Productivity and Innovation

Andrew Powell, 28 April 2015

Commodity prices are very persistent. A boom is always followed by a bust, and after a slump, a boom comes along. This column reviews some basic aspects of commodity theory and their role in the last boom. Finally, it presents arguments stating that lower commodity prices are here to stay for a while. We may have to wait many years for the next boom to come along.

Jonathan Ashworth, Charles A.E. Goodhart, 28 April 2015

When panic strikes, people tend to withdraw cash. While there were upticks in currency-to-deposit ratios in the autumn of 2008 and early 2009, they were modest and very short-lived compared to the Great Depression. This column argues that leading central banks learnt from the 1930s mistakes and acted decisively to check the panic. Key policies were the existence and upgrading of deposit insurance schemes, massive liquidity injections, and rapid cutting of interest rates. The most important were the guarantees that the biggest banks wouldn’t fail.

Charles Wyplosz, 27 April 2015

It seems that there will be no agreement between Greece and its Eurozone partners. Short of cash, the Greek government will have no choice but to suspend payment of its maturing debts. This column looks at what happens next. In brief, it will be very much up to the ECB to decide.

Ufuk Akcigit, Salome Baslandze, Stefanie Stantcheva, 27 April 2015

Taxing high earners is an issue of growing importance in many nations. One concern is that raising rates will lead high earners to move elsewhere. This column suggests that top-tier inventors are significantly affected by top tax rates when deciding where to live. The loss of these highly skilled agents could entail significant economic costs in terms of lost tax revenues and less overall innovation.

Dora L. Costa, Matthew E. Kahn, 27 April 2015

Newspapers report good and bad news, but the reporting doesn’t always match reality. This column presents evidence from turn-of-the-century America that news reports of typhoid tracked mortality patterns, but the reporting was biased. Spikes in death rates led to bigger jumps in media coverage when death rates were low. This could be due to the idea that deviations from Kahneman and Tversky’s ‘reference points’ are more newsworthy, or due to the possibility that bad news is more valuable to readers when things seem to be going well.

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