Copyright 2008 The New York Sun Fri, 14 Mar 2008 11:04:47 -0400 http://blogs.law.harvard.edu/tech/rss http://www.nysun.com/blogs/economics-on-the-web webmaster@nysun.com en-us Colin Gustafson http://www.nysun.com/blogs/economics-on-the-web/2008/03/beauty-and-the-borrower.html http://www.nysun.com/blogs/economics-on-the-web/2008/03/beauty-and-the-borrower.html Fri, 14 Mar 2008 11:04:47 EST Beautiful people are more likely to get loans and to pay less interest than average-looking borrowers with near-identical credit credentials, a New York University associate professor of finance, Enrichetta Ravina, finds in a paper cited this week on the Stumbling and Mumbling blog. Examining the photos and financial profiles of more than 7,000 online loan applicants, Ms. Ravina found good-looking applicants were more likely to get a loan by 1.41 percentage points, and paid 81 basis points Colin Gustafson http://www.nysun.com/blogs/economics-on-the-web/2008/03/why-pete-rose-didnt-fare-better-in.html http://www.nysun.com/blogs/economics-on-the-web/2008/03/why-pete-rose-didnt-fare-better-in.html Mon, 10 Mar 2008 10:17:22 EST Insider knowledge doesn't always bring a higher payoff — especially when inside experts try to cheat in a market full of other, well-informed participants. That's the conclusion of a paper written by a Rutgers University economist, Douglas Coate, and posted yesterday on the Marginal Utility blog (http://atbozzo.blogspot.com). Examining the baseball bets of a disgraced former Cincinnati Reds manager, Pete Rose, Mr. Coate found that Mr. Rose lost $47,200 on bad wagers on the performance of dozens Colin Gustafson http://www.nysun.com/blogs/economics-on-the-web/2008/03/fedspeak-as-balm-for-investors.html http://www.nysun.com/blogs/economics-on-the-web/2008/03/fedspeak-as-balm-for-investors.html Mon, 10 Mar 2008 10:14:07 EST When the chairman of the Federal Reserve, Ben Bernanke, speaks tomorrow about mortgage foreclosures, pay attention to his words. Fedspeak is a language of its own, as lawmakers saw when Mr. Bernanke presented a stark picture of the American economy to Congress last week. His testimony was padded with "understatements, spin, and happy talk," the blogger Barry Ritholtz writes (http://bigpicture.typepad.com). But while Mr. Bernanke's words may seem to understate the economy's dire condition, Mr. Colin Gustafson http://www.nysun.com/blogs/economics-on-the-web/2008/03/facts-about-nafta-and-jobs.html http://www.nysun.com/blogs/economics-on-the-web/2008/03/facts-about-nafta-and-jobs.html Wed, 5 Mar 2008 18:03:00 EST The leading Democratic presidential candidates have been arguing that the North American Free Trade Agreement has devastated America's workforce by allowing Canada and Mexico to siphon off manufacturing jobs. But a University of Michigan professor, Mark Perry (mjperry.blogspot.com/), writes that this protectionist argument is just empty rhetoric — and he's got facts and figures to prove it. Ignore "all the political rhetoric about NAFTA, free trade, and globalization causing manufacturing job Colin Gustafson http://www.nysun.com/blogs/economics-on-the-web/2008/02/ambacs-bailout-shows-little-faith.html http://www.nysun.com/blogs/economics-on-the-web/2008/02/ambacs-bailout-shows-little-faith.html Tue, 26 Feb 2008 09:34:00 EST A troubled bond insurer, Ambac Financial Group Inc., may be inching closer to a deal that could salvage its top-notch credit rating, but a skeptical blogger, Yves Smith (Naked Capitalism), writes that the proposed rescue plan is a token gesture that does little to help its chances for survival. The blogger's skepticism comes two days after Ambac reportedly started talks with a group of banks on plans to raise about $3 billion of capital to forestall a rating downgrade. Such a rating cut would Colin Gustafson http://www.nysun.com/blogs/economics-on-the-web/2008/02/trimming-expectations-to-spur-a.html http://www.nysun.com/blogs/economics-on-the-web/2008/02/trimming-expectations-to-spur-a.html Tue, 19 Feb 2008 09:48:00 EST The chairman of the Federal Reserve, Ben Bernanke, is all but certain to slash interest rates again, this time to as low as 2%, but only after market participants have tempered their expectations, an economist at the University of Oregon, Tim Duy, writes (Economist's View Defying some investors' predictions last week, Mr. Bernanke stopped short of lowering the Fed Funds rate yet again, while leaving open the possibility of further rate cuts in the future. The move signals that Mr. Bernanke, Colin Gustafson http://www.nysun.com/blogs/economics-on-the-web/2008/02/the-rising-demand-for-dollars.html http://www.nysun.com/blogs/economics-on-the-web/2008/02/the-rising-demand-for-dollars.html Fri, 15 Feb 2008 10:08:00 EST Robust demand for dollars among foreign central banks could exacerbate the nation's trade deficit and stymie economic growth, economist blogger Yves Smith warns. His admonition comes a day after fellow blogger Brad Setser hailed recent evidence of a growth in the dollar holdings of foreign central banks, a development that could allay fears about shortfalls in the foreign purchase of American securities (RGE Monitor). Both bloggers note that large overseas dollar reserves help prevent the Colin Gustafson http://www.nysun.com/blogs/economics-on-the-web/2008/02/linking-poverty-with-death.html http://www.nysun.com/blogs/economics-on-the-web/2008/02/linking-poverty-with-death.html Wed, 13 Feb 2008 10:11:00 EST It's widely known that severe poverty and high death rates go hand in hand. What is an open question, however, is the "causation" between the two, a University of Oregon economist, Mark Thoma (Economist's View), observes: Do ill people die in poverty because they're too unhealthy to work? Or does poverty lead to substandard living conditions, lack of medical care, and early death? Mr. Thoma looks at an article from a professor of international econonomics at the Graduate Institute in Geneva, Colin Gustafson http://www.nysun.com/blogs/economics-on-the-web/2008/02/sovereign-wealth-funds-and.html http://www.nysun.com/blogs/economics-on-the-web/2008/02/sovereign-wealth-funds-and.html Tue, 12 Feb 2008 10:17:00 EST Two economist bloggers are voicing skepticism this week about the International Monetary Fund's efforts to establish a code of conduct among sovereign wealth funds. For months, IMF officials have been pressuring these funds — many of which own large stakes in American banks that have been hobbled by the mortgage crisis — to be more "transparent" in their activities. The goal, officials say, is to ensure that the funds don't use their financial leverage to pursue their political objectives. Colin Gustafson http://www.nysun.com/blogs/economics-on-the-web/2008/02/looking-beyond-neoclassical.html http://www.nysun.com/blogs/economics-on-the-web/2008/02/looking-beyond-neoclassical.html Mon, 11 Feb 2008 10:24:00 EST When American economists debate economic development policy in Third World nations, they traditionally follow two prevailing schools of thought: the free market argument or the interventionist belief. But as blogger Yves Smith notes (Naked Capitalism), the prevailing two-school debate has obscured the fact that other, nontraditional "frameworks" of economic development theory are also valuable. "It's important to recognize biases" in traditional theory; "otherwise you have no hope of Colin Gustafson http://www.nysun.com/blogs/economics-on-the-web/2008/02/american-exceptionalism-in.html http://www.nysun.com/blogs/economics-on-the-web/2008/02/american-exceptionalism-in.html Fri, 8 Feb 2008 10:28:00 EST As the possibility of a recession looms, foreign economists are criticizing American policymakers for adhering to the belief that they must avoid a recession at all costs — be it through tax rebates, as proposed in the $145 billion economic stimulus package, or cuts to the Federal Reserve's key interest rate. Some critics are even urging America to heed the advice of policymakers from developing nations who have sidestepped similar financial woes through fiscal restraint rather than stimulus Colin Gustafson http://www.nysun.com/blogs/economics-on-the-web/2008/02/equity-valuation-in-a-volatile.html http://www.nysun.com/blogs/economics-on-the-web/2008/02/equity-valuation-in-a-volatile.html Wed, 6 Feb 2008 10:34:00 EST According to the so-called Fed model of equity valuation, investors measure whether equities are undervalued or overvalued by comparing the yield on the S&P 500 Index to the yield on a 10-year Treasury bill. Equity researcher Barry Ritholtz (The Big Picture) notes one potential problem with this model: The equation used to compare the yields includes the earnings estimates for S&P 500 companies, which can be wrong. The result is that the Fed model often promotes a bullish stance on Colin Gustafson http://www.nysun.com/blogs/economics-on-the-web/2008/02/nonmonetary-currencies-and.html http://www.nysun.com/blogs/economics-on-the-web/2008/02/nonmonetary-currencies-and.html Tue, 5 Feb 2008 10:39:00 EST A behavioral economist at the Massachusetts Institute of Technology (Predictably Irrational) has a unique theory about how rogue trader Jerome Kerviel may have rationalized making billions of dollars in allegedly fraudulent stock transactions while his employer, Société Générale, incurred staggering losses: He wasn't dealing in hard currency. "It's much easier for us to be dishonest when we are one step removed from cash," Professor Daniel Ariely writes. "After all, he was dealing with stock Travis Pantin http://www.nysun.com/blogs/economics-on-the-web/2008/01/stabilization-and-sovereign-wealth.html http://www.nysun.com/blogs/economics-on-the-web/2008/01/stabilization-and-sovereign-wealth.html Mon, 28 Jan 2008 20:22:36 EST Spokesmen for sovereign wealth funds have been arguing that the funds are a healthy and stabilizing force in the global economy. Their claim: The funds have a long-term perspective, aren't leveraged, and are willing to buy when others only want to sell. However, a fellow at the Council on Foreign Relations, Brad Setser, is not entirely convinced. "It is hard to actually know if sovereign funds act consistently to stabilize markets since the biggest existing funds are also the least Travis Pantin http://www.nysun.com/blogs/economics-on-the-web/2008/01/fed-rate-cuts-propping-up-asset.html http://www.nysun.com/blogs/economics-on-the-web/2008/01/fed-rate-cuts-propping-up-asset.html Mon, 28 Jan 2008 11:24:33 EST The Federal Reserve interest rate cuts have as much to do with trying to prop up asset values as with stimulating economic growth, a Washington economist, Thomas Palley, writes. "Let's not fool ourselves about Wall Street and free markets. The Fed is using its government granted power of fixing interest rates to bail out Wall Street. That is welfare, Federal Reserve-style," he writes. A less-recognized effect of lower interest rates is that they increase the price of fixed income assets. When Travis Pantin http://www.nysun.com/blogs/economics-on-the-web/2008/01/only-a-bare-minimum-at-minimum.html http://www.nysun.com/blogs/economics-on-the-web/2008/01/only-a-bare-minimum-at-minimum.html Wed, 23 Jan 2008 20:38:30 EST What portion of the American workforce earns the federal minimum wage or less? A George Mason University economics professor, Russell Roberts, asks his students this question every year. They almost always give the same answer: about 20%. However, according to the Bureau of Labor Statistics, the correct answer is a mere 2.2%. "Pretty amazing, isn't it. Over 97% of hourly workers make more than the law requires," Mr. Roberts writes. "Because this is only for workers who are paid hourly, the Travis Pantin http://www.nysun.com/blogs/economics-on-the-web/2008/01/less-than-stimulated-by-idea-of.html http://www.nysun.com/blogs/economics-on-the-web/2008/01/less-than-stimulated-by-idea-of.html Wed, 23 Jan 2008 10:49:18 EST On Cafe Hayek, a George Mason University professor of economics, Russell Roberts, explains in layman's terms why he thinks that an economic stimulus package will not cause the wider economy to grow. "Let us begin with the most basic question. If you received a windfall, that is, an unexpected increase in your income, what would you do with it? The right answer is that it depends," he writes. One of the determining factors is where the money comes from. "It would seem to be irrelevant, but Travis Pantin http://www.nysun.com/blogs/economics-on-the-web/2008/01/investment-tax-credit-makes-sense.html http://www.nysun.com/blogs/economics-on-the-web/2008/01/investment-tax-credit-makes-sense.html Mon, 21 Jan 2008 20:05:24 EST After posting a litany of objections to President Bush's fiscal stimulus plan, a professor of economics at George Mason University and blogger, Alex Tabarrok, concedes that some elements of the proposal make economic sense. "One part of the stimulus package will probably be an investment tax credit which does have some good properties," he writes. "Unlike traditional fiscal policy an investment tax credit cannot be fully crowded out." An investment tax credit works through changes in Travis Pantin http://www.nysun.com/blogs/economics-on-the-web/2008/01/the-poetry-of-finance.html http://www.nysun.com/blogs/economics-on-the-web/2008/01/the-poetry-of-finance.html Mon, 21 Jan 2008 20:00:44 EST An anonymous finance blogger who goes by the name "Macro Man" recently penned this finance-themed sonnet: Shall I compare thee to a levered trade? Thou art more lovely and more temperate. Rough winds do shake the market call you made; Perhaps thou erred in selling options of short date. Sometimes too hot the market darling shines, And oft the ertswhile star is dimmed; And every trade from time to time declines, Alas! The over-levered ones are trimmed; Just as a short-term extreme is made, And Travis Pantin http://www.nysun.com/blogs/economics-on-the-web/2008/01/bearish-on-china-investment.html http://www.nysun.com/blogs/economics-on-the-web/2008/01/bearish-on-china-investment.html Thu, 17 Jan 2008 21:49:59 EST "Ever since China became more open to commerce with the rest of the world, I have not understood the enthusiasm for investing in China," a blogger at Naked Capitalism, Yves Smith, writes. Mr. Smith argues that the Chinese attitude toward foreigners is relatively hostile. "Push comes to shove, the Chinese would have few inhibitions about nationalizing foreign assets," he writes. Washington economist Thomas Palley argues a similar point on his blog: "China's attitude to foreigners … is captured