Thursday, December 18, 2014

Make policy for real, not ideal, humans - FT.com

Make policy for real, not ideal, humans - FT.com: "
ut of the crooked timber of humanity, no straight thing was ever made. This famous remark of the German philosopher, Immanuel Kant, is particularly relevant to economists. “Homo economicus” is far-sighted, rational and self-interested. Real human beings are none of these things. We are bundles of emotions, not calculating machines. This matters."



'via Blog this'

Monday, December 15, 2014

My reading of the FT on China’s “turning away from the dollar” | Michael Pettis' CHINA FINANCIAL MARKETS

Michael Pettis' CHINA FINANCIAL MARKETS:  Michael, assesses the gloom and doom about changes in Chinese international capital flows.



"The authors provide the views of several analysts concerning the impact on the US bond markets and US economy more generally of reduced PBoC purchases of US government bonds, and these views range from neutral to very negative. I would argue however that in fact these views fail to understand the systemic nature of the balance of payments, in which any country’s internal imbalances must necessarily be consistent with its external imbalances. They assume implicitly assume that PBoC purchases only affect the demand for US government bonds, whereas in fact the flow of capital from one country to another must automatically affect both demand and supply. In fact the impact of reduced PBoC purchases of US government bonds is likely to be net positive, and while this view is probably counterintuitive, and certainly controversial, in another part of the article the authors cite a Chinese official whose statement, had they explored the implications fully, would have explained why."


Chinese current account surplus means a capital outflow.  As Michael indicates, the evidence from other major periods of capital flows:  US in the 1920s and 1950s, OPEC in 1970s, Japan in the 1980s, to which could be added UK in 1880s; suggests that it is not all beneficial to the exporter of capital.  Investment is difficult, mistakes are made. There are no many suppliers of safe, liquid assets.

Tuesday, December 09, 2014

At last the con has been taken out of econometrics

Tim Harford — Article — At last the con has been taken out of econometrics: "In 1983, Edward Leamer published an article with contents that would become almost as celebrated as its title. “Let’s Take the Con Out of Econometrics” began with an analogy that remains useful. Imagine an agricultural researcher who tests the effectiveness of a new fertiliser by dividing land into strips and spreading the new fertiliser only on a randomly chosen selection of those strips. Because of the randomisation, any effect will presumably be thanks to the fertiliser."



'via Blog this'

Tuesday, December 02, 2014

U.S. Investment in Global Bonds: As the Fed Pushes, Some EMEs Pull

U.S. Investment in Global Bonds: As the Fed Pushes, Some EMEs Pull:  An analysis of the flow into EM bond markets.



"We analyze reallocations within the international bond portfolios of US investors. The most striking empirical observation is a steady increase in US investors' allocations toward emerging market local currency bonds, unabated by the global financial crisis and accelerating in the post-crisis period. Part of the increase in EME allocations is associated with global "push" factors such as low US long-term interest rates and unconventional monetary policy as well as subdued risk aversion/expected volatility. But also evident is investor differentiation among EMEs, with the largest reallocations going to those EMEs with strong macroeconomic fundamentals such as more positive current account balances, less volatile inflation, and stronger economic growth. We also provide a descriptive analysis of global bond markets' structure and returns."

Sunday, November 30, 2014

You Want a Bigger Paycheck? Convince Me. - Bloomberg View

You Want a Bigger Paycheck? Convince Me. - Bloomberg View: "This last fact -- the increase in capital’s share of the national pie -- is really the big mystery. Why has it happened? There are two basic competing theses: the rise of the robots and the great labor dump."



'via Blog this'

Wednesday, November 26, 2014

Automation Makes Us Dumb - WSJ

Automation Makes Us Dumb - WSJ: The limits and limitations of automation.



"When system designers begin a project, they first consider the capabilities of computers, with an eye toward delegating as much of the work as possible to the software. The human operator is assigned whatever is left over, which usually consists of relatively passive chores such as entering data, following templates and monitoring displays."


Finding a new role for the human.

Monday, November 24, 2014

The truth about UK living standards since the crisis - FT.com

The truth about UK living standards since the crisis - FT.com:



An analysis of UK income statistics.



"Come next year’s UK election, bread and butter issues of living standards will displace Europe and immigration from the top of the public debate. The problem is that there are so many different comparisons and data sources that many contradictory claims are true. Few will be both true and fair. Here, then, is a guide to British living standards since the crisis, which avoids cherry-picking data and the cop out of saying that results are all too uncertain and complicated to conclude anything"


One additional area of interest is the contrast between the UK, the US and the Euro area.  The UK has had a fall in real wages and relatively healthy employment growth. For the US, though the economy has been stronger overall, employment and wages have been higher.  I need to look at the Euro area to complete the picture.