Monday, June 28, 2010

"Legal Tender" by Merle Hazard

Merle Hazard and the Carroll Family revisit "Love Me Tender" in this song about money (HT Mankiw):

Monday, June 21, 2010

Which Countries Are the Largest Whisky Importers?

France leads the pack, according to this The Economist article:

Sunday, June 20, 2010

Hamilton on Long-Term Inflation Risks in the US

Hamilton summarizes the main argument for the rise of long-term inflation in the US that has been ignored by inflation doves:

The source of my concern about long-run inflation comes not from the expansion of the Fed's balance sheet, but instead from worries about the ability of the U.S. government to fund its fiscal expenditures and debt-servicing obligations as we get another 5 or 10 years down the current path. Just as many analysts have had trouble seeing how Greece can reasonably be expected over the near term to move to primary surpluses sufficient to meet its growing debt servicing costs, I have similar problems squaring the numbers for the U.S. looking a little farther ahead.

The way that I would envision these pressures translating into inflation would be a flight from the dollar by international lenders, leading to depreciation of the exchange rate, increase in the dollar price of traded goods, and possible sharp challenges for rolling over U.S. Treasury debt. We've of course been seeing the exact opposite of this over the last few months, as worries in Europe and elsewhere have resulted in a flight to the dollar and the perceived safety of U.S. Treasuries. That appreciation of the dollar has been one factor keeping U.S. inflation down. So any inflation scare is clearly not an incipient development, but instead something we'd possibly face farther down the road.

Tuesday, June 8, 2010

The Problem with Outcomes Assessment in Higher Education

I don't think I've ever met a teaching faculty member in my life that hasn't at least once thought that the current system of outcomes assessment used by American universities is a waste of time and effort. Pontuso and Thornton explain its problems in this Thought & Action article:

There is a very simple way for accrediting agencies to assess whether students are learning. Rather than reinventing the wheel by using slick language (such as “student outcomes”) that doesn't mean anything, they should look at randomly selected course syllabi, reading assignments, term papers, tests, and student evaluations. It would be more work for assessors, since they would have to learn something about fields of study not their own, but it is a more effective way to judge whether students are learning. There may be an added benefit to this method: perhaps evaluators will discourage the grade inflation that has become the other scandalous bane of higher education. ...

Teachers assess all the time. They read student papers and exams to discover if students have learned. They ask questions in class and engage students in discussion. They look over student evaluations to see if the way they are interacting with students is being well-received. They are always trying to find better ways to help students grasp the material.Why do they need to spend time in another elaborate and meaningless type of assessment? For good teachers, outcomes assessment is mostly a distraction; for bad ones, it provides a bureaucratic cover to validate what they are doing.

Monday, June 7, 2010

Rogoff's Predictions Were on Target

About one and a half years ago, according to BusinessWeek, Harvard economist Kenneth Rogoff made the following prediction during the 2009 AEA Meeting:
... Rogoff was more pessimistic: At lunch on the first day he predicted that "what we will see next is a wave of sovereign defaults." He also pointed out that government debt historically increases by 86% in a crisis, in real terms. If the U.S. follows the same pattern, that would mean roughly $6 trillion in budget deficits over the next three years as tax revenues drop and government spending rises.
His predictions, at least when it comes to order of magnitude, were on target, see for example the graph below representing only the federal deficit.

Tuesday, June 1, 2010

Red Moon over Lake Superior

A beautiful nightscape of Lake Superior showing the moonrise, as viewed from our deck.