Friday, February 27, 2009

Long-term fiscal pressures and the first Obama budget

As Paul Krugman and David Brooks write today in the Times, the Obama budget doesn't come close to grappling with the long-term budget issues on the table. Public enemy number one is Medicare, and I agree that sounds odd and almost heartless.

Obama's director of the OMB is the able Peter Orszag, who as director of the Congressional Budget Office prior to joining the administration helped focus that bureau's public statements on the long-run sustainability of Medicare and other health care spending like Medicaid. As a scholar at Brookings prior to that, Orszag was similarly in the business of full-press academic responsibility vis-a-vis budget priorities.

You can't fault the President or any aides for not tackling those weighty issues right this second, in the middle of the largest recession since at least 1982. But as Krugman and Brooks remind us, there is plenty remaining on the table.

Monday, February 23, 2009

Sex and investing in Japan

The Financial Times recently reported on the historically female role of managing household finances in Japan. Part of the article traces that role back to the historical division of labor during the Edo or Shogunate period, at least among the aristocracy. Granted, lower classes probably didn't have much surplus wealth to invest.

But the article is really about how low Japanese interest rates early this decade, as a result of the "lost decade" and the attempts to stimulate the economy through monetary policy, may have led to a situation where "a culture of saving underwent a significant behavioural change, making ... frugal savers into bold, courageous investors."

That kind of thing can sweep up members of either sex, of any age, and so on and so on. The article delves much less into why this might be specially interesting in Japan, other than how it reports the hot water housewives had gotten into with their financially oblivious husbands.

Risk tolerance does vary by sex, however, and one would thing that all things equal, having the purse strings controlled by women probably dampened the irrational exuberance that otherwise would have raged.

Dads and daughters

It's like a Lifetime movie, and I love it! A Times article echoes an interesting paper on the increasing strength of the intergenerational transmission of skills from fathers to daughters.

Friday, February 20, 2009

Populist indignation and the collective good

Today David Brooks lays out some arguments on either side of the debate about what we might call "microeconomic stabilization," namely writing down or reorganizing debt for some of the population but not for the rest. The asymmetry is not very palatable to anyone who believes in basic fairness and responsibility, and that probably includes most Americans.

The fact is that macroeconomic stabilization policies also have asymmetric effects. When interest rates are lowered in hopes of stimulating investment, savers lose while borrowers win (and there are also substitution effects that can change behavior). I don't think this aspect of macroeconomics is frequently taught to college undergraduates, let alone whether it is broadly understood.

Brooks (and many others) have good points about how micro stabilization can reward bad decisions, creating moral hazard that will put future decisions off kilter, and how that just flat-out doesn't seem fair. But Brooks also puts the basic argument for stabilization quite well in his last paragraph: "The nation’s economy is not just the sum of its individuals. It is an interwoven context that we all share. To stabilize that communal landscape, sometimes you have to shower money upon those who have been foolish or self-indulgent. The greedy idiots may be greedy idiots, but they are our countrymen. And at some level, we’re all in this together. If their lives don’t stabilize, then our lives don’t stabilize."

Thursday, February 19, 2009

College grades and class size

Today Greg Mankiw writes about undergraduates' course satisfaction highly correlated with class size in the Harvard economics department, while the Times reports on students' and professors' differing perspectives and expectations regarding grades.

The latter article focuses on students' beliefs regarding hard work and whether it is enough to earn a high grade. I'm fond of telling undergraduate advisees about my own experience as an undergraduate, when I earned a solid "C" in introductory computer science. Notice my verb choice. I worked extremely hard, but I also knew I wasn't a particularly good computer scientist. One of our challenges as college educators, it seems to me, is to motivate students to continue striving to learn even when it is clearly difficult and thus will not result in particularly high grades.

The Census as a political football

Today's Times has an article about some early uneasiness among Republicans about Democratic intentions regarding the 2010 U.S. Census. At issue in 2000 and today is exactly what methods other than mailed paper forms, visits, phone calls, etc. to employ. Specifically, there is a spectrum of opinion about whether to use statistical methods to alter the final count based on priors about undercounting some subpopulations. Another issue is how to count individuals living abroad, like Mormon missionaries.

A big part of the problem is that to my knowledge, nobody has studied how to use statistical tools to adjust Census counts, and in so doing, figured out how to do it right.

Wednesday, February 18, 2009

Welfare for investment bankers

Exactly why laid-off investment bankers need a city-funded retraining program to weather the financial crisis is a little beyond me.

It should come as no surprise that New York City would be interested in retaining, not to mention expanding, its base of high-income, high-tax workers. But it is far from clear what kind of training would result in a laid-off investment banker's taking a high-paying job in the city when he or she otherwise would not. These workers are likely to be relatively young and certainly college educated. College and the experience in investment banking are probably general enough training for any extant jobs. In any event, unemployment insurance provides a safety net for all workers, high and low education alike.

As the article hints toward the end, energies directed toward stimulating entrepreneurial activity clearly ought to be more productive.

Monday, February 16, 2009

Friday, February 6, 2009

Recession axing more men than women

The Times reports that the recession is narrowing the employment gap between men and women by resulting in more layoffs for men.

Still, BLS data (the Current Population Survey) indicate that employed men currently outnumber employed women by 7-8 million. Shares in employment have certainly narrowed over time, however, leading to a current split of about 53-47 in favor of men.

Probably more interesting are the remarks in the article about the likely strains on the household during the downturn given that unemployed men do not typically report performing household chores. Another facet of all this is the different nature of jobs held by men and women --- jobs may differ in terms of quality (wages, benefits, part-time vs. full-time), in terms of flexibility, and also in terms of stability. Is this pattern indicative of the higher tolerance for risk typically found among men?

Sunday, February 1, 2009

Social consequences of recession

Tyler Cowen writes about the social impacts of the current recession in the Times. He paints a nice overview. I think it is absolutely right to keep an open mind about how this recession might differ markedly from previous downturns. Cowen writes about how "in cultural influence, it may well be the rich who lose the most in the current crisis."