Wonderful little exposition on the intersection between Technology, Economics, and Psychology. I find Roy's interpretation on the need to change perceptions particularly interesting: it is almost as if perception needs to be a factor of production. The example he offers is the UK postal service trying to improve delivery rates for first class mail such that 99% of the mail arrives by the next day. That task was extremely expensive, but the deeper issue was that people thought that only 50-60% of the mail arrives by the next day, even though at that time the rate was already in the high 90's. The bad perception made the marginal value of the actual product very minimal. If this is true, it suggests that impressions should play a much larger role in determining value.
Greek wants to turn back the clock on the austerity negotiations. It's not really surprising considering the original goals were wildly unsustainable. Austerity doesn't lead to growth, high debt doesn't necessarily retard it. It's getting particularly worrisome considering the Greek government is resorting to peculiar national forms of monetary expansion.
A new paper on industrial policy. I think Chris Blattman's argument that industrial policy can be designed intelligently is true, but the real question is whether it's helpful on an international arena. I don't know too much about industrial policy, but the thing that bothers me about it is if there's a risk of international "race-to-the-bottom" when it comes to gearing an economy to manufacturing. Does one country's industrial policy crowd out that of others? Or instead is it just a rebalancing within each country?
Commodities are being used as part of subprime finance deals? I see this as just another argument for why risk models are incredibly inaccurate. Considering there's so many transactions unknown to the public, how can the publicly measured parameters be accurate?
Economic data collectors are under attack. Why? There's a possibility that the republicans don't want to give the government the ability to measure statistics to execute policy. Instead of starving the beast, you could just take away its eyeglasses. The CATO argument that the free market could take over seems peculiar. Information is a public good considering it can be accessed by anybody, and a free market solution would have very restrictive funding arrangements, limiting the improvement of policy.
Economic justice is good for development! The statistics are pretty impressive. The authors estimate that 17 to 20 percent of growth in the period between 1960 and 2008 can be attributed to the growth in the decrease in discrimination for hiring.
Another example in which individual trade policy doesn't always align with global interests: trade barriers and food volatility. I'm personally very conflicted on this issue as I do believe countries should have the policy space to pursue trade barriers that have broader distributional implications within their countries. However, which rights should be granted to states if their own policies interfere with the policy space of others?
Europe breakup shouldn't be that big of a deal. But how do we know this? You only have to be wrong once on predicting these crises to be really wrong. Given the possibility of many hidden risks in the Spanish banks that are now just unraveling, there's still plenty of reasons why the Europe analysis is something to worry about. Given debt is fragile, it's impossible to prove that it won't collapse. Only one counterexample is needed for the house of cards to fall on itself.
Randomly lose a billion dollars on a single trade. These are the kinds of things that make me laugh at those who say the non-normality of financial markets is an insufficient reason to reject much of modern risk calculations. Non-normality is not some random "exception to the rule". It is the rule, to which stable returns are the exceptions.