Blogging's been light this week due to a few events, including speaking at the President's Academy for Public Administration and Economy (RANEPA) on institutional challenges to Russia. But wanted to let you know I appeared on Swiss financial TV today talking about more short-term challenges to the Russian economy and a response to the IMF/World Bank forecast
Greece's favorite Kanzlerin, Angela Merkel, absolutely crushed the opposition SPD yesterday in German elections to win an outright majority. However, it's not all rosy, as the FDP, the actual free-marketeers, failed to clear the 5% threshold and won't be in the Bundestag anymore. Meaning that there still might be a black-red coalition in the offing. Stay tuned.
It also helps to understand one of the institutions that shapes not only our worldview of economics, but that shapes the economists - I'm of course talking about the educational system of a specific country. In a real sense, the university system has somewhat converged internationally, especially in relation to higher degrees - while there may be specific differences (such as the habilitation system in Germanic countries and Poland, or the somewhat screwy Russian system of nauk and doktor and who knows what else), for the most part the tenets of academia are fairly similar.
And, according to this intrepid Swiss soul, it's a) a load of bunk, b) worthless at best and damaging at worst, and c) a cartel made for those on the inside to jealously guard against those on the outside. It's fascinating reading and, really, anyone who has spent any time with academics will agree with the bulk of what he has to say.
The discouraging thing is that, while he is a hard-core scientist, his words have applicability for all PhDs/academics:
“Professors with papers are like children,” a professor once told me. And, indeed, there seems to exist an unhealthy obsession among academics regarding their numbers of citations, impact factors, and numbers of publications. This leads to all sorts of nonsense, such as academics making “strategic citations”, writing “anonymous” peer reviews where they encourage the authors of the reviewed paper to cite their work, and gently trying to tell their colleagues about their recent work at conferences or other networking events or sometimes even trying to slip each other their papers with a “I’ll-read-yours-if-you-read-mine” wink and nod. No one, when asked if they care about their citations, will ever admit to it, and yet these same people will still know the numbers by heart. I admit that I’ve been there before, and hate myself for it.
Having only recently gone into the publishing game (remember, I came to my PhD much later in my career because, you know, I thought I would be doing my own research and not just kowtowing to 24-year-olds who had never done a days' work in their life), I agree with this entirely. Some of the other things he mentions are also true, given my short time dealing with reviewers who seem to make the point they want, even if it's already in the paper:
I often wonder if many people in academia come from insecure childhoods where they were never the strongest or the most popular among their peers, and, having studied more than their peers, are now out for revenge. I suspect that yes, since it is the only explanation I can give to explain why certain researchers attack, in the bad way, other researchers’ work. Perhaps the most common manifestation of this is via peer reviews, where these people abuse their anonymity to tell you, in no ambiguous terms, that you are an idiot and that your work isn’t worth a pile of dung. Occasionally, some have the gall to do the same during conferences, though I’ve yet to witness this latter manifestation personally.
Agree agree agree. The best manifestation of this was a paper I had rejected lately - I had extensively re-written it to comport with the first referee's three pages of notes (which, for the most part were excellent and helped the research become much better). The second referee wrote, in very poor English, about two paragraphs which were off-topic and dismissed the paper entirely. However, on the basis of the first referee, I went forward... after three months, it came back that the first referee was not satisfied, mainly on (oh the irony) the basis that the English wasn't up to snuff. But this wasn't the real dinger, the real humdinger was that, as an example of poor English, he cited a footnote that actually contained the words of Shakespeare.
To recap, this referee believed that Shakespeare was poor English. And THAT is everything you need to know about the ivory tower of Babel that academics have locked themselves into
I appeared yesterday on Russian News Service (Russian Radio, 107.0) at 2PM local time to talk about Armenia's actually surprising announcement that it's backing away from the EU and moving swiftly towards joining the Russian-led Customs Union. My gut feeling is that the Russians have promised Armenia favorable support regarding Nagorno-Karabakh, something that the EU was not likely to do. On the whole, though, probably a bad move for Armenia and a move that won't affect Russia, the EU, the US, or anyone else.
Listen to the show in its entirety here.
One other note: the host, Olga Baikalova, was fantastic, really asked some great questions and great follow-ups. And my translator, Margarita, was, as usual, fabulous. Thanks to both of them.
Disregard what I said earlier about the ruble - Putin's masterstroke in Syria, combined with the Fed's continued running of the presses, means the ruble is back down under 32 today.
Apparently the Fed announced that it was NOT going to "unwind" "quantitative easing" as soon as it had previously indicated. It has been treated by the markets and the media as quite the surprise:
The US Federal Reserve stunned the global financial markets last night as it opted to keep its quantitative easing programme going at $85bn a month despite widespread expectations that it would take the first step towards "tapering" it down.
How is this really a surprise? The minute the Fed announced back at the beginning of the summer that the party was the over, the markets went into a deep depression (spiritually, not economically); emerging markets are seeing a pullback already of the tsunami of liquidity that sloshed their way (and they're none too happy about it, see India's response at the G-20); and everyone decided to gird up their loins for the inevitable bubble burst that was coming.
But, shock and dismay, continued weak jobs number came in - as a digression, do you think Helicopter Ben might one day think the causality runs from monetary easing to poor economic performance, and not the other way - and since the Fed has explicitly said that employment is now a target, what could have happened? This is no shock - and, like protectionism, the more the markets get addicted to easy liquidity, the harder it is going to be to break it. Mark my words, we've got trouble ahead.
This is a bit dated, and I'm not sure how I missed it, but the Head of the Central Bank of Estonia (Eesti Pank) said in April that part of the reason for the Baltic success in bouncing back from crisis was the fact that they did the adjustment rapidly. That is, in a quasi-Misesan framework, they took their punches quickly and let the malinvestment work itself out, rather than try to prop up the creaking edifice with inflated currency ( I say "quasi" because, while Estonia is pretty good in terms of its liberal policies, it still is part of the EU and was pretty far from the frontier in terms of its fiscal and monetary policies). As you may or may not know, I studied under the architect of "shock therapy," Leszek Balcerowicz, at the Warsaw School of Economics, and it has been those countries that reformed the fastest that saw the most success. Estonia once again confirms this.
Yesterday was Constitution Day in the United States, honoring the signing of the Constitution on September 17, 1787. When we talk about political institutions, scholars often focus on constitutions and constitutional law as the sort of ur-political institution: after all, constitutions are generally "founding documents" that lay out the rules of the game and describe the distribution of political power within a system. Of course, constitutions can be amended, but there is no better example of a "Type II" policy - a policy that is directly related to institutional building. And like institutions themselves, constitutions (and Type II policies in general) are mean to be fairly solid and unchanged, if not immutable. Indeed, looking at constitutional changes is often a great proxy for political volatility (as shown in Argentina).
Of course, this doesn't mean that constitutions are actually restraining in reality, for administration can always thwart the designs of a piece of paper; a court can aggrandize power for itself to "interpret" the constitution; or normal political processes can entirely subvert the supposedly eternal truths of a constitution in favor of transient political expediency. Moreover, a constitution itself can be nothing more than a political ploy, a way to show the world that democracy has been achieved while acting counter to its tenets. Of course, constitutions also need not be politically or economically liberal in any way shape or form: given that a constitution is written by political elites ascendant at the time, it can enshrine such anti-liberal attributes as slavery or restricted voting to a certain class/race/gender.
Moreover, the economic effect of constitutions is debatable; my own preliminary research in my book showed that constitutions really didn't matter in transition economies for many economic metrics, but this is somewhat to be expected (after all, constitutions shouldn't really matter in the short-term, and 20 years was definitely the short-term). We should really only expect to see constitutions have effects in the medium- and especially the long-run, as institutions develop under its protective umbrella. Of course, others have done much more intensive research in this area (Persson and Tabeliini literally wrote the book on this), but this has been somewhat limited to the structure of the political system that is created under a constitution; in the citation above, P&T find that presidential systems have smaller governments, while parliamentary systems have more persistent fiscal outcomes. Much more work needs to be done, especially in seeing if constitutions actually do restrain government in more than just size - based on the US, and given its explosion in size of government since the mid-1960s (but especially over the past 10 years), it is likely that current political processes can always undermine past ones.
Tony Abbot is sworn in as Australia's PM and immediately pushed for officials to prepare legislation to repeal the carbon tax, the sine qua non of both Julia Gillard and Paul, er, Kevin Rudd's tenure. While I have no real dog in the fight over asylum seekers (open borders are the preferred alternative to lessen the power of the state, although impractical in a world of welfare statism), I think National Review said it best by noting that at least Australia was back under a bunch of grown-ups.
As a bonus, some of the Australians whom I used to work with at the IFC, making tax-free salaries working for an international organization while agitating for higher taxes for everyone else, are appalled at Abbott and have posted things about how there is only one woman in his cabinet. I would say, so long as that woman is not Julia Gillard, it's all right with me!
OK, flame off and political digression over.
Apologies for the awful pun this Monday morning, but it looks like Summers is out and there is no stopping the Yellen juggernaut for the Fed. Apparently, and according to the FT article linked above, lefty Democrats opposed his nomination as he was vilified as an architect of financial de-regulation. I don't even know where to begin with what's wrong on that one (I only have so many megabytes allocated to me for this website), so I'm not even going to try. And while I can't comment on how Larry Summers would have been as a Fed chief, I think having a monetary dove steeped in New Keynesian economics as the prohibitive favorite is not a situation that anyone (the US, Europe, emerging markets, anyone who holds cash) should be proud of.