Monday, July 31, 2006
Sunday, July 30, 2006
"Comparative Advantage, Comparative Advantage, Wherefore Art Thou, Oh Comparative Advantage?"
An email suggested looking at this paper by Richard Freeman on globalization and trends in U.S. and worldwide labor markets. It was a good suggestion. This is longer than usual even though I cut quite a bit, but well worth the time it takes to read it:...more>>
"Trust me, I'm an Economist"
"Trust me, I'm an economist." Really? Well, yes.
One of the great things that has been happening to the study of economics in recent years has been the focus on the micro rather than the macro. We used to worry mainly about the big issues: GDP growth, interest rates, inflation and so on. We still do, of course. But beside that has been a new interest in what economics can tell us about the small things. Why do people behave as they do? What makes people happy? How do we fix the NHS? Actually those do not sound small at all, but they are concerned with the detail of the behaviour of millions of people, rather than the mass of an economy...more>>
Saturday, July 29, 2006
The Economic "Self" -- Across Time and Space
Some Economics of Sight Evolution
Sight is obviously of high utility in most situations. However, the amount of resources we spend on sight is constrained by our metabolism...more>>
True Love and the International Marriage Market
What traits should he look for in a foreign woman? He should avoid countries which lost the Cold War. Avoid women met in hotels or hotel rooms. Avoid countries which generate large amounts of spam. Hepatitis counts as a minus. How about a plus for women who work in agriculture?
I discussed this problem in general terms a while back. Despite obvious advantages, the downside of marrying internationally is that your spouse is unlikely to "love you for yourself":
[T]he fact that people don't want to be married for their money explains some puzzles about the marriage market. For one thing, it explains why people prefer to marry within their social class. If you're rich guy, you would rather marry a rich girl because you know she's not after your money...The real solution to Tyler's challenge...more>>An even bigger puzzle we can explain is why men don't exploit the INS marriage loophole far more than they do. By going to the world market, the typical American man could probably use the lure of citizenship and a First World standard of living to find a wife who is better-looking, younger, and less demanding than he could find in the States. Roll your eyes if you must!
But only an idiot wouldn't wonder "Maybe she's just marrying me for the green card and the green." And that's usually enough to overpower the palpable benefits of casting a wider net.
Adam Smith on the Origins of Government
That such efforts normally fail is simple. That is, it proves very difficult to tell people to "be free" in certain areas but not in others. Sooner or later, they start crossing the regime's red lines!
On the other side I want to argue like here's an Adam Smith quote in it I used. Smith said "civil government, so far as it is instituted for the security of property, is in reality instituted for the defense of the rich against the poor." Smith would have railed against giant corporations if he were alive today. They plunder the world and we fight wars for them like in Iraq.’
Comment
Taking a quotation out of context can always cause misunderstandings. It does so in this case. Smith was not outlining the appropriate policies for civil governments for all time and in no sense did he suggest that the appropriate role of government in modern societies was to suppress the poor. Quite the reverse! His entire approach to modern government was for it to cease intervening on behalf of special interests to enrich themselves at the expense of consumers, the majority of whom were among the poor. He saw commercial society as a road to opulence that would spread its benefits to the family of common labourers...more>>
Saturday, July 22, 2006
Friday, July 21, 2006
Transition Analysis
I have been asked recently to discuss transition analysis. In a post last month I suggested that successful transitions are characterized by (a) creative adaptability, and (b) resiliency in the face of crisis. But in that post I never really addressed how we might approach the study of transition. Professionally, my career started out with a focus on theory, practice and failure of socialism in the former Soviet Union. I earned my PhD in 1989, so transition studies were thrust upon me...more>>
Real Compensation: An Index Number Problem Mankiw and Altig Might Hide
Thursday, July 20, 2006
Tuesday, July 18, 2006
Monday, July 17, 2006
Saturday, July 08, 2006
Friday, July 07, 2006
Toward a Reconstruction of Utility and Welfare Economics
It is the contention of this paper that the wake for all welfare economics is premature, and that welfare economics can be reconstructed with the aid of the concept of demonstrated preference. This reconstruction, however, will have no resemblance to either of the "old" or "new" edifices that preceded it. In fact, if Reder's thesis is correct, our proposed resurrection of the patient may be considered by many as more unfortunate than his demise.[56]
Demonstrated preference, as we remember, eliminates hypothetical imaginings about individual value scales. Welfare economics has until now always considered values as hypothetical valuations of hypothetical "social states." But demonstrated preference only treats values as revealed through chosen action...more>>
Allocation, Distribution, Scale, and Depth
Social choice and optimal inference
Wednesday, July 05, 2006
Central banks cannot live by Taylor's rule alone
In a recent post Chris at Stumbling and Mumbling wrote that the Bank of England's Monetary Policy Committee was not 'fit for purpose':
Herein, I think, lies one argument for adopting a Taylor rule. The MPC just can't get the members to make judgment-based decisions.
A rules-based approach to monetary policy is appealing in its simplicity, and the move by many central banks towards inflation targeting can be seen as a partial move from a discretion to rules-based approach. But I don't accept though that something as mechanistic as a Taylor rule (though informative) would work as as effectively as a Monetary Policy Committee. Here's three reasons for my scepticism:...more>>
Tuesday, July 04, 2006
FDI and productivity
Climate and economic growth
The fact is that almost all cool countries are rich. And most poor countries are hot. This alone suggests a link between climate and wealth.
For sure, there are exceptions - most obviously, some east Asian countries are hot and rich. But their economic development came after the introduction of air conditioning - which can't be a coincidence...more>>
Monday, July 03, 2006
The Need for New Ideas
Economists’ New World Order, by J. Bradford DeLong, Project Syndicate: Most academic economics rely on concepts laid down at the beginning of the twentieth century by the British economist Alfred Marshall, who said that “nature does not make leaps.” Yet we economists find ourselves increasingly disturbed by the apparent inadequacy of the neo-Marshallian toolkit that we have built to explain our world...more>>
Yes - markets are efficient
This is true in the UK as well as US. Figures from Trustnet show that almost two-thirds of actively managed unit trusts have under-performed the best tracker fund.
The facts, then, are clear. Perhaps the most expensive and long-running experiment in history shows that markets are roughly efficient, in that the experts don't beat them...more>>