madrick on the CBO's Take on Bushonomics

Jeff Madrick this month covers the Congressional Budget Office's take on the growth effects of the Bush economic program. It's a bad business-cycle stabilization plan. It's bad for American long-run economic growth. Jeff Madrick: Economic Scene: ...The textbook Solow model turned out to reduce the rate of growth and raise the deficit substantially. Higher deficits reduced total national savings and therefore undermined capital investment. The growth effects of the other two models were no more encouraging. In fact, the only cases in which the deficits were reduced by as much as 15 percent were when it was assumed that the government would raise taxes in 2014 to stabilize growing debt. The models then concluded that people anticipated this tax increase and saved more now. The higher level of savings resulted in more capital investment in the model, and therefore more growth and lower federal deficits......

Posted by DeLong at 10:08 AM

April 10, 2003
Notes: LTCM

A short summary of what went wrong at LTCM....

Posted by DeLong at 09:35 PM

Notes: On the Efficient Frontier

William J. Bernstein's Efficient Frontier....

Posted by DeLong at 08:58 PM

Notes: More Finance Demand Curves Sloping the Wrong Way

Notes: Teaching: Econ 236: Behavioral: Finance: Yet More Demand Curves That Slope the Wrong Way This time it's due to performance-based arbitrage: PBA: circumstances in which the fact that prices move against fundamentals leads investors to think that their smart-money managers aren't so smart, and so withdraw funds: From Andrei Shleifer and Robert Vishny (1995), "The Limits of Arbitrage" (Cambridge: NBER Working Paper 5167). One model of risky arbitrage is that of a large number of investors taking small positions against the mispricing. Fama's (1965) classic analysis of efficient markets and Ross's (1976) Arbitrage Pricing Theory are based on this model. An alternative, and in many cases more realistic view, is that arbitrage is conducted by a few professional, highly-specialized investors who combine their knowledge with resources of outside investors to take large positions. They operate in markets where fundamentals are difficult to ascertain and correct hedging strategies are hard to implement, such as the currency and derivative markets. The fundamental feature of such arbitrage is that brains and resources are separated by an agency relationship. the money comes from wealthy individuals, banks, endowments, and other investors with only a limited knowledge of individual markets, and is invested by arbitrageurs...

Posted by DeLong at 03:49 PM

Notes: Risk Aversion

Teaching Notes for Econ 236: April 9: What do different risk aversion parameters imply about gambles? Kocherlakota (1995) [Narayana R Kocherlakota (1995), "The Equity Premium: It’s Still a Puzzle," Journal of Economic Literature, 1996-1, pp. 42-72.] reports that the raw "equity premium puzzle" implies a coefficient of relative risk aversion of 18... (and then there is the risk-free rate puzzle: at a crra of 18, you need a raw time preference factor of -8% per year to fit average per-capita consumption growth to the average real risk-free rate of interest. What does such a high risk aversion parameter mean? Well... ...At a coefficient of relative risk aversion of 1... you are indifferent between a this year's consumption level of $30,000 for certain and a 58% chance of $40,000 coupled with a 42% chance of $20,000. ...At a coefficient of relative risk aversion of 5... you are indifferent between a this year's consumption level of $30,000 for certain and a 86% chance of $40,000 coupled with a 14% chance of $20,000. ...At a coefficient of relative risk aversion of 10... you are indifferent between a this year's consumption level of $30,000 for certain and a 97.6% chance of $40,000 coupled with...

Posted by DeLong at 03:44 PM

April 03, 2003
Europe's Business Cycle and Monetary Policy

As time passes, and as the European periphery becomes richer and richer, its real exchange rates vis-a-vis the European industrial core have to rise. This is the Balassa-Samuelson effect: poor countries have low real exchange rates because international trade is concentrated among the capital- and technology-intensive goods in which rich countries' absolute advantage is greatest, and so as countries catch up to the industrial core, their real exchange rates rise. In the case of poor countries inside the euro zone, convergence and the consequent rise in real exchange rates requires faster inflation than in the industrial core. If development on the European periphery is successful, and if growth on the European periphery is rapid, then inflation on the European periphery will be rapid too. This means that, if eurozone-wide inflation is to be low, there must be deflation--falling prices--in the German-Belgian-French industrial core of the euro zone. Deflation is, in general, a bad idea for lots of reasons, one of the chief of which is the catastrophic consequences of nominal wage cuts for worker morale. Yet as long as the ECB takes its goal to be low inflation eurozone-wide--rather than low inflation in the eurozone's industrial core, with the developing...

Posted by DeLong at 07:41 PM

March 22, 2003
Brink Lindsey Is Very Good Indeed

I've been rereading Brink Lindsey's book, Against the Dead Hand. God, it's good! When I compare it to other books that have gotten much more attention like... Ummm.... Well! Here's what I said about Brink's book on an earlier occasion: Now Brink Lindsey has written a book: Brink Lindsey (2002), Against the Dead Hand: The Uncertain Struggle for Global Capitalism (New York: John Wiley: 0471442771). The purpose of the book is to celebrate the end of one of what Lindsey sees as one of the great obstacles to human progress. The obstacle is "the dream of centralized, top-down control over the course of economic development" (p. 2). In Lindsey's mind, whether the policies were the bloody collectivization of agriculture by Stalin, Mao's command that peasants smelt steel in their backyards, French bureaucrats providing indicative guidance to enterprises for capacity expansion, the UK Labour Party nationalizing the "commanding heights" of the economy, Franklin D. Roosevelt commanding the separation of investment from commercial banking and decreeing the creation of the TVA, or Park Chung Hee offering large subsidized loans to chaebol that would successfully export--it was all one dream: the dream that government controls could successfully manage the economy. It is this...

Posted by DeLong at 08:40 AM

March 19, 2003

Ted Barlow points to a very nice and interesting article on Fortune.com by Jerry Useem. It's about the Mighty WalMart......

Posted by DeLong at 09:34 PM

March 18, 2003
Notes: Gordon Hanson on Mexico

More information on how NAFTA has been (primarily) a blessing and (secondarily) a curse to Mexico... What Has Happened to Wages in Mexico since NAFTA? | Gordon H. Hanson | NBER Working Paper No. w9563 | Issued in March 2003 Abstract: In this paper, I examine the impacts of trade and investment liberalization on the wage structure of Mexico. Part one of the paper surveys recent literature on the labor-market consequences of Mexico's economic reforms in the 1980s. Mexico's policy reforms appear to have raised the demand for skill in the country, reduced rents in industries that prior to reform paid their workers high wages, and raised the premium paid to workers in states along the U.S. border. These changes have resulted in an increase in wage dispersion in the country. Part two of the paper examines changes in Mexico's wage structure during the 1990's. In the last decade, Mexico has experienced rising returns to skill, which mirror closely wage movements in the United States. There is, however, little evidence of wage convergence between the two countries. Regional wage differentials in Mexico have widened and appear to be explained largely by variation in regional access to foreign trade and investment...

Posted by DeLong at 09:52 AM

March 17, 2003
Moore's Law Comes to Telecom

Why are WorldCom's physical assets worth only 1/4 what they paid for them? Some people blame incredibly stupid management. I have always ascribed the write-down of the market value of telecom assets to vastly greater progress in telecommunications software control than had been expected--if you can push ten times as many bits through a fiber as you had thought you would be able to, that kinda cramps your ability to make money off of the scarcity of fiber. Kevin Werbach and Scott Rafer seem to have a somewhat different take, but I'm not quite sure what it is. New York Times: "WorldCom's hard assets, including its network, are now worth almost 75 percent less than what they had cost." UPDATE: Scott Rafer's take on the same announcement. He thinks we're ascribing different causes to the writedown, but I think we agree. Worldcom's problem is that it didn't build its business (and capex plans) with Moore's Law in mind. [Werblog]...

Posted by DeLong at 07:16 PM

How to Be Happy

Richard Layard of the LSE tells us how to be happy in his Public Lectures and Seminars " href="http://cep.lse.ac.uk/events/lectures/">Lionel Robbins lectures......

Posted by DeLong at 03:13 PM

March 12, 2003
Mickey Kaus Is Puzzled

Mickey Kaus is puzzled: Don't Rush Me VI - Time for the grand gesture? By Mickey Kaus: About What Me Worry? I believe whatever Paul Krugman tells me, of course -- he's going to win the Nobel Prize, not me -- but I'm confused. It seems like only two months ago he had me terrified that inflation was going to go down so low it would plunge into negative territory, as in Japan. Now, after reading today's column, I'm worried that the government will decide to "inflate away debt" and "interest rates will soar." ... In other words[u]nless we slide into Japanese-style deflation, there are much higher interest rates in our future.What I don't understand -- and I recognize I may be missing something -- is why we can't end up somewhere in between inflation so low that it's a crisis and inflation so high that it's a crisis. In other words, not in a crisis! If I'm wondering about this, I bet so are many other Krugman readers. Explanation, please! ... Mickey Kaus is puzzled because he doesn't get the fact that that the two different problems that worry Krugman (and me!) operate at different time scales. One--possible deflation--is a...

Posted by DeLong at 07:30 AM

March 08, 2003
Notes: N. Gregory Mankiw

Notes: Greg Mankiw: MaxSpeak Weblog : N. GREGORY MANKIW ON ECONOMICS, IV: THE CORPORATE INCOME TAX. "The corporate income tax is popular in part because it appears to be paid by rich corporations. Yet those who bear the ultimate burden of the tax--the customers and workers of corporations--are often not rich. If the true incidence of the corporate tax were more widely known, this tax might be less popular among voters. (p. 255, Principles of Economics, N. Gregory Mankiw, The Dryden Press/Harcourt Brace, 1998) So this tax cannot impede investment and economic growth, insofar as such investment and growth is due to corporations. They should be indifferent to the tax, and they are wasting a lot of lobbying dollars combating it. By the same token, if the true incidence were more widely known in the White House, this tax might be more popular. . GREGORY MANKIW ON ECONOMICS, III: THE KEY TO ECONOMIC GROWTH. Thus, the most basic lesson about budget deficits follows directly from their effects on the supply and demand for loanable funds: When the government reduces national saving by running a budget deficit, the interest rate rises, and investment falls. Because investment is important for long-run economic...

Posted by DeLong at 09:52 AM

March 07, 2003
Where All of Us Live

Lance Knobel posts a very nice map of where people live: Update: Excellent! Thanks! Eric Eisenhart says: A higher resolution version with an explanation and credit is available at http://antwrp.gsfc.nasa.gov/apod/ap030305.html Posted by Eric Eisenhart at March 6, 2003 04:06 PM Update: And there is the still bigger version at http://antwrp.gsfc.nasa.gov/apod/image/0303/peopleearth94_usda_big.gif....

Posted by DeLong at 04:02 PM

Notes: Monetary and Fiscal Policy Reading Course: Open Economy Macro

Extra paper: Lucio Sarno, "Toward a New Paradigm..." Add Bagwell and Bernheim for next week......

Posted by DeLong at 03:04 PM

March 04, 2003
Those Who Do Not Remember History...

Those who do not remember history are condemned to repeat it, and the rest of us are condemned to repeat it with them. Gerardo della Paolera and Alan M. Taylor point out that those who have studied the 1929 collapse of the gold standard in Argentina would have found few surprises indeed in the 2001 collapse of the currency board. Yet another brick in the wall suggesting that it is long-lasting institutional deficiencies that are the causes of the "bad policies" that overoptimistic economists like me think stand in the way of successful development and growth. Gaucho Banking Redux: Gerardo della Paolera, Alan M. Taylor | NBER Working Paper No. w9457 | Issued in January 2003 | Argentina's economic crisis has strong similarities with previous crises stretching back to the nineteenth century. A common thread runs through all these crises: the interaction of a weak, undisciplined, or corruptible banking sector, and some other group of conspirators from the public or private sector that hasten its collapse. This pampean propensity for crony finance was dubbed 'gaucho banking' more than one hundred years ago. What happens when such a rotten structure interacts with a convertibility plan? We compare the 1929 and 2001...

Posted by DeLong at 02:02 PM

The Equity Premium Puzzle

Rajnish Mehra has a nice new working paper out explaining why all the attempts to resolve the "equity premium puzzle" (the puzzle of the large gap between expected returns on stocks and government bonds that he and Ed Prescott singlehandedly brought to the forefront of economists' concerns nearly two decades ago) are unconvincing: The Equity Premium: Why is it a Puzzle?: Rajnish Mehra | NBER Working Paper No. w9512 | Issued in February 2003 | This article takes a critical look at the equity premium puzzle the inability of standard intertemporal economic models to rationalize the statistics that have characterized U.S. financial markets over the past century. A summary of historical returns for the United States and other industrialized countries and an overview of the economic construct itself are provided. The intuition behind the discrepancy between model prediction and empirical data is explained. After detailing the research efforts to enhance the model's ability to replicate the empirical data, I argue that the proposed resolutions fail along crucial dimensions. Normally I'd just quote the abstract, and I'd be done. But Rajnish's abstract stops just where things get interesting. "I argue that the proposed resolutions fail along crucial dimensions"--sheesh! So let me...

Posted by DeLong at 01:32 PM

March 03, 2003
The Real Supply Siders

John Quiggen succumbs to High Relativism, and proclaims that whether Ronald Reagan was "convinced" that cutting tax rates would raise tax revenues is unknowable. John Quiggin: Wanniski's claim to have convinced Reagan is rejected by (broad sense) supply-siders who were around at the time, like William Niskanen (quoted by Alex Robson), and it seems unlikely that the truth can be determined... I think that this nihilistic-relativistic conclusion is much too pessimistic. What Reagan thought in his heart-of-hearts is not very important. Reagan wanted to lower taxes, balance the budget, and cut waste, fraud, and abuse in government. He (naively) relied on his advisers--his Grand Viziers--to share his priorities and to prepare and implement policies that would accomplish them. It went wrong: Reagan did not run for President so that he could become the biggest deficit-spender in American history. We know a lot about how it went wrong. But if we are to accurately set out what we know, we need to recognize that "supply side" and "economist" are contested terms of art. Different people use these terms to mean different things--deliberately use these terms to mean different things. Let's review the bidding. There are four ideological police actions in progress....

Posted by DeLong at 10:26 AM

March 01, 2003
John Irons Tracks the Economy

John F. Irons tracks the economy... ArgMax Economics Weblog: Tracking the Economy: This has been a busy week for economic news; I thought I would give an update for the week: 2002Q4 GDP revised up to 1.4% (from a previously estimated 0.7%). Better, but not great. Hubbard out, Mankiw in at the CEA. His nomination shouldn't have been controversial - he is an accomplished and respected academic macroeconomist (and a fellow MIT PhD), but some right-wing supply-side economists are unhappy about what he wrote in his Principles book about Reagan's policies. Oil Prices are hitting 12-year highs and getting close to 40$ a barrel. Consumer prices rose 0.3% in January and wholesale prices (the PPI) jumped 1.6%. The increases were due in part because of rising energy prices. The core CPI and PPI (which exclude food and energy) increased by 0.1% and 0.9%, respectively. If the PPI increases continue and make their way to consumer prices, it will cause the Fed to think twice before reducing interest rates in the case of a "double dig" recession. On the bright side, the increases should lessen deflation fears. Consumer confidence fell to 9-year lows. The link between the Conference Boards' index and...

Posted by DeLong at 05:49 PM

John F. Irons's News Box

John F. Irons is letting other people use his Economic News Box: NewsBox - ArgMax.com: number=12; width=500; bordercolor="#336699"; backcolor="#CCCCCC"; titlecolor="#FFFFFF";...

Posted by DeLong at 05:37 PM

Cranks and Charlatans

Our Australian Cousin John Quiggin is bemused as he watches the cranks and charlatans attack CEA-Chair designate Greg Mankiw: John Quiggin: Jason Soon points to this piece of silliness by Stephen Moore of the National Review. Moore doesn't like Greg Mankiw because he once wrote that Reagan-era supply-side economists were "charlatans and cranks".... I'll just concentrate on Moore's proposed alternatives [to Mankiw]. He writes The good news is there are a multitude of brilliant supply-side academics who would be superb chief economists at the White House. I am thinking of talented people like Brian Wesbury of Chicago, Richard Vedder of Ohio University, and David Malpass of Bear Stearns. It seemed a bit odd to describe someone working on Wall Street as an academic, but of course lots of academics have been lured there in recent years. And while I'd never heard of any of these guys, Chicago is one of the top economics departments in the US (or the world, for that matter) and Ohio State is certainly respectable. But why not say "University of Chicago" and "Ohio State University." A short Google search reveals all. Not only is David Malpass not an academic, he doesn't hold an economics qualification...

Posted by DeLong at 08:10 AM

February 28, 2003
Would Ezra Pound Have Been a Better Poet If He Had Taken Ec 10 From Marty Feldstein?

Would Ezra Pound have been a better poet if he had taken Ec 10 from Marty Feldstein? Daniel Davies appears to answer this question with a "yes," as he turns his attention to critiquing Pound's Canto XLV for Pound's failure to include an appropriate general-equilibrium model in his stanzas. D-squared Digest -- A fat young man without a good word for anyone: If you aren't able to charge rates of interest which compensate you for the risk you're taking, then as a lender, you're only going to do business with people familiar to you, which means that the typical working man is not going to find anyone who is prepared to lend to him. This means that the working class is denied one of the principle luxuries of the capitalist class; the ability to make decisions about the timing of purchases of goods independently of the fixed timing of the arrival of one's income. And it turns out that this is a very valuable advantage to enjoy. Usury has been very good in this regard. Pound is possibly in this passage and in the "bread made of good flour", thinking of the obvious association between predatory lending practices and poverty,...

Posted by DeLong at 08:21 AM

February 27, 2003
Excuse Me, What's Your Oxytocin Level Today?

I don't know about you, but in the future I'm only making contracts with people with elevated oxytocin levels... Virginia Postrel writes about those who are beginning to found the subdiscipline of Neuroeconomics: Looking Inside the Brains of the Stingy: ...Professor Zak and his colleagues study trust with a variation of the ultimatum game. Each player receives $10. Player 1 gets an additional $10. Players interact anonymously over computers. Player 1 can send any whole-dollar amount to Player 2. Whatever he sends is tripled, so a $5 gift turns into $15. Finally, Player 2 can return some of the money to Player 1. If Player 1 expects Player 2 not to send any money in return, Player 1 will keep the initial stake. That's the game's standard equilibrium. "In fact," Professor Zak said, "most people send about half of their stake to Player 2. They're signaling that they want to trust them." In response, about 75 percent of the Player 2's return some money, making both better off. "Even though we can't see each other and we don't know each other, we understand the other person as a human being," Professor Zak said. Extrapolating from animal results, he hypothesized that...

Posted by DeLong at 08:09 PM

February 26, 2003
Synchronicity on the Consumption Tax

Synchronicity: Today Vaguely Right writes: According to Bruce Bartlett:  a) "Liberals are opposing [the move from income taxation to consumption taxation] because it would benefit the rich too much." Yesterday, I had the following conversation: Him: "All this talk of the consumption tax seems to be just another way to justify not taxing the rich. Aren't there already enough ways to not tax the rich in this world?" Me: "Yes, a consumption tax is another ideological justification for not taxing the rich. But this reason for not taxing the rich does have desirable long-run efficiency properties......

Posted by DeLong at 01:05 PM

February 25, 2003
Thoughts on the Republican Economists' Letter

Thoughts on the Republican Economists' Letter So I downloaded and read the text and signature list of the Republican economists' letter supporting the Bush Administration's budget proposals: We enthusiastically endorse your economic growth and jobs proposal. It is fiscally responsible and it will create more employment, economic growth, and opportunities for all Americans. Moreover, it will improve corporate accountability and strengthen the nation's international competitiveness. I was somewhat disappointed for three reasons: I was moderately disappointed, first, that the letter was so short. If you have an opportunity as a professional economist to gain some media attention, you have a duty to use that opportunity to raise the level of the media debate over economic policy. This letter doesn't. It doesn't tell anyone who reads it why cutting dividend taxes would (if the appropriate adjustments are made to hold the right other things constant) be a good idea. It doesn't tell anyone who reads it why it would improve corporate accountability (a thing that nobody has explained to me to my satisfaction). It doesn't tell anyone who reads it how it would strengthen America's international competitiveness--let along what "international competitiveness" is, or why it is worth strengthening. I was slightly...

Posted by DeLong at 10:50 AM

February 21, 2003
The Bush Budget Once Again

Michael Kinsley bangs his head against the wall on the Bush budget, saying all the normal and appropriate things. As far as I can see, Bush Administration fiscal policy has no external private supporters (except possibly Kevin Hassett?) at all--at least, not one person I have talked to in private who understands the federal budget has told me that they think that the package as a whole (including future extra military expenditures, AMT relief, and all the other things in the policies but not in the OMB numbers) is good for the country. If anybody does think this is good policy, please drop me a note explaining why. The George W. Diet - Lose unsightly pounds by eating like a pig. By Michael Kinsley: Suppose you had a friend who was grossly overweight for years but lately had been looking very trim. Suddenly, though, he puts on 30 or 40 pounds and is waddling around like his old porcine self. He explains that he's found a marvelous new diet: "You eat like a pig and stop exercising until you get so fat that you just have to lose weight." Would you say that your friend is kidding himself?And if your friend...

Posted by DeLong at 01:41 PM

February 20, 2003
Thinking About Aristotle of Stagira and Moses Finley

I'm never sure whether I should begin my economic history survey courses with Aristotle or not. As Moses Finley powerfully argues, Aristotle does not care about the economy. The fragments in his Ethics and Politics that economists like Joseph Schumpeter point to are, mostly, concerned with other things than economic analysis. Karl Polanyi thought that Aristotle's naivete was the result of the fact that a mercantile, market, commercial economy was something very new. He was surely wrong: it was not something new, but rather something that Aristotle as a Hellenic aristocrat would have been embarrassed to be caught thinking seriously about. Still, I now wish I'd started this semester's history course with more on Aristotle. His perspective is so different from ours that it provides a useful mental shock: On Aristotle: Consider, first, that Aristotle of Stagira was not an idiot (even if he did believe that women had fewer teeth than men). For two thousand years people--pagan Hellenes, Christian Europeans, and Islamic Arabs, Egyptians, Mesopotamians,and Iranians--called Aristotle of Stagira "the philosopher", as if there could be only one. Think of the way seventeenth, eighteenth, and nineteenth century Britons regarded Newton (or the way we regard Einstein). So we need...

Posted by DeLong at 08:57 PM

February 19, 2003
Sailing the Wine-Dark Sea

I last read this book two years ago, and I read it last weekend on yet another trip to Monterey. I found myself, once again, enthralled. I also found myself wishing that I had assigned it--or something similar to it--to my students. And then I thought that my reading lists are too long already, and that adding another two to three hours onto their weekly readings would not please them... I wrote the piece below two years ago... H.N. Turteltaub (2001), Over the Wine-Dark Sea: A Sea Adventure of the Ancient World (New York: Forge: 0312876602). I picked this book up from the Barnes and Noble front table on my way down to Monterey for vacation. I had been looking for something light. Instead, I found myself engaged in the book for perhaps four times as many hours as I would usually spend on a book this length. I was entranced because the subject was interesting, because the writing did not get in the way of the story, and because I found myself greatly admiring the project--the historical, educational project--that the author is engaged in. H.N. Turteltaub is also Harry Turtledove, the author of a large number of heroic fantasy...

Posted by DeLong at 07:46 PM

February 18, 2003
Free Trade Simply Not a High Priority

The Economist writes about how free trade is simply not a priority for the governments of the industrial core--not for Japan, not for Europe, and certainly not for the Bush Administration. Given first-world attitudes, I cannot see how the Doha Round can end in anything but a very minor fig-leaf of an agreement. Economist.com: ...NEVER do today what can be put off till tomorrow. The trade ministers from 22 countries, whose three-day meeting in Tokyo ended on February 16th, managed to live down to their reputation for a reluctance to compromise?and enthusiasm for delay. Hardened trade negotiators are used to deadlines repeatedly missed, crisis talks at the eleventh hour, and second-best solutions. But the outcome of the Tokyo meeting was nevertheless disappointing for those hoping that the Doha round of trade negotiations, conducted under the auspices of the World Trade Organisation (WTO), were going to be different. For a time it looked as if they were. When the round was launched in the Qatari capital in November 2001, the atmosphere was one of rapprochement between the rich countries and their poorer neighbours, and between those rich countries that had been at loggerheads on trade issues. The aftermath of the attacks...

Posted by DeLong at 07:00 AM

February 14, 2003
Notes: Macro Field Course: February 12, 2003

Economics 236: February 12 Post-Class Notes On February 12 I taught Andrei Shleifer's "Implementation Cycles" (Journal of Political Economy, 1986) paper to my advanced macroeconomics Ph.D. students class. Once again, just has happened the week before, I didn't get through the paper. I had thought it would be easy--that I would finish with plenty of time to sketch extensions and qualifications. After all, the class does run from 12 to 2. However, that was not enough time. My recurrent problem is that I spend so much time in asides on the modeling strategy--"this term is in this definition because twenty minutes from now it will cancel that when we take a derivative to establish the first-order condition", "note that even though we have started with a rather general and flexible setup in which firms have a number of different decisions to make, the setup has been carefully designed so that when push comes to shove there is only one economically interesting and non-obvious decision a firm ever has to make", "note that if this condition is not satisfied, then the consumer's utility is infinite and it is not clear in what sense we can say that the model even has...

Posted by DeLong at 04:48 PM

February 12, 2003
Alan Greenspan Says the Expected, the Reasonable Thing

Alan Greenspan says the expected, the reasonable thing about the prospective return of the deficit and the long-run fiscal policy dilemmas of the American government. The truly surprising, the bizarre thing that I do not understand is why the Bush Administration PR flacks and their tame dogs in the press ever expected him to say anything else... Fed chief Greenspan undercuts GOP arguments for tax cuts - Feb. 12, 2003: The 'kiss of death': Warning of growing budget deficits, Greenspan again undercuts Bush, GOP arguments for tax cuts. February 12, 2003: 2:18 PM EST NEW YORK (CNN/Money) - Alan Greenspan stepped up his warnings about budget deficits Wednesday, forcing the White House to admit the Federal Reserve chief was at odds with President Bush's push for quick moves to stimulate the economy. In his second day on Capitol Hill, Greenspan told the House Financial Services Committee it was crucial that policy-makers ensure that "growing budget deficits [do not] again become entrenched.'' Bush's $695 billion stimulus plans forecasts record budget deficits this year and next -- drawing criticism from opposition Democrats. Administration officials contend the deficits are modest given the size of the $10 trillion U.S. economy and are needed to...

Posted by DeLong at 04:09 PM

February 11, 2003
The Increasingly-Strong Case for National Health Insurance

Daniel Davies points out that the rapid approach of genetic screening makes national health insurance inevitable--at least if we don't want to have a *huge* problem as those whose genes are bad for expensive-to-treat diseases find themselves very, very poor indeed. D-squared Digest -- A fat young man without a good word for anyone: ...Solutions? Sorry, don't really have one, unless one seriously thinks that the genie of genetic screening can be pushed back in the bottle. I'd note, however, that the engine of most of these "problems of asymmetric information" (in this case, the adverse selection problem which makes the pooled equilibrium solution with private information untenable) is usually an embedded option. In this case, it's the option of the insured party to choose whether or not to buy insurance. Since you can't force them to buy the product, they will only do so when it's to their advantage, and this turns out to be enough to knock down the existence of the market. I speak as a member of a health insurance scheme (the National Health Service) which doesn't have the property that you can refuse to buy it if you don't want it, and would humbly suggest...

Posted by DeLong at 06:24 PM

Not Serious on Freeing-Up Trade

WASHINGTON, FEB 10--The Bush Administration's first act in its Free Trade Agreement of the Americas negotiations is to take all discussion of agricultural subsidies off the table. This is not good. To say you won't even discuss what is the major hoped-for objective of the other partners in the negotiation is a very bad negotiating strategy--or is a very bad negotiating strategy if you want an agreement. Bob Zoellick has got to know better. As the first stage in negotiations to expand free trade throughout the Western Hemisphere, the Bush administration is offering to lift all tariffs on textiles and apparel within five years. The proposal will be presented on Tuesday by Robert B. Zoellick, the United States trade representative, who prepared the offer to cover duties on everything from beef to lamps while making special concessions for the poorest nations, a senior trade official said. The goal, Mr. Zoellick said, is the eventual elimination of duties on goods and services from throughout North and South America. But the administration will refuse to discuss reducing America's multibillion-dollar agricultural subsidies in the negotiations because they are not tariffs, the senior official said....

Posted by DeLong at 04:32 PM

What Alan Greenspan Will Say This Week

The G-7 Group predicts: Greenspan will do a two-step... He will say that he opposes the double taxation of dividends on principle, and that ending such policy represents good long-term tax policy. But he will also concede that eliminating dividends does little to stimulate the economy in the near term and does so at the risk of high deficits. This is what he told moderates behind closed doors and he will not be able to go soft on this point. He will likely warn against a return to long-term budget deficits while stressing the need to curb spending. Greenspan will try to avoid endorsing one party's stimulus package over the other's. But anyone paying attention will understand that he believes the Democrats? smaller package aimed at 2003-04 is better for the economy....

Posted by DeLong at 03:10 PM

A Short Dialogue on International Trade in Agricultural and Fishery Products

"Okay. One of the things that we are going to eat for lunch has travelled 9000 miles--almost halfway around the world--to land on our table. What is it?" "Bananas!" "Very good guess. But no. Bananas come from the Caribbean and Central America, and travel only 3000 miles or so to get here. It's the smoked salmon, from Tasmania, island off of the southeastern tip of Australia." "I've heard that most animals native to Tasmania are endangered. Is that true?" "BA-NA-NAS!" "It's certainly true that large Tasmanian marsupials are under very heavy pressure from introduced Eurasian forms that fill the same niches..." "BA-NA-NAS HAVE NO THUMBS!" "But does anybody have an idea why I would buy smoked salmon from Tasmania--Royal Tasmanian brand?" "So that you can torture your children with another boring lecture about international trade, the international division of labor, and the importance of human pwogwess through the mutual weduction of twade bawwiews?" "Plausible, but not true in this case..." "BANANAS STAND UP STRAIGHT!" "Because they were cheap?" "Yes, exactly, why were they cheap--half the price of Alaskan smoked salmon?" "BANANAS HAVE NO THUMBS!" "Either because you got a bargain, or because you don't know something about the quality of...

Posted by DeLong at 03:05 PM

September 14, 2002
Greenspan 5, DeLong 2

"You know me," said one senior Federal Reserve policymaker of the 1990s, "and on the inflation-unemployment tradeoff I'm dovey-dovey. I'm not prone to undercount the distributional and productivity benefits from low unemployment. I'm not prone to overweight the costs of moderate inflation. Yet there I was, in the Chairman's [Greenspan's] office, beggin him to raise interest rates. The NAIRU [the unemployment rate at which inflation is steady] couldn't have fallen that far. Potential growth couldn't be that fast. But he would say, 'It doesn't feel like an economy in which inflationary pressures are building'. And he was right. Whenever we monetary economics types get together, sooner or later the topic of conversation turns to Alan Greenspan. "He's not a God," somebody will say. We will agree that he's not a God. "He has a hard time giving a coherent explanation of why he holds his views," someone else will say. We will agree. Often, after a Greenspan explanation, our only reaction will be, "Huh?" "But why is his judgment so good? Why is he so right so often?" someone else will say. And we will have no answer. He knows things about how to analyze the modern business cycle that...

Posted by DeLong at 01:45 PM

September 13, 2002
Handout--the Current Economic Situation in the U.S.

Next Year's Analyses Next February the Commerce Department's Bureau of Economic Analysis is going to release its first estimates of production and productivity for the year 2002. When they do, everyone is going to sit up and take notice--because the numbers will be very surprising. We today already know (although very few think about it) what those numbers will be in rough outline: some 13/16 of the data for the year-to-year growth rates from 2001 to 2002 is already baked in the cake. So let's take a look at what next February's data releases are going to show: The growth rate of output per hour between 2001 and 2002 is going to be absolutely huge. Labor productivity growth will--unless our forecasts of what has happened in the third quarter and will happen in the fourth quarter are really, really off--be faster than in any year since the Korean War. The extraordinarily, ridiculously high productivity growth rates in the fourth quarter of 2001 and the first quarter of 2002 guarantee it. Labor productivity growth in 2002 relative to 2001 is a far cry from the 0.9 percent per year of the period from the mid-1970s productivity slowdown to the mid-1990s. Labor...

Posted by DeLong at 07:11 PM

September 12, 2002
More People Worry About Deflation

The Economist steps up to the "let's worry about deflation" plate. I agree with them. The Federal Reserve, however, does not seem to: the Federal Reserve appears to believe that the NAIRU--the unemployment rate at which inflation is constant--is somewhere near 5.5 percent (rather than the 4.5 to 5.5 percent I would estimate), and that the rate of growth of potential output--which is the rate at which real GDP has to grow to keep the unemployment rate constant--is only a shade above 2 percent per year (rather than the 3.5 percent per year that I would estimate). Economist.com: ...As a result, there is a risk that, before the end of 2003, the rich world's three biggest economies—America's, Japan's and Germany's—could all have negative inflation rates. A sharp jump in oil prices as a result of America invading Iraq could, of course, push up headline inflation. But the longer-term impact of higher oil prices would be deflationary, not inflationary. Higher oil prices operate like a tax that depresses growth, so their medium-term impact would be to heighten the deflation risk. DeAnne Julius, a former member of the Bank of England's monetary policy committee, argued in a recent speech that there is...

Posted by DeLong at 04:45 PM

Ken Rogoff on the IMF

Ken Rogoff on the claim that IMF bailouts take the money of rich-country taxpayers, give it to the unworthy, and so create "moral hazard". (He also covers a host of other issues.) Economist.com: ...It would be hard to overstate the influence of the popular perception that IMF crisis loans are thinly disguised bail-outs, with the tab paid mainly by ordinary taxpayers in the industrialised world. The presumed need to limit such bail-outs, and their adverse long-term incentive effects, is a central element of virtually every important plan out there to improve the way the IMF does business. The challenge posed by the bail-out view is not simply lack of transparency—that IMF loans are really outright transfers and should be called such. No, the deeper and more troubling implication is the “IMF moral hazard” theory. Simply put, if lenders are confident they will ultimately be bailed out by heavily subsidised IMF loans, they will extend too much credit to emerging-market debtors at rates that do not reflect the true underlying risk. The result? Bigger and more frequent crises than if the IMF did not exist. Giving the IMF more resources, it is argued, exacerbates the crises it was designed to alleviate....

Posted by DeLong at 02:21 PM

Who Benefits Most from the High-Tech Revolution?

David Wessel writes about one of the secrets of the new economy: the principal productivity gains and cost reductions are found not in IT-making but IT-using industries. Indeed, given the fierceness of competition in (most) IT-making industries, not just the productivity gains but the profits are likely to be found in IT-using industries, both here and abroad. WSJ.com - Capital: ...Ireland is proudly turning itself into the Silicon Isle. The Philippines and Thailand boast of their electronics exports. But one of the biggest beneficiaries from information technology is Australia, which hasn't any high-tech industry at all. Yet it is one of the few economies to have enjoyed a 1990s surge in productivity (or output for each hour of work) as impressive as the one the U.S. has seen. Its secret: import high-tech gear that others make. As in the U.S., the spread of bar-coding, scanning and inventory-management systems is making Australian wholesalers much more efficient, and that is paying economywide dividends. Compared to its population, Australia has more secure servers, the sort used in e-commerce, than anyone else besides the U.S. and Iceland (that is another story). "Australia is far better off being an importer of information- and communications-technology equipment...

Posted by DeLong at 01:48 AM

September 09, 2002
Alan Murray on IPO Underpricing

Alan Murray wrestles with the problem of IPO--Initial Public Offering--underpricing. On the one hand, why should the rest of us care if entrepreneurs wish to sell 10 percent of their companies at a half-off discount to the friends and clients of their investment bankers when their firms go public? Entrepreneurs are giving a rather large present to those on the IPO list, but if they did not wish to do so they could always use Hambrecht and Quist and run a true auction to sell off the initial tranche of shares. And they get benefits--a bunch of people who will have made money by investing in their stock, and who are likely to hold onto it and talk it up. Murray comes down on the side of the--highly plausible--theory that IPO underpricing is a way that investment banks get their going-public client corporations to bribe those from whom they want to be thrown other prices of investment banking business. WSJ.com - Article ...When the price of a stock jumps to $20 from $10 in the first day of trading, reaping instant profits for the lucky few who have been allocated shares, the investment bankers celebrate a "hot" offering. They ought...

Posted by DeLong at 09:18 PM

A Platonic Dialogue on Eldred v. Ashcroft

A Platonic Dialogue on Eldred v. Ashcroft Ignoramus Inquisitivus: I have a question. Why did the Supreme Court grant cert. [that is, agree to hear and decide] in Eldred v. Ashcroft [the case arguing that the most recent copyright extension act was unconstitutional because Article 1, Section 8, Clause 8 of the Constitution gives Congress the power to grant copyrights only for limited times, and only to promote the useful arts--and since the extension act was not intended to promote the useful arts Congress did not have the power to lawfully enact it]? One natural way to decide would be to say, "The Commerce Clause gives ample power for Congress to do whatever it wants as far as economic regulation is concerned. I§8¶8 covers patents and copyrights and should be read in a way consistent with the overall Commerce Clause to give the Congress effective plenary power..." A second way would be to say, "Congress has granted patents and copyrights for limited times, 100 years is a 'limited' time, 1000 years would be a 'limited' time, so what is the problem?" Realisticus: But this is not a Supreme Court that accepts cases simply to affirm the Appeals Court decision, and...

Posted by DeLong at 07:06 PM

Stephen Roach on "The Great Failure of Central Banking"

I don't agree with Stephen Roach that the Federal Reserve should have made interest rates higher and tried to make unemployment higher in the late 1990s in order to diminish investment spending and collapse the stock market bubble. In my view, the time to deal with any problems created by the bubble's collapse is when the bubble collapses--not before. Relative to a lower-stock prices, lower-investment, one-percentage-point-of-unemployment-higher bubble-popping path for the U.S. economy in the late 1990s, the actual path that we took gave us an extra $1 trillion of real production. You can complain about how that $1 trillion was distributed. You can regret that a large chunk of it--$200 billion?--was spent on investments that have much lower social value looking forward than their social cost. You can fear the damaging consequences of banruptcy and fraud on the economy. But you have to argue that these drawbacks from the fallout are quantitatively very large for the cost-benefit analysis to go Stephen Roach's way. Nevertheless, he makes his case more strongly than anybody else does: Morgan Stanley: ... Yet out of this glorious disinflation a new inflation was borne -- asset inflation. And central bankers didn’t have a clue how to...

Posted by DeLong at 09:58 AM

September 08, 2002
Six Degrees of Paul Krugman

Peter Passell writes about his twelve favorite economics websites. From the Milken Review that he edits: paul krugman | www.wws.princeton.edu/~pkrugman/ | Unofficial site:www.pkarchive.org/ Everyone, it seems, either loves Paul Krugman, or loves to hate him. One reason is that he gets amazing exposure through his Op-Ed column in The New York Times. Another is that he writes better than any economist since Keynes. Yet a third is that he doesn’t suffer fools (or knaves) easily – which often makes his opinion pieces a gas to read. His own Web site contains a sampling of his work, including some striking analytic pieces. But his unofficial site, run by Krugman groupies, is a whole lot more complete, and a whole lot more fun. It includes a lot of material about Krugman as well as stuff by him. xavier sala-i-martin | www.columbia.edu/~xs23/home.html Some economists are smart. A few are funny. A very few, including Columbia University’s Xavier Sala-i-Martin are smart and funny. Who else, after all, would grace his home page with a picture of Miss Piggy in her pigs-in-space getup, and a pair of floating eyeballs that follow your cursor around the site? Check out the picture of his favorite supermodel. Or...

Posted by DeLong at 11:01 AM

Ball and Mankiw on the "Natural Rate" of Unemployment

Larry Ball and Greg Mankiw have a very nice paper on the unemployment rate at which inflation is stable--the so-called NAIRU. The most fascinating part of the paper deals with the question of why the U.S. NAIRU fell so far and so fast in the 1990s. Ball and Mankiw find that they lean toward the hypothesis that the NAIRU is actually closely linked to the trend rate of productivity growth. The NAIRU in Theory and Practice: NAIRU stands for the nonaccelerating inflation rate of unemployment. It is beyond dispute that this acronym is an ugly addition to the English language. There are, however, two issues that fail to command consensus among economists, which we address in this essay. The first issue is whether the concept of NAIRU is a useful piece of business cycle theory. We believe it is, and we begin this paper by attempting to explain why. In our view, the NAIRU is approximately a synonym for the natural rate of unemployment. This concept follows naturally from any theory that says that changes in monetary policy, and aggregate demand more generally, push inflation and unemployment in opposite directions in the short run. Once this short-run tradeoff is admitted,...

Posted by DeLong at 08:35 AM

Japan's Recession

The Japanese data revisions are in, and they are even worse than anyone--or at least than I--had feared, even fearing that they were worse than we hard feared. The second quarter of 2001 saw real GDP shrink at an 8 percent annual rate. The first quarter of 2002--which had supposedly seen GDP grow at 6 percent per year--was completely flat. All this leaves Japanese real GDP today some 2.5 percent below its level in the fourth quarter of 20002. Economist.com: Earlier this year, optimists could at least take solace from signs that the economy was rebounding in the first quarter, from a dismally deflationary 2001. It now turns out, however, that all of that growth was illusory. After revising the way it tots up the figures, the government announced at the end of August that GDP growth had been zero in the first quarter, not the 5.7% annual rate that was announced earlier. The second quarter was better, but not especially reassuring, with GDP rising at an annual rate of 1.9%. Industrial production rose sharply in April and May, but it tailed off again in June and July. Domestic demand refuses to show a convincing bounce, leaving the economy desperately...

Posted by DeLong at 06:06 AM

September 06, 2002
Think Analytically!

Think Analytically! I remember one day during the first Clinton Administration when Joe Stiglitz came into the room to chair a meeting, looked around, noticed that--so far--only economists had shown up, and announced that nobody who did not have a Ph.D. in economics would be allowed to speak at the meeting. (Do I need to point out that that Joe was making a joke?) He was. All of us got it. All of us cheered and applauded. We did so not because we Clinton-era economists all agreed on all the issues--anybody with half an ear to the ground would know that we did not. We did so because we had found that it was possible to make intellectual and policy progress in discussions with economists because we had all been trained to think analytically: to break the issue down into background assumptions about the world, beliefs about the principal causal mechanisms, and claims about the likely effects of different policies on those chains of cause-and-effect. When we disagreed--as we often did--we could quickly ascertain where and why, and then agree on how to go hunting for pieces of information that would help resolve the disagreement. This was in striking contrast...

Posted by DeLong at 05:58 PM

High-Tech Investment

High-Tech Investment If you read your business pages, you might well think that business purchases of computers are way down. Guess what? They're not. This year it looks like America's businesses are going to buy 13% more in the way of quality-adjusted computers and peripherals than in any previous year. In 2001--the only year in which real investment in computers and peripherals fell--quality-adjusted purchases fell by only 3%. Spending on computers and peripherals has indeed fallen. But that's because computers have become cheaper--a lot cheaper--not because American business is installing less computer power this year than in the past. Things look less bright if you aggregate up all high-tech investment--not just real investment in computers, but also software and "other": real investment in this broader category this year will be 4 percent below its year-2000 peak--but still higher than in any year other than 2000. Why the different pattern? The falloff in telecom investment. We are no longer spending a fortune digging holes and stuffing large quantities of fiber optic cables down them....

Posted by DeLong at 05:34 PM

American Labor Productivity Growth Trends

Labor Productivity Growth Trends Bill Nordhaus just gave a paper on U.S. productivity growth. One problem with the subject is that the year-to-year data are so noisy: errors in measuring output this year, errors in measuring output last year, errors in measuring hours worked this year, and errors in measuring hours worked last year all disturb the numbers reported for any given year. As a result, such papers almost always divide the time period up into a few chunks--1977-1989; 1989-1995; 1995-2001--and simply compare averages over those chunks. But the time series is considerably richer. So while Bill was talking, I found myself (a) taking the annual data, (b) adjusting productivity growth for the business cycle (for productivity growth jumps by 0.39 percent for each percentage point increase in this year's unemployment rate, and falls by 0.77 percent for each percentage point increase in last year's unemployment rate), and (c) taking a centered five-year moving average (using our current forecasts for 2002, and taking a truncated four-year not-centered moving average for 2001). The resulting series--the "actual" and the "trend"--are plotted as the green and the red line in the figure below: As a measure of the underlying pace of potential economic...

Posted by DeLong at 05:28 PM

BLS August Report

The Bureau of Labor Statistics reports that businesses employed 39,000 more people in August than they did in July (on a seasonally adjusted basis). The BLS also reports that its survey of households produces an estimate of 429,000 more Americans at work in August than in July. Which is more reliable? I have always trusted the business employment survey rather than the household survey as a more reliable business cycle indicator. This month, it is the one that is more pessimistic about the state of the economy. Employment Report...

Posted by DeLong at 01:33 PM

September 03, 2002
Europe's Economic Policy Dilemmas

Here Morgan Stanley's Eric Chaney gives his take on western Europe's current fiscal policy dilemma. Given that the European economies are on the edge of recession, it makes neither economic nor political sense for them to cut their short-run budget deficits. But neither the "Stability and Growth Pact" nor the discourse about European fiscal policy allows one to try what the Clinton administration wanted to try in 1993--a larger deficit now coupled with lots of planned reduction in the deficit in the future. Morgan Stanley: Euroland: The Arithmetic and Politics of Fiscal Policies - Part I...

Posted by DeLong at 12:49 PM

In the Shadow of the Grand Tetons

Richard Berner from Morgan Stanley gives his take on the conversation at last weekend's Federal Reserve Jackson Hole symposium (sponsored by the Federal Reserve Bank of Kansas City). From my perspective, the strangest and most worrisome thing about his report of the conversation is the "European" belief that interest rates have to stay high to promote the "liquidation" of potentially bankrupt enterprises. This is not a strong current of thought in America (save, perhaps, for the pages of the New Republic): ...Few U.S. monetary policymakers fret that low interest rates will forestall corporate downsizing, because they believe that U.S. financial markets are appropriately denying capital to those sectors where gluts are biggest, or giving it to new management who will clean house. On the contrary, some officials worry that Corporate America is hesitant to hire. So while they are guardedly optimistic, they seemed more open-minded about the need for additional stimulus than recent press commentary had suggested. All agreed that the U.S. economy's resilience in the face of financial shocks was comforting, but no guarantee that it would persist.... With oil prices meaningfully higher than we forecast, I share their concern that fourth-quarter growth could zigzag back toward 2%. Such...

Posted by DeLong at 12:39 PM

September 01, 2002
The New German Problem

Project Syndicate: The New German Problem: J. Bradford DeLong : September 2002 As Germany prepares to elect its next Chancellor, the two main candidates, Gerhard Schroeder and Edmund Stoiber, agree on one thing: unemployment must be reduced. Over the past two decades, high unemployment has transformed Europe in general and Germany in particular into a sociological time bomb. What will the unemployed - especially the long-term unemployed with only dim memories of integration into the world of work - do with themselves and their time? What will happen to confidence in governments that can not solve the problem? It is easy to forget that little more than 50 years ago, Europe was the world's most violent continent. Europeans spent the previous forty years slaughtering each other on a scale unprecedented in human history. Against this backdrop, Western Europe after 1950 was remarkably peaceful and stable, even taking into account the fall of the French Fourth Republic and the transitions from dictatorship to democracy in Portugal, Spain, and Greece. The most remarkable transformation of all was that of the Federal Republic of Germany. Anyone familiar with German history since 1800 is still astonished at the enthusiasm with which the nation that...

Posted by DeLong at 04:44 PM

August 29, 2002
A Reader's Guide to the CBO

John S. Irons notes that the Center on Budget and Policy Priorities has put out a set--a very good set--of one-page analyses making sense of the Congressional Budget Office's updated forecasts. ArgMax Blog: CBO Budget Information: The Center on Budget and Policy Priorities has put together a series of 1-page reports answering questions about the most recent CBO budget release. Why the surplus has disappeared What part was under congressional control Revenue loss vs. spending Debt and interest on the debt CBO vs. OMB What's missing? Data Relating to Recent Budget and Economic Projections by the Congressional Budget Office, 8/29/02, 7pp. This series of one-page analyses discusses a range of issues, including the causes of the disappearing surplus. The data in these materials will be more fully discussed in a forthcoming paper....

Posted by DeLong at 08:45 PM

European Economic History Reading Course: Fall 2002: Second Draft Syllabus

1. Basics September 12: Robert Bates and Avner Greif (1998), Analytical Narratives (Princeton: Princeton University Press). Massimo Livi-Bacci (2001), A Concise History of World Population (Oxford: Blackwell). September 19: Douglass North (1981), Structure and Change in Economic History (New York: Norton). Douglass North (1990), Institutions, Institutional Change, and Economic Performance (Cambridge, UK: Cambridge University Press). Jack Goldstone (1987), "Cultural Orthodoxy, Risk, and Innovation: the Divergence of the East and West in the Early Modern World," Sociological Theory, 119-135. September 26 Jared Diamond (1999). Guns, Germs, and Steel (New York: W.W. Norton). 2. Europe Before the Industrial Revolution October 3: Carlo Cipolla (1980), Before the Industrial Revolution (New York: Norton). Philip Hoffman (1988), "Institutions and Agriculture in Old Regime France," Politics and Society, 16, 241-264. October 10: Jan de Vries and Ad van der Woude (1997), The First Modern Economy: Success, Failure, and Perseverance of the Dutch Economy, 1500-1815 (Cambridge, UK: Cambridge University Press). Jan De Vries, “The Industrious Revolution and the Industrious Revolution,” Journal of Economic History 54 (1994): 249-270 3. The European World Economy October 17: Kenneth Pomeranz (2000), The Great Divergence: Europe, China, and the Making of a Modern World Economy (Princeton: Princeton University Press). Richard Easterlin (1981),...

Posted by DeLong at 09:44 AM

August 26, 2002
The Japanese Economy Is in Worse Shape Than I Had Thought

The Financial Times reports that recent Japanese economic statistics are about to be revised sharply downward--and that taken together the first and second quarters of 2002 will show a real GDP growth rate of only 1.5 percent per year. Thus the hopes--based on preliminary first-quarter statistics--that Japan was pulling out of its long depression appear to have been false. New data may cast doubt on Japan recovery By David Pilling in Tokyo Published: August 26 2002 17:22 | Last Updated: August 26 2002 17:22 Japan may this week drastically scale back preliminary estimates for first-quarter growth, removing much of the gloss from what many had hopefully interpreted as a sharp rebound from the country's worst post-war recession.An improvement in the methodology by which gross domestic product is calculated could see revised GDP numbers for the first three months, due to be published on Friday, fall to about half the initial estimate of 1.4 per cent. The original figure implied an annualised growth rate of an improbable 5.7 per cent."I think it is pretty much established that the new figures will show that GDP did not perform as well as originally stated because those initial figures were based on wildly exaggerated...

Posted by DeLong at 10:01 AM

August 24, 2002
Louis Uchitelle of the New York Times Also Worries About Deflation

Louis Uchitelle writes about the danger of deflation--and wonders why more people aren't worrying about it. I think the answer is that people are worrying about it. However, it's not yet a crisis, or even a clear and present danger. But it does seem to me that it could become a clear and present danger in a year, if things do not break favorably. Cost-Cutting Can Start a Ruinous Circle: ...Why isn't that danger uppermost in everyone's mind? Why are forecasters like James Glassman, a senior economist at J. P. Morgan Chase, so optimistic? In a nutshell, they expect an infusion of demand from somewhere that will reverse the cost-cutting and persuade companies to expand investment, production and hiring. Their main hopes are more tax cuts, more growth in federal spending and more interest rate cuts by the Federal Reserve. They also count on people to finance consumption by continuing to extract equity from their homes, which are still rising in value. Mainly, though, it is stimulus from Washington that for Mr. Glassman will save the day. "If Washington cannot get us moving toward full employment within a year," he said, "then there will be more federal stimulus. We have...

Posted by DeLong at 09:28 PM

August 22, 2002
How to Run an Auction

Reading through back issues of Lynne Kiesling's very nice weblog, The Knowledge Problem, I find a link to a Hal Varian article on auctions that I had missed: ...Paul Klemperer, an Oxford economist, recently wrote a paper called "What Really Matters in Auction Design," which includes many amusing, and sobering, stories of auction manipulation. This paper, and related materials, can be downloaded from his Web site at www.paul klemperer.org. Mr. Klemperer argues that the principles of good auction design are the same as for any other market: try to encourage entry, and try to discourage collusion. Ascending-bid auctions, particularly when they involve only a few bidders, are often susceptible to collusion, since participants can use early rounds to signal intentions. In 1999, Germany sold some mobile-phone spectrum by auction, with one rule specifying that any new bid had to exceed the previous high bid by 10 percent. Two serious bidders were involved. One company bid 18.18 million marks on blocks 1 to 5 and 20 million on blocks 6 to 10. Why the difference? Note that 18.18 million plus 10 percent is just about 20 million. The first company was sending the second a message: "We think 20 million is...

Posted by DeLong at 08:48 PM

The Fruit Detective

"Ha!" says Ann Marie. "Your examples of the division of labor all are boring. Why don't you tell your students about somebody like the fruit detective? Absolutely brilliant New Yorker article. A man who makes his living by tracking down high-quality fruits and persuading restaurants and gourmet stores to buy them." "Mmmm..." I say. "These white-flesh nectarines are too good to be believed..."...

Posted by DeLong at 08:24 PM

August 21, 2002
Go To College!

If you're listening to this, are under 35, and haven't been to college: go to college. If you have children who are thinking of not going to college: convince them to go to college. Harvard economists Claudia Goldin and Larry Katz have called the twentieth century, "America's century of education." During that century the United States widened its lead over other industrial economies by creating the universal high school, and by developing a large and flexible system of colleges and universities. They believe that this educational expansion greatly increased the skills and adaptability of America's labor force throughout the twentieth century, and was a large part of the reason that America was and is richer and Americans more productive than people anywhere else in the world. But in the past few decades we've seen a slowdown in the growth of education in America. This slowdown has been accompanied by a sharp rise in the difference between the earnings of young workers who have and have not been to college. We economists are scratching our heads: since the--economic--benefits of going to college have become so large, why aren't more people going? One possibility is that people do not realize that the...

Posted by DeLong at 05:09 PM

August 20, 2002
Kieran Healy on Brink Lindsey

Another one for the clippings file Kieran Healy's Weblog: Firms, Markets and Information Firms, Markets and Information In this post to his weblog, Brink Lindsey, author of Against the Dead Hand, tries to put the recent corporate scandals in the context of a wider debate about markets and hierarchies. He wants to answer three questions, in descending order of generality. First, why are markets so great? Lindsey's starting point is a standard one. Free markets are the best way to produce and allocate goods, and thereby promote growth and maximize welfare. The reason markets are better at this than (say) the state, was best expressed by Hayek. The distributed and decentralized nature of the market mechanism gathers and transmits a vast amount of dispersed information about demand and supply. The flow of information is reflected in changes in prices. Markets quickly and efficiently allow people to make more or less the right decisions about of how to allocate scarce resources with alternative uses. Market ideologues generally stop there. Lindsey is more sensible, and asks the second question: If markets are so great at doing what Hayek claims, then why are there so many firms? Let alone, we might add, positively...

Posted by DeLong at 04:29 PM

August 16, 2002
Daniel Davies--A New Weblog...

Daniel Davies--who has been through massive efforts raising the level of the debate on this weblog's "comments" section--finally has his own weblog. His second and third posts alone are each worth much more than the price of admission... D-squared Digest -- A fat young man without a good word for anyone: Our cause might be right, so battle we might: Strange reasoning from all sides on the apparently vexed question of declaring war on Saddam Hussein ... From the left we have: 1. We are currently in the process of starving the Iraqis to death in the nastiest way possible. 2. It is abundantly clear that it is politically impossible to end the blockade while Saddam Hussein is in power. 3. Saddam Hussein is a horrendously unpleasant dictator. 4. Therefore, opposition to the war has the practical effect of lengthening the blockade and thus killing Iraqis, and the political effect of making the Left look like friends of murdering dictators. 5. [inaudible]. 6. HEY HEY HO HO DOUBLE YA HAS GOT TO GO! YANQUI GO HOME! SOLIDARITY FOREVER WITH IRAQ! And from the right: 1. Saddam Hussein, if he is a monster, is a monster of our own creation; we...

Posted by DeLong at 04:58 PM

Green Consumption

Richie Abrams, Professor of History here at Berkeley, and my part-time boss in his role as Associate Dean for International and Area Studies, has bought a Toyota Prius--one of the hybrid internal combustion-electric motor cars, that achieves extraordinary fuel efficiency (60 miles to the gallon?) by using the kinetic energy reduction accomplished during braking to charge up the battery. The only thing wrong with the car seems to be a lack of rear legroom... As he talked about the car, I couldn't help doing the math in my head, and finding that the financial side seemed to make the car's purchase nearly irresistible. Seven years of free maintenance--that's got to have a present value today of $2500. Increased efficiency implying a savings of $600 a year in gasoline costs at current prices--that's got to have a present value of $5000 today, plus whatever allowance for the risk of gasoline price changes we wish to include ($6500 in total?). Thus in buying a--fully-loaded--Prius, Richie paid $25000 and got back $9000 worth of maintenance, repair, and gasoline cost savings, for an NPV cost of only $16000. Plus he got enormous ecobragging rights, living as he does in North Berkeley. In a...

Posted by DeLong at 10:48 AM

August 15, 2002

At what level of material wealth does one become, completely, totally, utterly sated? How much stuff--how many things--how much power to buy and control does one have to have before one can say "enough is enough," stop playing the game for increased wealth, and start playing some other, different game? Here is discouraging psychological evidence from publishing magnate and Rolling Stone founder Jann Wenner. It turns out that--at least as far as he is concerned--wealth in nine figures isn't enough yet to make him not care... Premium Blend: A group weblog from the editors of Corante: What's your number? How much is enough? It may be more than you think: ''I had a fascinating conversation recently with Jann Wenner, the founder of Rolling Stone. Here's a guy who's probably got three or four hundred million dollars--he's got a Gulfstream II and a house here and a house there, and you can't imagine what trappings he could want from the next level. But he's got this gleam in his eye because he's telling me about how he spent the weekend with Paul Allen. He said that Paul Allen didn't have a GII, he had two 757s. They flew over to, like,...

Posted by DeLong at 08:10 PM

The Course of the Recession

Last month's revisions to the NIPA produced a three-quarter decline in real GDP in 2001, instead of the preliminary one-quarter decline. Nevertheless, real GDP declined by only 0.6 percent before beginning its bounce-back in the fourth quarter of 2001. But the most interesting series remains the unemployment rate, still trending upward as real GDP grows less rapidly than productivity plus the trend increase in the labor force, and thus the proportion of America's potential workers left idle continues to grow. Charts from the Wall Street Journal....

Posted by DeLong at 04:22 PM

I Am Envious Again

John Irons of Amherst has thought out what an economics website should be, has come up with an interesting design that works, and has successfully implemented it. I am envious... ArgMax.com - Economics News, Data, and Analysis...

Posted by DeLong at 09:38 AM

August 14, 2002
Price of Grapefruit

Andrew Tobias wonders how a Beverly Hills hotel that charges him $18 for a grapefruit can afford to rent him a whole room for $84 a night. Silly Andrew. It's only because the margins on items like grapefruit are so large that the hotel can advertise that it only costs $84 a night. Andrew Tobias is annoyed: it's unfair to charge him $18 for a grapefruit. He feels cheated, and when people feel that they are being cheated they get really, really upset--it seems to be hardwired into us. The interesting thing is that even with this strong feature of human psychology--don't cheat us, or we'll get mad--to deal with, the hotel prefers to overcharge for incidentals so as to be able to advertise a low barebones room rate. Something's going on here in the hotel's decision-making processes that I don't understand. I do know, however, that I am annoyed that I have to constantly tell the kids, "Don't you dare take anything from that minibar refrigerator!" Andrew Tobias - Money and Other Subjects I know room service has specific menus, but from time to time I remember that at many finer hotels you can ask for more or less...

Posted by DeLong at 10:09 AM

July 17, 2002
Project Syndicate

For most of the past decade people outside the United States have been treated to lecture after lecture by Americans who want to tell them just how perfect the U.S. economy is. Continental Europeans have been told to liberalize their labor markets, so that businesses that want to hire the unemployed can do so without losing money and so that unemployed workers who find new jobs don't see the wages they earn almost or completely offset by a cut in welfare-state benefits. Japanese have been told to socialize the losses their banking system incurred when Japan's bubble burst by nationalizing the banking system, re-privatizing those parts of it that have a chance of success as going concerns, and liquidating the rest. East Asian Tigers have been told to transform their financial systems from the Germano-Japanese universal banking to the Anglo-American market liquidity model--and do a better job of regulation. Other developing countries have been told that their trade barriers, their love of inflationary finance, their failure to curb tax evasion, and their lack of a government strong enough to enforce property and contract against local notables, organized bandits, and--most important--its own functionaries have kept them from participating in the cornucopia...

Posted by DeLong at 01:13 PM

July 16, 2002
By Contrast, the Economist Presents a Good Analysis of the Dollar-Euro

By contrast, the Economist runs a good, informative analysis of what the shift in the euro-dollar exchange rate means. The writers of the Economist will not be sent to the re-education camp to which so many other journalists will be consigned after the revolution. Instead, they will run the re-education camp, and after they are finished the world will be a better place. Worth Less Than a Euro Avinash Persaud... defines a safe-haven currency as one which rallies when investors are risk averse. He concludes that the dollar had become a safe haven by March 2000, just about a year after the euro was launched, and at a time when the American government had started to run large fiscal surpluses. The surpluses gave the government greater policy flexibility as the high-tech boom started to falter. As those large American surpluses have turned--very rapidly--into budget deficits, and as confidence in the euro has grown, the dollar has begun to lose its safe-haven status. As well as the euro, the yen, too, has started to appreciate rapidly. Of course, as Mr Persaud points out, safe-haven status can bring problems for the currencies which attract investors. An overvalued currency can be painful for...

Posted by DeLong at 11:48 AM

Yet Another Example of Truly Lousy Economic Journalism

After the revolution that establishes the rule of truth and justice, among the very first people to be sent to the reeducation camp will be Steven Erlanger of the New York Times, and his editor. Erlanger seems to think that the euro's rise to parity with the dollar is a "victory for Europeans"--as if the euro and the dollar were two competing sports teams, as if Europeans should cheer and feel proud for a high value of one and Americans feel proud for a high value of the other. Euro Edges Past the Dollar in Victory for Europeans By STEVEN ERLANGER, July 15, 2002 The euro became worth slightly more than the battered American dollar today for the first time in more than two years, giving Europeans a shot of pride at a time when many of them view the United States with some resentment. In a period when the United States is the world's only superpower, often perceived as selfish and unthinking about its European allies, today's little psychological victory of the euro over the dollar provided some not-so-sheepish satisfaction... Read that? Good. Now how many of the following facts about the dollar-euro has Mr. Erlanger managed to convey...

Posted by DeLong at 11:39 AM

July 14, 2002
2002-07-13: Notes: African Development

2002-07-13 Notes: African Development: An Email Exchange > And? Don't keep us in suspense! Was the fertilizer plant feasible? > Was it built? Does it work? Do thousands of cheering Tanzanians daily > praise the name of ________ _______? > The plant was actually in Uganda, but Tan-zanier is one of the main markets. But no. It fizzled. Not because it wasn't feasible, it was an excellent project, IMO. Trouble was the whole thing ground to a slow stuttering halt, because there's too many people who want to know what you can do for them, instead of doing their jobs. <shrug> ________ > Too many people in Britain? In Cyprus? In Uganda? > > > Brad In Uganda. Like endemic bribery and corruption to a degree that was almost a self-parody. _________ But Yoweri Musaveni is supposed to be one of Africa's best rulers, and his government one of the most honest......

Posted by DeLong at 03:21 PM

July 08, 2002
Brink Lindsey Says: The Human Race Has Been Dealt a Winning (and Invisible) Hand

"I think you're wrong," said one of the barons of the center-left Washington, DC thinktanks. "Cato's biggest problem isn't that its day-to-day stuff is too carefully crafted to be politically useful to those factions of the Republican Party that it approves of. Cato's biggest problem is that it doesn't have a deep enough analytical bench. In fact, it has only one young full-time truly-heavy intellectual hitter."* "Brink?" "Yes, Brink Lindsey. Very smart. Very knowledgable. Very thoughtful. And--which is very unusual--very willing to entertain the possibility that he might be wrong." Now Brink Lindsey has written a book: Brink Lindsey (2002), Against the Dead Hand: The Uncertain Struggle for Global Capitalism (New York: John Wiley: 0471442771). The purpose of the book is to celebrate the end of one of what Lindsey sees as one of the great obstacles to human progress. The obstacle is "the dream of centralized, top-down control over the course of economic development" (p. 2). In Lindsey's mind, whether the policies were the bloody collectivization of agriculture by Stalin, Mao's command that peasants smelt steel in their backyards, French bureaucrats providing indicative guidance to enterprises for capacity expansion, the UK Labour Party nationalizing the "commanding heights" of...

Posted by DeLong at 06:34 PM

Sustaining American Economic Growth: Education as the Highest Priority

The third of the four things that I had hoped to have finished by mid-May is finally put to bed--on July 9. *Sigh*. Nevertheless, I like it a lot: it is a chapter for a book to be edited by Henry Aaron, part of Brookings's Agenda for the Nation series. It's co-written with the brilliant and thoughtful team of Claudia Goldin and Larry Katz. We're supposed to talk about sustaining American economic growth. What do we say? A fast growing economy is a rich economy. A rich economy is one in which people have more options and better choices: the people can—through their individual private and collective public decisions—decide to consume more, lower tax rates, increase the scope of public education, take better care of the environment, strengthen national defense or accomplish any other goals they might choose. For an economist these are sufficient reasons to consider growth a good thing. Moreover, in America at least, slow economic growth appears to heighten political gridlock, and thus reduce the quality of political decisions. Although faster economic growth is a good thing, it is not the only good thing. The future benefits of more rapid economic growth come at a cost. Resources...

Posted by DeLong at 12:32 PM

July 07, 2002
Why the Decline in Health Insurance Coverage?

The continued decline in the share of Americans with health insurance coverage places additional stress on our health care financing system. Sometimes those without health insurance get no or get substandard treatment. Sometimes those without health insurance get adequate or excellent-quality catastrophic treatment--but the treatment is paid for by somebody else. Such cost-shifting further increases the cost of insurance, and reduces coverage. The fear is that at some point large chunks of the financing system will enter an adverse-selection death-spiral as each wave of price increases generates a large reduction in the pool of those paying for insurance and a further wave of price increases. And the derangement of the health-care financing system leads to a significant deterioriation in the quality of care provided. But, fortunately, we aren't there yet. However, we are getting closer. Here David Cutler tracks the decline in health insurance coverage in the 1990s. Employee Costs and the Decline in Health Insurance Coverage David M. Cutler NBER Working Paper No.w9036 Issued in July 2002 ---- Abstract...

Posted by DeLong at 07:51 PM

July 05, 2002
A Supermarket Epiphany

James Lileks has an epiphany about modern America and its economy in the grocery store, after staring at some people with weird tattoos. | LILEKS (James) The Bleat | Ever seen photographs of old grocery stores? Rent "Double Indemnity" some time, and watch the scene where Fred MacMurray and Babs Stanwick meet at an A&P. Four aisles of soap flakes and lousy coffee. My neighborhood has two old grocery stores from the post-war era; one is now a small restaurant, the other a liquor store. People are surprised to learn they were once grocery stores, because they look so small.Look at grocery stores today: gigantic. And look who they're for: not the lotus-eaters, but everyday folk. They're for people who aren't doing fabulous - but they're doing all right. Money's tight, the Visa's a bitch, but they have a house - not big, not new, but it's home, and if it's in this first-ring burb they have a huge yard, tall trees over the street and a decent school around the corner. They have a car - no Saab, but it runs great and you can fit six bags of groceries in the trunk. They have a couple of TVs,...

Posted by DeLong at 09:01 AM

July 03, 2002
The Boom in IT Investment

Real gross investment in IT relative to real GDP. The series is in chained 1996 dollars, so the relative levels are equal to nominal spending levels in 1996. We could choose an earlier base year, and blow up the apparent salience of IT investment today. We could choose a later base year, and reduce somewhat the salience of IT investment today. The first thing to note--the thing that is invariant to the choice of base year--is the extroardinary rise in the relative salience of IT, and how quickly it was accomplished. The second thing to note is how small the real decline in IT investment in the current recession has been. It erased less than two years' growth in relative real IT investment. Real Investment in Information Technology Equipment and Software Divided by Real GDP From the National Income and Product Accounts prepared by the Commerce Department's Bureau of Economic Analysis. Real gross private investment in information technology and software divided by real gross domestic product [GDP]. Note that this is not a "share": it is just two series of numbers, one divided by the other....

Posted by DeLong at 02:30 PM

The Accumulation Century, the Education Century, and What Comes Next...?

The nineteenth century was the age of invention, innovation, and accumulation. New technologies were developed in the lab and installed in the field, on the road, and in the factory. These new technologies were for the most part embodied in expensive and sophisticated capital goods. Hence economic growth in the nineteenth century was overwhelmingly the accumulation and deployment of physical capital goods that embodied productve modern technologies. By contrast, the twentieth century saw not a rise but a fall in the physical capital-output ratio. We have many more and much more sophisticated machines and structures now, yes. But the ratio of the value of capital to the value of output has fallen. In this sense, the twenteith century was the human-skill century, one in which the key complementarity was not between technology and machines but between technology and the skills and capabilities of the labor force. What comes next? What will the start of the twenty-first century bring? Unless the U.S. makes a major national effort, a variety of forces seem to be working to make the upgrading of the educational and skill level of the American labor force much slower in the future than it has been in the...

Posted by DeLong at 01:20 PM

The Upward Shift in Gross Investment in America

Before the 1990s there was some evidence for a long, slowly-moving upward trend in the volume of investment relative to GDP. Many Republican politicians (and a few analysts) thought that the Reagan tax cuts of the early 1980s had generated an investment breakthrough: they looked at the rise in investment from 1982 to its 1984 peak, projected this rise forward, and forecast rapid economic growth as it was "morning in America." But whatever supply-side incentives did in the mid- and late-1980s to boost demand for investment funds, the large federal deficits (and the swing in the balance of payments back toward zero) did more to drain the pool of savings and reduce the supply of potential investment funds. Anomalously, the later 1984-1989 stage of the 1980s expansion saw not rising but falling investment relative to GDP. The 1990s, by contrast, saw a stunning explosion of investment in America. A fall in private savings was greatly outweighed by a combination of the Clinton administration's successful commitment to deficit reduction, the return of foreigners' willingness--nay, eagerness--to invest in America, and stunning declines in the relative prices of high-tech investment goods that gave firms undertaking investment projects much more bang for the buck....

Posted by DeLong at 01:12 PM

The Two Decade-Long Fall in America's Private Savings Rate

Of all the remarkable things to happen in the U.S. economy over the past two decades, the fall in the private savings rate must rank among the top ten. Net private savings in the United States--the sum of household savings on the one hand and business retained earnings on the other--used to fluctuate between nine and twelve percent of gross domestic product [NDP]. Then in the mid-1980s, during the Reagan years, private savings began to fall. This was a mystery: after all, the government was running substantial deficits, and there were theoretical reasons to believe that individuals might save more to offset the risk--nay, the certainty--that higher levels of government debt would one way or another increase their taxes in the future. Some argued that the private savings rate was fallen because the 1980s stock market boom had made people wealthier, and they wanted to spend some of that wealth. But the crash in inflation-adjusted stock market values in the 1970s had not led people to save more to offset their reduced stock-market wealth. It remained a puzzle. And the puzzle gathered strength in the 1990s. By the peak of the late-1990s boom, the private savings rate was only three...

Posted by DeLong at 12:57 PM

November 10, 1999
How We Might Be Able to Do a Better Job of Teaching Macroeconomics

Macroeconomics Textbook Manifesto There is an apocryphal rule about new textbooks: they can only have 15% new material. A successful new textbook must be different enough from the old standards to give professors an incentive to switch, but must to similar enough to the old standards to keep the process of switching from requiring professors to throw away all their old lecture notes and completely redesign their courses. This is a neat trick. It makes intellectual progress--at least intellectual progress in undergraduate instruction--nearly impossible. Nevertheless, I believe that I can accomplish it. I think that I can greatly slim down "legacy" topics that are now included largely for intellectual-historical reasons (and that cause difficulty and confusion in teaching). I also think that I can make significant expositional improvements in several areas. Thus I think I can wind up with a shorter book that teaches students more material of interest and remains similar enough to past macroeconomics textbooks to be generally acceptable......

Posted by DeLong at 03:56 PM

November 06, 1999
Review of Jared Diamond, Guns, Germs, and Steel

Why did Europeans conquer Peru, Mexico, Ghana, and Australia? Why didn't Incas, Aztecs, Ashanti, or Australians conquer Eurasians. That is the question that Jared Diamond answers--largely successfully--in this book. And his answer can be summed up in one phrase: "seeds, germs, size, and guns." (Note that the answer is not "guns, germs, and steel"--a phrase that is more euphonious but less meaningful.) Eurasian societies acquired a key advantage relative to other societies because of big seeds. Eurasian societies acquired a key advantage (relative to other societies) in their resistance to germs. The relatively advantageous biological endowment of Eurasian societies was then reinforced because of the size of Eurasia. And the relative edge possessed by European societies was then amplified to overwhelming proportions by guns....

Posted by DeLong at 04:17 PM

August 01, 1990
J. Bradford DeLong (1990), "`Liquidation' Cycles: Old-Fashioned Real Business Cycle Theory and the Great Depression" (Cambridge, MA: Harvard University Department of Economics).

J. Bradford DeLong (1990), "`Liquidation' Cycles: Old-Fashioned Real Business Cycle Theory and the Great Depression" (Cambridge, MA: Harvard University Department of Economics)....

Posted by DeLong at 03:15 PM

June 01, 1990
J. Bradford DeLong, Andrei Shleifer, Lawrence H. Summers, and Robert J. Waldmann (1990), "Positive-Feedback Investment Strategies and Destabilizing Rational Speculation," Journal of Finance 45: 2 (June), pp. 374-397.

J. Bradford DeLong, Andrei Shleifer, Lawrence H. Summers, and Robert J. Waldmann (1990), "Positive-Feedback Investment Strategies and Destabilizing Rational Speculation," Journal of Finance 45: 2 (June), pp. 374-397....

Posted by DeLong at 03:12 PM

Robert B. Barsky and J. Bradford DeLong (1990), "Bull and Bear Markets in the Twentieth Century," Journal of Economic History 50: 2 (June), pp. 1-17.

Robert B. Barsky and J. Bradford DeLong (1990), "Bull and Bear Markets in the Twentieth Century," Journal of Economic History 50: 2 (June), pp. 1-17....

Posted by DeLong at 03:10 PM

January 01, 1990
J. Bradford DeLong (1990), "In Defense of Henry Simons' Credentials as a Classical Liberal," Cato Journal 9: 1 (Winter), pp. 105-122.

J. Bradford DeLong (1990), "In Defense of Henry Simons' Credentials as a Classical Liberal," Cato Journal 9: 1 (Winter), pp. 105-122....

Posted by DeLong at 03:07 PM

J. Bradford DeLong and Lawrence H. Summers (1990), "Price Level `Flexibility' and the Coming of the New Deal: A Response to Sumner," Cato Journal 9: 1 (Winter), pp. 729-735.

J. Bradford DeLong and Lawrence H. Summers (1990), "Price Level `Flexibility' and the Coming of the New Deal: A Response to Sumner," Cato Journal 9: 1 (Winter), pp. 729-735....

Posted by DeLong at 03:04 PM

December 01, 1989
J. Bradford DeLong (1989), "Review of Nicholas Spulber, Managing the American Economy from Roosevelt to Reagan," Journal of Economic History 49:3 (December), pp. 1058-1059.

J. Bradford DeLong (1989), "Review of Nicholas Spulber, Managing the American Economy from Roosevelt to Reagan," Journal of Economic History 49:3 (December), pp. 1058-1059....

Posted by DeLong at 02:59 PM

September 01, 1989
J. Bradford DeLong (1989), "Facets of Interwar Unemployment," Journal of Monetary Economics 49:3 (September), pp. 800-802.

J. Bradford DeLong (1989), "Facets of Interwar Unemployment," Journal of Monetary Economics 49:3 (September), pp. 800-802....

Posted by DeLong at 02:02 PM

J. Bradford DeLong and Lawrence H. Summers, "On the Existence and Interpretation of a `Unit Root' in U.S. Real GDP" (Cambridge, MA: Harvard University Department of Economics, 1989).

J. Bradford DeLong and Lawrence H. Summers (1989), "On the Existence and Interpretation of a `Unit Root' in U.S. Real GDP" (Cambridge, MA: Harvard University Department of Economics)....

Posted by DeLong at 01:51 PM

July 01, 1989
J. Bradford DeLong (1989), "The `Protestant Ethic' Revisited: A Twentieth-Century Look," Fletcher Forum 13: 2 (Summer), pp. 229-242.

J. Bradford DeLong (1989), "The `Protestant Ethic' Revisited: A Twentieth-Century Look," Fletcher Forum 13: 2 (Summer), pp. 229-242....

Posted by DeLong at 01:59 PM

J. Bradford DeLong (1989), "Nassau Senior's `Last Hour' and the `Advances' Conception of Capital Revisited," History of Political Economy 21: 2 (Summer), pp. 309-310.

J. Bradford DeLong (1989), "Nassau Senior's `Last Hour' and the `Advances' Conception of Capital Revisited," History of Political Economy 21: 2 (Summer), pp. 309-310....

Posted by DeLong at 01:46 PM

J. Bradford DeLong, Andrei Shleifer, Lawrence H. Summers, and Robert J. Waldmann (1989), "The Size and Incidence of Losses from Noise Trading," Journal of Finance 44: 3 (July), pp. 681-696.

J. Bradford DeLong, Andrei Shleifer, Lawrence H. Summers, and Robert J. Waldmann (1989), "The Size and Incidence of Losses from Noise Trading," Journal of Finance 44: 3 (July), pp. 681-696....

Posted by DeLong at 12:21 PM

December 01, 1988
J. Bradford DeLong (1988), "Productivity Growth, Convergence, and Welfare: Comment," American Economic Review 78: 5 (December), pp. 1138-1154.

J. Bradford DeLong (1988), "Productivity Growth, Convergence, and Welfare: Comment," American Economic Review 78: 5 (December), pp. 1138-1154. JSTOR....

Posted by DeLong at 11:51 AM

J. Bradford DeLong and Lawrence H. Summers (1986), "Is Increased Price Flexibility Stabilizing?" American Economic Review 76: 5 (December), pp. 1031-1044.

J. Bradford DeLong and Lawrence H. Summers (1986), "Is Increased Price Flexibility Stabilizing?" American Economic Review 76: 5 (December), pp. 1031-1044....

Posted by DeLong at 08:49 AM

September 01, 1988
J. Bradford DeLong and Lawrence H. Summers (1988), "How Does Macroeconomic Policy Matter?" Brookings Papers on Economic Activity 1988: 2 (Fall), pp. 433-480.

J. Bradford DeLong and Lawrence H. Summers (1988), "How Does Macroeconomic Policy Matter?" Brookings Papers on Economic Activity 1988: 2 (Fall), pp. 433-480....

Posted by DeLong at 11:48 AM

March 01, 1988
J. Bradford DeLong (1988), "Review of I. Berend and K. Borchardt, eds., The Impact of the Great Depression of the 1930s," Journal of Economic History 48:1 (March), pp. 239-240.

J. Bradford DeLong (1988), "Review of I. Berend and K. Borchardt, eds., The Impact of the Great Depression of the 1930s," Journal of Economic History 48:1 (March), pp. 239-240....

Posted by DeLong at 11:42 AM

September 01, 1987
J. Bradford DeLong (1987), "Review of N.F.R. Crafts, British Economic Growth during the Industrial Revolution," Journal of Economic History 47:3 (September), pp. 790-792.

J. Bradford DeLong (1987), "Review of N.F.R. Crafts, British Economic Growth during the Industrial Revolution," Journal of Economic History 47:3 (September), pp. 790-792....

Posted by DeLong at 11:39 AM

J. Bradford DeLong (1987), "Review of Bernard Elbaum and William Lazonick, The Decline of the British Economy," Journal of Economic History 47:3 (September), pp. 792-795.

J. Bradford DeLong (1987), "Review of Bernard Elbaum and William Lazonick, The Decline of the British Economy," Journal of Economic History 47:3 (September), pp. 792-795....

Posted by DeLong at 11:37 AM

August 01, 1986
J. Bradford DeLong (1986), "Senior's `Last Hour': A Suggested Resolution of a Famous Blunder," History of Political Economy 18: 2 (Summer), pp. 325-333.

J. Bradford DeLong (1986), "Senior's `Last Hour': A Suggested Resolution of a Famous Blunder," History of Political Economy 18: 2 (Summer), pp. 325-333....

Posted by DeLong at 08:14 AM

July 01, 1986
J. Bradford DeLong and Lawrence H. Summers (1986), "The Changing Cyclical Variability of Economic Activity in the United States," in Robert J. Gordon, ed., The American Business Cycle: Continuity and Change (Chicago, IL: University of Chicago Press for the National Bureau of Economic Research), pp. 679-719.

J. Bradford DeLong and Lawrence H. Summers (1986), "The Changing Cyclical Variability of Economic Activity in the United States," in Robert J. Gordon, ed., The American Business Cycle: Continuity and Change (Chicago, IL: University of Chicago Press for the National Bureau of Economic Research), pp. 679-719....

Posted by DeLong at 08:11 AM

J. Bradford DeLong and Lawrence H. Summers (1986), "A Comment on John Taylor's `Improvements in Macroeconomic Stability: The Role of Wages and Prices'," in Robert J. Gordon, ed., The American Business Cycle: Continuity and Change (Chicago, IL: University of Chicago Press for the National Bureau of Economic Research), pp. 667-675.

J. Bradford DeLong and Lawrence H. Summers (1986), "A Comment on John Taylor's `Improvements in Macroeconomic Stability: The Role of Wages and Prices'," in Robert J. Gordon, ed., The American Business Cycle: Continuity and Change (Chicago, IL: University of Chicago Press for the National Bureau of Economic Research), pp. 667-675....

Posted by DeLong at 08:08 AM

J. Bradford DeLong and Lawrence H. Summers (1986), "Are Business Cycles Symmetrical?" in Robert J. Gordon, ed., The American Business Cycle: Continuity and Change (Chicago, IL: University of Chicago Press for the National Bureau of Economic Research), pp. 166-178.

J. Bradford DeLong and Lawrence H. Summers (1986), "Are Business Cycles Symmetrical?" in Robert J. Gordon, ed., The American Business Cycle: Continuity and Change (Chicago, IL: University of Chicago Press for the National Bureau of Economic Research), pp. 166-178....

Posted by DeLong at 08:04 AM