Posts Tagged ‘James D. Hamilton’

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.

Jim argues for an inflation target

November 25, 2008

Jim Hamilton argues that the Fed should adopt an inflation target to get to grips with the current economic situation in the US. This is interesting. Norway’s central bank officially adopted an inflation target of 2.5%  in, I think, 1999. Jim has earlier made it clear that the standard measures the Fed usually use to govern the economy is failing; I reported on this earlier. Jim describes inflation targeting as ‘Plan C,’ and discusses why previous plans have failed. The reason why he sees it necessary to dig deep is the latest report on the Consumer Price Index. The report is dramatic; it shows that prices fell by 1% in October. It may sound innocent, but it amounts to 12% over a year. And it may get worse before it gets better. Jim admits that the Fed is running out of options, but he also thinks targeting inflation is a powerful measure that will work;

Targeting inflation is not just another arrow in the quiver; it’s a bazooka, at least for purposes of preventing deflation. Time to take aim and fire.

Thoughts on a recession

November 12, 2008

Over on Econbrowser, Jim (Hamilton) keeps us updated on the economic situation in the US. He has earlier established that the US economy is in a recession; the question remains how deep the recession will be.

Now, it is not hard to imagine that the consumption level in the US is unsustainable, both in terms of the environment (that is, pollution and climate change) and scarcity of resources. The US consumption level is particularly problematic if the ideal is a more or less global common level of consumption. One may argue that some of the problems with sustainability can be solved by changing the composition of the consumption, but I think such possibilities are limited. The consumption level in the US (and in much of western Europe for that matter) may have to come down to secure a sustainable environment and global development. Would the US be forced to bear on an extensive and long lasting recession for this to happen?

I admit that the argumentation above is speculative and, even worse, vague. If one is optimistic on behalf of science and technology, for example, one may argue that in the future we can consume much more with the same resources as today, and at least some pollution problems will be solved without necessarily changing neither the level of consumption nor its composition. Also, global development will hopefully reduce the population numbers naturally, making a future global high level of consumption less severe on the resources. However, (again) ideally, each country needs to be self-sufficient in the long run, meaning that they produce at least as much as they consume; they cannot have a trade deficit. Currently, the US is running a large deficit. This is a sign that their consumption level is usustainable. It would also be interesting to see who they traded with; if a large share of their trade originates in less developed countries (and I’m afraid that it is), the situation may change when their trading partners develop.

Finally, if it turns out that the US consumption level has to fall and this treatens to put the country and its economy into a deep recession, how far will the US government be willing to go to lessen the stress?

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.