Cross Discipline

"The Great Inflation of the 2010s: Hoisted from Niall Ferguson's Archives from Two Years Ago" 

Link

A reminder of the limits of disciplines. There are probably numerous inflationary cases that appeared through history.  What of the cases where budget deficits increased but there was no inflation?  It is clear that economists ignored economic history but this appears to be a case of a historian without economic knowledge.

John Maynard Keynes, The end of laissez-faire (1926)

Worthwhile for having the whole paper.

John Maynard Keynes, The end of laissez-faire (1926): "The maxim laissez-nous faire is traditionally attributed to the merchant Legendre addressing Colbert some time towards the end of the seventeenth century.

('Que faut-il faire pour vous aider?' asked Colbert. 'Nous laisser faire' answered Legendre)."

Productivity and potential market

Dan Liu and Christopher Meissner Market Potential and the Rise of US Productivity Leadership:

 "The US advantage in per capita output, apparent from the late 19th century, is frequently attributed to its relatively large domestic market. We construct market potential measures for the US and 26 other countries between 1880 and 1913 based on a general equilibrium model of production and trade. When compared to other leading economies in 1900, the year around which the US overtakes Britain in productivity leadership, the US does not have the overwhelming lead in market potential that it has in GDP per capita. Still, market potential is positively related to the cross-country distribution of income per capita, but the impact of market potential is likely to be very heterogeneous. We illustrate this in a quantitative calculation of the welfare gains from removing international borders in 1900 within a parsimonious general equilibrium trade model. While there are gains from trade for all nations, the largest European countries do not close their per capita income gaps with the US after this hypothetical rise in market potential. On the other hand, many small countries could have done so."

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Fake it!

Amy Cuddy: Your body language shapes who you are 

TED : http://on.ted.com/q1MN

Peak Oil

Brad DeLong : Liveblogging World War II: February 3, 1943:

A caveat to the predictions of economic collapse as a consequence of 'peak oil'.

"It needs to be said, of course, that the dire predictions of Hitler and his economic advisers in 1941 and 1942 about the certain collapse of the German war machine if no new sources of oil were obtained proved to be exaggerated. The German war effort did not grind to a halt when the campaign to capture the Caucasus oilfields failed. Although Germany's oil situation remained acute, and became desperate after the Allied air offensive against its synthetic fuel plants and the Rumanian oilfields began, the Reich continued fighting until May 1945."

There are alternatives.  They may not be sustainable themselves, but..
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The Allais Paradox

The Allais Paradox | Wired Science | Wired.com:

There is some explanation of the Allais Paradox here in Wired.com.  The is a tendency to value certainty but once this is gone, there is a tendency to take risk. For speculation, this means that the positive skew to returns are very attractive but the negative skew does not have very much influence.

"But why was certainty so attractive? Kahneman and Tversky wanted to understand the psychology behind the paradox. Their breakthrough came by accident. Kahneman had been reading a textbook on economic utility functions, and was puzzled by the way economists explained a particular aspect of our behavior. When evaluating a gamble—like betting on a hand of poker, or investing in a specific stock—economists assumed that we made the decision by taking into account our wealth as a whole. (Being rational requires factoring in all the relevant information.) But Kahneman realized that this isn’t how we think. Gamblers in Las Vegas don’t sit around the card table contemplating their complete financial portfolio. Instead, they make quick decisions that depend entirely upon the immediate terms of the gamble. If there is a $100 wager, and you’re trying to decide whether or not to ante in with a pair of aces, you probably aren’t thinking about the recent performance of your mutual fund, or the value of your home."

This may mean that fat tails are attractive as the possibility of large gains draws attention while the possibility of large losses is given less weight than it should.  There is loss aversion.  If there are large potential losses, losses should be cut swiftly, but there is a tendency to hand on a hope - with potentially catastrophic results.

A guide to bootstrapping

Bootstrapping and Subsampling: Part I « Normal Deviate:

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