Category Archives: economics

How to Build a Recovery

Posted on August 7, 2008 by Felix

Larry Summers has a long and pompous article in the FT today on building a financial recovery. If you can slog your way through the awkward constructions ("consideration should be given to whether the government should establish a mechanism for … Continue reading →

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The Economics of Discounting

Posted on August 5, 2008 by Felix

"Discounting smacks of desperation," says Liz Gunnison. "That’s why brands like Louis Vuitton and Apple don’t do it." Is this a common strategy, or is it a very tough one? All department stores have sales, no matter how high-end they … Continue reading →

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Timing the Recession

Posted on August 5, 2008 by Felix

Don Fishback and Barry Ritholtz are shocked — shocked! — that the InTrade recession contract is based on hard GDP numbers rather than, um, something else, maybe an NBER pronouncement the timing of which is entirely unknown. The fact is … Continue reading →

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Productivity: Looking Good

Posted on August 4, 2008 by Felix

One of the bright spots in the recent GDP reports has been the productivity figures. Whenever GDP continues to grow even as employment is falling, productivity — which is the growth in GDP per worker — will look particularly strong. … Continue reading →

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Did Reg FD Have Unintended Consequences?

Posted on August 1, 2008 by Felix

Heidi Moore has an interesting interview with Vanderbilt professor Robert Whaley, who claims to have found some nasty unintended consequences to the SEC’s Regulation Fair Disclosure, which tried to ensure investors were on a level playing field with respect to … Continue reading →

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Unemployment Spikes

Posted on August 1, 2008 by Felix

5.7% unemployment? That’s ugly. The headline payrolls number of -51,000 jobs might be less bad than the market expected, especially since the fall in June was smaller than originally reported as well. But only the financial markets care about the … Continue reading →

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The Upside of Moral Hazard

Posted on August 1, 2008 by Felix

Bob Van Order, a former chief economist of Freddie Mac, has a long and sensible piece describing what Fannie and Freddie are good for, and examining the problems they’re currently facing. Along the way, he talks a bit about the … Continue reading →

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SWFs vs Free Trade

Posted on July 31, 2008 by Felix

Matt Cooper says that sovereign wealth funds are "the opposite of free trade" and "anathema to a free-market economy". I don’t see why that should be the case: if anything, the funds are a natural consequence of free trade. If … Continue reading →

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Q2 GDP: Looking at the GDP Deflator

Posted on July 31, 2008 by Felix

Edward Harrison makes a good point about the unreliability of GDP numbers: the headline GDP number is equal to nominal GDP growth minus the GDP deflator — a measure of broad inflation. When the Q4 2007 GDP growth was revised … Continue reading →

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The Limits of GDP Statistics

Posted on July 31, 2008 by Felix

Zubin has the quarter-by-quarter GDP chart; he, like many others, is particularly taken that in the fourth quarter of 2007, the GDP figure fell below zero. But while the Q4 revision from +0.6% to -0.2% was big, the Q2 revision … Continue reading →

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Towards the Command-and-Control Economy

Posted on July 31, 2008 by Felix

On a day when David Weidner jokingly proposes the "no-loss sale" rule (no selling a stock for a price lower than the last trade), Barry Ritholtz has anecdotal evidence that Wachovia, for one, is refusing to let its clients short … Continue reading →

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Free Zimbabwe’s Banks!

Posted on July 31, 2008 by Felix

As Zimbabwe knocks another ten (yes, ten) zeroes off its currency, the central bank governor, Gideon Gono, is optimistic that somehow this will do some good: so optimistic, in fact, that he’s reintroducing coins. It won’t work, of course. Something … Continue reading →

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The Economics of Checked Baggage

Posted on July 30, 2008 by Felix

What to make of Delta’s new sliding scale for checking bags? On domestic flights, the first bag is free, the second is $50, and the third is $125. This kind of thing is the exact opposite of most retail economics, … Continue reading →

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John Hempton, Financial Blogger Extraordinaire

Posted on July 29, 2008 by Felix

In mid-May, Australian fund manager John Hempton started a blog which is already one of the best in the world for serious analysis of finance investment ideas on both the long and the short side. Coming back from holiday today … Continue reading →

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The Economic Paradoxes of Contemporary Art

Posted on July 28, 2008 by Felix

Don Thompson has written, by far, the best book on the economics of the contemporary art market yet written. It might seem like a narrow area, not enough to get a book out of – yet after wolfing down these … Continue reading →

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Oil Company Economics

Posted on July 17, 2008 by Felix

What would constitute price manipulation in the oil industry? Howell Raines doesn’t blame speculators for high prices in his latest column; instead, he blames the oil companies themselves. Supply and demand? Sure, but as John Lee, a business journalist at … Continue reading →

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European Storms

Posted on July 17, 2008 by Felix

Chart of the day comes from the FT, which has updated its April financial weather map of Europe. Over the past three months, just about every country in the region has deteriorated: you can see why the oceans have been … Continue reading →

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The Economic Policy of John McCain

Posted on July 8, 2008 by Felix

There’s a lot of talk in the blogosphere about John McCain’s pledge to balance the federal budget by the end of his first term in office. The NYT has two articles, by Michael Cooper and Robert Pear, about whether such … Continue reading →

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How Risk is Like Religion

Posted on July 7, 2008 by Felix

Religion is, generally, inherited: the chances are overwhelming that a person of any given religion will have parents of that religion. On the other hand, if your parents are complete religious nutcases, there’s a higher-than-normal chance that you’ll reject their … Continue reading →

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Iceland’s Crunch

Posted on July 2, 2008 by Felix

You’ve got to feel for Iceland. Not only do you have an economy in recession and a plunging currency, but you also have to put up with columns from LSE professors using 20-20 hindsight to tell you that you were … Continue reading →

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Infectious Inflation

Posted on July 1, 2008 by Felix

Barry Eichengreen, via Brad DeLong: There are now fifty countries in the world with inflation rates over 10%. It’s like the early 1930s, but just reverse the sign: back then everybody with their currency linked to the dollar imported deflation; … Continue reading →

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Equity in Individuals

Posted on July 1, 2008 by Felix

It will come as no surprise to learn that an eBay auction for half the future earnings of musician Ashley MacIsaac has had to be pulled: according to eBay regulations, you’re not allowed to sell part ownership of anything, much … Continue reading →

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When Pundits Discover the Repo Market

Posted on June 30, 2008 by Felix

If you want to get a good idea of the disconnect between politics and the markets, try looking across the pond, to Will Hutton’s 1200-word jeremiad against hedge funds. Hutton is a highly respected political commentator, but he clearly knows … Continue reading →

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Error, Randomness, and Payrolls Statistics

Posted on June 28, 2008 by Felix

Just how error-prone are the monthly payrolls statistics? I’ve been reading Len Mlodinow’s very good new book, The Drunkard’s Walk: How Randomness Rules Our Lives, and one of his statements really stood out for me: if you have a data … Continue reading →

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The Opposite of a Bubble

Posted on June 25, 2008 by Felix

"In current markets," says John Kay, "what we need is a term for the opposite of a bubble." In the opposite of a bubble, prices become disconnected from values because sellers believe that, whatever the fundamentals, they will soon be … Continue reading →

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