The left-wing solution to Greek bankruptcy
10 Jul 2015 Leave a comment
in applied price theory, applied welfare economics, comparative institutional analysis, constitutional political economy, currency unions, fiscal policy, global financial crisis (GFC), income redistribution, liberalism, macroeconomics, Marxist economics, Public Choice, public economics, rentseeking Tags: Eurosclerosis, expressive voting, Greece, rational ignorance, rational irrationality, sovereign default
Why Greece joined the Euro
06 Jul 2015 Leave a comment
in applied price theory, applied welfare economics, budget deficits, business cycles, comparative institutional analysis, constitutional political economy, currency unions, economic growth, economic history, Euro crisis, fiscal policy, fisheries economics, global financial crisis (GFC), international economics, macroeconomics, Public Choice, rentseeking Tags: Euro sclerosis, Greece, insurance attacks, sovereign defaults, speculative attacks
The roots of Greece’s crisis are simple. Before Greece joined the Eurozone, investors treated it as a middle-income country with poor governance — which is to say, a credit risk.
After Greece joined the Eurozone, investors thought that Greece was no longer a credit risk — they figured, if push came to shove, other Eurozone members like Germany would bail Greece out. They were wrong.
Michael Dooley put forward a theory of speculative attacks on currencies as insurance attacks on currencies for emerging markets after the East Asian financial crisis:
First generation models of speculative attacks show that apparently random speculative attacks on policy regimes can be fully consistent with rational and well-informed speculative behaviour.
Unfortunately, models driven by a conflict between exchange rate policy and other macroeconomic objectives do not seem consistent with important empirical regularities surrounding recent crises in emerging markets. This has generated considerable interest in models that associate crises with self-fulfilling shifts in private expectations.
In this paper we develop a first generation model based on an alternative policy conflict. Credit constrained governments accumulate reserve assets in order to self-insure against shocks to national consumption. Governments also insure poorly regulated domestic financial markets.
Given this policy regime, a variety of internal and external shocks generate capital inflows to emerging markets followed by successful and anticipated speculative attacks.
We argue that a common external shock generated capital inflows to emerging markets in Asia and Latin America after 1989. Country specific factors determined the timing of speculative attacks. Lending policies of industrial country governments and international organizations account for contagion, that is, a bunching of attacks over time.
His model was not within the context of a currency union but his basic theory is correct.
There are speculative attacks on a currency or a bank run after foreign markets revises their estimates of the available central bank reserves and international lines of credit to bail out the banking systems and/or foreign debt.
Michael Dooley was dealing with the emerging economies of Southeast Asia and their official lines of credit that insure their foreign exchange liabilities and domestic banking system. Greece is about lines of credit for similar purposes to other European union member states.
via 12 charts and maps that explain the Greek crisis – Vox and The Most Important Graphs of 2011 – The Atlantic.
Moving Brad DeLong’s Time Machine behind John Rawls’ veil of ignorance
06 Jul 2015 Leave a comment
in applied welfare economics, constitutional political economy, economic history, Rawls and Nozick Tags: Brad Delong, Elizabeth Warren, good old days, John Rawls, The Great Enrichment, The Great Escape, The Great Fact, time machine, Twitter left
Brad DeLong set up a thought experiment to work out if we were better off than in the good old days. He asked how much money would you want to take with you if you had to step into a time machine to go back to some specific point in time and not be worse off for the trip in living standards and life expectancy. He was writing in 1995, talking about going back to 1895.
John Rawls asks a similar question by saying what type of society would you to agree to in a social contract if you’re behind a veil of ignorance. You didn’t know where you were going to be in society behind the veil of ignorance.
All you know you is you will be some random member of that society, at the top, bottom or somewhere in between.
…no one knows his place in society, his class position or social status; nor does he know his fortune in the distribution of natural assets and abilities, his intelligence and strength, and the like.
What social institutions would you agree in that society given you don’t know where you will be in it?
John Rawls also said that the society was fair if you didn’t mind showing up somewhere in it as a random member.
Let’s suppose a thought experiment which combines a time machine with a veil of ignorance:
- Alien proctologists from outer space take time off from kidnapping rednecks at closing time at pubs to kidnap you instead;
- After probing your nether regions, but before flying off to light years away where they came from without any further earthly contact they offer you the option of beaming back to where you came from but with a twist in time;
- You can beam back to be a random member of your current society or a random member of a society in the past of your choice; but
- Random reassignment to either the present or a past of your choosing are your only options as the alien kidnap victim.
Behind that inter-temporal veil of ignorance, would you choose to be a random member of your own society or prefer to beam back in time to before the ravages of neoliberalism destroyed the good old days?
Apparently, we not a cent better off compared to the 70s because all the income gains, every single cent, went into the pockets of the top 10%, if Senator Warren is to be believed in her recent Washington post op-ed:
When you line up by Senator Warren to go into the time machine, remember to leave your iPhones and air points at the door.
Innovation is letting us accomplish more with less. Learn more: buff.ly/1LmtAZD #tech #progress http://t.co/e2kQlGu3NA—
HumanProgress.org (@humanprogress) June 22, 2015
Legal systems and property rights in Greece and Russia – Index of Economic Freedom rankings compared
05 Jul 2015 Leave a comment
in applied price theory, applied welfare economics, comparative institutional analysis, constitutional political economy, development economics, economics of crime, economics of regulation, growth disasters, industrial organisation, law and economics, property rights Tags: capitalism and freedom, Greece, rule of law, Russia
Figure 1: Index of Economic Freedom rankings for legal systems and property rights, Greece, Russia and USA, 2012
Source: Economic Freedom of the World – Annual Report 2014 | www.freetheworld.com.
Overall, there are not that many differences between Greece and Russia in the quality of their legal systems and property rights. Don’t go to the police in Russia and good luck trying to enforce contracts in Greece.
@MaxCRoser only one line in this chart about India matters
05 Jul 2015 Leave a comment
in comparative institutional analysis, constitutional political economy, development economics, economic history, growth disasters, growth miracles, poverty and inequality, Public Choice Tags: capitalism and freedom, extreme poverty, global poverty, India, Leftover Left, The Great Escape, The Great Fact, top 1%
In #India poverty is falling very, very rapidly – while inequality is rising.
More at: bit.ly/1KLT8Lh http://t.co/xTxlW1i06o—
Max Roser (@MaxCRoser) June 29, 2015
A blow to Director’s Law?
03 Jul 2015 Leave a comment
in constitutional political economy, income redistribution, Public Choice, public economics, rentseeking Tags: British economy, British politics, Director's Law, expressive voting, growth of government, median voter theorem, size of government
No, most U.K. homes do not get more in benefits than they pay in tax ow.ly/3y0nEo http://t.co/LaXvGa8ro2—
Bloomberg VisualData (@BBGVisualData) July 02, 2015
…the poorest 30 percent of households receive significantly more in cash benefits than they pay in tax. The next 10 percent receive on average £596 pounds a year more in cash benefits than they pay in tax, and the top 60 percent all pay more in tax than they get back in cash benefits.
New data from the ONS show the huge growth in state dependency under New Labour. Analysis at cps.org.uk/files/factshee… http://t.co/OLjRoxt3eg—
CPS Think Tank (@CPSThinkTank) June 29, 2015
Political donors back winners just before they start winning
01 Jul 2015 Leave a comment
in constitutional political economy, economics of bureaucracy, politics - USA, Public Choice, rentseeking Tags: campaign finance reform, campaign finance regulation, political lobbyists, pressure groups, voter demographics
Several major industries have shifted their political donations to Republicans from Democrats: nytimes.com/interactive/20… http://t.co/qYgOdbeZAp—
NYT Graphics (@nytgraphics) June 29, 2015
Countries where you become a citizen just by being born there
01 Jul 2015 Leave a comment
in constitutional political economy, development economics, economics of media and culture, law and economics, politics Tags: citizenship
Countries where you become a citizen just by being born there.
Interesting difference between old and new world! http://t.co/DzsH64SAqa—
Max Roser (@MaxCRoser) May 31, 2015
Dealing with the Spanish bureaucracy
28 Jun 2015 Leave a comment
in comparative institutional analysis, constitutional political economy, economics of bureaucracy, economics of regulation, industrial organisation, Public Choice, rentseeking, survivor principle Tags: cost of doing business, endogenous growth theory, Eurosclerosis, Spain
The different types of authoritarian personalities
28 Jun 2015 Leave a comment
in comparative institutional analysis, constitutional political economy, politics - Australia, politics - New Zealand, politics - USA, Public Choice Tags: antiforeign bias, antimarket bias, economics of personality traits, expressive voting, Leftover Left, makework bias, political psychology, rational ignorance, rational irrationality
Tom Sargent keynote address Emergency Economic Summit for Greece (1 June 2015)
26 Jun 2015 Leave a comment
in comparative institutional analysis, constitutional political economy, currency unions, Euro crisis, fiscal policy, macroeconomics, monetary economics Tags: EU, Euroland, Greece, sovereign borrowing, sovereign defaults, Thomas Sargent
Recent Comments