Thursday, December 25, 2014

George Deeks; "In order not to be reduced to sorrow and bitterness, we must look forward."

I found this speech remarkable in a number of ways. While probably an oversimplification, I think that it encapsulates a fundamental difference in approaches one can take to, and ultimately overcome, adversity/tragedy: look forward, and "secure the future" instead of dwelling on the past. George Deeks is a Christian Arab and Israel's Deputy Consul to Norway:

Office politics are unavoidable's all in how you manage them and prevent them from becoming toxic (HBR):

The best managers recognize the psychological underpinnings of office politics and do two things in response: they manage the way they themselves behave, and they are careful about how they motivate others. People who are perceived as apolitical display high levels of congruence between what they say and what they do, and they are also good at rewarding others for what they were required to do, while holding them accountable for what they fail to deliver.

As such, good leaders focus on the bright-side personality characteristics associated with their ability to navigate office politics: social skills, emotional intelligence, and intuition. They recognize that the more secretive, selfish, hypocritical, hierarchical, and incompetent they appear in the eyes of employees, the more political the organization will become. So they are driven to come across as competent, transparent, approachable and altruistic.

And in motivating their employees to try harder, they avoid pitting employees against one another and instead focus on out-performing common adversaries: the company’s competitors. They do this through articulating a meaningful mission — a vision that resonates and motivates people to achieve a collective goal. This keeps the team focused on beating their competitors, rather than each other.

"The final nail in the Keynesian coffin?"

I'll say no. Have politicians ever let evidence stand in their way of consolidating power and increasing spending? Cato's Dan Mitchell is also skeptical but points to one academic - Professor John Cochrane of the University of Chicago:

The tide also changed in economic ideas. The brief resurgence of traditional Keynesian ideas is washing away from the world of economic policy. …Why? In part, because even in economics, you can’t be wrong too many times in a row. …Our first big stimulus fell flat, leaving Keynesians to argue that the recession would have been worse otherwise. George Washington’s doctors probably argued that if they hadn’t bled him, he would have died faster. With the 2013 sequester, Keynesians warned that reduced spending and the end of 99-week unemployment benefits would drive the economy back to recession. Instead, unemployment came down faster than expected, and growth returned, albeit modestly. The story is similar in the U.K.

Monday, December 22, 2014

I'm betting on technology, American entrepreneurs and human ingenuity

I suspect that the WSJ article even underestimates the value of technology here that will keep driving costs of production lower. If I'm right, the world of hurt couldn't be happening to nicer people... (WSJ)

Saudi Arabia is taking a risk by letting oil prices plunge, said Arab, American and European officials. Saudi officials have said their economy can survive at least two years with low prices, thanks partly to the kingdom’s $750 billion foreign-exchange reserves. Arab officials believe many less-efficient producers will be driven out of the market.

Still, some oil-industry executives said, Riyadh and Mr. Naimi may underestimate how technology and the shale-oil boom have fundamentally altered energy markets. Many U.S. companies, they said, can make money or break even with oil below $40.

Tuesday, December 16, 2014

Not so shocking: trade leads to development

Again reinforcing that what's needed for economic development is trade, not aid - when a random group of small rug producers was given the opportunity to export handmade carpets to high-income markets (study by Atkin, Khandelwal and Osman, via Chris Blattman):

Treatment firms report 15-25 percent higher profits and exhibit large improvements in quality alongside reductions in output per hour relative to control firms.

These findings do not simply reflect firms being offered higher margins to manufacture high-quality products that take longer to produce. Instead, we find evidence of learning-by-exporting whereby exporting improves technical efficiency.

First, treatment firms have higher productivity and quality after accounting for rug specifications. Second, when asked to produce an identical domestic rug using the same inputs, treatment firms receive higher quality assessments despite no difference in production time. Third, treatment firms exhibit learning curves over time.

Finally, we document knowledge transfers with quality increasing most along the specific dimensions that the knowledge pertained to.

Friday, December 05, 2014

The Japanese economic recovery that wasn't

Inspired by the acolytes of Keynesian economics, Abenomics doesn't appear to be working out so well (Cato):

The government spending of tens of billions of dollars into public works projects — “investments,” as President Obama calls them–caused the Japanese debt burden to catapult from 19 percent of GDP, among the lowest in the industrialized world, to over 142 percent, among the highest.

Meanwhile Japan keeps printing money, as if it can devalue its way out of the crisis. From the late 1980s through 2000, the central bank’s balance sheet more than doubled — a precursor to the “quantitative easing” carried out by the U.S. Federal Reserve. And since 2000, the balance sheet has doubled once again.

But where is the promised recovery?

The expected Keynesian “multiplier effect” from spending and a flood of yen into the market never arrived.

Housing starts in Japan are still lower than the level nearly 25 years ago. Unemployment is still low by international standards, but wages have been flat.

It’s all a tragic story of economic playmaking that has gone all wrong. But don’t tell that to Paul Krugman of the New York Times, who predicted Japan “may end up showing the rest of us the way out” of stagnation.

Joseph Stiglitz, a fellow Nobel laureate of the Keynesian variety, advised American politicians to use the same strategy: “What we really need in the U.S. is expansionary policies that Abenomics is bringing into Japan.”