- Gary Becker on Capitalism’s Return from the Financial Crisis
Karl Marx saw every major depression in the nineteenth century as the final crisis of capitalism, due to its “ internal contradictions”, that would usher in the era of socialism and communism. Alas for Marx, each time he was proved wrong because the end of these depressions was often followed by an even stronger capitalist surge.
- Richard Posner asks Has Capitalism Revived/Survived?
The recent (actually current, though diminishing) depression kicked off by the worldwide financial crisis of September 2008 has not created any new communist or socialist countries. What it has done is give rise in almost all countries to a demand for more stringent regulation of banks and other financial institutions, and of some of their financial instruments, and to large public deficits; but neither of these developments is a harbinger of socialism. It’s no longer even clear what “socialism” means, or who has a coherent program of socialist administration of a modern economy.
- Donal Curtin on How governments rort their own countries' airline passengers
A while ago I had a go at the protectionist stupidity of typical bilateral inter-government airline agreements, as instanced on this occasion by Cathay Pacific having to get the Australian government's permission to increase the number of flights it would like to make between Hong Kong and Australia.
More recently I've come across some research documenting just how much of a dead hand these agreements tend to be, and how much more airline traffic would be enabled by having more liberal arrangements.
- William Easterly asks Are the Aid Donors Un-Developing Ethiopia?
The World Bank, the US Agency for International Development (USAID), and the UK’s Department for International Development (DFID) have consistently failed to act on allegations of human rights abuses in Ethiopia, including ones that are tied to their aid programmes, according to new reports.
- Peter Klein on NBER Papers of Interest
Klein points us to 3 new NBER papers on compensation, performance, and productivity.
- Eric Crampton on Of Free Riders and Forced Riders: America's Cup edition
But there's a necessary complement to free-rider problems. If we do make payment mandatory through taxes, we'll get a forced rider problem: lots of people who get epsilon, zero, or negative utility from the yacht race are forced to pay for it through their taxes.
- Daron Acemoglu and James Robinson ask Why Hasn’t Botswana Diversified out of Diamonds?
Yet despite this and the fact that diamonds are running it out, Botswana has struggled to diversify out of diamonds, and it also has very high levels of inequality. There has not been a resource curse in terms of economic growth, but the economy has not diversified out of diamonds and into more modern sectors either.
- Matt Nolan says That’s it, I’m done: RBNZ takes the path of discretion
This seems to be saying that simply ensuring the resilience of the financial system is not enough, the central bank should be trying to exert direct, and discretionary, control over what financial markets do and where investment heads. Fine tuning at its finest. It does appear that policymakers here have been strongly influenced by Borio.
- John Cochrane on McDonalds and the minimum wage
Recently, on a long car trip returning from a glider contest, I did something unusual among our liberal elite: I actually went to a McDonalds and ate there.
- Michael W Klein and Jay C. Shambaugh ask Is there a dilemma with the Trilemma
The ‘financial trilemma’ – that open capital markets and pegged exchange rates mean a loss of monetary autonomy – has recently been challenged. Some argue that even flexible exchange rates cannot assure monetary autonomy without capital controls, while others argue even countries with fixed exchange rates can gain autonomy through temporary capital controls. This column argues that free floating exchange rates do in fact allow autonomy, and partially floating ones allow partial autonomy. For countries with fixed exchange rates, capital controls provide monetary autonomy when they are widely applied and longstanding, but not when they are temporary and narrowly targeted.