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Blog Post - Views on the Economy and the World

You Don’t Miss International Cooperation Until It's Gone

| Dec. 02, 2020

As Joni Mitchell sang, “you don’t know what you’ve got ‘til it’s gone.”   Classroom education was often deemed boring by students and obsolete by tech visionaries.  Then the coronavirus made it difficult or impossible to meet in person.  The result:  We yearn for the irreplaceable in-class experience.
Perhaps the same is true of international economic cooperation. It was never especially popular. The theory, first formulated in a 1969 paper by Richard Cooper, said that countries could agree to coordinated bargains that achieved better outcomes, relative to the “Nash non-cooperative equilibrium.”  But economists thought of plenty of reasons to be skeptical.  The multilateral institutions of cooperation such as the World Trade Organization, the International Monetary Fund, and the United Nations agencies, were downright unpopular among the public.  Many Americans regarded them as invading US sovereignty, while other countries viewed them as an invasion of their sovereignty by the US.

Blog Post - Views on the Economy and the World

The Fed and Inequality

| Oct. 28, 2016
Populist politicians, among others, have claimed in recent years that monetary policy is too easy and that it is hurting ordinary workers.   But raising interest rates is not the way to address income inequality.It is a strange claim for anyone to make, but especially for populists.  Low interest rates are good for debtors, of course, and bad for creditors. Throughout most of US history, populists have supported easy monetary policy and low interest rates, to help the little guy, against bankers, who had hard hearts and believed in hard money.

Blog Post - Views on the Economy and the World

Fiscal Education for the G-7

| May 26, 2016
As the G-7 Leaders gather in Ise-Shima, Japan, on May 26-27, the still fragile global economy is on their minds.  They would like a road map to address stagnant growth. Their approach should be to talk less about currency wars and more about fiscal policy.Fiscal policy vs. monetary policyUnder the conditions that have prevailed in most major countries over the last ten years, we have reason to think that fiscal policy is a more powerful tool for affecting the level of economic activity, as compared to monetary policy.

Blog Post - Views on the Economy and the World

Talk on trade: TPP & Trump

| May 20, 2016
The ITC Wednesday released its mandated report on the economic effects estimated to result from the TransPacific Partnership.  As is usual in standard trade models, the estimated welfare gains may sound small: on the order of ¼ % of income.  But that would still be way worth doing.    Furthermore the ITC study, by design, leaves out a lot.  For example, the Petri-Plummer study from the Peterson Institute estimates income gains from TPP that are twice as large, in part because it takes into account Melitz-style opportunities for  more productive firms to expand.

Blog Post - Views on the Economy and the World

Protectionist Clouds Darken Sunny Forecasts for Solar Power

| Aug. 04, 2013
On July 27 negotiators reached a compromise settlement in the world’s largest anti-dumping dispute, regarding Chinese exports of solar panels to the European Union.   China agreed to constrain its exports to a minimum price and a maximum quantity.   The solution is restrictive relative to the six-year trend of rapidly Chinese market share (which had reached 80% in Europe), and plummeting prices.  But it is less severe than what had been the imminent alternative:  EU tariffs on Chinese solar panels had been set to rise sharply on August 6, to 47.

Blog Post - Views on the Economy and the World

Fear of Fracking: The Problem with the Precautionary Principle

| Apr. 18, 2013
An amazing thing has happened over the last five years.   Against all expectations, American emissions of carbon dioxide into the atmosphere, since peaking in 2007, have fallen by 12%, back to 1995 levels.  (As of 2012. US Energy Information Agency).   How can this be?   The United States did not ratify the Kyoto Protocol to cut emissions of greenhouse gases below 1997 levels by 2012, as Europe did.Was the achievement a side-effect of reduced economic activity?   It is true that the US economy peaked in late 2007, the same time as emissions.

Blog Post - Views on the Economy and the World

Black Swans of August

| Aug. 21, 2012
Throughout history, big economic and political shocks have often occurred in August, when leaders had gone on vacationin the belief that world affairs were quiet.   Examples of geopolitical jolts that came in August include the outbreak of World War I, the Nazi-Soviet pact of 1939 and the Berlin Wall in 1961.  Subsequent examples of economic and other surprises in August have included the Nixon shock of 1971 (when the American president enacted wage-price controls, took the dollar off gold, and imposed trade controls), 1982 eruption in Mexico of the international debt crisis, Iraq’s invasion of Kuwait in 1990, the 1991 Soviet coup, 1992 crisis in the European Exchange Rate Mechanism, Hurricane Katrina in 2005, and US subprime mortgage crisis of 2007.