tag:blogger.com,1999:blog-582368152716771238.post8946867682383177515..comments2024-03-28T14:41:03.793-05:00Comments on The Grumpy Economist: Micro vs. MacroJohn H. Cochranehttp://www.blogger.com/profile/04842601651429471525noreply@blogger.comBlogger23125tag:blogger.com,1999:blog-582368152716771238.post-84599084135345625192016-08-29T11:59:18.294-05:002016-08-29T11:59:18.294-05:001) At a time of the highest rate of expansion of ...1) At a time of the highest rate of expansion of scientific knowledge in the history of humanity, the concept of a "shortage of ideas seems insane". We have a shortage of imagination by certain economist. <br /><br />2) There is always demand for doing something better and more efficiently than it is being done at present. <br /><br />3) Any set of regulations/standards etc. creates arbitrary limits that prevent innovation from being implemented. Of course these limits are set by those organizations that benefit from the regulations/standards. <br /><br />Each human can only see part of the picture. My little view, with documented facts that regulations are the problem is as follows. <br /><br />I do see a 5 billion dollars per year opportunity in So. California for offshore aquaculture that is being directly blocked by US and California bureaucrats. In California, we don't have NE Pacific storms or Huricanes, allowing offshore operations year around plus we have deep water with lots of flow and 35 million people who want fresh seafood. In the rest of the world, aquaculture (especially offshore) is expanding at double digit rates, but in the US it is shrinking under a regulatory strangulation. <br /><br />In California, with a 35 million people market for seafood, the industry is evolving in Mexico. My consulting work in this area is now in Mexico where the regulators are not as power hungry and insane. <br /><br />In California, the regulatory system has been working on a desalinization proposal (making fresh water from saltwater) for 12 years concerned with 80 million fish larva "entrained in the intake seawater" per year being killed by the facility. Having bought, traded and sold fish fish larva for < $1000/million, having the regulators propose a billion dollar "solution" to this "entrainment" problem is representative of "institutional insanity". Meanwhile, many dozens of members of the "educated elite" (almost all have a MS degree or higher) have earned a high income discussing, studying, lobbying, debating, getting retirement, etc. while "Joe Median" employee who would build, operate and maintain the desalinization facility, providing water to So. California go without jobs. Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-37682119472485399722016-08-29T02:09:51.068-05:002016-08-29T02:09:51.068-05:00John,
"The cause of sclerotic growth is the ...John,<br /><br />"The cause of sclerotic growth is the major economic policy question of our time. The three big explanations are 1) We ran out of ideas (Gordon); 2) Deficient demand, remediable by more fiscal stimulus (Summers, say) 3); Death by a thousand cuts of cronyist regulation and legal economic interference."<br /><br />How about 4) We mistakenly thought that by giving stuff away (unemployment benefits, bank bailouts, credit, tax breaks, etc.) that this would resuscitate growth in trade.<br /><br />Perhaps charity is not the best way to spur growth (economic, emotional, or otherwise)? How many well adjusted adults have come along that have had everything handed to them on a silver platter?<br /><br />FRestlyhttps://www.blogger.com/profile/09440916887619001941noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-50210663613527147302016-08-26T11:35:59.212-05:002016-08-26T11:35:59.212-05:00Can we answer D) All of the above? Last I checked ...Can we answer D) All of the above? Last I checked things can be caused by a multitude of factors, often without 1 being dominant. It's easier and more digestible to say "Stagnation is caused by X" than "Stagnation is caused by an unknown mix of X, Y and Z". Anonymoushttps://www.blogger.com/profile/00724280544364726437noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-453289229949491442016-08-26T10:01:58.431-05:002016-08-26T10:01:58.431-05:00If you are looking for explanations for the Great ...If you are looking for explanations for the Great Stagnation, consider this possibility: the optimal equilibrium in the market for coercion is stagnation. The other 'equilibriums' involve a lot of physical conflict?Cliff Styleshttps://www.blogger.com/profile/09577830542915477730noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-6079976279742543632016-08-25T12:19:54.482-05:002016-08-25T12:19:54.482-05:00Do you really not know that the primary owner of e...Do you really not know that the primary owner of e-cigs is " big tobacco"?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-77371412943628388372016-08-24T13:09:55.541-05:002016-08-24T13:09:55.541-05:00Professor Cochrane,
This post fills me with despai...Professor Cochrane,<br />This post fills me with despair because I don't hear anyone from the GOP advocating for any of the ideas that you put forth. It would be one thing if we had two parties who were trying to solve problems and competing for the best way to do so, but instead it's arguably different constituencies fighting over rents. It feels like true pro-growth policies are entirely missing from the political discourse. Can you point any politician out to me (on the right especially) who wants to reform zoning, occupational licensing, drug discovery / FDA, etc? The only people I've seen arguing for these things have been mostly Democrats (for example, this from the White House on occupational licensing: https://www.whitehouse.gov/the-press-office/2016/06/17/fact-sheet-new-steps-reduce-unnecessary-occupation-licenses-are-limiting ).<br />Progressive Neo-liberalnoreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-76107338990187356642016-08-24T11:27:54.622-05:002016-08-24T11:27:54.622-05:00Real-GDP is a metric that is basically a hybrid of...Real-GDP is a metric that is basically a hybrid of what governments care about (growth) and what people care about (personal productivity (or spending power) improvement). It's not worth even thinking about the problem without disentangling the two separate issues here.Fish Goldsteinhttps://www.blogger.com/profile/13864053986442147618noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-57765569896717518982016-08-23T22:16:21.960-05:002016-08-23T22:16:21.960-05:00All good.
Now, let's go after property zoning...All good.<br /><br />Now, let's go after property zoning, the criminalization of push-cart or truck-vending, and the evidently permanent federal corn-ethanol fuel program. <br /><br />And can we stop licensing lawyers? <br /><br />And stop paying interest on excess reserves to banks? <br /><br />I would also like to end a 100% taxpayer-funded federal medical and welfare program for former federal employees who retire after 20 years of service. The VA.<br /><br />Sadly, my echo chamber had no walls. Benjamin Colehttps://www.blogger.com/profile/14001038338873263877noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-16565635476659472362016-08-23T15:25:16.784-05:002016-08-23T15:25:16.784-05:00John, in the interview you linked to earlier, you ...John, in the interview you linked to earlier, you said you're a fan of the new Keynesian model, which I think you stated is really a consumption function based on the permanent income hypothesis. Permanent income is of course just the present discounted value of future flows, and is then a stock. The stock of wealth comes in different forms. Capital is human, intangibles, tangibles, and financial, and these generate -- interdependent -- flows of income. So both macro and micro theory need to understand the formation and valuation of capital so that current demand management and growth theory can be merged. But, listening to a fun discussion between Eugene Fama and Richard Thaler on the efficient market hypothesis (check youtube), it's clear that one thing they agreed on is that we don't have and can't really get a theory of what appropriate capital values are or should be. Yes, the market is the most efficient mechanism for incorporating relevant information, but there is no model (not CAPM, not the empirical asset pricing model, not anything else) that can establish the "correct" price of capital assets. That includes not just stocks and bonds, but real estate and human capital (i.e., labor earnings) as well. But the point seems to be that the "new" Keynesian model would indicate that we need to look at all market mechanisms that set the prices of labor, financial instruments, real estate, physical capital, and the intangible knowledge capital in modern corporations. In other words, heed the efficient market theory, and make sure that the markets for all capital assets, including human capital, are able to function as freely as possible. That's how you get growth, i.e., higher levels of capital which yield higher rates of return and higher future income streams. If that's the new Keynesian model, there's much more to economic policy than Summners' simple fiscal demand management ideas, and sounds more like the kind of policies generally advocated by the Wall Street Journal -- and old school Chicago.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-3803027753091338262016-08-23T14:54:05.476-05:002016-08-23T14:54:05.476-05:00In the big scheme of things, though, pilot rest do...In the big scheme of things, though, pilot rest does not sound like a big cronyist anti competitive regulation. It's going to raise costs for everyone a bit, and airlines have to keep a few extra pilots around. Truckers also have to sleep. And of all the regulations raising costs and reducing innovation in aviation it also seems pretty small. John H. Cochranehttps://www.blogger.com/profile/04842601651429471525noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-54116628692576263872016-08-23T14:23:48.667-05:002016-08-23T14:23:48.667-05:00Of course Frank! They are all experts with one fla...Of course Frank! They are all experts with one flaw, the inability to understand, if it's not broken, fix it until it is!David Seltzernoreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-39232796782741958742016-08-23T13:30:40.557-05:002016-08-23T13:30:40.557-05:00Thanks so much, Parth.Thanks so much, Parth.David R. Hendersonhttps://www.blogger.com/profile/02927325694778972407noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-8754588591858122802016-08-23T12:48:09.854-05:002016-08-23T12:48:09.854-05:00http://www.usatoday.com/story/todayinthesky/2014/0...http://www.usatoday.com/story/todayinthesky/2014/01/03/pilot-fatigue-mandatory-rest-new-faa-rules/4304417/Parth Venkathttps://www.blogger.com/profile/09830285782100016152noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-55701587315268779392016-08-23T12:42:13.822-05:002016-08-23T12:42:13.822-05:00The policy under the guise of safety is how you co...The policy under the guise of safety is how you count a "full shift" for a pilot and crew. Previously it was sealed door to sealed door, now it's show up to work. The major effect is increasing how much single delays can impact the entire system because it's very easy for a crew now to go over their allotted time if they're stuck in the captains lounge. This has a minor impact on major airlines who have more route flexibility but leads to a ton of cancellations on the jet blues and virgin's of the world that don't have the same flexibility. I'm sure EVERYONE noticed how much the same weather issues are creating far more cancellations and delays. ALL FAA! Parth Venkathttps://www.blogger.com/profile/09830285782100016152noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-35200479193847770412016-08-23T11:56:12.583-05:002016-08-23T11:56:12.583-05:00In this case, I think that Jenkins is really argui...In this case, I think that Jenkins is really arguing that the administration is passively encouraging oligopoly by not objecting to airline consolidation because the major airline unions have become supporters of the mergers. The basic idea is that as long as the union members suffer minimal loss of benefits or service credit in a merger then they should be net beneficiaries as the oligopoly results in much more stable markets with more stable profits for the companies and more stable employment conditions for the employees. <br /><br />The history of the industry since deregulation has been very much boom/bust driven by excess capital spending in economic booms as competitors try to grab share. In the down cycle, airlines have retrenched (often thru bankruptcy) which has led to downward renegotiation of union deals, usually through furlows and reduced service credit for remaining employees.<br /><br />As a successful investor in airlines in this cycle, its clear to me that they have behaved in much more carefully in adding capacity, which has maintained pricing power much longer than prior cycles. But I am not convinced that they have acted as true oligopolists, but the absence of government interference in mergers is notable compared to other industries or to the history of airline regulatory concerns about concentration in individual markets. Pemakinhttps://www.blogger.com/profile/06117163546028266427noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-87126850015832782872016-08-23T08:27:36.194-05:002016-08-23T08:27:36.194-05:00I've learned from Chad Jones' work that th...I've learned from Chad Jones' work that there really is no distinction between "level" and "growth rate" effects. The promise of the first generation of new growth theory, that there are policies that skip a derivative and make everything else insignificant, didn't bear out. Everything is level -- albeit very big levels, with very long adjustment paths. I'll post at some point in detail. John H. Cochranehttps://www.blogger.com/profile/04842601651429471525noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-55757773103096531802016-08-23T05:07:04.028-05:002016-08-23T05:07:04.028-05:00Thanks for the post. One question: do you think th...Thanks for the post. One question: do you think these policies hamper the level of economic growth, or its growth rate? I appreciate one can't readily distinguish the two in finite time, but conceptually it's more likely to be the former, right?<br />It seems that Summers' thesis is really about the former too, with Gordon talking about something which hits the growth rate directly.<br /><br />While I agree that there's may be a lot of regulation that could be removed and be good, it's worth noting that here in the UK the Conservative government has tried to remove regulation and the UK's GDP growth performance has been somewhat similar to the US's (with a worse productivity growth rate). I appreciate there's lots of other differences which might offset this, but this at least suggests that the weakness of the recovery is not due to abnormally high amounts of regulation (relative to the long run average)?<br />blenheimhttps://www.blogger.com/profile/09958041567058351874noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-62680543228420248732016-08-23T00:07:40.303-05:002016-08-23T00:07:40.303-05:00"The truth is, government playing neutral arb..."The truth is, government playing neutral arbiter over the private economy doesn’t produce rents. A stable and predictable regulatory system produces only mingy or non-existent rents" -- ummm no? Regulations raise barriers to entry which favors large firms who can afford lawyers and lobbyists over small businesses and entrepreneurs who have neither the legal expertise nor the resources. And what is this fantasy about neutral arbitration, as if transgender bathroom law and critical sexual assault theory are branches of engineering? Just ask an expert EPA engineer to form a coherent rebuttal to Epstein's case for regulatory takings law and watch them squirm and it will be perfectly clear that THEY'RE RENT SEEKERS TOO! if I know it's just an example of a story about rent seeking but still... Also in response to the second author, the NLRB is technically an independent agency and not in the executive branch.unknownhttps://www.blogger.com/profile/06969449051138086858noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-53020250293249475182016-08-22T19:50:56.027-05:002016-08-22T19:50:56.027-05:00So now central bankers have become fiscal policy e...So now central bankers have become fiscal policy experts? Perhaps he should resign his post as Vice Chair of the Fed and run for Congress.FRestlyhttps://www.blogger.com/profile/09440916887619001941noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-33783797932302675462016-08-22T17:44:59.303-05:002016-08-22T17:44:59.303-05:00I'm not sure what he has in mind either. But I...I'm not sure what he has in mind either. But I haven't been following airline regulation. It's all too much, too fast... John H. Cochranehttps://www.blogger.com/profile/04842601651429471525noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-11497025585327885962016-08-22T15:04:09.740-05:002016-08-22T15:04:09.740-05:00Today's WSJ. Stanley Fischer, concerned about ...Today's WSJ. Stanley Fischer, concerned about long-term productivity, said more public investment in infrastructure and education along with regulatory Changes could boost flagging growth! Really? We've had eight years of shovel ready jobs and student loans approaching a trillion dollars. He didn't mention economic policies akin to blood letting and leeches to cure an ailing patient! Maybe the Fed should get out of the way as well.David Seltzernoreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-40353752770183688112016-08-22T12:12:33.251-05:002016-08-22T12:12:33.251-05:00Nice post. Related to the efficacy (or lack thereo...Nice post. Related to the efficacy (or lack thereof) of fiscal stimulus, I would also point to the numerous stories of inefficiency in federally-funded infrastructure projects. Some of these problems are certainly attributable to costly regulations (historical preservation, permitting, etc.) while others rise from more general issues of accountability. Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-91432715216992433902016-08-22T12:03:44.445-05:002016-08-22T12:03:44.445-05:00I love the Holman Jenkins WSJ piece that you quote...I love the Holman Jenkins WSJ piece that you quoted from. He’s my favorite regular WSJ columnist. Question: I didn’t know what he was referring to with this statement: "His airline policy, urged by labor unions, led to a major-carrier oligopoly, with rising fares and profits.” What’s his airline policy? Obviously, he doesn’t want to allow foreign competitors in domestic markets, but this has been a long-standing policy and so it’s hard to see how this leads to rising fares, as opposed to high fares. <br /> David R. Hendersonhttps://www.blogger.com/profile/02927325694778972407noreply@blogger.com