In Tuesday’s WSJ, Edward Lazear argued that we are now experiencing the “Worst Economic Recovery in History”. Before dissecting this remarkable document, it would behoove the reader to recall that while he was Chair of George W. Bush’s Council of Economic Advisers, he stated unequivocally in May 2008 (also in the pages of the WSJ):
Replacing Iran’s oil production
If an embargo is successful in preventing Iran from selling a significant amount of oil on the world market, what would replace it?
2012 Econbrowser NCAA tournament challenge
Congratulations to the University of Kentucky for winning the 2012 U.S. college men’s basketball championship. Congratulations also to the 28% of those of you in our world famous Econbrowser NCAA tournament challenge who successfully predicted that Kentucky would win. The high honors go to a reader with the moniker Heteroskedastic, who correctly anticipated that Kansas would be the team Kentucky would beat in the finals, as well as picking 3 of the last 4 and 5 of the last 8 standing. Thanks to all who participated, and try again next year!
Lessons from the Crisis for Teaching Macro
The NY Times “Room for Debate” recently had a forum on “Rethinking How We Teach Economics”, with contributions by Blinder, Taleb and Skidelsky, among others. In my contribution, I focused on the importance of asymmetric information and self-reinforcing feedback loops:
Okun’s Law, the Jobless Recovery, and Unexpectedly Fast Net Job Creation
I have found it somewhat surprising that analysts have worried about how employment growth has recently outpaced GDP, according to Okun’s Law, while others have bemoaned the slow pace of employment growth [0] [1]. Underpinning these discussions is a view that there is instability in the relationship. [2] The first thing to recall is that there are several versions of Okun’s Law. Some are expressed in levels, some in deviations from natural levels (gaps), and some in growth rates. From Figure 1, it does appear that private employment growth has been above expected, after being below expected.
Halbert L. White, Jr., 1950-2012
It is with great sadness that I report that UCSD Economics Professor Hal White passed away Saturday morning after an extended struggle with cancer. He was an irreplaceable colleague and dear friend, and we will miss him greatly.
Long Term Real Ex Post Interest Rates around the Great Depression
I was wondering how long real long term (ex post) interest rates remained negative after the onset of the Great Depression. This is obviously interesting given the large amount of slack currently in the global economy, and the rampant fears of crowding out (see [1]) as governments continue to run deficits (and are likely to continue as leaders refuse to raise tax revenues). Fortunately, Lawrence Officer and Sam Williamson have done the profession an enormous service by compiling online historical series on many variables, including interest rates and price, at Measuring Worth. It turns out ex post real rates were really low for a very long time…
International Trade, an Enhanced Petroleum Transportation Network, and Gasoline Prices
Don’t expect a big impact on gasoline prices from opening up an oil pipeline to the coast.
I am a little late to this debate [0] [1] [2], but I wanted to highlight something that is clear from basic international trade theory. Opening up to international trade changes relative prices, and in fact raises some prices. If a pipeline were to be built which could transport oil currently produced in the Midwestern US to the Gulf Coast, then to the extent that oil in the Midwest is lower priced than on the coasts, then average US oil prices may actually rise with completion of the pipeline.
A rational reason for high oil prices
“There is no rational reason for high oil prices,” writes Ali Naimi, Saudi Arabian Minister of Petroleum and Mineral Resources, in today’s Financial Times. Well, I can think of one– if oil prices were lower, the world would want to consume more than is currently being produced.
Simon Johnson and James Kwak on Learning — or Not — from the Past
I’ve been reading some history, from Simon Johnson and James Kwak‘s new book, White House Burning. And it strikes me how ahistorical (or just plain ignorant of history) so many of the prescriptions for fixing up the economy are. For instance, the tax cutting ideology of today is merely a recapitulation of what has caused America to come to grief at the Nation’s birth.