Europe's Population

"One is the familiar place of low fertility and population decline. Here, the fertility rate is below 1.5 and countries are struggling in a fertility trap. The low fertility belt runs from the Mediterranean to central and eastern Europe, embracing both old and new parts of the continent. The other, surprising Europe is a place of recovering fertility and rising population. It stretches from Scandinavia to France. Here, countries have escaped the fertility trap and the childbearing rate is around 1.8—not high, but higher than it was, and, in some cases, reaching the magic replacement level".

Economic Oddities

"Why do they sterilize the needle and swab a prisoner's arm with alcohol before administering a lethal injection?" Questions and answers to questions like this are in the new book written by Cornell's professor Robert H. Frank.

Free Trade: Bernanke vs. Blinder

Here are two different views on free trade:Bernanke defends free trade and Blinder attacks it.

Ranking Economic Journals

New Approaches to Ranking Economics Journals
Yolanda K. Kodrzycki, Federal Reserve Bank of Boston
Pingkang Yu, George Washington University
Abstract
We develop a flexible, citations- and reference-intensity-adjusted ranking technique that allows a specified set of journals to be evaluated using a range of alternative criteria. We also distinguish between the influence of a journal and that of a journal article, with the latter concept arguably being more relevant for measuring research productivity. The list of top economics journals can (but does not necessarily) change noticeably when one examines citations in the social science and policy literatures, and when one measures citations on a per-article basis. The changes in rankings are due to the broad interest in applied microeconomics and economic development, to differences in citation norms and in the relative importance assigned to theoretical and empirical contributions, and to the lack of a systematic effect of journal size on influence per article. We also find that economics is comparatively self-contained but nevertheless draws knowledge from a range of other disciplines.

Education Vouchers

The Economist: "FEW ideas in education are more controversial than vouchers—letting parents choose to educate their children wherever they wish at the taxpayer's expense. First suggested by Milton Friedman, an economist, in 1955, the principle is compellingly simple. The state pays; parents choose; schools compete; standards rise; everybody gains.
Simple, perhaps, but it has aroused predictable—and often fatal—opposition from the educational establishment. Letting parents choose where to educate their children is a silly idea; professionals know best. Co-operation, not competition, is the way to improve education for all. Vouchers would increase inequality because children who are hardest to teach would be left behind.
But these arguments are now succumbing to sheer weight of evidence. Voucher schemes are running in several different countries without ill-effects for social cohesion; those that use a lottery to hand out vouchers offer proof that recipients get a better education than those that do not". Read the article here.

Conversation of Nobel Laureates for Economics on the Future of Capitalism

Gary Becker, Kenneth Arrow and Myron Scholes talk about the future of capitalism.

Immigration-related cases clog courts

"During a push to crack down on illegal immigration last fall, Customs and Border Protection floated a plan for New Mexico that would have suspended the practice of sending home hundreds of illegal immigrants caught near the border with Mexico. Instead, these people would be sent to court.
The idea, called "Operation Streamline," was to make it clear that people caught illegally in the U.S. would be prosecuted".

How to Balance Freedom and Security

"The world after 9/11 has led many Western countries to rethink their security policies, but where does the limit lie between protecting citizens and eroding their civil liberties?" asks Der Spiegel.

Is Democracy the Best Setting for Growth?

Daron Acemoglu and Edward Glaeser answer this question.

The Tale of Two Bids

Private equity goes after Britain’s Boots.

Who Are the Jihadists in Europe

In the Der Spiegel :"242 jihadists, 31 attacks, 28 networks. After examining militant Islamism in Europe, researchers have found that self-recruitment is on the rise among terrorist leader Osama bin Laden's Eurofighters, and that there is no such thing as a standard terrorist".

Michael Jensen

David Warsh writes:"By any measure, Michael Jensen is an interesting figure. After graduating from Macalester College in 1962, he learned economics at the University of Chicago in the mid-1960s, and became co-founder in 1973 of the Journal of Financial Economics that, along with two other scientific journals, launched a revolution in quantitative finance -- portfolio selection, options pricing and all that. His 1976 paper with William Meckling, "Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure" started another revolution, and quickly became one of the most-cited papers in all of present-day economics". Read the rest here.

Is Transition from Communism Possible?

Sam Vaknin writes:"Can Socialist Professors of Economics Teach Capitalism? Is Transition from Communism Possible? Lest you hold your breath to the end of this article - the answers to both questions in the title are no and no. Capitalism cannot be "learned" or "imported" or "emulated" or "simulated". Capitalism (or, rather, liberalism) is not only a theoretical construct. It is not only a body of knowledge. It is a philosophy, an ideology, a way of life, a mentality and a personality".

A Brand New Journal in Economics

A new journal in economics, economics-ejournal. The journal is free, quick, democratic, widely disseminated, convenient and up to date.

Best Buy vs. Circuit City

"The companies' financial results are telling. Best Buy, the nation's No. 1 electronics retailer, this week posted an 18 percent rise in fourth-quarter profits despite a bruising environment of flat-panel TV price drops. No. 2 Circuit City, on the other hand, swung to a loss in the quarter and is shaving its total work force by 8 percent, laying off 3,400 of its most experienced (and expensive) clerks". Read more here.

Hal Varian on the Fashion Industry

Hal Varian writes about the fashion industry and intellectual property protection:
"Recently, two law professors, Kal Raustiala of the University of California, Los Angeles, and Chris Sprigman of the University of Virginia, wrote a fascinating paper that outlines the workings of the fashion industry and how it manages to function without much intellectual property protection.

At one time, the fashion industry did have a self-imposed system of intellectual property protection. In the 1930s, the Fashion Originators’ Guild prohibited copying among its members and urged retailers not to sell items from those who copied other designs. The guild was reasonably successful in these efforts. But in 1941, the Supreme Court held that its practices violated antitrust laws, and since then the fashion industry in the United States has had no intellectual property protection for designs.

A result has been that “piracy” of designs is common in the fashion industry. Designers constantly experiment with new shapes and colors. If a particular style catches on, it is quickly copied. Skinny jeans have been fashionable for the last few years, but there are signs that the trends are now moving toward straight-leg designs. If the tide changes, pretty soon everybody will be selling straight-leg jeans.

According to Mr. Raustiala and Mr. Sprigman, the fashion industry can survive without intellectual property protection because of two interacting factors that they refer to as “induced obsolescence” and “anchoring.”

The first factor means that clothes become unfashionable before they wear out, so trendy people have to keep buying new clothes every year. When you are wearing the same thing as your cool friends, that’s great. But when you start seeing that style on decidedly uncool people, it’s time for something new — which the fashion industry is happy to provide.

But how do the fashionable decide what the next big thing is? Or perhaps more to the point: how does the fashion industry convey to their consumers what they should be wearing? How does the industry “anchor” the consumers in this season’s fashions? This is where copying comes in. If all the designers are showing baby doll dresses in the spring of 2006, then there’s a good chance that is what everybody will be wearing by the summer of 2006.

Mr. Raustiala and Mr. Sprigman argue that the lack of intellectual property protection actually promotes the functioning of the industry. If the extension of copyright to fashion prevented clothes manufacturers from copying each other, the industry would be ceding a major role to the lawyers and become much less creative. We’d see the same thing year after year. In other words, women’s fashion would look much more like men’s fashions — boring, boring, boring.

Since I have the same fashion sense that most economists have — that is, none whatsoever — I cannot attest to the accuracy of the law professors’ description of the fashion industry. But it is consistent with other examples of what happens when there is no intellectual property protection."

High Education Salaries

The College and University Professional Association for Human Resources (CUPA-HR) survey presents the median salaries for over 500 academic and administrative job categories.

The Efficient Market Hypothesis

A good presentation of the Efficient Market Hypothesis.

Ed Lazear vs Larry Katz

Greg Mankiw's blog links to the debate between Lazear and Katz on the link between taxes and human capital.

On Wal-Mart

Jeffrey Goldberg writes about Wal-Mart:"Twenty years ago, Wal-Mart was widely viewed as a scrappy regional retailer, and its founder, Sam Walton, an Ozarks eccentric with a vision of super-discounting, was praised for intuiting the needs of his customers, and for maintaining high morale among his workers. When Walton retired, in 1988 (he died in 1992), the company had revenues of sixteen billion dollars. Today, Wal-Mart is the second-largest company in the world in terms of revenue—only ExxonMobil is bigger".

Incentives to Stop Abortions

"Texas legislator has proposed that pregnant women considering abortion be offered $500 not to end their pregnancies.
Republican State Sen. Dan Patrick, who also is a conservative radio talk show host, said on Friday the money might convince the women to go ahead and have babies, then give them up for adoption.
He said during a legislative conference in New Braunfels, 45 miles south of Austin, there were 75,000 abortions in Texas last year.
"If this incentive would give pause and change the mind of 5 percent of those woman, that's 3,000 lives. That's almost as many people as we've lost in Iraq," Patrick said".

An Economist's Courtroom Bonanza

In the WSJ: "For high-profile economists like the 58-year-old Prof. Teece, expert testimony has become a way to earn $2 million or more a year. Their rise has its roots in the Reagan era of the 1980s, when a free-market view of the law inspired by University of Chicago scholars gained ground. Courts now rely far more on economic analysis, with its apparent precision, to reach decisions. As a result, big companies in legal disputes race to enlist top economists on their side, paying top dollar in an arms race for talent".

Public Choice: Origins and Development of a Research Program

James Buchanam writes about Public Choice, its origins and development.

Quotations from Milton Friedman

Reason publishes some quotations from Milton Friedman. An interesting one is: "Why has there been so great a shift in the attitudes of the public [toward accepting free market ideas]? I’m sorry to confess that I do not believe it occurred because of the persuasive power of such books as Friedrich Hayek’s Road to Serfdom or Ayn Rand’s Fountainhead or Atlas Shrugged or our own Capitalism and Freedom. Such books certainly played a role, but I believe the major reason for the change is the extraordinary force of factual evidence.…The great hopes that had been placed in Russia and China by the collectivists and socialists turned into ashes.…Similarly, the hopes that were placed in Fabian socialism and the welfare state in Britain or the New Deal in the United States were disappointed. One major government program after another started with the very best aims and with noble objectives and turned out not to deliver the goods.…Ideas played their part. But they played their part not by producing a reaction against the spread of government but by determining the form that that reaction took. The role we play as intellectuals is not to persuade anybody but to keep options open and to provide alternative policies that can be adopted when people decide they have to make a change."

A Conversation with Tyler Cowen

There is an interesting conversation with Tyler Cowen in the Econtalk blog.

On Liberty

The classic book of John Stuart Mill is available in the Librivox site together with its audio book.

Global Imbalances

Global investors are worried about many things. Why is America's current-account deficit not one of them? asks The Economist.

Rational Terrorists and Optimal Network Structure

An article by Walter Enders and Xuejuan Su recently published in the Journal of Conflict Resolution: "After the events of 9/11, U.S. counterterrorism became more proactive in that the Patriot Act allowed the authorities far more freedom to directly attack terrorist network structures. We argue that rational terrorists will attempt to thwart such policies and restructure themselves to be less penetrable. We model the trade-off between security and intragroup communication faced by terrorists. The model is used to derive the anticipated changes in network structure and the consequent changes in the type, complexity, and success rate of potential terrorist attacks". An article by

The Memoirs of János Kornai

The Hungarian economist János Kornai that started his career believing that "Central planning must be more efficient than market anarchy", then "he came to reject first the brutal methods used by the regime and later the justificatory ends and theories as well. He went through a process of "emotional and intellectual restructuring that lasted several years." He also ceased to be a Marxist, unlike many Western intellectuals who, while rejecting communist systems, insisted that Marxist theory was wholly innocent of the wrongdoings committed on its behalf. Mr. Kornai was not one of those fighting "desperate rearguard actions" to salvage comforting beliefs. He quoted with approval a contemporary Hungarian philosopher who said that he came to reject Marxism "not because [the Party] did the whole beastly business in the name of Marxism, but because Marxism does not explain what is going on around me.""

Tenure Once Again: The Role of Academic Habits

I wrote an article with Goncalo Monteiro, forthcoming in the Japanese Economic Review, in which we investigate why some scholars [university professors] continue to be productive after receiving tenure. The paper shows that departments can set tenure rules and standards as incentives for scholars to accumulate academic habits. As a result, academic habits have a lasting positive impact in scholar’s productivity, leading to higher scholar’s productivity rate of growth and higher productivity level.

The paper appeared first as a University of York discussion paper, here is a link to the working paper.

Mankiw Comments on Levitt's Tenure Proposal

Greg Mankiw commenting on Levitt points out that "One question that Steve does not address is how department hiring would work in a world without tenure. Now, senior hiring is done by existing senior faculty. If those faculty could start firing one another, the political dynamics of hiring would become complicated and probably untenable. (Here is a related paper.) A university without tenure would likely have to move toward a more hierarchical system with a "boss" in charge of hiring and other major decisions. That is, one cannot abolish tenure and expect university governance to remain the same. Deans would likely have more power over hiring. In my experience, anything that gives deans more authority is a step in the wrong direction, for deans have less information about what is going on in the field or in the classroom than the faculty do."

Levitt Proposes the End of Tenure

According to Steven Levitt tenure "distorts people’s effort so that they face strong incentives early in their career (and presumably work very hard early on as a consequence) and very weak incentives forever after (and presumably work much less hard on average as a consequence)."

The Smith-Hayek Economist: From Character to Identity

An article by Daniel B. Klein on the Smith-Hayek Economist.

Here are some characteristics of the Smith-Hayek economist:

"a tendency to make the distinction between voluntary and coercive action clear in formulating many basic economic categories, principles, and arguments;
an appreciation that knowledge is not merely information, but also interpretation and judgment, and as such is highly particular to the individual and the moment; it is essential for humans to err, in the sense that they kick themselves for having interpreted or judged badly;
a sense that economics must be relevant and serve social purposes, and that such service necessarily entails heavy engagement with non-economists, notably laypeople and policy-makers;
a sensibility that economic reality is incredibly complex, inspiring the eschewal of efforts to paint a picture of the economy or how it "really" works;
a sober, non-romantic view of government—since economic reality is scarcely knowable, we should be wary of those who pretend to manipulate it beneficially;
a presumption in favor of liberty, not the status quo.

The Smith-Hayek characteristics are by no means typical of economists today. As one who shares those characteristics, I wonder if Smith-Hayek economists could do better. Maybe they would do better if they created an effective "we.""

Why We Need Risk

Why can't things always be smooth and nice and predictable? Myron Scholes, Nobel Laureate, says you wouldn't like it if they were

Illegal Immigration

Soft government's approach to illegal immigration leads to an increasing industry that help fuelling illegal immigration.

Differences in Ability and Quality of Teaching

Eric Rasmusen says: "I hear lots of complaints from professors that it is hard to teach a class because the students differ so much in ability. It is easier to teach all smart students or all stupid students than a mix, which is one reason required courses are tougher to teach— they get a random sample of abilities".

Stocks Have Worst Day Since 9/11 Attacks

"Stocks had their worst day of trading since the Sept. 11, 2001, terrorist attacks Tuesday, hurtling the Dow Jones industrials down more than 400 points on a worldwide tide of concern that the U.S. and Chinese economies are stumbling and that share prices have become overinflated". Read the remainder of the article here.

Greenspan Forecasts a Recession

Former U.S.Federal Reserve Chairman Alan Greenspan warned Monday that the American economy might slip into recession by year's end.

Life and Times of Milton Friedman

Remembering the 20th century's most influential libertarian by Brian Doherty published in Reason.

Slavery

The Economist published a confusing and badly written article on Slavery. However it makes a correct point when it acknowledges African participation in the institution of slavery: "A smokescreen still covers the African role in this pernicious trade. It is an awkward fact that the traffic could not have existed without African chiefs and traders. Europeans rarely went far from their forts; slaves were brought to them. Indeed, when the Europeans arrived the slave trade and slavery were already integral parts of local tribal economies. One of the few Ghanaian historians to touch these issues, Akosua Adoma Perbi, writes that “slavery became an important part of the Asante state [the Gold Coast's most powerful] right from its inception. For three centuries, Asante became the largest slave-trading, slave-owning and slave-dealing state in Ghana.”"

Mankiw and Reich

Mankiw criticizes Robert Reich for his economic non-sense: "Robert Reich says that, as a requirement for free trade deals, we should tell developing countries to "set a minimum wage that's half their median wage." The proposal raises two questions in my mind:1. Does Reich pay his nanny, cleaning person, and gardener more than half the median wage of members of his family?2. If not, should I refuse to buy his books?"

Tom Schelling and Michael Spence

A conversation between two Nobel Prize winners:Tom Schelling and Michael Spence

The Health Insurance Crisis

There are scores of people without health insurance in the U.S. . For instance, in New Jersey "About 15 percent of the population, or 1.4 million people, has no health insurance and little access to preventative care. Instead, the state pays nearly $1 billion a year to hospitals, which are required to treat the uninsured when they show up at emergency rooms with critical, not-so-critical and chronic illnesses. Hospitals say the reimbursement is insufficient. Many of them operate in the red". Mark V. Pauly, a Wharton School professor, analyzes the issue in a series of articles here .

Marketing Pizzas to Hispanics

The essence of capitalism is creativity. Consider the success of Pizza Patrón: " it has expanded to 61 locations in just a few years; same-store sales for the final quarter of 2006 (before the “Pizza por pesos” promotion began) were up an impressive 35 percent over the year before. Usually restaurants that focus on a particular ethnic group serve food associated with that demographic, and one of the first things people ask Antonio Swad, Pizza Patrón’s founder, is whether there’s something particularly (or maybe stereotypically) Hispanic about his pizza. Does he use habanero peppers and cilantro? The answer is no. Apart from offering chorizo as a topping, the pizzas are pretty much what you’d expect from any pizza place". Read the article here

A Cybernetic Arms Race

"At the Naval Network Warfare Command here, U.S. cyber defenders track and investigate hundreds of suspicious events each day. But the predominant threat comes from Chinese hackers, who are constantly waging all-out warfare against Defense Department networks, Netwarcom officials said". See the rest here.

Friedman and Blogs

"While 99.9% of blogs will be read only by their authors and three buddies, possibly coerced, quality asserts itself quickly and rises to the top. With no editorial straitjacket on the information or the quality of offerings, the consumer chooses by his action (reading—or not; spreading the word—or not, linking—or not) what makes a quality product. The “blogosphere” is like a little experimental universe validating consumer choice vs. regulation—and consumer choice has won a colossal victory. Trial and error may not help find the right surgeon, but it seems to be a great way to find your right media diet. By and large, blog consumers have shown an incredible sense for quality and reliability". See the rest of the article here.

Hayek and Fusionism

Is it possible to to combine libertarianism and conservatism into a unified political philosophy and program? Edward Feser analyzes this question.

Tyler Cowen on Hayek

Here is a short essay on Hayek written by Tyler Cowen.

What Magic is Holding up the Dollar?

Kenneth Rogoff writes on why the dollar hasn’t crashed yet:"As long as the status quo persists, with strong global growth and stunning macroeconomic stability, the US can continue to borrow and run trade deficits without immediate consequence. Over time, the dollar will still decline, but perhaps by no more than a couple of percent per year. Nevertheless, it is not hard to imagine scenarios in which the dollar collapses. Nuclear terrorism, a slowdown in China, or a sharp escalation of violence in the Middle East could all blow the lid off the current economic dynamic.

In principle, one can also think of scenarios in which the dollar shoots up, but overall these seem less likely. In sum, the fact that the US trade balance has defied gravity for so many years has made it possible for the dollar to do so, too. But some day, the US may well have to pay the bill for its spendthrift ways. When that day arrives, Americans had better pray that their creditors will be as happy to accept dollars as they are now". Read the article here.

Lucas on Growth, Poverty and Business Cycles

Listen the podcast with the Nobel Prize winner Robert Lucas Jr. on Growth, Poverty and Business Cycles
.

The Publication History of the The Road to Serfdom

See the excerpt from Bruce Caldwell’s introduction to The Road to Serfdom: Text and Documents—The Definitive Edition by F. A. Hayek.

Edmund Phelps' Contributions to Economics

On Edmund Phelps' contributions to modern economics.

Interrogating Inequality

What type of inequality do we talk about when we talk about inequality?

Guinea-Bissau: Fears of an Emerging Narco-State

Guinea-Bissau ranks fifth to the last on the United Nation's human development index as it struggles to recover from a brief civil war that ended six years ago. With observers agreeing that political tensions could again spark violence, donors are reluctant to provide assistance, and thus the government remains under-funded and ineffectual.

"As the state is unable to control its own territory, traffickers can operate undetected," Mazzitelli said

The European Economy since 1945

A review of Barry Eichengreen's book "The European Economy since 1945: Coordinated Capitalism and Beyond", from economicprincipals.com.

The Inevitable Collapse of China's Banks?

For Nicholas Vardy, the answer is yes. He says: "Chinese megabanks aren't even banks -- at least not the way we understand them. Carved out of the old Communist banking system just over 10 years ago, the state-owned banks' role has been to bankroll the government's massive infrastructure projects and to keep otherwise bankrupt state-owned enterprises [SOEs] afloat. As arms of the Communist government, Chinese banks have had no incentive to learn the disciplines of basic banking. Conversely, loan applicants never had to cobble together a business plan to get a loan -- or suffer the negative consequences of failure.

That's why it's no surprise that Chinese state-owned banks are a commercial disaster. The Chinese government has pumped over $434 billion to bail them out -- just since 1998. That's more than the GDP of banking giant Switzerland. The U.S. Savings & Loan scandal of the early 1990s cost to the U.S government barely registers in comparison. Add to that the estimated $358 billion in bad loans that China's four-largest banks officially have on their books today, and something smells rotten in Shanghai".
Read the rest of his article here.

Economic Idiocy

Only in France such stupid economic decision can happen: The government has decided to exclude particular retailers from the famous Champs Elysees.

Stiglitz, Sen, Gunter Grass on Globalization

An excellent link to articles written by Joseph Stiglitz, Amartya Sen, Gunter Grass, Meghnad Desai and others on globalisation.

Terror, Risk and Investment

Here is an article in The Economist on the economic effects of terrorist attacks. They increase uncertainty, reducing investment and job creation.

Hayek on Liberalism

In this article on liberalism Hayek analyzes its history and definitions. The article was published in 1973 in the Italian Enciclopedia del Novicento.

Questioning Milton Friedman’s Free Market and Freedom

Pranab Bardhan disputes Friedman's idea that economic freedom is a necessary and sufficient condition for political freedom.

Lucas vs. Lucas: On Inequality and Growth

Cordoba and Verdier wrote this interesting paper [IMF Working Paper No. 07/17]: "Lucas (2004) asserts that "Of the tendencies that are harmful to sound economics, the most seductive, and in my opinion the most poisonous, is to focus on questions of distribution... The potential for improving the lives of poor people by finding different ways of distributing current production is nothing compared to the apparently limitless potential of increasing production." In this paper we evaluate this claim using an extended version of Lucas' (1987) welfare-evaluation framework. Surprisingly, we find that the welfare costs of inequality outweigh the benefits of growth in most cases. These calculations support the case for a research agenda that treats not only growth but also inequality as a priority".

Incomes and Inequality

Tyler Cowen writes: "While there is little doubt that the gap between the wealthy and everybody else has widened in recent years, the situation is not as unfair as some of the numbers seem to imply". Read the article here.

The End of Poverty

Jeffrey Sachs believes that with a little help we can get rid of poverty.

Gary Becker on Reforming the American Health Care System

"In thinking about reforms it is crucial to recognize that the American system has many strong features that should be preserved, such as the predominant role of private physicians, private hospitals, and private HMO's that compete against each other for patients and health care dollars". Read the article here.

A History of the Modern American Libertarian Movement

A book review of Brian Doherty's Radicals for Capitalism: A Freewheeling History of the Modern American Libertarian Movement

Krugman on Friedman

Paul Krugman writes on Milton Friedman

Why Globalising Capitalism is Hated

"Globalising capitalism is opposed by two major groups - the cultural nationalists in the third world, who fear the westernisation it may bring and the New Dirigistes, proponents of the “third way’” in the West who bear the ancient hatred of capitalism on their sleeves. Why this continuing hatred of, and guilt about, a system which promises unprecedented global prosperity?" See the article of Deepak Lal
here.

The Importance of Institutions

A new economic history argues that Europe's institutions must adapt if the continent is to thrive in future

Growth Trade-Off?

Germany's economy has regained its lost competitiveness, but it may come at the expense of Spain, where wages are rising fast.

How Economists Think

Here is a chapter of David Friedman's book Price Theory on how economists think

Phelps on Dynamic Capitalism

"Instituting a high level of dynamism, so that the economy is fired by the new ideas of entrepreneurs, serves to transform the workplace--in the firms developing an innovation and also in the firms dealing with the innovations. The challenges that arise in developing a new idea and in gaining its acceptance in the marketplace provide the workforce with high levels of mental stimulation, problem-solving, employee-engagement and, thus, personal growth. Note that an individual working alone cannot easily create the continual arrival of new challenges. It "takes a village," preferably the whole society". Read the article here

What's Bringing Oil Prices Down?

According to James Hamilton in his blog Econbrowser the changed positions of speculators seem to be a big part of the explanation.

Krugman on Health Care

The Marginal Revolution has a recent op-ed of Paul Krugman on health insurance.

Milton Friedman: Free to Choose

Watch Milton Friedman's Free to Choose series online.

Financial Institutions for Low-Income People

Robert Shiller writes about financial innovations that may help finance low-income people and increase their savings.

Game Theory and War and Peace

In an article published in the American Political Science Review Bruce Bueno de Mesquita shows how game theory and political economics are important tools to help understanding conflicts between nations.

Military-Economic Transactions tend to Corrupt Business

According to Robert Higgis: "In countries such as the United States, whose economies are commonly, though inaccurately, described as "capitalist" or "free-market," war and preparation for war systematically corrupt both parties to the state-private transactions by which the government obtains the bulk of its military goods and services". Read the rest of the article Here.

Hayek and Orwell

In the prologue of the American edition of The Road To Serfdom, Hayek acknowledges the kindness of George Orwell in reviewing his book. Here is the review. Orwell concludes: "Capitalism leads to dole queues, the scramble for markets, and war. Collectivism leads to concentration camps, leader worship, and war. There is no way out of this unless a planned economy can somehow be combined with the freedom of the intellect, which can only happen if the concept of right and wrong is restored to politics". Aparently Orwell did not fully understand Hayek's argument.

Ph.D. Comics

Have a laugh at phdcomics.

Great Economists: Buchanan and Tullock

Picture of Gordon Tullock [left] and James Buchanan [right] authors of the classic "The Calculus of Consent". The picture was copied from the excelent blog Adam Smith lives.

Globalisation, Technology and Wages

Does globalisation increase wage inequality?

Fear and Work

"Our own and others' research have identified two types of factors that lead people to feel more or less safe speaking up: individual differences and contextual factors.Individual differences include personality dispositions such as one's level of extraversion or proactivity, or one's developed skills such as how to communicate in ways that don't evoke defensiveness, and also personal concerns about job security and/or mobility. These factors tend to be seen as applying across situations. For example, a person with greater communication skill might be more likely to speak up despite an unfavorable context.In contrast, context refers to organizational factors, outside the individual, that provide cues about how voice is likely to be received. Leader behavior is one such contextual cue. Aspects of organizational culture and structure also matter, such as the degree to which an organization is hierarchical or egalitarian, or has explicit mechanisms for inviting upward input (e.g., suggestion boxes, regularly-scheduled meetings, surveys).Our research adds the finding that specific features of the situation in which voice is contemplated, such as the size and formality of the venue and level of hierarchy present, also matter, as does the degree of demographic similarity between the speaker and the intended target of his or her communication". See the rest of the interview with Harvard's professor Amy Edmondson here.

World Bank's Problems

The Economist analyzes some criticisms put forward on the World Bank's performance: "They accuse the leadership of taking “new and untested results as hard evidence that its preferred policies work”; and of then using this research to “proselytise on behalf of bank policy”. This has a cost, the inspectors point out. “Placing fragile selected new research results on a pedestal invites later recrimination that undermines the credibility and usefulness of all bank research.”"

Open Source Science

"Is there a model for encouraging large-scale scientific problem solving? Yes, and it comes from an unexpected and unrelated corner of the universe: open source software development". See the interview with Lakhani here.

Are Economic Agents Rational?

The Economist has the answer from neuroeconomics.

Freak-Freakonomics

Ariel Rubinstein gives his answer to Freakonomics.

A Natural State

A Conceptual Framework for Interpreting Recorded Human History
Douglass C North, John Joseph Wallis, Barry R. Weingast
NBER Working Paper No. 12795Issued in December 2006

Abstract: Neither economics nor political science can explain the process of modern social development. The fact that developed societies always have developed economies and developed polities suggests that the connection between economics and politics must be a fundamental part of the development process. This paper develops an integrated theory of economics and politics. We show how, beginning 10,000 years ago, limited access social orders developed that were able to control violence, provide order, and allow greater production through specialization and exchange. Limited access orders provide order by using the political system to limit economic entry to create rents, and then using the rents to stabilize the political system and limit violence. We call this type of political economy arrangement a natural state. It appears to be the natural way that human societies are organized, even in most of the contemporary world. In contrast, a handful of developed societies have developed open access social orders. In these societies, open access and entry into economic and political organizations sustains economic and political competition. Social order is sustained by competition rather than rent-creation. The key to understanding modern social development is understanding the transition from limited to open access social orders, which only a handful of countries have managed since WWII.
See the paper at http://papers.nber.org/papers/w12795