Munger Over America Tour

Got some ink for the Kids Prefer Cheese blog, written by M. Munger and some other guy.  I think "Chopped Liver" is a fine name for the other guy.

From the Muncie Free Press:  A story.  More than 100 students and faculty showed up.  It was fun!  Then dinner at the very nice Vera Mae's.  Mushroom risotto:  yum!  Thanks to Cecil Bohanan!  And thanks to Kathryn Kennison (whom I inexplicably called "Elizabeth" in front of an audience at least twice!), a morning "tea" talk at the E.B. Ball Center.  She handled it pretty well, though.  She said, "Now, you come back soon, John!"

Spoke to the Bastiat Society of Indianapolis.  GREAT crowd.  Then dinner here.  Wonderful. Big props to Fundman; good call on the restaurant.  I had the "Spinach and Artichoke Pici;"  amazing.

Then, senior session for Econ majors at Davidson College, thanks to Prof. Fred Smith.  And dinner at Brickhouse, with amazing beer list, and pints just $4 all the time.

Three nights, four talks, three very fine meals out, three hotel rooms in different cities where I spent very little time.  Wednesday was the worst:  got up at 3 am to catch 3:30 taxi to IND to catch 5:10 am plane to Raleigh.  Drive to Duke to teach macro class, then drive to Davidson.  Give talk.  Informal talk with students.  Dinner with students and faculty.  Went to bed at 11 pm.  A long day.

Today, Thursday, I gave a talk to a group of Kazakh officials about democracy.  They are for it.  Me, I have questions.

Now all I need to do is not eat for a week, and it's all good!

My Talk to the Bastiat Society of Charlotte

On Wednesday, Feb 20 I gave a talk to the Bastiat Society of Charlotte.

Here is the video.  Long, not easy to see, but you can see the slides and hear the audio quite well.

Thanks to Eric Rowell and the folks in Charlotte!

Econ Blogger Conference MVTs

MVTs = Most Valuable Talkers:

Lots of smart people with a lot to say. Was great to see some old friends and meet some people face to face for the first time.

The panelists I got the most from though were Alex Tabarrok and Michael Mandel speaking about intellectual property and innovation.

Based on his remarks, I highly recommend Alex's new book on the same subject.

Thanks to the Kauffman Foundation for (A) putting on such a cool event, and (B) inviting me to attend.

The culture that is Japan

or, high art in low places.

People, we have a long way to go to catch up with the Japanese. Feast your eyes:

many more great ones here.

Back in Black

Records are back. They are so back that even The Economist has taken note:

One innovation that has helped vinyl sales is that albums often now come with codes that let you download a MP3 version of the music (occasionally, they come with FLAC downloads, but not often enough for nuts like me who sometimes buy both the LP and the CD(to get a high quality download)).

Apparently at lot of the young 'uns buy LPs and never play them.

Here's Dom from one of my new favorite bands (Dom):

“The reason we sell vinyl is that there will always be a market for it...people probably already downloaded the music anyway, and they’ll buy the record because of the big artwork and because it’s something you can hold on to.”

At Chez Angus, we have ditched the CD player. We have 800+ albums stored in lossless files and a cabinet full of LPs.

Born That Way

An old country preacher had a teenage son, and it was getting time the boy should give some thought to choosing a profession. Like many young Men his age, the boy didn't really know what he wanted to do, and he didn't seem too concerned about it. One day, while the boy was away at school, his father decided to try an experiment. He went into the boy's room and placed on his study table four objects.

1. A Bible.....
2. A silver dollar.....
3. A bottle of whiskey.....
4. And a Playboy magazine.....

"I'll just hide behind the door," the old preacher said to himself. "When he comes home from school today, I'll see which object he picks up. If it's the Bible, he's going to be a preacher like me, and what a blessing that would be!

If he picks up the dollar, he's going to be a business man, and that would be okay, too. But if he picks up the bottle, he's going to be a no-good drunken bum, and Lord, what a shame that would be.

And worst of all if he picks up that magazine he's going to be a skirt-chasing womanizer."

The old man waited anxiously, and soon heard his son's foot-steps as he entered the house whistling and headed for his room..

The boy tossed his books on the bed, and as he turned to leave the room he spotted the objects on the table...With curiosity in his eye, he walked over to inspect them. Finally, he picked up the Bible and placed it under his arm. He picked up the silver dollar and dropped into his pocket. He uncorked the bottle and took a big drink, while he admired this month's centerfold.

"Lord ha' mercy, that's terrible." the old preacher disgustedly whispered. "He's gonna run for Congress."

(Nod to the LMM)

7 million new jobs in 7 paragraphs

Man Robert Frank is ON FIRE in his Economic View column. The whole thing is 16 paragraphs, but in grafs 6-12 Bob lays out how we can get "more than 7 million" new jobs by the end of 2012.

I can boil his 7 grafs into 3 words:

payroll tax holiday

Yessirree Bob; it's just that easy. Cut the employee rate to zero and cut the employer's rate to zero for all new hires from now to the end of 2012.

I am in favor of cutting the payroll tax permanently, not just for 18 months, or so regardless of how many jobs it creates, but I am amazed that (a) Bob Frank is advocating this policy, and (b) that he is so sure that the resulting employment gains would be so strong.

me & 2T

Now just 2T:

Music News

1. Wayne Coyne tweets!

2. Versus is back (really!) with a new album.

3. New No Age drops September 28th.

4. Tennis anyone?

viva la reconquista!

From USA Today:

A new kind of Mexican immigrant is making it big in the USA: huge Mexican corporations that are snapping up U.S. brand names, opening U.S. factories and investing millions of pesos north of the border.

From Thomas' English Muffins to Borden milk, Saks Fifth Avenue department stores to The New York Times newspaper, Mexican investors have taken advantage of low interest rates and depressed prices during the economic downturn to expand their holdings in el norte.

People, Grupo Bimbo (aqui hay Bimbo) owns Entenmann's!

How are those Spanish lessons coming?

A new third (fourth) party in North Carolina?

Seriously? This report strains credulity....

But here is the newspaper story right here.... so it must be true, right?

In a shot across the bow of Dems, the labor powerhouse SEIU is starting a new third party in North Carolina that hopes to field its own slate of candidates, part of an effort to make the Democratic Party more reliable on issues important to labor, I’m told.

SEIU officials setting up the new party, called North Carolina First, are currently on the ground collecting signatures to qualify as a state party, SEIU officials tell me, adding that there are around 100 canvassers on the ground right now. The goal: To have the party up and running so candidates can run in this fall’s elections.

Hamid Karzai has a very good idea

Here is change we can believe in:

"Afghan President Hamid Karzai threatened over the weekend to quit the political process and join the Taliban if he continued to come under outside pressure to reform, several members of parliament said Monday."

Hey Hamid: Don't let the door hit you in the butt on the way out, bro!

People, if Karzai was in charge of the Taliban, we'd have wrapped this whole business up quite a while ago.

Economies of Scope: a continuing series

The first entry in the series is here.

Marking down the mark up

Potentially very cool new NBER working paper by Cúrdia and Reiss (ungated version here) argues that once you allow the exogenous shocks in DSGE models to be correlated, fluctuations in the mark up become less important in explaining business cycles.  

Here, let them tell it:

The dynamic stochastic general equilibrium (DSGE) models that are used to study business cycles typically assume that exogenous disturbances are independent autoregressions of order one. This paper relaxes this tight and arbitrary restriction, by allowing for disturbances that have a rich contemporaneous and dynamic correlation structure. Our first contribution is a new Bayesian econometric method that uses conjugate conditionals to make the estimation of DSGE models with correlated disturbances feasible and quick. Our second contribution is a re-examination of U.S. business cycles. We find that allowing for correlated disturbances resolves some conflicts between estimates from DSGE models and those from vector autoregressions, and that a key missing ingredient in the models is countercyclical fiscal policy. According to our estimates, government spending and technology disturbances play a larger role in the business cycle than previously ascribed, while changes in markups are less important.

Well done sirs. Kudos!

  

 

Irish University System Does Something Smart!

Irish university system aboishes the center! Let a thousand flowers bloom. And save a lot of money, at the same time you get rid of central bureaucracy.

The objection of the center:

"We produce all their degree parchments and also run awards competitions, from the undergraduate to the postdoctoral level," she said. Those awards allow the university to promote comparability of standards and reward academic excellence as a central unit. The university also supports academic publishing and gives grants to individual scholars, she said.

We produce all their degree parchments?

(At this point, Angus sticks his right fist in the air, sticks his thumb out between his ring and long fingers, wiggles his thumb, and yells, "ARRRRRRRRRR!")

(Nod to Tommy the Brit)

What sets the great ones apart is their attention to detail

Case in point:

CARACAS, Venezuela – President Hugo Chavez says there's too much capitalism on Venezuelan TV. So he's urging producers to start making films and TV shows that stress socialist values.

Chavez says producers should be making "socialist soap operas."
He said Sunday he recently visited Cuba "and they have soaps there. But they're not capitalist soap operas."

.... Chavez-allied producers made a 2004 soap opera called "Love Inside the Barrio" that emphasized socialist values but failed to draw many viewers.

Come on Venezolanos, show some initiative. He can't be expected to do EVERYTHING!!

 

Drug war over: We win!!

hat tip to Art Carden!

Busted

I like very much the original intent of the enterprise we now call DSGE modelling. Build a model from first principles wherein we can identify the deep parameters and do real policy analysis.

Two things though have always bothered me in the actual practice of DSGE modelling.

The first is the use of the "Calvo rule" for modelling how firms change their prices. This method assumes that firms have a constant probability of changing their price and that said probability does not vary with how long it has been since they last changed their price (i.e. it has a constant hazard).  

The second is the increasing number of ad-hoc "real rigidities" that are routinely added to the models to help them fit the data. Things like adjustment costs for capital, labor, and leisure, among others. They are not derived from theory, their correct functional forms are far from obvious, and in my view, they make the claim that we can do real counterfactual policy analysis with the models fairly suspect.

I have been told by practitioners that the Calvo rule is innocuous. They say that is a literally false assumption that is convenient, yet does not play a major role in the models' dynamics.

Two new papers show that, at least in some cases, this is not correct.  In "The cost of tractability and the Calvo pricing assumption" (available here), Fang Yao shows that, in the model he studies, replacing the Calvo rule with a price adjustment rule where the hazard function is increasing, makes the inflation dynamics of the model fit the data better without incorporating real rigidities! He also shows that money shocks have a bigger impact with the increasing hazard price adjustment rule.

In other words, in his model, the Calvo rule is not innocuous and replacing it with a more realistic rule lessens the need for incorporating real rigidities into the model and changes conclusion about the importance of nominal shocks for explaining model dynamics. Two birds with one stone!

Another recent paper, "Heterogeneous price setting behavior and aggregate dynamics" (available here) by Carvalho and Schwartzman not only allows for non-constant hazards but allows more than one type of price adjustment rule to be followed in the economy. They find that allowing such heterogeneity in price adjustments has large effects on model dynamics, specifically that it creates larger amounts of monetary non-neutrality.

Shout it from the rooftops!

Hat tip to Gabriel M

Going Galt? or A great idea!

Over at MR, Alex T. bemoans the government's plan to slash executive wages at the 7 "most bailed out" companies. I respectfully disagree. These are State owned enterprises now and having an expert decide if the public is getting its moneys worth is entirely reasonable.

If fact, I think this is a trend well worth expanding in dealing with pay for people who are publicly funded.

I would be happy to serve as a "special master" to evaluate pay relative to performance at a lot of other publicly funded enterprises like say, Congress, the SEC, the Federal Reserve, Fannie and Freddie, the EPA, the Treasury and (just to be mean spirited) the office of the Vice President.

As to how I would rule in these cases, let's just say that Santa would be able to save on reindeer food because he wouldn't be coming to the DC area this year.

And yes, I do realize that I teach at a State University. Thanks in advance for reminding me.