Tuesday, 21 February 2017

Central Bank Independence Cannot Survive a Crisis

For once my university curriculum was enough in-sync with world events around us to provide some relevant and interesting readings. The essay I just finished dealt with central bank independence, a fairly modern invention to these rather old institutions: most of them used to be another sub-departments under direct control of a Treasury. The idea behind an independent central bank, one that makes its decisions about monetary policy and target rates underlying most interest rates in the economy without influence by politicians or current policy-makers is as follows: since the result of monetary policy operates with a certain lag, a sitting government in direct control of the central bank can lower the target rate before an election – an action that will spur investments and increase economic activity in the short run – which lowers unemployment, and may help the sitting government to victory. This action has longer-term consequences in higher price inflation, which will not be apparent until later; to bring that price inflation down, rates have to be increased again, often causing (slight) recessions.

Sunday, 19 February 2017

How Scotland Caused the American Revolution

When I first read Niall Ferguson's The Ascent of Money a few years ago I was mesmerized not only by the brilliant clarity of his writing, but the underlying theme throughout that work, well captured on the back cover of the book itself: "[Ferguson] reveals financial history as the essential back-story behind all history." It's in line with what I've argued on numerous occassions: doing history without recourse to financial or economic reality is rather pointless  or at least seriously limited in scope. Penguin books, Ferguson's publisher, did a great job for Ascent of Money in getting potential readers hooked by listing quite a fascinating intro:

Wednesday, 15 February 2017

Noah Smith says Stuff

Say what you will about Noah Smith, the former econ professor at Stony Brook Uni and prolific blogger, now continuing his writing for Bloomberg View. His well-formulated articles and succint blog posts have always resonated with me, causing a reaction (mostly negative, however...) and inspired me to read, write and argue. In other words, Noah's writing brings out the very purpose of economists, Paul Romer-style; in September last year, Paul Romer made a fuzz with his article The Trouble With Macroeconomics, in which there was a quote I instantly pulled to place on my wall of inspirational quotes: 

Sunday, 12 February 2017

Turner and Banking Crises

I adore John Turner, not only from the fact that he’s coming to Glasgow Economic Forum in four weeks (get your tickets here!), but for his great work in financial and economic history. Honestly, until April last year I didn’t even know he existed  borderline treason for those of us with an academic interest in financial history. As I stumbled upon his award-winning book, Banking in Crisis: The Rise and Fall of British Banking Stability, 1800 to the Present, I added it to my very long dissertation reading list. The extra push given by my advisor in September was enough for me to order it and read it. And what a read it was. Although the book is relatively short – 220 pages – it took me weeks to finish, for the simple fact that every single page contains valuable lessons, amazing reasoning and breath-taking insights that I simply had to jot down; my OneNote entry on the book is one of the largest I have and there are countless of individual entries in my vast Google Keep archive.

Thursday, 9 February 2017

Economic Reflections of a Journey: Morocco

A few days ago, the length of my experience and knowledge of Morocco amounted to the dates I buy at Tesco. Yes, yes, yes I had watched Casablanca, I knew the name of a few cities and could place them on a map, but none of that really counts. Sitting on a terrace, looking out over the white brick-and-clay buildings of the Tangier Medina, with the wood-fired smoke from neighboring houses filling my nostrils, it all felt a lot more real. On top of the almost randomly scattered houses there are countless TV paraboles and antennas reinforcing my impression that this feels a bit like a poor imagination of East Germany; the old garbage cars, the teared and unfinished houses, the dirty alleys and intrusive plethora of smells: cat piss, old stables, hashish, the occassional unknown spice, of dirt and rain washing it all away. 

Saturday, 4 February 2017

Review of Bernanke's 'Courage to Act'

This review was originally published in Swedish on website of the Swedish Mises Institute in January 2016. Ben Bernanke was the chairmen of the U.S. Central Bank, 'The Federal Reserve', 2006-2014, and nowadays blogs for the Brookings Institute. In late-2015 he released a book, his memoir, of the crisis, titled The Courage to Act: A Memoir of a Crisis and its Aftermath, which I reviewed in Swedish not long after. This piece has been translated and re-worked from the Swedish version. Since I recently discussed Bernanke's "Firefighter Analogy" that appears in the book, I figured it was finally time to bring this 1500-word review onto Life of an Econ Student.

Tuesday, 31 January 2017

Two Missing Considerations in the Inequality Debate

Recently I have been engaging in a lot of "bashing the inequality crowd"-type posts (see my posts on WahlroosOxfam or measurement errors) at the expense of my many other intellectual interests. This is justified, I'd argue, since Life of an Econ Student and the experience of being an econ student in the 21st century is to constantly argue or consider inequality – even in class! It is a bit like historians and their relationship to class-gender-race. All. The. Bloody. Time. 

Sunday, 29 January 2017

Review of Björn Wahlroos

This review was originally published in Swedish on the website Frihetssmedjan in June 2015. Björn Wahlroos is a well-known figure in the Scandinavian finance sector, as a chairman of Nordea, the 9th largest European bank by market cap and Sampo, the holding company of IF (the largest Insurance company in Sweden). He has a Ph.D in Economics and used to teach at Brown University, Northwestern University and Hanken School of Economics in Helsinki, Finland. To my knowledge the book has not been translated from Swedish, and so those curious about Wahlroos may have to learn a new language beforehand.

Thursday, 26 January 2017

Why I Want to Master 'Metrics

Sometimes words or sentences fly out of your mouth before you have a minute to think about them. Most of the time such rambling is rather meaningless ad hoc answers to questions or comments you weren't expecting. But other times, you surprise yourself with how true your words are, aka Freudian slip or simply a moment of clarity. 

The other week I had one of those. A friend of mine asked me why I was taking econometrics as one of my optional classes. For the love of everything holy, why would I voluntarily take more econometrics than I am required to (or, in my flatmate's snarky comment: "do you have a death wish"?)

Monday, 23 January 2017

What's the Difference Between Economic History and History of Economics?

This is a question people have (rightly?) asked me on numerous occasions. Especially during my first semester in Sydney when I was studying both at the same time; obviously, then, people outside the nerdy game of economics would tend to get confused. I shouldn't blame them – but I guess I kind of did, probably rolled my eyes and said something snarky about googling it. Today, however, I feel more generous. 

Saturday, 21 January 2017

Putting the Cart Before the Horse

This week, like most weeks during semester time, we had a guest lecture with GURWES (Glasgow University Real World Economics Society), a heterodox students’ society focusing on academic pluralism of economic ideas. On campus, we’re known as the crazy-leftie economics society, and not without reason; apart from me, most other students involved with GURWES take various degrees of far-left positions, especially on economic issues. As I’ve discussed many times before (here and here) this is one of the major problems with the Rethinking Economics movement in general: pluralism is important, but only one-sided pluralism and, you know, how can those conservatives even live with themselves?

Wednesday, 18 January 2017

Dear Oxfam, There Is No Inequality Crisis

In January every year the conspiracy think-tank Oxfam publishes a report claiming that some number of billionaires own as much as the world's poorest 50%. This year the number they cranked out is 8  and the top 1% owns more than the rest of the planet combined. Wow, goes every indignant left-leaning person from the Guardian's editors to Social Justice Warriors on every political site across the globe. That's so unfair, and so bad, and capitalism has obviously failed. Oxfam describes the distribution as 'obscene'; here's Max Lawson, Oxfam's head of policy:
There are different ways of running capitalism that could be much, much more beneficial to the majority of people.

Monday, 16 January 2017

Emerging From a Bubble

This Bubble was not one of those exciting financial market or property ones that I enjoy discussing. This Bubble was called 'dissertation', a rather lengthy essay worth almost 17% of my entire university degree. It has kept me very occupied since September, and has completely absorbed me for the last few weeks. Daunting task, and most days since September, and every day since Christmas have I been reading, counting, writing, regressing, handling data-series, analysing, proof-reading, referencing and finally a few days ago handing it in. Such a relief.

Sunday, 1 January 2017

Summarizing 2016

It's that time of year, and I thought I'd make a brief note of how 2016 turned out.  
  • I have written about 8 university essays, including around half a dissertation. 
  • I posted 28 articles and blogs on Mises.se, of much varied quality, as well as 102 blog posts on Life of an Econ Student.
  • Read something like 85 journal articles or chapters in academic books.
  • Read at least 11 academic books in full, and on average probably halfway through another 5-6 books (among which are McCloskey, Shaikh, Mokyr, King)
  • The only fiction I managed to read this year was all four books of the Inheritance series (about Eragon and his dragon Saphira), which I devoured in a week or so. #PostExamDestress
  • Judging by my library history, I have taken out about 90 books from the university library (both Sydney and Glasgow).
  • I spent about £250 on books and £320 on clothes (continuing the strange trend from last year when spending on clothes exceeded spending on books); little over £3000 on food/drinks, about £5000 on rents and about £4000 on various trips
  • I added 220 new songs to my Spotify playlists, 2 new countries and 1 American state to my list and in total 16 flights.

Wednesday, 21 December 2016

How Rich Is Mr. Darcy?

Pre-Christmas chill has meant picking up my lovely edition of Pride & Prejudice. There's something about the language and the beautiful words that capture me  Jane Austen was onto something. Anyways, I started to think about the numbers and the incomes she reports throughout the book (and remembered how Piketty used them to portray how capital simply "earns its return r"). One of the first things we learn in the book is that insanely rich Mr. Bingley has let Netherfield, and he has "four or five thousand a year" (chapter 1). In chapter 7 we're told that Mr. Bennet (Lizzy's, the protagonist's, father) earns £2000/year and that his father-in-law left them £4000. In chapter 16 we also learn that Mr. Darcy, the rich proud and unpleasant fellow we initially loath, has £10k/year. It is never really explained or described how they earn this, and Piketty infamously argues that it was normal for capital to simply reproduce at some percent every year  so normal, in fact, that it's superflous for Austen to even describe it. 

Monday, 19 December 2016

If You've Never Missed a Flight, You're Spending Too Much Time at Airports

Waiting in a basically empty terminal for a flight not scheduled to depart for another hour reminded me of something Dr. Jordan Ellenberg convincingly discussed in his brilliant book How Not to Be Wrong: The Hidden Maths of Everyday Life. Back in October I thought I praised his book slightly too much, only to realize that I had forgotten to discuss this point.

In one of his chapters he discusses the optimal time to arrive at airports before the flight departures. He uses expected utility theory (for all its problems...) to suggest that maybe those hours waiting in the departure area or simply wandering the airport are pretty much wasted and could be avoided by showing up later  which also means that from time to time you may miss a flight or two. This is how Business Insider summarized the point when his book came out:

Friday, 16 December 2016

The Ins and Outs of Closing Fiscal Deficits

A range of well-respected economists, including Harvard economist Alberto Alesina whom I had pinned down as a Nobel candidate, just last week published an article (available here) that ought to cause some storm among academic economists. The snappy title of their paper on this politically-infected topic of fiscal policy is appealing enough: "Is it the 'How' or the 'When' that matters in fiscal adjustments?"

Tuesday, 13 December 2016

The Firefighter Analogy

In former Fed chair Ben Bernanke's 2015 autobiography of the financial crisis, The Courage to Act, he tells a a very self-righteous story of how he and his team saved the world from an even worse financial crisis. That conclusion is dubious on many grounds, as well as slightly too boastful for my taste; even Mervyn King in his End of Alchemy ridicules those kinds of stories coming out of the GFC.

However self-centered Bernanke's book might be, and for all its economic flaws, there is one particular idea that comes back over and over in other circumstances. I'm sure Bernanke didn't invent this analogy, but I have come to always associate it with him; I'm of course talking about Moral Hazard and the Firefighter Analogy. This is how Bernanke recounts it:

Tuesday, 6 December 2016

The Most Important Econ Books of 2016

We are slowly moving towards that time of year when we look back and summarise the most important events that have occured over the last twelve months. Of course, Life of an Econ Student wouldn't be much of a an econ blog if it didn't supply a list of our beautiful field. Unfortunately I see that both the Financial Times and Tyler Cowen at Marginal Revolution beat me to this, and I'm happy that they, at least partly, agree with my choices.

Of course, this list is entirely biased by my interests (banking, money, econ history, inequality) and my current experiences. Enjoy!

Sunday, 4 December 2016

Exchange Rate Arguments and Cognitive Dissonance

A while back I had an argument with my flatmate about how the quality of the content in The Economist has gotten worse. I used to enjoy their writings a lot, and it definitely contributed to my decision of pursuing an economics degree. A few years ago, when my understanding of economics was basically non-existent, their authoritative writings was simply mind-blowing. Epic. Such a good education, and I read their articles as often as I could. Nowadays, I increasingly find their stories bouncing between implausible, boring and superficial. Of course, my knowledge has multiplied and I am hence no longer their prime audience. Nevertheless, you would expect a much higher standard.

Saturday, 3 December 2016

The Humble Economist

Most of my friends would consider this title a contradiction in terms. A laughable description, perhaps even ironic. And I would agree. Very few economists are humble, yours truly included. We draw conclusions on theory or evidence, more or less rigorous, we play amateur political philosophers from time to time  what my lefty/sociology friends like to call 'Economic Imperialism'  and we make positive or normative judgements about individuals' psychology. We design models, often highly-sophisticated mathematical models, capturing various parts of the world, trying to imitate the world and its vast outcomes as (in)accurately as possible.

But the real task of a real economist is to reach the following insight:

Sunday, 27 November 2016

Why Trump Will Be a Good Force for Liberty

Back in June 2016 when most of my libertarian friends were mistakenly celebrating Brexit, I opposed them with the following very simple argument: The European Union has, on net, been a force for freedom and free trade, and against state abuse of power, taxation and money printing (David Howden & Huerta de Soto are among the famous Austrians pointing to this). Leaving the Union is likely to bring back the monetary and fiscal nationalism, beggar-thy-neighbour policies and protectionism Europe's history has been filled with for the last century or so. Ironically, libertarians who are used to spotting Nirvana Fallacies while debating lefties, were projecting all kinds of nirvana-like states of a post-Brexit Britain.

Monday, 21 November 2016

Economists vs. The Public

As was demonstrated in the Trump-mania, there is a mismatch between "experts/establishment" and the "general public" in many places of world: Brexit and Trump are simply the most recent and evident examples. I am very much enjoying the show, the only sane way of dealing with politics, but does this mean I buy the entire anti-establishment, stagnant-wages, manufacturing-workers-in-Pennsylvania story?

Of course not.

Thursday, 17 November 2016

When the World Backfires on You

The world is fundamentally uncertain, as economists from Keynes to Mises to Knight embraced vigorously. Since then, economists and their love for mathematical precision have tended to lose this conviction. Events in the world are not, as intro-level econ courses would suggest, evenly scattered into nice well-known distributions whose proportions and features we are well aware of. It is not the case that every unknown future is reducible to quantifiable risk based on long-term, long-time averages the way insurance companies meticulously gather statistics on past events to profitably guess their future outcomes. Uncertainty isn't risk, and cannot be assumed to be.

Monday, 14 November 2016

Krugman + Trump = Love?

In the aftermath of the U.S. Election, the renewed discussions of Trump's potential fiscal stimulus made me think of an awkward bed-fellow of his. Remember how Paul Krugman, the most viscious of hypocritical high-profile pseudo-economists, has been calling for additional fiscal stimulus for years? How odd. Shouldn't he secretly approve of Trump?