IMF's global financial stability report

• Systemic risks recede as result of policy actions, nascent economic recovery
• Expected asset writedowns decline
• Broad reforms required to forestall future crises 

Read a summary and the full report here.

 

Dear economist - my housemates won't clean

Dear Economist,

I am an economics student sharing a house with two other students and there is an issue with keeping the kitchen clean. I thought that a grim punishment strategy would maintain a system of alternate cleaners. But my threat to “punish” by refusing to clean indefinitely is not seen as credible by my housemates as I value a clean kitchen more than they do. What to do?

Tom, Gloucestershire

Tim Harford's answer is here.

Krugman on emission caps and the effect on surpluses

In the absence of government action, the private sector will increase emissions up to the point where there is no further marginal benefit. That is, emissions will rise to whatever level is implied by profit-maximization, paying no attention to the effects on the environment.

A cap-and-trade system puts a limit on overall emissions, so that emitters have to pay a price for emitting. This price will, as shown in the figure above, equal the marginal benefit of the last unit of emissions allowed.

Full article here.

The big C-word

   President Hu Jintao of China and President Hifikepunye

Pohamba of Namibia in Windhoek, Namibia, in 2007.

China spreads aid in Africa, with a catch for recipients - NY Times

China to take "bold" emissions step - Al Jazeera

the unexpected consequences of policies

Just in time for our class on the consequences of policies and how to measure them:

To outfox the chicken tax, Ford strips its vans

Confederation of Bristish Industry advises raising university fees to £5,000 a year to tackle funding crisis

Not just a discussion in the Netherlands.

The Confederation of British Industry said students should bear the brunt of a proposed funding overhaul to deal with a growing crisis in university finance. Under the plans, they face a triple blow of increased loan interest, fewer grants and higher tuition fees. One figure mooted is for annual tuition fees to rise to £5,000.

The unnecessary (?) meltdown - William D. Cohan

As we parse through the rubble of the one-year anniversary of the demise of what used to be known as Wall Street, is it possible to isolate the canary in the coalmine—the proverbial moment above all others when the magnitude of the growing carnage in the mortgage-securities market began to reveal itself, and could have been mitigated?
That moment was not the bankruptcy of Lehman Brothers, a year ago Monday, or the $85 billion government bailout of AIG or even the shotgun marriage between a near-bankrupt Bear Stearns and JPMorganChase. Rather, a relatively innocuous meeting held fifteen months earlier—in December 2006, in a conference room on the 30th floor of Goldman Sachs—would forever change Wall Street.

Read the full story here.

Facebook's profit

"Scratch Facebook from the list of web 2.0 startups that don't make money: The world's largest social network said today it has become profitable.

Co-founder and CEO Mark Zuckerberg said Facebook had crossed the 300 million registered-user milestone and that it had become "cash-flow positive" in the second quarter, ahead of schedule. Previously, Facebook had said it was targeting profitability "sometime in 2010."

This is significant for a number of reasons, but mostly because it has done so without a fully developed advertising business."

Read the full story here.

Bjorn Lomborg sets Global priorities

More info on the Copenhagen Consensus here

Focusing on recovery

CNN interviews U.S. Treasury Secretary Timothy Geithner.



Thanks to Timon D for the tip!

The recession is over (?)

Read more here.

want to participate in the Hub economic forum?

Hub Economic Forum - 15 September 13.00 - 16.00

Tuesday September 15th, The Hub Amsterdam & Imagine Economics will launch the Hub Economic Forum.

Has the financial crisis made you think about the systemic flaws in our current economic thinking? Or did you recognize the limits to growth long before? Do you want to ground social and sustainable values deeper in our economic system? And do you consider yourself an economic change agent? Then the Hub Economic Forum is the place to share your theories, pose your questions, voice your ideas!

While in The Hague 'Prinsjesdag' is being celebrated and the Minister of Finance presents the budget for the next year, The Hub and Imagine Economics invite you to dig into the deeper economic questions: What is an economy for? What are the objectives we are trying to reach and on which principles should our system be built? And looking at our world today, which current economic mental models are ready for revision and what do the alternatives look like?

During our first Forum we do not only use our collective intelligence to imagine our perfect economic system, but we also start co-creating that future by using the Hub network as a Community of Practice for our ideas, and a playground for economic experiments. As a practice of 'participatory economics' we'd like to share both the joy and the expenses of the afternoon. Therefore lunch is served, and you are warmly invited to contribute to the collection.
There is a maximum of 30 participants, so if you want to join The Hub Economic Forum on Prinsjesdag, please RSVP to Sarah (sarahdenie@mac.com).

The Hub Amsterdam is located at Westerstraat 187, Amsterdam

For more info about the Hub, click here.

Krugman - How did economics get it so wrong?

It’s hard to believe now, but not long ago economists were congratulating themselves over the success of their field. Those successes — or so they believed — were both theoretical and practical, leading to a golden era for the profession. On the theoretical side, they thought that they had resolved their internal disputes. Thus, in a 2008 paper titled “The State of Macro” (that is, macroeconomics, the study of big-picture issues like recessions), Olivier Blanchard of M.I.T., now the chief economist at the International Monetary Fund, declared that “the state of macro is good.” The battles of yesteryear, he said, were over, and there had been a “broad convergence of vision.” And in the real world, economists believed they had things under control: the “central problem of depression-prevention has been solved,” declared Robert Lucas of the University of Chicago in his 2003 presidential address to the American Economic Association. In 2004, Ben Bernanke, a former Princeton professor who is now the chairman of the Federal Reserve Board, celebrated the Great Moderation in economic performance over the previous two decades, which he attributed in part to improved economic policy making.

Last year, everything came apart.

Few economists saw our current crisis coming, but this predictive failure was the least of the field’s problems. More important was the profession’s blindness to the very possibility of catastrophic failures in a market economy.

Victors in Japan set to abandon market reform

TOKYO — Japan’s opposition party won an overwhelming victory at the polls on Sunday pledging to increase social welfare, better protect workers and do away with American-style, pro-market reforms to lead the country out of its long slump.

But while the presumptive prime minister, Yukio Hatoyama, rallied campaign crowds with his pledge to shift away from the “excessive” market reforms of recent years, many economists here say Japan may need more American-style deregulation and market-led growth, not less, to invigorate its stagnant economy.

the credit crunch - bad for your pocket, worse for your psyche

"People who are 18-25 when they experience a severe regional recession are influenced by that experience for the rest of their lives. Others are influenced much less; those under 17 or over 42 when the recession strikes do not seem to be changed by the experience."

"Recession-influenced respondents expressed a stronger preference for government redistribution, and they also tended to believe that success in life was more a matter of luck than hard work."

Read the full article by Tim Harford here.

Greg Mankiw on why aspiring economists need maths

Dear Dr. Mankiw,

Hi, I am an undergraduate student studying economics in Michigan. I have recently become a big fan of your blog. I found your "Advice for Students" very helpful to professional economist-wannabes like me, and especially, those considering graduate study in economics. Your suggestion on math preparation for undergrads landed me on one simple question: "Do economists really use all that math?"

I was wondering if you could tell me how closely math and the works of professional economists at international organizations, such as World Bank and IMF, are related?

I look forward to your answer. Thank you in advance!

Best Regards,
[name withheld]

Read Mankiw's answer here.

Update: Krugman joins the argumentation