Friday, April 15, 2011

Acemoglu, Rajan, Roberts, Sumner (amv)

Some non-technical introductions to important topics:
  1.  A nice piece by Scott Sumner making The Case for NGDP Targeting (Adam Smith Institute, UK). Very neat introduction to the topic, esp. part 3 on level targeting and forecast targeting. I would only add that if the target rate of NGDP-growth is sufficiently low (i.e., only accommodating the increase of factor supplies), then markets can infer information about productivity growth from stochastic price-level processes. Sumner's article is also discussed at Bloomberg.
  2. A great informal summary of the Great Recession and its roots by Russ Roberts. Roberts is a razor-sharp economic thinker as well as a terrific writer and clever communicator. BTW: this piece gives you a clear understanding of the superiority of rational-choice reasoning. It is a neat explanation of the crisis without resuming to empty 'people-just-went-crazy' arguments dominating behavioural approaches.
  3. Here the link to Daron Acemoglu's appearance on Econtalk. Might be of particular interest for ls. Here the summary:
    Daron Acemoglu of MIT talks with EconTalk host Russ Roberts about the role income inequality may have played in creating the financial crisis. Raghuram Rajan in his book, Fault Lines, argues that growing income inequality in the last part of the 20th century created a political demand for redistribution and various policy changes. This in turn created the push for higher home ownership rates and led to the distortions of the housing market that in turn led to excessive risk-taking in the financial market. Acemoglu suggests a simpler story where the financial sector through its political influence distorted the rules of the game, benefiting executives in the industry, which in turn led to outsized rewards and ultimate instability in the financial industry. The conversation discusses ways of distinguishing between these two arguments and what might be done to change the incentives of politicians.