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The publisher of my textbook Principles of Economics will host a webinar on October 21 during which I will talk about the new edition, which will be available in January. If you are interested, click here.

On mainstream economists hiding information regarding the BEA's development of distributional national accounts, reader John Hofer wrote in January of 2024: In an unmentioned recent development, BEA is actually providing data on income distribution, something which should be of interest to macro students. " Gross Domestic Product, or GDP, is the constant go-to economic indicator […]

I have not posted here in awhile, so I thought it would be good to share a few recent charts that tell interesting stories.Central Bank Balance SheetsFirst up, are two charts that show the relationship between the size of the central bank balance sheets and inflation rates. The first one shows for the 2010-2019 period the average size of central bank balance sheets as a percent of NGDP plotted against the average core inflation rate. Since larger balance sheets are typically seen as adding more stimulus to the economy, one might expect to see a positive relationship between their size and the inflation rate over this long of an horizon. Instead, we see a negative relationship:One objection to the above chart is it may be misleading since it is the rate of change in central bank liabilities, not the level, that should drive the inflation rate. To that end, the next chart shows the change in the size of the central bank balance sheets over the same period. The same relationship holds: Another objection is that these charts simply show central banks responding to the low inflation environments: the lower the inflation rate the bigger the central bank balance sheets. I think that is fair, but again the horizon is an entire decade. Consequently, if the standard theories for QE such as the portfolio balance channel and the signalling channels hold, then we should expect to eventually see something different than a negative relationship. And 10 years seems long enough for 'eventually' to come to fruition. My explanation for these charts, forthcoming in a working paper, is that something else is driving both the low inflation and the expanding central bank balance sheets. NGDP GapOur 2020 Q3 report for the NGDP Gap came out recently. Here is the key takeaway: [the] NGDP gap of −4.77 percent indicates that the dollar size of the economy is still significantly smaller than prepandemic expectations. Specifically, the neutral level of NGDP was $22.22 trillion in the third quarter of 2020, whereas actual NGDP came in at $21.16 trillion. That is a shortfall of $1.06 trillion, which is a vast improvement over the previous quarter's shortfall of $2.57 trillion, but still a sizable hole to fill in the economy. This trillion-dollar hole means that both aggregate spending and income are still falling short of their prepandemic trend levels.Below are the relevant charts. Note, you can now get the neutral NGDP and NGDP gap measures in both Haver and Macrobond data! Real Interest Rates DeterminationI was recently embroiled in a debate over what determines the path of real interest rates.  The debate was whether the standard desired saving - desired investment (S-I) theory of interest rates or the liquidity preference theory best explains the path of real interest rates. The former looks to the fundamentals of time preferences, population growth, and expected economic growth as the explanation for real interest rates. The latter view looks to money markets and the expected interest rate path of the central bank as the explanation. My take has been the fundamentals view is more important over the longrun while the money view is more important in the shortrun. Here are some charts I made that look at the longrun and show that fundamentals are, indeed, tied to real interest rate formation in advanced economies. Specifically, population growth rates and fertility rates are associated with the 10-year real yield.  I created these charts  after chatting with Matt Yglesias about his book "One Billion Americans" for the podcast. He verbally sketched out these scatterplots and I was curious to see if they held up in the data. They did! FOMC HumorFinally, here is my attempt at the two choice meme as it relates to Treasury Secretary Mnuchin's decision to pull back the Treasury backstop funds for the Fed's 13(3) facilities. I joked that maybe the Secretary was attempting to force Congress to be more active on relief and rely less on the Fed. Looks like I was not too far off. Anyways, the tension between asking the Fed to do more with 13(3) facilities and asking Congress to do more is real. 

Readers of this blog are most likely vaccinated to some extent against COVID-19 -- a big majority of Americans are. Of course, the level of vaccination varies greatly. The CDC says that about 78% of the US population has had one dose of vaccine and 67% has had the "complete initial protocol." Only about 38% of Americans have received the booster even though almost everyone 5 or older can get one dose. FYI: The CDC officially recommends that everyone eligible should get boosted. Below I reference some research suggesting the booster might save your life. A second booster shot (also recommended by the CDC for those eligible) is available for people aged 50 and above, plus the immunocompromised -- basically, the people facing the greatest risks during the pandemic.Unfortunately, the virus keeps mutating and so neither the vaccines nor previous infection have been especially effective at preventing transmission of the latest version of the disease. They are doing a much better job at preventing hospitalization and death, as the rates for those outcomes have been lower in the US in 2022 than they were in 2020. The Washington Post reported in late April that the most recent variants have primarily been  killing peopled aged 75 and up: "nearly two-thirds of the people who died during the omicron surge were 75 and older." However, there are differences among the victims:the bulk of vaccinated deaths are among people who did not get a booster shot, according to state data provided to The Post. In two of the states, California and Mississippi, three-quarters of the vaccinated senior citizens who died in January and February did not have booster doses.A new study also finds that it is dangerous to become infected with the virus multiple times: The constellation of findings show that reinfection adds non-trivial risks of all-cause mortality, hospitalization, and adverse health outcomes in the acute and post-acute phase of the reinfection. Reducing overall burden of death and disease due to SARS-CoV-2 will require strategies for reinfection prevention.This is likely already be baked into that data, but experts say about 1 to 5% of COVID patients develop what is commonly called "long COVID"The percentage of people with severely debilitating symptoms is probably between 1 and 5 percent — amounting to millions of people in this country, according to Harlan Krumholz, a Yale University professor of medicine.The April information referenced above is now a bit out of date as it is primarily discussing the Omicron variant that was then dominant -- version BA.2. The new BA.5 variant is seemingly much more contagious. Indeed, from Alpha to Delta and then through the several Omicron variants, virtually ever wave of the virus has been propelled by an ever more contagious version of the disease. There is some good news: While it was recently calculated and reported that the R-naught (or R0) of BA.5 is over 18, making it the most contagious viral infection known to man (worse than measles), that is apparently incorrect and fact-checkers have now corrected the reporting. It is, however, too soon to calculate the R0 precisely. By the time we can calculate it, the new BA.2.75 circulating in India might be dominant. The original reproductive rate of COVID was likely 2 to 3 with Delta probably around 5. The initial omicron variant number was apparently 8. Additionally, the current circulating versions of the disease remain deadlier than the seasonal flu -- at least for the unvaccinated. In all, the information fairly clearly reveals that the pandemic is not over -- no matter how many unhelpful strangers tell you that it is -- and people should continue to take precautions.Get boosted. Wear an effective mask (N95 or KN95). Maybe even outdoors (in crowds). Practice social distancing. The government should be pushing harder to reinstate masks on planes and other forms of public transportation.  Indeed, because of standing room only crowds and poor ventilation, buses might be the most dangerous. 
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To fight climate change, democratic countries must find a way to work with autocratic ones.

Victim swindled out of almost 500K Canadian dollars

One thing is very clear to me. Trump is not being well served by lawyers who either don't understand the FOIA statute and its associated case law or are choosing to ignore it.

Bing prompt: "Draw a businessman leaving China".Hot on the heels of the previous post about how Chinese are showing at the United States' southern border seeking asylum from increasingly dire economic conditions in the PRC, we get more news of this sort. Just as people are leaving China, so is capital: For the first time its records, the PRC has seen a net outflow of Foreign Direct Investment (FDI). On balance, more FDI is leaving than entering China, once the world's most notable destination for investment. From the Nikkei Asia Review: Outflows of foreign direct investment in China have exceeded inflows
for the first time as tensions with the U.S. over semiconductor
technology and concerns about increased anti-spying activity heighten
risks. The shift was reflected in balance-of-payments data for the
July-September quarter released Friday by the State Administration of
Foreign Exchange.FDI came to minus $11.8 billion, with more
withdrawals and downsizing than new investments for factory construction
and other purposes. This marked the first negative figure in data going
back to 1998.To be sure, there are overseas precursors for this shift. The US is keen on banning cutting-edge knowledge on semiconductors and artificial intelligence from leaking to China:Escalating tensions with the U.S. are one reason for the decline in
foreign investment. In a survey taken last fall by the American Chamber
of Commerce in the People's Republic of China, 66% of member respondents
cited rising bilateral tensions as a business challenge in China. In August, the U.S. announced tighter restrictions on chip
and artificial intelligence investment in China. Washington is
coordinating with Beijing ahead of a summit meeting between Presidents
Joe Biden and Xi Jinping in November, but the U.S. remains committed to
technology restrictions in the name of economic security.Looking
at foreign investment in the semiconductor field by destination, China's
share has already shrunk from 48% in 2018 to 1% in 2022, according to
U.S. research firm Rhodium Group. In contrast, the U.S. share rose from zero to 37%. The combined share of India, Singapore and Malaysia grew from 10% to 38%.However, American chip and AI concerns obviously do not make up all potential sources of FDI to China. It is here where a decidedly unfriendly foreign investment policy climate factors in. You name it: from corporate espionage to various forms of harassment of overseas businesses under dubious pretenses... today's PRC leadership does not think much of how others perceive these actions meant to promote domestic industry at the expense of foreign concerns. Europeans, for instance, cite only cosmetic efforts to improve prospects for FDI:Beijing has been seeking to reverse capital outflows in the face of mounting economic challenges. But such efforts appear to have failed to assure investors. The China International Import Expo (CIIE), an annual event
launched by President Xi Jinping in 2018 to portray China as an open
market and improve its trade ties, kicked off on Sunday. But the European Union Chamber of Commerce in China criticized the event last week as a "showcase."



"European businesses are becoming disillusioned as symbolic
gestures take the place of tangible results needed to restore business
confidence," the chamber said in a Friday statement. "The CIIE was originally intended as a showcase of China's opening
up and reform agenda, but it has proven to be largely smoke and mirrors
so far," Carlo D'Andrea, vice president of the chamber, said in the
statement. Having done nearly everything possible to discourage FDI, is it any wonder it's leaving China?

Just a little note from the frontlines of the real economy. We're oft told that the world is running out of metals and minerals. That's why we need to recycle everything at whatever the cost. Simply because if we don't then we'll run out. This is not true. A circular economy is a very fine idea if the resource consumption - that is, the cost - is lower doing it that way. But it's not necessary for the reason that we're going to run out if we don't recycle everything.Australian miner Lynas posted a slump in third-quarter sales revenue on Wednesday, missing analyst expectations on the back of a plunge in prices for rare earths, ……"There's a general consensus that the current price is below cost for many Chinese producers." …. The firm's quarterly sales revenue fell to A$101.2 million ($65.64 million) in the three months to March 31, down from A$242.8 million a year earlier.Rare earths prices are, as above, below production prices. That's not quite and wholly true, in mining we make the difference between mere operating costs and all in costs. It's entirely possible to be below those all in costs - covering those capital costs - and still rationally producing if prices are above mere operating costs. But rare earth prices are as above. Further, the lithium price is below the operating costs of some to many mines, including recently opened ones. The cobalt price is below that all in cost for many producers. Rare earths, lithium, cobalt, the three we need from that critical minerals list for this electric revolution. There's so much out there that they're not worth the cost of digging them out of the ground. Which does rather kill off that idea that they're in such short supply that we must, at whatever cost, recycle them all.As we say, if it's cheap to recycle them then do so by all means. But prices really are information - we've not got a shortage of them.

At least for today. From CNN: Former President Donald Trump on Monday suggested he was open to making cuts to Social Security and Medicare after opposing touching the entitlement programs and attacking his GOP presidential primary rivals over the issue. Trump was asked in an interview with CNBC whether he had changed his outlook on how to handle entitlement […]

Plus: Voters in Massachusetts reject state-mandated upzonings, Florida localities rebel against a surprisingly effective YIMBY reform, and lawsuits target missing middle housing in Virginia.

 I have been reluctant to quit twitter despite all of the Musk-ness.  I have built up a pretty cool network of followers and followees over the past 14 years, and I didn't want to lose that.  Path dependence/sunk costs are a thing--as are network effects.  But Musk has made twitter a Nazi house party--this weekend's attacks on the Anti-Defamation League, cheered on by real life Nazis.  That Musk embraced anti-semitic conspiracy bullshit is not surprising given that he has already proven to be transphobic (at the expense of his kid), racist, and more.  All those hatreds tend to travel together, but Musk didn't have to platform and amplify them.  That was his choice, and since he has made Twitter not just a social media company, but his play thing, it was time for me to pull the ripcord.  Yes, I know that twitter has long been a hostile place to many groups, but I found my pieces of community there.  Now?  Oy.So, what did I get out of twitter?  How about the classic listicle to ponder what we are losing?Friends.  Yep, real life friends from silly virtual interactions.  This is what has been most valuable and what I hope I can carry over to the alternatives.  Twitter fight club, for instance, did an amazing job of not only connecting me with tons of sharp national security folks--scholars, analysts, practitioners in DC and elsewhere--but helping to foster friendships, even with those that denied me a victory.  Icebreaking.  I was able to use the tenuous, virtual connections to meet people I would never have met.  While I started out mostly focusing on those most directly related to my research and other interests, I began to use twitter to meet the next generations of scholars and policy-makers and especially those from different backgrounds.  My feed got increasingly diverse over the years.Expertise.  All those connections gave me quick ways to catch up stuff around the world.  I am not only a deeply curious person, but I also need to know stuff that is going on for my classes and for engagement (more on that below).Research.  For me the civ-mil community has been so great on twitter--learning of ongoing projects, getting perspectives on the stuff, building panels for conferences, etc.   Engagement (that didn't take long).  I developed connections with and friendships with journalists in Canada, the US, and even occasionally elsewhere.  This made it easier to have productive conversations for stories they were working on, and I would occasionally get some handy info as well.ENGAGEMENT.  Not just journalists but folks in the policy world and in the public and in the political world.  So strange to have members of parliament and admirals and other folks follow my stuff.  I know that the public affairs folks at the Canadian Department of National Defence were following what I have been spewing on twitter.  Twitter has helped me bridge all kinds of gaps.CDSN.  The Canadian Defence and Security Network probably wouldn't exist without twitter.  It helped foster connections that led to partnerships and a credible "knowledge dissemination strategy" for sharing our work with the public and the policy world. We used twitter to try to get audiences for our events, to get folks to apply for our various opportunities, and so on.  Twitter's collapse is going to make a dent in our efforts, but we are lucky this is happening so deep into our run than if it had been year 1.PromotionOther: I have greatly enjoyed connecting folks to exciting work I have found.  I got more deliberate over time about promoting the work of junior folks.Self: twitter was always handy for promoting my own stuff.  Indeed, the fact that I started twitter about two months after I started blogging is no coincidence. I have used twitter to promote my research projects as they have bumped along, the products (hey, you want to find a good cheap book on NATO....?), the events I have been organizing, and all that.  One of the strange realizations over the past few years is that I have some influence in Canada via my ramblings online--twitter, blogging, the podcasts.  I don't get additional pay to be an influencer, but I get more media attention and govt attention because I am loud on social media.  Fun.  So much fun stuff. I have met virtually some folks who featured bigly in pop culture--Henry Winkler and Morgan Fairchild to name the most obvious cases.  I have had conversations with my cooking muse Nigella Lawson.  Mark Hamill even liked one of my tweets.  I have found cool podcasts via twitter.  I have enjoyed the snark and the memes about all things--political and otherwiseTwitter became a more hostile place over time, even before Musk, but there was always room for heaps of humor and silliness.Fixes.  I have complained about some companies which led to their responding to me and getting my problem fixed. Other times, folks have provided solicited and unsolicted advice that has been most helpful.   What am I going to do next?  Bluesky.  Same address--@smsaideman.bsky.social.  I have tried Mastodon and Post, but neither really took.  I am avoiding threads for now.  Bluesky seems to have much potential and feels kind of 2011 twitter.  Much snark, easy to use, not too much noise.  I hope to build networks there from those that I had developed over the years at twitter.  I will post announcements over at twitter since I had something like 19k followers over there.  But I am not going to visit that often, moving my app to off the front page of my phone.  I will check out mentions and such because ... FOMO and narcissism.  I will also blog more--that instead of 12 threaded tweets, I just will jump over here and post something.  Like the olden days of June 2009. What will you miss about twitter?

One argument for maintaining tight monetary policy is inflationary pressures — but the question is whether it's from a positive output gap or cost-push shocks (or expectations). One big question is what is the size of the output gap. Figure 1: GDP (bold black), SPF median August forecast (tan), GDO (blue), GDP+ (teal), GDPNow of […]

In my first published peer-reviewed article, Peter Navarro and I argued that both economic special interests and candidate ideology separately could explain Congressional voting farm subsidies (we also applied the framework to domestic content legislation for automobiles), following Kalt and Zupan (AER 1984). In the ongoing discussions of how many members of the Republican caucus […]

It is actually pretty basic: if you pass a law that addresses a non-problem but harms a vulnerable minority, then you have no grounds to complain when other criticize you.  So, passing Bill 21 in Quebec, an Islamophobic and anti-semitic law, that didn't address an issue where there was a real problem makes those parties supporting it Islamophobic.  What was true when the proposed law was being discussed is even more true today as we see the seeds of hate producing the predicted fruit--violence and harassment of the vulnerable minorities.  When political parties and ultimately the government target groups, they are sending signals to the public to, yes, treat such groups worse.  Quebec's parties, by supporting this law, incited violence against its Muslim and Jewish communities (and probably Sikhs as well).  Intolerant laws don't breed tolerance.This all, of course, is a product of ethnic outbidding where the various parties tried to compete with each other to rid the public square of religious symbols ... of minority groups.  These parties have agency as do those who vote for them.  Bill 21 basically said that religious minorities could not wear signifiers of their religion while working in provincial jobs--not just law enforcement officers and judges, but doctors, nurses, bus drivers, etc.  The public sector in Quebec is quite large, in part because most health care is delivered by the province.  So, this law affected a great number of people.  Was there a study done to show how these folks wearing religious stuff was actually harmful?  Was the law designed to cover Catholics?  Not really.  Did it single out Muslims, Jews, and Sikhs?  Of course.  "We saw severe social stigmatization of Muslim women, marginalization of
Muslim women and very disturbing declines in their sense of well-being,
their ability to fulfil their aspirations, sense of safety, but also
hope for the future."  Some folks claiming to be feminists said that the aim was to free Muslim women from having to wear hijabs.... how do they feel now that women have faced abuse and have their security threatened?  To be fair, men supported this legislation more than women, because, hey, why not another tool to dominate women, but many women supported this as well.To be clear, it is not just that the folks who worked in the public sector were affected by this, which is bad enough.  It is also that the province sent a signal to the public that it was ok to discriminate against these groups, and the public heard this message.  So, all Muslims, Sikhs, and Jews are worse off now than a few years ago, whether they worked in the public sector or not. From the Association for Canadian Studies studyAnd, now, of course, Quebeckers are outraged.  Their parties and their politicians hate being called out for their racism, their xenophobia, their Islamophobia, and their anti-semitism.  The ire right now is aimed at Amira Elghawaby who was named Canada's first special representative on combating Islamophobia.  Why?  Because in 2019, she co-wrote a piece criticizing this awful law.  How dare a person appointed to combat hate against Muslims previously take a stand against a hateful law?While the law is the most awful part about this, the grandstanding by Quebec politicians who claims to be victims is also pretty terrible.  It again goes to something very basic and now ritualized: those who engage in hateful behavior (Islamophobia, racism, anti-semitism, misogyny) find it more problematic to be called hateful than to be hateful.  It is worse to be called a racist than to do racism, for example.  While this law was passed by a populist xenophobic party, other parties were part of the outbidding process, and now they are piling on Elghawaby to prove their nationalist credentials.I left Quebec for a variety of reasons, but the awful discourse of the place was one of them.  That a people who suffered much discrimination and harm at the ends of an often insensitive majority have turned around and used their domination of provincial power centres to treat their minorities this badly again and again because it plays well in elections.  That again speaks not just to parties of Quebec, but to Quebec media who blow these stories up, and to the public that both these parties and the media pander.  To be clear, these dynamics exist elsewhere--Bill 21 was attractive to significant hunks of the Canadian public outside of Quebec--and the provincial leadership of many provinces suck mightily.  But the nationalist outbidding aimed at proving one's worth by targeting minorities is far more severe in Quebec.  And no one should call them out for it, of course.