Friday, May 28, 2010

Uwe Reinhardt on naked short-sells

Today a health economist makes a complicated topic in financial economics clearer. Uwe Reinhardt discusses "naked" sales of financial instruments: what they are, why or when they might be good, and why they might be bad.

A naked short sale occurs when a participant sells an asset he or she does not actually own or even yet possess; a traditional short sale requires the participant to actually obtain it "on loan" from another party, in return for a fee and the promise to give it back at a future date, before actually selling it.

Reinhardt points out that short sales, whether naked or not, can be good insofar as they may more rapidly transmit knowledge or perceptions about the quality of investments.

But if enough short-selling occurs, it is also plausible that such bets could simply become self-fulfilling prophecies, unrelated to any particular market fundamental.

Wednesday, May 19, 2010

Esther Duflo in the New Yorker

The May 17 issue of the New Yorker includes an article about Esther Duflo, the winner of the 2010 John Bates Clark Award. Probably the most interesting scientific tidbit concerns her work that suggests microfinance does not unambiguously raise consumption.

Military families, integrated financial services, and banking reform

It turns out that USAA, a company whose goals include providing integrated financial services to military families, feels its business model may be jeopardized by the proposed Volcker Rule in financial regulation reform.

The idea of the Volcker Rule is to keep FDIC insurance of bank deposits from effectively underwriting riskier trading. The idea of the one-stop-shopping that USAA provides, with insurance and banking products offered by a single entity, is to streamline finances, something that is clearly useful for military families grappling with the stresses of deployment and relocation.

Tuesday, May 18, 2010

Several economists weigh in on stuff

Greg Mankiw talks (mostly) fiscal policy, while Christina Romer sees insufficient aggregate demand, Narayana Kocherlakota assesses the state of macroeconomics, Ben Bernanke talks about the economics of happiness, and Ed Glaeser discusses popular agglomeration and Zipf's Law.

Perspectives on immigration

An article in today's Times spotlights generational differences in U.S. perspectives toward immigration. The post-1965 immigration law was certainly a departure from previous statute, and the article describes how birth cohorts appear to have been affected differently by it.

I particularly enjoyed the blurb about Spanish language segments on Sesame Street. I remember those well from the late 1970s!

Sunday, May 16, 2010

To train vocationally or not?

This article in the Times discusses the benefits and costs to students of college education, and asks the perennial question of whether it makes sense for students to aspire and attend. Toward the end, a quote from the president of Northwestern mentions that even those who do not graduate from college are likely to benefit in ways other than increased earnings, which themselves may not sufficiently compensate for the high cost of attending. In particular, education appears to improve health regardless of whether it results in a degree or not.

Thursday, May 13, 2010


The latest from Albany appears to be that courts have blocked the governor's furlough plans for non-essential state workers. An earlier article details the original plan, which is at least on hold if not defunct.

Based on the statistics in that latter article, the furloughs would have resulted in a reduction in the average state worker's paycheck of about $270. This is on the same order of magnitude as the $600-per-household federal tax rebate check in 2001, and the 2008 checks, the latter of which phased out with income. The interesting thing about the furloughs is that those would have increased with income.

Age differences and mortality outcomes in couples

An article by Sven Drefahl has gotten some popular press notice for its provocative results. Having a younger spouse appears to be better for men's longevity but not for women's, while having an older spouse is worse for both sexes.