Tag: economics

Central banks buying assets

Central banks around the world could raise rates of price inflation, and boost aggregate demand, if they were allowed to buy corporate bonds and other higher-yielding assets. Admittedly this could require changes in law and custom in many countries There is no economic theory which says central banks could not do this, as supposed liquidity traps would not apply. These are not nearly equivalent assets with nearly equivalent yields.

Cheap oil has consequences

cheap oil, while great for crushing odious regimes, does cause some collateral damage.

The sense that falling oil is bad for stocks is mostly a matter of timing and conspicuousness. The bad parts of the oil plunge are hitting now: the credit downgrades, the defaults, the investment cutbacks, the layoffs of roughnecks. They’re making news and rattling people’s confidence. Eventually, the money freed up by cheap oil will leak into other parts of the economy.

Nonrival Goods

My previous post, which answered the question, “Why has growth has been speeding up?” made no use of the concept of excludability. So why did I make such a big deal about partial excludability in my 1990 paper? At least since Marshall handed down his Principles of Economics (arguably since Adam Smith told the story of the pin factory), economists have fretted about how to reconcile the increasing returns associated with what Smith called increases in “the extent of the market” with the obvious fact that in real economies, lots of firms of all sizes compete with each other. One of most important things about growth theory that I learned from Chad Jones is that this question is separable from the question about why the growth rate has been speeding up. Speeding up follows from the 2 key properties of production possibilities that I emphasized in that post–combinatorial explosion and nonrivalry. These are facts about the physical world that nature gives to us, provided we recognize that part of what nature gave us was the amazing capacity to humans was the ability to codify things we learn in words that other humans understand. What Chad pointed out in an aside that I will never forget is that that to understand speeding up, it is enough to take a specification of the production possibilities, attach an objective function, and just solve a social planner’s problem. All the reasonable proposals for decentralizing an equilibrium have a path for growth that is qualitatively similar to the path that solves the planner’s problem. If your production possibilities give you a solution to the planner’s problem with a growth rate that speeds up, you will be able to come up with a decentralized version that does so too.

Visas need to die

Amid worries about the wave of asylum-seekers from Syria and elsewhere, governments in Europe and beyond will face pressure to keep making life hard for tourists and business travelers—even as other departments of those same governments spend heavily on promoting tourism and foreign investment.

They serve no “security” purpose and are pure arbitrage.

The yuan %

Fuerdai are to China what Paris Hilton was to the US 10 years ago, only less tasteful. Every few months there’s a fuerdai scandal, whether it’s a photo of a woman about to set fire to a pile of 100-yuan notes; members of the much derided Sports Car Club posing beside their Lamborghinis; or someone pulling a gun during a street race. In 2013 reports of a fuerdai sex party at the beach resort of Sanya provoked a nationwide finger-wag. 2 prominent rich kids got into a public arms race over who had the bigger stash: The widely despised socialite Guo Meimei posted photos online of herself with 5M yuan worth of casino chips; her rival responded with a screen shot of his bank statement, which appeared to contain 3.7M yuan. (Guo was sentenced to 5 years in prison for running a gambling den.) Recently, the son of Wang Jianlin, a real estate mogul and the richest man in China, trolled the nation by posting a photo of his dog wearing 2 gold Apple Watches, 1 on each forepaw. Fuerdai outrages occasionally feature government intrigue, such as a 2012 Ferrari crash in Beijing involving 2 young women and the son of a high-level official, all of whom were at least partially naked when they were thrown from the car. The man’s father, a top aide to then-president Hu Jintao, was later arrested and charged with corruption.