Saturday, April 30, 2022

Wrap Up for April 2022

When it comes to sanctions, China would be quite different from Russia.

The chip shortage is leading to changes in product design.

There's little certainty about the emerging world order.

It's a shame Russia could not let go of its dependence on oil as an economic foundation.

Stephen Davies reviews The Story of Work: A New History of Humankind, by Jan Lucassen.

The possibilities of covered downtown freeways.

Who will take part in global competition for financial hegemony?

Some highlights re world wealth.

How will working from home shape urban and suburban demographics?

An NGDP policy could have given the Fed a clear signal to begin tightening last summer, when doing so would have most contributed to monetary stability. 

Brian Potter explains how indoor climates have evolved. (Part 1) Also, Part 2

Five book recommendations on inflation.

Nationalism is often confused with patriotism.

David Beckworth and Joey Politano talk about recent inflationary trends.

I'm convinced one reason people in the U.S. use more than an optimal amount of energy, is due to a lack of walkable communities.

Consumer spending patterns are still unpredictable.

Dylan Matthews admits he got inflation wrong.

Gas price escalation? It's complicated.

Thomas Philippon explains that total factor productivity is linear, rather than exponential. More on additive growth from Tyler CowenMatt Clancy and Jeremy Neufeld. NBER working paper here.

Why has inflation been a greater problem for those with limited income?

Alas, tragedy never left us.

Pumped storage as an energy source.

The Pharr-Reynosa International Bridge was especially hit hard by recent political shenanigans. Even so, no drugs or contraband were found.

The West is coming up short on promises to poor countries.

Nick Timiraos discusses his new book on Jerome Powell.

Duncan Weldon almost feels sorry for central bankers right now.

Some possibilities for construction platforms.

The future still appears promising, even if there are significant setbacks in the short term.

While the Fed remains "behind the curve", it's certainly done worse in the past.

Ben Southwood wishes we could live closer to our friends. In the earlier years of this blog, I wrote about the possibilities of domestic summits as a way to form economic group settings. The dream was for individuals to explore relationships that lead to flexible service activity commitments. In particular, systems ownership which includes physical proximity could be established .

Republicans have changed their approach on healthcare.

Chris Blattman on the psychological and strategic roots of war. Plus, a long war between Ukraine and Russia is frightening but plausible.

Noah Smith reviews Trade Wars are Class Wars.

Adam Ozimek looks at the broader possibilities of remote work.

What can we learn from pandemic monetary policy?

Minimum wage increases do affect job postings.

Scott Sumner notes his contribution to a new book about the Fed and highlights a relevant article as well.

Degrees in the humanities have peaked.

When it comes to the recent drop in GDP, rising imports are not the relevant issue.

Is this a housing boom? Not really.

Russia has struggled to generate monetary value from its human resource capacity.

Thursday, March 31, 2022

Wrap Up for March 2022

How will China face up to its many pressures? Indeed, it is at a crossroads.

What broke the nickel market on March 8th?

Job loss is experienced differently (less severely) by those holding bachelor's degrees.

How might the Fed best respond to supply side inflation? Housing is another thorny supply side problem.

Neon is part of a fragile supply chain.

"Washington ignored years of signals that the South's health care system was crumbling. When the pandemic began, it was too late to rebuild."

The chilling prospect of chemical weapons.

Oil producers now face considerable constraints. And, "In four of the past ten years, the oil industry lost money."

Can the Fed make a soft landing in heavy weather? "In fact the Fed is not reconciled with itself."

There are big changes in medical debt credit reporting.

What is happening to Ukrainian currency?

Price stability is especially important for public debt.

Housing suggestions from the CEO of Habitat for Humanity International.

Many laws adopted before the war were already killing economic growth possibilities in Russia.

Noah Smith is hopeful for Ukraine's future.

The Fed didn't stay with FAIT very long at all. And, why have inflation expectations been rising instead of falling?

Construction startups have recently gained traction.

Brian Albrecht takes a look at human capital and intangible capital.

When it comes to population density, aesthetics actually isn't the main point.

What are China's economic options for continued prosperity?

Defending intergenerational equity.

"Demand destruction" is also another way to say "hunger".

In Austria, the "right to repair" has gotten a boost.

NPR explains the home shortage.

Despite our current supply side woes, "100% of excessive inflation is due to bad monetary policy". Timothy Taylor also offers highlights from the relevant Larry Summers interview with Ezra Klein.

China may be better prepared for further losses of globalization, than the West.

Has the climate movement lost its way? Likewise for globalization.

In praise of maintenance.

"As Russia sees tech brain drain, other countries hope to gain"

Tuesday, March 29, 2022

Our Meritocratic Knowledge Systems Are Quite Fragile

War can create many problems, and this time it includes difficulties for supply side circumstance, central bankers, and monetary policy. Some are also debating (although they are divided) how Putin's actions will ultimately affect global currency patterns. I'd suggest that while no one knows how long global dollar dominance could last, this is still an opportune moment for special interest groups to dial back on their dependence of global financial flows for monetary compensation. Especially since this decades long global positioning has added to income inequalities, many of which stem from administrative privilege. In particular, inequality in the U.S. is largely due to tax dependent secondary markets (and their associated housing valuations) where knowledge and skill are essential. 

Meritocratic organizational patterns in dependent markets have become like an endangered species, by aligning too closely with other aspects of elite tendencies (both left and right leaning) in advanced economies. Consider how this matters, for political opponents are now so opposed to each another that both sides are losing the ability to effectively function. This really matters for merit based organization, once profit becomes defined as the strongest limits possible to total applied knowledge participation. Even though the patterns we observe are more often knowledge use losses in rural areas, this is nevertheless symptomatic of continued losses for valuable skills in general, in all of society.

For decades we have taken administrative dominance for granted in the compensation of meritocratic time based knowledge. But unfortunately, administrative capture of monetary value for time based skill sets, creates extensive participation limits in terms of both supply and demand. When price making is used in excess of price taking in equilibrium conditions, the result is inevitably reduced societal coordination patterns (hence loss of mutual trust) for knowledge use. Indeed, our housing asset markets closely represent the pinnacle of what people hope to achieve in monetary compensation for knowledge and skill, instead of the compensation many citizens actually receive. 

The supply side conditions which allowed this circumstance have only been exacerbated since the turn of the 21st century. Small wonder that our educational and healthcare institutions now experience problems at systemic levels with few solutions on offer. Yet applied skill losses tend to occur in ways that aren't necessarily evident, such as in U.S. justice scenarios which greatly impact both lower and middle income levels. For that matter, much of the cultural resistance to vaccines took place in "red" states where rural areas have already long since lost their hospitals and other local healthcare settings.

Should we finally reform knowledge centered citizen participation, recall as well, how closely linked these time based services are with housing. States such as Texas (where I live) have been heavily dependent on property taxes to fund the services citizens rely on, for instance. There are other important economic connections between housing and services as well. A prime example is how the Fed frames housing as a transmission mechanism for monetary policy, which in turn affects the money available for services in given time periods. 

Hence when we highlight possibilities for greater housing affordability, it helps to remember that services access and participation would be closely connected to these efforts. Since services values are reflective of housing, only recall that good deflation in housing would require good deflation in time based services costs. This time based adaptation of local property taxes would only work for citizens if they can actually count on lower mutual time costs for group coordination. In many earlier posts I advocated for time as a formal economic unit. Fortunately, we could design means to connect economic time value to originating wealth or monetary value, via local building patterns for participating groups. I continue to hope that production and ownership reform efforts such as these, might be considered in the near future.

Tuesday, March 15, 2022

Mid Month Highlights in the Ides of March

Emily Hamilton discusses the consequences of restricted housing with David Beckworth.

What makes intangible capital different? (Jonathan Haskel and Stian Westlake) Also, Diane Coyle reviews their latest book. 

Will $100 oil encourage oil companies to add drilling capacity?

China is also easing restrictions on Russian wheat.

Fiona Hill explains Putin.

Dollar mortgage holders in Russia are in quite a bind.

"The oil lobby has fought against nuclear for years". Still, both war and climate goals create renewed impetus for nuclear power. 

Alan Cole gives five reasons why the sanctions are so effective.

Only one fifth of high school students complete college courses which lead to fully relevant employment.

Ukraine has been "a key producer of wiring harnesses that hold the electronic cables within a car."

"Nature is a harsh taskmaster, but so, it seems, is human culture."

War includes lessons that no one expected.

"What we know so far" (Duncan Weldon on the war) Part 1 and Part 2.

Popular towns have had to become quite creative in finding ways for their workers to afford housing.

How will Ukraine's planting seasons be affected this year?

Matthew Klein discusses the economic fallout of the war with David Beckworth.

Covid led to an unprecedented increase in demand for assistance with mental health.

Noah Smith takes a closer look at sanctions on Russia imposed the first week of March.

Is Putin's war affecting dollar dominance?

This war has been going on longer than we realized.

Often, especially in its earlier stages, dementia need not mean a complete loss of personal responsibility or autonomy.

Electric vehicle makers will have to adapt. And, "battery production and integration is a big ship for automakers to turn around."

"Putin's days are numbered."

To what extent does war seem irrational?

on "the troubled birth of modern Ukraine"

The looming shortage for semiconductor grade neon.

Rising inflation is going to be with us for a while.

Automakers have begun directly investing in mines for future supply side stability.

Is the Fed able to steer its way to a soft landing? But new COVID lockdowns in Shenzhen will only create additional problems.

An optimistic take on Ukraine. Nevertheless, a realistic take as well.

Sunday, February 27, 2022

Wrap Up for February 2022

"plants protect their most essential genes"

Unilateral debt forgiveness is not a good idea.

Imagine stable real world velocity.

Will wage growth increase too much? It's a trend which does not appear to be slowing. Plus, some are starting their own businesses.

There's a backlog for solar additions to our electrical grids.

Our educational institutions are becoming more fragile. But what might ultimately take their place?

Russia doesn't need Europe's gas market. 

A century from now, how will people explain the forces which pulled the world apart in our era?

The January jobs report is more complicated than usual.

How has labour force participation evolved by race?

"The Puzzle of Falling US Birth Rates since the Great Recession"

Putting ownership into the hands of everyday people.

Sanctions as an economic weapon. This is a review by Adam Tooze, of a new book from Nick Mulder which explains the role of sanctions during the interwar period.

Preschool is hardly the panacea it once seemed.

It's not just gasoline or used cars which are responsible for the current inflation level. However, only recently has production started to recover.

Bitcoin mining as a solution for the (otherwise) lost energy of gas flares.

Los Angeles is gradually adjusting to climate change.

What might sanctions on Russia mean for the availability of palladium?

Plenty of Democrats aren't ready to meaningfully tax six figure incomes.

At home care brings the hospital to the patient's living room.

There is no longer room for the political center in either party.

How important is meritocracy to a country's success?

An expanded Russia would also mean a diminished NATO.

"I see at least three reasons for the Fed's policy mistake." And, The Fed needs a simpler mandate for monetary policy.

Services pricing affects inflation trends even more than goods pricing. In particular the Fed is probably worried about the pace of nominal income.

"Unfinished business"

Hard to believe Bryan Caplan is leaving Econlog after all these years. 

Noah Smith interviews Emi Nakamura.

There's plenty of disagreement when it comes to expectations about macroeconomic outcomes.

Energy needs made it difficult to impose significant sanctions. (Matthew Klein)

The American Medical Association is split regarding healthcare access.

How can the broken housing systems in the U.S. be repaired?

An explanation of correspondent banking as a sanctions tool.

What will happen to wheat prices?

Consumer patterns have shifted since the pandemic.

Until now, Article 5 has only been invoked for the attacks of 9/11.

Why didn't the West act sooner?

Some explanation for the more recent sanctions.

Has Putin lost touch with reality?

Wednesday, February 23, 2022

The Baumol Effect: Benefit, or Problem?

Is the Baumol effect a positive contributor to economic activity, or is its frequent description as the "Baumol Disease" more realistic?  Perhaps much depends on who and what is involved in the discussion. Timothy Lee (in a January post) explains how a negative framing can be unfortunate:  

From my perspective as a parent, it might be a bummer that child costs are rising. But my daughter's nanny probably doesn't see it that way - the Baumol effect means her income goes up.

Lee explains how productivity gains in some industries may mean higher wages in areas with a more personal focus, via time based activity. He sees this as beneficial, for humans are social beings who often value personal experiences with others over robot encounters to get things done. Indeed, time based product is subjective, which is why it can be more highly valued than products requiring more technology than labour. Personal instruction is a good example, particularly when a given subject is actively and voluntarily sought out by avid students. 

Nevertheless, a concerning issue re the Baumol effect, is its uneven equilibrium dispersion which impacts both short and long term outcomes. As it turns out, well paid and fully functioning service markets are generally limited to places where originating wealth plays a dominant role. Despite the fact many scenarios lack this level of economic complexity, it's easy to assume the societal coordination of the Baumol effect is more widespread than is actually the case. Yet anyone who spends much time outside the more prosperous regions, will notice a dearth of markets for many important skills sets and services. Since applied knowledge and its related maintenance are necessary for modern economies, places where the Baumol effect is largely missing, tend to lack social cohesion and community purpose.

Hence we need to come to terms with the Baumol effect as an incomplete societal coordinator, not really capable of generating the level of applied knowledge which is crucial for modern day economies. Granted, the Baumol effect functions as a positive where it does contribute to economic dynamism. However, time based services run the gamut from the mundane to what are far more aspirational goals. Fortunately, many people remain willing to pursue their higher aspirations on non pecuniary and even solitary terms. That said, not all that is necessary and mundane in our lives is accomplished this way, particularly when recognizable markets for time value remain missing. We need to recognize where personal freedoms are too often lost to cultural expectations - expectations where many are pressed to sacrifice the whole of their lives for mundane and necessary tasks, while others remain free to pursue broader goals or perhaps higher callings.

Consider again the fortunate nature of free market framing, which at least has created partial equilibrium compensation via the Baumol effect in today's secondary markets. Since Timothy Lee could afford to pay his daughter's nanny (who accepted this work voluntarily), that created tangible benefits not only for the nanny, but Lee's family also in terms of their own expanded time use options at home. 

Alas, it's a shame the Baumol effect is often missing in places where it is needed most. Which is why we are challenged to bring stronger economic value to a wide range of time use options. Let's face up to the fact we can't always achieve interpersonal goals through money alone. Without a broader range of economic options, societies stand to lose even more voluntary societal coordination, to what are often outdated and rigid cultural "norms".

To sum up, the Baumol effect is problematic due to what it can't readily accomplish for a majority of citizens, despite what people hoped for via monetary and fiscal policy potential. This is one of the main reasons I've promoted time arbitrage as an economic option, especially whenever the Baumol effect falls short. Let's make certain that free markets can be preserved in the meaningful use of our time, and that voluntary economic coordination remains a real possibility for the foreseeable future.

Sunday, January 30, 2022

Wrap Up for January 2022

Don't reason from a change in profit margins.

"are traditions that no one cares about worth preserving?"

Prices for used vehicles are no longer rational.

Alan Cole questions the logic of 95 year copyright protection.

Paul Krugman and David Beckworth on inflation.

The pandemic will leave long term behavioral effects.

Timothy Taylor highlights some points from an online draft of Olivier Blanchard's upcoming book on low interest rates and fiscal policy.

Perhaps the Fed isn't sufficiently worried about the labour force participation trend line.

Some basic elements for 1000 year structures.

"These places can recover." Edward Abbey would be relieved.

The labour shortage is real. And, the Fed is drifting away from what market monetarists had hoped for in terms of accurate NGDP targeting.

The deep state as a tool for redistribution.

Reflections from Adam Tooze on The Mushroom at the End of the World.

Scott Sumner explains his preferences to fiscal policy.

Solving the "duck curve" of renewables. And Noah Smith is optimistic about renewable electricity.

Noah Smith interviews Tyler Cowen.

It was once more difficult to determine whether a car might be a lemon.

Will NGDP stay close to the 4% growth trend that stabilized in 2010?

Why has book reading declined?

Builders are reaching a point where they can no longer pass cost increases on to consumers. My thought: Is it still possible to explain the ways we might reconfigure the nature of housing definition and composition? 

"the real estate market in the U.S. now resembles the car market in Cuba: A stagnant supply of junkers is being forced into service long after its intended life span."

The recent increase in goods demand is unprecedented.

"When should international boundary lines change?"

Cutting through the noise of inflation.

How to think about excess savings?

Some recommendations on books about GDP from Fivebooks.

18 charts that illustrate the U.S. economy.

Batch versus flow in production methods.

"Crypto and the politics of money" 

So, what is left? "Dreams and kindness are all we have."

"holding AD constant, eliminating shortages with higher prices means reducing output."

In the UK, demand for healthcare has been outstripping resources even prior to COVID.

Housing is too important, for societies to leave its present market framing in such stagnant circumstance. I tried to write another post about housing this month. But after my Blogger format "swallowed" several days of efforts, I fortunately recalled this Works in Progress article which is definitely worth reading.

What is meant when we say something is inflationary? Part one and part two.

We are not experiencing inflation in a conventional macroeconomic sense.

Might a 2024 coup actually happen? Some weaknesses in our election system.

Old style monetarism was marginally successful in 2021.

How are stablecoins different from other cryptocurrency? 

Some thoughts on The Tyranny of Merit.