· Last month’s squeeze in overnight domestic US$ funding rattled markets · The Fed responded rapidly but the problem has been growing for some time · Market fragility stems from problems in the transmission mechanism
Tyler Cowan conducts one of his rapid-fire, many-different-topics "Conversations with Tyler" with Hal Varian ("Hal Varian on Taking the Academic Approach to Business," June 19, 2019). Of course, Varian was a very prominent academic economist (and textbook author) for decades, but then 20 years ago became one of the first prominent economists to move over to the tech industry. He has now spent the last 20 years at Google. The conversation is full of highlights, but here are some snippets.
I know a number of economics faculty who have been incorporating video clips into their classes. Sometimes it's part of a lecture presentation. Sometimes it's for students to watch before class. For intro students in particular, it can be a useful practice because it gives them a sense that they are being introduced to a universe of economists, not just to one professor and a textbook. The faculty member can also react to the video clip, and in this way offer students some encouragement to react and to comment as well--in a way that students might not feel comfortable reacting if they need to confront their own professor.
The idea that governments can’t lower taxes because there is a deficit, but are free to raise all expenses even if there is a deficit can be found in many political manifestos these days. Central planners always see the economic challenges as a problem of demand, and as such cringe at the idea of prudent investment and saving. When GDP growth, gross capital formation, and consumption are lower than what Keynesians would want, they always blame the alleged problem on “too much saving”, a ridiculous premise based on the perception that economic cycles and excess capacity do not matter and if companies and citizens don’t spend as much as the government wants, then the public sector should spend a lot more.
As the pedants among us never tire of pointing out, the so-called "Nobel Prize in economics" is not literally a "Nobel prize." It was not established by the original bequest from Alfred Nobel, but instead was first given in 1969, with the prize money provided by a grant from Sweden's central bank as part of the 300th anniversary of the founding of the bank. Thus, the award is officially "The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel." (Justin Fox gives a nice brief overview of the history here.) Although I am pedantic in many matters, this doesn't happen to be one of them, so I will continue following the conventional usage in calling it the "Nobel prize in economics."
Next Monday the 51th Nobel prize in Economics will be awarded. Allen R. Sanderson and John J. Siegfried offer some perspective on the first 50 years of the economics award by providing some context with the other Nobel prizes in "The Nobel Prize in Economics Turns 50" (American Economist, 2019, 64:2, pp. 167–182). They offer background on the genesis of the prize, how its official name has evolved, academic backgrounds, and big ideas that spanned several awards.
The Federal Reserve, through its president Jerome Powell, has indicated that it is preparing to increase its balance “organically”. The effort to separate this latest monetary policy change of course from a full-blown new QE (quantitative easing) is, at the very least, amusing. If we look at what is being discussed, it has nothing to do with organic expansion and looks a lot like a new repurchase program.