Machiavellian missionaries

I have had recently the opportunity to chat with a missionary who has been working as a bush doctor in Western Africa. I find it quite admirable that a Westerner is willing to leave easy life aside and spend many years in the middle of an inhospitable nowhere to help others. Of course, the end goal is to spread Christianity, and I have no problem if these free health services are provided through a sponsor.

What I found very disturbing, though, was the approach to converting the locals. Indeed, missionaries tell these pagans that now that they know about God, Jesus and the Bible, they will go to Hell if they do not convert. They would have avoided that fate had they remained ignorant. The missionaries are devout Christians and believe this as well. Can we then really say they care about the locals? They willingly paint the pagans into a corner, threatening them out of nowhere with the worst possible outcome in their afterlife. What is then the point of making terrestrial life a little better? In the end, many locals would much worse off after the arrival of the missionaries.

Insure better against natural disasters

When Hurricane Sandy hit the East coast of the US, relatively few people died, there was considerable damage, but no long term consequences of significance are expected. The story is different with Hurricane Katrina, which inflicted damage of a similar order of magnitude but New Orleans and its surroundings are still feeling the hit. Look at similar weather events in developing countries and the recovery takes even longer, if ever. This should not have to do with the number of victims, as there is some evidence that sudden population drops actually improve conditions for the survivors.

Goetz von Peter, Sebastian von Dahlen and Sweta Saxena use data on natural catastrophes from a large reinsurance company and find that what matters for subsequent macroeconomic performance is not the cost of the damage, but the cost of the uninsured damage. It just so happens that the proportion of insured property increases with development. Yet another argument to encourage adoption of insurance policies in developing economies (I, II III, IV).

Large GDP shocks are permanent

Fiscal policy being in complete disarray and unpredictable in the United Sates, economic policy is currently limited to monetary policy. But even there, it is not blindingly obvious what the Federal Reserve should do. If economic activity is below potential (and is forecasted to remain so beyond the "long and variable lags" it takes for monetary action to have an impact), the monetary easing is in order. Define potential, and there disagreement starts. If you look at the evolution of GDP, you cannot help thinking that it went through a permanent downward shift and is now tugging along at the usual growth rate, simply a step below. This would mean we are ready to get off the zero interest rates:



That would go against the idea that there are no permanent shifts in GDP. But while there are usually no such shifts, maybe there are rare circumstances where they happen. Mehdi Hosseinkouchack and Maik Wolters test the unit root of US GDP not only at the conditional mean but also at the tails of the distribution using a quantile autoregression based unit root test. Ad they find that sharp declines in output, like the one we recently experienced, do indeed look permanent. We should therefore not expect GDP to get on the previous path, and this not treat the latter as our current potential GDP. Would the FOMC believe this? I doubt it.

The Gains from Trade

A story of how a model employee outsourced his own job.

Some people go to classical concerts to cough

Classical concerts comes with a set of very strict rules for the public: you cannot applaud while the music plays (the only exception being after opera arias), you are supposed to dress up, and there should be complete silence from the audience during the performance. And that urge to cough should be repressed until an applause. Yet, it turns out that coughing is more frequent during the performance.

Andreas Wagener ponders from an economic angle this apparent voluntary breach of concert etiquette. Norms at concerts are supposed to create conformity. Concerts are, to some extend, also a venue where you want to be seen. Being against the norm in subtle ways make you more remarkable. Parading naked would certainly get you noticed, but in a bad way. Coughing at the wrong moment also gets you noticed, but you can be excused unless you dared to go to the concert with a severe case of whooping cough. The cougher can always blame it on a bodily reflex that is unexpected and cannot be controlled. At it looks like the empirical evidence shows coughing is more prevalent in quiet moments of the concerts, when the benefit of coughing is the highest.

Concert halls will be packed in this flu season.

A Comic on GDP Accounting

A friend recommends this comic as a way to motivate a class discussion of GDP.

Very Quick Reviews

My older son and I saw Zero Dark Thirty over the weekend.  Great movie.  On par with Argo.  Much better than Lincoln, which seems to be the Oscar favorite.

By the way, I have heard that the revival of Pippin I saw and loved is moving to New York after its Boston run is over.  Highly recommended.