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Our economics correspondents consider the fluctuations in the world economy, in theory and practice
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06 февраля, 06:02

How to interpret a market plunge

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FOR much of the past two years, market watchers have had little to write about, apart from the passing of one stock-index milestone after another. The events of the past week, however, have shaken the financial world awake. A recent, upward zag in bond yields seemed to signal the arrival of a new theme in market movements.

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06 февраля, 06:02

How to interpret a market plunge

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FOR much of the past two years, market watchers have had little to write about, apart from the passing of one stock-index milestone after another. The events of the past week, however, have shaken the financial world awake. A recent, upward zag in bond yields seemed to signal the arrival of a new theme in market movements. Stock prices confirmed it, and then some. Over the past week, American stocks have dropped about 7%, punctuated by a breathtaking, record-setting plunge on Monday. The Dow Jones stock index recorded its largest ever one-day drop, of more than 1,000 points. In percentage terms the decline, of more than 4%, was the biggest since 2011.The swoon set tongues to wagging, about its cause and likely effect. There can be no knowing about the former. Markets may have worried that rising wages would crimp profits or trigger a faster pace of growth-squelching interest-rate increases, but a butterfly flapping its wings in Indonesia might just as well be to blame. There is little more certainty regarding the latter. Commentators have...Continue reading

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01 декабря 2017, 20:11

Republicans grouse about tax models they once supported

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THEY have been at this a long time. In 1994 Republicans, newly in charge of Congress, held hearings on what would come to be called “dynamic scoring”. Bills, they said, should be evaluated using the predictive power of macroeconomic models.

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01 декабря 2017, 20:11

Republicans grouse about tax models they once supported

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THEY have been at this a long time. In 1994 Republicans, newly in charge of Congress, held hearings on what would come to be called “dynamic scoring”. Bills, they said, should be evaluated using the predictive power of macroeconomic models. If the model predicts more GDP growth, then it could be inferred that the growth would produce more tax revenue. During the hearings, however, came an awkward moment. Alan Greenspan, then in charge of the Federal Reserve, told Congress that macroeconomic models were “deficient”. That is, their predictive power, though interesting, was not good enough to rely on. Last year, after the election of Donald Trump, your blogger contacted Mr Greenspan to see whether the models were good enough yet. Mr Greenspan, his office responded, had not yet changed his opinion.Neither have Republicans. Over the past two decades, in and out of control of Congress, the party has nudged dynamic scoring successively closer to the official policy process until we arrived, yesterday evening, at as dramatic a moment as...Continue reading

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29 ноября 2017, 21:47

Why scan-reading artificial intelligence is bad news for radiologists

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THE better artificial intelligence gets, the greater the popular concern that smart machines will soon usher in a labour-market catastrophe. In Chandler, Arizona, Americans can at this moment hail a ride from a car without a human at the wheel.

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29 ноября 2017, 21:47

Why scan-reading artificial intelligence is bad news for radiologists

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THE better artificial intelligence gets, the greater the popular concern that smart machines will soon usher in a labour-market catastrophe. In Chandler, Arizona, Americans can at this moment hail a ride from a car without a human at the wheel. Web users can read high-quality, instant translations of foreign-language newspapers—no professional translation service needed. And developers of machine-learning technologies are moving rapidly to apply their tools across a vast array of medical tasks.Despite this, economists, with rare exceptions, are relatively sanguine about the possible labour-market effects of AI. Technological change always raises fears of mass unemployment, after all, and yet there are more people working worldwide than ever. Count me among those who reckon this approach is a bit too dismissive of the threat. On the one hand, while the very broad story of technological progress over the past two centuries has been one in which employment has grown massively, across shorter...Continue reading

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11 октября 2017, 15:37

Richard Thaler’s work demonstrates why economics is hard

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RICHARD THALER has won the Nobel prize in economic sciences this year for his contributions to behavioural economics. It's a well-deserved prize and a clarifying one, as far as economics is concerned.

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11 октября 2017, 15:37

Richard Thaler’s work demonstrates why economics is hard

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RICHARD THALER has won the Nobel prize in economic sciences this year for his contributions to behavioural economics. It's a well-deserved prize and a clarifying one, as far as economics is concerned. For a very long time, economists hoped to treat individuals a bit like particles in physics, whose activity can be described by a few well-understood rules, which allow researchers to model and understand complex interactions between particles. The rules, they reckoned, were things like perfect information, forward-looking reasoning and rationality. Of course economists understood that individuals didn't always behave according to those rules, but the idea was that, in aggregate, the rules would allow for a pretty good approximation of reality.Then came the behavioural economists, who made it their task to find ways in which human activity systematically diverges from models using those basic assumptions. For many of them, the goal was probably to come up with an...Continue reading

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09 октября 2017, 16:43

The Nobel in economics rewards a pioneer of “nudges”

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NOT long ago, the starting assumption of any economic theory was that humans are rational actors who maximise their utility. Economists summarily dismissed anyone insisting otherwise. But over the past few decades, behavioural economists like Richard Thaler have progressively chipped away at this notion.

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09 октября 2017, 16:43

The Nobel in economics rewards a pioneer of “nudges”

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NOT long ago, the starting assumption of any economic theory was that humans are rational actors who maximise their utility. Economists summarily dismissed anyone insisting otherwise. But over the past few decades, behavioural economists like Richard Thaler have progressively chipped away at this notion. They combine economics with insights from psychology to show how heavily economic decisions are influenced by cognitive biases. On October 9th Mr Thaler’s work was recognised at the highest level when the Nobel Committee awarded him this year’s prize in economics. Mr Thaler thus becomes one of very few behavioural economists to win the prize.Mr Thaler’s has been a prolific career, spanning over four decades, the last two of them at the University of Chicago’s Booth School of Business. His research has touched on subjects as varied as asset prices, personal savings and property crime. For example, Mr Thaler developed a theory of mental accounting, which explains how people making financial decisions look only at the narrow effect of...Continue reading

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22 сентября 2017, 08:31

Bitcoin is fiat money, too

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FINANCIERS with PhDs like to remind each other to “read your Kindleberger". The rare academic who could speak fluently to bureaucrats and normal people, Charles Kindleberger designed the Marshall Plan and wrote vast economic histories worthy of Tolstoy.

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22 сентября 2017, 08:31

Bitcoin is fiat money, too

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FINANCIERS with PhDs like to remind each other to “read your Kindleberger". The rare academic who could speak fluently to bureaucrats and normal people, Charles Kindleberger designed the Marshall Plan and wrote vast economic histories worthy of Tolstoy. “Read your Kindleberger” is just a coded way of saying “don’t forget this has all happened before”. So to anyone invested in, mining or building applications for distributed ledger money such as bitcoin or ethereum: read your Kindleberger.Start with A Financial History of Western Europe, in which Kindleberger documents how many times merchants in different centuries figured out clever ways of doing the exact same thing. They made transactions easier, and in the process created new deposits and bills that increased the supply of money. In most cases, the Bürgermeister or the king left these innovations in place, but decided to control the supply of money and credit themselves. It is good for the king to be in charge of his own creditors. But also, it has always been...Continue reading