Economics

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New economic thinking

In the context of economics there are two major things that the GFC proved to the world. Firstly, global financial regulatory frameworks are woefully inadequate and, secondly, very few of the ruling class of economists have any idea what is going on. These two things alone have lead to a massive loss of wealth and

38

El-Erian on unsustainable central bank policies

Perhaps a small warning within the lecture given by PIMCO’s Mohamed El-Erian at the St Louis Federal Reserve last night for those who think our own central bank should go down a similar road to other developed nations. This is a marvellous speech, available in full here. Here are the key points, beginning with his

31

Keen slaps Krugman back

Love him or hate him, you have to admire Dr Steve Keen’s chutzpah, which is slowly but surely going global. Today Dr Keen returns via the global blogosphere to defend himself against a recent ill-considered attack from Paul Krugman. It’s clear that Keen has Krugman on toast here, as was first noted at Naked Capitalism. This

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Chart of the Day: A fat bubble

From The Atlantic, on an article about unwalkable roads via Zero Hedge, I couldn’t go past this one for todays Chart: And don’t worry Australia you’re not that far behind, with this chart linked within the article: The original Atlantic articles premise (and shocking photos) was about how America’s infrastructure is positioned solely around the

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Exponentials to love

Doom sayers like to point to the problems implicit in exponential growth within a finite system. There are of course causes for concern, but I believe the picture is a lot more complicated.

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What’s wrong with economic models?

As linked this morning,  Dr Steve Keen is getting a bit of attention from Paul Krugman after he wrote a Primer article on Minsky in which he called out Krugman, among other neo-classical economists. This was also covered by Philip Pilkington over at Naked Capitalism. I’m not going to address the discussion directly, but essentially, Dr Keen

21

Reindustrialization of Europe

Cross-posted with permission from MacroTragedy, a Greek-based macro-analyst who you can also follow on Twitter It certainly is no secret that the west is de-industrializing fast and has been doing so for some time now. This trend has been present since the 1980s. Nonetheless, some countries, did manage to buck this trend and re-industrialized. Now

13

The economy as machine

The Economist recently had an article on Ray Dalio, hedge fund manager and founder of Bridgewater. The article quotes Paul Volcker describing the degree of detail in Mr Dalio’s work as “mind-blowing”, adding that “he has a bigger staff, and produces more relevant statistics and analyses, than the Federal Reserve.” So it was with some interest that

3

Population and disinflation

In my 2012 forecast for China’s economy, I pointed out that while the consensus seems to suggest that the future for China will be inflationary because of ageing population and shrinking labour force (see also BarCap’s view on this issue, in which they think China will have a structurally high inflation in the years to

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Are we hooked on population growth?

I was recently invited to attend the launch of a new documentary called “Growthbusters” in Brisbane on Friday night but was unable to attend due to work commitments. Thankfully, the sponsor, The Stable Population Party, gave me access to an online screening. Here is a preview of the 1hr 30min film: This is a very

21

Adrift in a sea of economic data

A little known fact about John Maynard Keynes, detailed in Jane Gleeson-White’s book “Double Entry” is that he was responsible for the development of national economic statistics and that he expected them to be aggregated only on a temporary basis. It was being done for the war effort, and would, he reasoned, not be necessary

28

Have labour will travel

We cannot say we were not warned. Many commentators about globalisation said that it would create an imbalance between labour and capital, for the simple reason that capital is free to move wherever it wants, and labour, except at the very top end, is not. And so it is turning out, with the middle classes

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Weekend Musing: Exponential Potential

The potentially exponential growth of IT power is having a transformative effect on industry structures, as I posted last week. But thinking about some of the responses to the post, it occurred to me that I have it back to front. Yves of Naked Capitalism, for example,  expresses scepticism about growth projections: “I am always leery

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Government cheques don’t bounce

Check out the chart below. It’s of the breakup of the US GDP with the last bar being the results for the 4th quarter of 2011 released Friday night. I got it out of The Atlantic on Saturday Morning and tweeted it. The reason I was so excited, well not excited really but rather whatever

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Economics is people not arithmetic

The non-reaction of the markets to the ratings agencies downgrades of European debt underlines a persistent characteristic of the markets that is all too often forgotten. Especially by economic commentators. If it were simply a matter of extending the arithmetic of current economic performance into the future, then economic predictions would usually be right. On

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Weekend Musing: Direct Democracy and Voters

Guest blogger Steven Spadijer, of Australian National University, continues with Part Two of his series on Direct Democracy. Part One is available here. In today’s post I’ll examine the role direct democracy has on informing the people. That is, what impact does direct democracy have on the average voter competence? Does the information-rich environment make

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Weekend Musing: Direct Democracy and Economics

Guest blogger Steven Spadijer presents a multi-part series on Direct Democracy to start off the Weekend Musing articles for 2012. In this first post he examines the empirical evidence, speficially the economic impact versus a “representative” democracy. The second post will confront the questions regarding the intelligence of voters, particularly the information-rich environment effect on

33

An Aussie sunscreen rebound effect?

I’ve just returned from a week at the beach with my family (it was lovely, thanks for asking).  One thing that stands out as a key function of parenting in the Summer beach environment is making sure your child avoids sunburn. This got me thinking about a world without sunscreen.  This cheap little cream enables

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The private education dilemma

As an Australian parent in 2012, the public versus private school debate is hard to avoid.  In a society where private schooling is becoming the norm, yet literacy and numeracy skills are stagnating, how does one objectively analyse the costs and benefits of school choice? First, let me say that school choice is just one factor determining vocational,

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Urban planning & economic performance

The UK Spatial Economics Research Centre (SERC), which is in my opinion one of the world’s leading authorities on planning economics, recently released a Policy Paper entitled  What we Know (and Don’t Know) About the Links between Planning and Economic Performance (provided below). The Policy Paper summarises the impact of the UK’s land-use planning on economic performance,

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Why developers land bank

Land banking is a common practice adopted by developers, whereby they accumulate land for development well before the date at which they intend to sub-divide and build new housing. In modern production processes, “just-in-time” systems – where inputs into the production process are received/acquired just prior to use – are favoured because they reduce the

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Skills shortage myths

The shrill voice of commentators warning of Australia’s apparent skills shortage is deafening. But there are a number of reasons why this claim, and the inevitable recommendation for government to increase quotas of skilled migrants, is flawed, and why the solution is not in the best interests of Australia in the long run. For the acute observer

8

What makes us WEIRD people?

The Ultimatum Game works like this: You are given $100 and asked to share it with someone else. You can offer that person any amount and if he accepts the offer, you each get to keep your share. If he rejects your offer, you both walk away empty-handed. How much would you offer? If it’s

31

Economics of bike lanes

As an economist and keen utility cyclist (sorry, no lycra here) I have a close eye on the economic arguments surrounding urban transport investment.  The question I often ponder is whether investment in a cycling infrastructure network (on or off road) in Australian cities is justifiable on purely economic grounds.  To be specific, would the

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The Coroner’s dodgy statistics

There are few journalists with enough knowledge of statistics to check the facts of those making wild claims.  It has become a hobby of mine to actually check the facts, particularly of the most outrageous claims, which typically go unchallenged.  Please send any tips for future installments of Macro Media Watch to [email protected] Today’s Media Watch

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We are all Keensians now

Last week, the Prince posted the below chart showing the spectacular rise and then stagnation of private credit in Australia: This rise in private credit, which is largely attributable to housing debt, has seen Australia become one of the most heavily mortgaged nations in the developed world (chart from the IMF): Commentators like Professor Steve

9

Clearing derivatives

Guest post from Satyajit Das: The key element of derivative market reform is a central clearinghouse, the central counter party (“CCP”). Under the proposal, standardised derivative transactions must be cleared through the CCP that will guarantee performance. The debate surrounding the CCP provides an insight into the problems of controlling countreparty risk, complex interest of

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Myth of the socialist classroom experiment

For over fifteen years, a story about a professor’s classroom experiment of ‘socialising’ grades has been circulating around the globe in various forms, and mostly recently as a chain email.  The story apparently shows that ‘social loafing’ is inevitable in a society where rewards are averaged for a group, rather than efforts rewarded individually. Taken to its

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Economics of piracy

Public debate over Internet piracy is riddled with contradictions and fingerprints of vested interests.  In the US, congress is considering the Stop Online Piracy Act (SOPA), while in Australia, an alliance of internet service providers had their proposal to crack down on piracy rejected by the Australian content Industry Group (group of music, software and

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Keen questions economics of free trade

In his trademark way, Steve Keen recently upset the apple cart of the economic mainstream by questioning the assumptions economists make to explain the benefits of free trade between nations.  Free trade is yet another example of an economic principle that is sound at an individual level, but cannot be simply translated to a macro level. Keen