What I've Been Listening To

At EconTalk Russ Roberts talking to John Nye about the Great Depression, the backlash against globalization in the early twentieth century, long run changes in the role of government, and more.

At VoxTalks Romesh Vaitilingam talks to Dean Karlan about microfinance and the use of experimental methods in economic research.

Which economists got it wrong?

Gregory Mankiw’s most recent blog post is “How did economists get it so wrong?” with a link to an answer by Barry Eichengreen. Paul Krugman had a long essay on the topic in last weeks Sunday New York Times. A group of British economists even felt the need to respond when the Queen asked the question. I am getting tired of the question for several reasons. First, many economists were pointing to problems before the recession began. Robert Shiller, Nouriel Roubini, Raghuram Rajan would just be the start of the list. Krugman himself wrote a book titled The Return of Depression Economics. How much warning do people need. Does every economist have to stand up and shout at the same time?

Second, who are the economists who got it wrong. Who is the Irving Fisher of our time?

Third, its not clear that it would have made a difference if all economists had shouted at the same time. Since when did policy makers start doing what economists say. If policymakers listened to economists we wouldn’t have tariffs, quotas, or agricultural price supports.

The irony of the tea party protest

The irony of holding tea party protests on April 15 is that the Tea Act of 1773 was a tax cut. Prior to the Act the English East India Company had to send tea to London where it paid a duty of about 2 shilling six pence per pound. Only after going through London and paying this duty could it go to the colonies.The Act allowed the Company to ship directly to the colonies, paying only a duty of about three pence per pound in the colonial ports. The purpose of the Act was to aid the East India Company not the colonists, but it resulted in a considerable reduction in taxes on tea shipped to the colonies. The trouble is that many people had done well under the old rules, for instance, profiting from smuggled Dutch tea. While the Tea Act would have lowered the tax for consumers it would have harmed these people.

The Allegory That Would Not Die

The BBC Online examines the Wizard of Oz as a monetary allegory. I was interviewed because of my paper “The Fable of the Allegory: the Wizard of Oz in Economics” Journal of Economic Education (Summer 2002). I said in the interview that there is no evidence that the Wizard of Oz was written as an allegory. Even those who advocate using it as a monetary allegory generally agree. See, for example, Ranjit Dighe’s book and reply to my paper. I also say that I am not convinced that the allegory adds to the understanding of monetary issues in the late nineteenth century. In particular, I don’t think it add to the understanding of support for the gold standard. In general support for the gold standard was not based on some superstitious notion that only gold could be money. People at the time had experience with gold and silver as well as paper money. Participation in the gold standard required that currency be convertible into gold at a fixed rate. Adherence to this requirement meant that control of the money supply was taken out of the hands of policy makers. When multiple countries adhered to the gold standard it also created a system of fixed exchange rates. Fixed exchange rates remove exchange rate risk and, other things equal, encourage foreign investment. Advocates of the gold standard recognized these benefits. The issues surrounding the adoption of the gold standard in 1900 are still relevant to today. Students can gain historical perspective on the adoption of the euro, and the use of fixed exchange rates or dollarization in less developed countries by studying the gold standard. I am not yet convinced that The Wizard of Oz adds to the understanding of economic history.

Constraining the state's ability to employ force

"Constraining the state's ability to employ forces: the standing army debates, 1697-99" by Shawn Humphrey and Bradley A. Hansen was just accepted by the Journal of Institutional Economics.

Abstract: Britain's Glorious Revolution of 1688 is one of the most widely studied cases of institutional change. Recent institutional analyses of the Glorious Revolution, however, have failed to address one of the central issues in political science: control of the state’s comparative advantage in violence. This paper examines this issue through analysis of the standing army debates of the late 1690s. Participants in the debates disputed whether a standing army or a militia would be the most effective institutional arrangement to guard against threats from abroad and tyranny at home. Both sides of the debate analyzed the effects of a standing army in terms of the incentives that it created for soldiers, citizens, the monarch, and foreign governments.

Internships

Think Tanks
The Cato Institute
The Brookings Institution
The American Enterprise Institute
The Heritage Foundation
The Urban Institute

Government
Council of Economic Advisors
Bureau of Labor Statistics
The Bureau of Economic Analysis
Congressional Budget Office
Environmental Protection Agency
Federal Reserve Board
Federal Trade Commission

Business
BB &T
Geico

Development
First People’s Worldwide

Alexander Hamilton

Robert Wright reviews Hamilton's Curse a new book by Thomas D Lorenzo.

Majoring in Economics

If you are thinking about majoring in economics you are not alone. Here are stories from NPR and the Chronicle of Higher Education.