Pre-May Day blurbs. Some old, some new.
- Yglesias believes in one dollar one vote. I hear the price of foie gras has gone up alot over the last decade. Must be because Americans prefer it. The real surprise is given the massive increase in concentrations of wealth, why land prices in the urban core have not become even more expensive. That the 99% who cannot buy land in the urban core continue to prefer to buy their own little spot of land farther away, and consequently live in less dense areas is a trend that has held up over a thousand years, and is not surprising at all, particularly as transportation and communication continues to become more efficient. But I don’t understand how the left can idealize living in the core while ignoring the centrality of land ownership and getting out from under the thumb of economic rent extraction by landlords. Handing over 1/3 of your income to a small group of incumbents is not fun. The automobile and similar increases in transportation efficiencies were viewed as liberating because they were, in fact, liberating. Perhaps new modalities are needed now, but moving back into the core is not going to happen.
- Last May Day, Obama did not dissapoint, joining many other presidents in declaring May 1 Loyalty Day. Who wants to place bets on what our President will do today as workers from around the world march?
- A beautiful post
- Now more than ever, I am reminded of this gem. In particular: “Furthermore, even when moderate adjustments could be made, they tend to be resisted, because any simplification discomfits elites.”
Central Bank attempting to control the money supply
Continuing with our chartbook investigation as to what was moderate during the Great Moderation, let’s turn to prices — based in part on this post.
Let’s start by looking at spreads in consumption prices versus investment prices:
Investment Price Index/Consumption Price Index, base year = 1 at 2005
The relative rise in consumption prices is driven primarily by health care and housing services:
Major PCE components
What about relative price volatility? I took the y/y percent change of the following PPI time series:
- Producer Price Index: Finished Goods: Capital Equipment (PPICPE), Percent Change from Year Ago, Monthly, Seasonally Adjusted
- Producer Price Index: Crude Materials for Further Processing (PPICRM), Index 1982=100, Monthly, Seasonally Adjusted
- Producer Price Index: Intermediate Materials: Supplies & Components (PPIITM), Percent Change from Year Ago, Monthly, Seasonally Adjusted
- Producer Price Index: Finished Consumer Foods (PPIFCF), Percent Change from Year Ago, Monthly, Seasonally Adjusted
- Producer Price Index: Fuels & Related Products & Power (PPIENG), Percent Change from Year Ago, Monthly, Not Seasonally Adjusted
- Producer Price Index: Finished Consumer Goods Excluding Foods (PFCGEF), Percent Change from Year Ago, Monthly, Seasonally Adjusted
Producer Price Index series dispersion
..and calculated the standard deviation of these series:
Price Dispersion measured as STDEV of % changes of Major Producer Price Indexes
In addition to spreads in producer prices, let’s look at spreads in rates, i.e. risk premia:
From Shiller Data, we have the house price index relative to the consumer price index:
Real House Price Index
What price stability?
We smelt the steel
to make the hammers
to dig the mines
to mine the ores
to smelt the steel
Update 2: Added a Youtube video
Updated 1: Added snark
Noah Smith doesn’t understand why everyone who’s ever looked at Chinese development seriously is calling for a re-balancing and consumption led growth. Instead, he is worried about bliss points:
Or does it mean that consumption should rise faster than the other components of GDP? Fine, but consumption’s share of GDP can’t increase forever. Eventually, consumption’s share will hit a ceiling, and the “consumption-led growth” – if this is what it means – will be gone.
On the other hand, we have the historical record:
Source For those with low screen resolution, the declining right hand curve corresponds to China — an aging population filled with households that would very much like to consume if they were given the chance to do so. And yes, that is a consumption figure of only 35% of GDP which is most likely an overestimate.
Is our economists learning?
Which eras are those of moderation, and which are those of excess volatility? What did the central bank succeed in stabilizing as a result of relying on interest rate adjustments rather than income flow adjustments?
Tom Slee has written an essay titled “Seeing Like a Geek”. The premise of his essay is that tearing down barriers to information disadvantages local monopolists and advantages new monopolists who have superior sophistication and complementary skills. Supposedly we are better off with local video rental stores than with Netflix.
There is a sort of odd fascination with small businessmen — a specimen famous for short-sightedness, self-satisfaction, and inefficiency.