Bryan Caplan (George Mason University) explains it all:
“For professors who’ve always wanted to live the life of the mind, blogging is a dream come true”, while doing "normal science" is boring.
Read his Econlog post.
Thursday, February 17, 2011
Wednesday, February 16, 2011
Tuesday, February 15, 2011
Love, Actually, Is a Superior Good
Love, it is said, is what economists economize. But academic psychologists try to measure it and even to link it to economic well being. A study published in the Journal of Research in Psychology demonstrates that the level of romance varies over regions of the world with East Asia having significantly lower levels of Emotional Investment, while North America had significantly higher levels than all other world regions. Their conclusion: love is a “luxury good”, one that people demand proportionally more as their income increase.
Read the report by Marina Adshade (in BigThink) here . It also includes a link to the original study.
Read the report by Marina Adshade (in BigThink) here . It also includes a link to the original study.
Thursday, February 10, 2011
Wednesday, February 9, 2011
The Top 20 AER Articles In A Century
The American Economic Review new issue publishes a paper by Arrow, Bernheim, Feldstein, McFadden, Poterba, and Solow, presenting the “Top 20” articles that appeared in the review during its first hundred years. The authors “decided against trying to define formally the criteria for inclusion”. It would have been a daunting task indeed.
Here are the first selected papers, by alphabetical order:
Alchian and Demsetz (1972): “Production, Information Costs, and Economic Organization” (I love that one …)
Arrow (1963): “Uncertainty and the Welfare Economics of Medical Care”.
Cobb and Douglas (1928): “A Theory of Production”.
And then:
Hayek: “The Use of Knowledge in Society”.
Modigliani and Miller: “The Cost of Capital, Corporation Finance and the Theory of Investment”.
Mundell: “A Theory of Optimum Currency Areas”.
Read the whole paper here .
Here are the first selected papers, by alphabetical order:
Alchian and Demsetz (1972): “Production, Information Costs, and Economic Organization” (I love that one …)
Arrow (1963): “Uncertainty and the Welfare Economics of Medical Care”.
Cobb and Douglas (1928): “A Theory of Production”.
And then:
Hayek: “The Use of Knowledge in Society”.
Modigliani and Miller: “The Cost of Capital, Corporation Finance and the Theory of Investment”.
Mundell: “A Theory of Optimum Currency Areas”.
Read the whole paper here .
Tuesday, February 8, 2011
The Great Stagnation Hypothesis
The main argument of Tyler Cowen’s new book, The Great Stagnation, is that technological progress has been slowing down during the last 40 years or so. David Beckworth explains why he is skeptic about the hypothesis.
According to Mike Mandel the Great Stagnation started in 1998 or 2000 rather than 1973 as Tyler Cowen would have it.
I agree with Mandel because of the IT boom, which started in the mid-1970s and lasted until about 2000, brought with it many opportunities to obtain extraordinary returns on investment during the last 30 years. This is coherent with the increased stock market valuation from the 1980s on, and increased risk taking (speculation and high leverage): Schumpeter-Kondratiev innovation phases are usually correlated with financial booms (the 1920s for example). And given the excessively high leverage and uncertainty of returns in innovation phases, the financial boom was due to give way to a crash. It happened in two bouts: the first, the IT crash, in 2001, and the second, the general crash, in 2007-2008, that led to the great balance sheet recession.
I thus take the financial excesses of the recent decades as a partial evidence of a long schumpeterian innovation phase, not of a slow down of innovation.
According to Mike Mandel the Great Stagnation started in 1998 or 2000 rather than 1973 as Tyler Cowen would have it.
I agree with Mandel because of the IT boom, which started in the mid-1970s and lasted until about 2000, brought with it many opportunities to obtain extraordinary returns on investment during the last 30 years. This is coherent with the increased stock market valuation from the 1980s on, and increased risk taking (speculation and high leverage): Schumpeter-Kondratiev innovation phases are usually correlated with financial booms (the 1920s for example). And given the excessively high leverage and uncertainty of returns in innovation phases, the financial boom was due to give way to a crash. It happened in two bouts: the first, the IT crash, in 2001, and the second, the general crash, in 2007-2008, that led to the great balance sheet recession.
I thus take the financial excesses of the recent decades as a partial evidence of a long schumpeterian innovation phase, not of a slow down of innovation.
Wednesday, February 2, 2011
Great Decoupling and Great Stagnation
There are many comments on Tyler Cowen’s new e-book, The Great Stagnation. Here is one , by Lane Kenworthy, that strikes me as reasonable.
The Kenworthy objections:
First, it is not obvious that innovation has in fact slowed significantly (which is the main factor of stagnating median income according to Cowen). Moreover the Cowen measurement of innovation by patents is especially unconvincing.
Second, “the rate of economic growth has been lower in the recent era, but it’s nevertheless been decent. Yet median income growth has been very slow. This contrasts sharply with the prior period.”
Conclusion: “I’m all for helping to accelerate the rate of innovation. But the big change in the recent decades lies in the degree to which economic growth lifts middle-class incomes. If we want to understand slow income growth, that should be our focus.”
I agree and I suggest the following direction for research: couldn’t the slowing down of middle-class incomes growth be linked to the shrinking of the middle managers number in firms’ hierarchies? See my paper (with J. Hanoteau) on “The Shrinking Hand” on my SSRN page, or on my homepage (http://jjrosa.com).
The Kenworthy objections:
First, it is not obvious that innovation has in fact slowed significantly (which is the main factor of stagnating median income according to Cowen). Moreover the Cowen measurement of innovation by patents is especially unconvincing.
Second, “the rate of economic growth has been lower in the recent era, but it’s nevertheless been decent. Yet median income growth has been very slow. This contrasts sharply with the prior period.”
Conclusion: “I’m all for helping to accelerate the rate of innovation. But the big change in the recent decades lies in the degree to which economic growth lifts middle-class incomes. If we want to understand slow income growth, that should be our focus.”
I agree and I suggest the following direction for research: couldn’t the slowing down of middle-class incomes growth be linked to the shrinking of the middle managers number in firms’ hierarchies? See my paper (with J. Hanoteau) on “The Shrinking Hand” on my SSRN page, or on my homepage (http://jjrosa.com).
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