The current irresistible wave of nationalism/populism which took place in Europe and USA has of course an economic dimension, among several other distinctive factors (cultural, historical, geographic, etc.).
Let us call “globalization” this economic dimension. Globalization itself has a long history, as it is well known, but here I refer to the developments occurred in the last 30 years – even if a narrative in terms of courses and re-courses could be applied with some justification to the topic.
I propose here that the AD-AS model, and its elementary geometry consisting of two curves, can be employed to shed some light on the basics of this economic dimension. It is sufficient to add to this popular framework another curve expressing the world supply of tradeable goods & services (WAS) at given price levels and exchange rates. In this integrated framework, the short run aggregate supply curve (SAS) refers to the domestic production (of tradeable goods) of a given country, and the short run aggregate demand curve (SAD) refers to the country expenditure in both domestic and foreign tradeable goods. The long run aggregate supply (LAS) is vertical at the potential level of domestic output. The WAS curve is horizontal because I suppose that foreign producers are ready to offer whatever amount they can at the current equalized world price (I assume the law of one price: equivalent goods sell for equivalent prices on international markets). Continue reading →
The 2018 Spring semester is going to start at the Roma3 University, and thus a new beginning for the courses of Political Economy and Economic Policy is expected.
In the meanwhile, I like to post some remarks regarding two fundamental economic issues: 1) supply and demand; 2) market power.
1 – Consider this sentence:
«Teach a parrot the terms supply and demand and you’ve got an economist».
It may seems a malicious caricature of economists, but his author, Thomas Carlyle, is not completely wrong. Simply, he doesn’t understand the usefulness of a conceptual framework like that of supply & demand (S&D). Continue reading →
The dissatisfaction with Macroeconomics is a bit like that with philosophy or modern novel or string theory: a recurrent topic, a constantly revived affliction. As such, it deals with feelings.
The question is: it is also about facts?
My answer is: it depends. It depends from the side you look at the question.
On a purely theoretic ground, recent facts as the financial crisis and the subsequent Global Macroeconomic Recession that sorely tried mainstream explanations and models didn’t ignite a noteworthy reflection and least of all any significant change.
The policy field is intrinsically more pragmatic than the academic one – ie, models built for policy and forecasting purposes reflect cum grano salis a given dominant paradigm with its usual theoretic purity. Continue reading →
Some people are optimist about the current wave of technological change, other pessimists. The truth is that there is a lot of uncertainty about the prospective effects of this change. The current wave of technological change is mainly AI, artificial intelligence, and its spectrum of enhanced capabilities, particularly those based on machine learning. The optimists mainly belong to the fields of managers, technologists and, to a lesser extent, physicists. For example, Stephen Hawking, talking recently at the Web Summit Technology Conference in Lisbon, claimed that “success in creating effective AI, could be the biggest event in the history of our civilization. Or the worst. We just don’t know. So we cannot know if we will be infinitely helped by AI, or ignored by it and side-lined, or conceivably destroyed by it”. The “fact” we certainly know is that systems using AI can emulate and in theory exceed human intelligence, matching or surpassing human level performance in more and more domains. Even if it is largely recognized the potential of AI to help undo damage done to the natural world, or eradicate poverty and disease, with every aspect of society being transformed, the outcome is not granted. “Unless – in the words of Hawking – we learn how to prepare for, and avoid, the potential risks”. In a certain sense, economists are among the pessimists about the virtues of AI and robotics. Continue reading →
From a lot of time I stopped looking at the tests and the natural experiments of social or cognitive psychology. The evidence of false “positive” is overwhelming in this field, and in truth embarrassing. For example, the hypothesis of power posing is a well-documented case of replication failure in psychology: initially charming theories that cannot be replicated in follow-up experiments. The research on power posing quickly became famous after a 2012 TED talk of Amy Cuddy (viewed more than 40 million times) but was definitively discredited by a number of subsequent studies. Amy Cuddy (Harvard Business School) carried out an experiment with Dana Carney and Andy Yap (Columbia University) – “Power Posing: Brief Nonverbal Displays Affect Neuroendocrine Levels and Risk Tolerance”, Psychological Science I-6 2010 – on how nonverbal expressions of power (i.e., open, expansive postures) affect people’s feelings, behaviors, and hormone levels. In particular, they claimed that adopting body postures associated with dominance and power (power posing) for as little as two minutes can increase appetite for risk and testosterone, causing better performance in job interviews.
Now a research by David Rosembaum (Tel Aviv University), Yaniv Mama (Ariel University) and Daniel Algom (Tel Aviv University) Continue reading →
Some years ago a nice paper on comparative productivity performance appeared on the AER: “Americans Do IT Better…”, by Nicholas Bloom Raffaella Sadun and John Van Reenen, who joked with semantics in the title of their paper (capitalizing “it”, they overlap the meaning of the acronym of Information Technology to the pronoun). Bloom, Sadun and Van Reenen (2012)[BSV] show that the better productivity performance of US multinationals in respect to those from Europe is primarily due to their “tougher people managing practices”. That the reason for this gap comes from a managerial advantage had been previously suggested by Blanchard (2004), among others. In particular, BSV Continue reading →
How democracies emerge from authoritarian environments? The intuitive answer is that, as any form of institutional framework and of political arrangement, democracy is embraced as the effect of some mixture of conflict and bargain between incumbents and outsiders. It makes sense to ask how much of this mixture is driven by intentional vs. compelled choices? In particular, is it sensible to ask whether despotic elites/absolute dictators democratize by choice? Authoritarian leaders suffer an unambiguous loss by surrendering or sharing power, and thus why do they intentionally adopt democracy? Despite this natural remark, a number of old and new arguments posit that despotic incumbents deliberately choose to embrace democracy. Continue reading →