Welcome to week 292! The articles below caught my attention this week. Please note that what are intended to be relatively objective “briefs” are preceded by dashes (——–), whereas additional material or relatively subjective comments are preceded by asterisks (********). The links to articles preceded by [SR] require a subscription to be read in their entirety, although complete articles may frequently be found by an Internet title search.
This was somewhat of a slow week. So much of the media, print and otherwise, has been caught up in speculation about what a Donald Trump administration will be like that it seems like a good deal of more conventional—less speculative—reporting has been crowded out. That being said, both of the following articles touch, directly or indirectly, on matters that are somewhat speculative.
(17 November 2016): “How Republicans Plan to Spend Like Crazy Without Running Up Debt” (http://www.bloomberg.com/news/articles/2016-11-17/how-the-white-house-could-justify-a-debt-driven-keynesian-stimulus)
********This article was titled “John Maynard Trump” in the print version of Bloomberg Businessweek. I prefer the title of the print version as it comes closer to reflecting the content of the article and I appreciate the play on John Maynard Keynes. What the article does, however, is provide a somewhat, perhaps deservedly, jaundiced view of alternative perspectives on macroeconomic modeling, especially regarding whether it should be doing “statically” or “dynamically.” The meaning of both of those terms in developed in the article. As you make your way through it, you will receive a clearer view of some of the assumptions that underlay macroeconomic policymaking and the widely divergent estimates one can generate through their choice. Of course, these assumptions are almost never discussed in media presentations, so read this and get a sense of the immense mass that lies below the surface of (some) public pronouncements.
(19 November 2016): “Globalization: The third wave” (http://www.economist.com/news/books-and-arts/21710240-first-free-movement-goods-then-ideas-momentum-may-stop-free-exchange)
——–[A review of The Great Convergence: Information Technology and the New Globalization (https://www.amazon.com/Great-Convergence-Information-Technology-Globalization/dp/067466048X), by Richard Baldwin.] “Mr Baldwin’s grand theory of globalisation is of a series of unbundlings, driven by sequential collapses in the cost of moving things and ideas across space.” In the first, which unbundled production and consumption, “moving goods became cheap” but “until the very end of the 20th century moving ideas was expensive.” Since the 1990s, however, “globalisations has changed radically, as the internet has lifted [i.e., reduced] the cost of moving ideas, and fueled a second unbundling. Now that co-ordinating international production is cheaper, faster and safer, supply chains ignore borders to go sprawling across the world. . . . With many products made everywhere, trade has been, in effect, denationalised.” Yet, there is a third constraint on globalisation beyond things and ideas: labour. Mr Baldwin imagines a future globalisation “unshackled from its third constraint, as labour is made mobile by robots allowing people to offer their services remotely.”
********The reviewer gives a nod to current political realities in the U.S., noting “To placate voters by raising tariffs is to tackle 21-century globalisation with tools better suited to the 20th (or even 19th) century. Given the new world of global supply chains, a tariff is life erecting a wall in the middle of a factory.” It is an image that gives me pause. It does seem that a view of business built upon, i.e., a Smithian pin factory, is at work in the minds of some. Yet the vertical process from production to the ultimate consumer, today, is generally highly distributed, with each production stage likely to be the output of a different producer often in a different country.
May you have a good week!