This WordPress hosted site will be my backup…

… but never goes down, so I’ll never really need this place. I’d just delete the blog here, but wordpress seems to be cranky about that.

My usual digs are here.

OMG!!! Inequality is rising, big time! I’m outraged!!!

Round up the rich and rally the firing squad; inequality is on the rise!*

  • The income share of the top 1% went up by 20% over the last 20 years!
  • The average wage is almost 3 times the median!!
  • The income share of the bottom 50% went down by a quarter!!!

Seriously, what are we going to do?!?! Call the President! Write your Senator! Storm your Congressman’s office!!!

*These statistics are for baseball

Money is just a commodity…

Slashdot reports on the gaining popularity of a virtual money in China:

It’s the QQ coin — online play money created by marketers to sell such things as virtual flowers for instant-message buddies, cellphone ringtones and magical swords for online games. In recent weeks, the QQ coin’s real-world value has risen as much as 70%. It’s the most extreme case of a so-called virtual currency blurring the boundaries between the online and real worlds — and challenging legal limits.

Someone comments:

Currency is just an agreement on a medium to symbolize value.

Common misconception, but one which governments are happy to foster. Actually, currency is a commodity in exactly the same way as coffee, bread, oil, gold, pork bellies.You see if currency were really a medium which symbolised value, it wouldn’t change much. Bread, coffee, gold etc would pretty much always cost the same, they would always have the same value throughout time. Instead what happens is that over time, everything becomes more expensive, inflation. What’s happening is that the currency is losing it’s value. It does that because there’s more of it; supply and demand. When the government(‘s bankers) print money, all the existing money in circulation decreases in value because there is more of it around.

So, no, there’s no fundamental difference between real and virtual money, just as there’s no fundamental difference between real money and a kg of coffee.

Except one thing: we imagine the government is able, through controlling the money supply, to smooth short-run business cycles. If the government doesn’t control the money supply, it can’t do this. So so-called virtual currencies undermine the power of monetary policy.

Labor contracts in the U.S., for example, are usually cover a year, or more, and they’re denominated in dollars. Some people believe the government’s monetary power comes from the fact people write long-term contracts, like wage contracts, in the government controlled currency. So the government shouldn’t start sweating about “virtual” currencies until it starts seeing long-term contracts written in currencies it doesn’t control (…like stock options…).

The Economist is soliciting ideas…

…for a new online venture to be launched in the summer.

Don’t bother submitting any ideas, though. The best one has already been submitted; see this post.

Oh, google… you guys are too funny…


Bring the troops home?

It’s true that what’s happening in Iraq doesn’t meet the ambitions of Iraqis or Americans and everyone admits that many mistakes were made. I agree that the Iraqi government should be pressed to speed up the effort to establish rule of law and achieve reconciliation. And I also agree that the American administration needs to revise the way it’s been handling and planning for this critical war.

But abandoning this front or failing to recognize its priority is a terrible mistake that can lead to disastrous consequences to all of us.

Mohammed from ITM

The Lucas Critique and Climate Change

In Economics we have something called the Lucas Critique. Lucas’ observation was that people change their behavior depending on the policy environment. Its dangerous to assume because we see a correlation between high level variables (e.g. output and inflation), those relationship will hold when when we change the policy (e.g. increase inflation). His critique was basically a call for economist to think about the deep structure of the relationships between high level variables. For us economists, this meant we should look at people’s preferences and how people go about making decisions. (I know it sounds strange, but many macro economists didn’t consider these ‘micro foundations’ before Lucas.)

Now there is the Dyson Critique of climate models:

Concerning the climate models, I know enough of the details to be sure that they are unreliable. They are full of fudge factors that are fitted to the existing climate, so the models more or less agree with the observed data. But there is no reason to believe that the same fudge factors would give the right behavior in a world with different chemistry, for example in a world with increased CO2 in the atmosphere.

I don’t know anything about climate models, but it sounds like he’s making a Lucas-like critique of those models. Those models assume the correlation between CO2 and global warming (or other high level variables like cloud cover) will remain unchanged in the changing environment (e.g. higher CO2 levels). Without knowing the deep relationship between CO2 and these other climate variables it seems dangerous to try to predict their future relationships. He seems to be encouraging climate scientists, like Lucas encouraged economists, to understand the deep relationships between the variables they’re studying.

(h/t Newmark’s Door)