Asset inflation, price inflation, and the great moderation
as penance have been trying to locate the origins of the great chain of causation that has led us to our present situation -- the worrying conclusion is that problems remain -- imbalances precipitated by a labour supply shock [1,2] and/or (the rise of) machines [1,2] have not gone away and continue to persist in decimating the ('developed world's) middle class, as evidenced by high and rising unemployment, which has led to a crisis in central banking itself. [more inside]
The Freakonomics follow up, Superfreakonomics, contains a chapter on climate change that lives up to the best selling contrarian style of authors Steven Levitt and Stephen Dubner. However actual climate scientists were not pleased with the chapter. According to the Union of Concerned Scientists, the book "repeats tired global cooling myths," "unfairly trashes climate models" and "advocates rolling the dice on unproven technology" among other faults. They have also been accused of misquoting climate scientist Ken Caldeira. Levitt and Dubner respond to their critics, Global Warming in SuperFreakonomics: The Anatomy of a Smear. [more inside]
The Gervais Principle, Or The Office According to “The Office”. Warning: link may evoke baleful despair!
Surprise, surprise. It's a girl - for the first time. Elinor Ostrom ("for her analysis of economic governance, especially the commons") and Oliver E. Williamson ("for his analysis of economic governance, especially the boundaries of the firm") have won the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2009.
Most of Africa, India and the developing world depends on innovative and inventive people coming up with ways to make a living with no cash and next to no resources. Fritz Schumacher ( wiki ) was an internationally influential economic thinker with a professional background as a statistician and economist whose 1973 book "Small is beautiful" - Economics as if People Mattered; is among the 100 most influential books published since World War II ( Review ). There are links to several articles, Essays and Videos on the Schumacher Society webpage including the Essay "Buddhist Economics". He was a founder of the Charity Practical Action. ( Related 1; 2 )
The First Bank of the United States was Americas first attempt at forming a Central Bank. Inaugurated by Congress in 1791, it was followed by The Second Bank of the United States, which was dissolved in 1836.
And then The United States of America was without a Central Bank for 77 years. [more inside]
And then The United States of America was without a Central Bank for 77 years. [more inside]
Paul Krugman attacked professional macroeconomists (previously). John Cochrane, an economist at the University of Chicago, returns the favor, arguing that Krugman deeply misrepresents current economic ideas because he's abandoned economics as a "quest for understanding" in favor of trying to be the "Rush Limbaugh of the Left."
Why is deflation far worse than inflation? After all, prices are falling, goods and services get cheaper, what's not to like? [more inside]
First Zimbabwe formally abandoned their currency, then received assistance from The IMF, and now now we're seeing inflation in that nation easing to an acceptable rate of 0.04% per month. So it's fair to ask, is hyperinflation in Zimbabwe is a thing of the past? [more inside]
How Wal-Mart's values are shaping America's economy -- and why this is a very bad thing:
Around the time that the young Sam Walton opened his first stores, John Kennedy redeemed a presidential campaign promise by persuading Congress to extend the minimum wage to retail workers, who had until then not been covered by the law. Walton was furious. Now the goddamn federal government was telling him he had to pay his workers the $1.15 hourly minimum. Walton's response was to divide up his stores into individual companies whose revenues didn't exceed the $250,000 threshold. Eventually, though, a federal court ruled that this was simply a scheme to avoid paying the minimum wage, and he was ordered to pay his workers the accumulated sums he owed them, plus a double-time penalty thrown in for good measure. Wal-Mart cut the checks, but Walton also summoned the employees at a major cluster of his stores to a meeting. "I'll fire anyone who cashes the check," he told them.
How Did Economists Get It So Wrong? - The Great Recession was the result not only of lax regulation in Washington and reckless risk-taking on Wall Street but also of faulty theorizing in academia. Can economists learn from their mistakes? (via mr & ev) [more inside]
Robert Capps, Wired senior editor, has an article up called The Good Enough Revolution: When Cheap and Simple Is Just Fine. It explores what happens when an established product meets a competitor that has most of the features at fraction of the price. Think hi-fi vs MP3s, A-10 bombers vs Predator drones or landline vs Skype. [more inside]
TARP investments yield 15% returns. Almost trom the start, critics characterized the TARP program that first began under the Bush administration and that continued through early this year under President Obama as a taxpayer funded giveaway, while government officials insisted it was a long-term investment program whose initial costs would eventually turn a profit as economic recovery began. Now the NY Times reports that the program has already yielded $4 billion in profits, and a separate report reveals that related Federal Reserve loan programs aimed at economic stabilization have returned $14 billion in profits.
Japan's opposition party, The Democratic Party of Japan (DPJ), is projected to win a landslide victory tomorrow, ending the 52-year reign of the Liberal Democratic Party (LDP). Furthermore, according to a survey conducted by the popular Asahi Shimbun newspaper, the DPJ could win a two-thirds majority, enabling them to roll legislation through the Diet unabated. Despite the projections, the two parties are still battling hard. Washington is following these elections very closely, because of the man who could be the next prime minister, Yukio Hatoyama. [more inside]
How American Health Care Killed My Father After the needless death of his father, the author, a business executive, began a personal exploration of a health-care industry that for years has delivered poor service and irregular quality at astonishingly high cost. It is a system, he argues, that is not worth preserving in anything like its current form. And the health-care reform now being contemplated will not fix it. Here’s a radical solution to an agonizing problem. (via mr) [more inside]
Bicycle Inflation in Paradise? Freakanomics looks at used bike prices in Portland. Interesting reading.
How the myth of Silicon Valley is really like a “gold rush.” Riches for some, “slavery” for many, says Toronto technology commentator Jesse Hirsh, who also takes aim at the ethic of waste built into Web ideology as expressed in Chris Anderson’s Free. (Video of presentation.) [more inside]
There's no way we get all this stuff and everything is done fair and square and everyone gets treated right. A Chinese employee of Foxconn, entrusted with fourteen (maybe sixteen) prototype iPhones misplaced one before they could be shipped; what followed was his detainment and torture at the hands of company police, and his eventual suicide. Shanghaiist has confirmed the story. Fake Steve weighs in.
The author of a new book on how rising oil prices will change America makes the claims that higher gasoline prices will make the country healthier and safer. Christopher Steiner asserts that, for every $1 that gasoline prices rise, obesity rates drop by 10% (as people walk more and eat out less). As for "safer", that comes in when high gasoline prices force police out of their cruisers and onto bicycles and foot patrols, where they can interact more closely with their communities. [more inside]
The story of stuff and how it's currently being played out between the political economies of China and the US (G2 'Chimerica') in an illuminating Fallows vs. Ferguson cage match. [more inside]
Rebuilding Something Better by Barack Obama: "this week, I'll be talking about how we give our workers the skills they need to compete... Part of this goal will be met by helping Americans better afford a college education. But part of it will also be strengthening our network of community colleges..." [more inside]
Recently, John Michael Greer has been exploring a little known idea of the deceased economist E.F. Schumacher (a student of the oft-discussed Keynes). "Schumacher drew a hard distinction between primary goods and secondary goods. The latter of these includes everything dealt with by conventional economics: the goods and services produced by human labor and exchanged among human beings. The former includes all those things necessary for human life and economic activity that are produced not by human beings, but by nature. Schumacher pointed out that primary goods, as the phrase implies, need to come first in any economic analysis because they supply the preconditions for the production of secondary goods. Renewable resources, he proposed, form the equivalent of income in the primary economy, while nonrenewable resources are the equivalent of capital; to insist that an economic system is sound when it is burning through nonrenewable resources at a rate that will lead to rapid depletion is thus as silly as claiming that a business is breaking even if it’s covering up huge losses by drawing down its bank accounts." [more inside]
Paul Romer: A Theory of History, with an Application - "His economic theory of history explains phenomena such as the constant improvement of the human standard of living by looking primarily at just two forms of innovative ideas: technology and rules." (previously, via) [more inside]
Monarchy vs. Democracy: "Was the change from monarchy to democracy a step backwards? In practical terms, there is no question: democracy has had tremendously bad effects compared to monarchy." [more inside]
Economists Matthew Weinzierl (HBS) and Gregory Mankiw (Harvard) make a utilitarian case for a height tax. [more inside]
The Global Oneness Project is exploring how the radically simple notion of interconnectedness can be lived in our increasingly complex world. They travel the globe gathering stories from creative and courageous people who base their lives and work on the understanding that we bear great responsibility for each other and our shared world. [more inside]
With all the dust that's been* riled up by Obama's nomination of Sonia Sotomayor (previously), everyone is suddenly taking an interest in Puerto Rico. A basic question that may come up is why we're there in the first place. Understanding that, we can see how the complicated relationship has played out between Puerto Rico, the US, and, most recently, the United Nations. Although the UN has urged the US to take steps towards establishing Puerto Rico's sovereignty, referendums held on the island have overwhelmingly preferred the status quo and the US has been indifferent at best. But independence activists, after a twenty-year decline, may be on the rise. The island's current governor, Luis Fortuño, is pro-statehood. But the whole issue has taken a back seat since plans have been made to fire 30,000 government workers, privatize some public services, and sell some the the government's US$3.2 billion debt. [more inside]
Ecocomics: Where Graphic Art Meets Dismal Science. With such entries as "Superman, New Krypton, and Labor Unions" and "The Construction Industry in Comics."
It's Finished is a witty and erudite essay by MeFi lurker John Lanchester in The London Review of Books on how completely and utterly screwed the British economy is. In the process of laying out his case Lanchester touches on varied issues, such Scottish banknotes, why Alan Hollinghurst's phrase "tremendous, Basil Fawltyish lengths" is applicable to the reaction by the US and UK governments to the banking meltdown, the value destruction of corporate mergers, the invention of modern accounting, and why no one really knows how large a share of the failed banks is owned by governments.
Prelude to Federation - Like a neocolonial SEZ (or TAZ) Paul Romer, not to be confused with David, posits "less developed countries contract with capitalist nations to set up Hong Kong's for them... that we rethink sovereignty (respect borders, but maybe import administrative control); rethink citizenship (support residency, but maybe import voice in political affairs); and rethink scale (instead of focusing on nations, focus on cities—on city states like Hong Kong and Singapore)." cf. neocameralism [1, 2, 3] [more inside]
The Bulls vs. Bears? The incessant back and forth between equity market longs and shorts is well known to most retail investors via a variety of distribution channels; financial television, the print media, online news. But the really big market battle, one with the potential to impact the entire US economy, happens, as is usual in finance, just out of sight of retail eyes ... [more inside]
Theory versus Statistics, Financial Economics Edition. "You can almost here the lament of this quant that the real math theory has been dead since 1980, and that it has all been applied and statistics ever since. It’s like Fischer Black was Kool Herc and Myron Scholes was Afrika Bambaataa, and they’d all go plug in their computers into lamp posts and do martingale representations in the streets and at house parties. And, of course, it was all ruined in 1979 when it went commercial." A response to The Last Temptation of Risk by Barry Eichengreen.
Limited Purpose Banking -- for lending, investing, etc. -- Turn all financial firms into mutual funds: "All mutual funds would break the buck with one exception: cash mutual funds. These funds would strictly hold cash and be valued at $1 per share. Owners of these funds would write checks against their balances and never have to worry about a bank run. Fractional reserve banking and the FDIC would be history." [previously] [more inside]
The second most powerful United States Senator admits, "And the banks -- hard to believe in a time when we're facing a banking crisis that many of the banks created -- are still the most powerful lobby on Capitol Hill. And they frankly own the place." [more inside]
Keynes & Marx thought "that productivity would grow sufficiently to allow our needs to be met with very little labour," and that humankind's biggest preoccupation in the future would be leading lives of comfortable (or comparative) leisure. Obviously, that has not yet come to pass. But why?** Yochai Benkler (previously), for one, is working on it... [more inside]
The new monetary standard: Copper.
[MLYT] Peter Schiff gives a talk to the Western Regional Mortgage Bankers Association, describing exactly the ongoing economic meltdown. (Part 1, 2, 3, 4, 5, 6, 7, 8). The catch? The talk was given in 2006. Listening to his bullish counterpart in parts 6-8 is a real scream. [more inside]
The separation of the ownership of a business from its management is one of the defining characteristics of the modern capitalist system. But ongoing failures of corporate governance, particularly in banking, have called into question these structures. Is there a better way? Secretive UK private bank C. Hoare & Co. has a solution that works for those customers it chooses to accept. [more inside]
A philosophy professor takes on the financial system. Or perhaps that should read - a philosophy professor's take on the financial system. Daniel Cloud, teacher of philosophy at Princeton University and a founding partner in two hedge funds, makes the case in a recent opinion piece that "... complicated explanations about derivatives, regulatory failure, and so on are beside the point. ... The truth is that ... models are most useful when they are little known or not universally believed. They progressively lose their predictive value as we all accept and begin to bet on them."
The recession has hit the theatre world (and the arts scene in general) very hard - but some argue that theatre practitioners aren't doing themselves any favours when seeking funding. The main question insufficiently addressed is "who is the funding for?" - hint: it's not about you. Approaching theatre as a product isn't working, not when MFA acting programs don't often allow its graduates to earn enough to earn back their debt. So now the question is: how can the economics of theatre be changed?
The Fed's Public Private Partnership Program, promises to clear down as much as $1T worth of "legacy assets" from banks balance sheets. Globally, equity markets responded positively. But what about assets held off balance sheet? [more inside]
Matt Taibbifilter: Among other things, the GAO report noted that the entire OTS had only one insurance specialist on staff — and this despite the fact that it was the primary regulator for the world's largest insurer! This week's MeFi stories have generally failed to explain the reasoning that caused the recession, even though Jon Stewart was basically on the mark. Now, Rolling Stone's only reporter lays it all out The Big Takeover, a typical combination of zealous snark and the overlooked, damning facts needed to clear up a ridiculously complicated story.