An economist is like an alchem…
April 11, 2009 – 12:52 amAn economist is like an alchemist, but less messy. — More quotes by Terry Pratchett http://www.kasinomics.com/quotes/
Topics of this post: Discussions, Quotes, Terry Pratchett, TwitterRT @kasi T-Shirt with “I survi…
April 11, 2009 – 12:39 am
See also
The Economics of Height
October 2, 2008 – 12:33 pmThe New York Times Blog features an interesting article about the different average heights between North- and South Koreans, and Europeans and Americans. The author Tara Parker-Pope writes about the relevance of height statistics for economic performance:
While the conditions for North Koreans are troubling, Americans have a similar height gap to worry about, and it also appears to be due to a lower standard of living, poor health care and inadequate nutrition. Last summer, the journal Social Science Quarterly reported that Americans are, quite literally, falling short of Europeans. In 1880, Americans were the tallest people in the world. But by 2000, American men, at an average height of 5-feet-10.5-inches, ranked 9th, and women, at about 5-feet-5-inches, fell to 15th. Several Northern European countries rank the highest in height, with the Dutch coming in first, at just over 6 feet for the men and 5-feet-7-inches for the women.
The height gap between Americans and Northern Europeans can’t be explained by an influx of short immigrants. Experts say the United States takes in too few immigrants to account for the disparity, and the height statistics cited in the article include only English-speaking native-born Americans, and don’t include people of Asian and Hispanic descent.
The real answer may be that Northern European countries do a better job of spreading the wealth and taking care of their children.
It would be interesting to run a simple regression on the prediction capability of average male height on GDP/capita. A short search on the internet only gave this small graph.
Topics of this post: GDP, height, Memo, statisticsUnrealistic hope among libertarians to save the climate by waiting for the market
August 25, 2008 – 12:10 amWhy Karl Rove should call himself a libertarian is a mystery, given that the Bush Administration, which he served as a central adviser to, has greatly expanded, not reduced, the goverment impact on American citizens. In Art Diamonds Blog, another example is given for Mr. Rove’s hypocricy: Rove criticizes McCain for not having understood Schumpeter.
Schumpeter is, besides Smith and Mises, probably the most quoted economist among libertarians, even though few people have bothered to read his works. Libertarians, and Rove as well, often quote the notion of the destructive and innovative power of capitalism, bringing to the front new solutions and technologies. Schumpeter argues that innovation often comes from outside an established industry – and that should give readers a clue why Roves defense of the American Energy Policy is so mistaken.
Rove argues, blatantly with Schumpeters words, that the American Energy Companies should not be held responsible for investing in alternative energies because a) they know better than government b) they already invest in alternative energies c) the market produces the best energy mix incorporating both costs and possible profits.
Surely Schumpeter would have easily dismissed such a short-sighted argument. In modern terms, there are number of reasons why we would not necessarily expect the market to work perfectly. Oligopols reduce competition and allow excessive rent-seeking – something quite visible in most energy markets in the world. Regulatory capture prohibits internalizing potential risks and external costs into the decision-making process. Path dependence makes it difficult to switch a network technology from one alternative to the other.
None of these have to do with government interference – no, that’s not true. All of them have to do with government interference, but not necessarily with too much government interference.
Oligopolies in network technologies (energy, transport, communication) are difficult to break up, the European Union can sing plenty of songs about their efforts to break up the Energy-Quadropoly in Germany. Regulatory capture is particularly difficult if the administration, as under Karl Rove, is heavily tilted towards an industry and does not encourage regulators to intervene. Path dependence can only be reduced by subsidizing alternatives – heavily!
What the American Libertarians need to learn is that there is little hope for the market to magically bring about alternative energies. It needs an approach on several levels:
On the demand side, give incentives to consumers to use less energy, save energy or buy alternative energies. Government-supported renovation programs to make houses up-to-date with heat- and electricity-standards can help. Lower taxes on fuel-efficient cars are good incentives. These instruments do not prescribe a certain behaviour, but simply encourage another market framework.
On the supply-side, it helps to pay a higher reimbursement to providers of alternative energy, something which has been running successfully in Germany and has drastically increased the share from Wind- and Solar-Energy.
On the network-side, it is crucial to separate the various stages: from production to transport to distribution of energy. This can only be done by a tough regulatory agency.
It is difficult to acknowledge this, but libertarians who like the market, need to empower the goverment to create a market framework which works. This is in fact what Schumpeter was skeptic of, that a government could be too weak to harness the destructive force of the capitalism. Schumpeter actually argued that capitalism will eat itself because bureaucracies would be too weak.
Karl Rove seems to be unaware of that position of Schumpeter.
Topics of this post: climate change, Discussions, energy markets, karl rove, libertarian, schumpeterSee also
Economics of Sex at the Olympic Games
August 24, 2008 – 9:15 pm
Matthew Syed, a former British Table-Tennis Player, has written a wonderfully amusing article called “Sex and the Olympic City” about the sex life in the Athletes’ Village during the Olympic Games.
He makes two interesting observations, probably suspected by the casual onlooker, but in its sincerity most fascinating: first of all, an estimated 99% of all athletes are having the time of their life, at least sexually, during the Olympic Games. Secondly, gold medals help the males, don’t necessarily help the female athletes.
The second observation is explained by a reference to the disambigious way society deals with succesful women:
Sport, in this respect, is a reflection of wider society, where male success is a universal desirable whereas female success is sexually ambiguous.
The first observation, however, is explained through a number of theories:
- Is it related to the level of self-discipline which athletes must exhibit before the race, which finds a channel afterwards? No, as Syed observes:
“Most of the athletes I know are as up for it before and during competition as they are in the immediate aftermath.”
- Is it related to the level of testosterone, which increases aggression, competition and virility. Syed says:
“At a population level, higher naturally occurring levels of testosterone in both genders would provide a powerful explanation for the combination of sporting prowess and sexual potency.”
- He also mentions a moral, or rather immoral, argument:
“For most athletes, the village is thousands of miles from home.”
- Or is it simply evoluationary, which helps promiscuity, as Syed says:
“A man’s sperm count doubles when he spends a lot of time on the road.”
Syed concludes that a mixture of causes might be respoinsbile for the outbreak in sexual filibustering (I know, the term does not really apply here, but I like the sound of it). One cause he has overlooked: put together 10.000 athletes who have their mind set on medals – and only about 900 of them receive one. There must be some sort of compensation for the remaining bunch.
Topics of this post: Discussions, homo economicus, Matthew Syed, olympic games, sexSee also
Slaughter – A New World Order
August 22, 2008 – 1:30 pm
Anne Marie Slaughters Book on A New World Order deals with transgovernmental networks. She focuses on the classic governmental networks, but also on regulators, judges and parlamentarians establishing their own network.
The description of Regulatory networks are particular interesting. According to Slaughter, regulatory networks emerged because of shared responsibility for transnational financial entities. These networks are concentrated around EU- and OECD-countries (in the field of financial regulation maybe it’s better to speak of BIS-networks).
She also distinguishes three different kinds of transgovernmental networks: government networks within international organisations (within the UN), within an executive agreements (G7) or spontaneous government networks which sometimes became institutionalized. She also distinguishes Information Networks, Enforcement Networks (which sometimes leads to capacity building) and Harmonization Networks.
The book tries to explain how increased transgovernmental networks help to solve the dilemma of needing increased cooperation between goverments on global problems with an increased scepticism against a global government. She also points to the dilemmas of criticism of transgovernmental network. For instance, the increased demand for accountability to domestic political groups might reduce the ability of transgovernmental networks to solve global problems.
Topics of this post: anne-marie slaughter, bis, Books, g7, oecdSee also
Eatwell, Taylor – Global Finance at Risk
July 31, 2008 – 7:29 pm
Last week I had a fascinating conversation with a friend of mine who is an anarchist. We tend to discuss international capitalism and he always wants to convince me that it is possible to create a society without capitalism. When I asked him about what that would mean he often replies that he wants a society in which there no interest paid on the ownership of money. When I replied that interest rates simply identify the price of money, or the costs of borrowing money, which is necessary to induce capital holders to lend to capital borrowers, he replies that he would like to get rid of private ownership of capital alltogether.
I wished I had John Eatwells and Lance Taylors book “Global Finance at Risk: The Case for International Regulation” with me. For anyone interested in important aspects of financial regulations, it is a good starting point. It not only explains how financial markets changed since the introduction of flexible exchange rates, it also makes a good argument on the dilemma that policy-makers face when trying to induce markets to internalize systematic risk. The book also takes apart the notion that a financial crises are always induced by government policies, instead the authors argue that financial cycles leading to a financial crisis can originate in the behaviour of the markets themselves.
Where I disagree with the authors is on their assessment of the necessity of a World Financial Authority. The authors describe the limited capability of domestic regulation in the face of global financial markets and the need to gather the decision-making on the global level. They offer two alternatives for locating the WFA: inside the BIS-System or at an enhanced IMF. The BIS-System has the advantage of market knowledge, access to statistics, and flexibility and thus it would be beneficial to extend the power of this system. However it is unclear whether the USA would agree to move such a lot of regulatory power outside of the US to an institution dominated by Central Banks. And it is not clear whether such a World Financial Authority. And there has been little debate in the current crisis to institutionalize the web of regulatory bodies existing today, probably because any attempt at institutionalization risks loosing the flexibility of the current system.
Topics of this post: Books, capital markets, financial architecture, financial crisis, financial regulation, John Eatwell, Lance Taylor, World Financial AuthoritySee also
Broughton-Bradford: Challenges to Global Governance to the G8
June 28, 2008 – 4:12 pmJames Boughton and Colin Bradford published an article in the IMF-Magazine “Finance and Development” in December 2007 called “Global Governance: New Players, New Rules”, in which they questioned the governance capability of the G8.
They define ideal global governance as such:
The ideal of global governance is a process of cooperative leadership that brings together national governments, multilateral public agencies, and civil society to achieve commonly accepted goals. It provides strategic direction and then marshals collective energies to address global challenges. To be effective, it must be inclusive, dynamic, and able to span national and sectoral boundaries and interests. It should operate through soft rather than hard power. It should be more democratic than authoritarian, more openly political than bureaucratic, and more integrated than specialized.
The G8 can be seen as the embodiement of such an ideal. They are a symbol of cooperative leadership, provide strategic interataction and can marshall collective energies. They operate through soft-power. However, due to demographic changes, changed in demand in energy commodities and global health challenges, the authors claim that the G8 is not representative anymore.
The first and most important front is to reform the process by which national political leaders come together at the summit or ministerial level to discuss common concerns. [...] Because the only truly powerful group—the G-8 summit—is composed exclusively of rich, industrial countries, mostly from the North Atlantic, there is a “democratic deficit” in the current summit grouping and, as a consequence, a void at the apex of the international system.
Unfortunately,the authors do not acknowledge that cooperation between the G8 and Emerging Economies are using a wide variety of channels. There is extensive cooperation through the BIS-hosted institutions, through the OECD and the FATF, through various governmental summits. The Heiligendamm Process of further cooperation with the O5 is an example of how governance is increased without changing the institutional composition of the summit itself.
Topics of this post: Colin Bradford, EMEs, g8, General, global governance, James BoughtonSee also
G8-Action Plan on Local Bond Markets – Missing Follow-Up Documents
June 26, 2008 – 4:13 pmThe overview of G8 Action Plan on Local Bond Markets lists a couple of documents that were mentioned in the implementation report to be published soon, but have not been published since:
- IMF: “ABS in Emerging Markets: Recent Trends and Policy Implications”
- Capital Markets Consultative Group (CMCG): Study about the Impediments to development of emerging capital markets
- IMF: “Derivatives in Emerging Markets: Recent Trends and Policy Implications for Capital Markets”
- IMF and World Bank: Study about Economic Transmission Mechanisms and the impact of the current turmoil on the local bond markets.
- Working Group on Securities Databases: Report about September 2007 Meeting
- World Bank: Study about Regionalisation of East-African Securities
See also
G8 Action Plan on Local Currency Bond Markets – Overview
June 25, 2008 – 7:56 pm
The Document contains an overview of the G8 Action Plan on the developments of local currency bond markets and the implementation report.
The overview-report looks at the problems identified by the G8 Action Plans, Task delegated to various institutions and results given from the implementation report. It is subdivided into ten sections:
- General Provisions
- Market Infrastructure
- Securitization Markets
- Public Debt Management
- Broadening and Diversifying the Investor Base
- Developing of derivative and swap markets
- Promoting Regional Initiatives
- Broadening the Database
- Developing bond markets in less-developed countries (especially Sub-Saharan Africa)
- Techical Assistance
The G8 Action Plan was mentioned in the recent report of the G8 Finance Ministers Meeting in Osaka, Japan, but also in various other conferences:
- High Level Workshop 2007 Developing Bond Markets in Emerging Market Economies, Frankfurt, May 10, 2007
- G8 Conference on Bond Markets in Emerging Economies and Developing Countries, Frankfurt, 31 January 2008
- Second OECD Forum on African Public Debt Management, 12-13 December 2007, Amsterdam
- World Bank Debt Management Stakeholder’s Conference, Oslo Norway, March 5-6 2008
A list of further documents can be found in the report, further entries will be added in the future.
Topics of this post: bis, cgfs, cpss, EMEs, g30, g7, g8, germany, ifc, imf, iosco, local bond markets, oecd, Papers, securities, sovereign debt, world bank