Too much finance?

This paper examines whether there is a threshold above which financial development no longer has a positive effect on economic growth. We develop a simple model in which the expectation of a bailout may lead to a financial sector which is too large with respect to the social optimum. We then use different empirical approaches to show that there can indeed be “too much” finance. In particular, our results suggest that finance starts having a negative effect on output growth when credit to the private sector reaches 110 percent of GDP. We conclude by showing that the size of the financial sector was a significant amplifying factor in the global crisis that followed the collapse of Lehman Brothers in September 2008.

The vox.eu article about it is here

The paper is here

An older version of the paper is  here

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Keynes on exams

The results of his civil service exams infuriate Keynes. He writes to Strachey:

"I have done worst in the only two subjects of which I possessed a solid knowledge - Mathematics and Economics. I scored more marks for English History than for Mathematics - is it credible? For Economics I got a relatively low percentage and was eight or ninth in order of merit..."

He was later to say: "I evidently knew more about Economics than my examiners."

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On economists

Therefore, the total impact includes a journal's impact on many disciplines
other than economics. For many purposes this may be an entirely reasonable
measure of influence, but economists, being a rather narrow-minded and
self-centered group, are probably more concerned with a journal's impact on the
economics profession

Liebowitz and Palmer (1984)
Journal of Economic Literature 22, p.81-82.
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Macro Data 4 STATA

is now public http://sites.google.com/site/md4stata/.

This is Alex Tabarrok on MR. One commenter suggests to install Kountry. I did not now about it and it's indeed very cool (however, I am not sure that it is more useful than Md4Stata, they are both useful and I think that they complement each other)

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Surely

Surely, no sentence beginning with the word ‘surely’ can validly contain a question mark at its end? However, one paradox is enough for one article …” This was Paul Samuelson
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Paul Samuelson passed away

Here's Krugman
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Nudge

Just finished reading the book and liked it a lot. Here's the website

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Krugman on Skidelsky on Keynes

Here

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Back to 1978

Gordon on the state of Macro

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Posner versus Thaler

Here, Here, Here

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Journal for rejected papers

So far only in math. (found on MR). The first time I heard the idea of a journal for rejected papers was 15 years ago from Alberto Cassone.

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Interview with Samuelson

Waiting for part 2. In the meantime:

And this brings us to Alan Greenspan, whom I've known for over 50 years and who I regarded as one of the best young business economists. Townsend-Greenspan was his company. But the trouble is that he had been an Ayn Rander. You can take the boy out of the cult but you can't take the cult out of the boy. He actually had instruction, probably pinned on the wall: 'Nothing from this office should go forth which discredits the capitalist system. Greed is good.'

However, unlike someone like Milton, Greenspan was quite streetwise. But he was overconfident that he could handle anything that arose. I can remember when some of us -- and I remember there were a lot of us in the late 90s -- said you should do something about the stock bubble. And he kind of said, 'look, reasonable men are putting their money into these things -- who are we to second guess them?' Well, reasonable men are not reasonable when you're in the bubbles which have characterized capitalism since the beginning of time.

part two is here

By the way, I don't want you to think that I think that everything for the next 15 years will be cozy. I think it's almost inevitable that, with a billion people in China wide awake for the first time, and a billion people in India, there's going to be some kind of a terrible run against the dollar. And I doubt it can stay orderly, because all of our own hedge funds will be right in the vanguard of the operation. And it will be hard to imagine that that wouldn't create different kind of meltdown.

Last thing. Mea culpa, mea culpa. MIT and Wharton and University of Chicago created the financial engineering instruments, which, like Samson and Delilah, blinded every CEO -- they didn't realize the kind of leverage they were doing and they didn't understand when they were really creating a real profit or a fictitious one. There 's a lot of causality in economics, even though it's very far from an exact science.

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Forecasters

here

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Museums (economics and modern art)

Rigotnomics has a post about the economics museum in Mexico City. I know that the University of Buenos Aires has a museum dedicated to external debt crises but I've neve seen it. I will try to go when I go to LACEA this October.

Talking about muesums, last week I was in London and went to Tate Modern. It's amazing. I got goosebumps from this Cattelan piece.

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Brad DeLong on Posner and the Chicago School

Here

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FT exchange rates

The Financial Times is the best place to sell your dollars. In the normal world 1 USD buys you 0.7 euro cents or 0.6 pence. In the FT world 1USD buys 1.7 euros (2.5 times the normal exchange ate) or 0.8 pence (1.3 times the normal exchange rate). 

Here it is: How much would you pay to read this page? At about 2,000 of the roughly 50,000 printed words in a typical copy of the Financial Times, it should in theory be worth about 4 per cent of the newspaper's cover price - 10 US cents, 17½ euro cents or eight pence.

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Growth after the crisis

New (at least to me) paper by Dani Rodrik

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Popper on research

via CB

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The big problem of small change

Via MR, I found this article on lack of coins in Argentina. The same thing happened in Italy in the 1970s. There is actually serious research on this. I think that it started with Cipolla (his laws of stupidity are here). The most recent work is by Sargent and Velde. 

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Refuted economic doctrines

Here

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