Why not inflation?

29 May 2009

Paul Krugman writes in today’s NYT about inflation. In particular, he voices a sentiment that I’ve been thinking for awhile now:

So is there any reason to think that inflation is coming? Some economists have argued for moderate inflation as a deliberate policy, as a way to encourage lending and reduce private debt burdens. I’m sympathetic to these arguments and made a similar case for Japan in the 1990s. But the case for inflation never made headway with Japanese policy makers then, and there’s no sign it’s getting traction with U.S. policy makers now


The question is why not? Surely some degree of inflation would be good for the housing market, as well as the consumer credit markets.


Andy Kroll: Six Ways the Financial Bailout Scams Taxpayers

27 May 2009

Andy Kroll: Six Ways the Financial Bailout Scams Taxpayers

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This is why Timothy Geithner was a lousy choice for Treasury Secretary. I hope now that he’s got some help from Alan Krueger and others that there will be more transparency and less cronyism.

Debt as income substitute?

18 May 2009

I don’t have any statistics at hand, but an enterprising graduate student could do this. I have been wondering lately, whether overall inequality in the US would have increased or decreased if you include borrowing from housing and credit cards over the last 10 years. To what extent did borrowing substitute for real wage growth, which we know has been pretty stagnant over much of the distribution.

This seems like the kind of thing the folks at Center for American Progress or the Economic Policy Institute would be interested in doing…

Without some sustained and across the board real wage growth, it’s hard to see how things will improve for most people, even once the housing market eventually picks up.

What’s wrong with single payer?

18 May 2009

David Sirota hits the nail on the head with this piece in Salon:

In saying they can voluntarily slash $200 billion a year off the country’s medical bills over the next decade and still preserve their profits, healthcare companies implicitly acknowledged they were plotting to fleece consumers and have been fleecing them for years. With that acknowledgment came the tacit admission that the industry’s business is based not on respectable returns, but on grotesque profiteering and waste — the kind that can give up $2 trillion and still guarantee huge margins.


That’s why the White House’s current posture is so puzzling. As the Associated Press reports, Obama aides are trying to squelch any single-payer discussion, deploying their healthcare point-person, Sen. Max Baucus, D-Mont., to announce that “everything is on the table with the single exception of single-payer.”

So it’s back to why — why Obama’s insurance-industry-coddling inconsistency? Is it a pol’s payback for campaign cash? Is it an overly cautious lawmaker’s paralysis? Is it a conciliator’s desire to appease powerful interests? Or is it something else?

So, Obama, which is it?

The immigration debate: is it possible to be objective and nativist at the same time?

11 May 2009

A few weeks ago George Borjas talked about how the Center for Immigration Studies has come under attack from the Southern Poverty Law Center for its anti-immigration stances.

George cites a well-known labor economist who thinks that CIS’s output will be more accurate than refereed journals because of all the folks gunning to discredit CIS. I’m not sure I buy that arguement. Besides, a very well-known immigration economist that I know is just as skeptical about CIS’s work because of their very obvious nativist position.

That said, I think Steve Camarota, the poli-sci Ph.D. who produces most of CIS’s Backgrounders, is a smart guy, and affable, too (I had the good fortune to debate with Steve awhile back at a function for William and Mary’s Christopher Wren Society).

This all points to the question as to whether we stop believing research when its producer starts to take political stands, or when it is produced by a “think tank” with an obvious perspective. I think places like Brookings do a better job of this than, say, CIS, but that may be because I am more likely to see the world from the same perspective that Brookings does.

For me, I guess it comes down to whether I can predict a priori what someone is going to say about a particular topic. If the Cato Institute suddenly came out endorsing universal health coverage, it would be news (and I make take what they say more seriously, because would run counter to my expectations).

I once had some of my research used as talking points by the Republican National Committee (back when Pat Buchanan was running for president) because it showed that immigration had an impact on the wage structure in the US. Despite the fact that I hated being a poster child for the RNC, the data said what they said. I couldn’t (and wouldn’t) change that just because it ran counter to my (usually) liberal attitudes. Maybe the numbers that CIS produces are accurate, but you have to wonder whether they always tell the whole story, even if it doesn’t suit their agenda.

Germany’s recession

11 May 2009

John Vinocur writes a damning article in today’s New York Times about how the German government has botched the response to the recession.

Most interestingly:

Even more strikingly, a report by the federal financial services supervisory agency a week earlier sets at €816 billion the amount of toxic assets in German banks. That is enormous. In terms of overall assets, according to news reports, it is proportionately higher than the International Monetary Fund’s comparable estimate for American banks of $1.6 trillion.

This truly is enormous, and one wonders where these toxic assets are from. A higher share of German households rent rather than own, generally Germans in my experience seem wary of taking on any debt. So if the German banks are so leveraged, they must be truly incompetent.

Or arrogant, which I find is a common thread running through many of my experiences with Germans. For example:

Where was this reality when Mrs. Merkel was going on about the German example for the world, or when Mr. Steinbrück told the Bundestag that while, fortunately, “our situation is more robust,” the United States “will lose its superpower status in the world financial system”?

There is a large degree of Schadenfreude, I think amongst certain sectors of German society (particularly certain elites) that the US is having difficulties. I was once told, for example, that the EUR/$ exchange rate would reach 2 sometime in the near future because of how poorly the US economy was doing — and it was said with a certain smugness.

While the US may take some hits on its “superpower” status in the financial market (and I think the jury is still way out on that), there’s no doubt in my mind it’s not going to be Frankfurt that will fill the gap.

Health care costs to be lower?

11 May 2009

Paul Krugman sounds (for him these days) positively upbeat regarding the the news that the healthcare industry has volunteered to help the Obama administration in reducing the growth rate in health care costs:

And serious cost control would change everything, not just for health care, but for America’s fiscal future. As Mr. Orszag has emphasized, rising health care costs are the main reason long-run budget projections look so grim. Slow the rate at which those costs rise, and the future will look far brighter.
I still won’t count my health care chickens until they’re hatched. But this is some of the best policy news I’ve heard in a long time. 

And serious cost control would change everything, not just for health care, but for America’s fiscal future. As Mr. Orszag has emphasized, rising health care costs are the main reason long-run budget projections look so grim. Slow the rate at which those costs rise, and the future will look far brighter.

I still won’t count my health care chickens until they’re hatched. But this is some of the best policy news I’ve heard in a long time. 

One wonders whether this includes reigning in administrative costs.  I’m still not convinced that a single-payer system wouldn’t be better. There have to be economies of scale in providing health care administration.

Marginal changes no longer interesting?

10 May 2009

David Brooks wrote an interesting column this week on the charter schools run by the Harlem Children’s Zone. In it he describes the the findings of the HCZ experiment and Roland Fryer‘s comment that the study “changed his life as a scientist.”

Later on in the article Brooks quotes Fryer as saying “The results changed my life as a researcher because I am no longer interested in marginal changes.”

I know Roland has a reputation that has grown by leaps and bounds, but statements like this give me pause. Does that mean that he’s just not going to publish anything where the estimated treatment effects are small?

As a scientist, I’m interested in the truth, whether its big, small, marginal, whatever. I have to wonder about folks who issue blanket statements that rule out any potential finding on research done objectively. Moreover, I think the essence of what we do as scientists is look for marginal changes — after all, how do we know what works and what doesn’t work? Even within an experiment like HCZ, there must be aspects that are more effective than others. Wouldn’t we like to know what they are?

If the claims in Brooks’s articles are true — that’s great. But I’m wary of anybody who claims to be objective and then sounds like an evangelist.


9 May 2009

Hi… welcome to yet another economist’s blog.   Can we really know as much as we think we do?