unpaid thoughts on the dismal science

Thursday, September 12, 2002  
In "Strategies on Fourth Down, From a Mathematical Point of View", Virginia Postrel talks about a new working paper from the NBER by David Romer entitled "It's Fourth Down and What Does the Bellman Equation Say? A Dynamic Programming Analysis of Football Strategy" (abstract online, $5 to download paper). Romer thinks that teams should be a lot more aggressive on fourth down, but he admits it might be tough for an economist to convince a coach to go for it.
9:07 PM

Tuesday, September 10, 2002  
Paul Krugman writes about "The Long Haul" in today's column.
9:51 PM

Great photo over at Brad Delong's site today.
9:43 PM

In "Deflation Nation", Robert Shapiro asks, "Could falling prices send the U.S. into a Japanese-style recession?" Shapiro makes some good points that are rarely brought up during the normal hand-wringing articles about potential deflation:
Disinflation—a falling but still positive inflation rate—is often good for an economy, and even mild deflation—in which that rate drops below zero—may be no worse than mild inflation, if it reflects rising productivity. For example, technological advances and strong demand have enabled the semiconductor industry to steadily improve the power of chips so, in effect, the price of a given chip steadily falls. Imagine a version of the same thing on an economy-wide scale, and you have benign deflation.
On the positive side, the retrenchment that deflation usually breeds can weed out inefficient producers and spur companies to drive for greater efficiency, which is helpful for future productivity. But in the near term, deflation will probably dampen enthusiasm for spending. When consumers and companies expect prices to fall, they're more inclined to put off their purchases. Moreover, every downward tick in the price level raises real interest rates, increasing business's real cost to invest. Falling prices also raise the cost of keeping inventories, another blow to investment.
There's also a great analogy using Dell and Kmart.
9:36 PM

Arnold Kling talks about "Being There", in the first part of a two part series on a vision for the architecture of electronic communications. He doesn't get to the economics of it until near the end.
9:23 PM

Cold Spring Shops is a new blog by economics professor Stephen Karlson and, get this!, he lives in my home town. I hereby propose the first ever De Kalb, Illinois blogger get together, sometime the week of September 22nd, when I will be flying home to visit "those who have not yet escaped."
4:23 PM

Monday, September 09, 2002  
Woo hoo! I've earned a coveted spot on John Quiggin's link list. Thanks, JQ!
10:28 PM

Sunday, September 08, 2002  
It looks like Max Sawicky is moving to Sweden. Oops, I guess not, he's merely weighing in on the Mississippi vs. Sweden debate that is currently swirling around the blogosphere. Max correctly points out the many different ways the two places could be compared and the many factors that need to be controlled for to make a decent comparison. I don't have much to say on the subject, but Max pulls out one statistic that has always stuck in my craw when I heard it: percent of GDP spent on healthcare. Apparently, Sweden spends four percent less than the USA, but I've never undestood the relevance. After all, doesn't that mean they are spending more than the USA on something else?

Look at it this way. Say a country only spends its money on two things, healthcare and food. If country A spends sixty percent of its GDP on healthcare and country B spends only fifty percent, then country B must be better, right? But wait a sec! Country A spends only forty percent of its GDP on food, while country B spends fifty! Therefore, country A must be better. Bottom line is that I can't see how "percent of GDP spend on X" tells us anything about whether a country is doing something right or not.

UPDATE: Glenn Reynolds adds some words and a bunch of links from across the blogoshpere in "Big Fat Swedish Wrap-up".
8:53 PM