Friday, June 24, 2011

Macroeconomic insights from Sweden

Today an article in the Washington Post presents five economic lessons from Sweden, which has weathered the worldwide recession better than most. In no apparent order, they are:

1. Run a budget surplus beforehand in case deficit spending is required during a crisis
2. Rely more on "automatic stabilizers," fiscal policies that increase spending and reduce taxes automatically during a recession, without extra action by legislators
3. Use monetary policy aggressively
4. Keep a flexible exchange rate
5. Have chastened bankers who avoid reckless lending

The first two deal with fiscal policy and are clearly related, and 3 and 4 concern monetary policy; with a fixed exchange rate, there isn't much room (if any) for an independent monetary policy, as Greece now knows too well.

Bankers who avoid self-immolation are nice to have, but it's hard to draw distinct policy advice from the Swedish experience. Maybe the Riksbank engaged in more aggressive oversight (seems likely) or the structure of the banking industry was somehow different (less so), but otherwise the lesson seems to be that having smaller banking crises more frequently might help you avoid having a larger one. Not a very comforting thought, if that's the best we can do!

Mankiw on health insurance and fiscal balance

I missed it when it came out last Sunday, but Greg Mankiw provides a concise look at the basic economics of some key fiscal issues the nation is confronting. A one sentence summary might be, "Taxes and subsidies are similar in their effects on incentives, and we should think about whom we incentivize and how on the road toward fiscal sustainability."

I liked his point about high implicit taxes on seniors as probably being especially bad for their labor supply, but I wonder how many such seniors there are. To be sure, Mankiw is talking about wealthy seniors who would get their benefits "means tested," and in theory their behavior should respond. But I think he'd agree one would want to some estimates of labor supply elasticity before making a judgment. This kind of thing is reminiscent of the back-and-forth blogging of Paul Krugman and Greg Mankiw and Paul Krugman about tax revenue during different business cycles or administrations.

I'm sure Krugman meant "stupid" only in the Black-Eyes Peas sense.

Monday, June 20, 2011

Optimism and facts about college

I enjoyed reading this article on NPR the value of a college degree because it was an article about the long history of articles about the value of a college degree. It did a nice job placing them in context. I also enjoyed the closing anecdote about a graduate of the class of 1993 who "settled" on a secretarial job that led to great things later.

Friday, June 17, 2011

Fun for undergraduate econometrics

On the Freakonomics blog, Justin Wolfers demonstrates how spurious correlation can arise, with some nifty graphs. His age is (also) tightly correlated with national obesity rates.

Wednesday, June 15, 2011

Geographic variation in U.S. life expectancy

Here is the latest from Chris Murray's shop on geographic variation in average life expectancy across U.S. counties, discussed in a Post article here.

Saturday, June 11, 2011

Neat post on fertility and development

Justin Wolfers provides some neat graphs of total fertility rates against GDP in a recent Freakonomics blog post.

Friday, June 3, 2011

Menand on Academically Adrift and others

Leading off with a delicious observation on the difference between Princeton and CUNY students, Louis Menand reviews Academically Adrift in the June 6, 2011 issue of the New Yorker. He cites a criticism of the book's statistics in the Chronicle of Higher Education.

The average effect of college is different than the effect of an elite college, but I still thought of recent work by Dale and Krueger revisiting the latter.