Economists as Gurus
Among many great papers at the Mont Pelerin Society General Meeting in Sydney was Geoff Brennan’s contribution on The Economist as Guru, which looked at the supply and demand for gurus. There was some debate as to whether the willingness of some economists to misappropriate their intellectual authority mattered given a free market in ideas.
Perhaps the most outrageous case of a guru in financial markets is Nouriel Roubini, but this article shows that the market in ideas has not completely failed in exposing Roubini:
A closer inspection of Roubini’s record shows that while he was predicting doom and gloom for the US in 2004, his initial call had nothing to do with a runaway housing bubble.
Rather he argued that the Bush Administration was racking up massive deficits to foreign investors, namely the Chinese, and that the Chinese would scale back on their purchases of US debt, causing interest rates to spike and the dollar to decline in value, resulting in “financial trainwrecks for the US economy in a matter of a couple of years.”
Sounds good, but the problem with the theory is that it didn’t happen.
posted on 17 October 2010 by skirchner in Economics, Financial Markets
(0) Comments | Permalink | Main
Behavioural Economics at the Mont Pelerin Society
Blogging will be even lighter than usual next week, as I will be attending the Mont Pelerin Society General Meeting in Sydney. I will be the lead discussant for a paper by Doug Ginsburg and Joshua Wright, ‘Behavioural Economics, Law and Liberty’. The paper should be topical, with the Nobel prize for economics announced next week and behaviouralists currently leading the field of potential winners at iPredict. While Richard Thaler would be a deserving recipient, it would be unfortunate if Robert Shiller were a co-recipient (indeed, it would be a tacit admission that Shiller should not win in his own right). Oddly enough, I was on the same Sydney-New York flight as Shiller when I went to the MPS special meeting in February last year, but did not spot him until after we had landed. Shiller can thank Qantas for not putting me next to him for 22 hours (that would have been an interesting conversation).
posted on 08 October 2010 by skirchner in Classical Liberalism, Economics
(0) Comments | Permalink | Main
The Perception that Will Not Die
The RBA wrong-footed the market and commentariat with Tuesday’s steady rates decision, although not quite as comprehensively as a similar decision back in February. The February decision provided a rather convenient backdrop for RBA Governor Glenn Stevens’ appearance before the House Economics Committee later that month, where he was questioned about RBA media backgrounding and said that ‘people do not leak the outcome’.
Despite the wrong-footing of the commentariat, most notably Terry McCrann, this has still not laid to rest financial market perceptions that the RBA engages in media backgrounding of selected journalists. Chris Joye quotes Kieran Davies:
note that the surprise decision today potentially signals a change in communication strategy by the Reserve Bank. In the past, the Bank has been fond of guiding the market via indirect signalling via the media. That hasn’t been the case this month, but it is not clear whether the Bank has permanently closed this channel.
Governor Stevens’ denial before the House Economics Committee and the wrong-footing of the commentariat has yet to convince those in financial markets. Having played favourites with the media for so long, it will be hard for the Bank to finally put this perception to rest.
For the record, here is what a former RBA official had to say in the AFR Magazine in 2001:
The Bank uses newspapers to manage expectations. It’s a game the Bank manages very well. Senior people talk to a small handful of the economics writers from the major papers on a strictly non-attributable basis. I think it’s right to do this from the bank’s point of view, but not necessarily from a public policy view: accountability and a critical press are very important in this system.
posted on 06 October 2010 by skirchner in Economics, Financial Markets, Monetary Policy
(0) Comments | Permalink | Main
Peter Reith’s Triumph of Hope Over Experience
Robert Carling and I recently argued that a parliamentary budget office was the wrong model for an improved fiscal responsibility framework in Australia. Former federal minister Peter Reith has an op-ed in today’s Australian arguing for a PBO, but his review of overseas experience does not inspire confidence:
Hopefully, Australia’s PBO will not have the rocky start that the Canadians have had. Only recently, while I was in Canada, former deputy minister of finance Scott Clark wrote that the PBO had been an experiment in transparency and accessibility “that was doomed from the start”. Clark told me it was ironic that the Conservatives established the PBO in 2008, then undermined it from the start. The big problems have been a lack of independence, the failure to properly resource the PBO and the failure of government departments to provide necessary information. Clark says the PBO should be appointed and dismissed by parliament, not by the prime minister. It should be adequately resourced and have access to the same information as the auditor-general.
Carling and I have argued for an independent statutory Fiscal Commission, with Commissioners appointed in consultation with the states in much the same manner as the ACCC Commissioners. This was a theme I pursued at the recent Conference of Economist panel on Monetary and Fiscal Policy Interactions organised by Jan Libich from La Trobe University. The papers from the panel will appear in a future issue of Economic Papers.
posted on 05 October 2010 by skirchner in Economics, Fiscal Policy
(0) Comments | Permalink | Main
The CPI Pulse that Goes Dead Two Months in Three
HSBC chief economist for Australia and New Zealand, Paul Bloxham, makes the case for a monthly CPI. I made related arguments in this op-ed in The Canberra Times in March.
posted on 04 October 2010 by skirchner in Economics, Financial Markets, Monetary Policy
(0) Comments | Permalink | Main
We’re from the Nudge Unit…
...and we’re here to socially integrate you.
posted on 01 October 2010 by skirchner in Economics
(0) Comments | Permalink | Main
How to Name A Hedge Fund
...according to Nobel laureate Myron Scholes of Platinum Grove Asset Management:
One of my partners is Chinese, and he said we needed a name that had one metal in it and one wood.
posted on 30 September 2010 by skirchner in Economics, Financial Markets
(0) Comments | Permalink | Main
How to Start a Hedge Fund
Name your fund, then hire a law firm.
posted on 29 September 2010 by skirchner in Economics, Financial Markets
(0) Comments | Permalink | Main
You Know You’ve Got a Perception Problem…
When hedgies write satirical songs about RBA leaks:
Hong Kong specs buy it
London’s hedge funds will buy it
We could be a CTA
Run a model like the RBA
With the boys from the Darwin and the Swan and Murray
But there’s no danger
It’s a professional career
Though it could be arranged
With just a word in Mr. McCrann’s ear.
If you’re out of work or out of luck
We really couldn’t give a f*ck
posted on 28 September 2010 by skirchner in Economics, Financial Markets, Monetary Policy
(0) Comments | Permalink | Main
Charts You Won’t See from the RBA
Scandie central banks show how it should be done.
posted on 28 September 2010 by skirchner in Economics, Monetary Policy
(2) Comments | Permalink | Main
The Euro Zone’s Plunge Protection Team
The group that doesn’t exist.
posted on 25 September 2010 by skirchner in Economics, Financial Markets
(0) Comments | Permalink | Main
Red Book Hints at (Redacted) Changes to FDI Regime
The Treasury’s incoming government briefs partly support my criticisms of Australia’s regulatory regime for foreign direct investment, noting the current framework’s ‘reliance on policy unsupported by legislation’ and calls for ‘further changes’ to the regime. The ‘next steps’ section is redacted, however.
posted on 25 September 2010 by skirchner in Economics, Foreign Investment
(0) Comments | Permalink | Main
The RBA Did Not Prick a ‘Housing Bubble’
The Reserve Bank of Australia has released a research discussion paper that is aimed at ‘describing the Australian experience of a cycle in house prices and credit from 2002 to 2004 and discussing the role played by various policies during this episode.’ This period is widely misunderstood and the RBA seeks to set the record straight by noting that:
During the period, monetary policy continued to be set on the basis of medium-term prospects for inflation and output and the Bank was not targeting housing prices or credit growth.
Not that this will stop numerous observers, particularly from offshore, from continuing to maintain the contrary. The RBA’s approach during this episode is often used as a foil to support Fed-bashing of one kind or another. The fact is that the RBA’s approach was textbook inflation targeting, but one augmented by open mouth operations aimed at moderating growth in housing and credit markets, which the RBA then deemed to be experiencing speculative excess.
Of course, the RBA has been understandably reluctant to offer too much by way of objection to the suggestion that Australia’s economic outperformance in recent years has been due to the deft handling of monetary and other policy instruments. The authors of the paper no doubt see the Australian experience as a successful episode of managing an asset price cycle and at least one of the authors, Chris Kent, has been a long-standing advocate of a more activist approach to managing innovations in asset prices.
However, the paper’s review of the RBA’s past statements on housing and credit growth undermines the case for a more activist approach to asset prices. Any prospective home buyer or investor with a time horizon of more than a few years who actually heeded the RBA’s warnings would have almost certainly been left worse off in view of subsequent developments in the housing market. The RBA’s warnings about ‘overheating’ in the housing market during 2002-04 now look quaint in view of the chronic undersupply that has emerged in recent years. Indeed, it is frightening to contemplate what the current supply situation would look like in the absence of the boom in housing investment during this period. To the extent that the RBA successfully deterred housing investment during 2002-2004, it may have even contributed to the subsequent supply problems that have put upward pressure on rents, CPI inflation and house prices. The RBA can’t have it both ways. To complain about ‘overheating’ in 2002-2004 and then ‘serious supply-side constraints’ in 2009 suggests that the RBA’s jaw-boning efforts may well have been pro-cyclical.
Milton Friedman showed the disastrous consequences of a central bank becoming an ‘arbiter of security speculation and value’. The RBA’s review of its own record suggests that it is no better at calling future developments in the housing market than anyone else. Statements such as ‘the very prominent role of investors in the housing market also suggested a strong speculative element’ (p. 24 of the RDP) belong in the mouths of politicians and taxi drivers and not central bankers.
posted on 24 September 2010 by skirchner in Economics, House Prices, Monetary Policy
(0) Comments | Permalink | Main
Why the US CBO is the Wrong Model for Australia
Robert Carling and I have an op-ed in today’s Australian arguing that a parliamentary budget office modelled on the US Congressional Budget Office is the wrong model for reforming Australia’s fiscal policy framework.
I will be discussing these issues as part of a panel at this year’s Australian Conference of Economists on the topic of ‘Monetary-Fiscal Interactions: How to Improve Policy Outcomes.’ Other panellists include Don Brash (ex-RBNZ), Jacopo Cimadomo (ECB), Carl Wash (UCSC) and Jan Libich (La Trobe).
posted on 21 September 2010 by skirchner in Economics, Fiscal Policy
(0) Comments | Permalink | Main
Matt Ridley’s The Rational Optimist…
...is currently available for free on (US) Kindle. I disagree with at least one aspect of Ridley’s work, which I may blog about at a later date, but there is plenty in the book to like.
Ridley incorrectly identifies my CIS colleague Peter Saunders as an ‘Australian economist’ when he is in fact a British sociologist (although Saunders probably understands economics better than the average Australian economist).
posted on 17 September 2010 by skirchner in Economics
(0) Comments | Permalink | Main
Page 19 of 97 pages ‹ First < 17 18 19 20 21 > Last ›
|
