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Economics

July 01, 2015

Two for background on Greece's fiscal problem

John Tamny, "What Greece's Alleged 'Collapse' Is, and Is Not". With this key part:

As is always the case, market fears are a creation of government error, not worries about a very minor economic entity.

To see why, it needs to first be remembered that a Greek default would be nothing new. As Carmen Reinhart and Kenneth Rogoff noted in their much talked about 2009 book This Time Is Different, Greece has been in default mode roughly half of its modern existence. That its creditors might suffer a "haircut" on what is owed them is far from novel.

Anil Kashyap, "A Primer on the Greek Crisis: the things you need to know from the start until now". (Link via Greg Mankiw.)

June 30, 2015

"Memo To Presidential Campaigns -- Federal Regulation Matters More Than Spending"

Clyde Wayne Crews, Jr. makes an important point. I hope the Republican nominee reads this and campaigns vigorously on it.

(I wouldn't make a case for any particular amount. But the point is qualitatively correct.)

Related: an academic paper by John W. Dawson and John J. Seater, "Federal Regulation and Aggregate Economic Growth".

We introduce a new time series measure of the extent of federal regulation in the U.S. and use it to investigate the relationship between federal regulation and macroeconomic performance. We find that regulation has statistically and economically significant effects on aggregate output and the factors that produce it – total factor productivity (TFP), physical capital, and labor. Regulation has caused substantial reductions in the growth rates of both output and TFP and has had effects on the trends in capital and labor that vary over time in both sign and magnitude. Regulation also affects deviations about the trends in output and its factors of production, and the effects differ across dependent variables. Regulation changes the way output is produced by changing the mix of inputs. Changes in regulation offer a straightforward explanation for the productivity slowdown of the 1970s. Qualitatively and quantitatively, our results agree with those obtained from cross-section and panel measures of regulation using cross-country data.

(Note that this could help explain our weak recovery, 2009-present.)

"Four [Budget] Gimmicks to Watch Out For"

From the Committee for a Responsible Federal Budget.

Alas, to paraphrase Jimmy Durante, they've got a million of 'em!

"Homo economicus or homo paleas?"

John Cochrane's very skeptical review of "behavioral economics".

UPDATE: Link fixed now. (Thanks Gorgasal and Michael.)

June 29, 2015

"What are some examples of public policy and laws that produced totally unexpected results?"

I imagine this Quora discussion will get very, very long.

"U.S. Can't Import the Scandinavian Model"

Megan McArdle discusses a paper by Daron Acemoglu, James Robinson, and Thierry Verdier.

I'd just add that at least up until recently we were also essentially paying for the defense of those happy, happy Scandanavians.

June 24, 2015

"American recycling is stalling, and the big blue bin is one reason why"

Key sentence: "Trying to encourage conservation, progressive lawmakers and environmentalists have made matters worse."

I'm shocked, just shocked.

June 23, 2015

"Detroit pays a price for clinging to the Big Three"

Dan Calabrese op-ed in the Detroit News.

GM and Chrysler, perpetually in boom/bust cycles, are turning in respectable performances at the moment. This has has certain political and media types yelping that anyone who opposed the bailouts should apologize. But companies that benefited from billions in taxpayer money while having their debts and long-term obligations wiped out might be expected to enjoy some short-term profitability. Michigan’s economic position will remain perilous as long as we rely so heavily on companies with such erratic track records.

Creative destruction is a necessary element of long-term prosperity. No one had to destroy GM and Chrysler’s dinosaur business practices. They were destroying it on their own. We just had to let them do it.

June 22, 2015

"Book Review: The Redistribution Recession"

Philip Greenspun reviews U. of Chicago economist Casey Mulligan's book, The Redistribution Recession: How Labor Market Distortions Contracted the Economy. Here's the TL;DR:

With 363 pages of analysis and mathematical models, Mulligan shows that essentially all of what we have observed since 2009 can be explained by the following:

  • many able-bodied Americans will not work if they have a reasonably attractive alternative
  • the federal government, starting in 2009, made not working much more financially rewarding for tens of millions of working-age adults . . .

This is an important book and deserves to be read by anyone interested in the U.S. economy. There is a lot of interesting information still accessible even to those whose econ/math background isn’t adequate for fully appreciating Mulligan’s mathematical model.

"Pension tidal wave is about to crash down on taxpayers"

Excellent evidence of the current dysfunction of our political system.

But no surprise to readers of the Public Choice literature.

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