Saturday, April 30, 2011

7th Art: The Kennedys (2011) and Political Censorship in Hollywood

In this nice the Atlantic interview, Joel Surnow, producer and writer of series like "24" and "Miami Vice," talks about political censorship in left-dominated Hollywood and the cancelling of the series "The Kennedys" by the History Channel. Here's a segment:
TA: You're a super-successful writer/producer. How did these events impact you?

JS: It makes me very sad. Hollywood is extremely concerned about civil liberties. I can't tell you how many movies and projects have been produced about the McCarthy era. Where's the outrage for what happened here?

TA: Even though people in Hollywood are mostly liberal, I thought the real master of this town was the bottom line—TV ratings and box office ticket sales. With The Kennedys, you've got subject matter and stars who almost guarantee viewers. Doesn't that trump political or personal loyalties?

JS: One would think so. But do you think the news business only cares about the bottom line? If so, why isn't everyone in the news business emulating the Fox News Channel? Because most people who work in media have one worldview, and it doesn't care for a conservative outlook. Look, I'm an agnostic filmmaker. I don't put politics in my entertainment. Never have. I've been a journeyman doing this for 25 years. 24 was never considered a problematic show—until there was a New Yorker article by Jane Mayer that reported that I was a conservative.
The irony is that here in France we will enjoy this nicely done series on one of the major over-the-air broadcast channels: France 3. Another case of heavy-handed politics stomping basic freedoms in America?

Thursday, April 28, 2011

Keynes and Hayek Exchange Punches

Literally...

Monday, April 25, 2011

The Unbearable Lightness of the Dollar

(Click on the graph to magnify)

The graphs shows the dollar value of one euro since June 9 2010. I cherry-picked the initial date as the most recent bottom of the euro. The depreciation trend since then is quite impressive.

It poses some interesting macroeconomic questions. If it represents a movement towards the reduction of the American trade deficit, then we should see a rebalancing of the capital account too. It could happen through an even greater decrease in investment (probably not an interesting outcome) or an increase in saving. Where will the increased saving be coming from? If it isn't the government, then households will have to do it, otherwise investment will fall even further compared to what it is today.

Alternatively, if not matched by higher saving, this trend will have to stop at some point, or it will need to be matched by higher prices in dollar, in other words, inflation. Just extrapolating the trend (silly, I know, but this is just a baseline exercise) indicates a matching yearly inflation rate of around 23%.

It took decades for macroeconomists to see so much action in their field.

Wednesday, April 20, 2011

The Map of Social Liberalism in Europe

Marek Hlavac has produced some very interesting maps on social liberalism (some Americans may want to call it social libertarianism) in Europe (HT Selva Brasilis). The one below for example represents attitudes towards sex and family (green means more liberal, red means more traditional):

Saturday, April 16, 2011

The Impossible Monetary Economics of Star Trek

I always thought about writing an article on one of the silliest scientific mistakes in Star Trek: the belief that plenty is enough to satisfy human needs and, as a corollary, to make money disappear. Funny how Gene Roddenberry had a shallow quasi-Marxist view of how the monetary side of an advanced economy should (not) work.

Well, no need to write this article anymore. Gabriella Cordone has done an amazing job researching the monetary inconsistencies in the series, and explaining some of its economic problems in this article, a translation of the original in Italian. Quoting her:
Let’s start with the Roddenberry rule. No money in the Federation! Easy to say... not so easy to do. ...

When TNG arrived on the silver screen, the Great Bird of the Galaxy Gene Roddenberry had been deceased for several years, but apparently his rule kept following his characters; at least that seemed the intention. In Star Trek: First Contact, here comes Captain Picard again, who talks with Lily and, answering her question about the Enterprise: “How much this ship cost?” he answers “The economics of the future is somewhat different. You see, money doesn’t exist in the 24th century.” “No money? You’re telling me you’re not paid?” Lily is surprised. “The acquisition of wealth is no longer the driving force in our lives. We work to better ourselves and the rest of Humanity.” Despite Lily’s surprise (that mirrors the whole audience’s surprise), the line does not leave doubts: money does not exist and it’s not for money that you work. Picard and company are explorers and the risks they run are no different from those ran in the past by people like Amundsen or Livingston. The prestige of making a discovery exists since ages ago, the honor of being the first to know something and bring back the knowledge to the rest of humanity is drive enough for men like the Federation officers.

This is the lesson Roddenberry wanted to give, saying that in the Federation there was no money, word by word. ... What’s not clear enough, though, is the question Picard doesn’t answer: how things are done when a workforce is involved? Lily had difficulty in putting together the metal needed for building the capsule of Cochrane’s rocket, while apparently the metal needed for the Enterprise costs nothing... Let’s assume that miners do not exist and any heavy work is not done by men. But there must be - along the process of building a starship - some boring job that men have to do and they might do only for remuneration. So what, if not money?

Thursday, April 14, 2011

Brasilia, the City on the Edge of Forever

I lived a good part of my life in Brasilia, Brazil's capital. The city was created from scratch by government decree. Historically speaking, cultural trends reach their apex in Brazil with a substantial lag relative to central nations, and the construction of Brasilia was no exception. Its planners, designers and architects came to symbolize the last breath of modernism in architecture, so the city was unlucky to have been heavily influenced by an architectural school whose failures were at that point becoming evident, and also by communist ideology and a religious-like faith in central planning.

There's no need to say that the results were negative. Brasilia is known for being unfriendly to its dwellers. Some have called it "the soulless city," others have called it the "fantasy island." It's also called the "monumental city," many times pejoratively ("people don't enjoy living and working inside monuments" is a commonly heard complaint in Brasilia). I personally find Brasilia's monuments to vary in appearance from plain ugly to nightmarish.

As time goes, the city looks to me more and more like the ideal location for a postwar fascistic dystopia. Economist Marcos Bittencourt for example recently wrote a very good article (in Portuguese) that explains the many failures of Brasilia as a livable city. It's a personal judgment naturally, but I've been to only one city that is uglier and less urban friendly than Brasilia, and this city is São Paulo - and I've been to many places. Economist Tyler Cowen has been recently to Brasilia and summarized well how it looks like to an outsider:
Could this be the strangest city I have visited? ... It resembles an old science fiction movie and yes I like old science fiction movies.
Cowen hits the bull's-eye: Brasilia looks and feels exactly like a sixties sci-fi z-movie, and ages as badly as sci-fi z-movies from the sixties do. In reality, I've always wondered why is it that very few people have realized that one of the most well-known backdrop drawings in the Star Trek explicitly paid homage to Brasilia. Compare the two pictures below:


The first picture shows the Tantalus Penal Colony in the Star Trek episode "Dagger of the Mind" while the second picture shows the Palacio da Alvorada, the residence of the President of Brazil. The similarities between the two buildings are clearly not coincidental, and, some may suggest, tongue in cheek, prophetical...

It's unfortunate that Brasilia had to be built at the wrong time and place (unremarkable nature, geographically isolated, extremely dry weather). Had it been built during any other couple of decades, and at a more livable location, it would probably be a glorious city. So be it: at least, Brasilia will become the ultimate monument to an age of questionable aesthetic preferences, misguided "humanism," and failed ideologies: the city on the edge of forever.
PS: Cowen made it clear that he thinks that "Brasilia works reasonably well." Relative to other cities in Brazil, this may indeed be true, but it clearly comes at a high cost to the average Brazilian taxpayer.

The Angry Left

James Lindgren article on political views, anger and altruism in the US presents results that match my own personal observations (HT Marginal Revolution's Cowen):
Compared to anti-redistributionists, strong redistributionists have about two to three times higher odds of reporting that in the prior seven days they were angry, mad at someone, outraged, sad, lonely, and had trouble shaking the blues. Similarly, anti-redistributionists had about two to four times higher odds of reporting being happy or at ease. Not only do redistributionists report more anger, but they report that their anger lasts longer. When asked about the last time they were angry, strong redistributionists were more than twice as likely as strong opponents of leveling to admit that they responded to their anger by plotting revenge. Last, both redistributionists and anti-capitalists expressed lower overall happiness, less happy marriages, and lower satisfaction with their financial situations and with their jobs or housework. ...

Those who support capitalism and oppose greater income redistribution tend to be better educated, to have higher family incomes, to be less traditionally racist, and to be less intolerant of unpopular groups. Those who oppose greater redistribution also tend to be more generous in donating to charities and more likely to engage in some other altruistic behavior. The academic assumption that anti-capitalism and opposition to income redistribution reflect an orientation toward social dominance seems unwarranted.

Friday, April 8, 2011

The Oddly Libertarian Conclusion of HBO's "Big Love"

It was interesting to watch the conclusion of HBO series "Big Love," as the writers decided to follow a surprisingly libertarian (instead of moralist) path.

On one hand, they chose to make it very clear that the three wives of Bill Henrickson were in the relationship due to their own will and free choice. This statement was made very clear during the last few episodes, when every party in the relationship had the opportunity to leave the multiple marriage, very good reasons to do it, and yet decided to recommit to it because they conscientiously believed that they were better off in it. Even the "cult" motif was discarded once Margene Heffman chose to abandon the "real cult" she got involved with.

Tragedy and redemption, even if overused as a narrative solution, always makes for good storytelling as long as the outcome remains hard to predict, as it was the case with their wrap up choice. What I found interesting however is that the tragedy itself is in line with some of the theories that try to explain why societies have traditionally decided to ban plural marriages, in this case, competition exclusion and the maintenance of social peace. The same argument may also explain why serial marriage arrangements haven't faced similar oposition in open societies.

Thursday, April 7, 2011

Are Some Countries Suffering from Financial Overload?

This is the question that Arcand, Berkes and Panizza ask in this Vox article. Here's how they summarize their research:
We build a simple model finding that, even in the presence of credit rationing, the expectation of a bailout may lead to a financial sector that is too large with respect to the social optimum...

Our results show that the marginal effect of financial development on output growth becomes negative when credit to the private sector surpasses 110% of GDP. This result is surprisingly consistent across different types of estimators...

All the advanced economies that are now facing serious problems are located above our “too much” finance threshold.
In other words, excessively protected financial systems become too big to fail, but fail anyway, implying that, in the world of government regulated finance, too much of a good thing indeed turns out to be a bad thing.

Wednesday, April 6, 2011

Dilma's Import Tax: What It Tells You About the Government is More Important than What It Does to the Economy

My latest Ordem Livre article (in Portuguese) is about the silly rate increase of the Brazilian tax on foreign purchases with credit cards, which I called the "Dilma tax." One of the goals of the policy is to reduce the country's trade balance deficit. Credit card foreign transactions in Brazil represent however only 5% of the country's imports, and, to make things worse, the base of this tax is obviously highly elastic due to its narrowness, or, in other words, consumers will just find other ways to pay for their purchases. Besides, let's look at what Greg Mankiw has to say in his introductory textbook about the effects of tariffs (import taxes) on the trade balance:
Although restrictive trade policies such as tariffs or quotas on imports are sometimes advocated as a way to alter the trade balance, they do not necessarily have that effect. A trade restriction increases net exports for a given exchange rate and, therefore, increases the demand for [domestic] currency in the market for foreign-currency exchange. As a result, the [domestic currency] appreciates in value, making domestic goods more expensive relative to foreign goods. This appreciation offsets the initial impact of the trade restriction on net exports.
This tariff evidently won't have a significant effect on Brazil's trade balance, but tells us a lot about the Brazilian government's economic ineptitude, and also about the country's middle class passivity when facing targeted aggressions by the federal government.

Tuesday, April 5, 2011

Are Long-Run Inflation Expectations Better Anchored in the Euro Area than in the US?

This is what an article by Beechey, Johannsen and Levin published in the American Economic Journal: Macroeconomics investigates. Here is their conclusion:
This paper compares the evolution of long-run inflation expectations in the euro area and the United States, using evidence from financial markets and surveys of professional forecasters. Survey data indicate that long-run inflation expectations are reasonably well anchored in both economies but reveal substantially greater dispersion across forecasters' long-horizon projections of US inflation. Analysis of daily data on inflation swaps and nominal-indexed bond spreads, which gauge compensation for expected inflation and inflation risk, also suggests that long-run inflation expectations are more firmly anchored in the euro area than in the United States.

Sunday, April 3, 2011

IDEP's "Asset Prices, Credit and Macroeconomic Policies" Conference

Last week I had the pleasure of attending the conference "Asset Prices, Credit and Macroeconomic Policies" organized by the Institut D'Économie Publique (IDEP) in Marseilles. Presentation slides can be found here and articles here.

The remarkable feature of this conference was the broad presentation in just two days of the many challenges that macroeconomics research has been facing since the inset of the latest financial crisis. Researchers could offer some interesting insights, but many questions remain yet to be answered.

Attending the conference reinforced my impression that modern macroeconomics research continues to suffer from two serious problems: excessive aggregation and lack of integration with public choice theory. I hope to move my own research towards this direction in the future.

BTW, congratulations to the organizing committee for putting together such a great conference.

Friday, April 1, 2011

The Onion: Damning Evidence Against Tenets of Capitalism

Here's a passage from a The Onion article on irrefutable evidence disproving tenets of capitalism (HT Mankiw):
"In theory, the market should have done away with Edible Arrangements long ago," said American Economic Association president Orley Ashenfelter, who added that one of the crucial assumptions of capitalism is the idea that businesses producing undesired goods or services will fail. "That's how it's supposed to work. Yet somehow, despite offering no product of any worth whatsoever, this company not only makes payroll every week, but also generates strong profits."

"It's mind-boggling," Ashenfelter continued. "I honestly have never even heard the name Edible Arrangements mentioned in conversation before. Seriously, has anyone?"

Upon examining the so-called Edible Arrangements paradox, economists worldwide have abandoned many of the ideas that have dominated economic thought since the time of Adam Smith, arguing that the forces of supply and demand are powerless to explain the company's 45-piece line of officially licensed NASCAR-themed fruit bouquets.