Collected Links 04/2016: Krugmania

Okay, I admit this link collection is a little bit Krugman-heavy. But, to quote Tina Turner, he’s simply the best, better than all the rest, better than anyone…

What went wrong in Europe? Krugman points out the fact that European real GDP per capita and core inflation moved in sync with the US until 2011-12 and fell behind after that. He also points out that austerity cannot explain this, because both European and US governments pursued contractionary fiscal policies at that time. Krugman blames it all on the ECB who raised interest rates in 2011 whereas the Fed didn’t. I am not so convinced, but it’s an interesting fact that needs to be explained.

Olivier Blanchard and Paul Krugman about saving the world, um, the world economy.

Reason No. 39251 for using economic models: They sometimes prevent you from believing what you want to be true but isn’t.

How responsive are trade flows to changes in the real exchange rate? Some people think not very much, Krugman explains why they might be wrong. Why does it matter? Because if “elasticity pessimists” are correct, Spain and Greece and the other Eurozone crisis countries don’t actually need a lot of internal devaluation (falling prices and wages) to pay off their external debt.

Those of you who felt guilty for eating quinoa because your doing so would drive up quinoa prices which would hurt quinoa consumers in developing countries can now breathe a sigh of relief: “Not only has the [increased demand for quinoa] benefited farmers in Peru — it’s even benefited quinoa consumers in the region who don’t actually plant the crop”, says Vox.

Gita Gopinath.

The time discount factor (how much you weigh future utility relative to present utility) is a key determinant of a lot of things. Estimating it is very tricky. A change in Italian penal law in the mid-2000s provides a quasi-natural experiment to estimate how much criminals discount future prison time. The mean discount factor in the prison population is found to be 0.74, which is substantially below existing estimates for the general population. This supports the theory that high preference for present utility increases the likelihood to commit crimes.

Greatest field experiment ever: What If We Just Gave Poor People a Basic Income for Life?

My second-favorite economist’s theory of exploitative taxation: The more naturally beautiful a place is, the higher it’s discrepancy between the taxes its government collects and the public benefits it provides. Maybe Austria is a case in point?

The Uberization of Banking: How SoFi might bring about the world of 100% equity-financed banking.

Who created Bitcoin? A guy by the obviously fake name Satoshi Nakamoto. Now Craig Steven Wright (another fake name?) claims to be the guy. The Economist believes him.

Gross Domestic Product was one of the greatest ideas economists had in the 20th century. But it may be quite inadequate to measure economic activity in the 21st century. The Economist explains why here.

Argentina’s government went into default in 2001. Now, 15 years later, they return to the capital market.

Zweckentfremdungsverbot – that’s what Berlin’s new ban on renting out private rooms and apartments on Airbnb is called. The city claims that this would help preventing rents from rising further. This is so German, and so wrong.

Finally, a meta-study on the economic impact of a Brexit has appeared. The mainstream conclusion is that “disadvantages from lower economic integration appear to outweigh the economic advantages. However, overall, several reviews come to similar (mainstream) conclusions that the net economic effects of Brexit should lie in the lower single digit range between 1% and mostly significantly below 5% of GDP in the longer term”. Of course, they include the caveat that existing studies might miss out on some really damaging long-run risks.

New Graz Economics Papers:

This new paper by Grete Kreimer and Ricardo Mora uses micro data from the Austrian Labor Force Survey from 1996 to 2010 to study the evolution of gender segregation in the labor market. “Our main results show that the gender division of labor is very stable over the 15-year period. This is because the positive effects from the rising female labor force participation rates are counterbalanced by the negative effects from increasing gender differences in the incidence of part-time jobs.”

What will be the effect of climate change on public budgets and what should we do about it? Answers are found in this new paper by Gabriel Bachner and Birgit Bednar-Friedl.