why is gas at $4 a gallon? June 23, 2008Posted by KG in econ, environment, foreign policy, international, politics.
Tags: alternative energy, demand, dollar, economics, futures, gas, instability, oil, recession, robert reich, speculation
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Conspiracy theories abound, but the soaring price of crude oil (today around $137 a barrel) is related to four more mundane forces:
(1) growing demand from developing nations, especially China and India. This is the main reason for the price rise over the last six years.
(2) the dropping dollar. As it drops, because of our trade imbalance and overall indebtedness to the rest of the world as well as our slowing economy, everything we buy from abroad — including much of the oil we import — costs more; everything we sell to foreigners — including much of the oil we produce — costs less to them. I attribute half of oil’s price rise since January to this.
(3) Global investors (including, perhaps, your own pension fund) are anxious about the American economy, and looking to hedge their bets against future declines. Oil is one of the commodities that looks like a good bet. Hence, there’s speculation in oil futures. This isn’t a nefarious plot. It’s the way the market works. A bit of a speculative bubble is forming, so beware. I attribute a big part of oil’s price rise over the last few weeks to this.
(4) Instability in the Middle East. Israel’s recent bellicose statements about Iran have generated fears about the continuing capacity and willingness of Middle Eastern oil producers to generate oil (about a third of world oil production). OPEC refuses to produce more. Some of oil’s price rise over the last week is attributable to this.
In other words, a perfect storm. Given the US recession and slowing of European economies, I expect oil to fall to around $125 a barrel but then be pushed up by speculators and the falling dollar to around $135 over the next several weeks. Wall Street investment houses are talking about $150 by July but that’s their way of stoking more speculation (in which they have a financial interest).
Bottom line: The days of cheap energy are over, folks. Gas may go down to $3.50 a gallon by this time next year, but you’d be wise to trade in your SUV for an economy car. And you’d be wise to avoid building that new addition to your home and put the money instead into better insulation.
sachs on npr April 10, 2008Posted by AP in books, econ, international.
Tags: development, earth institue, economics, forum, jeffrey sachs, michael krasny, millennium development goals, npr, united nations
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from forum, on npr:
Jeffrey Sachs may be the only economics professor who has his own MTV video — documenting his trip to Africa with Angelina Jolie — and he continues to be a leading voice promoting solutions to global poverty and environmental crises. He joins us to talk about his book, “Common Wealth: Economics for a Crowded Planet.” Sachs is director of the Earth Institute at Columbia University and special adviser to United Nations Secretary General Ban Ki-Moon on the Millennium Development Goals.
migration = development March 31, 2008Posted by AP in econ, immigration, international.
Tags: development, economics, gdp, immigration, lant pritchett, michael clemens, per capita, per natural
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the center for global devlopment publishes a paper that suggests a new measure for wealth. (link from mr). i haven’t read the actual paper yet, but the following passage is from the abstract. something to think about the next time you vote on immigration laws:
migration is one of the most important sources of poverty reduction for a large portion of the developing world. If economic development is defined as rising human well being, then a residence-neutral measure of well-being emphasizes that crossing international borders is not an alternative to economic development, it is economic development.
the downside of obamanomics February 27, 2008Posted by AP in 2008 Elections, econ, news, politics.
Tags: economics, greg mankiw, minimum wage, obama, patriot employer act, protectionism
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hint: most acts with the word “patriot” in them are a bad idea.
Much of the US infrastructure is old and inadequate following decades of bipartisan neglect; it serves as an obstacle to the ability of the United States to respond and adapt to change. The quality of primary and secondary education in the US has fallen behind the level provided by most other industrial countries and is even threatened to be eclipsed by levels in quite a number of emerging market nations.
the audacity of data February 26, 2008Posted by KG in 2008 Elections, books, econ, politics.
Tags: austan goolsbee, behavior, behavioral economics, economics, richard thaler, robert reich, the winner's curse, university of chicago
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noam scheiber with an excellent piece about obama’s economic advisors:
But what’s really interesting is how Thaler and his fellow behaviorists responded to this fairly critical insight. Though rational self-interest was the central tenet of neoclassical (i.e., modern) economics, they didn’t take a wrecking ball to the field and replace it with some equally sweeping theory of human behavior. Instead, they labored to bring economics closer in line with how the world actually works, one small adjustment at a time. “‘Discovery commences with the awareness of anomaly,'” Thaler wrote in the introduction to The Winner’s Curse, quoting the philosopher Thomas Kuhn. “I hope to accomplish that first step–awareness of anomaly. Perhaps at that point we can start to see the development of the new, improved version of economic theory.”
As it happens, Thaler is revered by the leading wonks on Barack Obama’s presidential campaign. Though he has no formal role, Thaler presides as a kind of in-house intellectual guru, consulting regularly with Obama’s top economic adviser, a fellow University of Chicago professor named Austan Goolsbee. “My main role has been to harass Austan, who has an office down the hall from mine, ” Thaler recently told me. “I give him as much grief as possible.” You can find subtle evidence of this influence across numerous Obama proposals. For example, one key behavioral finding is that people often fail to set aside money for retirement even when their employers offer generous 401(k) plans. If, on the other hand, you automatically enroll workers in 401(k)s but allow them to opt out, most stick with it. Obama’s savings plan exploits this so-called “status quo” bias.
And, yet, it’s not just the details of Obama’s policies that suggest a behavioral approach. In some respects, the sensibility behind the behaviorist critique of economics is one shared by all the Obama wonks, whether they’re domestic policy nerds or grizzled foreign policy hands. Despite Obama’s reputation for grandiose rhetoric and utopian hope-mongering, the Obamanauts aren’t radicals–far from it. They’re pragmatists–people who, when an existing paradigm clashes with reality, opt to tweak that paradigm rather than replace it wholesale. As Thaler puts it, “Physics with friction is not as beautiful. But you need it to get rockets off the ground.” It might as well be the motto for Obama’s entire policy shop.
on growth in china and india January 29, 2008Posted by AP in econ, international, politics.
Tags: china, democracy, development, economics, growth, india, pranab bardhan
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pranab bardhan, a berkeley economics professor, tackles common political and economic misconceptions about growth in china and india:
What explains this strikingly rapid growth? The answer that continues to dominate public discussion in the United States runs along the following lines: decades of socialist controls and regulations stifled enterprise in India and China and led them to a dead end. A mix of market reforms and global integration finally unleashed their entrepreneurial energies. As these giants shook off their “socialist slumber,” they entered the “flattened” playing field of global capitalism. The result has been high economic growth in both countries and correspondingly large declines in poverty….
This story contains a few elements of truth and provides many comforts to our preconceptions. But through sheer repetition it has acquired an authority that does not withstand scrutiny….
But we must remember that the story of their rise is more complicated and nuanced than standard accounts make out. That more complex story includes the positive legacy of China and India’s earlier statist periods, which offers general lessons for the process of development much too often ignored.
mankiw on carbon tax December 21, 2007Posted by KG in econ, environment, interviews, politics, science.
Tags: cap and trade, carbon, carbon tax, economics, environment, global warming, mankiw, tax
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Morning Edition, December 20, 2007 · A so-called carbon tax would put a price on any carbon released into the atmosphere. But even for the greenest voters, a tax increase that would help the environment is likely to be a hard sell. “There’s no question that, politically, tax is a four-letter word. But we have to really convince voters that this is not an overall tax increase; it’s really a tax shift,” said Gregory Mankiw, an economist and former chairman of President Bush’s Council of Economic Advisors.
Mankiw, who supports a tax, speaks with John Ydstie.
Those vying for elected office, however, are reluctant to sign on to this agenda. Their political consultants are no fans of taxes, Pigovian or otherwise. Republican consultants advise using the word “tax” only if followed immediately by the word “cut.” Democratic consultants recommend the word “tax” be followed by “on the rich.”
Yet this natural aversion to carbon taxes can be overcome if the revenue from the tax is used to reduce other taxes. By itself, a carbon tax would raise the tax burden on anyone who drives a car or uses electricity produced with fossil fuels, which means just about everybody. Some might fear this would be particularly hard on the poor and middle class.
But Gilbert Metcalf, a professor of economics at Tufts, has shown how revenue from a carbon tax could be used to reduce payroll taxes in a way that would leave the distribution of total tax burden approximately unchanged. He proposes a tax of $15 per metric ton of carbon dioxide, together with a rebate of the federal payroll tax on the first $3,660 of earnings for each worker.
bias in intro economics December 3, 2007Posted by AP in Uncategorized.
Tags: economics, mankiw, markets, textbooks
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gilles reveaud writes a rant against the use of greg mankiw’s introductory econ textbook, calling it conservative “indoctrination” and saying that it overly-praises markets.
given that there is a MARKET FOR TEXTBOOKS THAT PROFESSORS CHOOSE, maybe reveaud should rethink his argument.