This and That

Economics of Pop Music

In recent years, the economics of pop music have been upended. The market for CDs has collapsed, and not even the rise of legal downloading can offset the damage to record companies. Meanwhile, demand for live performances has rocketed

Same old folly, new spiral of risk - John Kay
Risk markets are based more on imperfections of information than on differences in attitude to risk. Drawing an analogy between the Lloyds insurance market of the 1980s and the structured credit markets of today, John describes how financial follies repeat themselves in each generation

Who's Counting: Alternative Voting Methods and Mitt Romney's Mathematical/Political Gaffes

Who's Counting: Hofstadter's Strange Loops -- as Well as Colbert and Borat

PhD or not?

Three important questions

China, Filling a Void, Drills for Riches in Chad ;

As Beijing’s ambassador to this country, Wang Yingwu, said at his residence in Ndjamena, Chad’s capital, where the electricity repeatedly failed, “We are exempting Chadian goods from import duties.” When the interviewer noted that Chad produced almost nothing besides oil, Mr. Wang was undaunted, saying, “If they don’t produce things today, they will tomorrow.”

To help make that happen, China plans to build the country’s first oil refinery, lay new roads, provide irrigation and erect a mobile telephone network, for starters.

With such intensive efforts across the continent, China’s trade with Africa topped $55 billion in 2006, up from less than $10 million in the 1980s. To achieve this growth, it has bypassed multinational institutions like the World Bank and the International Monetary Fund and flouted many of their lending criteria, including minimum standards of transparency, open bidding for contracts, environmental impact studies and assessments of overall debt and fiscal policies.

A testosterone tax

Remembering a Classic Investing Theory;

More than 70 years ago, two Columbia professors named Benjamin Graham and David L. Dodd came up with a simple investing idea that remains more influential than perhaps any other. In the wake of the stock market crash in 1929, they urged investors to focus on hard facts — like a company’s past earnings and the value of its assets — rather than trying to guess what the future would bring. A company with strong profits and a relatively low stock price was probably undervalued, they said.

Their classic 1934 textbook, “Security Analysis,” became the bible for what is now known as value investing. Warren E. Buffett took Mr. Graham’s course at Columbia Business School in the 1950s and, after working briefly for Mr. Graham’s investment firm, set out on his own to put the theories into practice. Mr. Buffett’s billions are just one part of the professors’ giant legacy

Real Analysis for Economics I
Real Analysis for Economics II

High returns, low investment;

I do not quite buy the Harberger story. The risk story has two problems that I can see. One is that it applies to ex-ante returns, not ex-post returns. If what is deterring investment is really risk, then over a sufficiently long period of time we should see the ex-post, realized rate of return to be low, not high. Yet, as Harberger reports, the high rates of return have been there for quite some time. In El Salvador, private investment was as depressed when FMLN was not a serious electoral threat. Second, when we look at instances of rapid increase in investment, it is hard to argue that there was less uncertainty in those policy environments. I have in mind cases like South Korea in the early 1960s or indeed Harberger's own Chile in the late 1980s. I read the evidence as suggesting that investment responds pretty quickly to profitability-enhancing reforms, even in the presence of uncertainty about their permanence. Which is of course why I think the Washington Consensus reforms failed: they simply did not increase the private profitability of investment sufficiently (whatever their risk profile).

The Harvard Education You Could Do Without

Anarchy Rebound

Federal Reserve policy actions in August 2007: frequently asked questions

The Central Bank as the Market Maker of last Resort: From lender of last resort to market maker of last resort

Sink or Swim?

An ECB Put?

The Malthusian Zombie

Tabarrok Corrects Rodrik (and a Lot of Textbooks)

The First Fundamental Theorem of Welfare Economics

In Dusty Archives, a Theory of Affluence

Amid Financial Excess, a Revival of Austrian Economics