Two articles came out today in the Washington Post about the deficit. One was on the apparent agreement between the president and Congressional Republicans on a measure that would eliminate half a trillion dollars in deficit spending over a decade. The author, Ezra Klein, is rightly skeptical that this would actually get passed. Run a thought experiment and imagine one or another political actor proposes this measure. What do you think will happen next in Congress and in media outlets?
The second was on action that could be taken that will virtually eliminate the entire deficit. Or rather the inaction that could be taken. If you think Washington is good at doing nothing, you should be pleased with this prospect: if Congress does not act at all, the deficit is cut dramatically beginning in 2013. Congress must act - and the president must affirm Congressional action - in order for a variety of temporary measures to be extended. This includes the Bush era tax cuts (or Bush-Obama tax cuts, if you prefer), the Medicare "doc fix", and other tax and spending provisions. If Congress does not act, we also will see $600 billion in cuts both to the military and to discretionary spending. Taken together, if Congress and the President cannot agree to extend these provisions, the deficit nearly goes away.
For me, one of the interesting subtexts of the 2012 election will be the efforts of the Republican nominee to get Obama to pledge to extend all the Bush tax cuts (which Obama himself did previously agree to extend for 2 years, but not permanently). Whether and how Obama stands on that will, I suspect tell us a lot about what will happen in the period between the election and the end of December 2012, the time when extensions of the tax cuts would have to be in place.
In any event, I was reminded of a recent study by the Center on Budget and Policy Priorities that disaggregates the causes of the deficit. If you have a chance, have a look. It makes for interesting reading.
Tuesday, January 31, 2012
Thursday, January 26, 2012
Signs of the Times
The Economist has long had sections in each issue on "Britain" (since it is originally a British magazine) and the "United States" (being half-published in the U.S. now, and because of American economic weight), as well as sections on "Europe", "Asia", "The Americas", "Middle East and Africa", and then other topics such as "Business", "Finance and Economics", and so on.
And this is the way the world changes: starting this week, China gets its own section.
And this is the way the world changes: starting this week, China gets its own section.
NPR PlanetMoney (on Iran)
NPR has a good segment its news shows called PlanetMoney, as Kane Thomas has noted. This morning, a segment featured a description of the pressure on Iran's currency. We will be turning to money, foreign exchange, and currency in the coming weeks, so not all of the language may be familiar yet, but have a look. I hope you will find it to be a nice segment in the way I did: it's targeted at the educated-but-not-specialized listener (or reader), so it demands your attention, but is sparing with the jargon.
In any event, the economic news out of Iran is a classic manifestation of exactly the kind of bank runs, panics, and possible currency collapses that have so often struck developing countries, such as in Latin America in the 1980s and 1990s. It also ranges from politics and corruption to the global market for energy (namely oil). We will discuss.
In any event, the economic news out of Iran is a classic manifestation of exactly the kind of bank runs, panics, and possible currency collapses that have so often struck developing countries, such as in Latin America in the 1980s and 1990s. It also ranges from politics and corruption to the global market for energy (namely oil). We will discuss.
Religion, Culture, and Development
Hal Bozarth has written a lengthy post on the Protestant work ethic, and the role of religion and culture in economic development. It has not received much attention yet, but I will be curious to see if reactions emerge. The piece takes a strong tone on these issues, with Bozarth (let me refer to the scholar by his last name, as convention dictates) calling the Protestant ethic "nonsense", for instance.
My own reactions to the piece are mixed. On the positive side, there are two items. First, I am intrigued by Bozarth's argument that the fragmentation of authority in modernizing Europe contributed to economic dynamism, and will be on the lookout to see how and where that argument is developed further. The thrust of my reading being that the rivalry between Protestant and Catholic authorities and between Protestant denominations themselves inhibited the rise of a continental church-state (a "super-Church") that might have stunted economic growth. An interesting historical hypothesis to test and consider further.
Second, I too am generally queasy about cultural interpretations that can become overly deterministic. The suggestion that a certain theology or worldview is more conducive to dynamism more sound innocuous, but a paired implication is that other worldviews are more conducive to backwardness. From here, the leap is too easy to the idea that if, say, Africans are economically behind, they must have certain cultural deficiencies. Experience in Africa and other developing countries leads me to object to that culturalist implication more strongly than almost any other proposition in all the social sciences. I rather think of seemingly cultural expressions of economic practice (in Africa, for example) as something less theological and culturally-given, and more environmentally adaptive and even rationalist: communal solidarity and collectivism (at the level of families, villages, community groups, and other local units, but not at the level of the state) have a different economic significance when people are living at close to a subsistence level, to use one example. I have met very few Africans who have any less ambition for capital accumulation than Americans, but I have probably met more Africans who feel strong socio-economic obligations to share meager wealth with family and friends.
On the other side of the argument, Bozarth seems too quick to categorize and to make sweeping statements in some areas, even as he adds welcome nuance in others. Islam's economic history is much more varied than the caricature of Koranic limitations on usury would suggest, for instance. It also strikes me as overstated that "Calvinism and other sects had no bearing on economics". Cultural theories of development come in a range of flavors, from the baldly deterministic (which I do often find reprehensible and inaccurate) to much subtler and more conditional theories that treat religion and culture as factors that may matter among others, and that further deem religion and culture to be endogenous, subject to their own modifications and alterations over time.
This would be central to my critique of Bozarth: that he treats religion as rather exogenous and fixed, rather than being itself malleable, adaptable, and engaged in a more reciprocal relationship with economy and society. Perhaps this is because he is responding in kind to what he sees as religious determinists, but I would not find it fair to assert that Weber and others necessarily do the same. I am not a culturalist, yet I feel comfortable saying that one of the reasons for Weber's enduring significance is that he both carved out a clear theoretical statement of religion's possible impact (which I agree may well have been wrong) AND understood religion's embeddedness in economy and society, and its own adaptability. For this reason, while I agree with Bozarth on the merits of some of the critique of religious and cultural arguments, I think it precipitous to flatly argue that these lines of thought are of necessity wrong and/or imply they are reprehensible. Instead, cultural arguments are only partially correct (at best, and they require constant revision) and exist on a spectrum from reprehensible to something much more thoughtful and even humanistic.
It would also be useful to distinguish further between strict scriptural or textual interpretations of religions and their actual application in different societies. On this note, Bozarth offers an interpretation, drawing on Christopher Hitchens (see brief, but touching obituary here) of biblical requirements on the accumulation of wealth, but we cannot paint with a broad brush the extent to which these have been adopted as Christian practice; we cannot simply cast Protestantism as looking solely to scripture for guidance, then assume it should come out with a single, fixed interpretation of what that scripture says. It has never done so. No major text survives centuries without being subject to interpretation and reinterpretation. (Consider the Supreme Court and the U.S. Constitution, among others.) It is unclear the extent to which people and cultures through history have taken the "vow of poverty" and service as the central interpretation of the Christian economic gospel. Certainly, modern Christianity has included hugely ranging perspectives on wealth, from the "prosperity gospel" to liberation theology's "preferential option for the poor", with the Calvinist ethic being one of these many understandings.
I risk a reply that is longer than the original post, which I prefer to avoid for substantive blog entries. I encourage others to have a look and offer comments on Bozarth's blog and/or here.
My own reactions to the piece are mixed. On the positive side, there are two items. First, I am intrigued by Bozarth's argument that the fragmentation of authority in modernizing Europe contributed to economic dynamism, and will be on the lookout to see how and where that argument is developed further. The thrust of my reading being that the rivalry between Protestant and Catholic authorities and between Protestant denominations themselves inhibited the rise of a continental church-state (a "super-Church") that might have stunted economic growth. An interesting historical hypothesis to test and consider further.
Second, I too am generally queasy about cultural interpretations that can become overly deterministic. The suggestion that a certain theology or worldview is more conducive to dynamism more sound innocuous, but a paired implication is that other worldviews are more conducive to backwardness. From here, the leap is too easy to the idea that if, say, Africans are economically behind, they must have certain cultural deficiencies. Experience in Africa and other developing countries leads me to object to that culturalist implication more strongly than almost any other proposition in all the social sciences. I rather think of seemingly cultural expressions of economic practice (in Africa, for example) as something less theological and culturally-given, and more environmentally adaptive and even rationalist: communal solidarity and collectivism (at the level of families, villages, community groups, and other local units, but not at the level of the state) have a different economic significance when people are living at close to a subsistence level, to use one example. I have met very few Africans who have any less ambition for capital accumulation than Americans, but I have probably met more Africans who feel strong socio-economic obligations to share meager wealth with family and friends.
On the other side of the argument, Bozarth seems too quick to categorize and to make sweeping statements in some areas, even as he adds welcome nuance in others. Islam's economic history is much more varied than the caricature of Koranic limitations on usury would suggest, for instance. It also strikes me as overstated that "Calvinism and other sects had no bearing on economics". Cultural theories of development come in a range of flavors, from the baldly deterministic (which I do often find reprehensible and inaccurate) to much subtler and more conditional theories that treat religion and culture as factors that may matter among others, and that further deem religion and culture to be endogenous, subject to their own modifications and alterations over time.
This would be central to my critique of Bozarth: that he treats religion as rather exogenous and fixed, rather than being itself malleable, adaptable, and engaged in a more reciprocal relationship with economy and society. Perhaps this is because he is responding in kind to what he sees as religious determinists, but I would not find it fair to assert that Weber and others necessarily do the same. I am not a culturalist, yet I feel comfortable saying that one of the reasons for Weber's enduring significance is that he both carved out a clear theoretical statement of religion's possible impact (which I agree may well have been wrong) AND understood religion's embeddedness in economy and society, and its own adaptability. For this reason, while I agree with Bozarth on the merits of some of the critique of religious and cultural arguments, I think it precipitous to flatly argue that these lines of thought are of necessity wrong and/or imply they are reprehensible. Instead, cultural arguments are only partially correct (at best, and they require constant revision) and exist on a spectrum from reprehensible to something much more thoughtful and even humanistic.
It would also be useful to distinguish further between strict scriptural or textual interpretations of religions and their actual application in different societies. On this note, Bozarth offers an interpretation, drawing on Christopher Hitchens (see brief, but touching obituary here) of biblical requirements on the accumulation of wealth, but we cannot paint with a broad brush the extent to which these have been adopted as Christian practice; we cannot simply cast Protestantism as looking solely to scripture for guidance, then assume it should come out with a single, fixed interpretation of what that scripture says. It has never done so. No major text survives centuries without being subject to interpretation and reinterpretation. (Consider the Supreme Court and the U.S. Constitution, among others.) It is unclear the extent to which people and cultures through history have taken the "vow of poverty" and service as the central interpretation of the Christian economic gospel. Certainly, modern Christianity has included hugely ranging perspectives on wealth, from the "prosperity gospel" to liberation theology's "preferential option for the poor", with the Calvinist ethic being one of these many understandings.
I risk a reply that is longer than the original post, which I prefer to avoid for substantive blog entries. I encourage others to have a look and offer comments on Bozarth's blog and/or here.
Friedman: Don't be average
Not exactly new stuff, but in case you are up for a dose of Thomas Friedman's latest.
The more we discuss this, the more I am struck by the different implications and implicit recommendations from Friedman and Blinder. The two seem to me to depart from a common diagnosis of the fundamental challenge: that competition from an increasingly global labor supply will put downward pressure on white-collar American wages (see also Freeman on factor price equalization). But as many of you have noticed, the remedies do diverge from there, with Friedman seeming to be a science and technology enthusiast and Blinder deeming personal services to be the set of options that will be less vulnerable to offshoring.
There is much to say about this. One point I would offer is the comment I suggested on Freeman's piece in class: that downward pressure on wages in one sector of a market economy should soon "trickle through" to other sectors, albeit with a time lag. If wages in offshorable jobs fall, would not people in those jobs be expected to move more toward the now-higher-wage jobs in personal services, thereby driving down wages in personal services due to the increased labor supply? (The example in class was that more people will become barbers, and the greater competition among barbers should lead to cheaper haircuts: good for consumers, but likely bad for barbers.)
There are many other angles, including the question of job satisfaction and what status professions would look like if Blinder is correct, but that can be discussed another time.
The more we discuss this, the more I am struck by the different implications and implicit recommendations from Friedman and Blinder. The two seem to me to depart from a common diagnosis of the fundamental challenge: that competition from an increasingly global labor supply will put downward pressure on white-collar American wages (see also Freeman on factor price equalization). But as many of you have noticed, the remedies do diverge from there, with Friedman seeming to be a science and technology enthusiast and Blinder deeming personal services to be the set of options that will be less vulnerable to offshoring.
There is much to say about this. One point I would offer is the comment I suggested on Freeman's piece in class: that downward pressure on wages in one sector of a market economy should soon "trickle through" to other sectors, albeit with a time lag. If wages in offshorable jobs fall, would not people in those jobs be expected to move more toward the now-higher-wage jobs in personal services, thereby driving down wages in personal services due to the increased labor supply? (The example in class was that more people will become barbers, and the greater competition among barbers should lead to cheaper haircuts: good for consumers, but likely bad for barbers.)
There are many other angles, including the question of job satisfaction and what status professions would look like if Blinder is correct, but that can be discussed another time.
Tuesday, January 24, 2012
Monday, January 23, 2012
On stimulus
We have discussed two perspectives on the economic stimulus that began in earnest in 2009 and is now winding down.
One perspective is exemplified by Sally Platt, who noted that the stimulus did not work, but merely contributed to the deficit and was detrimental to the overall economy: "Let's be honest, the stimulus plan did nothing". Another perspective - less featured on our blogs thus far, but one that received several approving nods in the classroom - is that the stimulus was inadequate, not big enough.
It may not come as surprising that both Stiglitz and Krugman take on the second of these perspectives. Krugman has done so in many articles in the New York Times over the last two years, and Stiglitz on several instances as well. It should be noted that while both lean more Democratic than Republican, neither necessarily applauds the Obama administration on their execution of the stimulus, though both would be highly critical of Republican reactions.
More surprising, perhaps, is Martin Wolf, whose perspective on the stimulus would not have been a foregone conclusion. Here it is.
Thanks to Prof. Casey in the Econ department for noting this when he saw me carrying my Wolf book around after class.
One perspective is exemplified by Sally Platt, who noted that the stimulus did not work, but merely contributed to the deficit and was detrimental to the overall economy: "Let's be honest, the stimulus plan did nothing". Another perspective - less featured on our blogs thus far, but one that received several approving nods in the classroom - is that the stimulus was inadequate, not big enough.
It may not come as surprising that both Stiglitz and Krugman take on the second of these perspectives. Krugman has done so in many articles in the New York Times over the last two years, and Stiglitz on several instances as well. It should be noted that while both lean more Democratic than Republican, neither necessarily applauds the Obama administration on their execution of the stimulus, though both would be highly critical of Republican reactions.
More surprising, perhaps, is Martin Wolf, whose perspective on the stimulus would not have been a foregone conclusion. Here it is.
Thanks to Prof. Casey in the Econ department for noting this when he saw me carrying my Wolf book around after class.
Wednesday, January 11, 2012
Early Blog Awards
Only some of the blogs are functional yet, but as I get the URLs and links from you, I will update the list at right. Incidentally, here are the early nominees for blog awards:
Best Title (3 nominees):
"If the Ruby Slipper Fits", Stephanie Brandao Carvalho
"Gringa Economics", unnamed student
"See email later*", Morten Wendelbo
Most Ambitious Title (only 1 nominee):
"All Things International", Ben Ersing
Lamest Title (2 nominees):
Sorelle Peat, for "Sorelle Peat"
Tyler Dickovick, for "International Political Economy"
Best image in a post:
"Gringa Economics" for Castro hugging Chavez
Best post that is not actually a post to the best of my knowledge (1 kandydat):
Bądź pierwszą osobą! (Dominika Kruszewska)
* this is Morten's blog URL as listed on the sign-up sheet. I think it actually means "See email later", not "my blog title is 'See email later'". If so, I reserve the right to unnominate him.
Best Title (3 nominees):
"If the Ruby Slipper Fits", Stephanie Brandao Carvalho
"Gringa Economics", unnamed student
"See email later*", Morten Wendelbo
Most Ambitious Title (only 1 nominee):
"All Things International", Ben Ersing
Lamest Title (2 nominees):
Sorelle Peat, for "Sorelle Peat"
Tyler Dickovick, for "International Political Economy"
Best image in a post:
"Gringa Economics" for Castro hugging Chavez
Best post that is not actually a post to the best of my knowledge (1 kandydat):
Bądź pierwszą osobą! (Dominika Kruszewska)
* this is Morten's blog URL as listed on the sign-up sheet. I think it actually means "See email later", not "my blog title is 'See email later'". If so, I reserve the right to unnominate him.
Monday, January 09, 2012
Useful resources
In a previous post, I noted that the Euro crisis (or resolution of the crisis) is likely to be the issue that dominates much of the IPE news this year. That is, barring an economic crash in China or the U.S. that could conceivably emerge for other reasons. One of my hopes in designing the course is that we will be able to discuss these sorts of issues on an ongoing basis, working to figure out what is going on even as global political leaders and leading economists are trying to do the same.
Now, many of the most reputable books and most major academic articles are going to get published more slowly than current events move; this is the nature of how academic work gets reviewed. So we will have to look to other sources to keep up with this. As noted on the bottom of p. 1 of the syllabus, I think some of the best resources are the regional banks of the Federal Reserve. Just click on the map in the link to go to one of the 12 banks, and then look for their research or publications. For some reason, the St. Louis and Atlanta banks in particular seem to have a lot of material on IPE. You may have to do a bit of fishing, but there is a lot of good material that won't show up easily in a Google Scholar search.
Here's an example of a report on the causes of the Euro crisis. Don't consider it required reading by any means - it's a bit technical and probably a better read a few weeks from now. But if this type of issue is your thing, do know that there is more where this came from.
Another good resource is the International Monetary Fund, though their reports tend towards the highly technical. Not to mention their website construction has been lousy for years. You can do a search, or look at their publications page, scrolling down to look at "Working Papers" and "Economic Issues in full text".
These sites have papers that will be timelier than many academic journals, but more analytical than newspapers. They can be helpful for research going forward. You will have to pick and choose, but do consider looking at these sorts of institutions and at this sort of material.
Now, many of the most reputable books and most major academic articles are going to get published more slowly than current events move; this is the nature of how academic work gets reviewed. So we will have to look to other sources to keep up with this. As noted on the bottom of p. 1 of the syllabus, I think some of the best resources are the regional banks of the Federal Reserve. Just click on the map in the link to go to one of the 12 banks, and then look for their research or publications. For some reason, the St. Louis and Atlanta banks in particular seem to have a lot of material on IPE. You may have to do a bit of fishing, but there is a lot of good material that won't show up easily in a Google Scholar search.
Here's an example of a report on the causes of the Euro crisis. Don't consider it required reading by any means - it's a bit technical and probably a better read a few weeks from now. But if this type of issue is your thing, do know that there is more where this came from.
Another good resource is the International Monetary Fund, though their reports tend towards the highly technical. Not to mention their website construction has been lousy for years. You can do a search, or look at their publications page, scrolling down to look at "Working Papers" and "Economic Issues in full text".
These sites have papers that will be timelier than many academic journals, but more analytical than newspapers. They can be helpful for research going forward. You will have to pick and choose, but do consider looking at these sorts of institutions and at this sort of material.
Book List (running)
This is a non-exhaustive list of books on financial and economic crisis that you might choose to read and write about for Weeks 7 and 8 [reposted and updated from 2009].
Ahamed, Liaquat. Lords of Finance: The Bankers who Broke the World.
Akerlof, George & Robert Shiller. Animal Spirits.
Bagus, Philip. Tragedy of the Euro.
Bernanke, Ben. Essays on the Great Depression.
Cooper, George. The Origin of Financial Crises.
Eichengreen, Barry. Globalizing Capital: A History of the International Monetary System
Fox, Justin. The Myth of the Rational Market
Friedman, Milton. The Great Contraction, 1929-1933.
Galbraith, John Kenneth. The Great Crash of 1929.
James, Harold. The Creation and Destruction of Value: The Globalization Cycle
James, Harold. The End of Globalization: Lessons from the Great Depression.
Keynes, John Maynard. The General Theory of Employment, Interest, and Money.
Kindleberger, Charles. Manias, Panics, and Crashes: A History of Financial Crises.
Kindleberger, Charles. The World in Depression, 1929-1939.
Lewis, Michael. Panic: The Story of Modern Financial Insanity.
Lynn, Matthew. Bust: Greece, The Euro, and the Sovereign Debt Crisis.
Marsh, David. The Euro: The Battle for the New Global Currency
Minsky, Hyman. Can 'It' Happen Again? Essays on Instability and Finance
Minsky, Hyman. Stabilizing an Unstable Economy.
Morris, Charles. The Two Trillion Dollar Meltdown.
Onaran, Yalman. Zombie Banks: How Broken Banks and Debtor Nations are Crippling the Global Economy
Reinhart, Carmen and Kenneth Rogoff. This Time is Different: Eight Centuries of Financial Folly.
Shiller, Robert. The Subprime Solution.
van Overtveldt, Johan. The End of the Euro: The Uneasy Future of the European Union
Wapshot, Nicholas. Keynes Hayek: The Clash that Defined Modern Economics
Wessel, David. In Fed We Trust: Ben Bernanke's War on the Great Panic.
Wolf, Martin. Fixing Global Finance.
Zandi, Mark. Financial Shock.
Ahamed, Liaquat. Lords of Finance: The Bankers who Broke the World.
Akerlof, George & Robert Shiller. Animal Spirits.
Bagus, Philip. Tragedy of the Euro.
Bernanke, Ben. Essays on the Great Depression.
Cooper, George. The Origin of Financial Crises.
Eichengreen, Barry. Globalizing Capital: A History of the International Monetary System
Fox, Justin. The Myth of the Rational Market
Friedman, Milton. The Great Contraction, 1929-1933.
Galbraith, John Kenneth. The Great Crash of 1929.
James, Harold. The Creation and Destruction of Value: The Globalization Cycle
James, Harold. The End of Globalization: Lessons from the Great Depression.
Keynes, John Maynard. The General Theory of Employment, Interest, and Money.
Kindleberger, Charles. Manias, Panics, and Crashes: A History of Financial Crises.
Kindleberger, Charles. The World in Depression, 1929-1939.
Lewis, Michael. Panic: The Story of Modern Financial Insanity.
Lynn, Matthew. Bust: Greece, The Euro, and the Sovereign Debt Crisis.
Marsh, David. The Euro: The Battle for the New Global Currency
Minsky, Hyman. Can 'It' Happen Again? Essays on Instability and Finance
Minsky, Hyman. Stabilizing an Unstable Economy.
Morris, Charles. The Two Trillion Dollar Meltdown.
Onaran, Yalman. Zombie Banks: How Broken Banks and Debtor Nations are Crippling the Global Economy
Reinhart, Carmen and Kenneth Rogoff. This Time is Different: Eight Centuries of Financial Folly.
Shiller, Robert. The Subprime Solution.
van Overtveldt, Johan. The End of the Euro: The Uneasy Future of the European Union
Wapshot, Nicholas. Keynes Hayek: The Clash that Defined Modern Economics
Wessel, David. In Fed We Trust: Ben Bernanke's War on the Great Panic.
Wolf, Martin. Fixing Global Finance.
Zandi, Mark. Financial Shock.
IPE 2012
One of the leading issues I will wish to address in the coming weeks and months will be the prospects for the survival or collapse of the Euro. This issue cuts across many of the themes we will be discussing, it is pressing and current, and it will have a huge impact on all of our futures (for reasons we can discuss).
As you think about your choices for selected books later in the semester, keep your eye out for any books coming out about the Euro, and we can talk about whether they would be good options.
This is an example of how IPE moves faster than a syllabus.
As you think about your choices for selected books later in the semester, keep your eye out for any books coming out about the Euro, and we can talk about whether they would be good options.
This is an example of how IPE moves faster than a syllabus.
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