Theoretical Moments — Alpha.Sources

Economics brain food

Glenn Loury is preparing to host a conference at the Hoover Institute, honouring the life and works of Thomal Sowell. To that end, he is hosting a number of conversations on his podcast. The first one with Emily Skarbek, associate economics professor at Brown University, and the second with Jason Riley, columnist for the WSJ, a senior fellow at the Manhattan Institute. They’re great conversations even if you, like me, are not familiar with the works and life of Thomas Sowell. TS, still going strong in his 90s, writes and thinks about core principles of economic thought, social life, individual responsibility and rights, and it is great to hear Glenn and his guests flex their intellectual muscles on these topics. I’d add to these two a recent Econtalk episode in which Russ Roberts sits down with his friend, and long-time guest on Econtalk, Mike Munger to discuss the question of what capitalism is.

We could all use a space online to unplug once in a while, especially in our current moment. For that purpose, you could do a lot worse than listening to the conversations above.

A new feudalism?

I recently finished Techno Feudalism: What Killed Capitalism by Yanis Varoufakis, on audiobook read by the author himself. It offers an interesting perspective on modern capitalism or, in the opinion of the author, why capitalism as we know it is dead. Mr. Varoufakis writes from the left, which grants him a unique perspective inherent to that side of the political spectrum. Marxism is interesting primarily for its critique and diagnosis of capitalism’s structure, not for its purported inevitable end-result of a communist revolution. In this sense, Mr. Varoufakis’ book is an enlightening read.

The latest front in the macro wars

The skirmishes in the macro wars are getting dirtier. More recently, the debate on inflation has pitted #TeamTransitory and its detractors—I’ve seen the other side described as #TeamPermanent and #TeamSustained—in a mud-slinging and, often emotionally charged, spat. I suspect that #TeamTransitory will win, eventually—whatever that means—though I also think this side of the debate has most to answer for in terms of the deteriorating debate. The rules seem to change as the consensus-beating inflation prints roll in. As I as explained here, it is unreasonable to term all versions of the world in which inflation is not making a new high on a monthly basis, as a transitory. More importantly, however, the checkmate-like rebuttal to anyone arguing that rates could and should go higher that they must be in favour of higher unemployment is particularly odd to me. The question we need to ask it seems is whether there are conditions under which policy tightening—both fiscal and monetary—to rein in demand are optimal or desirable, in an economic sense, even if it means, presumably, unemployment going up. The answer is; yes.

The Life Cycle Hypothesis

Depending on the wording, a search on Google Scholar for papers and research on the link between macroeconomics and demographics yields anywhere between 20,000 and 100,000 results. This is an unhelpful start for someone looking to explore and understand the field. This essay aims to rectify this issue by tracing the origins of the life cycle hypothesis (LCH)—ground zero for linking macroeconomics and demographics—through a close inspection of the 1950s literature that gave birth to the theory. It is motivated by the idea that anyone who wishes to explore this topic needs to have a firm grasp of the original material. A lot can be said for getting the basics right, and this essay is an ode to that idea.

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