Ray Dalio is the founder of Bridgewater Associates, known to some as “the world’s richest and strangest hedge fund.” He has appeared on this blog before, talking about the upsides of negative feedback. Now Dalio has put together a beguiling 30-minute video that tries to explain how the U.S. economy actually works. Don’t be ashamed if you find out a lot you didn’t know — as Dalio makes clear, most policy makers don’t know much about the economy either. Read More »
A new study by Bradley W. Lane, Natalie Messer-Betts, Devin Hartmann, Sanya Carley, Rachel M. Krause, and John D. Graham on why governments promote electric vehicles finds that the environmental benefits of the vehicles have little to do with politicians’ motives for supporting the industry. Perhaps not surprisingly, “Government Promotion of the Electric Car: Risk Management or Industrial Policy?” (gated) finds that the economic benefits of the industry are the primary motivator for most governments. From the press release:
Contrary to common belief, many of the world’s most powerful nations promote the manufacture and sale of electric vehicles primarily for reasons of economic development – notably job creation – not because of their potential to improve the environment through decreased air pollution and oil consumption.
This is among the main findings of a study by researchers at the Indiana University Bloomington School of Public and Environmental (SPEA) and University of Kansas that analyzed policies related to electric vehicles (EVs) in California, China, the European Union, France, Germany, and the United States – political jurisdictions with significant automotive industries and markets for EVs.
“Billions of dollars are being invested despite doubts that some express about the viability of electricity as a propulsion system,” said John D. Graham, SPEA dean and co-author of the study. “The objective of many of these national and sub-national governments is to establish a significant position – or even dominance – in the global marketplace for these emerging, innovative new technologies.”
Most of the coverage of the turmoil in Egypt and Syria (the latter of which has decreased in proportion to an increase in coverage of the former) focuses on political, religious, and social factors. These are all obviously important. But once you read David P. Goldman‘s op-ed in the Wall Street Journal about the economic underpinnings of the Arab revolutions, you may see things differently. A few key excerpts:
Read More »
Sometimes economies can’t be fixed after decades of statist misdirection, and the people simply get up and go. Since the debt crisis of the 1980s, 10 million poor Mexicans—victims of a post-revolutionary policy that kept rural Mexicans trapped on government-owned collective farms—have migrated to the United States. Today, Egyptians and Syrians face economic problems much worse than Mexico’s, but there is nowhere for them to go. Half a century of socialist mismanagement has left the two Arab states unable to meet the basic needs of their people, with economies so damaged that they may be past the point of recovery in our lifetimes.
This is the crucial background to understanding the state failure in Egypt and civil war in Syria. It may not be within America’s power to reverse their free falls; the best scenario for the U.S. is to manage the chaos as best it can.
Our latest Freakonomics on Marketplace podcast is called “Why Family and Business Don’t Mix.” (You can download/subscribe at iTunes, get the RSS feed, listen via the media player above, or read the transcript.) It’s based on a recent paper by Alberto Alesina and Paola Giuliano called “Family Ties.” It argues that strong family ties bring a lot of benefits, but may also depress economic activity:
Read More »
We study the role of the most primitive institution in society: the family. Its organization and relationship between generations shape values formation, economic outcomes and influences national institutions. We use a measure of family ties, constructed from the World Values Survey, to review and extend the literature on the effect of family ties on economic behavior and economic attitudes. We show that strong family ties are negatively correlated with generalized trust; they imply more household production and less participation in the labor market of women, young adult and elderly. They are correlated with lower interest and participation in political activities and prefer labor market regulation and welfare systems based upon the family rather than the market or the government. Strong family ties may interfere with activities leading to faster growth, but they may provide relief from stress, support to family members and increased wellbeing. We argue that the value regarding the strength of family relationships are very persistent over time, more so than institutions like labor market regulation or welfare systems.
U.S. stock markets* are flirting with all-time highs (it may happen today) but I am hearing and reading very little about it. Why is that?
I can think of a few possible reasons, and am eager to hear yours.
1. After the spectacular meltdown of 2007-2009, a lot of people are generally gun-shy and/or inattentive.
2. Since so many people sold into the teeth of the meltdown, and stayed on the sidelines since, a new high is to them relatively bad news.
3. Because the economy itself is not quite roaring, a roaring stock market doesn’t seem legit (unless, of course, you consider it a leading indicator, which it usually is).
4. Just “getting back” to an all-time high from more than five years ago is, at best, a muted victory.
All that said, I remain surprised by the lack of chatter.
With the Presidential debate finished, we are officially in the final lap of America’s second-favorite spectator sport. (Yes, football is better than politics.) Of all the talking that Barack Obama and Mitt Romney will do by Nov. 6, you can bet that a great deal of their breath will be expended on economic matters. Because that’s what the President of the United States does, right — runs our economy?
That, of course, won’t stop the candidates from talking about their plans to “fix” or “heal” or “restore” our economy — all of which imply that we are in an economic doldrums that is sure to pass. But what if it doesn’t? What if the massive economic growth the U.S. has experienced through most of our history is a thing of the past?
There are two broad shifts that account for much of this decline: globalization and computerization. From T-shirts to toys, manufacturing jobs have migrated to low-wage countries like Vietnam, Bangladesh, and of course China. Meanwhile, many of the tasks that might have been done by middle-income Americans employed as bookkeepers or middle managers have been replaced by spreadsheets and data algorithms.
Fisman argues that in order to succeed in the new economy, American workers need to shift away from construction and manufacturing jobs to “high touch” professions. “If jobs are being lost to low-wage Indians and computer programs, then what today’s worker needs is a set of skills that offers the personal touch and judgment that can’t be provided by a machine or someone 12 time zones away,” writes Fisman.
The BBC reports that Portugal will be cutting 4 of its 14 public holidays as an “austerity measure”:
Read More »
Two religious festivals and two other public holidays will be suspended for five years from 2013.
The decision over which Catholic festivals to cut was negotiated with the Vatican.
It is hoped the suspension of the public holidays will improve competitiveness and boost economic activity.