Links for 16th May, 2019

  1. “The other risk of a huge centrally planned response to climate change is that of a huge centrally planned response to anything: clumsy megaprojects chosen for their political or bureaucratic acceptability rather than because they deliver the biggest results for the lowest cost.”
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    In which the ghost of Pigou is found to be giving a contented chuckle. Pigouvian taxes is a term you should learn about, and read this article to find out how and why the idea continues to resonate.
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  2. “With casuals being the next wave of streaming adopters, their impact will increase. But despite being ‘more valuable’ they will also reduce royalties, because more streams per user means revenue gets shared between more tracks, which means lower per-stream rates. The music industry thus has an apparently oxymoronic challenge: it is not in its interest to significantly increase the amount of media consumption time it gets per user, but instead it will be better served by getting a larger number of people listening less!Current market trajectory points to more streams per user, which – for subscriptions, where royalties are paid as a share of revenue – means lower per-stream rates.”
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    Have you read The Long Tail, by Chris Anderson? Read it (or about it), and then read this article to learn about the problems that will arise in a world full of long tails.
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  3. “The answer is no and yes. The views of Piketty and Blanchard can indeed be reconciled, because they are talking about different interest rates. While Blanchard focuses on the rate on low-risk government bonds, Piketty is concerned with the return on risky capital investments. Because the two interest rates are separated by a risk premium of roughly five percentage points, it is entirely possible for the rate on government bonds to be below the economic growth rate, while the rate on capital is above it.”
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    Barry Eichengreen on the return (as he puts it) of fiscal policy. A short article, but a useful one to understand macroeconomics better.
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  4. “When historians in the distant future look back at our era, the name Alfred Sauvy may appear in a footnote somewhere. Sauvy was a French demographer who coined the term “third world” in a magazine article in 1952, just as the Cold War was heating up. His point was that there were countries not aligned with the United States or the Soviet Union that had pressing economic needs, but whose voices were not being heard.”
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    The always excellent Tim Taylor on the nomenclature for “third world” countries – how it came about, what it means, how it might change going forward – and ends with a clarification about how it may not have been what we have thought all along!
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  5. “I have to tell you, I’m a pretty lazy person, I don’t work more than 40 hours per week. What I’ve discovered helps me is to not compartmentalize – because if I thought of my life as, “there’s teaching, there’s research, there’s writing on my blog, there’s X, Y and Z…” then you very quickly run out of hours in the day. But almost everything I do spills over into almost everything else I do. So I’m constantly looking for ways to take whatever I do and get it to serve three or four or five purposes.”
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    A fascinating interview with Aswath Damodaran – a person you must know more about if you want to study finance. The entire interview is worth reading – but this excerpt is for you even if you are not a student of finance – his view about what qualifies as work, and what doesn’t.

Links for 15th March, 2019

  1. “Nellie’s tree is said to be the most romantic in the UK. Nearly a century ago, Vic Stead would walk to a nearby village to visit a woman he was courting, called Nellie. One day, he came across three beech saplings and grafted one between the other two to form the letter ‘N’ in an attempt to woo her. They went on to marry and have children, and the tree is a popular site for proposals today”
    The Guardian comes up with  a lovely photo essay about the ‘European Tree of the Year’. Do not miss the tree that stands in the middle of a highway that connects the Netherlands to Belgium as well.
  2. “At the moment, global CO₂ emissions are about 37 billion metric tons per year, and we’re on track to raise temperatures by 3 degrees Celsius by 2100. To have a shot at maintaining a climate suitable for humans, the world’s nations most likely have to reduce CO₂ emissions drastically from the current level — to perhaps 15 billion or 20 billion metric tons per year by 2030; then, through some kind of unprecedented political and industrial effort, we need to bring carbon emissions to zero by around 2050. In this context, Climeworks’s effort to collect 1,000 metric tons of CO₂ on a rooftop near Zurich might seem like bailing out the ocean one bucket at a time.”
    Direct air capture of carbon, which is what the article is about, isn’t really going to ‘solve’ climate change anytime soon. But the article is worth reading because it speaks about a variety of economic issues, including climate change – there’s public goods, pricing, subsidies, micro-payments, the creation of markets, and much else.
  3. “Many of the dominant policy ideas of the last few decades are supported neither by sound economics nor by good evidence. Neoliberalism – or market fundamentalism, market fetishism, etc. — is a perversion of mainstream economics, rather than an application thereof. And contemporary economics research is rife with new ideas for creating a more inclusive society. But it is up to us economists to convince their audience about the merits of these claims.”
    Dani Rodrik, and ten others aim to recast economics as being for ‘inclusive prosperity‘. Ten policy briefs to begin with, and more to come later. The idea isn’t to form another think tank, as the post mentions, but to promote more academic research along these ten briefs.
  4. “This Letter quantitatively evaluates the beneficial impact a negative Fed policy rate could have had during the recovery from the Great Recession. While it’s difficult to capture all the complexities of the economy in a model, this analysis suggests that negative rates could have mitigated the depth of the recession and sped up the recovery, though they would have had little effect on economic activity beyond 2014. The analysis also shows that the interest rate does not have to fall too deeply into negative territory to accomplish meaningful economic improvements.”
    Would negative interest rates have helped generate a quicker recovery in the United States? This letter suggests that this may well have been the case. Forget the model that was used – that’s a rabbit hole in its own right – but take a look at this article for a very readable introduction to the world of negative interest rates.
  5. “‘NIRC’ – it’s a uniquely Singaporean economic abbreviation that stands for net investment returns contribution.
    It’s a mouthful, but in the coming weeks the term is likely to be on the lips of many of the Lion City’s lawmakers as they debate the national budget Finance Minister Heng Swee Keat will unveil on Monday. The NIRC is the amount of Singapore government revenue that comes from interest earned on its outsize reserves.”
    Everything about Singapore is worth reading, and I really do mean that. Reading this article will introduce you to one of Singapore’s lesser known features – Singapore’s government runs a pretty large fund, it is pretty profitable (presumably), and there’s debate about what to do with the proceeds.