Category: Economics

Economics Books of 2014

Happy New Year to the entire GSE community! I’m sure that I am not the only one with a resolution to read more books, so I thought I would try to help. Since few people fell in love with economics through graduate textbooks, here are some recreational economic reads to look forward to in 2014.

Fragile by Design: The Political Origins of Banking Crises and Scarce Credit by Charles W. Calomiris and Stephen H. Haber

GDP: A Brief but Affectionate History by Diane Coyle

The Tyranny of Experts: Economists, Dictators, and the Forgotten Rights of the Poor by William Easterly

Think Like a Freak by Steven Levitt and Stephen Dubner

The Transformation of the World: A Global History of the Nineteenth Century (America in the World) by Jürgen Osterhammel

In 100 Years: Leading Economists Predict the Future edited by Ignacio Palacios-huerta

The Dollar Trap: How the U.S. Dollar Tightened Its Grip on Global Finance by Eswar S. Prasad

I hope you learn more in 2014 than in any prior year. Happy New Year!

Hat tip: Diane Coyle

If Economists Wrote Christmas Cards

Happy Holidays to everyone in the GSE community and beyond!

In honor of this day of massive signaling (and possible deadweight losses), I wanted to share a post by Derek Thompson of The Atlantic. The topic is “If Economists Wrote Christmas Cards.” I doubt that Hallmark cards hires economists as writers. Derek Thompson explains-

Cash is the most efficient gift, according to economists. Cash is also a terrible gift,according to economists. By guaranteeing that the recipient can buy exactly what she wants, you guarantee that the recipient will consider you an unemotional robot.

That’s why the vast majority of economists in the University of Chicago’s IGM poll said it’s absurd to give cash to loved ones for the holidays. “In some cases,”Steven Kaplan said, in a stirring defense for thoughtful gifts, “non-pecuniary [not cash-related] values are important.”

For everyone in the community, both those who will be giving and receiving gifts this holiday season and those who will not, I wish that your highest ordinal rankings be satisfied and may your deadweight losses not be too large!

 

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Alumni Research- Macro Imbalances and Culture

At the “policy portal” VoxEU.org, Macro Policy and Financial Markets alumni (’11) and current University of Munich Ph.D. candidate Sascha Bützer co-wrote a columnabout macroeconomic imbalances and differences in culture in the Eurozone.

Since the advent of the Eurozone sovereign-debt crisis, economic commentators have drawn attention to macroeconomic imbalances within the Eurozone. This column presents evidence on the link between macroeconomic imbalances and differences in culture – or more specifically, interpersonal trust. A conservative estimatation (sic) suggests that a one standard-deviation increase in trust reduces macroeconomic imbalances by about a quarter of a standard deviation. Moreover, differences in interpersonal trust can explain a fifth of the variation in intra-Eurozone imbalances.

This is just one more example of the creative research being done in greater GSE community.

The authors have a working paper on this topic here.

 

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Talking Past Each Other

(Originally posted at EconPointOfView.com)

While deep methodological differences exist across economists, many disagreements involve “talking past each other.” Each side uses similar words to discuss fundamentally distinct, though related, concepts. This is especially a problem with every-day language words and leads to more confusion than understanding.

One problematic term is information. Everyone believes they have a reasonable definition and that others have the same concept in mind. This is unfortunate and stagnated the discussion. Only through clarity of thought and language can these issues be resolved.

Complete and Perfect Information, or Ignore for Now

Doing what was necessary for early models, the economists started easy. They ignored it. They approximated that every actor knows everything. That made life easy.

Since Marshall and Walras, economics focused on equilibria. Starting from perfect competition, complete and perfect information are crucial. How do supply and demand equilibrate? Everyone knows everything. After a few easy steps, boom, supply=demand.

While all economists admit perfect information is an untrue assumption, it is still the default in many models.

Information as Commodity Xn

Stigler believed that academics should understand that information is not free. Academics make their living by selling information. Continue reading “Talking Past Each Other”

Jumping to Conclusions

(Originally posted at EconPointOfView.com)

Conclusions are easy to draw. I can look at any study and draw many different conclusions or policy prescriptions. That does not mean I am right or even that the data supports my argument.

Floyd Norris of the NYT Economix fell into this trap yesterday. He claimed, indirectly, that the US federal government is not bloated. I take bloated to mean too big or too intrusive. To argue this, he cites the latest job numbers.

In September, before the government shutdown, the government had 2,723,000 employees, according to the latest job report, on a seasonally adjusted basis. That is the lowest figure since 1966. Continue reading “Jumping to Conclusions”

Networks and Contagion in Financial Markets

(This article follows on from a more general post on the study of networks in economics)

In this model, as well as those concepts Jackson discussed in the broader discussion on networks, we have the concepts of diversification and integration to separate the breadth and depth of connectivity of one organisation to others. A company/organisation/ country with many connections to others would be highly diversified; where those interests represented a higher proportion of their overall connectivity, they would be highly integrated. Continue reading “Networks and Contagion in Financial Markets”

It’s a Small World, After All

We all know we’re only 7 steps away from Jonny Depp. Or Obama. Or Lionel Messi (maybe, quite literally if you’re here at the GSE.) However, the world is not only small; it is shrinking. We are becoming more interconnected through new forms of communication. We find out information through these networks, which then influences our decisions. What we do, therefore, is influenced by whom we know.

Matt Jackson at Stanford University has been analysing the increasing connectedness of the world and its implications on spreading information, and came to Barcelona to explain his findings at the UPF opening ceremony. (And there we were thinking we’d been here so long, you could look us up on the book directory at the library and know where to find us.)

So what is a network and how can we think about connectivity within one?

Continue reading “It’s a Small World, After All”

Spotlight on Faculty Research: Prof. Pau Olivella

Prof. Pau Olivella (PhD, Northwestern) is a Barcelona GSE Affiliated Professor and Associate Professor at Universitat Autònoma de Barcelona. He is also the Research Director for the Heath Economics and Policy program at the GSE. This spring, Prof. Olivella was the co-author for an article on the following health economics topic-

Does having a voluntary private health insurance sector lead to costs savings?

In many countries, including the UK, a fraction of the population enjoys public and private health insurance covering a similar portfolio of services; hence, they have duplicate coverage. In principle, this could translate into lower healthcare costs in the public health system. Indeed, an emprirical study by Pau Olivella and Marcos Vera-Hernandez (UCL), suggests that people in the UK who buy their own private health insurance are more likely to use healthcare services than those who receive insurance as a fringe benefit of their job. For example, they are 50% more likely to be hospitalised than those who got insurance through their employer.

But are these individuals really in worse health? Analysis of data from the British Household Panel Survey shows they are not. Indeed, on average, the number of health problems faced by those who purchase private insurance is the same as for those who get insurance through the employer. In fact, the higher tendency of insurance buyers to use healthcare services comes from their preferences for health. In particular, they are 7 percentage points more likely to state that health is very important for them. Therefore, it all boils down to another empirical question for further investigation: what are the true drivers of healthcare costs?

The promises and pitfalls of genoeconomics

In keeping up with cutting-edge economics research, GSE chose a controversial topic for its opening seminar in the microeconomic series for this academic year:  Genoeconomics.

Daniel Benjamin came to the UPF campus on September 30th to give an introduction into this brand new field of research. The areas is currently opening up in light of the cheap DNA data now available to researchers. Given, as Benjamin rightly stated, it is natural for economists to seize on this new opportunity for analytical enquiry, he has been testing the question: does our genetic code influence our economic behaviour?

Benjamin gave us a brief overview of the kinds of effects his work his modeling, which I will summarise even more briefly: over 99% of genetic data is the same from one person to another, however along the genome there are certain locations where variation is more likely.  One such variation is a Single Nucleotide Polymorphisms (SNPs – pronounced ‘snips’ – for short); there are around 10 million such variations in the human genome. Although there is also genetic variation of other types, this is the most common. Benjamin and his many collaborators are studying SNPs. Continue reading “The promises and pitfalls of genoeconomics”

Hanging Out at the Lower Bound- Otmar Issing Welcomes The BGSE

(Originally posted at Econ Point of View)

After three weeks of math brush-up courses and a week of fall term, it is nice to know we can “start” the year here at BGSE. While cava and food were incentives to attend, there was another reason. Professor Otmar Issing, President of the Center for Financial Studies and former member of the Executive Board of the European Central Bank, was giving the opening lecture on monetary policy. While there are about as many opinions about monetary policy as people, Otmar Issing has the academic and policy credentials to deserve a serious listen. He isn´t some no name student on a blog.

Continue reading “Hanging Out at the Lower Bound- Otmar Issing Welcomes The BGSE”