Welcome by Brad Delong, Professor of Economics U.C. Berkeley and weblogger at "Grasping Reality with Both Invisible Hands"
8:35 a.m.
Keynote – Economic and Financial Weblogging and the Future (Speaker: Hal Varian; Discussant Joshua Gans; Moderator, Mayor Sly James)
9:35 a.m.
Break
9:50 a.m.
Panel discussion – Economic and Financial Weblogging, and New Modes and Orders in Education (Speaker: Clay Shirky; Discussant Ben Wildavsky; Moderator: R. Crosby Kemper III)
10:40 a.m.
Break
10:55 a.m.
Panel discussion – Economic and Financial Weblogging and the Future and Sustainability of Financial Journalism (Panel: Cardiff Garcia, Joe Weisenthal, Allison Schrager; Moderator: George Kahn)
11:45 a.m.
Networking Lunch
12:45 p.m
Panel discussion – Economic and Financial Weblogging and the Future and Sustainability of Mainstream Journalism (Panel: Bruce Bartlett; Megan McArdle; Josh Barro; Moderator: Felix Salmon)
1:35 p.m.
Break
1:50 p.m.
Panel discussion – Economic and Financial Weblogging, Thinktanks and Policy Advocacy, and the Public Sphere (Panel: Stan Collender; Dane Stangler; Sarah Kliff; Moderator: Corey Dillon)
2:40 p.m.
Break
2:55 p.m.
Panel discussion – Economic and Financial Weblogging and Standard Ivy-Covered Academia (Speaker: Mark Thoma (EconomistsView.typepad.com); Discussant Stephanie Kelton; Moderator: Bob Strom)
Raj Chetty, a Harvard University economist working on taxation, social insurance and education policy, won the John Bates Clark young economist award, the American Economic Association said in a statement today.
“Raj Chetty is a remarkably productive economist whose contributions assimilate evidence using a variety of methodological perspectives to shed new light on important public policy questions,” the AEA said in a statement on its website. “He has established himself in a few short years as arguably the best applied microeconomist of his generation.”...
Fortunately, crises as serious as the current one, end up imposing the need for a true union. If Europe does not unite, in 40 years there will be none of its Member States in the G8. It will be irrelevant.
"By almost any market test, economics is the premier social science," Stanford University economist Edward Lazear wrote just over a decade ago.
"The field attracts the most students, enjoys the attention of
policy-makers and journalists, and gains notice, both positive and
negative, from other scientists."
...
Triumphalism like that calls for a comeuppance, of course. So, as the nation's (and a lot of the world's) economists gather this weekend in San Diego for their annual hoedown, it's worth asking: Are there any signs that the imperialist era of economics might finally be coming to an end?...
AEA in conjunction with approximately 55 associations in related
disciplines, holds a three-day meeting each January to present papers on
general economic subjects. Over 520 scholarly sessions are held. In
2012, 11,624 registered.
"[E]ssential reading . . . both for its originality and for the sobering patterns of financial behaviour it reveals."--Economist
"[A] terrific book."--Andrew Ross Sorkin, New York Times
"[T]he most comprehensive study of financial crises and their aftermath . . ."--Eduardo Porter, New York Times
"Everyone working on economic policy should own This Time is Different and open it for a bracing blast of sobriety when things seem to be going well."--Greg Ip, Washington Post
WASHINGTON—The Peterson Institute for International Economics is pleased to announce that Eclipse: Living in the Shadow of China's Economic Dominance (2011), by Arvind Subramanian, has been named one of the three Best Books of 2012 by China Business News. Subramanian, a senior fellow at the Institute and at the Center for Global Development, shares this year's Best Book honor with Henry Kissinger for his book, On China, and with Zhou Xiaochuan, the governor of the Central Bank of China, for his book, The Global Financial Crisis: Observations, Analysis and Countermeasures. The award was presented during China Business News's annual conference in Beijing on November 24.Eclipse was published by the Peterson Institute and has been translated into Chinese, Japanese, and Spanish (forthcoming). There are more than 100,000 copies in print worldwide.
"We are extremely proud that Arvind's book has been recognized with this award for its important discussion of China's ascendance as an economic power," said C. Fred Bergsten, director of the Peterson Institute. "The award demonstrates that Arvind's historical and political analysis is spurring debate and discussion throughout the world, not just in the United States. He is in very good company with Dr. Kissinger and Governor Zhou!"
In the book Subramanian argues that China's global economic dominance is likely to be more imminent, broader in scope, and larger in magnitude than is generally believed. He explains this dominance as a product of historical forces, economic policies and objectives put forward by China, and argues that the United States cannot do much to alter the trend. This conclusion challenges a widely held view that the right set of economic policies can retain the United States' position as the most economically powerful nation in the world.
China Business News, one of China's leading daily newspapers, is based in Shanghai. The award selection was made by a jury of influential Chinese academics, international economists, and finance executives. The other contenders for Best Book honors included Daniel Yergin's, The Quest: Energy, Security and the Remaking of the Modern World , Robert Shiller's Finance and the Good Society, former World Bank chief economist Justin Lin's The Quest for Prosperity: How Developing Countries Can Take Off, and Nobel Prize winning economist Michael Spence's The Next Convergence: The Future of Economic Growth in a Multi-Speed World.
Arvind Subramanian is senior fellow jointly at the Peterson Institute for International Economics and the Center for
Global Development. He is also coauthor of Who Needs to Open the Capital Account? (2012) and of a forthcoming book
(with Aaditya Mattoo) Greenprint: A New Approach to Climate Change Cooperation. Foreign Policy magazine named him
as one of the world’s top 100 global thinkers in 2011.
About the Peterson institute
The Peterson Institute for International Economics is a private, nonprofit, nonpartisan research institution devoted to
the study of international economic policy. Since 1981 the Institute has provided timely and objective analysis of, and
concrete solutions to, a wide range of international economic problems. Support is provided by a wide range of chari-
table foundations, private corporations and individual donors, and from earnings on the Institute’s publications and
capital fund.
On 17-18 December, economics and law professors, data publishers,
practitioners and representatives from international institutions will
gather at Emmanuel College, Cambridge for the First Open Economics International Workshop.
From showcasing the examples of successes in collaborative economic
research and open data to reviewing the legal cultural and other
barriers to information sharing, this event aims to build an
understanding of the value of open data and open tools for the economics
profession and the obstacles to opening up information in economics.
The workshop will also explore the role of greater openness in
broadening understanding of and engagement with economics among the
wider community including policy-makers and society.
This event is part of the Open Economics project, funded by the Alfred P. Sloan Foundation
and is a key step in identifying best practice as well as legal,
regulatory and technical barriers and opportunities for open economic
data. A statement on the Open Economics Principles will be produced as a
result of the workshop...
A UK organization called the Global Climate Project
has put out its annual estimates of annual carbon emissions, and
perhaps unsurprisingly, the world economy is on track to set a new
record in 2012 of 38.2 billion tons, up a few percentage points from
2011.
Here's one figure from the report showing trendlines for
the four largest emitters: China, the U.S., the EU, and India. Notice in
particular that China is not only by far the largest carbon emitter,
but is a spike-like upward trend in emissions. Emissions in the U.S. are
fairly flat since the late 1990s. Emissions from India are on a path to
soon surpass emissions from the EU.
This next figure shows carbon emissions on a per capita basis. The U.S. economy is by far the... .. The study ("Global economic potential for reducing carbon dioxide
emissions from mangrove loss") by Siikamäki, Sanchirico, and Jardine appeared in the September 2, 2012, issue of Proceedings of the Natural Academy of Sciences: a pre-print version is available here (PDF 6 pages).
The latest CESifo DICE Report (2/2012) focuses on how the European labour markets in Estonia, France, Germany, Ireland, Italy, the Netherlands and Spain have fared in the euro crisis. While Germany and the Netherlands have come through the crisis relatively well, the labour market situation in Estonia, Ireland and Spain has deteriorated considerably. France and Italy fall between these two poles.
Askenazy, Philippe and Christine Erhel, "The French Labour Market and the (Not So) Great Recession",CESifo DICE Report 10 (2), 2012, 08-13 | Details | Download (PDF 6 pages)
It's little surprise, considering the economic
turbulence in the developed world, that emerging markets fare well in
the rankings. China, India, and Brazil take the top three positions, and
Southeast Asia, with its large and growing consumer base, makes a
strong showing: Indonesia, Malaysia, Singapore, Thailand, and Vietnam
all hold high rankings. South Africa, which was unranked in 2010,
rebounds to 11th place, while Russia and Turkey make large gains,
especially in comparison to neighboring countries in Europe (see figure
1).
Environmental impact of palm oil (Wikipedia)
...Significant greenhouse gas emissions. Deforestation, mainly in tropical areas, accounts for up to one-third of total anthropogenic CO2 emissions...
...responsible for over 80% (~88%) of world oil palm production, Indonesia and Malaysia...
...In 2010, the Nature Conservancy took representatives of America’s National Farmers Union and the American Farmland Trust to Brazil to see how illegal forest clearance was "hurting US businesses by flooding markets with cheap and unsustainable products". A new (2010) report from David Gardiner & Associates (Mr. Gardiner served as the Executive Director of the White House Climate Change Task Force during the Clinton Administration), a consultancy, says that protecting the 13,000,000 hectares (50,000 sq mi) of mostly tropical forest that are lost annually to timber, cattle and agricultural production would boost American agricultural revenue by as much as USD$190 billion-270 billion between 2012 and 2030. (PDF, 56 pages, "Farms Here, Forests there" (see page 20 Palm Oil Modeling Results: potential $USD 40B savings))
Conclusion of "Farms Here, Forests there" Conserving tropical rainforests generates significant financial gains and savings for the U.S. agriculture and timber industries, while also increasing opportunities for residents of rainforest nations.
Taking action with our suppliers
The supply chain of palm oil is very complex and there are no quick and easy solutions. We have conducted an in depth analysis of our supply chain in order to create transparency and detailed action plans. Read more about the complexity of the palm oil supply chain in the RSPO Supply Chain Systems Overview (pdf, 3.95Mb)..."
In response to the urgent and pressing global call for sustainably produced palm oil, the Roundtable on Sustainable Palm Oil (RSPO) was formed in 2004 with the objective promoting the growth and use of sustainable oil palm products through credible global standards and engagement of stakeholders.
The seat of the association is in Zurich, Switzerland, while the secretariat is currently based in Kuala Lumpur with a satellite office in Jakarta.
RSPO is a not-for-profit association that unites stakeholders from seven sectors of the palm oil industry - oil palm producers, palm oil processors or traders, consumer goods manufacturers, retailers, banks and investors, environmental or nature conservation NGOs and social or developmental NGOs - to develop and implement global standards for sustainable palm oil...
The Palm Oil Buyers’ Scorecard 2011 measures the
performance of 132 major retailers and consumer goods manufacturers
against 4 areas which show whether these companies are acting
responsibly.
The Scorecard focuses on European companies, since they are leading the
way in transforming the market for palm oil, and were the first to
commit to the Roundtable on Sustainable Palm Oil (RSPO). However, it
also looks at other markets such as Australia and Japan where some
progress is being made.
...In 2008 Unilever, an RSPO member, committed to use only palm oil which is certified as sustainable, by ensuring that the large companies and smallholders that supply it convert to sustainable production by 2015. ...As of 2009, twelve companies including giant retailer X, tied for worst, scoring 0.
It’s
not cost that stop consumers from buying according to their conscience.
It’s simply a lack of clear information on the product label.
Research
from Melbourne Business School (MBS) has found that if a product
clearly reflects factors which impact ethical consumerism on its label,
consumers will favour that product over others.
As a result of her research in this area, MBS Professor Jill Klein is calling for manufacturers to improve their labeling to provide consumers with a more informed choice and to increase sales.
Professor
Klein based her research on a series of experiments performed at the
Melbourne Zoo between April and June last year. Zoo visitors were asked
to select between a food product that did not contain the
orangutan-unfriendly palm oil and a virtually equivalent alternative
that contained vegetable oil...
A new report comes up with a better way to size up wealth
... Gauging an economy by its GDP is like judging a company by its quarterly profits, without ever peeking at its balance-sheet. Happily, the United Nations this month published balance-sheets for 20 nations in a report overseen by Sir Partha Dasgupta of Cambridge University. They included three kinds of asset: “manufactured”, or physical, capital (machinery, buildings, infrastructure and so on); human capital (the population’s education and skills); and natural capital (including land, forests, fossil fuels and minerals).
...Human capital represents 88% of Britain’s wealth and 75% of America’s. The average Japanese has more human capital than anyone else...
...In 14 of the 20 countries studied, these increases in wealth outpaced the growth of their population, leaving per-person wealth higher in 2008 than in 1990. Germany, for example, increased its human capital by over 50%. China expanded its “manufactured” capital by an extraordinary 540%.
... Now that economists have shown that such wealth can be measured, they must decide what it should be called. In his earlier academic work Sir Partha calls it “comprehensive wealth”. The UN report dubs it “inclusive wealth”
The S&P/Case-Shiller Home Price Indices are the leading measures for the US residential housing market, tracking changes in the value of residential real estate both nationally as well as in 20 metropolitan regions
...In the 1971 book “The Logic of Collective Action: Public Goods and the Theory of Groups,” the economist Mancur Olson argued that collective action problems are pervasive, plaguing nations and economic groups alike. “Most groups cannot provide themselves with optimal amounts of a collective good,” he said, because they cannot manage a “selective incentive” or arrange “coercion or some reward.”...
...If such mortgage principal reductions could be applied on a large scale, there could be large neighborhood effects, raising a sense of optimism among homeowners and bolstering the value of all homes and, ultimately, the whole economy. But mortgage lenders in all their different forms lack a group strategy...
Whether the Greek elections this weekend trigger the Eurozone’s first exit or not, the possibility of exit is now firmly on the table. But where are the plans for this highly complex operation that could, if mishandled, cause untold economic damage in Europe and beyond? This column, by a Wolfson Prize finalist (Catherine Dobbs) and a Nobel Laureate (Michael Spence, Emeritus Dean Stanford Graduate School of Business), sketches the core elements of one such plan.
15 June 2012,"Preventing a Eurozone bank and bond run"
Columbia University, Department of Economics, Professor of Economics, 1996-present
World Economic Forum, Davos, Switzerland, Chief Economic Advisor 2006-present, author of the Global Competitiveness Index (used by the WEF in its Global Competitiveness Report since 2004), Co-editor of the Global Competitiveness Report, 2003-2008, and member of the Advisory Board and the Global Agenda Council on Competitiveness. Annual Meetings Davos-Klosters participant since 2001.
Futbol Club Barcelona, Treasurer and member of the board 2009-2010, President of the Economic Commission, 2004-2009, President of the Club, Summer 2006.
...But what outside analysts often ignore is that this bleak scenario hides some impressive successes. Spain entered the crisis with one of the lowest public debt figures in the eurozone and still has a smaller debt/GDP ratio than Germany despite its rapid rise.
Spain's conservative, diversified commercial banks have not yet needed a major bailout, and they have spent four years provisioning against the eventual collapse of real estate prices. The chronic current-account deficit has fallen by half, and export growth is strong. Unit labor costs have declined steadily for two years.
Spain last year handed a huge electoral win to a government that promised only austerity and unpopular reforms, hence voting for austerity rather than against it. In February, the government unveiled a reform of the rigid labor market which was the most radical in postwar Europe, and the only public response was a call for a general strike that met with a tepid response. Spain's indignados, who were actually the precursors of the Occupy movement, have continued a peaceful and dwindling protest over the crisis, without concrete proposals.
There is still no violence in the streets, no calls to leave the euro or repudiate the debt, no government defiance of eurozone demands. It would be difficult to find a more model patient for the bitter medicine being administered by eurozone leaders.
So why are markets continuing to drive up Spain´s risk premium? Foreign analysts appear to toss Spain into the Greece "bag" for two reasons: either they overlook...
In 2005 he received the John Bates Clark Medal awarded to economists under forty judged to have made the most significant contribution to economic thought and knowledge. In 2010 Foreign Policy listed him as one of the top 100 global thinkers.
..."The same applies to Greece and Spain. Fix politics, improve institutions, undertake structural reforms that encourage investment and innovation and create a level playing field for the population at large, and the Greek and Spanish people will be as hard-working and as innovative as Northern Europeans"...
After the expropriation of YPF from Repsol by the Argentinian government, and if the same criteria are used for the analysis in the report of 2013 as those of 2012, Argentina will worsen its position in the table at the end of this year when the data of Doing Business 2013 will be published, which will be updated or conducted with data of the 1st June 2012.
...Nine years of Doing Business data, together with other data sets, have enabled a growing body of research on how specific areas of business regulation—and regulatory reforms in those areas—relate to social and economic outcomes. Some 873 articles have been published in peer-reviewed academic journals, and about 2,332 working papers are available through Google Scholar...
...Over the past 9 years more than 12,000 professionals in 183 economies have assisted in providing the data that inform the Doing Business indicators...
...In addition, the World Bank Group has been working with a consultative group—including labor lawyers, employer and employee representatives, and experts from civil society, the private sector, the (United Nations) International Labour Organization (ILO) and the OECD— to review the methodology and explore future areas of research...
...Gayle Allard, a professor of managerial economics from Spain's IE Business School, has this analogy.
"You have the Greek model, or the Irish model," she said. "You can either go kicking or screaming, or you can bite the bullet, like people have done in Ireland."...
...
Some countries, like the UK can decide whether they do tough austerity or not. But Spain doesn't have that choice," she said.
YouTube: Project Syndicate contributor and former IMF chief economist discusses risks to the global economy, and steps industrial countries can take to spur long-term growth. Read the article discussed, "A Crisis in Two Narratives," at http://bit.ly/yf15RL.
New Data Set Reveals Health of U.S. Economy Professor Matt Slaughter talks about a newly released data set that won't get much media coverage, and yet paradoxically is one of the most important indicators of the health of the U.S. Economy.
For fifty years, the UCLA Anderson Forecast has provided forecasts for the economies of California and the United States. Founded by professor Robert M. Williams in 1952, the national forecast has been recognized as one of the most accurate, and has a reputation for being unbiased – a factor that the numerous corporate and Wall Street forecasts cannot lay claim to...
Established in 1978 The Group of Thirty is a private, nonprofit, international body composed of very senior representatives of the private and public sectors and academia.
The Group of Thirty aims to deepen understanding of international economic and financial issues, to explore the international repercussions of decisions taken in the public and private sectors, and to examine the choices available to market practitioners and policymakers.
Latest publication
The 2008 Financial Crisis and Its Aftermath: Addressing the Next Debt Challenge (PDF download, 143 pages)
Thomas A. Russo, Aaron J. Katzel (2011), (Economic Policy, Debt, Banking).
This paper examines the recent developments in the 2008 Financial Crisis, including the causes, responses, and the future outlook for the United States.
The 2008 Financial Crisis and Its Aftermath: Addressing the Next Debt Challenge
..The path to recovery now lies not in a new housing bubble, but in upgraded skills, increased exports and public investments in infrastructure and low-carbon energy. Instead, the US and Europe have veered between dead-end, consumption-oriented stimulus packages and austerity without a vision for investment...
Jeffrey D. Sachs is the Director of The Earth Institute, Quetelet Professor of Sustainable Development, and Professor of Health Policy and Management at Columbia University. He is also Special Advisor to United Nations Secretary-General Ban Ki-moon...
"Nobody knows what is going to happen next," says Nicholas Bloom. One thing is sure: "When people are uncertain about the future they wait and do nothing" – and that will lead to recession.
That's the Jeopardy-like question matching the answer: "The best step the government could take now to promote growth and employment." The Obama administration has been responding with "What are higher marginal tax rates and more stimulus?" But fundamental tax reform offers three key benefits.
First, reducing marginal tax rates on saving and investment and on work and entrepreneurship will increase capital formation and productivity, raising wages and output. Broadening the tax base and sharply lowering marginal tax rates can raise gross-domestic-product growth by a half to a full percentage point per year over a decade, according ...
Investors are anticipating the unravelling of the 21 July 2011 “solution” and a breakdown of the interbank-market that would throw the economy into an “immediate recession” like the one experienced after the Lehman bankruptcy. This column argues that this will happen without quick and bold action...
...
What needs to be done
At this point the Eurozone needs a massive infusion of liquidity. Given that the cascade structure of the EFSF is part of the problem, the solution cannot be a massive increase in its size. However, the EFSF could simply be registered as a bank and could then have access to unlimited re-financing by the ECB, which is the only institution which can provide the required liquidity quickly and in convincing quantity.
This solution would have the advantage that it leaves the management of public debt problems in the hand of the finance ministries, but it provides them with the liquidity backstop that is needed when there is a generalised breakdown of confidence and liquidity. This is exactly when a lender of last resort is most needed.
It would of course be much better if the ECB did not have to ‘bail out’ the European rescue mechanism, but in this case one has to choose between two evils. Even a massive increase in the ECB’s balance sheet (which if the US experience is any guide will not lead to inflation) constitutes a lesser evil compared to a breakdown of the Eurozone financial system.
Daniel Gros is the Director of the Centre for European Policy Studies (CEPS) in Brussels. Originally from Germany, he attended university in Italy, where he obtained a Laurea in Economia e Commercio. He also studied in the United States, where he earned his M.A. and PhD (University of Chicago, 1984). He worked at the International Monetary Fund, in the European and Research Departments (1983-1986), then as an Economic Advisor to the Directorate General II of the European Commission (1988-1990). He has taught at the European College (Natolin) as well as at various universities across Europe, including the Catholic University of Leuven, the University of Frankfurt, the University of Basel, Bocconi University, the Kiel Institute of World Studies and the Central European University in Prague.
JUDY WOODRUFF: Today's plunge marked the fourth time in just over a week where the Dow Jones industrials have dropped by triple digits. Market volatility is at again near record levels.
The scary roller-coaster ride on the stock market continued again today. How do you explain it?
CHRISTINA ROMER, University of California at Berkley: Well, I think, obviously, one of the things about the stock market is it's very hard to explain the ups and downs...
From the perspective of Michael Spence, a Nobel Prize-winning economist (2001) and Hoover Institutionfellow, the president faces some tough sledding..
...It's a structural reality that Spence believes Washington hasn't fully grasped and doesn't have a plan in place to address. "It's a design challenge, and that's not what we're doing right now," he said..
"There is every reason to believe these trends will continue," according to Spence, also a professor of economics at New York University's Stern School of Business..
Beshears and Katherine L. Milkman of the Wharton School at the University of Pennsylvania looked at how so-called "escalation bias" affects analysts' forecasts. Their paper, "Do Sell-Side Stock Analysts Exhibit Escalation of Commitment?" (PDF, 39 pages) was published in March by the Journal of Economic Behavior and Organization.
...
Beshears and Milkman studied the Institutional Brokers' Estimate System I/B/E/S database with more than 6,200 analysts' quarterly forecasts on about 3,500 companies over more than 18 years, from 1990 to 2008.
...
Among their specific findings:
As analysts got more and more extreme, or "out-of-consensus," they became less and less responsive to the new earnings information when revising their full-year forecasts.
Stubbornness hurts forecasting accuracy. Revised full-year forecasts from extreme incorrect analysts were further off the mark from actual earnings than they would have been had the analysts' updating behavior been like the behavior of analysts who started at the consensus point.
Analysts are punished for stubbornness. The more extreme, incorrect, and stubborn an analyst was, the less likely that he or she would rank among Institutional Investor magazine's "All-American" list of top analysts.
...misguided decision by Standard & Poor’s to downgrade the US...
...So can we avoid another severe recession? It might simply be mission impossible. The best bet is for those countries that have not lost market access – the US, UK, Japan, and Germany – to introduce new short-term fiscal stimulus while committing to medium-term fiscal austerity. The US downgrade will hasten demands for fiscal reduction, but America in particular should commit to look for significant cuts in the medium term, not an immediate fiscal drag that will worsen growth and deficits.
Most western central banks should also introduce further QE, even though its effect will be limited. The European Central Bank should not just stop rate hiking: it should cut rates to zero and make big purchases of government bonds to prevent Italy or Spain losing market access – the outcome of which would be a truly major crisis, requiring doubling (or tripling) of bail-out resources, or debt workouts and a eurozone break-up.
Finally, since this is a crisis of solvency as well as liquidity, orderly debt restructuring must begin. This means across the board reduction on the mortgage debt for the roughly half of America’s households that are underwater, and bail-ins for creditors of banks in distress. Greek-style coercive maturity extensions, at risk free rates, must also come for Portugal and Ireland, with Italy and Spain to follow if they lose market access. Another recession may not be preventable. But policy can stop a second depression. That is reason enough for swift and targeted action.
The writer is chairman of Roubini Global Economics, professor at the Stern School, NYU and co-author of Crisis Economics.
+
Economics team at Goldman Sachs now say: "We now see a one-in-three risk of renewed recession".
...In the meantime, US politicians might have done just about enough to convince debt markets that America’s credit is still good. For that, Americans – and others around the world – should stop pillorying them and give them their due credit.
Raghuram Rajan, a former chief economist of the IMF, is Professor of Finance at the University of Chicago’s Booth School of Business and author of Fault Lines: How Hidden Fractures Still Threaten the World Economy, the Financial Times Business Book of the Year.
...None of the current policy stances in the United States, Japan, or Europe is sustainable...
MIT bio Simon Johnson is the Ronald A. Kurtz (1954) Professor of Entrepreneurship at MIT's Sloan School of Management, a position he has held since 2004.
IMF bio Economic Counsellor and Director, Research Department, IMF (March 2007-August 2008)
Simon Johnson was Economic Counsellor and Director of the Research Department (Chief Economist) at the IMF from March 2007-August 2008. Mr. Johnson was on leave from the Sloan School of Management at MIT, where he was the Ronald A. Kurtz Professor of Entrepreneurship. Mr. Johnson is an expert on the financial sector and economic crises. Over the past 20 years he has worked on crisis prevention and mitigation, as well as economic growth issues in advanced, emerging market, and developing countries. His work focuses on how policymakers can limit the impact of negative shocks and manage the risks faced by their countries. His PhD is in economics from MIT, while his MA is from the University of Manchester and his BA is from the University of Oxford.
...if, for any reason, a country does end up in the danger zone, only two responses make economic sense. Either officials recognize immediately the inevitability of default and waste no resources trying to prevent it, or they believe that a default can be avoided and deploy all the resources at their disposal as fast as possible. As in many wars, a staged escalation in a financial crisis often leads to the worst possible outcome: a defeat with large losses....
Luigi Zingales is Professor of Entrepreneurship and Finance at University of Chicago Graduate School of Business and co-author, with Raghuram G. Rajan, of Saving Capitalism from the Capitalists (www.savingcapitalism.com).
Global foreign direct investment (FDI) has not yet bounced back to pre-crisis levels, though some regions show better recovery than others. The reason is not financing constraints, but perceived risks and regulatory uncertainty in a fragile world economy.
The World Investment Report 2011 (PDF, 251 pages) forecasts that, barring any economic shocks, FDI flows will recover to pre-crisis levels over the next two years. The challenge for the development community is to make this anticipated investment have greater impact on our efforts to achieve the Millennium Development Goals.
In 2010 – for the first time – developing economies absorbed close to half of global FDI inflows. They also generated record levels of FDI outflows, much of it directed to other countries in the South. This further demonstrates the growing importance of developing economies to the world economy, and of South-South cooperation and investment for sustainable development.
Increasingly, transnational corporations are engaging with developing and transition economies through a broadening array of production and investment models, such as contract manufacturing and farming, service outsourcing, franchising and licensing. These relatively new phenomena present opportunities for developing and transition economies to deepen their integration into the rapidly evolving global economy, to strengthen the potential of their home-grown productive capacity, and to improve their international competitiveness.
Unlocking the full potential of these new developments will depend on wise policymaking and institution building by governments and international organizations. Entrepreneurs and businesses in developing and transition economies need frameworks in which they can benefit fully from integrated international production and trade. I commend this report, with its wealth of research and analysis, to policymakers and businesses pursuing development success in a fast-changing world.
BAN Ki-moon Secretary-General of the United Nations
Page 37 and 38 have a list of the more than 30 scholars and policymakers from around the world who gathered in Philadelphia for a two-day conference.
Executive Summary
The financial and economic crisis has heightened everyone’s awareness of systemic risk. Confidence in the ability of decision-makers, policymakers and institutions to handle such risks has been shattered. Psychology, a culture of destructive self-interest, and social processes have also been invoked as part of a complex set of conditions that led to the debacle. In turn, the crisis has accelerated some prevailing demographic, economic, and social trends, including population aging, political tensions, geopolitical instability and environmental degradation, as the focus of attention has unavoidably shifted towards short-term, immediate concerns. The crisis has placed the issue of systemic risk at the top of the global agenda, forcing analysts and policymakers to make a stark distinction between what is important and what is actually urgent.
In this white paper we provide an overview of the causes, consequences, and potential solutions to the problem of risk, focusing on economic and financial aspects, while also paying attention to political, social and environmental risks associated with the crisis and its aftermath. The analysis represents the outcome of a collective, multi-disciplinary effort at understanding risk by a group of more than 30 scholars and policymakers from around the world who gathered in Philadelphia for a two-day conference.
The analysis begins with the conventional explanations of the crisis, further adding political considerations, institutional constraints, psychology, and social processes. This prepares the stage for the assessment of the effectiveness of policy interventions during the crisis which, while averting a massive meltdown, generated a number of additional problems, both short-term and long-term. Failures in global governance and in understanding complex ripple effects are also explored. Risks building up in emerging economies—from financial to political and demographic—are presented as a stark reminder that global instability is punctuated by a growing number of troubled hot spots.
The conference participants identified four action items. First, global governance needs to be enhanced, a task that is not easy as a changing of the guard takes place due to the ascendancy of the emerging economies. Second, regulation must both set parameters for self-regulation and establish a set of cushions, bells and whistles to ameliorate the possibility of further systemic crises. Third, policymakers and scholars ought to adopt a more humble attitude in terms of the extent to which they are able to understand and overcome the complexities posed by crises. And fourth, as people adopt shorter time horizons due to incentives, demographics, politics, and cognitive biases, it is important to remain on the alert for the weaknesses and faults in the global economic, political, and social architecture.
As the deadline approaches for the US Congress to either raise the debt ceiling or enter into technical default on the huge US public debt, what appears to characterize the debate is a lack of concern for what will happen if the deadline is missed.
Republicans, determined not to raise taxes, refuse to approve any compromise that would violate that objective. Democrats, reluctant to make deep reforms to social programs, want most adjustments to happen on the revenues side. The deadlock has held firm even under the time pressure of looming nonpayment on the debt.
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