Wednesday, October 31, 2012

Good and bad local news

Revealing bits of good and bad local news from the Chicago Tribune: Food trucks and congestion pricing.

Saturday, October 27, 2012

NBER Asset Pricing conference

I spent Friday at the NBER Asset Pricing conference in Palo Alto. All the papers were really good, and the discussions were especially thoughtful. Here are a few highlights that blog readers might like.

There's no better way to wake up than with a good puzzle. Emanuel Moench presented his paper with David Lucca,The Pre-FOMC Announcement Drift.(If these links don't work for you, most papers can be found with google.)

Here are average cumulative returns on the S&P 500 in the day preceding scheduled FOMC announcements (when the Fed says what it will do with interest rates). The grey shaded areas are 2 standard error confidence intervals. The S&P500 drifts up half a percent in the day before FOMC announcements!  In fact, 80% of the total return on the S&P500 over this period was  earned on these days.

Monday, October 22, 2012

Christina Romer on Stimulus

(Small update to clarify in response to early comments)
Christiana Romer has an important column in Sunday's New York Times on the stimulus. You will recall that as chair of the Council of Economic advisers, she played a big part in designing the stimulus, and forecasting its effects. She also is one of the preeminent academics who have done empirical work evaluating the effects of stimulus programs. You expect a thoughtful essay.

Pile of paper

In response to my long health-care essay, a friendly doctor sent me the image at the left, with an explanation:

"You want to talk about filling out forms? Here are two hospital privilege renewal applications. Most of my info - such as where I graduated from, where I trained, license #, etc - has not changed. That includes my face, yet they want a new photo. My staff tabbed all the places where I have to sign or initial. This is a standardized form, yet I have to fill one out for every hospital and they all want extra information (including a copy of my signature on a check made out to the hospital)."

Comment: And, amazingly this is all on paper!  

Friday, October 19, 2012

After the ACA: Freeing the market for health care

This is an essay, based on a talk I gave at the conference, “The Future of Health Care Reform in the United States,” at the University of Chicago Law School. The pdf version on my webpage may be easier to read than this version, which is a bit long for a blog post. Also, I'll update the pdf over time as I collect comments, but not this blog post.

Update 2/6/2013 I revised the essay on my webpage which is now better than this one. 

Clearly, two important items on the policy agenda are, if we could get rid of the ACA and Dodd-Frank, what would we replace them with? This essay thinks about ACA, I'll be back on Dodd-Frank. Here goes:

After the ACA: Freeing the market for health care
John H. Cochrane1
October 18 2012

Most of the current policy debate, and the optimistically-named “Affordable Care Act,” focuses on health insurance. I think we need to move on to think about the economics of health care. If the ACA is repealed, we still have a mess on our hands, and just fixing insurance will not be enough to clean up that mess.

Wednesday, October 17, 2012

Are recoveries always slow after financial crises and why

Carmen Reinhart and Ken Rogoff have an interesting new Bloomberg column, "Sorry, U.S. recoveries really aren't different." They point to the great Barry Eichengreen and Kevin O'Rourke "Tale of two depressions: what do the new data tell us" columns. (Hat tip, commenter Tim to "slow recoveries after financial crises" who asked what I think. Here's the answer)

Reinhart and Rogoff go after the sequence of studies who have questioned their assertion that recessions after financial crisis are deeper and recoveries slower.

Friday, October 12, 2012

If air travel worked like health care

I spent the day at the Law School's "Future of Health Care Reform in the United States." I'll post my talk soon. In the meantime, Einer Elhauge from Harvard showed this hilarious video. Enjoy!

Thursday, October 4, 2012

Dynamic Tax Scoring

The Tax Foundation study, "Simulating the Effects of Romney's Tax Plan" is worth reading and thinking about, especially in contrast to the standard static analysis that I complained about at the CBO.

Gov. Romney has proposed, at heart, a reduction in marginal rates, together with tightening of deductions. He hopes to make the latter large enough so that the program is revenue neutral, or at least deficit neutral when some spending cuts are included, and as close to neutral across the income distribution as possible.

Unlike a Keynesian plan, whose purpose is to transfer wealth to the hands of people (voters) likely to "consume" it, or a redistributionist plan, whose purpose is to transfer wealth from one category to another of people, the point of a revenue-neutral, income-neutral tax reform is to permanently and predictably lower marginal rates, giving rise to incentives to work, save, invest, and increase economic growth over the long run.

What possible sense does it make, then, to evaluate such a plan by assuming off the bat that it has no effect at all on output, employment, investment and so forth? Yet that is precisely what the standard "static" scoring does!  We build a rocket ship to go to the moon, and we evaluate its cost effectiveness by assuming that it never leaves the launch pad?