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observingrealities Is the Chinese growth model somehow unique? Contrary to what many have argued, Michael Pettis presents a compelling case as to why not – demonstrating that despite bucking the mainstream (IMF / World Bank) policy recommendations for development, the growth model that has served China well in recent decades is a variant that has proved successful for various countries over the last three centuries…. The debate centers around the role of economic doctrines of free trade vs the benefits of protectionism, and finishes off debating some of the structural impediments to continued rapid development in China: observingrealities
PRIME ECONOMICS By Jeremy Smith, 6th January 2014 The UK economy has – in terms of GDP – performed somewhat better in 2013 than almost all analysts expected. That includes us in PRIME. But the “growth” – which looks like being around 1.75% year on year – is nothing like as large or as entrenched for the future as many commentators want to persuade us. It comes after a year (2012) of utterly dismal economic performance, due largely to the austerity policy of the government, in which real GDP per head of population fell again, with GDP rising by just 0.25%. PRIME ECONOMICS
This article, shared recently by Marginal Revolution, got Anti-Mankiw's blood boiling, for all the wrong reasons. The core issue was the defense of mainstream economics through the use of particular analogies that we believe are fundamentally flawed. As we explain elsewhere, analogies are often a deceptive way of explaining the core analytical framework of a concept, because an analogy between A and B is only as good as the likeness between A and B. anti-mankiw anti-mankiw
Twenty-Cent Paradigms That's a German word that means "method war" and it came to mind reading Simon Wren-Lewis' post last week, "Are New Keynesian DSGE Models a Faustian Bargain?" The reason they might seem so is the methodological underpinnings of DSGE (Dynamic Stochastic General Equilibrium) models, which are "micro-founded" macroeconomic models derived from the optimizing behavior of individuals (or, often a "representative agent") were brought into macroeconomics by Robert Lucas, Ed Prescott and others who were seeking to overturn "Keynesian" macroeconomics (see, e.g., Lucas and Sargent, 1979, "After Keynesian Macroeconomics"). The first generation of models of this type - "Real Business Cycle" (RBC - where "real" means non-monetary) implied that economic fluctuations could be optimal, and that monetary and fiscal policy were either useless or harmful (this JEP article by Charles Plosser is a good primer). Twenty-Cent Paradigms
Cornell University economist Robert Frank has become the Johnny One Note of economics. His one note: how bad wealth and income inequality (he often doesn't distinguish between the two although he should) are, along with his particular reasoning about why we have such inequality. His reasoning? I'll get to that. In "The Vicious Circle of Income Inequality," his latest piece in the New York Times, he plays that same note. EconLog | Library of Economics and Liberty EconLog | Library of Economics and Liberty
CONVERSABLE ECONOMIST The central function of the Internal Revenue Service is intrinsically difficult. In 2013, the IRS processed 146 million individual income tax returns; 2.2 million corporate income tax forms, and overall about 10.5 million business tax returns (including C corporations, S corporations, and partnerships); nearly 30 million employment tax forms (on which employers, including the self-employed, report the income paid to employees and taxes withheld); 1.2 million excise tax forms from the businesses required to collect federal excise taxes on cigarettes, alcohol, and gasoline; and about 275,000 gift or estate tax forms. All of this needs to happen in a mobile and evolving U.S. economy, against the backdrop of an ever-more globalized world economy, and with a tax code that approaches 74,000 pages in length and changes every year. Just in case this isn't enough, we have been loading up the IRS with additional major tasks, too. CONVERSABLE ECONOMIST
By Leith van Onselen The AFR has this afternoon reported that Chief executive of National Seniors, Michael O’Neill, has slammed rumoured changes to the Aged Pension, claiming that raising the pension age would backfire as a Budget savings measure, since older Australians would simply shift to Newstart or the disability pension. While this might be true for some oldies, O'Neill has failed to mention that the Aged Pension is currently around $6,600 higher than Newstart - i.e. $19,916 per annum for a single pension versus $13,273 for the single Newstart unemployment allowance. Moreover,... macrobusiness.com.au | macrobusiness.com.au |
EconoSpeak In Nevada, rancher Cliven Bundy thinks that the state of Nevada does, but whether it does or not, he thinks that effectively he can use it if he wants to without paying anybody any fees to do so, although I gather he thinks this because he thinks that his grandfather was given some right to use it in perpetuity back in the 1880s, that is, the federal Bureau of Land Management (BLM) land he has been grazing his cattle on for the last 20 years or so without paying required fees, now piled up to about $1 million or so that he has not paid. So when his cattle were corralled by the BLM for Bundy's non-payment of said fees, a bunch of his armed friends went and successfully demanded that the BLM release his corralled cattle, which the BLM did, afraid of any violence that might ensue. So, even though all the other cattle ranchers in Nevada who use BLM lands are paying their fees, Bundy does not. Does he have any basis for his claims? EconoSpeak
Econometrics Beat: Dave Giles' Blog
Merkel a collateral victim of U.S. spying scandal Widespread U.S. spying on German Internet and mobile-phone users is angering voters. Angela Merkel doesn’t seem to take the debate seriously. It’s unclear what she knew about possible German involvement. Her battered credibility could have electoral consequences. Economics Intelligence | Olaf Storbeck on current economic research Economics Intelligence | Olaf Storbeck on current economic research
Trusted Sources | Variant Perception
Worthwhile Canadian Initiative Worthwhile Canadian Initiative People make elementary errors when they run a regression for the first time. They inadvertently drop large numbers of observations by including a variable, such as spouse's hours of work, which is missing for over half their sample. They include every single observation in their data set, even when it makes no sense to do so.
Greenwald Slams Snowden Attacker Glenn Greenwald: 1Ruth Marcus: 0 If you want to know if someone is telling the truth, keep an eye on the eyes.Liars blink in different ways during and after a falsehood, researchers claim.They blink less than normal during the lie, and then have a flurry up to eight times faster than usual afterwards.‘It is striking what different patterns in eye blinks emerged for liars and truth tellers,’ said Dr Sharon Leal, co-author of the study at Portsmouth University. Bearish Market News | By Adam Sharp
Fifty years ago this week, the United States and Soviet Union came closer to nuclear war than anyone, including John F. Kennedy and Nikita Khrushchev, knew at the time. On Friday, October 26, at the height of the Cuban missile crisis, a US destroyer dropped practice depth charges, the size of hand grenades, on a Soviet submarine, whose rattled commander may have prepared to fire a nuclear missile, before being overruled by his onboard commodore. Economic Principals
Modern Money Mechanics | MMT simplified. How to use this site. For some of you this post may seem superfluous and that is fine. For those of you that have an interest in Modern Monetary Theory (MMT) and have zero background knowledge in economics I recommend starting at the link above that says Index.
Today’s Financial Times articles: Swiss central bank discord provides a warning bell (Feb 24), Sovereigns turn to pre-crisis financial wizardry (Feb 24) On facing pages in the print version of the FT, the reader is invited to consider the encounter of the modern state with the modern market. On the left hand page the story is about the central bank, on the right hand page the story is about the Treasury, and on both pages the story is about the continuing reverberations of the Global Financial Crisis and the changing role of both central banks and Treasuries as a consequence of financial globalization. In a piece ostensibly about the political trials of the Swiss National Bank in the face of losses after failed intervention to stem currency appreciation, Gillian Tett includes the following paragraph: “But the SNB is not the only central bank that has recently taken bold gambits. Brave New World
Nobody will thank me for saying so, but I have a bit of a mancrush on Ed Smith. Yet again, he has raised a profound point in the social sciences: Nakedly ambitious people rarely achieve their ambitions...Simplistic self-interest is not just bad PR, it is often bad strategy. Stumbling and Mumbling
Coordination Problem
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