An Enlightening Example

Chapter 1 of my favorite textbook talks about how policies can have unintended consequences because of their effects on incentives.  One example I use is Sam Peltzman's famous study of seatbelt laws.  Here, from The Economist, is another example:

SOLID-STATE lighting, the latest idea to brighten up the world while saving the planet, promises illumination for a fraction of the energy used by incandescent or fluorescent bulbs. A win all round, then: lower electricity bills and...less climate-changing carbon dioxide belching from power stations.

Well, no. Not if history is any guide. Solid-state lamps, which use souped-up versions of the light-emitting diodes that shine from the faces of digital clocks and flash irritatingly on the front panels of audio and video equipment, will indeed make lighting better. But precedent suggests that this will serve merely to increase the demand for light. The consequence may not be just more light for the same amount of energy, but an actual increase in energy consumption.

COPENHAGEN - anne, fashion week ss 11, 08/12/10

I've posted all my photos of Istanbul Fashion Week on my visual diary.

Barro on Unemployment Insurance

Harvard's Robert Barro says the recent expansion of UI explains the persistently high unemployment rate.

ISTANBUL - fashion week bonus, 08/25-28/10

ISTANBUL - melis, fashion week, 08/26/10

ISTANBUL - dilay, fashion week, 08/27/10

Reinhardt on Efficiency

Princeton's Uwe Reinhardt offers a thoughtful and thought-provoking perspective on economists' use of the concept of efficiency.

I know that Uwe has used my Principles of Micro textbook in his introductory class.  So his commentary on "modern textbooks" is, at least to some extent, directed at me. (In particular, I suspect he has chapters 7, 8, and 9 in mind.)  Uwe also provides some useful links to handouts he gives to his class.

Update: Steven Landsburg responds.

ISTANBUL - ayca, fashion week, 08/26/10

ISTANBUL - sellen, dice kayek exhibition opening, 08/25/10

STOCKHOLM - lotte & frida, fashion week ss 11, 08/16-17/10

The photos of my entire stay in Stockholm are up on my visual diary.

The Latest from Merle Hazard

STOCKHOLM - all in black, fashion week ss 11, 08/16-18/10

Check out my photos of the two first days of Stockholm Fashion Week on my visual diary.

Krugman reestimates the Mankiw rule

This scatterplot is from Paul Krugman.  x is the core inflation rate minus the unemployment rate.  y is the federal funds rate.  It uses data from 1988 to 2008.

This graph is motivated by a version of the Taylor rule I once proposed.  Paul uses a different sample than I did, so he gets slightly different parameter values.  Nonetheless, I think Paul and I agree that this equation provides a reasonable first approximation to what the Fed will and should do in response to macroeconomic conditions.

Notes from the Sixth Row

Last week, my friend Phill Swagel attended an event to hear about the future of policy toward housing finance.  He sends along the following.  (By the way, here is Phill's own proposal for GSE reform.)

Notes from the Sixth Row: The Treasury-HUD GSE Conference

Phillip Swagel

I took away four main points from Tuesday's Treasury-HUD GSE conference:

Hints of reform. Treasury Secretary Timothy Geithner said that the administration supported fundamental GSE reform but with still a government guarantee for housing finance in some form. The GSE portfolios, however, would disappear. None of this is a surprise, but it was still novel�especially in contrast with past policy efforts such as stimulus and healthcare, where the administration allowed the Congress to take the lead on policy formation.

Industry participants love government guarantees. Conference participants from industries involved with the financing and construction of homes assert that no American will ever buy a home again if the government does not provide a full credit guarantee against the financial market consequences of people defaulting on their mortgages. And that guarantee needs a fair (that is, low) price. Bill Gross made some news in calling for full nationalization of housing finance and complete guarantees on mortgage capital. He prefaced this by saying that he was speaking on behalf of public policy and not his firm. Mr. Gross is smart and was exceedingly public-minded during the financial crisis (even, yes, while profiting from some astute investment calls). There is no doubt that he means well. But it�s scary to think about what he might suggest when he speaks for his book of business instead of the public interest.

Blowback from the left. The administration is scared of its own shadow with respect to flak from the left�the White House staffer�s introductory remarks were an awkward ode to inclusion and conference guidelines such as time limits went out the window when advocates of affordable housing subsidies were speaking (As a note, I very much support these subsidies and think that an important element of GSE reform is to make the subsidies more effective. But this still does not mean that the people making that point should have had carte blanche to long-talk while avoiding answering direct questions.) Amidst the long-talking, it turns out that there is good reason for the administration�s trembling. To the limited extent that advocates of affordable/low-income housing participated in the conference, they vehemently opposed scaling back any form of government support, including reducing the activities of the portfolios. It was impossible to tell what the affordable advocates were for other than �more.� The administration�s GSE reform plan could come down on stone tablets from Mt. Sinai � and still be attacked by the advocate community as "not enough." GSE reform thus represents yet another conflict brewing between the administration and its frenemies in the �professional� left. And yet the President's political tactics of late center on demonizing the moderate/responsible Republicans (�privatizers�) with whom he might form a centrist coalition to actually move forward with a housing finance overhaul. GSE reform could be a long ways off�until we have a President who seeks to lead in a bipartisan fashion.

Settle in; this is going to be a long process. Yesterday's conference was a show of attention to the issue but not more. And next on the agenda are several regional conferences�perhaps the hotel and travel spending is a form of stimulus (or better�it�s time for Congress to shut off Treasury�s unlimited authority to spend money through the Office of Financial Stability). The wheels of GSE reform are turning, but the vehicle is moving forward at a crawl.

STOCKHOLM - s�dermalm, 08/20/10

CBO's Latest Projection

Source

LONDON, ISTANBUL, COLOMBIA, NYC, BUCHAREST, MILAN, PARIS & LISBON

In the next weeks, I take you with me to...

Aug. 22-24: LONDON

Aug. 25-28: ISTANBUL Fashion Week

Aug. 30 - Sept. 7: COLOMBIA for the 1st time, it's going to be a very special experience. I'm invited by Exclama Magazine to host a couple of events in BOGOT�.

Sept. 1st, 10AM
Lecture
Conferencia Universidad Jorge Tadeo Lozano UJTL
Hemiciclo Biblioteca UJTL
CR 4 # 22 - 61
entrance: 10.000 Pesos (free for UJTL students and professors)
RSVP: escribo@revistaexclama.com

Sept. 2nd, 7.30PM
Exhibition opening
Exposici�n Galer�a La Cometa
CR. 10A N. 92A - 25
The exhibition will be open until Sept. 15th

Sept. 2nd 10PM
Facehunter Fiesta
�Secret location!

After a few days in the capital, I will probably go to CARTAGENA DE INDIAS, in the North of the country.

Sep. 9-16: NEW YORK Fashion Week

Sep. 17-21: LONDON Fashion Week
Sep. 22-23: LONDON

Sep. 24-25: BUCHAREST, Absolutely Fabulous

Sep. 26-28: MILAN Fashion Week

Sep. 29- Oct. 7: PARIS Fashion Week

Oct. 8-10: LISBON Fashion Week


Tallinn, August 2010

STOCKHOLM - stockholm street style's caroline & street peeper's phil, fashion week ss 11, 08/18/10

Amazon Bestsellers

In Microeconomics and Macroeconomics.

What I Learned on My Summer Vacation

As is typical for me during this time of year, I have been on a field trip to study the economy of Nantucket.  The chart below shows what I learned: This idyllic island has not escaped the rise and fall in housing prices that the rest of the nation has experienced.

Source.

STOCKHOLM - fashion week ss 11, day 2, 08/17/10

All my Copenhagen Fashion Week shots are up on my visual diary.

What I've Been Reading

Sebastian Mallaby's history of hedge funds is well written, smart, and balanced. 

For econonerds, this is a good beach read.

We're number one!

Harvard tops the US News college ranking this year.  (FYI, in a few weeks, I will be sending off my first child to school number two.)

STOCKHOLM - josefin, fashion week ss 11, 08/16/10

The photos of my 2 first day at Copenhagen Fashion Week are on my visual diary.

COPENHAGEN - fashion week ss 11, 08/11-12/10

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COPENHAGEN - veneda, fashion week ss 11, 08/13/10

See more of the fashion week on my visual diary.