Posts Tagged ‘Tyler Cowen’

Richard Florida
by Richard Florida
Mon Jun 29th 2009 at 11:02am UTC

The Real New Economy is Yours

Monday, June 29th, 2009

Tyler Cowen outlines some themes of his new book, Create Your Own Economy, in Fast Company.

In a typical day, I might write two tweets, peruse 15 blogs (Jason Kottke and Penelope Trunk are two must-reads), and watch James Brown dance on YouTube. If it’s a really fun day, I’ll read more blogs, scour the Web for movie reviews, browse eBay, Google myself, and spend more time on Twitter. None of this costs me a penny, and yet I am producing plenty – namely, my own interest and amusement.

More and more, “production” – that word my fellow economists have worked over for generations – has become interior to the human mind rather than set on a factory floor. A tweet may not look like much, but its value lies in the mental dimension. You use Twitter, Facebook, MySpace, and other Web services to construct a complex meld of stories, images, and feelings in your mind. No single bit seems weighty on its own, but the resulting blend is rich in joy, emotion, and suspense. This is a new form of drama, and it plays out inside us – with technological assistance – rather than on a public stage.

Online, you can literally create your own economy. By that, I mean you can build an ordered set of opportunities for prosperity and pleasure, analogous to a traditional economy but held in your head. There is no obvious monetary transaction, but you’re using your limited resources to get a better deal – the very essence of economics. In fact, “economics” comes from oikonomia, the ancient Greek word for household management, and the modern practice of economics is returning to that idea.

More here.

His day sounds a lot like mine, though on the best of them I’d find time for a road ride. His argument makes a lot of sense.

Richard Florida
by Richard Florida
Mon Jun 29th 2009 at 9:22am UTC

Art, Music, and Modern Management

Monday, June 29th, 2009

There’s no shortage of debate on this one. But a new report (pointer via Tyler Cowen) by the intriguing combination of Harvard professor of Technology and Operations Management Robert D. Austin and Lee Devinand, a theatre dramaturg, shows there’s really no conflict:

[W]e examine the apparent conflict between artistic and commercial objectives within creative companies … We surface some assumptions that underlie such debates, compare them with findings from our research on creative industries, and identify three “fallacies” that sometimes enter into discussions of art in relation to money. This, in turn, leads us to propose a framework that can support more productive discussion and to describe a direction for management research that might help integrate art and business practices. We conclude that despite an inclination to take offense that often attends the close juxtaposition of art and commerce … the interests of art, artists, and business can be best served if more commerce enters into the world of art, not less.

Check out the other fascinating work on art, music, and management this team is doing.

Richard Florida
by Richard Florida
Tue May 19th 2009 at 2:30pm UTC

Banking – Shadow and Real

Tuesday, May 19th, 2009

Tyler Cowen points to a new NBER study that concludes that the shadow banking system is misnamed: it’s part of the real banking system and at the heart of the financial crisis:

“The ’shadow banking system’ at the heart of the current credit crisis is, in fact, a real banking system – and is vulnerable to a banking panic. Indeed, the events starting in August 2007 are a banking panic. A banking panic is a systemic event because the banking system cannot honor its obligations and is insolvent. Unlike the historical banking panics of the 19th and early 20th centuries, the current banking panic is a wholesale panic, not a retail panic. In the earlier episodes, depositors ran to their banks and demanded cash in exchange for their checking accounts. Unable to meet those demands, the banking system became insolvent. The current panic involved financial firms ‘running’ on other financial firms by not renewing sale and repurchase agreements (repo) or increasing the repo margin (‘haircut’), forcing massive deleveraging, and resulting in the banking system being insolvent. The earlier episodes have many features in common with the current crisis, and examination of history can help understand the current situation and guide thoughts about reform of bank regulation. New regulation can facilitate the functioning of the shadow banking system, making it less vulnerable to panic.”

Richard Florida
by Richard Florida
Fri May 1st 2009 at 9:20am UTC

Bailout Schmailout

Friday, May 1st, 2009

The New York Times asks leading experts whether America “needs an auto industry.” Robert Lawrence and Tyler Cowen both point out that Japanese companies like Toyota make cars very effectively in the U.S. with American workers. As Lawrence writes, the problem is continuously “framed” in terms of costs and competitiveness, but that’s not really what’s the matter. The real problem is about out-of-touch, outmoded, ineffective Big Three management.

We’re told Chrysler needs a massive injection of “cutting-edge Fiat technology” to survive. Huh, why? What were these guys doing? Did they just forget that… er… new technology might be important to their long-run future?

Robert Reich lays down the gauntlet on jobs:

What? Having General Motors or Chrysler cut tens of thousands of jobs in order to be eligible for a government bailout reminds me of “saving” Vietnam by bombing it to smithereens. Aren’t we giving these companies billions of taxpayer dollars to save jobs? If not, we’re just transferring money from taxpayers to GM and Chrysler bondholders and shareholders …

[T]he “American auto industry” shouldn’t be defined as auto companies whose headquarters are in the United States. The true “American auto industry” is Americans who make automobiles. At the rate the Big Three are shrinking even as they’re bailed out, foreign automakers with American plants may soon employ more Americans than the Big Three do.”

Your thoughts?

Richard Florida
by Richard Florida
Thu Apr 23rd 2009 at 9:27am UTC

Home-Base Effect

Thursday, April 23rd, 2009

There’s an undeniable home-base effect for leading consumer brands. So, Starbucks does better in Seattle; Wal-Mart in Arkansas; Heinz ketchup in Pittsburgh. Here’s the abstract for the detailed study published in the Journal of Political Economy.

We document evidence of a persistent “early entry” advantage for brands in 34 consumer packaged goods industries across the 50 largest U.S. cities. Current market shares are higher in markets closest to a brand’s historic city of origin than in those farthest. For six industries, we know the order of entry among the top brands in each of the markets. We find an early entry effect on a brand’s current market share and perceived quality across U.S. cities. The magnitude of this effect typically drives the rank order of market shares and perceived quality levels across cities.

Tyler Cowen comments; and Andrew Gelman has maps which depict a similar diffusion away from home-base effect for Starbucks and Wal-Mart.

I wonder though if this is just a home-base effect, as brands take hold where they are established and get picked up more slowly elsewhere, or if there might be another (deeper) process which would explain why certain kinds of brands – say like Starbucks and Wal-Mart – crop up in particular locations to begin with.

Your thoughts?

Richard Florida
by Richard Florida
Fri Feb 20th 2009 at 9:41am UTC

Grading Obama’s Economic Policy

Friday, February 20th, 2009

Tyler Cowen says not so good:

The simple truth is that so far economic policy has fallen short of being good. Some (not all) left-wing bloggers may be reluctant to say this so early in the tenure of such a long-awaited administration, but perhaps a few of them are thinking it. There is the stimulus, the Geithner banking plan, and the housing plan. Of course there are differences of opinion but perhaps it is fair to say he is straining to be one out of three?

Richard Florida
by Richard Florida
Fri Feb 20th 2009 at 9:39am UTC

On Housing …

Friday, February 20th, 2009

Ed Glaeser:

The plan does too little to recognize that many homeowners are living in homes that they cannot afford. In one of the government examples, a family earning less than $44,000 a year has a $213,000 mortgage on a $190,000 house. By any reasonable standard, this family cannot afford that house. It would be far wiser for the government to facilitate the family’s move to rental housing than to provide a short-term subsidy aimed at keeping the family in the home. The plan should have been more forthright in acknowledging that America’s housing mess means new mortgage terms for some and new housing for others.

Tyler Cowen:

We should not be helping people stay in their homes if their mortgage payments are at 43 percent of their income.  (The bill requires banks, in such cases, to lower interest rates until monthly payments are at 38 percent of income.  The government then steps in to lower payments to 31 percent of income.)

Willem Buiter::

The extreme fiscal largesse bestowed on residential housing, directly and indirectly through mortgage interest deductibility, has led to a massive misallocation of investment in the US.  There has been overinvestment in the private residential housing stock and underinvestment in just about every other form of fixed capital: infrastructure, public amenities of all kinds (sports facilities, public recreational facilities, parks etc.), commercial structures, plant and equipment.  It is time to correct the distorted incentives that are at the root of this misallocation.  The easiest way to do this, in the current tax system, is to end the deductibility of mortgage interest in the personal income tax, close down Fannie and Freddie and end the role of the US government in the provision of residential mortgages.

Matt Yglesias:

But this impossible dream of re-inflating the housing bubble and making all the wealth reappear is going to die hard. Clever, but stupid, politicians are going to try to convince people that they have plans to make this happen, and they’ll criticize the Obama administration for not getting the job done. It’s important to understand, however, that we’re not talking about real assets that vanished. The houses are still there, and they’re still as good or bad or useful or non-useful as they ever were. What’s vanished is a speculative mania, and public policy can’t—and shouldn’t—create a new one.

Richard Florida
by Richard Florida
Fri Oct 3rd 2008 at 7:47am UTC

When Marty Worries…

Friday, October 3rd, 2008

Martin Feldstein is growing increasingly worried about the state of the U.S. economy. He’s usually a voice of calm in the middle of the storm – former head of the National Bureau of Economic Research, past chairman of the Council of Economic Advisors under Reagan, and Harvard economics professor.

So that is where the US is now: in the middle of a financial crisis, with the economy sliding into recession, monetary policy already at maximum easing, and fiscal transfers impotent. That is an unenviable situation, to say the least, for any incoming president.

He’s basically saying that we have thrown most of our fiscal and monetary policy ammunition at the crisis with little effect. Uh-oh.

In related crisis matters, Tyler Cowen suggests that the dollar should weather the storm. His reasoning is solid as usual. The dollar is likely to hold for the short-term. But for the longer-run, I’m not so sanguine. There has been a big global shift in the underlying real economy going on for some time now. This, plus financial trauma and large deficits, means sooner or later the currency has to give. That leaves me inclined to believe Ken Rogoff, Marty Feldstein, Larry Summers, and others who agree that a gradual slide in the dollar is inevitable. Even if large investors and smart people simply hedge (rather than go on a stampede) – say in gold, euros, Swiss francs, and yen – the dollar will eventually slip.

My advice in the matter: we live in an increasingly global world – diversify accordingly.

Richard Florida
by Richard Florida
Thu May 1st 2008 at 9:03am UTC

Bubble-Land

Thursday, May 1st, 2008

Philip Thiel:

Consider the strangeness of the American context. One would not have thought it
possible for the internet bubble of the late
1990s, the greatest boom in the history of the world, to be replaced within five
years by a real estate bubble of even greater magnitude and worse stupidity.
Under more normal circumstances, one would not have thought that the same
mistake could happen twice in the lifetimes of the people involved. One might
be tempted to invoke extraordinary psychosocial explanations
— for example, that all of this was driven by baby boomers who destroyed their
minds on drugs in the 1960s and therewith merit the dubious
distinction of being America’s Dumbest Generation. But when one surveys
the many other bubbles that have proliferated throughout the world, one
realizes that this cannot be the whole truth.

The most straightforward explanation begins with the view that all of these
bubbles are not truly separate, but instead represent different facets of a
single Great Boom of unprecedented size and duration. As with the earlier
bubbles of the modern age, the Great Boom has been based on a similar story of
globalization, told and retold in different ways — and so we have seen a rotating series of local booms and bubbles as investors price a globally unified world through the prism of different markets …

Just as the risk of a secular apocalypse defines the limits of our world, one
might speak of the risk of a “personal apocalypse” that defines the limits of our lives. By way of illustration, the subprime housing boom in the United States is not simply the result of extreme optimism about the prospects for housing, but also a reflection of the brutal fact that
tens of millions are approaching retirement in an actuarially bankrupt state.
In effect, the two choices are: 1) continue on the present course to certain destitution in old age; or 2) roll the dice on the housing boom as the last chance to build wealth, and hope
against hope that one gets out in time. The personal and secular levels
intersect, in that lives of quiet desperation paradoxically may surface as
ebullient market bubbles …

None of the foregoing detracts from the earlier claim that the greatest
investments of our time remain those most highly levered to genuine
globalization. But because the line between good and bad (or no) globalization
is very thin, catastrophic approximations abound. The difficulty of the
challenge can be illustrated by considering three related examples: the
“China bubble,” the “Web 2.0 bubble,” and the “hedge fund bubble,” which relate to the globalization of labor, technology, and finance, respectively, and are properly seen as contemporary facets of the Great Boom. They are the dark matter that is reshaping the human world — and that may hopefully counteract the dark energy that is making things fall
apart.

Much more here (pointer from Tyler Cowen via Ben Casnocha).