Showing posts from February, 2010

Will resource constraints bind in the next boom?

I'm kind of seeing the same thing as Paul Krugman here : The Oil Bubble Controversy, Revisited One of the curious things about economic debate in the later Bush years was the conviction among many on the right that there wasn’t a bubble in housing, but that there was one in oil . We now know the truth about housing. But what about oil? Oil prices did spike to triple-digit levels in early 2008, then drop sharply. But think about the fact that right now, with the world economy still seriously depressed, oil is at $80 a barrel. This suggests to me that high oil prices are largely caused by fundamentals. And it also suggests that resource constraints will be an issue if and when we do get a full recovery. But I'm looking more at agricultural commodities.  While prices have come down a lot from the summer of 2008 I didn't see a lot of evidence of a speculative bubble then.  And I would have thought that a worldwide recession a large as the one we're in would hav

Some honest thinking about long-term deficits

Substantive posting is probably going to remain thin for awhile. I wanted to save this link to this short interview with Rudolph Penner, former director of the Congressional Budget Office under President Reagan about a new report that appears to look sincerely at budget options going forward.  (Hat tip to Ezra Klein ) The situation does look pretty grim in the long run.  It is bizarre to think we were worrying about budget surpluses less than a decade ago.  This makes me wonder: how would truly effective health care reform coupled with faster-than-expected economic growth change things?  Not that I'm especially optimistic about either of these things happening.  But I'm curious to know how sensitive the projections are to assumptions about growth in health care costs and economic growth more broadly.  The true budget picture going forward must be a highly uncertain one, something that does not come across in the interview [or, after a quick skim, in the report itself].

An instructor's observation

I believe this phenomenon, which I have observed in every class I have taught, spanning several universities and colleges, from undergraduates to PhD students, is nearly universal:  Most students pick a seat on the first day of class and stay in that seat throughout the entire semester. Why? I'd like to find a compelling economic explanation but I cannot.  But failing an economic explanation, I'd be interested in any explanation that is compelling. A somewhat related observation: It seems to me students sitting near the front learn more from lecture than students sitting near the back.

Experimental Policy

Sorry for the thin posting recently--just very, very busy. This is not a new idea, but it is one that I think receives much too little discussion.  Everyone's got their juggernaut policy--their unstoppable idea that they think will make everything work right, or at least a lot better that it currently works.  Sometimes ideas are put in place and sometimes they're not.  Sometimes good ideas get corrupted along the way and morph into bad ideas.  But in the end, it's almost always painfully difficult to evaluate the efficacy of policies good and bad because no one takes care to test the idea before adopting it fully.   If not evaluated experimentally, there are inevitable claims that good policies were actually bad ones, that bad ones were actually good ones, but since the evidence is mucked up by all kinds of the other things that changed at or around the time the policy changed, it's really hard to know. So what I'd like to advocate for here is an experimental ap

The slow but steady dismantling of agricultural subsidies

I know a fair amount about historical agricultural policies since those are the data I tend to analyze.  But I don't follow what's going on with agricultural policy on a day-by-day basis as much as I should.   If you do want up-to-moment briefings on what's going on, the place to go is , which should be blogrolled below. Anyway, just a brief observation here to say that it looks to me like agricultural subsidies (except for ethanol) appear to be going away over time, slowly but surely.  Even crop insurance funding is being cut back, one area of subsidy growth in recent decades (see this post for some nice background).  Many of the beneficiaries of this government largess are the insurance companies rather than farmers.  But farmers have a nice big premium subsidies, too.  Budget pressure will likely help to widdle subsidies down even further, especially since farmers seem to be fairing better than most during this recession. But let me emphasize, slowly