Dennis Leyden's Blog

Better than an autograph ...

2011-10-20T22:37:00.002-04:00

... is a video of a famous economist from days gone by! (Thanks to Paul Krugman's blog for making me aware of the video).

Now if only I could find one of Adam Smith!

Is the housing bubble over?

2011-10-19T22:15:00.002-04:00

The current economic depression has a long way to go until we get back to something approaching normalcy. My best guess is we won't pick up much speed until the massive housing debt is cleared up. While it appears there is still a lot of debt (and hence still a lot of foreclosures), a recent look at the Case-Shiller Home Price Index (after adjusting for inflation) reveals that we are approaching the "normal" post-WWII price levels:

Of course, with all the bad mortgages still out there, I would expect the index to fall a bit below that normal level (just a guess, but if we stick to historic trends, maybe another 5-10%?). But, I'm starting to see the bottom of depression. And then maybe we can start on the road back.

Is this a case of having your cake and eating it too? Or avoiding throwing the baby out with the bathwater?

2011-10-11T14:18:00.001-04:00

Out of a concern for the increased volatility in financial markets, the US and other governments are making attempts at controlling computerized, high speed trading. The arguments against such regulation center on the efficiency gain that such high-speed transactions are supposed to generate. But it's not clear how much gain is actually generated over the usual tatonnement process of financial markets, especially if one adds in the greater risk of financial market manipulations that such transactions create. Thus, such regulation would get rid of the bad ("bathwater") while preserving the good that financial markets do ("saving the baby").

However, such regulation is aimed at treating symptoms without getting at fundamental causes. There is a controversial argument (see my last post) that the fundamental cause of such speculation is the presence of fractional-reserve banking. As speculation occurs, so the argument would go, it creates profits that allow the banking system to create new money that fuels further speculation. Eventually bubble pops and the speculation runs the other way with banks destroying money. If this argument is correct, it suggests that the regulations being considered are simply band-aids in an attempt to reduce volatility ("having one's cake") while keeping the fractional-reserve banking system ("and eating it too").

Should fractional-reserve banking be banned?

2011-10-11T12:08:00.003-04:00

Paul Krugman posted yesterday a criticism of the argument that we should ban fractional-reserve banking (which occurs when you make a deposit in your checking account and the bank is allowed to use most of that money as its own). It turns out I am slowly working my way through the book Money, Bank Credit and Economic Cycles by the economist Jesus Huerta de Soto at the Rey Juan Carlos University of Madrid which seems to argue (I've only worked through the first 3 chapters so far) we need to ban fractional banking for demand deposits (such as checking accounts) to eliminate the boom-and-bust nature of short-run macroeconomic fluctuations (the 2001-2007 was the latest boom, 2007-present is the latest bust). I'm not ready to advocate his position, but it is an interesting one that I think Krugman dismisses too easily. In particular:

Krugman argues that a fractional-reserve banking system with proper regulation has did well from the 1930s to the 1980s when we started deregulating that system. I agree - It did do well. My concern however is that such a system depend on a certain level of economic sophistication on the part of Congress to create and maintain such a system, and it is not clear to me over the long haul we can trust in that level of sophistication. There is a tendency for politicians and regulators to come under the influence of the very people they seek to regulate (this is what is known as the capture theory of regulation). Of course, whether the system Huerta de Soto advocates would be more stable, I don't known. Talk to me after I've finished the book!
Krugman also argues that eliminating fractional-reserve banking would shut down the ability of business (and households) to have access to liquidity and thereby slow down the economy. First, eliminating fractional-reserve banking would only keep banks from loaning out demand deposit funds, not time deposits (that is, loans to banks). Nonetheless, I think it is true that it would reduce the availability of liquidity, though I suspect not as much as Krugman believes because in such a world, interest rates would rise and induce some of those demand deposits to be converted to time deposits (that is, loans to banks). But in any event, I believe, Huerta de Soto's point is precisely that with fractional-reserve banking, money is made too plentiful. How can it be too plentiful? If I understand his argument, it is that investment is ultimately a real (as opposed to a monetary) phenomenon that uses real, physical resources. And that requires savings, that is, deciding not to use all our resources to produce consumption goods. He then argues that fractional-reserve banking allows money to be created by banks that gives the illusion that there are more real resources available for investment that then are (since savings does not in that process increase). And that leads to the boom that ends up in the bust. Again, I haven't come to a conclusion on this issue, but I do believe that simply saying that liquidity would be reduced is not necessarily a bad thing.
Krugman also argues against the feasibility of eliminating a fractional-reserves system, stating, for example, "So, are you going to ban fractional reserve strategies by money market funds? Are you going to ban repo? Auction rate securities? Where does it stop?" But eliminating fractional-reserve banking does not mean eliminating money market funds or other such instruments. It does argue for making a clear distinction between demand deposits and time deposits, with the former being backed by 100% reserves, and the latter being explicitly a risky act of saving and investment. As I understand it, Huerta de Soto's argument is that it is the money creating power of banks that leads to the (increased) volatility in the macro economy. By having 100% reserves on demand deposits, that power is eliminated, and so the volatility is reduced. I haven't worked through this argument yet, but so far I'm not persuaded that Krugman's concern is valid.
Krugman then argues that banning fractional-reserve banking would drive such activities underground and make them harder to regulate. First, it is clear from Huerta de Soto's history of banking that there are strong motivations on the part of banks to engage in fractional banking. (Give one to Krugman!) But, it is also true that the regulatory system that Krugman argues for has been less than perfect. Thus, it has allowed a lot of banking activity to exist outside the regulatory system, and that's why we had the crashing in 2008. That is, to be sure, the result of political influences, but that's the point. Regulation looks good on paper but is not so good in the real world of (imperfect) politics. Would a system that requires explicit noting of the nature of financial transfers as demand deposits or loans to banks/bank-like institutions along with a 100% reserve requirement for demand deposits be any more effective or any less susceptible to political manipulation? I don't know, and my sense is this is the fundamental issue.
Finally, Krugman argues that the anti-fractional reservists are behind the times. I agree that for many (most?) of them, there is an emotional belief in the halcyon days of yore that clouds their thinking, and that a clear look at those days of yore reveals they weren't that halcyonic (how's that for a word!). But, that does not mean that the current way we organize ourselves is always the best and that we cannot learn from those who came before us. Indeed, the Renaissance was the result of an attempt to bring back the best of ancient Greece and Rome, and it produced some good stuff. Rather than argue for or against something because it is new or because it is old, it would be better to look at the substance of the argument. Huerta de Soto's conclusions may or may not be right, but his method is - a clear, explicit analysis of the issue from a conceptual, empirical, and historical perspective.

Deficit Reduction Panel - Laissez faire!

2011-10-11T11:14:00.000-04:00

It appears that many in Congress are upset that the Deficit Reduction Panel isn't conducting its deliberations in public. Though feigning a desire for good government, in fact my take is they're upset that they can't be involved in the process for their own benefit. Congress has had decades to get its fiscal house(s) in order and has failed miserably, so I have no faith that opening up the Panel's deliberations would do anything but kill the process. Whether the Panel comes up with anything worth while is not yet clear, but there is at least one precedent that worked out well - the deliberations that resulted in the US Constitution. Not a perfect document by any means, but all in all not a bad result.

Wiki education

2011-10-07T10:48:00.000-04:00

I'm currently serving on a committee charged with improving the university's general education program. The current program is unfocused and with a byzantine structure that few, faculty or students, can fathom. Efforts to improve it are now center on trying to force it back into a traditional 20th century approach in which all requirements are thought of ideally as freshman-sophomore courses with an emphasis on exposure to subject matter rather than intellectual skill development. The problem, at least for my university, is that things have changed. A very large proportion of students transfer in from community colleges and other institutions and therefore take very few freshman-sophomore level courses; the vast majority of students here are interested in their major, not a separate, two-year general education program that they perceive as unconnected to their interest, and a faculty who for the most part are equally uninterested in a separate two-year general education program. But there is an alternative structure that plays off the US's tradition of liberal education and the EU's innovative 3-year undergraduate degree (associated with the Bologna agreement). That structure would place the major responsibility for a full, intellectually rigorous undergraduate education on the various university colleges/schools with particular responsibility at the department level. Emphasis would be placed on those units producing graduates who have demonstrable intellectual skills (critical thinking, numeracy, aesthetic, etc.). Those units would also be given significant latitude in how they achieve those skills. The university then would get out of the business of micromanaging such details and instead focus on quality assurance - defining clearly the types of intellectual skills that all majors must produce and making sure (with appropriate carrots and sticks) that the various academic units graduate students with those skills. Indeed, I would argue to do anything else is doomed to failure. As the economist Hayek argued more than half a century ago, managing complex institutions centrally cannot but fail because it is impossible for any office or bureaucracy to gather and process sufficient information on a timely basis to assure an efficient outcome. The key is to put in place diffused structures that allows all participants to contribute in a focused manner and toward generally established ends.

Sometimes Cost-Benefit Analysis is a Life-or-Death Issue

2011-10-06T14:22:00.002-04:00

For my ECO 523: Topics in Public Policy students - Cost-Benefit Analysis seems like a pretty dry subject. But it can be associated with some of the most difficult decisions that a person makes in life. Here is an example from the New York Times of the difficulties doing that in the case of prostate cancer and the strong emotions that are raised in the process.

Altruism & selfishness - Life's complicated, get over it! (I'm sorry, let me explain ...)

2011-10-04T10:51:00.003-04:00

There's a wonderful novel by Italo Calvino called the Il Visconte Dimezzato (The Cloven (aka, cut in half) Viscount) about viscount who is cut in half, one side being pure good, the other side pure bad. Both sides turn out to be real pests, and eventually people conspire as to how to put him back together. That novel reminds me of the debate today on whether people are intrinsically selfish (I'm talking about you, Ayn Rand and Richard Dawkins) or altruistic (more names than I can list - just search for altruism on Amazon, or visit any high school). But the problem, as Calvino recognized more than half a century ago, is that trying to reduce human nature to one or the other is wrong headed. A world full of purely selfish people would be hell, as would be a world full of purely altruistic people. The problem, as recent work in the medical field attests, is that life is a constant balancing act between both selfishness and altruism. Unfortunately, contemporary society wants the simplistic answer, and so it teaches the beauty of a life dedicated to entirely to public service or entirely to self interest. But, as Aristotle noted almost 2400 years ago, the balanced life is the one best lived, and to do that we must first extol its beauty.

Empathy is cheap. Moral action takes work.

2011-09-30T10:05:00.001-04:00

Interesting article by David Brooks in the New York Times this morning. He argues that:

Nobody is against empathy. Nonetheless, it’s insufficient. These days empathy has become a shortcut. It has become a way to experience delicious moral emotions without confronting the weaknesses in our nature that prevent us from actually acting upon them. It has become a way to experience the illusion of moral progress without having to do the nasty work of making moral judgments. In a culture that is inarticulate about moral categories and touchy about giving offense, teaching empathy is a safe way for schools and other institutions to seem virtuous without risking controversy or hurting anybody’s feelings.

What is needed in addition to empathy, he argues, is a moral code (be it religious, military, social, or philosophic) that judges the feelings of others and the context in which they occur, and then enjoins a proper response. And that's where the heavy lifting occurs.

A good explanation of why we're in a depression

2011-09-29T13:54:00.002-04:00

I have just finished reading Irving Fisher's Booms and Depressions, an account of the causes of, and cures for, the Great Depression based on the author's debt cycle theory of the business cycle. I found his description of the debt cycle as the primary cause of depressions (such as what we are living through now) persuasive. I did not find his proscription for a cure as persuasive. He argues that the key to avoiding depressions is to "sterilize" (my word) debts so that when debtors default it does not affect the general economy, and that to do that, one needs to engage in countervailing monetary policy that keeps the price level steady (that is, that keeps inflation and deflation from happening). I have some sympathy with that argument in the abstract, but I do not have the confidence he had that we have the ability in practice to do so with sufficient timeliness and accuracy. In that respect, I remain concerned that Hayek may be right - the economy is too complex and the informational needs too high for any agency, no matter how well intentioned, intelligent, and backed by technology, to effect the policies that Fisher envisaged. But I heartily recommend reading the first two parts of Fisher's book (Part I - Theoretical and Part II - Factual). They are spot on for what is going on today.

The book is not on the current best seller list, but you may be able to find it in your library. Here is a pdf version courtesy of the St. Louis Fed's Archival System for Economic Research, and here is a link to a version on Amazon.com. I purchased my copy years ago when I was an undergraduate economics major at the University of Virginia. The Charlottesville city library was having a book sale, and when I went roaming through what they had for sale, I found this book. I didn't know who Fisher was, but it was an economics book and it was autographed by Fisher. So I picked it up for a paltry $2. 25 years later, I finally read it!

Are Utilitarians psychopaths?

2011-09-24T10:09:00.000-04:00

Interesting research by Daniel Bartels from Columbia University and David Pizarro from Cornell University (as reported in The Economist) finds that people who would apply Utilitarian principles to deal with moral issues have views that correlate with the views of people who are are psychopathic, Machiavellian, that tend to see life as meaningless. Of course, correlation does not prove causation, but startling results nonetheless for a ethical perspective that underlies much of modern thinking on public policy.

For those wondering about the photo, that is the body of Jeremy Bentham (ok, just his skeleton and some stuffing in those clothes) on display at University College London. Good Utilitarian that he was (he and John Stuart Mill are considered the founders of Utilitarianism), he left his body when he died to be dissected for educational reasons. The bones and preserved head were then assembled as you see above, though the actual head is in storage because of a history of students playing pranks with the real one. I've been to see Jeremy. He was just sitting in a hallway in one of UCL's buildings.

QE3 is finally here. Bon voyage!

2011-09-21T19:15:00.001-04:00

And let's hope this third round of Quantitative Easing helps. It's a little later than I expected, but it's welcome nonetheless. Its purpose is to reduce long-run interest rates (they're the only ones that aren't already low) and thereby provide an incentive for business to invest and get the economy moving. But don't get too excited. It's not likely to get us out of the current depression, but it may help create a little economic growth and reduce the chance that the depression will deepen. (I case you were wondering, it's hard to find a nice picture of quantitative easing. But it turns out there's a cruise liner called the Queen Elizabeth, and its the third one of that name, hence the QE 3 is also a ship!)

Is Libertarianism anti-democratic?

2011-09-10T12:22:00.000-04:00

I wouldn't have thought so, but in rereading an old blog post by the economist Edward Glaeser from Harvard and his description of how Libertarians would have restricted the government's response to existing tort laws deal in the case of the BP oil spill in the Gulf of Mexico:

Even more problematically, the libertarian’s solution requires us to place great trust in part of the public sector: the court system. At times, judges have been bribed; any courtroom can be influenced by the best lawyers that money can buy. Andrei Shleifer and I have argued that the early regulations were appealing precisely because of a sense that the courts couldn’t be counted upon to protect private property.

it occurred to me that it might be. Why are the court's to be more trusted than other forms of government? If I introspect a bit (in my youth, I registered with the Libertarian Party and continue to find some aspects of their arguments enticing), it may have more to do with personality than conscious, rational philosophy. I wonder whether people who like clear, precise rules are more apt to take a Libertarian stand. Of course, they will argue it's the result of rational analysis, but in the words of David Hume, "Reason is a slave to the passions."

Put a lid on it?

2011-09-09T19:53:00.001-04:00

Here's a nice example of the type of disagreements that arise when doing cost-benefit analysis. In this case, it's about whether to put a roof over the Arthur Ashe Stadium at the National Tennis Center in Flushing, NY (home to the US Open). I'm especially impressed by Pam Shriver's perspective and her recognition of opportunity costs.

Should the rich pay more?

2011-09-09T19:42:00.001-04:00

President Obama in his speech to Congress the other day has raised once again the issue of whether tax rates on the very rich should be raised. His argument, based on a fairness argument (and specifically on the notion of vertical equity), is that people should pay taxes based on their ability to do so, the rich are more able to do so than current income tax rates reflect, and therefore those rates should be increased. Greg Mankiw from Harvard in this article disagrees in two ways. First, he disputes the claim that tax rates of the very rich as as low as Obama says. Instead, he argues from a fairness perspective, when one includes the taxes paid by corporations, the very rich are in fact already paying a significant amount. Second, he argues against raising tax rates on the very wealthy because it will result in them reducing their work effort, thus resulting in a smaller economy. Thus, he argues it would be wrong from an efficiency and therefore Utilitarian perspective.

I understand the argument that corporate taxes should be included in the calculations. However, that assumes that what matters from a fairness perspective is the end result - how much money individuals get to keep. That's the standard approach in economics, but my sense is for many people, it is the process of taxation that is at least as important. For those people, Obama's argument will carry more weight. Secondly, I also understand the efficiency argument that Mankiw raises. However, that argument depend crucially on increased marginal tax rates having significant effects on output, and I'm not sure that's true. Among highly paid CEOs, for example, there is an argument that they seek high salaries simply as a matter of social status (check out the 2010 LSE Lionel Robbins Lectures by Lord Turner), and that they would be willing to put out the same effort if CEO salaries were lower, so long as their relative salary remained the same. (Those with some background in economics will recognize this as evidence of economic rents.) As a result, I remain skeptical of the efficiency argument but, as always, open to persuasion.

New study shows importance of technological change in the macro economy

2011-09-07T22:24:00.000-04:00

One of the punchlines of macroeconomics is that technological change is a fundamental source of long-run economic growth. And if it has long-run effects, surely it has short-run effects as well and therefore could affect what is commonly known as the business cycle. But measures of technological change for a nation as a whole are difficult to come by. Now there comes a recent study by Michelle Alexopoulos from the University of Toronto that uses an ingenious measure of technological change based on the number of new books titles published on technology. Using that measure, Alexopoulos finds, as expected, that technological changes have been an important source of short-run fluctuations in the economy thus providing support for the importance of supply-side factors in the macro economy.

Why innovation is important to entrepreneurs

2011-09-07T22:10:00.000-04:00

I came across an interesting study the other day by a group of economists from Penn State and NYU (Bee Aw, Mark Roberts, and Daniel Xu) that provides evidence that companies that engage in R&D are more likely to export more and that increase in exporting leads to still greater productivity gains than the R&D does alone. So R&D doesn't just improve the nation's productivity; it also improves the nation's balance of payments.

Should good people play by different rules than bad people?

2011-09-06T15:04:00.005-04:00

ECO 523 students - Here in a nutshell is a nice discussion courtesy of Greg Mankiw about how public policy should pay for emergency measures. Notice the role of marginal thinking, time, discount rates, and whether previous behavior was optimal to begin with. Notice also, by the way, how this all goes back to David Ricardo, the founder of much of economic theory about taxation and about international trade. If you don't know much about him, he led an interesting life.

Why a carbon tax makes more cents

2011-09-06T12:05:00.004-04:00

There are two basic approaches to dealing with the problem of some people unilaterally imposing hidden costs on others (such as pollution; what economists call negative externalities). The one is work up a set of regulations ("do this", "don't do that") and subsidies ("build this", "invest in that"). The other is to make the hidden costs visible by linking them to "Pigou tax". In the case of the use of carbon based fuels, there are two basic hidden costs imposed on others, the one due to putting CO2 into the atmosphere, the other due to the increased national security risk due to the importation of petroleum. Government tends to like the regulations and subsidies route. Hence, restrictions on automobile mpg's, subsidies for green technology, etc. The problem with such an approach is it forces the government to be an expert in all the ways in which the use of carbon fuels imposes hidden costs on us, and frankly, it can't do it (check out this column by David Brooks for some evidence). There are simply too many ways this happens, and things are changing all the time. But there is a simpler approach - get rid of all those regulations and subsidies and simply impose a Pigou tax equal to the size of the hidden cost. Then let everyone in the economy do their thing. Everyone who uses a gallon of gas whether in their car, at home, or in a factory will become aware of the hidden cost they are imposing and make adjustments that are in their best interests. And if you don't want government to be bigger, no problem - cut the total amount of revenue collected through the income tax by the same amount.

Are today's college students being sold a bill of goods?

2011-09-04T22:16:00.003-04:00

A recent column in The Economist suggests that the income premium associated with having a college may soon be a thing of the past, especially if the work those graduates do is routine. If true, that suggests that colleges need to think hard about the education they provide. Those colleges that can provide their students with an education that helps them learn to think purposefully, self critically, and independently will have the greatest chance of graduating students with an optimistic future.

USPS pending bankruptcy raises fundamental questions

2011-09-04T19:09:00.004-04:00

As this New York Times article details, the US Postal Service is in serious financial trouble. The reasons for the trouble are many, not all of the USPS's making, but I would argue what we do requires asking some fundamental policy questions about what the purpose of the USPS is. A traditional economic rationale for government is to correct some inefficiency (correcting for externalities, providing public goods, correcting for market failure, etc.) or inequity that the private-sector can't, or won't, correct. And the traditional justification for the post office, which goes all the way back to Benjamin Franklin here in the US, is that it is a public good. But providing for a public good, and producing a public good are two separate issues. Moreover, as the article details, there seem to be strongly held views by some that the purpose of the USPS is at least partially to fulfill equity objectives. Hence the fears expressed by the USPS unions and by small town that might lose their local post offices. So here are the big questions:

Are postal services a public good?
Should the US government provide for postal services? If so, should it produce postal services? Why?
Should issues of equity/fairness be part of the discussion? What is owed to the postal unions? What is owed to small towns?

A tragic example of uncertainty (versus risk)

2011-09-01T22:01:00.004-04:00

Speaking of value of forgetting, I was talking with my macro principles students the other day about the distinction between risk and uncertainty. I turns out that the LSE podcast of a talk by Viktor Mayer-Schonberger (professor of internet governance and regulation at Oxford) that I referred to in the previous post has a tragic example that illustrates uncertainty as opposed to risk. It seems the Dutch before World War II had collected comprehensive census data to help them with their social security program. An entirely noble enterprise, to be sure, but when the Nazi's invaded the Netherlands, they took possession of that census information. And because it contained ethnic background information and religious affiliation, a greater proportion of Dutch Jews were killed by the Nazis that in other countries. Clearly, no one anticipated such a tragic outcome from collecting such information. And that's the point of uncertainty versus risk. With risk we know what might happen and can assign probabilities. But with uncertainty, we can't predict, we don't know what we don't know.

There are plenty of economics of information public policy issues

2011-09-01T21:48:00.003-04:00

I was talking with students in my ECO 523: Topics in Public Policy course the other day, and the issue arose as to what sort of public policy issues are there that deal with issues of information. Well, here's an interesting LSE podcast of a talk by Viktor Mayer-Schonberger (professor of internet governance and regulation at Oxford). His talk, which is entitled "Delete: The Virtue of Forgetting in the Digital Age" (also available in book form), raises important issues about the the nature of digital record keeping and the problems it gives rise to.

Recent projections spell another decade of depression for North Carolina

2011-08-28T17:17:00.003-04:00

Article in today's News & Record reports on unemployment projections till 2020 in North Carolina. Long term projections always have a some uncertainty attached to them. But all in all, not a good report. Not good at all.

Evidence of an impending recession accumulates

2011-08-16T13:36:00.002-04:00

More evidence today that the world economy is slipping toward a recession. The big news is Germany is now growing at an annual rate of 0.1%.

Abandon all hope, you who enter ...

2011-08-14T14:14:00.005-04:00

So reads the sign above the entrance to hell in Dante's L'Inferno. I was reminded of that sign this weekend after reading several pieces about the failure of Congress and the Admininstration to deal with the current depression:

What comes out of all these pieces is that neither Congress nor the Administration get it. They seem to have no understanding of the past 80 years of macroeconomics either theoretically or empirically. So they play political games to put themselves in a position to win the next election so that they can put themselves in a position to win the election after that so that ...

What's the solution? Economically, we need to (1) stimulate the economy now so we have the income to (2) address the issues of entitlements in a rational way to get rid of our long-term debt problem. Politically? I don't know, and I despair that our 4 year old depression will end up be a full decade with nothing to show for that pain in the end.

Reduction in military personnel to push unemployment higher

2011-08-11T10:18:00.006-04:00

Buried in today's in the News & Record, the local Greensboro paper, is a story about reductions in the number of military personnel (sorry, I can't find a web link). I don't have figures for the other services, but for the Marines the plan is for a reduction of 22,000. All these reductions won't happen in the coming year, but they will put added stress on military families, not all of whom will be able to stay in the military, to find jobs in the civilian economy. Unemployment is terrible in so many ways for families, but it seems especially harsh for those who have risked their lives for our country. (Photo from a June 30th story on the KGVO radio (Missoula, Montana) website.)

Fed: Depression will last another 2 years

2011-08-09T14:29:00.004-04:00

The Fed's Open Market Committee met today. While they didn't call for a QE3, they signaled that such policies are in their tool box and would be used in the future if needed. Perhaps the most significant thing to be learned from its statement was that it anticipates the economy will continue to be depressed for the next two years. That conclusion is not a surprise, but its willingness to admit it is surprising.

The human face of macroeconomics

2011-08-09T06:17:00.004-04:00

One of the difficulties when teaching macroeconomics is bringing to life such dry notions as deleveraging (that is, the liquidation of debt) and the multiplier effect (that is, small changes in investment can have big effects on GDP). Here is an article from the New York Times that illustrates these two ideas in real time. And as can be clearly seen, this is more than an abstract notion. This is about real people, real anxiety, and real pain.

QE3 - Ben, it's time for another round!

2011-08-08T21:16:00.005-04:00

Back in May I posted about the possibility of a third round of "quantitative easing". It's looking more and more like now's the time. Any bets on a QE3 announcement tomorrow (Tuesday August 9th) at the Fed's Open Market Committee meeting?

Patent laws, LR Growth, & Depressions - a Fundamental Confusion

2011-08-08T12:40:00.006-04:00

It seems that Congress is contemplating a reform of patent laws. I haven't read the proposed changes in detail, but my initial thought is, "Good for them." However, this is being touted by the Administration and many in Congress as a jobs bill. It is true that improvements in patent laws could help the country with future economic growth, but this is a long-run effect and will not get us out of the current depression. Over the long run, the economy grows at a rate that averages a bit over 3% per year (the red line in he above graph). But we don't actually grow at the average each year. Instead, we bounce around that 3% trend (the blue line), sometimes growing, say, at 5%, other times at, say -1%. It just averages to a bit over 3%. The problem now is that we are below that long-run trend (that's why they call it a a depression). Changes in patent laws may help push that long-run trend up a bit, but they don't help us get back to that trend. So, Congress, go ahead and improve our patent laws. But don't think you've taken care of the current depression. You haven't. (Graph constructed using FRED at the St. Louis Federal Reserve Bank's website: https://research.stlouisfed.org/fred2/.)

S&P Downgrade: US Congress, Administration still in denial

2011-08-07T14:51:00.007-04:00

It's no longer news that Standard & Poor's has downgraded the quality of US government debt from AAA to AA+. What is news is how many people, including many in the US Congress and the Administration, are complaining that Standard and Poor's is, in essence, incompetent and arbitrary. To be sure, Standard & Poor's is not without its faults. But the US government has a long history of irresponsible fiscal policy that goes back 30 years, and regardless of Standard and Poor's faults, today's political climate means that the current depression is likely to continue for the foreseeable future and that the US budget process is likely to continue to be disfunctional. Does anyone believe that US governmental debt hasn't increased in risk?

Do us all a favor - be a pighead!

2011-08-04T19:13:00.005-04:00

An interesting column in the New York Times by Cordelia Fine highlights the important social role of critical thinking. The essential argument is that being "pigheaded" (Dr. Fine's word) in one's thinking can actually be a good thing as long as opposing pigheads confront each other. Why? Because each will do all they can to win the argument, and by such verbal jousting, we as a society gradual learn and improve. I might add that this doesn't mean that there's no role for those whose temperament is drawn more to resolving conflicting arguments. If the pigheads are the bricks, those others are the mortar in the building of the edifice of knowledge. (!) And with that tortured metaphor, I better stop.

And now we return you to your regularly scheduled program

2011-08-03T11:10:00.005-04:00

Now that the Debt Ceiling Crisis is over (for now), we can return to the real problem - the US economy is still in a depression and there is increasing evidence that we are slipping back toward recession. Nationwide, the unemployment rate has started back up, and North Carolina is leading the way with May's unemployment rate of 9.7% rising in June to 10.4%. And here in the Triad, the unemployment rate is at 10.8%. Here at UNCG, the impact is showing up in the classroom. 157 faculty and 46 staff positions have been lost, which translates to a loss of approximately 40,000 seats and 975 course sections. We won't know for another 6 months or so, but some analysts are wondering if we have already entered another recession.

It is a tale told by an idiot ...

2011-08-01T17:08:00.005-04:00

So goes MacBeth's soliloquy on the meaning of life. The self-inflicted debt crisis is at long last about to come to an end. For all the political sturm und drang, the macroeconomic implications of the bill are relatively minor. In the short-term, the debt ceiling bill will have a negative effect on the economy. One estimate I saw that seems reasonable is that GDP over the coming 12 months will be 0.1 % lower than it would have been otherwise. Using Okun's Law, this means unemployment will be 0.05% higher. Not good, but my best guess is the average person won't notice a difference. Long-term, while the bill would reduce Federal government spending by about 2 trillion dollars over 10 years (in other words, $200 billion/year), it doesn't do anything to change the trajectory of Federal government spending over the next decade. And there's nothing in the bill that I can see that improves future capital investment or private-sector productivity. So overall, the punchline is a small amount of short-term harm, a small amount of long-term benefit. But nothing substantial to help the economy either way. As MacBeth says, "It is a tale told by an idiot, full of sound and fury. Signifying nothing."

Whose default is it?

2011-07-29T09:41:00.005-04:00

Congress may yet muddle through its self-inflicted default crisis, but this morning (Friday July 29) it's looking more and more likely that some sort of default of US government debt may occur next week. Whose fault is it? At a fundamental level, it's ours because we've voted for each and every one of the members of Congress. Until we start electing people who understand economics (and here I fault in part the economics profession) and who have a level of intellectual modesty that allows them to work through issues with others, especially when they disagree, we're just going to get more muddle.

So what's the likely impact of a default? No one knows for sure, but my best thinking at this point suggests that it will reduce the already anemic rate of growth (now under an annual rate of 2%) and could even lead to another recession. Why? Because (1) it will destabilize financial markets (remember what happened in fall 2008), (2) it will reduce government spending (because of higher interest costs on existing debt and an inability to borrow as much), (3) it will reduce business investment due to higher interest rates on investments, and (4) it will reduce consumer spending because of higher interest rates on things like mortgages and consumer durables and higher unemployment than would have occurred otherwise. Even without this debt crisis, unemployment was unlikely to fall more than 1% a year for the foreseeable future. If some sort of default occurs, it wouldn't surprise me if the unemployment rate stays at its current 9% level for the next year, if not rise.

Radical school of education has lessons for business schools

2011-07-21T16:20:00.001-04:00

I just read an interesting article in the New York Times about a radically different school of education that focuses more on developing effective teachers than accumulating college credits. It's not clear to me whether their specific method works, but the general approach is worth thinking about to make undergraduate business education more effective, particularly if the expectation is that graduates will have a strong entrepreneurial bent.

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Local Triad economy is so-so

2011-06-30T16:34:00.002-04:00

The Dixon Hughs Goodman Triad Business Index is out, and the results are rather flat. To be sure, some things are up just a bit, but with total employment essentially flat since the end of the recession and housing continuing to fall, I would call it much of a recovery. Given Congress's inability to run effective short-run or long-run fiscal policy, and given the Fed has done just about as much as it can, I'd say the near future will be much like what we see today.

Thought you were in control?

2011-06-27T20:54:00.005-04:00

The web is a perilous place. While there is an amazing amount of good material, there is also tons of garbage. In my economics classes, I try to help students improve their ability to navigate critically through the web to find valuable material about economic issues. One of the tools, of course is using Google (or some other search engine). But a lecture at the London School of Economics by Eli Pariser (Senior Fellow at the Roosevelt Institute) and a New York Times column by Virginia Heffernan has given me pause. According to Pariser, it seems that search engines (perhaps with good intentions) are increasingly manipulating your searches to give you what you want. That sounds good, but it means that you are increasingly unlikely to come across legitimate views that differ from your own. So two students, one liberal, the other conservative, can search for something such as debate over some public policy and end up with entirely different sets of hits that only ratify their preconceptions and don't challenge them to think harder. And add to that Hefferan's column about content farms, whose sole purpose is to provide manipulated, fake content that manipulates search engines so that viewers suckered into viewing ads, and you have a nasty and brutish web world. Caveat lector.

Afraid of inflation? Budget deficits? Think again.

2011-06-03T22:01:00.003-04:00

Thanks to Greg Mankiw's blog, here's a sobering analysis by Gauti Eggertsson at the New York Federal Reserve Bank of what happens if you worry about the right things at the wrong time. In 1937 commodity prices were rising, people worried about inflation and deficits, and so they acted - and paid the price.

Every wonder what a bubble looks like from the inside?

2011-06-03T21:30:00.004-04:00

A common lament in macroeconomics is that we can only recognize them in retrospect (I believe it was former Fed chair Alan Greenspan who most famously asserted this). However, thanks to my son, I have come across a great example of a bubble in the making - Groupon's current IPO (initial public offering of stock). This IPO has all the hallmarks of a bubble in the making - original investors who are believe so little in Groupon's business model that they are cashing out their original investment (thus revealing their motivation to be solely speculators/gamblers, not real investors), the manipulation of the truth to deceive others, and the eager, blind purchasing of a faulty investment by ever more naive speculators. For a fuller description of this process, check out Akerlof's and Shiller's 2010 book Animal Spirits or Irving Fisher's 1932 classic book Booms and Depressions (which I'm currently reading).

Bucking the conventional wisdom - Is there really a political business cycle?

2011-06-03T14:48:00.003-04:00

The conventional wisdom is that if unemployment is above some level (you choose), an incumbent president won't win re-election. No doubt you will hear that many times before November 2012. But now Nate Silver, Statistician Extraordinaire, argues in a New York Times column that there may be less to that argument than is commonly believed.

How to reduce the ills of income inequality AND grow the economy

2011-05-28T14:33:00.004-04:00

Economists in recent years have been investigating the correlation between greater income inequality and greater social problems (crime, drug usage, early pregnancies, etc.). The real issue, of course, is whether greater income inequality causes social problems. And if it does, what if anything should be do about it? Many don't want to belief that there is something causal going on here because they believe that the implication is greater taxes for the rich more and more charity for the poor (and with that, slower economic growth for all). But Stephen Machin from the London School of Economics argued in a lecture presented earlier this year that there are other ways to reduce income inequality that I would argue are on net efficiency and growth enhancing, among those being such things as minimum wage policies and (especially) greater emphasis on education and training.

Max out your green bar - take a walk on the wild side

2011-05-26T14:38:00.005-04:00

Thanks to my mother, I learned of a Georgetown University study (reported in The Washington Post) that documents the value of various undergraduate degrees. It's not clear whether economics is categorized under business or social sciences, but it comes out relatively well in either case. Bottom of the list are the arts, humanities, psychology, and social work. The graph to the left, taken from The Washington Post article, describes annual earnings, though the article really focuses more on lifetime earnings and whether going into debt for an undergraduate degree is really worth it. What's not clear is to what extent some majors are worth more than others because of the skills each major teaches (in economics lingo, human capital acquired), because of the type of person who chooses each major (this is the old "education as signal" argument), or because of the number who choose each major (quantity of labor supplied). And given the wide range of incomes for each major (notice how wide the green bars are), this is not a trivial issue. If you want to be at the top of your green bar, I would recommend the human capital part of education: Take your studies seriously, eschew as many outside distractions as you can, and diversify, that is, take the liberal education part of your college degree seriously. For economics, math, and science majors, that means taking some art and humanities, and taking those perspectives seriously; and for art and humanities majors, that means taking some economics, math and science, and taking those perspectives seriously as well. What's that saying about "walking in the shoes of another"?

Ben Bernanke's got your back

2011-05-19T20:50:00.003-04:00

The federal government has a serious long-term deficit problem, and clearly the time to plan for how to deal with that problem is now. But I have been increasingly worried that Congress will cut spending too much and too early (that is, engage in serious contractionary fiscal policy), and this will kill the recovery just as it is starting to gain traction. I was therefore comforted by the word that the Fed is keeping open the option of a QE3 (a third round of quantitative easing) if Congress does in fact cut too much too soon. In short, if Congress decides to engage in contractionary fiscal policy, the Fed will counteract its negative macroeconomic effects by putting in place a QE3. Not the best way to run macro policy, but given Congress's inability to run a coherent and effective macro policy, probably the best we can hope for.

China's not the problem

2011-05-17T15:25:00.005-04:00

Laura D'Andrea Tyson, professor at Berkeley and former chair of the President Clinton's Council of Economic Advisors, argues in a New York Times column that the US obsession with China as the cause of many of the US's current economic ills is not true. China's currency has appreciated both in nominal and real terms significantly in the past year or two, and in any event the US would not be greatly affected were it to appreciate further. The current obsession with China as the cause of US problems reminds me of the same obsession with Japan during the 1980s. At the time, many were screaming about how terrible it was that Japan was buying up all sorts of US assets like Rockefeller Center (like they were going to carry it off to Tokyo!), and that soon the Japanese would control the US economy. But, if my memory serves me right, the Dutch owned a larger share of US assets than the Japanese, and I've never heard anyone worried about a Dutch takeover of the US economy. I can't help think that in both cases, the fundamental source of the anxiety has little to do with economics and more to do with xenophobia.

Utilitarianism wins out, and the people along the Atchafalaya lose

2011-05-16T15:12:00.007-04:00

The decision to open the Morganza Spillway is the result of choosing to use a utilitarian view ("the greatest benefit for the greatest number") to make policy decisions. Since there are fewer people and less economic wealth in the Atchafalaya River basin than the lower Mississippi River, the decision has been made that the people of the Atchafalaya River basin will suffer to save the people and property of such cities as Baton Rouge and New Orleans. Of course, that hardly seems fair if you're one of the people living in the Atchafalaya River basin, but that's the whole point of a utilitarian perspective: the individual has no absolute rights except for the right to be considered in combination with with all others. Many in that basin argued against opening the spillway based on the argument that we should let the Mississippi River do what comes naturally (that is, based on a "right to the status quo" argument). But that argument has problems as well. Ignoring the fact that it would result in a greater number bearing a greater total loss, it turns out that about 40 years ago a system (including the Morganza Spillway) was completed that assured that the Mississippi River continued to flow through its old channel (through Baton Rouge and New Orleans) rather than switch (as it would without human intervention) to the Atchafalaya River basin. In the absence of that river regulatory system, most of the flood would have gone down the Atchafalaya River basin anyway. So it's not quite clear what letting the river do what comes naturally means anymore.

When reasonable norms come into conflict

2011-04-29T21:43:00.006-04:00

A federal judge has ruled that the Army Corp of Engineers can blow up a levee on the Mississippi River in the state of Missouri if it will protect the Illinois city of Cairo from the current flooding. It is sad that the Corp is confronted with such a difficult set of alternatives, but from an economic perspective this is a wonderful example of conflicting norms. On the one hand, the state of Missouri, which thinks the Corp should not be allowed to blow up the levee, is arguing from a "right to the status quo" perspective. On the other hand, the states of Illinois and Kentucky, which support the right of the Corp to blow up the levee if necessary, are arguing from a utilitarian perspective.

Speaking of randomized trials

2011-04-27T18:07:00.004-04:00

The Economist this week provides comments by four economists on the relative merits and problems with the use of randomized trials in economics. Permanent links to their comments are provided below. Bottom line: Useful tool? Yes. Will fundamentally change the very nature of economics? No.

Economic development - the devil is in the details

2011-04-27T18:00:00.000-04:00

One of the major issues in my Intermediate Macroeconomic Theory course focuses on long-run growth. One of the fundamental models in that area is the Solow Growth Model that argues that in certain circumstances, a key to growing a nation's economy is increasing the amount of capital the country has. But how does that work in practice?

Thanks to Greg Mankiw's blog, here's a very interesting article by Ester Duflo and Abhijit Bannerjee (both at MIT) on the the problems with increasing capital in practice. Based on their work using randomized trials, Duflo and Bannerjee suggest the issue is much more complicated than models such as Solow's would suggest and call into question the value of at least some types of foreign aid.

Health better v. more filling

2011-04-27T07:41:00.002-04:00

The New York Times reports on work by Robert Fogel, Nobel Prize winning economist, on links between economic prosperity, technological innovations, and human height, weight, and longevity. The essential argument is that improved nutrition has led to a virtuous cycle of greater height, weight, and longevity. And with that comes healthier, more productive adults. The results are remarkable (see graph from article), but some argue that improvements in public health have been the more important factor. And in the balance is the answer to how to improve economic development in poor countries.

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US economy slows - expect high unemployment till 2015

2011-04-24T19:14:00.003-04:00

Evidence is starting to trickle out today that the US annual growth rate has fallen from about 3% to less than 2%. At that rate (using Okun's Law), it will 2015 before we're back to full employment. Not good news.

What is QE2? (Hint: It's not an ocean liner!)

2011-04-24T07:21:00.001-04:00

My macroeconomics students sometimes have difficulty understanding what the Fed's quantitative easing policy (QE and QE2) and why it is different from standard monetary policy. This New York Times article is a nice description of that policy and why it has had limited effect. Bottom line: Despite the different label, it works like standard monetary policy by reducing interest rates and thereby stimulating the economy by increasing business investment and net exports. Unlike standard monetary policy, however, it does it not by manipulating the (short term) Federal funds rate. Rather it does so by buying longer term bonds (especially government bonds) with the intent of lowering long term interest rates. Its effects, while positive, have been limited. And that's not surprising given that the determination of long term interest rates is more complicated than short term rates because of such factors as changing inflationary expectations.

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Why everyone has their own inflation rate

2011-04-22T19:45:00.003-04:00

Nice story by John Schoen, senior business producer for MSNBC, on the basics of how inflation is calculated and why your experience and the reported inflation rate may differ. For my macroeconomics principles students are getting ready for their comprehensive final exam, this is a nice way to review in a fresh way their understanding of what price indices are about.

Okun's Law Primer

2011-04-20T11:54:00.004-04:00

Thanks to one of my Intermediate Macroeconomic Theory students, Dominick Milford, here is an interesting article by Mary Daly and Bart Hobijn from the Federal Reserve Bank of San Francisco on recent unemployment rate behavior. Interestingly, it seems to contradict Okun's Law, the well established finding that unemployment falls 1 percentage point for every 2 percentage point rise in GDP. The article is also a very nice presentation of the subtle aspects of Okun's Law and the various versions that macroeconomists use.

The American Ozymandias

2011-04-08T21:14:00.004-04:00

Thanks to Jennifer Valentine, one of my macro principles students, here are some haunting photographs of the decay of Detroit in the book The Ruins of Detroit by Yves Marchand and Romain Meffre (published by Steidl) as a result of the collapse of the auto industry in that city. We talked several weeks ago in class about the notion of structural unemployment, and I pointed to Detroit as a city that never recovered from a structural change in the economy. But these pictures reveal the impact of such change much better than any statistics can.

Birds do it. Bees do it. Even educated fleas do it.

2011-04-01T08:16:00.000-04:00

But (with apologies to Cole Porter), the economic question is, "Does fiscal policy do it?" (Multiply, that is; not fall in love.) I've been talking recently in my macro courses about fiscal policy multipliers and the controversy of Ricardian Equivalence. In the balance is the answer to the question as to how effective fiscal policy is. Add to that research over whether how tax cuts or spending increases are disbursed makes a difference in its stimulative effect (see, for example, an NBER working paper by Parker, Souleles, Johnson, and McClelland that argues the method of disbursement does not make a difference), and you have the foundation for an interesting macro policy paper in this fall's ECO 523 course.

Data fight!

2011-03-31T16:38:00.007-04:00

A recent controversy has blossomed in the economics blogosphere. In brief, John Taylor posted several graphs including this one:that show a correlation between greater investment and lower unemployment, Greg Mankiw shares it on his blog, Justin Wolfers criticizes the limited data used (from 1990 to the present) and shares the same graph with more data:and Paul Krugman argues Taylor's graph is simply due to the housing bust.

This whole debate reminds me the 1970s fight over Phillips Curve (does it exist? does it shift? etc.), and like that debate, the explanation lies in distinguishing short-run effects from long-run effects. The standard short-run macro story (which my understanding can be traced to Keynes) is that higher investment leads to greater short-run GDP and thereby lower unemployment (a la Okun's Law). Hence Taylor's graph above. But in the long-run, unemployment tends to settle to a natural rate of unemployment (which can be traced to Friedman and Phelps). However, over time this natural rate can change. Given all that, when I look at Wolfer's diagram, I see the a downward sloping curve that has shifted downward over time. If true (and clearly a more sophisticated analysis would be needed to confirm or refute this argument), it would explain the negative correlation between unemployment and investment in the 1990-present period, but the lack of a correlation for the entire post-WWII period. Finally, from a policy perspective, there's good and bad news. The good news is that reducing taxes on business (as Taylor argues for) would reduce unemployment. The bad news is that it is only a short-run effect; in the long-run it is not likely to have a big impact.

Are we near the top?

2011-03-30T08:13:00.003-04:00

Nor should the argument seem strange that taxation may be so high as to defeat its object, and that, given sufficient time to gather the fruits, a reduction of taxation will run a better chance than an increase of balancing the budget.
--- John Maynard Keynes

Thanks to a post by Greg Mankiw, I recently came across some interesting observations from Scott Sumner at Bentley University suggesting that the the US might be near the top of the Laffer curve. The truth of this suggestion is ultimately an empirical issue about which I am agnostic. However, if true, it would suggest that higher tax rates would not generate much in the way of additional tax revenue, and might provide an explanation for why there seems to be so much emphasis these days on cutting taxes and reducing government budgets. Sounds like an interesting macro policy topic for one of my future ECO 523 students!

And happy 150th anniversary to Italy!

2011-03-17T08:36:00.002-04:00

Coincidentally, today is also the 150th anniversary of the unification of Italy. It's an important milestone and has been filled with much reflection and celebration in Italy. And with family names like Vacca, Iodice, and Cigioli (yes, I'm also part Italian!), it gives me great pride to join in the celebration.

Happy St. Patrick's Day!

2011-03-17T08:31:00.003-04:00

With family names like Leyden, McKelvey, and McCarthy-Mor, how could I not celebrate!

Japanese disaster will reinforce current high price of gas

2011-03-14T15:45:00.007-04:00

By far, the most important effect of the Japanese disaster is the the human tragedy that continues to unfold with each passing day. It boggles the mind (and emotions) to think of the world that those who live in the affected areas now live in.

Much less important, but still of significance is the effect that this disaster will have on the world market for petroleum. While the Japanese demand for petroleum is likely to fall in the very near term, once recovery starts happening, that same demand will rise. And especially given the destruction of Japanese nuclear reactors, that demand is likely to be higher than it was before the disaster and likely to stay higher for a decade (if not longer). Add to that the increased concern that people will have about using nuclear power worldwide, and I can't imagine for the foreseeable future that oil prices will fall back to what they were 5-10 years ago.

A college education is no guarantee

2011-03-10T13:08:00.005-05:00

Paul Krugman has an interesting recent column in the New York Times that makes the argument that a college education is no guarantee of a prosperous and stable career. Instead, such success at least in part depends on the degree to which the services you might provide are subject to competition (from others elsewhere in the world or from computers) or not. In that respect, the local plumber has a greater chance at economic prosperity than the college educated bookkeeper. I have long argued that a college education (especially an undergraduate one) can be of enormous value, but that value is tied to the general ability to make sense of the world and to come to terms with it, not because of its income earning capabilities. Thus, a college education is neither necessary nor a good fit for everyone. For many, developing skills in one of the trades would be at least as fulfilling and at least as good a choice from an income perspective.

As an aside, Krugman's article concludes by arguing for reinvigorating unions. There may be some justification in that (see for example, courtesy of Greg Mankiw's blog, the argument by Harvard University's Richard Freeman that private sector unions can increase productivity and reduce costs by providing employers with a more stable workforce ), but I don't see how that conclusion follows from his (accurate) observations about the value of a college degree.

How good is your attunement, equipoise, metis, sympathy, & limerance?

2011-03-08T11:32:00.002-05:00

For all of you how have felt that economics, for all its complexity, is somehow missing an important aspect of what it is to be human, you're right. David Brooks writes again in his column in the New York Times on the connection between the rational and the emotional sides of the human mind and introduces some interesting "skills" or "qualities" that describe the connection between the two:

Attunement: the ability to enter other minds and learn what they have to offer.
Equipoise: the ability to serenely monitor the movements of one’s own mind and correct for biases and shortcomings.
Metis: the ability to see patterns in the world and derive a gist from complex situations.
Sympathy: the ability to fall into a rhythm with those around you and thrive in groups.
Limerence: This isn’t a talent as much as a motivation. The conscious mind hungers for money and success, but the unconscious mind hungers for those moments of transcendence when the skull line falls away and we are lost in love for another, the challenge of a task or the love of God. Some people seem to experience this drive more powerfully than others.

This is not the stuff of supply and demand, but it is interesting and clearly relevant to a wide variety of economic circumstances. Brooks may be right in believing that we're in the midst of a sea change in the social sciences.

Wie man berichtet, so geschehe

2011-03-06T11:02:00.007-05:00

A recent New York Timesa op-ed column by Bob Herbert documents the sad state of current US colleges - more and more college graduates are not leaving college any brighter or better skilled than when they entered. Although the column seems to suggest that the fault is with students, it couldn'thappen without the complicity of their universities. But i need to be clear - There certainly are some students who are truly interested in improving their knowledge and skills (and I've had the great pleasure of working with some of them). And certainly many individual faculty work hard to give their students the education they and the country need and deserve. However, there are limits to what individuals can do given the significant pressures from above for higher retention and graduation rates --- with no regard to the quality of the education.

What's the solution? William Clark in his book Academic Charisma and the Origins of the Research University (p. 48) quotes Conrad Ischinger, Wie man berichtet, so geschehe: People only focus and work on that which they are required to report on. If universities are to improve, they need some sort of quality-adjusted measure of retention and graduation rates so that administrators, university boards, and politicians start caring about quality as well.

NC dropout rate falls?

2011-03-04T08:31:00.004-05:00

Today's report in the local paper says North Carolina dropout rates have fallen dramatically and that the reason is:

"Educators across the state have focused on keeping students in class and on track to graduation, and their hard work is paying off," said State Superintendent June Atkinson, according to a press release.

A fall in the number of dropouts, but it's not clear to me that it's due to efforts by the schools. If you look at the table above (from the 2009-10 Consolidated Data Report from the North Carolina Department of Public Instruction; p. 108), there is some reduction in the proportion of dropouts due to academic and behavior problems. But the biggest fall in the reason for dropouts is that North Carolina schools are doing a better job at tracking what happens to students who move. Why that might be isn't clear, but Figure D1 (p. 103 of the same report) reveals that the current trend in lower dropouts began as the country (and the state) entered the recent recession. If that is the cause, it suggests at best that the reason for lower dropouts is more students are staying in school because of the recession; at worst it suggests that the dropout rate has not fallen, but that because of the recession there is less in the way of students (and their families) moving and the state losing track of where they go. Sounds like a great policy research paper for one of my ECO 523: Public Policy students this coming fall!

Fight breaks out over interpretation of the Industrial Revolution!

2011-02-11T13:39:00.006-05:00

OK, so it's not the WWF, but here is some interesting and at times very heated discussion about the origins and effects of the industrial revolution thanks to Melvyn Bragg and his BBC Radio 4 show In Our Time:

The Industrial Revolution (Part 1)
The Industrial Revolution (Part 2)

For my principles of macroeconomics students, this provides a nice example on the value of an historical perspective in macroeconomics, and for giving us a nice description of the world that the early classical macroeconomists (for example, Adam Smith, Karl Marx, and Jean-Baptiste Say) where trying to understand.

For my intermediate macroeconomic theory students, this is a nice case study of economic growth and the debate over what causes it. Notice in particular the BIG debate between whether growth is the result of culture (that is, TFP) or capital (that is, invention), and the dispute whether living standards (think of that as (1) per-capita consumption, and as (2) whether GDP is the best measure of human well being) initially rose or fell as a result of the changes. There may be some interesting lessons for understanding today's economy in these discussions.

Economics Smackdown, Part II

2011-02-11T13:31:00.003-05:00

A year ago, I posted on a rap video based on the economic arguments of Keynes and Hayek. Now, thanks to fellow Economics faculty member Jeff Sarbaum here at UNCG, I learn Daily Kos has put together an analysis of the text of that video. It's a bit long, but good stuff.

Deflation a particularly difficult problem for young workers

2011-01-28T07:00:00.001-05:00

In general, the fear of inflation is a rational one - when inflation gets high (say, over about 6%), the corrosive effects on the economy start to be significant. But low levels of inflation are relatively easy to deal with, and as Milton Friedman argued assure that monetary policy doesn't inadvertently hurt the economy. However, even small amounts of deflation can be a significant problem. Today's New York Times provides evidence of the corrosive effects of deflation and the particular problems it creates for young workers.

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My favorite textbook

2011-01-15T21:07:00.006-05:00

The end of last semester got rather hectic, but I'm delighted to be able to now announce that my new favorite textbook has been published: Critical Thinking in Economics (published by Kona Publishing & Media Group). It's an ancillary text that can be used in all sorts of economics courses to help students really learn how to think critically. Unfortunately, while students may learn to think using economics logic in their economics courses, few of them actually get help learning what critical thinking is or how to do it. I'm using the text this semester to organize my macro principles course.

plus ça change, plus c'est la même chose

2010-11-19T13:27:00.007-05:00

Valerie Ramey (NBER; University of California, San Diego) reports on some interesting work of hers on the degree to which increased productivity over the past 100 years has resulted in people in the US working less. There has been some changes for subgroups, but overall it appears that people are working about as much as they did back in 1900. While I'm not a Randian, it does suggest that Ayn Rand's argument that the drive to be productive is fundamental to human nature has some truth to it. Where I suspect I differ from her is in how that productive behavior plays out. For Rand it was primarily in buying and selling in the marketplace. I take a broader view, that one can also get satisfaction from being productive in running a household well, raising one's children well, being engaged in the production and maintenance of social capital, etc. It would be interesting to see a similar study of Europe, and if they engage in more leisure than in 1900, how they spend that extra time.

David Hume and macroeconomic policy

2010-10-20T20:59:00.010-04:00

I've come to the conclusion that David Hume was right: Reason is the slave of the passions. For all our pretense of being rational in macroeconomic policy, fundamental choices are being driven by emotions. Britain has decided to go for fiscal austerity in the midst of an economic depression, while the US Federal Reserve continues to try to avoid making the depression worse. How could two countries with a shared economic culture choose such different paths? Michael Saunders, an economist with Citigroup in London provides the answer:

In the U.S., central bank memory is ingrained in the Depression, while in the U.K. it is being bailed out by the I.M.F. That gives policy makers different sets of priorities.

One would think that macroeconomic policy would be based on basic macroeconomic objectives and objective analysis of the best methods for achieving those objectives. But instead it seems to be based on past emotional experiences.

Why aren't people worried about deflation?

2010-10-19T20:01:00.003-04:00

Inflation continues to be a big concern of lots of people. But a look at this report from Mary Daly, vice president of the Federal Reserve Bank of San Francisco shows it's not inflation, it's deflation that we should be worried about (thanks to Paul Krugman's blog for making me aware of the report). Why should we be worried? Read this for a flavor of what happens when there's deflation.

So why aren't people concerned? My guess is that like the old adage about generals always wanting to fight the last war, many people think all economic crises look like the late 1970s. But crises come in different shapes and sizes, and the current one looks more like Japan of the last decade and a half.

This year's Nobel Prize in Economics winners are ...

2010-10-19T16:58:00.002-04:00

Last week the 2010 Nobel Prize in Economics was awarded to Peter Diamond, Dale Mortensen, and Christopher Pissarides for the work on market frictions. That might not sound like much, but it is quite significant. Labor markets and housing markets are two examples where there is an enormous matching process. These markets are not perfectly competitive - each worker, each house is a little different from every other worker or house. And that means that buyers and sellers have difficulty finding each other (that's what we mean by market friction). Among other things, this means that we can get things like unemployment or unsold houses despite the fact that in principle there are buyers and sellers who would love to trade. Diamond, Mortensen, and Pissarides pioneered our understanding of such things and what the implications are for policy. For a fuller explanation of what their work is about, check out the article on VoxEU.org by Barbara Petrongolo (Professor of Economics at Queen Mary University and Research Associate at the London School of Economics's Centre for Economic Performance) which notes in closing that:

The work by Peter Diamond, Dale Mortensen and Christopher Pissarides has deeply influenced the view of modern labour markets of both academics and policymakers. As many countries are facing consequences of the most severe recession of the postwar era, this year’s Nobel Prize is an award to research on fundamental economic issues that are both at the core of the wellbeing of society at large and very high on the policy agenda of the moment.

Should California decriminalize marijuana?

2010-10-19T15:25:00.002-04:00

I don't know. The libertarian in me wants to say yes, but I recognize that drug usage can have negative spillovers --- on others, on the level of crime, on property values, etc. For an interesting discussion about possible implications of legalization, go to VoxEU.org for an interview with Imran Rasul of University College London about his research with Jerome Adda and Brendon McConnell on the decriminalization of marijuana in the London borough of Lambeth. The results were mixed: drug crime went up, overall crime went down, and property values went down. However, the police generally thought it was a beneficial change because it allowed them to redirect their limited resources to what they saw as more important crime.

Would these results hold if California did the same thing? It's not clear. For one, Lambeth is a relatively small area, so the decriminalization may have led to more people traveling to Lambeth to purchase drugs (hence the higher drug crimes rate) and to others moving out (hence the lower property values). Presumably there would be less of that sort of movement if the entire state of California were to decriminalize marijuana. For another, the time frame was relatively short and for the initial part of the period, there was uncertainty whether the decriminalization would be reversed.

Congress doesn't get it

2010-10-15T21:47:00.004-04:00

The upcoming election has me rather depressed. It's not that the Republicans may take over the House. It's that neither side seems to understand the nature of the current economic depression. The Democrats have squandered the chance do things right, and the Republicans are advocating policies that would continue the fiasco with policies that would lead to a decade of high unemployment and stagnation. Regrettably, I have come to the conclusion that neither side really understands what is going on.

I take all of this as a fundamental indictment against the economics profession. We have done a horrible job of teaching how to think economically. Thus, rather than understanding that the risks that inflation, deflation, unemployment, and recession present depend on context and then thinking out the best way to proceed, each side has offered stock, one-size-fits-all macroeconomic policies. And neither fits current circumstances.

Predicted $3.2 billion budget shortfall for North Carolina state government

2010-10-14T15:28:00.004-04:00

A recent report by Barry Boardman from the Fiscal Research Division of the North Carolina General Assembly says that as a result of the continued economic depression North Carolina's state budget will have to make up a $3.2 billion shortfall in the 2011-12 fiscal year. While theoretically one could make up some of that by raising taxes, all indications are that it will resolved by cutting spending. (North Carolina state government by law cannot run a deficit.) Given other demands for spending, expect the University of North Carolina System (which includes UNCG) to be hit hard and possible to try to raise tuition. For details check out this link.

Triad Business Index for August

2010-09-28T15:18:00.002-04:00

The local economy in August 2010 continued in a depression with some modest growth but a housing section that appeared to be in recession again. For details, see the Dixon Hughes Triad Business Index put out by UNCG's Bryan School of Business and Economics.

Walking the walk

2010-09-28T15:02:00.004-04:00

One of the problems with American education is that we don't follow through on what we say are our top priorities. We say that reading and writing, mathematical literacy, and critical thinking are of primary importance, but then we treat these skills as just another subject. Bright students learn in spite of this failure. But for many, the failure to make these fundamental skills the top priorities means they never learn. Now comes evidence from Brockton High School in Brockton, Massachusetts that good things happen to students whose schools get their priorities straight. And this is not just a lesson for K-12 education. There are universities that could be so much more but have not yet learned the lesson.

A hundred-year growth trend that's not so good

2010-09-10T13:15:00.003-04:00

Interesting evidence from Marek Brabec (National Institute of Public Health) and John Komlos (Ludwig-Maximilians University) at VoxEU.org that the increase in US obesity started after World War I. If true, it suggests we have a more culturally ingrained problem that originally thought.

2010 Reith Lectures - The role of science in public policy

2010-09-08T10:16:00.003-04:00

Check out the first (of four) of the 2010 Reith Lectures here by Martin Rees. And if you go there, there's a link to older Reith Lectures. Check out the first 2009 lecture by Michael Sandel. Both are interesting stuff if you care about public policy and the role of economics in contributing to policy. Martin Rees's lecture is also a nice example of critical thinking in action.

Background to help understand justice in economics

2010-09-08T10:12:00.004-04:00

For my students (especially those of you in 523: Public Policy) - Interesting website based on the work of Michael Sandel and his book Justice.

Professor Marshall was right

2010-08-31T19:15:00.005-04:00

Back in the 1800s, economists used to argue over whether prices were determined by demand or supply. Alfred Marshall, author of the first modern principles of economics book (around 1890), helped set everyone straight by observing that asking whether supply or demand determines price is like asking which blade of the scissors cuts the paper. As any microeconomics principles student knows, both interact to generate the price we see, and sometimes it is a change in demand that results in a change in price, and sometimes it is a change in supply that results in a change in price.

Over a hundred years later, it seems we have forgotten Marshall's wise observation. The current dispute among economists over how to deal with the current depressed economic state is very much tied to whether they think the depression was caused by fall in aggregate supply (AS) or a fall in aggregate demand (AD). In general, a depression can be caused by either. In the 1930s, we saw deflation, zero interest rates, and a collapse of the financial system -- all signs of a fall in AD. And the cure is loose fiscal policy and stimulative fiscal policy. In the 1970s, by contrast, we saw high inflation, high interest rates, and an oil embargo -- all signs of a fall in AS. And the cure is tight monetary and fiscal policies.

So what do we have today? Zero interest rates, collapse of the financial system, and we are quickly moving toward deflation. But a number of economists and other business commentators cannot fathom the idea that current circumstances could be due to a fall in AD. And worse, the administration and Congress seem to bought into their muddled thinking.

Bottom line - a future of years of no growth and continued high unemployment. What's that line about those who forget the past are condemned to repeat it?

State of the local economy for July 2010

2010-08-31T11:11:00.002-04:00

Triad Business Index out for July 2010 here. I would characterize the local economy as continuing to be depressed but with at least a little growth in the service sector. But we're still worse than the US average.

An honest assessment of the Triad's state of economic development

2010-08-29T20:24:00.003-04:00

Rob Bencini in the News and Record has a frank and honest appraisal of the state of economic development in the the local area. You can find a copy here on his website (August 29, 2010 post). It's a refreshing read.

Fiscal stagnation in North Carolina

2010-08-27T10:42:00.002-04:00

The latest news from the North Carolina state government suggests a stagnant economy with tax revenues up a bit only because of higher sales tax rates and a program to improve collection of the corporate income tax. For the coming fiscal year, it suggests the state and local governments are going to have to make some tough decisions: raise tax rates or cut programs and services.

Does Arthur Lewis have insights for the US today?

2010-08-26T13:21:00.004-04:00

In working on a textbook, I have been putting together a short biography of the Nobel Prize winning economist Arthur Lewis. It seems he was perplexed as to why the first half century of the industrial revolution in Britain was characterized by rising profits and stagnant wages when classical economic theory argued that wages should have risen and profits fallen. After thinking about the issue, however, it occurred to him that the explanation was tied to population pressures that the classical theory never considered. In brief, he found that a virtually unlimited supply of labor that arose from a booming UK population generated the result.

The reason this is intriguing is that the US seems to have been experiencing a similar pattern: stagnant wages and rising profits which have resulted in a dramatic increase in income inequality. The usual explanation for this is either the dynamism of unfettered capitalists (if you're inclined to libertarian views) or a reduction in the quality of social services and a fall in the progressiveness of federal income tax rates (if you're inclined to more egalitarian views). But now I wonder whether the increase in US immigration has played a role. Don't get me wrong - I am very much the product of immigrants (including illegal immigration), am quite proud of it, and tend to be rather pro-immigration and pro-immigrant. But Lewis's work has me wondering.

Give your brain a rest - you'll do better in school

2010-08-24T22:31:00.003-04:00

Report out today from the New York Times confirms what I had read elsewhere: brains can get overloaded, so to be productive (and that includes learning in college courses), give your brain a rest from time to time to allow it to process everything and put things in permanent storage. Take a walk in the woods, daydream a bit, or just veg. Without music, without a computer, without an iPod. I know; easier said than done. I better get off this computer!

Do we live in the age of fear?

2010-08-24T10:28:00.004-04:00

The rise of the Tea Party movement in the US got me thinking about where such strong feelings come from. Then I saw this article in the New York Times on violence over the use of genetically altered corn in Italy, and it occurred to me that both the Italian situation and the Tea Party movement, though the specifics of their concerns are quite different, are driven by fear. And, as US terrorism policy shows, fear can be a significant factor in the design of public policy. Unfortunately, while fear is a natural, and sometimes justified emotion that can and sometimes should provide the motivation for public policy, it also clouds our thinking and therefore should not be in the driver's seat when it comes to designing policy. FDR was right on this one.

Wikidemics?

2010-08-23T19:06:00.003-04:00

The standard process ("peer review") for getting an academic article published is to submit it to a journal and have it reviewed (typically anonymously) by two or three other academics. It's not a perfect system, but it does assure some semblance of quality control. And while a number of academic journals are now using the web to make the reviewing process easier and quicker, the basic process remains the same. Now comes word in this New York Times article of an experiment by the academic journal The Shakespeare Quarterly to open up the reviewing process to the web. I'm not sure what to think of it, but it certainly is intriguing. Sounds like a subject that would make a great economics paper!

Is the criminalization of the drug trade ethical?

2010-08-14T09:46:00.004-04:00

Drug addiction is a significant problem both for the addict and for the community in which the addict lives. But does the criminalization of the selling, buying, and using of addictive drugs help people avoid or get out of such addiction? After 28,000 murders associated with the illegal drug trade over the past four years, Mexico is beginning to wonder. See The Economist for more details including a courageous call by President Calderón for a national debate on the issue.

Amartya Sen and the solution to failed utopianism

2010-08-12T21:32:00.008-04:00

I came across this entertaining but provocative video the other day from RSA:

The words are those of Slavoj Zizek, a well respected psychoanalytic/Hegalian/Marxist philosopher. Interestingly, his attitude toward charity is quite similar (but for entirely different reasons) to that of Ayn Rand. While I sometimes find charitable actions to be destructive rather than constructive, what I find troubling about the criticisms of both Zizek and Rand is their utopianism and their advocacy of a virtually complete replacement of existing social structures with what they believe to be the ideal.

So it was with considerable interest that I listened to Amartya Sen (past winner of the Nobel in economics) talking at the London School of Economics about his latest book The Idea of Justice. His argument is that such utopian arguments (which find their roots in Hobbs, Locke, Rousseau, and Marx) are often inspiring, but are from a practical perspective of little use. Instead, he argues for an approach (which he traces back to Adam Smith and Mary Wollstonecraft) that works in small steps, eliminating injustices rather than shooting for the achievement of perfect justice. It is his argument that over time this results in a much better world than can be achieved by fighting for perfection. In a world full of stridency, it's nice to listen to someone who is intelligent, thoughtful, and practical. You can find his talk at the following links:

Available as: mp3 (20 MB; approx 84 minutes)
Available as: video
Event Posting: Global Justice

My favorite city

2010-08-10T15:23:00.007-04:00

Sorry, I couldn't resist. There's not much economics here, but the film is a work of beauty and the city is my favorite for roaming around and having fun. Cheers! And thanks to my son for making me aware of the film.

Ayn Rand, Richard Sennett, and the Value of Work

2010-08-09T10:16:00.003-04:00

Though a non-entity to most economists, Ayn Rand for a small number is an inspiration while for probably a larger number she is an anathema. Having recently read some of her work for the first time, my quarrel with her is not so much what she says as what she doesn't say. A case in point where I think she is on to something is her extolling the value of work and of making things. This is, as best I can make out, her application of Aristotle's notion that ethics is tied to fulfilling one's potential as a human being. But why the focus on work and making things? Part of the reason may be found in a comment the sociologist Richard Sennett made at a recent lecture/discussion at the London School of Economics in which he and Rowan Williams, Archbishop of Canterbury, discuss the nature and role of Narrative and Ritual. (For those who want to listen, the comment comes near the end of the podcast.)

[Craftmanship] is something in which out of these ordinary materials of everyday life ... eventually you take a kind of appropriation. You begin to give them a shape, and that's something that takes you outside of yourself and into the world. ... For me the point [of craftmanship] is not self-fulfillment or self expression, but something rather processes that objectify that get involved in something other than themselves, and I suppose if I have an ethical point of view it's all about that: How do you be in the world rather than inside of yourself.

I don't know if Rand would have accepted that argument; but at least for me, it provides an explanation for why work is so important to her philosophy. For more from Richard Sennett, see his latest book The Craftsman.

Autonomy. Mastery. Purpose.

2010-08-07T21:09:00.006-04:00

Check out this RSA Animate (thanks again to one of my former students Josh Robinson for the heads up) on the place of the profit motive in human motivations. This has implications both for business management and for how courses should be taught.

RSA stands for the Royal Society for the Encouragement of the Arts, Manufactures, and Commerce. Among its past members include Adam Smith and Benjamin Franklin. For more information, check out their website or this Wikipedia entry.

Utilitarianism and a critique of modern microeconomics

2010-08-03T00:41:00.004-04:00

I just finished reading John Stuart Mill's Utilitarianism for the first time (an ebook version available at Feedbooks). While I find it interesting, I have some problems with it, and given that it is in many ways the foundation for modern microeconomic analysis, it has led be to think hard about its implications for economics. Utilitarianism is broadly defined as the belief that people are motivated by a desire for the greatest happiness (defined in the broadest sense) for the greatest number with all individuals of equal value, and with the route to happiness being justice which is defined as the right to not be coerced ("freedom") and to some basic set of goods (presumably associated with the basics of life). As a policy for government, I am sympathetic to it and suspect that most in the US would in the abstract find it attractive. But in practice it presents a fundamental problem: namely, greater freedom necessarily means a reduced ability to provide those certain goods, and an increased ability to provide those certain goods means less freedom. Thus, in practice, some balance between the two is needed, and here is where political battles are fought (think Libertarians versus Socialists). The reason for there are battles is that while Utilitarianism may appear to be desirable from a public policy, it is my experience that people in general do not use it to run their own lives. Thus, for example, Libertarians would resent the taxes needed to provide those necessary goods.

The implications for economics derive from the fact that standard microeconomics has for the most part focused on the goods aspect of Utilitarianism (think consumer surplus) and ignores the freedom notion (think process). How this might play out in economic thinking, I am not sure. It may be significant; it may be trivial. But I do think the dichotomy between goods and freedom lies at the conflicts that we see being played out in US politics today.

Local Greensboro economy slightly better in June

2010-07-29T11:09:00.002-04:00

Triad Business Index report for June 2010 can be found here. Results a slightly positive, though nothing that could be described as a robust recovery.

When Greeks and the Enlightenment collide

2010-07-14T19:55:00.006-04:00

There seems to be an unbridgeable chasm between deficit hawks who argue that the solution to the current depressed economic state is to reduce government spending and deficits, and Keynesians who argue we're in a liquidity trap and therefore that the solution is additional fiscal stimulus. Why such a difference? Part of the difference, and the reason the chasm is unbridgeable is that there is at its core a fundamental difference in how the two groups reason. Deficit hawks are most comfortable in a world of certainty and primarily rely on deductive logic (the logic which can be traced back to the ancient Greeks) which if done right yields absolute conclusions. Thus, they generally start with a set of what they believe to be truths about human behavior and how economies work, and because that includes an abiding belief that large government is destructive of human welfare, they use deductive logic to conclude that the solution to our woes is smaller government and smaller deficits. Keynesians in contrast are comfortable (even enjoy?) in a world of uncertainty and use inductive logic (the logic of modern science which can be traced "only" to Bacon) which by its nature is inherently probabilistic. Thus, they see the world through fundamental different eyes. And so the chasm will remain.

Sometimes a tax makes things more efficient

2010-07-05T12:43:00.006-04:00

This morning's News and Record has a story of a local biodiesel maker who may go under because Congress has not renewed the subsidy on biodiesel. While I feel for the owner of the firm, the subsidy seems to be a poor way to deal with issues of global warming, the development of alternative fuels, and reducing US dependence on foreign oil. The relevant economic concepts here are that of negative externalities and Pigou taxes. A negative externality occurs when the making and/or use a good imposes a cost on some third party, and that results in an inefficient over-use of the good because the user and the producer do not take account of all the costs associated with the making and use of the good. A Pigou tax (named after the economist A. C. Pigou) fixes the problem and therefore makes things more efficient by imposing on those who produce the externality a tax equal to the size of the externality. It works because the user and producer as a result of the tax take into account all the costs associated with their actions. The tax in this case is not an additional cost; there was already a cost being imposed on a third party. It simply brings that cost within the market process so that people act efficiently. And the result is typically a reduction but not elimination in the making and use of the offending good. The use of petroleum is an example of a good that results in a negative externality: It creates negative externalities in the form of carbon emissions, oil spills, and international risk to the nation. So the solution is to impose a carbon tax (again this is not a new cost, it simply brings the existing external costs into the market process) so that producers and consumers act more effficiently in their making and using of petroleum.

So, back to the biodiesel subsidy. The reason the biodiesel is not such a good idea is that it doesn't get at the fundamental problem. The fundamental problem is that petroleum is priced under its true, complete cost to us; it is not that we don't use enough biodiesel. To be sure, one part of becoming more efficient in the use of petroleum may be increased use of biodiesel, but there may be other responses that would help too (driving less, living closer to work, increased use of nuclear energy, increased use of wind turbines, etc.). I don't know exactly what the best way to be more efficient is, and that's the point. By imposing a carbon tax, markets can figure out how best to respond. That may include more biodiesel use. But if we don't tax carbon emissions, and we subsidize biodiesel, then increased biodiesel use is our only response. And that means a less efficient outcome.

Happy Independence Day!

2010-07-04T12:04:00.016-04:00

And thanks to the North Carolina signers for their courage: William Hooper, Joseph Hewes, and John Penn. It's often forgotten what risk they took for signing the Declaration and that it was not at all clear at the time they would live to see the United States an independent nation. A monument to all three (as well as the graves of Hooper and Penn) is here in Greensboro at the Guilford Court House National Military Park.