Noted for June 9, 2013
Nate Silver: FiveThirtyEight's 2012 Forecast - NYTimes.com | gselevator | Jean-Philippe Stijns (2005): Natural resource abundance and economic growth revisited | Kina Lillet | Carola Binder: Depressing Slow Recovery Graphs | Charles Wyplosz: Exit strategies: Time to think about them |
Barry Eichengreen interviewed by Mark Sniderman: "Another [misleading historical] example, this one from Europe, is the 'lesson' that there is necessarily such a thing as expansionary fiscal consolidation. Europeans, when arguing that such a thing exists, look to the experience of the Netherlands and Ireland in the 1980s, when those countries cut their budget deficits without experiencing extended recessions. Both countries were able to consolidate but continue to grow, leading contemporary observers to argue that the same should be true in Europe today. But reasoning from that historical case to today misleads because the circumstances at both the country and global level were very different. Ireland and the Netherlands were small. They were consolidating in a period when the world economy was growing. These facts allowed them to substitute external demand for domestic demand. In addition, unlike European countries today they had their own monetary policies, allowing them step down the exchange rate, enhancing the competitiveness of their exports at one fell swoop, and avoid extended recessions. But it does not follow from their experience that the same is necessarily possible today. Everyone in Europe is consolidating simultaneously. Most nations lack their own independent exchange rate and monetary policies. And the world economy is not growing robustly. A third 'lesson' of history capable equally of informing and misinforming policy would be the belief in Germany that hyperinflation is always and everywhere just around the corner. Whenever the European Central Bank does something unconventional, like its program of Outright Monetary Transactions, there are warnings in German press that this is about to unleash the hounds of inflation. This presumption reflects from the 'lesson' of history, taught in German schools, that there is no such thing as a little inflation. It reflects the searing impact of the hyperinflation of the 1920s, in other words. From a distance, it’s interesting and more than a little peculiar that those textbooks fail to mention the high unemployment rate in the 1930s and how that also had highly damaging political and social consequences."
Aaron Chatterji, Edward Glaeser, and William Kerr: The origins of entrepreneurship and innovation clusters: "For decades, the conventional wisdom among local officials pursuing employment growth was to attract a large firm to relocate. ‘Smokestack chasing’ often leads to zero-sum games where regional governments bid against each other…. The success of ‘entrepreneurial clusters’ in recent decades has challenged this wisdom. Now many policymakers state that they want their regions ‘to be the next Silicon Valley’. This new emphasis on bottom-up strategies has led to extensive efforts to seed local entrepreneurship (e.g. Lerner 2009)…. The move away from chasing smokestacks to fostering entrepreneurship is understandable given the strong correlation between small establishment size and local economic development…. We have reasonable evidence at this stage for the causal role in local economic growth of venture capital investment, breakthrough inventions, and university spillovers. We are making progress towards… [understanding] general entrepreneurship features…. The literature on spatial determinants of entrepreneurship is more established… age structure, local entrepreneurial culture, and physical infrastructure… industry linkages… skilled immigrants…. Perhaps the strongest message provided to policymakers from this work on spatial determinants is the key importance of ‘supply-side’ factors for local entrepreneurship, especially among the local population that disproportionately constitute local entrepreneurs (Michelacci and Silva 2007)…. We also review the varied role of policy in the development of three well-known innovative clusters: Silicon Valley, Boston’s Route 128 corridor, and North Carolina’s Research Triangle Park. A common theme in many of these discussions is the importance of correct baseline business environments, or ‘setting the table’ activities, relative to targeted interventions."
William Bowen: : "A major lesson from the earlier MIT OpenCourseWare (OCW) experience is that it can be much easier to create something like OCW, often with philanthropic support, than to find regular sources of revenue to pay the ongoing costs of maintaining and upgrading the system. MIT is today still paying the running costs of OCW each year, and we are told that the faculty and trustees of MIT are convinced that they cannot go down the same path again – their pride in OCW as a truly pioneering venture notwithstanding…. Nonetheless, I believe that the educational community should make every effort to take advantage of the great strengths of the leading MOOCs. Not only should we encourage their continuing interest in serving existing institutions as well as a worldwide audience, but we should also try to find ways of testing learning outcomes and assessing cost-saving options for specific universities and university systems. Right now there is, as far as I am aware, no real evidence as to how well MOOCs can produce good learning outcomes for 18-22-year-olds of various backgrounds studying on mainline campuses—and this is a huge gap in our knowledge…. There are central aspects of life on our traditional campuses that must not only be retained, but even strengthened…. First is the need to emphasize—and, if need be, to re-emphasize—the great value of “minds rubbing against minds.” We should resist efforts to overdo online instruction, important as it can be… those of us who have benefitted from personal interactions with brilliant teachers (some of whom became close friends), as I certainly have, can testify to the inspirational, life-changing aspects of such experiences… a great advantage of residential institutions is that genuine learning occurs more or less continually, and as often, or more often, out of the classroom as in it. This cliché, repeated by countless presidents, conveys real truth. Late night, peer-to-peer exchanges offer students hard-to-replicate access…. Second, we must retain, whatever the provocations, the unswerving commitment of great colleges and universities to freedom of thought…. Third, our colleges and universities should focus, unashamedly, on values, as well as on 'knowledge'—and we should spend more time than we usually do considering how best to do this."
Gillian Tett: Thank you, Singapore: "In recent weeks I have been flicking through a fascinating ebook, Affordable Excellence, that an American scientist friend, William Haseltine, has written about Singaporean medicine for the Brookings Institution. And this leaves me convinced that I have even more reasons to say 'thank you' to Singapore than I realised at the time. For if Haseltine is correct, Singapore’s healthcare system is not just low cost but also very effective in terms of saving lives – both during emergencies and in less dramatic cases too. Indeed, the success is so striking that it might offer lessons elsewhere, particularly in America, which is now embarking on its own radical health reforms via Obamacare."
Simon Wren-Lewis: Austerity is not even a sensible precautionary policy when we have Quantitative Easing: "There is one very bad, possibly dishonest, argument for austerity today, and that is the idea that cutting government spending will have no impact on the economy, even though we are in a liquidity trap…. For those who like their theory state of the art, see Woodford, M. (2011), ‘Simple analytics of the government expenditure multiplier’, American Economic Journal of Macroeconomics, 3, pp. 1–35.) The data backs up the theory when the empirics are properly done, as this nice survey by Christina Romer shows. However I have in the past had more respect for the following argument, which we might call the case for ‘precautionary austerity’: Although there are good reasons why a rapid reduction in government debt is unnecessary, financial markets do not always behave rationally. There is a chance that markets might suddenly panic, and stop buying government debt, forcing up interest rates. As the cost of such an outcome would be very high, macroeconomic policy should do everything it can to avoid it – including reducing debt rapidly - even if that meant deepening the recession."
Aragorn at the Black Gate:
