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Links (6/17/19)

  • The Decline of American Journalism Is an Antitrust Problem – ProMarket Weak antitrust enforcement set the stage for Facebook and Google to extract the fruits of publishers’ labor. We won’t be able to save journalism and solve our disinformation problem unless we weaken monopolies’ power.
  • Three Recommended Changes to U.S. Currency Policy – Brad Setser I have a new Policy Innovation Memo that recommends three changes to U.S. currency policy, and specifically, three changes to the U.S. Treasury’s Foreign Exchange report: …
  • Stage Set For a Dovish Shift – Tim Duy Expect a more dovish Fed this week, but no rate cut. Data Incoming inflation data raises questions about the persistence of the supposedly transitory weakness inflation.The April PCE report gave support to the Fed’s hypothesis, but the May CPI report took away some support. See my note on the May CPI numbers here. Perhaps most worrisome for the Fed were declining survey-based and market-based measures of inflation expectations. The University of Michigan measure of long-run inflation expectations fell to a record low in June while the 5-year, 5-year forward expected rate of inflation remains mired below 2%. …
  • The Future of Macroeconomics – Roger E. A. Farmer In May of 2018, I was privileged to be invited to participate in an ECB colloquium on the Future of Central Banking and Macroeconomics in honour of Vítor Constâncio. Here is a video of my ten minute discussion of a paper by John Muellbauer. … This discussion reflects my thinking on many topics including hysteresis, multiple equilibria and the need for a fundamental shift in direction for the future of macroeconomics and macroeconomic policy. I have also included a link to the full conference progamme, with videos, here.
  • Interview with Rachel Glennerster: Development and Aid – Tim Taylor Rachel Glennester has her finger on the pulse of both development economicsresearch and real-world development policy. She was the long-time Executive Director of the Abdul Latif Jameel Poverty Action Lab based at MIT, and now has taken a position as Chief Economist of the primary UK agency for developiment aid, the Department for International Development. She was interviewed by Robert Wiblin and Nathan Labenz at the 80,000 Hours website. You can listen to the 90-minute podcast or read a transcript at "A year’s worth of education for under a dollar and other‘ best buys’ in development, from the UK aid agency’s Chief Economist," by Robert Wiblin and Keiran Harris (December 20, 2018). …
  • The Brave New World of Monetary Policy Operations – Cecchetti & Schoenholtz …since 2008, small open-market operations of a few billion dollars no longer alter the federal funds rate. Instead, the Fed introduced administered rates to change its policy stance. The most important of these—the interest rate that the Fed now pays on excess reserves (IOER)—sets a floor below which banks will not lend to other counterparties (since an overnight loan to the Fed is the safest rate available). …
  • Addressing Climate Change through Price and Non-Price Interventions – Joe Stiglitz Recognizing the importance of the second-best nature of economies, the Stern-Stiglitz report on carbon pricing departed from the recommendation of a single carbon price for all uses at all places and times. This paper provides some of the analytics behind these recommendations. First, I analyze the circumstances in which distributional concerns make desirable a tax or regulation inducing significant reductions in carbon usage in a carbon-intensive sector for which consumers are disproportionately rich. Such policies allow lower carbon prices elsewhere without exceeding carbon emission targets. The cost of the resulting production inefficiency may, under the identified circumstances, be less than the distributional benefits. The paper considers the circumstances in which such differential policies may be best implemented through regulation vs. differential pricing, as well as differential effects on political economy and norm setting. Second, I consider the effect of carbon price trajectories on induced innovation, providing general conditions under which the optimal carbon path should, at least eventually, be falling over time. Finally, I revisit the price-versus-quantity debate and highlight important aspects of the dynamic nature of the problem.
  • Misapplied metaphors in AI policy – Digitopoly Many querulous conversations fan the flames in policy debates about artificial intelligence. Everyone agrees we are transitioning to something, but not on what that will be. Anyone want to venture a guess? It is safe to bet on widespread use of neural networks and deep learning. Anything else? Some futurists also forecast a confrontation between the US and China. The Chinese government has played no small role in that forecast by broadcasting its aspirations for Chinese firms to take a leading position in AI. That has set off a predictable debate in Washington about whether the US government should do something similar. That policy question creates jumping off point for today’s column. This column attempts to correct a few of the misapplied metaphors. …
  • Principles of industrial policy – VoxEU The 'Asian miracles' and their industrial policies are often considered as statistical accidents that cannot be replicated. The column argues that we can learn more about sustained growth from these miracles than from the large pool of failures, and that industrial policy is instrumental in achieving sustained growth. Successful policy uses state intervention for early entry into sophisticated sectors, strong export orientation, and fierce competition with strict accountability.
  • Learning The Origin Of "Duality" – EconoSpeak Yesterday I learned that the person who first used the term "duality" in connection with linear programming, indeed with anything in economics, was John von Neumann in a private conversation with George Dantzig in 1947, the "father of linear programming." That was the year Dantzig published his paper showing the simplex method for solving linear programming problems, bot their primals and their duals. Von Neumann wrote a paper on it the same year but did not publish it, with it only appearing in his Collected Papers in 1963, 6 years after he died. …
  • Mortality Rate of Children Over the Last Two Millennia – Tim Taylor The global mortality rate of infants and youth up to the age of 15, based on an average of many studies, was almost one-half (46.2%) for the two millennia up to about 1900. By 1950, it was 27%. By 2017, it had fallen to 4.6%,. The global infant mortality rate for children under the age of 1, again based on the average of many studies, was more than one-quarter (26.9%) for the two millennia up to about 1900. By 1950, it was 16%. By 2017, it had fallen to 2.9% Here's a figure showing the patterns from Max Roser at the "Our World in Data" website (June 11, 2019). …
  • The "Right" and "Wrong" Kind of Artificial Intelligence for Labor Markets – Tim Taylor Sometimes technology replaces existing jobs. Sometimes it create new jobs. Sometimes it does both at the same time. This raises an intriguing question: Do we need to view the effects of technology on jobs as a sort of tornado blowing through the labor market? Or could we come to understand why some technologies have bigger effects on creating jobs, or supplementing existing jobs, than on replacing job–and maybe even give greater encouragement to those kinds of technologies? …
  • We don’t usually put ‘moral’ and ‘economics’ in the same sentence. It’s time we started. – The Washington Post Do you build the economy from the top down or the bottom up? And is the main purpose of the economy the production of things or the enhancement of life?
  • A Radical Plan to Fix the Dollar – The New York Times The novel idea that the United States could achieve greater domestic prosperity by revaluing the dollar sounds obscure and a little risky. Who would want to tinker with our currency? … The reality is that China and about 20 other nations are already doing so. …

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