Posts Tagged ‘Econbrowser’

Wall Street Journal’s Top 25 Economics Blogs

July 17, 2009

The Wall Street Journal lists their top 25 economics blogs. Jim Hamilton’s Econbrowser is among them:

Originality: 5 light bulbs
Geekiness: 5 calculators
Readability: 3 reading glasses
For his day job at the University of Calif.-San Diego, economist James Hamilton works on the sorts of statistical problems that can leave even other trained economists confused. On Econbrowser, the blog he started in 2005, he (mostly) puts his insights on the economy into plain English. With a keen interest in energy markets, he was early with analysis of how a rapidly developing world and slowing oil production was pushing energy prices higher, and how those prices were affecting the economy. With his co-blogger, University of Wisconsin economist Menzie Chinn, he’s been delving into thorny macroeconomic questions and offering detailed, but understandable, explanations of how the Federal Reserve’s unconventional policy shifts work.
Quibble: Usually Messrs. Hamilton and Chin keep the wonk factor down, but not always. One recent post made the point that “dY = (1/Ä){[((Yññi+Yi))m/Di )+YññR]dR + YññZdZ}.”

Among others are Freakonomics, Paul Krugman’s blog, and Matt Kahn’s Environmental and Urban Economics blog.

Hat-tip: Env-Econ

1 000 000 000 000

March 5, 2009

How much is a trillion? Jim asks in relation to the proposed U.S. deficits in the next few years. (Jim is one of my favourite economists, or should I say professor.) The short (and pedantic) answer would be the title of this post. Another is a million million. Jim’s may be better (for Americans, at least):

A trillion dollars is about the total amount collected in income taxes by the U.S. federal government in fiscal year 2006– $1.04 trillion, if you’re curious to use the exact number. That gives me a simple rule of thumb for personalizing these numbers. If I want to know what an additional trillion dollars in government borrowing or spending will mean for me, I just imagine what it would be like to pay twice as much in federal income taxes for one year.

The comments on Jim’s Econbrowser yields other amusing ways to imagine a trillion:

A billion dollars is a stack of $1000 dollar bills 358 feet high. A trillion dollars is a stack of $1000 bills 67.9 miles high!

Another way to look at it is that a business that was started on the day Jesus was born, and lost one million dollars EVERY single day since then, would still not have lost $1 trillion.

If you earned 1 dollar for every second you would have:
$1 million after 2 months
$1 billion after 32 years
$1 trillion after 32 000 years. 32 thousand years!

Here’s an appropriate quote from physicist Richard Feynman: “There are 10^11 stars in the galaxy. That used to be a huge number. But it’s only a hundred billion. It’s less than the national deficit! We used to call them astronomical numbers. Now we should call them economical numbers.”

To be sure, the comments has a lot of interesting content as well.

A sick system

November 19, 2008

Talking of paradox, it may seem paradoxical that when I comment on economic issues here on the blog, I mostly comment macroeconomic issues; I am a resource and environmental economist, or more generally a microeconomist. Anyway, the Fed funds rate in the US has shown anomalous behaviour the last few weeks. Jim explains: The Fed funds rate is the interest rate at which institutions lend their deposits held in accounts with the Federal Reserve to one another overnight. Currently, the Fed is offering a 1% interest rate on such deposits, but the effective market rate is hoovering around 0.35%. This seems paradoxical (both ironic and illogical):

If you’re a bank and there’s a GSE out there willing to lend fed funds at 0.35%, how much do you want to borrow? Let’s look at the math. If you borrow $1 billion, you pay 0.35% interest and earn 1.0% from the Fed for just holding those funds overnight, from which you’d net $6.5 million over the course of a year. If you borrow $10 billion, you’ll earn $65 million. Totally risk-free, $65 million for your bank as pure profits. Here’s the question– How much would you like to borrow?

Me, I’d like to borrow a few gazillion.

The market does not work. A possible explanation is that carrying out the necessary transactions to take advantage of the situation, banks would see their leverage ratio decrease. Leverage has become (more) painful to banks after the financial breakdown in September. Jim comments:

I have to say that if this is the explanation, it is profoundly disturbing to me. If banks indeed are finding themselves hamstrung to the point that they are unwilling to pick up millions of dollars that are just lying around on the sidewalk, absolutely risk-free, then how can they possibly be expected to function in their traditional role of funneling capital to legitimate investments that all necessarily entail some risk? If this is indeed what is going on, we should be looking at the spread between the effective fed funds rate and the interest rate paid on excess reserves as another indicator of a profoundly sick financial system […]

Recession numbers

October 20, 2008

James D. Hamilton is one of my favourite economists. He has written a great book on time series, and while in California I was lucky to sit in on his econometrics class; he is a fabulous lecturer. On his blog Econbrowser he offers analyses and comments to current economic conditions and policy. In a recent post he discusses numbers that indicate that the US economy is in a recession (industrial production fell by 33.6% (annual rate) in September). More interesting, however, are the comments to the post where a reader asks whether academic economists did (or didn’t do) their job to warn about the possibility of the severe economic breakdown that seemingly is happening in the US. Underlying this question is the much bigger question of whether (macro) economists know what they’re doing.

I find the critique against academic economists misplaced. Many of the best economists work in the financial sector and in related governmental agencies, and neither these nor the academic economists were able to forecast the current crisis. (Well, as Jim points out, several economists did warn of potential danger. The sheer size of it, however, was seemingly not predicted with enough confidence.) There is no reason to believe that academic researchers are better at forecasting than those employed in the financial sector. (Those in the finance sector would not necessarily publish their forecast, but if any of them had any reliable forecasts of the crisis we’re in, their companies would have positioned themselves relative to that, and it seems that none of the Wall Street companies had done so.) This also tells of the extreme difficult of forecasting in economics.