Thoughtful interview on Fed policy

Our whole conference has been about anomalies. Some of those anomalies are pretty fundamental. Why has G.D.P. growth been slow? Why has the labor force participation rate come down so much? Why haven’t we hit 2 percent inflation more quickly? Those are all really interesting questions for an academic. For a policy maker you actually have to make a determination with imperfect information about what the answers to those questions are. So an academic gets to work on exciting ideas and there’s not much cost to being wrong. Anybody who’s in a policy-making role knows there is cost and so that makes it more challenging.

Source: Q. and A. With Eric Rosengren: The Danger of Low Unemployment – The New York Times

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Recent leisure reading: Marlon James A Brief History of Seven Killings

Marlon James A Brief History of Seven Killings I finally got around to reading this and am almost over. It is a hard book to read. Multiple narration, Jamaican patois (with a lot of vocabulary that has to be inferred from context), lots of swearing, raw sex, and violence, and an assumed familiarity with Jamaican history.  I grew up listening to reggae (The Harder They Come was one of the first albums I owned, and Bob Marley was very big at Georgetown, naturally, in 1979 and after, and one could reasonably expect to encounter people who had opinions about Peter Tosh vs. Marley).  But still a surprising thing for me about the novel is how much I hear a set of voices in the dialogue.  In particular, whenever I am reading the Papa-Lo segments, the sound is always the singing voice of the older Lee “Scratch” Perry.  I have no idea how that happened.  The other voices don’t have counterparts with identifiable figures, but I hear them.  Not many novels produce that effect.  Now, the novel itself is sprawling and complex. Reminds me a lot of Ben Okri’s The Famished Road.  I do not always like experimental fiction (every now and then we get fast forwards, dreams, disorienting first person narration, unattributed dialogue), but James is certainly pulling it off.  I would recommend, but it is not an easy read and take a hundred pages to settle into the rhythm and overlook some of the more grating voices.

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Land tenure security and investment in African agriculture: Thoughts on Fenske

I assigned James Fenske’s excellent survey, meta-analysis, and re-analysis for my African Economic Development class.  In some ways, the lesson to draw is how little can be generalized.  There are many reasons for why few studies find a strong positive relationship between “more complete” land rights (by which is usually meant all rights bundled together and held by a single person or household) and measures of farming practices (especially those that have long term term implications for land productivity, such as fallowing, tree-planting, soil management, terracing, etc).   Fenske does a great job of going through why that might be the case.

One possibility that he does not consider (unless I missed it, which is always possible) is that maybe there are some advantages to “less complete” tenure rights (by which typically is meant secondary and joint rights, and prohibitions against sale).  Off the top of my head, five come to mind:

  • Joint ownership can work in theory just like joint equity ownership anywhere, as a way to pool capital and spread risk, and so carry out more investment.  Separation of ownership and management is what should be studied, then… how has joint tenure led to institutions (customs, norms) for effective management?
  • Joint ownership can lead to better decisions.  If land is constantly being subdivided and placed under the control of young people when they become adults, maybe a lot of relatively inexperienced farm managers take bad decisions that ultimately lower productivity.  If young adults are more impatient than older adults, they will increase farm profitability in the short term and threaten the longer term.
  • Secondary rights means, usually, specialized rights.  Why shouldn’t tree product processors have the rights to tree products?  They will then manage the trees (pruning, gathering, nurturing) better than a generalist.  So the research agenda to be studied then is: Just how much effort is put by women, say, into nurturing trees that will be economically useful?  The avenues may not be obvious: women gather firewood and cut down trees.  If they do not have rights to tree products, then maybe they would just cut down useful trees.  Note that the investment may then be very mismeasured: the farmer who “owns” the main rights to the field is not the one doing the investment, the woman with tree rights is.
  • The large kin group is a very complex organization, but in most places in Africa women are second-order stakeholders.  Also, many village, agrarian social systems have strong social norms against women freely selling their labor in a competitive labor market.  In an individualized system, every wife is basically a single seller of labor to her husband (the monopsonist).  When the agrarian production unit is larger, however, then two collective entities (the husbands on one side and the wives and daughters on the other) are negotiating.  It might be that women do much better for themselves in that situation, and so objectively prefer the communal tenure and resist individualized tenure.
  • Same point as above, but now thinking of the implications of land as an asset.  If the husband controls land freehold, his threats regarding the asset are credible (“I will see the farm, dammit, and then where will you go?”) whereas in a communal system with no land sales he has no credible threat regarding disposition of the asset.

Cognitive overload sets in after five points (hey, the Ramans do everything in threes, and I got to five, so give me some credit).

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The Life We Bury by Allen Eskens

My Dad gave this to me to read after he had finished.  A good, serviceable, honest thriller.  Very earnest in some ways, but what can you expect from the snowy plains of Minnesota.  I enjoyed it, even as I longed for Dalgleish.  But Eskens did a really nice job capturing the reality of the Midwest, where young and old are trapped by geography… everything takes so long… and limited opportunities…. community college, or not?… and expectations.

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John Cochrane thinks the administrative state silences speech… I think there is a bigger danger from Donald Trump

I was listening to John Cochrane, now at Hoover Institute, giving an EconTalk Podcast with Russ Roberts. One of the main problems with the over-regulatory administrative state that the United States is becoming, according to Cochrane, is that “the rules” are no longer clear and so regulatory agencies make the rules and the rules are discretionary and situational so people in business have to “be quiet” for fear of angering the regulators.  (BTW, I am paraphrasing, not quoting.) Russ Roberts, for the first time in many a podcast (and I have listened to a lot, he has excellent guests) pushed back.  “Hasn’t that always been true?  What evidence is there that there is more arbitrariness?”  Cochrane was not that convincing.  His argument sounds better than it tastes.

But that is not why I suddenly decided to write.  Reading about Trump’s threat to have his attorney general appoint a special prosecutor to “lock her up” I thought to myself: Who do we fear, really? The Republican and Democrat well-intentioned, if-revolving-door regulators of the U.S. government?  Or someone who cavalierly brushes aside a long-standing norm about the administration of criminal justice (a norm reinforced after Richard Nixon’s disgrace)?  Here is Benjamin Wittes on the issue:

One of these norms is that the Justice Department doesn’t use the criminal enforcement powers of the federal government to go after the administration’s political opponents. This is the idea of impartial justice. But don’t kid yourself. The Constitution does not require impartial justice. The president has enormous discretion—which, put more crudely, means that we expect him to discriminate. One possible basis for this discrimination is how much he likes or dislikes you. Most people have committed crimes if you look hard enough to find them. What prevents administrations from focusing on the crimes of their opponents, rather than the most serious crimes committed by whomever, is nothing more than the institutional expectations we have of the executive branch—and it has of itself. These expectations sound less in law than they do in decency and civic virtue. What Trump is promising here is precisely war on that decency and civic virtue.

Back to Cochrane.  Turns out a grumpy Republican economist a the Hoover Institute thinks just like a cheerful economist (generally… how can you not be cheerful living in northern California, compared to, oh, Burkina Faso?) at Santa Clara University.  The evidence is from his blog:

The leading candidates have already promised which way they’re going. For example, Ms. Clinton, quoted by Kim Strassel, promises to use Treasury regulation to punish companies that legally reduce taxes by moving abroad. And Mr. Trump outrages the law and constitution daily.

If you have to choose the least-bad, I think Cochrane is telling us who he will choose.  One proposes to outrage a regulation.  The other outrages the law and constitution daily.

Postscript: Can an amateur blogger compete? Tyler Cowen wrote about this issue back in March, unfavorably in regards to Trump.  When very libertarian economists find common ground with non-ideological economists, that is something.  WTF is a “non-ideological economist” you might ask.  Here’s my working definition: Because I don’t have a strong ideology, I don’t feel compelled to have or to express an opinion about everything.  Ideologues have to (or want to) fit everything into the perspective of the ideology.  They enjoy and see as important figuring out how their ideology applies to every issue that crosses their plate.  They are the foodies of intellectuals.  Everything has to be evaluated.  (Most ideologues, but certainly not Tyler Cowen, limit themselves in other ways… Libertarian economists rarely have any interest in what happens in foreign countries, leading to their occasional Aleppo moments, to use the phrase that is au courant…  Socialist economists never seem to quite know what to do with consumer behavior…) 

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Clear statement about why Brexit matters for the United Kingdom

More than anything, though, the precipitous drop [in the pound] seemed to attest to an increasingly unmistakable reality: Britain’s vote to exit the European Union — Brexit, in common parlance — has put its commercial relationships with the world on uncertain and potentially perilous ground. That poses risks for the British economy, making its money less attractive to hold.  “The world believes that the U.K. is going to be poorer in the future, and find it more expensive to trade,” said Paul Johnson, the director of the Institute for Fiscal Studies, an independent research institution in London. “Essentially, the world is betting against the pound.” And against the British economy. The immediate cause of the plunge appeared to be a speech by the French president, François Hollande, on Thursday evening in Paris, in which he endorsed the view that Britain must be forced to swallow unpalatable terms of departure to discourage other European Union members from eyeing the exits. “The U.K. has decided to do a Brexit, I believe even a hard Brexit,” Mr. Hollande said. “Well, then, we must go all the way through the U.K.’s willingness to leave the E.U. We have to have this firmness. “If not,” he continued, “we would jeopardize the fundamental principles of the E.U. Other countries would want to leave the E.U. to get the supposed advantages without the obligations.”

Source: For Britain’s ‘Brexit’ Bunch, the Party Just Ended – The New York Times

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Friday music: Kurt Wagner of Lambchop on drugs

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