Ryan Avent
Recently by Ryan Avent
May 29 2009, 4:15PM
Trains for America
Transportation secretary Ray LaHood has been having himself a nice little trip around Europe over the past few days to see what he can learn from folks who know how to do rail right. The Spanish leg of the journey, which included a nice tour of the country's new high-speed rail network, prompted coverage from the New York Times, which noted:
As has happened elsewhere, the high-speed train is stealing passengers from the airlines: The 2.5-hour route between Madrid and Seville claims about 89 percent of railway and air traffic between the cities, according to Renfe, the state railway operator. In its first year, the Madrid-Barcelona route lured nearly half the five million passengers who would normally fly between the cities, Renfe said.To which I say: bring it on.
May 29 2009, 12:58PM
Deja Vu All Over Again
May 28 2009, 4:35PM
If So-and-so Jumped Off a Bridge, Would You?
Fun new research:
In this paper we investigate whether peers' behavior influences the choice of college major, thus contributing to the mismatch of skills in the labor market. Using a newly constructed dataset, we are able to identify the endogenous effect of peers on such decisions through a novel identification strategy that solves the common econometric problems of studies of social interactions. Results show that, indeed, one is more likely to choose a major when many of her peers make the same choice. We also provide evidence on skills mismatch in terms of entry wages and occupation. We find that peers can divert students from majors in which they have a relative ability advantage, with adverse consequences on academic performance, entry wages and job satisfaction.Advertisers have begun appreciating the idea that if "tastemakers" or otherwise popular and influential people pick up a habit or trend or product, then a lot of others will, too. Maybe the nation's engineering and science departments need to start recruiting the popular kids to join up.
May 28 2009, 2:20PM
Expectation Anchors Aweigh
Daniel beat me to the punch on Simon Johnson's latest writing, but hopefully he won't mind if I add a few additional thoughts. As Daniel notes, Johnson is worried about inflation, primarily because he thinks America has become a lot more like an emerging market than your standard developed nation. Johnson writes:
May 28 2009, 12:20PM
Working On Our Backwards Walk
When telling a story, it's important to talk about past events in the past tense and present events in the present tense. Otherwise readers are likely to get very confused. This is true for economic stories, just as it is for fairy tales and mystery novels. Let's explore an example. Joe Weisenthal writes:
May 28 2009, 10:55AM
Bond. Long Bond.
It's extremely easy to get very deep in the weeds very quickly when talking about what's happening in the market for government bonds. "Steepening yield curve," is one of those signal phrases that informs 99% of the population that what follows will be intelligible or uninteresting, or both. But recent moves in the market for government debt have exercised insiders. Across the Curve's John Jansen got the blogosphere's attention, for instance, by writing:
Maybe the final climactic event is upon us. Maybe the final bubble to burst is the US Treasury market and maybe we are on the verge of a financial Krakatoa which will realign financial markets.
Whatever the case it feels like the calm before the storm and we are about to embark on another interesting expedition.
Ok, then. Best to try and figure out what's going on.
May 27 2009, 4:10PM
Why Not a National Sales Tax?
As Daniel Indiviglio mentions, the idea of a national sales tax -- similar to the value-added tax (VAT) typical in European countries -- has grown more popular in America as the scope of the federal government's budget mess has become clear. Daniel is quite skeptical that such a tax could be adopted in the short term:
Don't get me wrong: a VAT has benefits as well -- particularly if you aren't bothered by the poor paying a greater share of their income to taxes. I just find it highly unlikely a congress with strong Democrat [sic] majorities and a very progressive president would ever allow it. After all, they could instead rely on a plethora of other options, such as further increasing taxes on the rich or imposing high luxury good taxes, as more liberal-minded alternatives.I'm not so sure.
May 27 2009, 1:40PM
Oil!
I'm a recovery optimist -- to me, the shoots are always greener -- but when I get nervous about the prospects for a strong return to growth, it's usually because I've been looking at oil prices. This is a personal hobbyhorse. Americans rely on oil to do a lot of stuff. Commute, obviously. To run errands, including those to pick up various goods shipped across the country by truck. To operate lawnmowers and gas grills and use any of the many, many household chemical products derives in part from petroleum. Oil used to be cheap, and we became very dependent upon it.
May 27 2009, 11:57AM
I Swear, the Last One on Cap-and-Trade
Really, it is. I'd just like to address a few additional comments from Will Wilkinson. He writes:
Ryan evidently believes it is almost obvious that the structure of the strategic problem in securing global climate policy coordination is less complex than the problem of putting together standard-issue public goods, like a system of roads. In the case of global climate policy coordination, we're talking not about diffuse millions but a mere "handful of great powers," who will enjoy such concentrated benefits from an agreement that the normal worries about credible commitment, assurance, free-riding, and so forth do not really apply. So the absence of a coercive enforcement mechanism is pretty much irrelevant. Not only shouldn't we worry about the standard logic of interdependent strategic action, but it's almost deliberately dense to do so. My bad.Sigh. Do I think that it's easier to coordinate international policy than to use national government to build roads? No, I do not. Here's how the discussion went, as far as I can tell.
May 27 2009, 9:00AM
Out of the Ashes Rises ... Another Bubble
The Phoenix metropolitan area marks the easternmost edge of the smoking crater that is the epicenter of the housing bust. While nearly every market in America experienced at least a little frothiness in home prices during the bubble, Phoenix, along with Las Vegas, and California's Inland Empire, stumbled into a perfect bubble storm -- bubble conditions reflective of the tight housing markets along the coast combined with building rules facilitating a huge spike in construction. Not only did housing prices overshoot during the bubble; so too did inventory.
May 26 2009, 3:40PM
Why Health Costs Make American Workers Less Competitive
Greg Mankiw likes linking to this analysis (PDF) of employer-provided health coverage from CBO's Doug Elmendorf, in which it is said:
[T]he costs of providing health insurance to their workers are not a competitive disadvantage for U.S.-based firms.He's done it before, and he does it again today. His goal is to demonstrate that the market sets total compensation levels, such that larger employer benefits must be accompanied by wage reductions, other things equal. Removing the burden of paying for insurance from employers would result in wage increases, leading to no net change in compensation, and therefore no net change in "competitiveness" relative to workers abroad.
May 26 2009, 12:30PM
A Few Final Thoughts on Waxman-Markey
I know, that title promises all the verve of a library's reference room. Apologies, but my entry
last week on how to think about the climate bill drew a few responses,
and I thought I'd take the time to answer. First, to the main point of
my post -- that if we can avoid imposing serious costs on other nations
at a reasonable costs to ourselves, we should -- Jim Manzi replied:
May 21 2009, 12:40PM
How to Think About Waxman-Markey
Tyler Cowen sent out the call for a cost-benefit analysis of the Waxman-Markey (W-M) climate bill making its way through Congress, and Jim Manzi (lately of the Atlantic, also of the American Scene and National Review) has responded. I have tangled with Jim on climate policy a number of times. We disagree very much about what ought to be done, but Manzi is a very rigorous thinker and worth engaging. And because he is so rigorous in his approach, his analysis of the bill and his conclusion should give W-M supporters pause. He writes:
May 20 2009, 1:35PM
Funny Muni
Megan has been making her case for allowing the perennially fiscally stressed state of California to default on its debt, should it come to that. It wouldn't be fun, she says (and really, it wouldn't), but saving California would eliminate the possibility of real reform of the state's budget process, which is absolutely necessary. It would also open up a giant can of moral hazard worms, which would wriggle their way through the mud of state and local budgets around the country. End metaphor.
May 19 2009, 4:24PM
Big (Credit Card) Bills on the Sidewalk
The New York Times' Andrew Martin has a big story today on how credit card companies are worried that Congress is going to put the kibosh on their big money making center -- big borrowers and balance carriers -- leading them to try and squeeze more out of the folks who pay off their bills every month. Ezra Klein remarks:
The credit card industry, in recent years, has developed something of a tiered model. Good customers are treated extremely well. There are rewards programs, favorable terms, and high limits. But those who don't prove as assiduous about their bills, or slip up amidst their payments, fall into a second tier that's as punishing and deceptive as the first tier is serene and straightforward. Hidden fees, unexpected rate increases, universal default, and all the rest. The result is that low income credit card holders effectively subsidize high income credit card holders. The financially illiterate are gamed so the financially literate can pay very low fees. Flattening that business model out a bit would make a lot of sense. It's a feature of the new legislation, not a bug.This seems off to me.
May 19 2009, 1:00PM
A Few Words About Inflation
A lot of folks out there seem to be pretty worried about inflation, despite the fact that price levels have been flat for months and there's considerably slack in the economy. Some even manage to worry about hyperinflation, that is, extremely rapid and uncontrolled increase in the price level. This strikes me as extremely wrongheaded. It fails to place the current American debt-load in any kind of historical context, and more importantly, it posits a world where the Fed wouldn't respond to several years of double-digit annual inflation by raising interest rates. That's just not the world we live in.
May 19 2009, 9:30AM
Beyond Gas
A revealing disclosure -- one of the ways I've amused myself in recent months has been by tracking the movement of crude oil futures relative to stock indexes. As best I can tell, the two tend to like traveling in the same direction; oil rises when stocks rise and declines when stocks decline. This isn't too difficult to understand. Stocks jump on positive economic news, which also happens to boost expectations for future oil demand.
May 18 2009, 2:19PM
Bank, Heal Thyself
It's hard to get too far into a discussion about what to do with the nation's large and troubled banks without someone bringing up Japan (or Sweden; they're both popular). In debates over bank policy, Japan has taken on talismanic properties, making it a sufficient answer to just about any difficult question. Why shouldn't we prop up struggling banks? Japan. Why should we nationalize insolvent institutions? Japan. What will happen if we ignore the lessons of Japan? The dreaded Lost Decade.
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