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Javier E

A Reply To Jonathan Chait On Stimulus | The New Republic - 0 views

www.tnr.com/...reply-jon-chait-stimulus

stimulus economics social science knowledge experiment Keynes

shared by Javier E on 24 Aug 10 - Cached
  • It is certainly true that a large majority of professional economists accept the view that “increasing spending or reducing taxes temporarily increases economic growth”—but that is very far from claiming that disputing it is largely a political campaign.
  • in a genuinely scientific field which has accepted a predictive rule as valid to the point that there is a true consensus—such that the only reason for refusal to accept it is crankery or, in Chait’s terms, “politics”—you don’t usually see: several full professors at the top two departments in the subject, when speaking directly in their area of research expertise, challenge it; 10 percent of all practitioners in the field refuse to accept it; and the two leading global general circulation publications in field running op-eds questioning it.
  • A great many leading economists may accept the proposition that enough stimulus spending will probably cause at least some increase in output for a short period of time in some circumstances, yet are still uncomfortable with the kind of stimulus spending strategy that is the actual subject of current political debate. In 2009, James Buchanan (1986 Nobel Laureate in Economics), Edward Prescott (2004 Nobel Laureate in Economics), and Vernon Smith (2002 Nobel Laureate in Economics) promulgated this statement: “Notwithstanding reports that all economists are now Keynesians and that we all support a big increase in the burden of government, we do not believe that more government spending is a way to improve economic performance.”
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  • It is nerdy-sounding, but I believe critical to this discussion, to distinguish between measurement and knowledge. I made a very strong claim about measurement, and a very specific claim about knowledge. I claim that we cannot usefully measure the effect of the stimulus program launched in 2009 at all.
  • All potentially useful predictions made about the output impact of the stimulus program are non-falsifiable. Failure of predictions can be simply justified by this sort of ad hoc explanation after the fact.
  • This argument will always degenerate back into endlessly dueling regressions, because there is no ability to adjudicate among them via experiment.
  • It simply means that we have no scientific knowledge about this topic. Macroeconomic assertions about the effect of a proposed stimulus policy are not valueless, but despite their complex mathematical justifications, do not have standing as knowledge that can trump common sense, historical reasoning, and so on in the same way that a predictive rule that has been verified through experimental testing can.
  • When using stimulus to ameliorate the economic crisis, we are like primitive tribesmen using herbs to treat an infection, and we should not allow ourselves to imagine that we are using antibiotics that have been proven through clinical trials. This should not imply merely a different feeling about the same actions, but should rationally lead us to greater circumspection.
  • Javier E on 24 Aug 10
     
    An incisive analysis of knowledge claims in economics, and Keynesian approaches.
Javier E

Fiscal Fever Breaks - NYTimes.com - 0 views

www.nytimes.com/...ugman-fiscal-fever-breaks.html

social science economics discourse revisionist knowledge

shared by Javier E on 30 Dec 13 - No Cached
  • over the course of 2013 the intellectual case for debt panic collapsed. Normally, technical debates among economists have relatively little impact on the political world, because politicians can almost always find experts — or, in many cases, “experts” — to tell them what they want to hear
  • for several years fiscal scolds in both Europe and the United States leaned heavily on a paper by two highly-respected economists, Carmen Reinhart and Kenneth Rogoff, suggesting that government debt has severe negative effects on growth when it exceeds 90 percent of G.D.P
  • Thomas Herndon, a graduate student at the University of Massachusetts, reworked the data, and found that the apparent cliff at 90 percent disappeared once you corrected a minor error and added a few more data points.
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  • From the beginning, many economists expressed skepticism about this claim. In particular, it seemed immediately obvious that slow growth often causes high debt, not the other way around — as has surely been the case, for example, in both Japan and Italy. But in political circles the 90 percent claim nonetheless became gospel.
  • it’s not as if fiscal scolds really arrived at their position based on statistical evidence. As the old saying goes, they used Reinhart-Rogoff the way a drunk uses a lamppost — for support, not illumination. Still, they suddenly lost that support, and with it the ability to pretend that economic necessity justified their ideological agenda.
Javier E

Achievement gaps: Revenge of the tiger mother | The Economist - 2 views

www.economist.com/...achievement-gaps

achievement gap cultural learning effort success Asian-American racial work ethic

shared by Javier E on 08 May 14 - Cached
  • WHEN measured in terms of academic achievement, Asian Americans are a successful bunch. Forty-nine percent have a bachelor's degree or higher. This compares favourably against white Americans (30%), African-Americans (19%) and Latinos (13%).
  • Amy Chua, a self-declared "tiger mother" who became famous for promoting the benefits of harsh parenting, would put this down to culture. She has argued that Chinese-American children statistically out-perform their peers because they are pushed harder at home.
  • she ascribes the success of different cultures in America to a "triple package" comprised of a superiority complex, insecurity and good impulse control. In other words, certain groups tell themselves they are better than other groups, but learn that they have to work hard to succeed, and must resist temptation and distraction in proving themselves.
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  • sociologists at City University of New York and the University of Michigan, wanted to try to find out why it exists. In a new paper in the journal PNAS, they looked at whether it could be explained by socio-demographic factors (such as family income and parental education), cognitive ability (were these children simply more intelligent?), or work ethic. 
  • socio-demographic factors could not explain the achievement gap between Asians and whites. This is because recently arrived Asian immigrants with little formal education and low incomes have children that do better in school than their white peers.
  • Being brainier isn't the answer either. When the pair looked at cognitive ability as measured by standardised tests, Asian-Americans were not different from their white peers
  •  Instead Dr Hsin and Dr Xie find that the achievement gap can be explained through harder work—as measured by teacher assessments of student work habits and motivation.
  • What might explain harder work? The authors point to the fact Asian-Americans are likely to be immigrants or children of immigrants who, as a group, tend to be more optimistic. These are people who have made a big move in search of better opportunities. Immigration is a "manifestation of that optimism through effort, that you can have a better life"
  • Added to this mix is a general cultural belief among Asian-Americans that achievement comes with effort. We know that children who believe ability is innate are more inclined to give up if something doesn't come naturally. An understanding that success requires hard work—not merely an aptitude—is therefore useful.
  • “Tiger” parenting clearly has its place, but it is not everything, according to this study. Dr Hsin says that Asian-Americans also have some unique social and ethnic capital, such as good access to tutors and social networks that offer information about schools and college-admission routes. They also benefit from positive stereotypes which lead to wider expectations of success.
  • Should Ms Chua’s approach to child-rearing replace the American standard, which seems to emphasise self-esteem over test scores? Not necessarily. The report’s researchers point out that Asian-American children also suffer from poorer self-images and more conflicted relationships with their parents. Dr Hsin wonders if this may be the result of pressure to meet narrowly defined and high standards for success. Children who fail to meet these expectations end up feeling like failures, while those who succeed fail to feel satisfied because they are simply achieving what is expected.
Javier E

Economic history: When did globalisation start? | The Economist - 0 views

www.economist.com/...economic-history-1

globalization historiography economics economic history

shared by Javier E on 25 Mar 15 - No Cached
  • economic historians reckon the question of whether the benefits of globalisation outweigh the downsides is more complicated than this. For them, the answer depends on when you say the process of globalisation started.
  • it is impossible to say how much of a “good thing” a process is in history without first defining for how long it has been going on.
  • Although Adam Smith himself never used the word, globalisation is a key theme in the Wealth of Nations. His description of economic development has as its underlying principle the integration of markets over time. As the division of labour enables output to expand, the search for specialisation expands trade, and gradually, brings communities from disparate parts of the world together
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  • Smith had a particular example in mind when he talked about market integration between continents: Europe and America.
  • Kevin O’Rourke and Jeffrey Williamson argued in a 2002 paper that globalisation only really began in the nineteenth century when a sudden drop in transport costs allowed the prices of commodities in Europe and Asia to converge
  • But there is one important market that Mssrs O’Rourke and Williamson ignore in their analysis: that for silver. As European currencies were generally based on the value of silver, any change in its value would have had big effects on the European price level.
  • The impact of what historians have called the resulting “price revolution” dramatically changed the face of Europe. Historians attribute everything from the dominance of the Spanish Empire in Europe to the sudden increase in witch hunts around the sixteenth century to the destabilising effects of inflation on European society. And if it were not for the sudden increase of silver imports from Europe to China and India during this period, European inflation would have been much worse than it was. Price rises only stopped in about 1650 when the price of silver coinage in Europe fell to such a low level that it was no longer profitable to import it from the Americas.
  • The German historical economist, Andre Gunder Frank, has argued that the start of globalisation can be traced back to the growth of trade and market integration between the Sumer and Indus civilisations of the third millennium BC. Trade links between China and Europe first grew during the Hellenistic Age, with further increases in global market convergence occuring when transport costs dropped in the sixteenth century and more rapidly in the modern era of globalisation, which Mssrs O’Rourke and Williamson describe as after 1750.
  • it is clear that globalisation is not simply a process that started in the last two decades or even the last two centuries. It has a history that stretches thousands of years, starting with Smith’s primitive hunter-gatherers trading with the next village, and eventually developing into the globally interconnected societies of today. Whether you think globalisation is a “good thing” or not, it appears to be an essential element of the economic history of mankind.
Javier E

This Is Not a Market | Dissent Magazine - 0 views

www.dissentmagazine.org/...t-economy-bad-metaphor-transit

market fundamentalism market theory economics American idea language

shared by Javier E on 25 Aug 16 - No Cached
  • Given how ordinary people use the term, it’s not surprising that academic economists are a little vague about it—but you’ll be glad to hear that they know they’re being vague. A generation of economists have criticized their colleagues’ inability to specify what a “market” actually is. George Stigler, back in 1967, thought it “a source of embarrassment that so little attention has been paid to the theory of markets.” Sociologists agree: according to Harrison White, there is no “neoclassical theory of the market—[only] a pure theory of exchange.” And Wayne Baker found that the idea of the market is “typically assumed—not studied” by most economists, who “implicitly characterize ‘market’ as a ‘featureless plane.’
  • When we say “market” now, we mean nothing particularly specific, and, at the same time, everything—the entire economy, of course, but also our lives in general. If you can name it, there’s a market in it: housing, education, the law, dating. Maybe even love is “just an economy based on resource scarcity.”
  • The use of markets to describe everything is odd, because talking about “markets” doesn’t even help us understand how the economy works—let alone the rest of our lives. Even though nobody seems to know what it means, we use the metaphor freely, even unthinkingly. Let the market decide. The markets are volatile. The markets responded poorly. Obvious facts—that the economy hasn’t rebounded after the recession—are hidden or ignored, because “the market” is booming, and what is the economy other than “the market”? Well, it’s lots of other things. We might see that if we talked about it a bit differently.
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  • For instance, we might choose a different metaphor—like, say, the traffic system. Sounds ridiculous? No more so than the market metaphor. After all, we already talk about one important aspect of economic life in terms of traffic: online activity. We could describe it in market terms (the market demands Trump memes!), but we use a different metaphor, because it’s just intuitively more suitable. That last Trump meme is generating a lot of traffic. Redirect your attention as required.
  • We don’t know much about markets, because we don’t deal with them very often. But most of us know plenty about traffic systems: drivers will know the frustration of trying to turn left onto a major road, of ceaseless, pointless lane-switching on a stalled rush-hour freeway, but also the joys of clear highways.
  • We know the traffic system because, whether we like it or not, we are always involved in it, from birth
  • As of birth, Jean is in the economy—even if s/he rarely goes to a market. You can’t not be an economic actor; you can’t not be part of the transport system.
  • Consider also the composition of the traffic system and the economy. A market, whatever else it is, is always essentially the same thing: a place where people can come together to buy and sell things. We could set up a market right now, with a few fences and a sign announcing that people could buy and sell. We don’t even really need the fences. A traffic system, however, is far more complex. To begin with, the system includes publicly and privately run elements: most cars are privately owned, as are most airlines
  • If we don’t evaluate traffic systems based on their size, or their growth, how do we evaluate them? Mostly, by how well they help people get where they want to go. The market metaphor encourages us to think that all economic activity is motivated by the search for profit, and pursued in the same fashion everywhere. In a market, everyone’s desires are perfectly interchangeable. But, while everybody engages in the transport system, we have no difficulty remembering that we all want to go to different places, in different ways, at different times, at different speeds, for different reasons
  • Deciding how to improve the traffic system, how to expand people’s opportunities, is obviously a question of resource allocation and prioritization on a scale that private individuals—even traders—cannot influence on their own. That’s why government have not historically trusted the “magic of the markets” to produce better opportunities for transport. We intuitively understand that these decisions are made at the level of mass society and public policy. And, whether you like it or not, this is true for decisions about the economy as well.
  • Thinking of the economy in terms of the market—a featureless plane, with no entry or exit costs, little need for regulation, and equal opportunity for all—obscures this basic insight. And this underlying misconception creates a lot of problems: we’ve fetishized economic growth, we’ve come to distrust government regulation, and we imagine that the inequalities in our country, and our world, are natural or justified. If we imagine the economy otherwise—as a traffic system, for example—we see more clearly how the economy actually works.
  • We see that our economic life looks a lot less like going to “market” for fun and profit than it does sitting in traffic on our morning commute, hoping against hope that we’ll get where we want to go, and on time.
Javier E

Centuries of trial and error | The Economist - 0 views

www.economist.com/...21528581

economist economics theory history

shared by Javier E on 17 Jun 17 - No Cached
  • The author demonstrates that there is far more to economics than Thomas Carlyle's “dismal science”. And she does so with all the style and panache that you would expect from the author of the 1998 bestseller, “A Beautiful Mind”
  • In lesser hands Ms Nasar's story might have degenerated into a series of pen portraits: tittle-tattle for the middlebrow. But she unifies her account with a series of big questions. How, for example, did humanity escape from the grinding poverty that has been its lot through most of human history? Why was a static society replaced by a dynamic one? And how best to cope with the booms and busts that have been capitalism's peculiar contribution to human life?
  • In Marx's view the capitalist system, for all its ability to unleash productive power, was haunted by a contradiction: the drive to increase profits would immiserate the poor and lead to crises of overproduction
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  • But Marshall demonstrated that capitalism advances not by immiserating the poor, but by boosting productivity. Factory owners make relentless small improvements that allow them to produce both higher wages and lower prices, thereby spreading the gains of material progress throughout society.
  • Schumpeter further expanded the idea of productivity increases. The economy doesn't simply get bigger and bigger. It goes through a constant process of discombobulation as entrepreneurs invent new products and processes.
  • Marx got it upside down: capitalism's recurrent crises actually make it stronger.
caelengrubb

Investment - Econlib - 0 views

www.econlib.org/...Investment.html

shared by caelengrubb on 27 Mar 21 - No Cached
  • nvestment is one of the most important variables in economics.
  • Its surges and collapses are still a primary cause of recessions.
  • By investment, economists mean the production of goods that will be used to produce other goods. This definition differs from the popular usage, wherein decisions to purchase stocks (see stock market) or bonds are thought of as investment.
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  • Investment is usually the result of forgoing consumption. In a purely agrarian society, early humans had to choose how much grain to eat after the harvest and how much to save for future planting. The latter was investment.
  • In a more modern society, we allocate our productive capacity to producing pure consumer goods such as hamburgers and hot dogs, and investment goods such as semiconductor foundries. If we create one dollar worth of hamburgers today, then our gross national product is higher by one dollar.
  • Investment need not always take the form of a privately owned physical product. The most common example of nonphysical investment is investment in human capital.
  • In an economy that is closed to the outside world, investment can come only from the forgone consumption—the saving—of private individuals, private firms, or government.
  • In an open economy, however, investment can surge at the same time that a nation’s saving is low because a country can borrow the resources necessary to invest from neighboring countries.
  • That economists have a fairly strong understanding of firms’ investment behavior makes sense. A firm that maximizes its profits must address investment using the framework discussed in this article.
  • This method of financing investment has been very important in the United States. The industrial base of the United States in the nineteenth century—railroads, factories, and so on—was built on foreign finance, especially from Britain. More recently, the United States has repeatedly posted significant investment growth and very low savings.
  • Investment fluctuates a lot because the fundamentals that drive investment—output prices, interest rates, and taxes—also fluctuate. But economists do not fully understand fluctuations in investment. Indeed, the sharp swings in investment that occur might require an extension to the Jorgenson theory.
  • In Jorgenson’s user cost model, firms will purchase a machine if the extra revenue the machine generates is a smidgen more than its cost.
  • The general conclusion is that there is a gain to waiting if there is uncertainty and if the installation of the machine entails sunk costs, that is, costs that cannot be recovered once spent.
  • Although quantifying this gain exactly is a highly mathematical exercise, the reasoning is straightforward. That would explain why firms typically want to invest only in projects that have a high expected profit.
  • The fact of irreversibility might explain the large fluctuations in investment that we observe.
  • The theory of investment dates back to the giants of economics. irving fisher, arthur cecil pigou, and alfred marshall all made contributions; as did john maynard keynes, whose Marshallian user cost theory is a central feature in his General Theory.
  • Consumer behavior is harder to study than firms’ behavior. Market forces that drive irrational people out of the marketplace are much weaker than market forces that drive bad companies from the market.
  • Because the saving response of consumers must be known if one is to fully understand the impact of any investment policy, and because saving behavior is so poorly understood, much work remains to be done.
Javier E

The Irrational Consumer: Why Economics Is Dead Wrong About How We Make Choices - Derek ... - 4 views

www.theatlantic.com/...267255

rational choice rationality psychology consumer economics

shared by Javier E on 20 May 15 - No Cached
  • Atlantic.displayRandomElement('#header li.business .sponsored-dropdown-item'); Derek Thompson - Derek Thompson is a senior editor at The Atlantic, where he oversees business coverage for the website. More Derek has also written for Slate, BusinessWeek, and the Daily Beast. He has appeared as a guest on radio and television networks, including NPR, the BBC, CNBC, and MSNBC. All Posts RSS feed Share Share on facebook Share on linkedin Share on twitter « Previous Thompson Email Print Close function plusOneCallback () { $(document).trigger('share'); } $(document).ready(function() { var iframeUrl = "\/ad\/thanks-iframe\/TheAtlanticOnline\/channel_business;src=blog;by=derek-thompson;title=the-irrational-consumer-why-economics-is-dead-wrong-about-how-we-make-choices;pos=sharing;sz=640x480,336x280,300x250"; var toolsClicked = false; $('#toolsTop').click(function() { toolsClicked = 'top'; }); $('#toolsBottom').click(function() { toolsClicked = 'bottom'; }); $('#thanksForSharing a.hide').click(function() { $('#thanksForSharing').hide(); }); var onShareClickHandler = function() { var top = parseInt($(this).css('top').replace(/px/, ''), 10); toolsClicked = (top > 600) ? 'bottom' : 'top'; }; var onIframeReady = function(iframe) { var win = iframe.contentWindow; // Don't show the box if there's no ad in it if (win.$('.ad').children().length == 1) { return; } var visibleAds = win.$('.ad').filter(function() { return !($(this).css('display') == 'none'); }); if (visibleAds.length == 0) { // Ad is hidden, so don't show return; } if (win.$('.ad').hasClass('adNotLoaded')) { // Ad failed to load so don't show return; } $('#thanksForSharing').css('display', 'block'); var top; if(toolsClicked == 'bottom' && $('#toolsBottom').length) { top = $('#toolsBottom')[0].offsetTop + $('#toolsBottom').height() - 310; } else { top = $('#toolsTop')[0].offsetTop + $('#toolsTop').height() + 10; } $('#thanksForSharing').css('left', (-$('#toolsTop').offset().left + 60) + 'px'); $('#thanksForSharing').css('top', top + 'px'); }; var onShare = function() { // Close "Share successful!" AddThis plugin popup if (window._atw && window._atw.clb && $('#at15s:visible').length) { _atw.clb(); } if (iframeUrl == null) { return; } $('#thanksForSharingIframe').attr('src', "\/ad\/thanks-iframe\/TheAtlanticOnline\/channel_business;src=blog;by=derek-thompson;title=the-irrational-consumer-why-economics-is-dead-wrong-about-how-we-make-choices;pos=sharing;sz=640x480,336x280,300x250"); $('#thanksForSharingIframe').load(function() { var iframe = this; var win = iframe.contentWindow; if (win.loaded) { onIframeReady(iframe); } else { win.$(iframe.contentDocument).ready(function() { onIframeReady(iframe); }) } }); }; if (window.addthis) { addthis.addEventListener('addthis.ready', function() { $('.articleTools .share').mouseover(function() { $('#at15s').unbind('click', onShareClickHandler); $('#at15s').bind('click', onShareClickHandler); }); }); addthis.addEventListener('addthis.menu.share', function(evt) { onShare(); }); } // This 'share' event is used for testing, so one can call // $(document).trigger('share') to get the thank you for // sharing box to appear. $(document).bind('share', function(event) { onShare(); }); if (!window.FB || (window.FB && !window.FB._apiKey)) { // Hook into the fbAsyncInit function and register our listener there var oldFbAsyncInit = (window.fbAsyncInit) ? window.fbAsyncInit : (function() { }); window.fbAsyncInit = function() { oldFbAsyncInit(); FB.Event.subscribe('edge.create', function(response) { // to hide the facebook comments box $('#facebookLike span.fb_edge_comment_widget').hide(); onShare(); }); }; } else if (window.FB) { FB.Event.subscribe('edge.create', function(response) { // to hide the facebook comments box $('#facebookLike span.fb_edge_comment_widget').hide(); onShare(); }); } }); The Irrational Consumer: Why Economics Is Dead Wrong About How We Make Choices By Derek Thompson he
  • First, making a choice is physically exhausting, literally, so that somebody forced to make a number of decisions in a row is likely to get lazy and dumb.
  • Second, having too many choices can make us less likely to come to a conclusion. In a famous study of the so-called "paradox of choice", psychologists Mark Lepper and Sheena Iyengar found that customers presented with six jam varieties were more likely to buy one than customers offered a choice of 24.
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  • Many of our mistakes stem from a central "availability bias." Our brains are computers, and we like to access recently opened files, even though many decisions require a deep body of information that might require some searching. Cheap example: We remember the first, last, and peak moments of certain experiences.
  • The third check against the theory of the rational consumer is the fact that we're social animals. We let our friends and family and tribes do our thinking for us
  • neurologists are finding that many of the biases behavioral economists perceive in decision-making start in our brains. "Brain studies indicate that organisms seem to be on a hedonic treadmill, quickly habituating to homeostasis," McFadden writes. In other words, perhaps our preference for the status quo isn't just figuratively our heads, but also literally sculpted by the hand of evolution inside of our brains.
  • The popular psychological theory of "hyperbolic discounting" says people don't properly evaluate rewards over time. The theory seeks to explain why many groups -- nappers, procrastinators, Congress -- take rewards now and pain later, over and over again. But neurology suggests that it hardly makes sense to speak of "the brain," in the singular, because it's two very different parts of the brain that process choices for now and later. The choice to delay gratification is mostly processed in the frontal system. But studies show that the choice to do something immediately gratifying is processed in a different system, the limbic system, which is more viscerally connected to our behavior, our "reward pathways," and our feelings of pain and pleasure.
  • the final message is that neither the physiology of pleasure nor the methods we use to make choices are as simple or as single-minded as the classical economists thought. A lot of behavior is consistent with pursuit of self-interest, but in novel or ambiguous decision-making environments there is a good chance that our habits will fail us and inconsistencies in the way we process information will undo us.
  • Our brains seem to operate like committees, assigning some tasks to the limbic system, others to the frontal system. The "switchboard" does not seem to achieve complete, consistent communication between different parts of the brain. Pleasure and pain are experienced in the limbic system, but not on one fixed "utility" or "self-interest" scale. Pleasure and pain have distinct neural pathways, and these pathways adapt quickly to homeostasis, with sensation coming from changes rather than levels
  • Social networks are sources of information, on what products are available, what their features are, and how your friends like them. If the information is accurate, this should help you make better choices. On the other hand, it also makes it easier for you to follow the crowd rather than engaging in the due diligence of collecting and evaluating your own information and playing it against your own preferences
johnsonel7

India's Economic Troubles Are Rooted in Politics - 0 views

foreignpolicy.com/...blems-politics-citizenship-law

economics paradigm psychology research

shared by johnsonel7 on 23 Feb 20 - No Cached
  • ince the Great Recession that began in late 2007, there is a growing feeling that economics is not serving us well. There is truth to this hunch, but the reasons are more complex than most people realize.
  • Academic disciplines are built on assumptions; the most tried and tested of these are often enshrined as axioms. When economic policies go wrong, the standard practice is to rush to examine those axioms. Are some of them incorrect? Economists collate statistics, create new data using randomized trials, collect impressionistic information, and often come out with the conclusion that some of the established axioms are not quite right. Correct them, and one will get better predictions and better policy. Such an approach can work under normal circumstances, but when economic outcomes go deeply wrong, the problem may be more foundational: not in the axioms of the discipline but in the unstated assumptions—the “assumptions in the woodwork,” which all disciplines have and which we are usually unaware of.
  • Economists usually point to a few assumptions, such as self-interest (in particular, the urge to accumulate and consume more), the axiom of diminishing marginal utility (the fact that consuming more of the same good causes utility from each additional unit to decline), and so on. But these assumptions are in fact inadequate. Laboratory tests show that rats satisfy these axioms, too, but there is no evidence of trade among rats. For society to conduct trade, these economic assumptions need to be supplemented with other social and normative preconditions: We need language, the ability to communicate, and some minimal respect for others’ rights. These are the assumptions in the woodwork that economists are often unmindful of but play a vital role.
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  • India presents a striking example of the limitations of pure economics. From 2003 to 2011, the world’s largest democracy was growing at a phenomenal rate, exceeding 9 percent each year between 2005 and 2008. Even after 2011, it kept up a reasonable rate of growth. However, since 2018, the economy seems to be spinning into a crisis, with growth declining to 4.5 percent, consumption in India’s vast rural sector declining at rates not seen since the late 1960s, and the overall unemployment rate at a 45-year high. The 2018 Accidental Deaths and Suicides in India Report, recently released by the National Crime Records Bureau, highlights a stark mood of despair: Since 2017, there has been a noticeable rise in the relative share of suicides by daily wage earners. They are among the poorest people in the economic ladder, thereby suggesting a rise in poverty.
  • A recent Harvard Business Review paper shows that if a company’s workers have a sense of belonging, they improve their job performance by 56 percent, with a 50 percent drop in churn and a 75 percent reduction in sick days. For a 10,000-person company, this would result in annual savings of more than $52 million. Extrapolate this to a nation, and you get a sense of why nations where large segments feel excluded do poorly.
sanderk

The economy is in for tough times, but here's a roadmap for recovery from the coronavir... - 0 views

www.marketwatch.com/...rom-the-coronavirus-2020-03-13

economy research Knowledge education

shared by sanderk on 28 Mar 20 - No Cached
  • Not for the next few months. The government still doesn’t know how widely the coronavirus has spread across America because of repeated snafus creating a test and it will take time to contain it. Until then large parts of the economy —schools, sports leagues, workplaces, cultural sites — are likely to remain shut down or operating on a limited basis.
  • The economy could shrink as much as 4% to 5% in the second quarter and trigger a sharp increase in unemployment, according to the most pessimistic Wall Street forecasts. The last time that happened was during the 2007-2009 Great Recession.
  • The vast majority of economists predict the U.S. will start to rebound later in the year, though they are split over how soon and how fast. Some like Donabedian see a rapid recovery starting in the summer. Others predict a short recession that extends through the fall.
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  • “There’s going to be a lot of bad news in the next three to four months,” said David Donabedian, chief investment officer of CIBC Private Wealth Management. “It will be pretty ugly. It is sure going to feel like a recession for awhile.”
  • If the U.S. achieves the same success as say, South Korea, the hope is that spread of the coronavirus will taper off by early summer, when illnesses such as the flu and cold also tend to weaken because of the heat and humidity.
  • “Some countries have proven that if you take precautionary measures such as social distancing you can get in front of this virus and contain it or at least slow it down,” said Sal Guatieri, senior economist at BMO Capital Markets.
  • The Fed has already cut a key interest rate on March 3 and could reduce it to basically zero by next week. The lowest rates in modern times is already encouraging a fusillade of mortgage refinancings that will put more money in family’s pockets.
  • Congress, for its part, is assembling what’s likely to be the first in a series of steps to cushion the blow to individuals and businesses most likely to suffer. A pending bill includes free testing, paid sick leave, emergency jobless benefits and small-business bridge loans.Economists says an overwhelming federal response is critical.
  • Still, even relative optimists such as Guatieri say there’s still too much uncertainty to feel confident. He and Wells Fargo’s Bullard say their firms have been changing their forecasts almost daily in the past week as the situation deteriorated. What’s made matters worse is simply not knowing the scope of the problem
  • “We’re not getting the insight into where we are or where we are going,” Bullard said. “So we’re all just speculating.”
tongoscar

Chinese economy clobbered by coronavirus but set to recover soon: Reuters poll - 0 views

finance.yahoo.com/...coronavirus-set-001922711.html

shared by tongoscar on 14 Feb 20 - No Cached
  • The coronavirus-hit Chinese economy will grow at its slowest rate since the financial crisis in the current quarter, according to a Reuters poll of economists who said the downturn will be short-lived if the outbreak is contained.
  • However, economists were optimistic the economy would bounce back as soon as the second quarter, with growth then forecast to recover to a median 5.7%, according to the poll.
  • That figure was pushed higher by several optimistic forecasts from economists based in mainland China. The range was 2.9%-6.5%.
  • ...3 more annotations...
  • "I think the virus will be under control by April. However, in the worst-case scenario, growth may fall to 2-3% in the first quarter and to 5% in (full-year) 2020," said Bingnan Ye, senior macroeconomic analyst at Bank of China International in Beijing.
  • China's share of the global economy has quadrupled to 16% since the SARS outbreak, so any major disruption to economic activity is likely to have a bigger impact on the world economy now.
  • "Every day is a deadline in February as Wuhan coronavirus data roll in," noted Lee Hardman, currency strategist at MUFG, the most accurate forecaster for Asian currencies in 2019. "For the yuan, the overall depreciation story continues."
Javier E

The Excel Depression - NYTimes.com - 0 views

www.nytimes.com/...gman-the-excel-depression.html

austerity social science interpretation data mistake GDP

shared by Javier E on 19 Apr 13 - No Cached
  • the paper instantly became famous; it was, and is, surely the most influential economic analysis of recent years.
  • In fact, Reinhart-Rogoff quickly achieved almost sacred status among self-proclaimed guardians of fiscal responsibility; their tipping-point claim was treated not as a disputed hypothesis but as unquestioned fact.
  • the truth is that Reinhart-Rogoff faced substantial criticism from the start, and the controversy grew over time. As soon as the paper was released, many economists pointed out that a negative correlation between debt and economic performance need not mean that high debt causes low growth. It could just as easily be the other way around
  • ...5 more annotations...
  • another problem emerged: Other researchers, using seemingly comparable data on debt and growth, couldn’t replicate the Reinhart-Rogoff results.
  • Correct these oddities and errors, and you get what other researchers have found: some correlation between high debt and slow growth, with no indication of which is causing which, but no sign at all of that 90 percent “threshold.”
  • Finally, Ms. Reinhart and Mr. Rogoff allowed researchers at the University of Massachusetts to look at their original spreadsheet — and the mystery of the irreproducible results was solved. First, they omitted some data; second, they used unusual and highly questionable statistical procedures; and finally, yes, they made an Excel coding error.
  • the Reinhart-Rogoff fiasco needs to be seen in the broader context of austerity mania: the obviously intense desire of policy makers, politicians and pundits across the Western world to turn their backs on the unemployed and instead use the economic crisis as an excuse to slash social programs.
  • What the Reinhart-Rogoff affair shows is the extent to which austerity has been sold on false pretenses. For three years, the turn to austerity has been presented not as a choice but as a necessity. Economic research, austerity advocates insisted, showed that terrible things happen once debt exceeds 90 percent of G.D.P. But “economic research” showed no such thing; a couple of economists made that assertion, while many others disagreed. Policy makers abandoned the unemployed and turned to austerity because they wanted to, not because they had to.
Dunia Tonob

Latin American fiction: A tragic hero's tale | The Economist - 0 views

www.economist.com/...latin-american-fiction

shared by Dunia Tonob on 21 Oct 12 - No Cached
  • IN 1884 Roger Casement, an ascetic young Ulsterman, joined an expedition up the Congo river led by Henry Morton Stanley, a Welsh-born American explorer, believing that commerce, Christianity and colonialism would emancipate the dark continent.
  • When reports reached London that the rubber boom had prompted a similar reign of terror against the indigenous population in Putumayo, in the Peruvian Amazon, the British foreign secretary sent Casement to investigate, with the words: “You're a specialist in atrocities. You can't say no.
  • Only a few years after his lauded success in Peru he was hanged in Pentonville prison as a traitor. Having transferred his thirst for justice to the fight for Irish independence, he sought German military support for the cause during the first world war
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  • “The Dream of the Celt” is a moral tale. It is about the choice between denial or denunciation in the face of evil, and the fine line between activism and fanaticism
proudsa

May's Jobs Report: Very Disappointing - The Atlantic - 0 views

www.theatlantic.com/...485450

shared by proudsa on 03 Jun 16 - No Cached
  • May's Jobs Report: Very Disappointing
    • proudsa
      proudsa on 03 Jun 16
       
      false predications by economists
  • . Economists were expecting a modest 158,000 jobs to be added last month, meaning that May’s disappointing jobs report will almost surely be read as a sign of a slowing economy. It is the smallest number of jobs added in a monthly jobs report since 2010.
  • oughly 35,000 Verizon workers were on strike in the month of May, but they returned to work this week after an agreement between Verizon and its union was reached
  • ...1 more annotation...
  • Jobs reports reveal key economic indicators, and thus this one will likely influence the Federal Reserve’s decision making  at the next Federal Open Market Committee meeting on June 14.
proudsa

Hillary Clinton Sets Up A Fight With Bernie Sanders Over Paid Leave - 0 views

www.huffingtonpost.com/...leave_568f2e27e4b0a2b6fb6f8d81

shared by proudsa on 08 Jan 16 - No Cached
  • Democratic presidential candidate Hillary Clinton on Thursday offered new details about her plan to make sure all workers can take time off, with pay, in order to care for a newborn or sick relative.
  • During that time, the worker would be eligible to receive replacement wages, up to two-thirds of his or her salary.
  • The proposal, if enacted, would patch a major gap in America’s safety net. Workers in every other developed country are entitled to paid leave, in some cases for more than a year.
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  • Some companies provide paid leave anyway. In the last year, high-profile employers like Facebook and Goldman Sachs introduced or expanded paid leave for their employees.
  • But Clinton’s proposal differs from the bill in one crucial way. In order to finance the replacement wages that workers would get, the Gillibrand-DeLauro bill would impose a small payroll tax, of 0.4 percent, that employers and employees would split evenly.
  • Clinton has criticized that approach repeatedly because it would mean higher taxes on lower- and middle-income workers.
  • Sen. Marco Rubio (R-Fla.), the only Republican presidential candidate to address the issue formally, has said he’d offer small tax breaks to companies that offer paid leave -- an approach unlikely to have much impact, except perhaps to help well-off workers.
  • “The benefit of being one of the last countries in the world to adopt paid maternity leave is that we have been able to learn from other countries' experiences and the results are clear,” Betsey Stevenson, a University of Michigan economist and former adviser to President Barack Obama, told the Huffington Post on Thursday.
  • To advocates like Heather Boushey, chief economist and executive director of the Washington Center for Equitable Growth, that’s a welcome sign that American politics is finally talking about the challenges of parents who also have jobs.
tornekm

So long, farewell? | The Economist - 0 views

www.economist.com/...-force-europe-so-long-farewell

Politics Conservative

shared by tornekm on 27 May 16 - No Cached
  • Just 31,000 votes averted the election of western Europe’s first far-right head of state since 1945. How had a man who talks of the “Muslim invasion” of Europe come so close?
  • Austria’s failure fully to come to terms with its complicity in the Third Reich.
  • The FPÖ has traded its earlier anti-Semitism for Islamophobia; “Vienna must not become Istanbul” runs one slogan.
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  • The result on May 23rd could easily have gone the other way. Moderates elsewhere should be scared.
tornekm

Of bairns and brains | The Economist - 0 views

www.economist.com/...hy-humans-are-so-clever-bairns

science brain science knowledge

shared by tornekm on 27 May 16 - No Cached
  • especially given the steep price at which it was bought. Humans’ outsized, power-hungry brains suck up around a quarter of their body’s oxygen supplies.
  • . It was simply humanity’s good fortune that those big sexy brains turned out to be useful for lots of other things, from thinking up agriculture to building internal-combustion engines. Another idea is that human cleverness arose out of the mental demands of living in groups whose members are sometimes allies and sometimes rivals.
  • human infants take a year to learn even to walk, and need constant supervision for many years afterwards. That helplessness is thought to be one consequence of intelligence—or, at least, of brain size.
  • ...6 more annotations...
  • ever-more incompetent infants, requiring ever-brighter parents to ensure they survive childhood.
  • The self-reinforcing nature of the process would explain why intelligence is so strikingly overdeveloped in humans compared even with chimpanzees.
  • developed first in primates, a newish branch of the mammals, a group that is itself relatively young.
  • found that babies born to mothers with higher IQs had a better chance of surviving than those born to low-IQ women, which bolsters the idea that looking after human babies is indeed cognitively taxing.
  • none of this adds up to definitive proof.
  • Any such feedback loop would be a slow process (at least as reckoned by the humans themselves), most of which would have taken place in the distant past.
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