The world economy is plainly in a poor state, but it could get a lot worse. This is a time to put dogma and politics to one side and concentrate on pragmatic answers. That means more government intervention and co-operation in the short term than taxpayers, politicians or indeed free-market newspapers would normally like.
"I'm trying to make sense of all this financial fiasco from economics perspectives. I read blogs. But now there are way too many people talking about anything out there. Suggestion?"
"Don't read them all. Just check regularly those of Mankiw, Krugman, Arnold Kling (of EconLog -- in the meantime, just skip Bryan Caplan), Econbrowser (both Hamilton and Chinn)"
"What about magazines, newspapers?"
"New York Times. Don't miss Leonhardt. And of course The Economist".
"I'm not a professional economist. But if I were to read academic papers, what do you suggest?
"Ben Bernanke's papers in early 80s"
"Books?"
"Bernanke's Essays on the Great Depression"
"As for Indonesian context?"
"The two Basris: Chatib and Faisal"
This crisis is so huge and complex that I don't think you can fairly cite anything as the main cause. But it is certain that the way we account for securities has contributed, by turning illiquidity in various banks into insolvency. Moreover, while deregulation played a role, so has regulation. One of the reasons that severe markdowns are such a problem for banks is that the thin balance sheet triggers a ratings downgrade. At that point, many large institutions are legally prohibited from investing in them; others are forbidden by charter. The change in the government sanctioned rating kicks in government rules which ensure that bankruptcy rapidly follows a writedown. Did I mention that financial firms are not allowed to restructure in bankruptcy? They have to liquidate.
Title II. Sect. 211. Transportation fringe benefits to bicycle commuters.
[With]: "(i) QUALIFIED BICYCLE COMMUTING REIMBURSEMENT.—The term 'qualified bicycle commuting reimbursement' means, with respect to any calendar year, any employer reimbursement during the 15-month period beginning with the first day of such calendar year for reasonable expenses incurred by the employee during such calendar year for the purchase of a bicycle and bicycle improvements, repair, and storage, if such bicycle is regularly used for travel between the employee's residence and place of employment.... [and some more down the document]
We also hear that it is the free market that is to blame. But the facts show that it was the government that pressured financial institutions in general to lend to subprime borrowers, with such things as the Community Reinvestment Act and, later, threats of legal action by then Attorney General Janet Reno if the feds did not like the statistics on who was getting loans and who wasn't.That's Thomas Sowell
To blame laissez faire for today's economic crisis is akin to blaming the human body's natural and normal functioning for the illness suffered by someone who's overdosing on heroin.That is Don Boudreaux.
Saying that "greed" caused today's problems is like saying that gravity caused the death of someone pushed from the top floor of the Empire State building.
[E]conomics is a science, politics is a subject, and political economy is a branch of moral philosophy. Just because politicians talk about economics doesn't mean they are making any sense, and just because some economists compromise in political discourse doesn't mean they are doing economics.
As China's export juggernaut employs many imported inputs, there are many policy questions for which it is crucial to know the extent of domestic and foreign value added in its exports. The best known approach - the concept of "vertical specialization" proposed by Hummels, Ishii and Yi (2001) - is not appropriate for countries that engage actively in tariff/tax-favored processing exports such as China, Mexico, and Vietnam. We develop a general formula for computing domestic and foreign contents when processing exports are pervasive. Because this new formula requires some input-output coefficients not typically available from a conventional input-output table, we propose a mathematical programming procedure to estimate these coefficients by combining information from detailed trade statistics with
input-output tables. By our estimation, the share of foreign content in China's exports is at about 50%, almost twice the estimate given by the HIY formula. There are also interesting variations across sectors and firm ownership. Those sectors that are likely labeled as relatively sophisticated such as electronic devices have particularly high foreign content (about 80%). Foreign-invested firms also tend to have higher foreign content in their exports than do domestic firms.
The paper was presented last week at IDS, Univ. of Sussex, UK. The revised version will be posted here.
This phenomenon is also evident in the local level. Our study on domestic trade barriers found that the trucking costs are very high in Indonesia compared to those in the neighboring countries. Many of these are due to illegal charges collected by police, DOT officials, and local thugs. But surprisingly, many respondents showed hesitance to cooperate with our researchers, because they were afraid that the study would come up with a recommendation to clean up the road from such charges that would then backfire in the form of higher level of insecurity!
These two anecdotal evidences are not to be underestimated. Are we looking at the "dilemma of reform" or to put it in differently: are these necessary costs of our long-awaited good governance and transparency (or bigger yet: democracy)?
Other protests [against fuel price increase] have been driven mainly by student activists from various universities, whose tertiary education does not seem to have imbued them with the inclination to properly analyze the policy issues involved. Absent this analysis, the conclusion is always the same: Price increases are bad, end of story. Perhaps their response might have been different if the government had been able to couch the fuel price increases in terms of a reallocation of spending away from consumption subsidies and into investments in Indonesia's future.
Important exceptions notwithstanding, the overall trend toward greater regulation of consumer choices is disturbing. Consumers make worse decisions when they are not responsible for their decisions, or when they can sue or otherwise get compensated when they make bad decisions. Consumers make mistakes, but they learn from them when they have to bear the consequences of their decisions. They are generally far more competent to make decisions in their own interests than are regulators or lawmakers as long as consumers are the ones who benefit from good choices and are hurt by bad choices. This is why I continue to be a minimalist on government regulation, and greatly prefer the controls over behavior that stem from consumer responsibility and the discipline of competition.
We should topple SBY down. This is a good time to do that: BBM issue. We should make sure that he finally really increase the BBM price. That way, it is easier to beat him in the upcoming general election. But we should also make sure that the public at large keep believing that fuel subsidy is good. Yes, this has to be played smart. Because on one hand we want SBY to cut the subsidy and on the other hand we want the public to hate that, so later we can use the public sentiment against the president. So, let's keep opposing the plan, but let's pray that SBY continue with it. Play smart, fellas.
