Globalization Powerpoint

Please find the powerpoint from last Wednesday’s Globalization lecture here : globalization1

Globalization Section this Week

This week we will be wrapping up the Globalization section with a discussion of the regulation of cross border policy issues. We will address the challenges of achieving policy outcomes across sovereign states in the absence of a global government, and amidst the reality of international economic competition and the quest for economic competitiveness.

 

Depending on how much time we have, we will discuss challenges in labor and climate change as examples.

 

The readings for this week are:

 

 

(E) The Golden Straight Jacket

(E) Globalization: Crisis of Regulation or Crisis of Capital?

(E) Susan M Collins, “Economic Integration and the American Worker”

Chapters 3 & 6 from “Making Globalization Work” by Joseph Stiglitz (focus on the trade, labor and climate discussions)

Final Assignment Questions

The following are the assignment questions for the last two assignments with their respective due dates:

Compare and contrast Sen’s view of economic rationality to a public choice theorist’s (i.e., Buchanan or Niskanen) view of the same. How might any differences translate into different viewpoints regarding rational decision-making in non-economic situations (for example, voting, government agencies, etc.)? (Due April 29,2009)

In class, we discussed the views on regulation of Stigler, Downs, Arrow and others. How would their perspectives regard/assess the regulation of the financial market before it suffered a meltdown last fall? What insights might these theorists offer regarding the best way to fix the financial sector? (Due on the last day of class)

Notes from April 8th’s Lecture

Please click on the following link to access the powerpoint  slides for last week’s lecture…   public_choice_2009

Josh

Warren on the Daily Show

Elizabeth Warren, chair of the Congressional Oversight panel for TARP, was on the Daily Show explaining the oversight of TARP.

The Daily Show With Jon Stewart	M – Th 11p / 10c
Elizabeth Warren Pt. 1
thedailyshow.com
Daily Show Full Episodes Economic Crisis Political Humor

The Daily Show With Jon Stewart	M – Th 11p / 10c
Elizabeth Warren Pt. 2
thedailyshow.com
Daily Show Full Episodes Economic Crisis Political Humor

This Week’s Powerpoint

Please find this week’s power point slides  here

Regulating the environment

In class this week we’ll start regulatory policy. Of course, whenever someone mentions regulatory policy most people assume they’re talking about environmental protection. While the environment is a big piece of the regulatory puzzle in the US, it is not the only one.

Nonetheless, with Earth Day coming up in a few days, it is worthwhile to review some noteworthy trends in environmental economics. One development that has gained some attention, especially since the Obama administration has embraced it in principle, is carbon emissions trading, also known as cap and trade. In his blog, The Inspired Economist, Chris Milton writes about how the emerging carbon market can lead to a shift in current land management policies.

In another article, John Meadowcroft writing on the IEA blog, discusses the difference between stated and revealed preferences when it comes to things like protecting the environment. In the article, he uses the example of the English actress, Emma Thompson, who participated in a demonstration against expanding Heathrow airport in London (stated preference) and a few days later flew to Los Angeles to attend the Golden Globes Award ceremony (revealed preference). While most people’s stated preferences include saving the environment and reducing climate change; unfortunately, their consumption patterns, i.e., revealed preferences, tell quite a different story. In order to produce meaningful environmental change, governments must figure out a way to get revealed preferences to better coincide with stated preferences.

Finally, (at least for now) I want to draw your attention to a new world model–actually an update of the World3 model (“Limits to Growth”)--including climate change and its interaction with energy and natural resources. The inescapable conclusion reached by the authors is that we are on an unsustainable path. The model’s chief virtue, however, derives principally from the fact that it is a tool that can be used to experiment with ideas on how to solve these environmental problems. So as we celebrate another Earth Day, we can contemplate the increased role that private individuals, firms and governments must play, working together, to ensure that our children and grandchildren will be able to enjoy future Earth Days.

European Banks & Bailouts

As unpopular as bailing banks out is in the US, at least we can bail them out. Europe may be pushing for tighter regulation of the financial markets, but they have bank issues that are much more problematic than ours if you make the assumption that regulation might prevent or mitigate most crises, but it is never 100% insurance against any crisis.

We have banks that have a balance sheet of 10-15% of GDP. The biggest banks total somewhere near 50% of GDP if I have my figure straight. There are individual European banks with balance sheets 200-600% GDP of their respective country. Iceland’s banks had balance sheets totaling over 1000% of GDP – it is no wonder the country went bankrupt.

The Financial Times has very interesting graphic.

-kc

Readings for This Week

The Readings for this week:

Buchanan: “Analysis of Closed Behavioral Systems”
Buchanan and Wagner
Niskanen

Next week
Downs
Stigler
Arrow

Great Depression or Great Recession?

There is a lot of debate occurring in the blogosphere on whether we’re in a depression or recession. Some commentators, as mentioned in earlier posts here, have taken to calling our economic crisis, “The Great Recession.” Others are calling it another Depression. The excellent economics site, Vox, falls squarely in the latter camp with its most recent post. The authors support their claim by citing a number of significant trends in the data. First and foremost, they emphasize that the current situation requires a close consideration of global rather than just domestic US data. When one looks at the world economic condition, the sight is not pretty. In nearly every important indicator–industrial production, stock markets and trade–the global trends are tracking the Great Depression. However, I think this gloomy prognosis has to be qualified by two observations, one the authors make themselves and one of my own. First, the data points for the current crisis are fewer so far than the trend lines shown in the post’s graphs. Thus, it is still too early to tell whether this downturn will be as severe as the Great Depression or whether it will last as long. Second, and related to the first point, the governments of the world seem to be responding in a more proactive and effective manner to this crisis. This is the gist of their conclusion, which suggests that through a sustained, global policy response, the world’s intertwined economies can hope to weather this difficult economic storm.

Unemployment Numbers

I’ve been told as recently as this weekend that, despite what I’ve heard, this is still not as bad as the 1981 recession (I am not old enough to remember it), but the March unemployment numbers beg to differ…

Change in Payroll for Recent Recessions

Yes, there were other negatives in the early ’80s, inflation, super-high interest rates, etc. but it wasn’t a financial crisis and it wasn’t global. And that is what Eichengreen (UC-Berkley) & O’Rourke (Trinity College) assert when they call this a depression in their article on VOX… when you look at the global picture, this is as bad as 1929. They hope the difference in the policy response will mean we don’t re-live the 1930s in their entirety.

One final thought:

Compulsive optimism, otherwise known as grasping at straws, is habitual for some economists, especially if they are selling public policy or common stock. But it is also dangerous, destroying credibility and to discouraging action. Repress it. – James K. Galbraith

And I though that economics was called the dismal science…

Chart from Justin Fox at Time

-kc

Orszag & Behavior Economics

There is a brief interview with Peter Orszag, director of OMB, on NPR. Just a brief take on his view of behavioral economics in the Obama Administration.

He was also on the Daily Show last week where he discussed deficit and debt:

The Daily Show With Jon Stewart	M – Th 11p / 10c
Peter Orszag Pt. 1
comedycentral.com
Daily Show Full Episodes Economic Crisis Political Humor

The Daily Show With Jon Stewart	M – Th 11p / 10c
Peter Orszag Pt. 1
comedycentral.com
Daily Show Full Episodes Economic Crisis Political Humor

-kc

Classes For the Rest of the Semester

For the next two weeks we will be tackling  Public Choice. Later for a about a class to class and a half we will wrap-up the Globalization section.Then for the last week (and probably a half of the prior week)we will have student presentations on your papers.

JCN

Tonight’s PowerPoints

The PowerPoint slides for tonight’s class are up.

We will be finishing Sen’’s book tonight. Our discussion will focus on the last three chapters.