Things You Should Read on the Morning of December 1, 2013

Must-Reads:

1. Tony Yates: Price level targeting: “In a nice post on the New York Fed’s blog, Liberty Street Economics, Marc Giannoni and Hannah Herman write on price level targeting.  In a nutshell, they observe that, whatever the FRB said it was doing ex ante, ex post it has brought about a trend-stationary price level, which is what you would get if you were ‘price level targeting’.  The question is begged:  so why not consolidate this into a formal Price Level Target to lock in the benefits?…”

2. Ricardo Hausmann: “It is often difficult to understand how countries that are dealt a pretty good economic hand can end up making a major mess…as if they were trying to commit suicide by jumping from the basement. Two of the most extreme cases… Argentina and Venezuela…. The puzzling thing is that this is not the first time either country has veered into an economic cul-de-sac…. It is certainly possible to describe how the road to hell is paved…. Overall inflation or some key price… come[s] under upward pressure. The government then uses its coercive power to keep a lid on price growth…. Things become really nasty when the government opts for foreign-exchange controls…. [which] give the government the sense that it can have its cake… and eat low inflation…. The dual-exchange-rate system ends up distorting production incentives… a combination of inflation and shortages… fiscal accounts worsen automatically…. Such a system can generate a self-reinforcing set of popular beliefs, which may explain why countries like Argentina and Venezuela repeatedly drive down dead-end streets. Because so many businesses make money from the rents created by the rationing of foreign exchange, rather than by creating value, it is easy to believe that markets do not work, that entrepreneurs are speculators, and that governments need to control them and impose ‘fair’ prices. All too often, this allows governments to blame the car, and even the passengers, for getting lost.”

Should-Reads:

1. Wendy Carlin: Teaching what matters in economics: The INET CORE Project: “We missed the boat in 2008…. Nor did we later provide convincing explanations…. Some… advocated policies that contributed to the onset… exacerbated the resulting unemployment… complacency… that a largely unregulated market economy would take care of itself…. Our students are… embarrassed when they are no more able to explain the eurozone crisis or persistent unemployment than their fellow students in engineering or archaeology…. Experimental methods have shown that people are more fair-minded and moral, and less calculating than the so called Economic Man… greatly expands the set of politically viable and economically effective policies…. Improved techniques for computer modelling of complex interactions… can help design policies…. For our students, though… this is all a well-kept secret. We impose a curriculum… remote from what economists now know, and more distant still from the pressing problems…. The curriculum project… is creating open access materials for a new curriculum… history, experiments and other data sources to test competing explanations and policies. This is a great time to be an economist. It is time we made it a golden age for students of economics…”

2. Andrés Rodríguez-Pose, Roberto Ezcurra: Government and spatial inequality: “Using regional data for 46 countries with different degrees of economic development over the period 1996-2006… there is a strong negative association between quality of government and within-country disparities. Countries with better quality of government register lower levels of spatial inequality”

3. Matthew Yglesias (May 28, 2013): Fast and Furious economics: “It would be comforting to simply dismiss the Fast and Furious franchise as an ethically unfortunate series of movies about illegal street racing… the low-trust ethics it embodies are… typical of societies featuring a high and growing level of income inequality…. generally take economically sound risks.
   In a world where the system increasingly seems to be rigged, it’s natural to turn to the Dominic Torettos of the world as heroes. Yet Dom, for all his hard work, ingenuity, and undeniable skill doesn’t really do anything useful or productive…. He lives by a code… ultimately destructive of the social institutions needed to generate prosperity. And yet at a time when elites long ago stopped caring whether the gains of economic growth would be widely shared, and in recent years seem to have turned their backs on the unemployed altogether, then these are the heroes we’ll turn to.”

Should Be Aware of:

1. John Holbo: Laugh if you like, but death on the tracks is funnyr: “Mirth is an emotion that may affect our moral thinking. Specifically, it makes us more utilitarian… trolley scenarios are, or may be, used as intuition pumps for utilitarian purposes. (They may be used for other things, of course.) But it is an underdiscussed fact that they may inherently do so, in part, because trolley tragedies can’t help being a bit funny…”

Duncan Black: “Every Villager pundit hitting a certain age decides that what the country really needs is mandatory military service for people younger than them” | Jo Wolff: “At its worst, philosophy is something you do against an opponent. Your job is to take the most mean-minded interpretation you can of the other person’s view and show its absurdity. And repeat until submission” | Glenn Fleishman: “The newsstand isn’t dead, but [Apple is] hiding it in a way that makes it less useful for publishers of any scale” | John Aziz: Why the post-antibiotic world is the real-life version of the zombie apocalypse | Chris Blattman: Where do warlords come from? (My favorite political economy paper of the year) | Kathleen Geier: “Last week, Michelle Goldberg wrote a smart and provocative blog post that… argues conservatives may be… abandoning the pseudo-populist brand of conservatism that, for decades, has been their mainstay, in favor of a more open elitism…” |