Showing posts from 2009

A year of blog-lighting

It's the New Year and baby GG&G is one year old! It began on something of a lark, during last year's holiday break.  Mainly I wanted to show my mother how easy it was.  My mother is an expert in early child development and eduction and has tremendous knowledge and enthusiasm about her subject.  She's also a great story teller.  And she's always claimed she wanted to write one day, so I suggested blogging would be a great way for her to get started. So far my attempt at leading my mother by example hasn't worked, but I haven't given up. Visits and page views here at GG&G are gradually increasing and typically range from 50-100 unique visits and 75-150 page views a day.  Sometimes, when Mark Thoma (who's probably responsible for 1/3-1/2 my visits) or some other higher-profile blogger links to GG&G, I can get 400 or more visits and over 600 page views.  (Thanks Mark!)  Besides Mark, I've been linked to by Grist, the Faceless Bureaucrat, Cl

On price-to-earnings and price-to-rent ratios

Standard metrics for assessing values of stocks and homes are the price-to-earnings ratio and price-to-rent ratio.  For stocks, sometimes a price-to-dividend ratio is used.  Also for stocks, since earnings and dividends can be highly volatile in the short-run, a longer-run average is used rather than current earnings or dividends. Here's a recent chart from Calculated Risk showing the price-to-rent ratio for houses. And here's a recent chart from Econbrowser showing the price-to-earnings ratio for stocks. (Note that the first plot shows the index rescaled so that 1980 [1987] = 1.  If it were not rescaled this way, the units on the vertical axis would look pretty similar to those for stocks.) These are nice metrics both conceptually and empirically. Conceptually, they say something about the rate of investment return.  If the stock were infinitely lived and paid same earnings, then the net present value of the flow of earnings equals the price if future earnings ar

Might Krugman's polemic prediction about Enron vs. 9-11 ever come true?

I look at our financial and economic system in dumbfounded awe as to how it all works.  We shovel trillions of dollars into banks, stocks and mutual funds, rarely knowing the first thing about how well the underlying companies are managed or how profitable they are or what they are truly doing with our money.  While I think I'm more informed than the average investor, I couldn't tell you which 10 CEOs are most responsible for my investments.  I couldn't even tell you the top 10 companies! I think most investors are like me.  So this begs the obvious question: what keeps those CEOs from running off with all our money?! The fact that I do invest shows I have remarkable confidence in our financial system.  That confidence is based on history, the fact that firms and CEOs have been honest and transparent enough in their accounting and that, over the long run, the stock market has performed extremely well.  The long sweep of history says I'm crazy not to invest. But th

Obama isn't elusive

I'm disinclined to blog much about politics.  But this column by the former blogger turned conservative NY Times columnist Ross Douthat kind of struck a chord in me. Every presidency is the subject of competing caricatures. But almost a year into his first term, there’s something particularly elusive about Barack Obama’s political identity. He’s a bipartisan bridge-builder — unless he’s a polarizing ideologue. He’s a crypto-Marxist radical — except when he’s a pawn of corporate interests. He’s a post-American utopian — or else he’s a willing tool of the national security state... If one were to read traditional media and never listen to what Barack Obama has actually said or written, then Barack Obama would seem elusive.  But if one actually listened to what he has said--and by any standard President Obama is particularly articulate are particularly non-evasive--then there is absolutely nothing at all elusive about him.  He has done pretty much exactly what he said he would do. 

First Agricultural Economics Workshop at NBER

Jeffrey Perloff has done a fantastic job organizing the first ever NBER workshop on agricultural economics.  Here 's the program.  I just booked my ticket and am really looking forward to it. This was a difficult thing to do and many kudos to Jeff for all his efforts.  Polite folks don't say it out loud, but the truth is that many econ folks see ag. econ. as the ugly stepchild of economics, and so it's quite a feat to have an ag. econ. grace the halls of the relatively exclusive NBER.  I hope this helps to whittle down silly intellectual barriers.

Rob Stavins is the best source for substantive review of all things related to climate policy

Here 's his review of the Copenhagen summit.

Cochrane's tips for empirical work

A little while ago I stumbled upon this post by Greg Mankiw that provides great list of resources with advice for graduate students. I highly recommend all grad students read all of these, especially the first two by Don Davis and John Cochrane. I'd like to emphasize Cochrane's tips for empirical work: These tips verge on “how to do empirical work” rather than just “how to write empirical work,” but in the larger picture “doing” and “writing” are not that different. What are the three most important things for empirical work? Identification, Identification, Identification. Describe your identification strategy clearly. (Understand what it is, first!) Much empirical work boils down to a claim that “A causes B,” usually documented by some sort of regression. Explain how the causal effect you think you see in the data is identified. 1. Describe what economic mechanism caused the dispersion in your right hand variables. No, God does not hand us true natural experiments very o

Googling "Inflation targeting" and "fiscal stimulus"

I'm encouraged by a recent uptick in discussion about inflation targeting among some influential economists. Brad Delong asks whether it's " time for some hand-forcing at the Fed ." This in response to a very nice post by David Beckworth , which was partly in response to Bernanke's  unconvincing answer to Brad Delong's question to Bernanke about why the Fed isn't targeting a 3% inflation rate. Paul Krugman then compares Ben Bernanke to Montague Norman . Mark Thoma still thinks the focus should be on fiscal stimulus rather than inflation targeting or quantitative easing (there are subtle differences betweeen IT and QE--see Krugman). I can understand why economists (a characteristically conservative bunch) would be worried about announcing a new inflation target and vigorously enforcing it with bond purchases.  Unhinging inflation expectations from a very stable 2.5 percent could have unanticipated consequences.  But aside from knee-jerk conservat

Paul Samuelson

Paul Samuelson was among the most influential economists in modern history. After Keynes and Friedman, at the moment I can't think of any economist with more sweeping and enduring influence.  In some ways his contributions were deeper than Keynes and Friedman. He developed the modern structure of economics--not just how we think the economy works, but how think about how the economy works, particularly the way economists use mathematics. He will be sorely missed. Update :  Krugman's tribute  Another update: Krugman summarizes some of Samuelson's biggest contributions .  I did not know Samuelson was the source of some of these.  Amazing...

I have not seen a single cogent explanation for why uncertainty about climate change implies inaction is the optimal policy

Via Brad Delong , Mark Kleiman tells us that "If anyone tries to tell you that uncertainty about climate change is a reason for inaction, he’s either a fool or a scoundrel. Probably a bit of both." That may be a little strong.  But if there is a cogent explanation for why uncertainty means we should do nothing, I have no idea what it may be. Brad Delong is a more precise.  He writes: There is one set of circumstances in which uncertainty is a reason for inaction: (a) the measures you would take would be expensive, (b) the measures you would take will be irreversible, and (c) you will get a lot of new information soon to help you judge the situation better. That set of circumstances does not apply here. I agree.  Because the one uncertainty-related rationale for doing nothing is an option value--the value of waiting to learn more about the best course of action.  Option values are generally very small.  They are especially small right now because (a) the amount of new

Econ 101 Analysis of Cap & Trade

(To read small text, click for larger slide)    

Where are the incentives on the demand side of Waxman-Markey?

Update:  I really need to eat some crow here.  The demand side incentives are in place on Waxman-Markey, so long as utilities pass through the value of permits to consumers in "lump-sum" fashion as the bill prescribes (see Stavins , with hat tip to 'R' in the comments of this post).  Darn it all.  My apologies.  I now remember reading this post by Stavins.  I'm going prematurely senile... The key idea underlying cap-and-trade is to create a market price for carbon emissions that wouldn't otherwise exist. While this provides a useful incentive to cut carbon emissions, it also means higher energy bills for the consumer. But a clever idea in the Waxman-Markey bill limits the price effect for consumers.** It does this by issuing a share of the tradeable carbon permits to local utility distributors.  Local utility companies are regulated not-for-profit enterprises due to their status as a natural monopoly.  Thus they are not free to charge consumers any price

Climate Change Really Shouldn't be a Big Deal

For all the media attention and research focus on climate change, and the potentially dramatic implications of warming currently predicted, it is kind of amazing how small a deal this really should be. Why a small deal?  No, I'm not a denialist.   It's a small deal because the costs of curbing greenhouse gas emissions are probably very small if done in an intelligent way.  And Waxman-Markey, while probably far from ideal policy, does seem to get a lot of the basics right.  In fact, all anyone talks about these days are market-based approaches to solving the problem (carbon taxes or cap-and-trade), so I'm optimistic that if policy is implemented, it will at least get first-order efficiencies right.  That is a huge victory for economics.  But the longer we wait to do something the more expensive it gets. Krugman, as usual, is able to clearly and concisely cover a lot of key issues .  I think he's right on almost all accounts here.  The science and the economics back u

100 Best Blogs for Socially Minded MBAs

Here's a pretty cool link.   Greed, Green and Grains in number 20. I don't know all of these blogs, but I like the mix and the way it is organized.

A nice summary of various climate issues

Brian Angliss over at Scholars and Rogues has written a very nice summary of climate modeling and geo-engineering issues.   Nominally it's about Levitt and Dubner's unfortunate combination of arrogance and ignorance.  But even if you could give a hoot about Superfreakonomics, there's a lot of meat here, and useful links too.

Nature Editors on the climate/email controversy

Here's the link Nature 462 , 545 (3 December 2009) | doi :10.1038/462545a; Published online 2 December 2009 Stolen e-mails have revealed no scientific conspiracy, but do highlight ways in which climate researchers could be better supported in the face of public scrutiny. The e-mail archives stolen last month from the Climatic Research Unit at the University of East Anglia (UEA), UK, have been greeted by the climate-change-denialist fringe as a propaganda windfall (see page 551 ). To these denialists, the scientists' scathing remarks about certain controversial palaeoclimate reconstructions qualify as the proverbial 'smoking gun': proof that mainstream climate researchers have systematically conspired to suppress evidence contradicting their doctrine that humans are warming the globe. This paranoid interpretation would be laughable were it not for the fact that obstructionist politicians in the US Senate will probably use it next year as an excuse to stiffen the

Research calls...

My semester free from teaching is quickly coming to an end. And I'm in a panic. Because the stack of unfinished papers on my desk is not out the door. Yet.  So I'm scrambling to finish them before I have to teach again. I'm putting the finishing touches on a really cool paper that measures the incidence and budgetary cost of moral hazard in the U.S. crop insurance program.  I'm also finishing up a consulting project surrounding an environmental impact statement for the Conservation Reserve Program.   And several other papers that need revision very soon. Anyway.  That's my excuse for light posting these days...

China approves GMO corn and rice

Here's the story at Bloomberg. Interesting stuff, but I suppose this was just a matter of time.  The same will happen in other developing countries, too, I suspect.  Especially if prices keep going up, I suspect resistance to GMOs will vanish. But (there's always a but...) I won't believe the yield gains until I see them.  Why? China's yields have already grown more than anyone else's in the past 50 years.  (Hopefully I'll post a plot showing that one day when I have some time.) The reason that matters is that GMOs haven't really boosted yields in places where yields are already high.  Mainly they just save labor and input costs, saving pesticide spraying and making herbicide spraying really easy. There have been some yield gains in the poorest developing countries and so there may be some gains in China.  But given how much things have already improved there, I'm skeptical. And the comparison in the Bloomberg article to U.S. yields is kind of si

A seed of hope: corn genome sequenced

This just came in my inbox.  Let's hope they can do something good with it! National Science Foundation 4201 Wilson Blvd., Arlington, VA 22230 "Where Discoveries Begin" For Immediate Release 11/19/2009 Media Contacts:    Lily Whiteman, National Science Foundation, (703) 292-8310,      Jennifer Martin, U.S. Department of Agriculture, (202) 720-8188,      Caroline Arbanas, Washington University School of Medicine, (314) 286-0109, KERNELS OF TRUTH: RESEARCHERS SEQUENCE THE MAIZE (CORN) GENOME New, high-quality sequence will advance basic and applied research Sequence of maize genome. Credit: Image courtesty of Science/AAAS. Credit and Larger Version The completion of a high-quality sequence of the maize (corn) genome is announced in the cover story of the November 20, 2009, issue of Science. This new genome sequence reports the sequence of genes in maize and provides a detailed physical

via Mark Thoma, Jeffrey Sachs worries about transgressing our planet's boundaries

I'd really like to read the whole thing, but I don't have a subscription to Scientific American.  Maybe I'll buy a copy of the magazine at the airport tonight and read it on the way to DC. Here's Thoma's snippet : Transgressing Planetary Boundaries, by Jeff Sachs, Scientific American : We are eating ourselves out of house and home. ... The green revolution that made grain production soar gave humanity some breathing space, but the continuing rise in population and demand for meat production is exhausting that buffer. ... Food production accounts for a third of all greenhouse gas emissions... Through the clearing of forestland, food production is also responsible for much of the loss of biodiversity. Chemical fertilizers cause massive depositions of nitrogen and phosphorus, which now destroy estuaries in hundreds of river systems and threaten ocean chemistry. Roughly 70 percent of worldwide water use goes to food production, which is implicated in groundwater

Questions from China about the Food Summit

A reporter (Xu Jingjing) from China's Life Week magazine writes with questions about the FAO's food summit.  Here are the questions and my answers: 1.        Do you think it is a productive summit? If it is, what are the most important outcomes? If it’s not, why this happens? I think it's great that the summit took place.  And there may be some productive results from it. But I'm an academic and am not very connected to international political events like this one.  It's hard for me to judge whether it is a success, or even how to measure the success of such events. 2.        Some comment said world leaders at the food summit on Monday rallied around a new strategy to fight global hunger and help poor countries feed themselves. Is it a substantial progress or just on rhetoric? I think I'll defer to my answer to question 1.  It's often hard for me to discern the difference between rhetoric and substance.  Maybe in 10 years I'll be able to look back a

How are we going to feed the world?

I'm trying out a new trick: embedding power point slides into a blog post. These are for today's panel discussion for International Education Week .  The topic:  "Genetically modified food crops: a solution to the global food crisis? " 2- 3:30 PM, Talley North Galler Here are my slides:

Is dynamic inconsistency really the problem with inflation targeting?

Okay, I should really heed Brad Delong's two rules regarding Paul Krugman : Remember that Paul Krugman is right. If your analysis leads you to conclude that Paul Krugman is wrong, refer to rule #1. But I've already stepped out of my field and way beyond where I have any business spouting off about what the Fed should do.  Maybe I'm just looking for someone to present a better argument for why inflation targeting is infeasible. Besides, I'm actually pitting Krugman against Krugman, since what I know about inflation targeting I learned from reading the one and only PK So the comments to my earlier post argue that dynamic inconsistency is the reason inflation targeting won't work.  I understand dynamic consistency, backward induction, and all that.  Or at least I hope I do, given I teach those fundamentals to each crop of 25 PhDs each year during their second semester of micro theory. For context, here is Krugman's argument against inflation targeting, d

A thoughtful critique of Gladwell (and by implication, other populist extremes)

Here Steven Pinker critiques Malcom Gladwell, nominally about his latest book What the Dog Saw And Other Adventures , but it is actually much broader than that. I don't have much to say about it.  Mainly I just wanted to save the link. But the reason I think this is important, and something I'd like to save, is that the subtle devices used by Gladwell, like the "Straw We" and perverse manipulation of uncertainties, are not unique to his writing.  These devices are ubiquitous.  These devices exploit our (a "Straw Our"?) collective discomfort with ambiguity. Update: Pinker smackdown alert (and, by implication, smackdown of me):  Gladwell's response to Pinker:       In one of my essays, I wrote that the position a quarterback is taken in the college draft is not a reliable indicator of his performance as a professional. That was based on the work of the academic economists David Berri and Rob Simmons, who, in a paper published the Journal of Produ

Krugman: Inflation targeting is the first best solution

So now Krugman says inflation targeting is the first-best solution to our economic problems. This is consistent with everything he wrote about Japan over a decade ago, and also consistent with a wide majority of non-crazy macro economists across the political spectrum. So why on earth has he not said this a lot more starting a long time ago? (Note that I've asked this question several times before--here are a couple early examples: 1 , 2 )  Krugman blames stupid economics.  He just sees misguided conventional wisdom against inflation as too much to overcome. Huh?  Krugman--the man who boldly, clearly, and effectively challenges establishment views on EVERYTHING--gets weak knees when it comes to inflation targeting? I see and get that inflation is a four-letter word among some crazy economists and much of the media.  But that's exactly why Krugman should be writing about it. Bernanke must have sympathy for this this view.  After all, it is what he spent much of his academ

Can biotechnology help fight world hunger?

I just found the transcript to forum from over nine years ago.  This seems like good reading in preparation for the panel discussion next week .  It's also good reading for anyone else who may be interested in the broader topic. Here's the lineup: CONGRESSIONAL HUNGER CENTER BIOTECH BRIEFING Congressional Hunger Center The Gold Room, 2168 Rayburn House Office Building, Capitol Hill June 29, 2000 9am-12pm For pdf version, click here. 09:00 - 09:30 Introduction: Rev. David Beckmann, Moderator President, Bread for the World, Congressional Hunger Center Board Member Opening Remarks: Rep. Tony Hall Sen. Richard Lugar Rep. Robert Ehrlich, Jr. Rep. Dennis Kucinich 09:30 - 10:20