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12 months

Difficulties of Making Predictions: Global Power Politics Edition

Making predictions is hard, especially about the future. It's a comment that seems to have been attributed to everyone from Nostradamus to Niels Bohr to Yogi Berra. But it's deeply true. Most of us have a tendency to make statements about the future with a high level of self-belief, avoid later reconsidering how wrong we were, and then make more statements.

12 months

The Need for Generalists

One can make a reasonable argument that the concept of an economy and the study of economics begins with the idea of specialization, in the sense that those who function within an economy specialize in one kind of production, but then trade with others to consume a broader array of good.

12 months

A Weak Dollar Won't Make America Great

The US dollar has become the safest asset in the face of mounting evidence that the “beggar thy neighbor” policy and drowning structural liquidity problems are coming to a close.

12 months

The Economics of Advertising

There's an old rueful line from firms that advertise: "We know that half of all we spend on advertising is wasted, but we don't know which half." It's not clear who originally coined the phrase. But we do know that the effects of advertising have changed dramatically in a digital age. Half of all advertising spending may still be wasted, but now it's for a very different reason.

12 months

Early Examples of Randomization in the Social Sciences

Randomization is one of the most persuasive techniques for determining cause and effect. Half of a certain group get a treatment; half don't. Compare. If the groups were truly chosen at random, and the treatment was truly the only difference between them, and the differences in outcomes are meaningful and the size of the samples are also large enough for drawing statistically meaningful conclusions, then the differences can tell you something about causes.

12 months

The Modern Shape-Up Labor Market

It’s not unusual to hear predictions that in the future, we will all have opportunities to run our own companies, or that jobs will become a series of freelance contracts. Here’s a representative comment from business school professor Arun Sundararajan (“The Future of Work,” Finance & Development, June 2017, p. 7-11):

12 months

What if Country Bonds Were Linked to GDP Growth?

What if countries could have some built-in flexibility in repaying their debts: specifically, what if the repayment of the debt was linked to whether the domestic economy was growing? Thus, the burden of debt payments would fall in a recession, which is when government sees tax revenues fall and social expenditures rise. Imagine, for example, how the the situation of Greece with government debt would have been different if the country's lousy economic performance had automatically restructured its debt burden in away that reduced current payments. Of course, the tradeoff is that when the economy is going well, debt payments are higher -- but presumably also easier to bear.