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Why Does February (Usually) Have 28 Days? - Conversable Economist
I understand why the calendar adds an extra day to February every four years. The revolution of the earth around the sun is approximately 365 and one-quarter days. Every four years, that adds up to one additional day, plus some extra minutes. The modest rounding error in this calculation is offset by steps like dropping
Modern China, the Old USSR, and American Attitudes about Trade - Conversable Economist
The GATT, formally known as the General Agreement on Tariffs and Trade but informally known as the Gentleman's Agreement to Talk and Talk, was first signed by 23 countrie back in 1947. Over the decades, all that talking led to a substantial decrease in tariffs all around the world. By 1994, the GATT morphed into
The Child Penalty: An International View - Conversable Economist
It's well-known that when a couple has a child, the average woman experiences a "child penalty" in labor market outcomes, while outcomes for the man are largely unchanged. For a discussion of this pattern using US data, here's an article by Jane Waldfogel from back in 1998 in the Journal of Economic Perspectives. As that
Hayek on Decentralized Information in Markets - Conversable Economist
Friedrich von Hayek won the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel in 1974. For the 50th anniversary of the prize, the IEA published a short collection of essays called Hayek’s Nobel: 50 Years On, edited by Kristian Niemietz. It Includes Hayek's speech upon acceptance of the Nobel Prize, "The Pretence
Levels of Industrial Policy - Conversable Economist
In arguments over industrial policy, there's often a moment where someone makes an assertion like: "Every nation has industrial policy. Even not having an industrial policy is a type of industrial policy. The only relevant question is what kind of industrial policy we should choose." In my experience, the people who make this argument then
Protectionism Fails to Achieve Its Stated Goals - Conversable Economist
President Trump set off a wave of protectionist trade policies about seven years ago, back in 2018, and those policies were mostly extended and followed during President Biden's term of office as well. But unsurprisingly to most economists, trade restrictions have done a poor job of producing the desired results. Michael Strain provides a trenchant
The Big Problem Paradox - Conversable Economist
Learning that a problem is widespread may, paradoxically, cause people to view the problem as less dangerous. Kasandra Brabaw offers a readable overview of this dynamic in "The ‘Big Problem Paradox'" (Chicago Booth Review, December 10, 2024). Brabaw writes: If you want to get people’s attention to address a problem, making it seem as big
China’s Industrial Policy for Shipbuilding: The US Pushes Back - Conversable Economist
The US Trade Representative has filed a "Report on China's Targeting of the Maritime, Logistics and Shipbuilding Sectors for Dominance" (January 16, 2025). In the lingo of US trade law, this is a "Section 301" report, which comes from a 1974 law delegating the authority to the USTR to investigate "unfair" trade practices by other
Will AI Bring an “Intention Economy”? - Conversable Economist
Back in the 1971, Herbert Simon (Nobel '78) published an essay on the "attention economy." It famously noted that "a wealth of information creates a poverty of attention." He offered insights about how economic organizations (and people) needed mechanisms to receive and process large amounts of information, and then pass only the relevant portion of
Interview with Myron Scholes: On Academic Finance and the Black-Scholes Option Pricing Formula - Conversable Economist
Jon Hartley interviews Myron Scholes (Nobel '97) on "Academic Finance, Black-Scholes Options Pricing, and Regulation"("Capitalism and Freedom in the 21st Century" podcast, January 5, 2025). The interview includes insights about what was happening in economic finance in the 1960s and 1970s after the "big bang" represented by the work of Harry Markowitz. Here are a
Happy Public Domain Day 2025 - Conversable Economist
For most of us, January 1 is New Year's Day. But for the copyright lawyers among us, it is Public Domain Day, when a new batch of copyright materials first published back in the 1920s lose their intellectual property protection. Jennifer Jenkins and James Boyle, who direct the Duke Center for the Study of the
Interview with Eugene Fama: For Whom are Financial Markets Efficient? - Conversable Economist
Joe Walker interviews Eugene Fama (Nobel '13) with the title "For Whom is the Market Efficient?" (The Joe Walker podcast, December 31, 2024). Here are some bits and pieces of their exchange that caught my eye. Are financial markets efficient? WALKER: Gene, I was talking with a few friends who work in high finance in preparation
Why Trucks Should Pay Mileage Taxes - Conversable Economist
Back in 1956, the federal government created the Highway Trust Fund. The basic idea was to use money collected from the federal tax on gasoline and diesel fuel to pay for construction and maintenance of federal highways. When the interstate highway system was completed back in the early 1990s, this obviously meant that less funding
China’s Economic Situation: Interview with Barry Naughton - Conversable Economist
Andrew Peaple interviews "Barry Naughton on the State of the Xi Jinping Economy" at The Wire China website (January 5, 2025). The interview is subtitled: "The economist discusses Beijing’s recent stimulus efforts, and the long-term problems building up as China’s leader implements his model for the country." The interview is packed with insights. Here are
Many Capitalisms - Conversable Economist
Neither "capitalism" nor "socialism" seems to me well-named. As I've noted here in the past, my experience is that most Americans who favor "socialism" don't actually favor the dictionary definition of government ownership of the means of production, but instead favor something resembling a Scandinavian approach to government taxes and spending. However, the Swedes themselves--who
A.A. Milne on First-Rate, Second-Rate, and Third-Rate Minds - Conversable Economist
A.A. Milne is best-known today as the author of the Winnie-the-Pooh books, but he also had his moments are a serious essayist. In a 1940 essay, he offered this comment on the first-rate, second-rate, and third-rate mind. It seemed useful to me to pass along during the present climate of intense partisanship, where comments are
Economists, Public Policy, and the Ideas that are Lying Around - Conversable Economist
When you listen to economists who have worked in or near government about their role in the mechanisms of policy-making, they are appropriately humble. They harbor few illusions that a quick lecture about, say, the dynamics of supply and demand or the advantages of rule-based monetary policy will convert politicians to their point of view.
The Line Between Unreadable and Unread - Conversable Economist
As the end of the year approaches, I again find myself in a reflective mode, thinking about my life and work. I remember a comment from Oscar Wilde (1854-1900), who wrote an 1891 essay, The Critic as Artist, in the form of a conversation between Gilbert and Ernest. At one point, Wilde writes: GILBERT. Ernest,
Nordhaus on the Perils of Long-Term Forecasting - Conversable Economist
When people try to think about the long-term future, by which I mean here looking a half-century or a century ahead, they often suffer a lack of imagination. As a common example, they take today's problems and just multiply them by a factor of ten. Or they assume that improved central planning, in one form
Inequality From the Neolithic Era to the Bronze Age - Conversable Economist
Economic inequality appears to have been rare and transient among humans during the Neolithic period (that is, from about 11,000 to 5,000 years ago). But in the following period, economic inequality became common and widespread. Why? Samuel Bowles and Mattia Fochesato tackle this question in "The Origins of Enduring Economic Inequality" (Journal of Economic Literature,
Charles Dickens on Management and Labor - Conversable Economist
There's a sort of parlor game that the economically-minded sometimes play around the Christmas holiday, related to A Christmas Carol, by Charles Dickens. Was Dickens writing his story as an attack on economics, capitalism, and selfishness? After all, his depiction of Ebenezer Scrooge, along with his use of phrases like "decrease the surplus population" and the
Charles Dickens on Seeing Poverty - Conversable Economist
Charles Dickens wrote what has become one of the iconic stories of Christmas day and Christmas spirit in A Christmas Carol. But of course, the experiences of Ebenezer Scrooge are a story, not a piece of reporting. Here's a piece by Dickens written for the weekly journal Household Words that he edited from 1850 to 1859. It's from the
Expanding the Child Tax Credit: Lessons From a Short-lived Pandemic Policy - Conversable Economist
A "child allowance," in the policy lingo, is a policy that provides a per-child payment to every family with children. The US has for some decades now has a "child tax credit," which has reduced taxes and paid refunds to low-income families with children. But during the pandemic, this program was expanded temporarily in a
More Police, Fewer Prisons, and Other Ways to Reduce Crime - Conversable Economist
What does the existing research evidence say about how to reduce crime? Jennifer Doleac offers and over overview in "Why Crime Matters, and What to Do About It." It appear as an essay in a book published by the Aspen Economic Strategy Group, Strengthening America's Economic Dynamism, edited by Melissa Kearney and Luke Pardue. You
Why Don’t EU Firms Innovate? The Hidden Costs of Failure - Conversable Economist
A simple-minded view of a business trying to innovate might go like this: You spend some money, hire some workers, give it a try--and if it fails to produce revenue, you take your losses, close the books, and shut it down. But what if the act of shutting something down imposes additional future costs? In
The Changing US Labor Market - Conversable Economist
There is a widespread belief that the US labor market has been undergoing a period of unprecedented chance in the last decade or two. On one hand, David Deming, Christopher Ong, and Lawrence H. Summers case doubt on this historical claim in their essay, " Technological Disruption in the US Labor Market"--that is, they argue
Argentina’s Economic Challenge in Context - Conversable Economist
When those outside Argentina discuss Javier Milei, who took office as President of Argentina in December 2023, I sometimes feel as if they are actually saying how they would feel if Milei was elected in their own country. For example, Milei has in a year cut Argentina's government spending by 30% in real terms. So
Some Patterns of Long-Run Asset Returns - Conversable Economist
In classes about personal finance, once of the best-known lessons is that investing in US stocks can have considerable short-term risk, but that over an extended period of time, a patient investor has been rewarded for that short-term risk with higher long-run returns. David Chambers, Elroy Dimson, Antti Ilmanen, and Paul Rintamäki discuss this pattern and others in
Will President Trump Have the Power to Impose Tariffs on Day One? - Conversable Economist
Most actions of the US government require a process. A law is passed through Congress and signed by the president. An administrative agency follows a process for a rule, which is then open for a period of public comment, before being finalized. So it seems reasonable to ask: Does President Trump have the legal authority
Designing an Industry Subsidy: Repayable Advances? - Conversable Economist
If government is considering an industrial policy to subsidize a certain industry (for example, as the US is subsidizing domestic semiconductor manufacturing), what's the best way to do it? I am not typically a fan of such subsidies, but it's possible to make an economic case that for certain industries that provide social as well
An Economist Chews Over Thanksgiving - Conversable Economist
As Thanksgiving preparations arrive, I naturally find my thoughts veering to the evolution of demand for turkey, technological change in turkey production, market concentration in the turkey industry, and price indexes for a classic Thanksgiving dinner. Not that there’s anything wrong with that. [This is an updated, amended, rearranged, and cobbled-together version of a post that
Thanksgiving Origins - Conversable Economist
Thanksgiving is a day for a traditional menu, and part of my holiday is to reprint this annual column on the origins of the day. The first presidential proclamation of Thanksgiving as a national holiday was issued by George Washington on October 3, 1789. But it was a one-time event. Individual states (especially those in
Robots Rising - Conversable Economist
The International Federation of Robotics publishes an annual report on the use of robots in manufacturing and services. The main report is expensive and restricted, but some highlights are free. The top panel shows robots per 10,000 workers in manufacturing industries for 2023. The panel below shows a similar figure with data for 2017. A
The Middle Income Trap - Conversable Economist
The middle income trap refers to the pattern in which certain economies grow rapidly enough to move into the global middle class, or even into the group of high-income countries, but at some point this catch-up growth seem to stall. The problem seems potentially widespread. For example, Japan and Korea both went through several decades
Russia’s Economy and Deathonomics - Conversable Economist
Back in 1939, Winston Churchill famously said in a radio broadcast: "I cannot forecast to you the action of Russia. It is a riddle wrapped in a mystery inside an enigma ..." One might say something similar today about the state of Russia's economy. Since Russia's renewed invasion of Ukraine in 2022, international economic sanctions have
An Economic Policy Tradeoff between Speed and Fraud During the Pandemic - Conversable Economist
The eruption of the COVID-19 pandemic in March 2020 is less than five years ago: still, it has become hard (for me, at least) to recapture in my own head the fears and uncertainties of those first few months. The unemployment rate spiked from 3.5% in February 2020 to 14.8% just two months later in
Interview with Laura Alfaro: Globalization and the Great Reallocation - Conversable Economist
David A. Price of the Richmond Fed serves as interlocutor in an interview with "Laura Alfaro: On global supply chains, sentiment about trade, and what to learn from Latin America" (Econ Focus, Fourth Quarter 2024, pp. 22-25). Here are a couple of comments from Alfaro that stuck with me: On lessons for the United States
Nordhaus Reflects on Technology and Climate Change - Conversable Economist
William Nordhaus (Nobel '18) reflects on his pathway into and through economics in "Looking Backward, Looking Forward" (Annual Review of Resource Economics, 2024, 16: 1–20). He writes: "I first saw light in Albuquerque, New Mexico, at the dawn of World War II, in the lush Rio Grande River floodplain, with an irrigated alfalfa field outside
Are Theme Park Rides a Giffen Good? - Conversable Economist
It is canonical among economists that as the price of a good rises, the quantity demanded of that good falls (other factors held equal). The underlying logic is that a higher price for a certain good has two effects. The "substitution effect" is that a higher price for a certain good causes potential buyers to
Fall 2024 Journal of Economic Perspectives Free Online - Conversable Economist
I have been the Managing Editor of the Journal of Economic Perspectives since the first issue in Summer 1987. The JEP is published by the American Economic Association, which decided back in 2011–to my delight–that the journal would be freely available online, from the current issue all the way back to the first issue. You can download individual