Felix Salmon

A big red dog explains the fiscal cliff

The main problem with trying to explain the fiscal cliff, as I see it, is that people get far too caught up in the details — tax deductions, tax hikes, spending cuts, debt ceilings, and the like. Which are all important, but they’re not fundamentally what the austerity bomb is about. Rather, the reason that everybody’s worried about the effects of the fiscal cliff is simple Keynsian mathematics: if we cut spending and raise taxes, that means less economic activity — and a nasty recession, just when we can least afford it.

Should gas prices be soaring?

Traffic is flowing in New York again this morning, for four reasons. First is the ban on private cars entering the island if they’re carrying fewer than three people. Second is the subways, which have started working again, in a limited manner. Third is a noticeable increase in bicyclists, even between yesterday and today: I have real hope that Sandy might persuade a whole swath of new people that bike commuting is incredibly fast and easy. And then there’s a much more mundane fourth reason: people are running out of gas.

What would happen if investments in people succeeded?

Daniel Friedman has a question:

There are now a few companies — Upstart and Lumni to name two — trying to create a market where we can invest in people in exchange for a percentage of future income. If they succeed and reach scale, will student debt problems be alleviated? Will our future incomes be reliably predicted by newly developed algorithms? Will it encourage increased risk-taking?

When Taleb met Davies

This morning, Nassim Taleb returned to Twitter, posting one of the technical appendices to his new book. And immediately he got into a wonderfully wonky twitterfight/conversation with Daniel Davies.

How to protect New York from disaster

Today, September 11, is a day that all New Yorkers become hyper-aware of tail risk — of some monstrous and tragic disaster appearing out of nowhere to devastate our city. And so it’s interesting that the NYT has decided to splash across its front page today Mireya Navarro’s article about the risk of natural disaster — flooding — in New York.

Chart of the day, employment-status edition

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There are two ways in which the national employment situation influences the election. The first is, simply, the effect of unemployment and underemployment on America’s animal spirits. People who are unemployed, or who are so discouraged that they’re not even looking for work any more, don’t tend to be very happy with their lot, and as a result are more likely to vote against the current president. It may or may not be fair, but the president does get blamed for current economic conditions, and arguments about first derivatives (“it’s bad, but it’s getting better”) or counterfactuals (“it’s bad, but it’s better than it would have been under the other guys”) tend to be pretty unpersuasive to voters.

Why you won’t find hyperinflation in democracies

There are those who believe that the length of a mathematical paper is inversely proportionate to how interesting it is. Something similar can be said about the new paper — short and absolutely first-rate — from Steve Hanke and Nicholas Krus, entitled “World Hyperinflations“. It’s technically 19 pages long, but the first 12 are basically just throat-clearing, and the last two are references. The meat is the five pages in the middle: three pages of tables, and another two of footnotes, detailing every instance of hyperinflation that the world has ever seen.

Annals of dubious research, 401(k) loan-default edition

Bob Litan, formerly of the Kauffman Foundation and the Brookings Institution, has recently taken up a new job as director of research for Bloomberg Government, where he’s going to have to be transparent and impartial. But one of his last gigs before moving to Bloomberg — a paper on the subject of people borrowing money from their 401(k) accounts — was neither of those things.

Why social mobility is important

Tim Harford is a fan of the clear way in which Alex Tabarrok has couched the debate — which started with a Tyler Cowen post back in January — about the desirability of intergenerational economic mobility. Or, in English, is it a good thing if quite a lot of poor people become rich?