Do Markets Increase Trust?
August 27, 2009

What's the relationship between markets and morality? The standard assumption is that markets have little impact on the moral character of people who operate within them. But it doesn't look like that's necessarily the case. Patrick Francois and Tanguy van Ypersele studied what happened to people's level of "trust in others" in states that deregulated their financial sectors in ways that increased competition. Trust can be considered a moral attribute, and given what's happened in the subprime market, you'd think that deregulation might lead to a drop in trust.

The Economic Storm Ahead
August 26, 2009

 With the near-simultaneous release this morning of CBO's updated Budget and Economic Outlook and OMB's Mid-Session Review, we have the most detailed economic analyses and forecasts we are likely to see for the rest of the year. If the consensus these documents represent is in the ballpark, the country and the Obama administration are in for a rough ride.

Worth Reading
August 26, 2009

California is auctioning items on eBay to raise funds. What Bernanke's reappoinment means for Larry Summers. Cowen, Thoma, DeLong, Reinhart, and Galbraith on Bernanke's future. Why the health insurance market isn't competitive right now. Expats from the UK are heading home. 

Barney Frank's Inflection Point
August 25, 2009

The New Republic is holding a Washington conference called "Inflection Point: Washington & Wall Street in the New Financial System." It will be held on Monday, September 14, a year to the date after Lehman Brothers collapsed--that is, a year to the date after the markets really collapsed, instead of the gradual fall they'd been experiencing in the months before. The big players will be at this event--players from the executive branch, both houses of Congress, and from the banks and other counting houses of our time. Of course, Barney Frank will also be there arguing his sensible program f

Don't Panic Over the New Deficit Numbers
August 25, 2009

So what should we make of today’s other economic announcement--that the 10-year deficit projection has climbed to $9 trillion from just over $7 trillion earlier this year? Short answer: Not too much. As the OMB fact-sheet accompanying the release points out, the reason for the bulk of the $2 trillion increase is that the recession was deeper than expected, which led to far greater spending on “automatic stabilizers” like unemployment insurance and lower tax bills.

Is the College Admissions Race Efficient?
August 25, 2009

Thanks to the positive effects of higher education on pay, the competition for entrance into the top colleges has increased sharply over the past three decades--particularly in the Northeast and California. But over the same period, the number of slots available at these schools has stayed largely unchanged, leading to a situation where demand far outstrips supply. In response, high school students and their parents have devoted a greater share of their resources to improving their relative standing. The evidence: Average scores on college entrance exams have gone up.

Aliyah and Interest Rates
August 25, 2009

Aliyah is the at once mystical and practical "going up" to Zion. Stanley Fischer is one of the very many men and women who have made that journey and are, thus, olim. It was Bibi Netanyahu who, as minister of finance in Ariel Sharon's government, summoned him to the service of the Jewish state and turned around his whole life.

The Three Faces Of Ben Bernanke
August 25, 2009

Ben Bernanke will be nominated for a second term as chairman of the Federal Reserve. But which Bernanke are we getting? There are at least three.  The Bernanke who led the charge to rescue the US (and world’s) financial system after the Lehman-AIG collapse.  If you accept that the choice from late September was “Collapse or Rescue,” this Bernanke did a great job. The Bernanke who argued for keeping interest rates low as the housing bubble developed. This Bernanke was part of the Greenspan Illusion--the Fed should ignore bubbles and “just clean up afterwards.” Is that still Bernanke’s view?

The Logic of Reappointing Bernanke
August 24, 2009

The big news from Martha's Vineyard is that Obama is appointing Ben Bernanke to a second term as Fed chairman. I've explained before why I think this is a good idea--Bernanke has been creative, even highly unorthodox, at precisely the moment when the economy demanded these qualities from the Fed, and when a conservative, by-the-book approach would have likely sent us into a depression.

To Love, or Blame, the Fed?
August 24, 2009

Ben Bernanke's moves at the Fed have rightly attracted much praise in the last month after better-than-expected GDP and unemployment reports pointed to the end of the Great Recession. The latest signs of Fed-Love come by way of John Maggs at the National Journal's econ blog, which points to a new paper arguing for a "Fed-like approach" to budget-making. Maggs asks: "Should we and could we create a Fed for the budget?" (The paper is a highly-recommended read.) Of course, Fed criticism hasn't abated that much. The latest evidence comes from this weekend's Jackson Hole macro-econ get-together.