You've heard of an international market for superstar soccer players. We need an international market for superstar central bankers.
[ Reuters ]
Great Britain gets a lot of things wrong, like food and spelling. But here's something they get right: They're willing to poach the best central bankers from around the world for the top spots at the Bank of England.
The UK is hardly alone on this. They're just particularly aggressive about it. Their latest target is Mark Carney, the current chief of the Bank of Canada. Before that, though, they snatched up American economist Adam Posen -- an expert on Japan's lost decade -- to serve on their monetary policy committee. You've heard of an international market for superstar soccer players and Olympic coaches. This is an international market for superstar central bankers.
It got me thinking: How much is a good central banker worth? Consider this chart. The blue line shows where our economy could, and should, be if it had kept growing at its long-term trend since 2008. The red line shows where we actually are. The difference between the two is the so-called output gap. (Note: These dollar figures are not adjusted for inflation).
We're in about a trillion-dollar hole. And that's a trillion dollars every year. Even if we get "Morning in America: The Sequel" and the economy rapidly reverts to its long-term trend, we'll forever be $4 trillion poorer than we would have otherwise been.
Let's try a thought experiment. Say that Lars Svensson -- one of the world's top monetary economists and the current deputy governor of Sweden's central bank, the Riksbank -- could get our economy back to trend in half the time Ben Bernanke could. It's actually plausible-ish. Like Bernanke, Svensson spent his academic career championing unconventional monetary policy as a "foolproof" way to escape a liquidity trap. (Coincidentally, they were colleagues at Princeton). But unlike Bernanke, Svensson's Riksbank has been much more willing than Bernanke's Fed to experiment with these kind of heterodox policies. Perhaps unsurprisingly, Sweden's recovery has been the envy of the developed world. So I ask again: How much is a good central banker worth? Put simply, how much cash should we throw at Svensson to steal him away from Sweden?
That's another way of asking how long it will take the economy to return to trend. Here's where things get really depressing. According to Fed Vice Chair Janet Yellen, we won't get back to full employment until after 2018. If we assume the output gap will steadily shrink until then, that leaves us with roughly another $4 trillion in lost income. Maybe more. If Svensson really could double our recovery speed, he'd be worth $2 trillion to us. Even if that's being wildly optimistic, something on the order of hundreds of billions of dollars probably isn't. Tell me that wouldn't be worth paying Svensson a billion dollars a year. Maybe more.
The above suggestion is obviously a bit tongue-in-cheek ... but not completely. Right now, central bankers are paid almost entirely in prestige. Ben Bernanke is making just $199,700 this year. That's not to say that we need to pay central bankers more to attract the best ones. We don't. Economists really care about prestige.
This doesn't necessarily lead to the most efficient allocation of monetary economists. As Matt Yglesias pointed out, we'd ideally have economists prove their central banking chops in smaller countries before moving up to the big leagues of the Fed or the ECB or the Bank of England. Put a bit less diplomatically: Sweden is important, but it's a relative waste of Svensson's talents not to have him running a bigger central bank. (Not that I have anything against Sweden). Here comes the "to be sure" sentence: It wouldn't be enough just to import Svensson. As L.A. Galaxy fans can tell you, bringing in one (albeit, overrated) superstar like David Beckham doesn't help much if his teammates are only mediocre. We'd need to create a Federal Reserve board equivalent of the Super Friends for Svensson to make the biggest difference. We might even find out that we already have a superstar in Bernanke in that scenario.
Central banking should be a superstar profession. The difference between a top central banker and an average one can be astronomical, particularly when conventional policy is impotent. An efficient market would pay them accordingly. If the United States spent $10 billion assembling a central banking fantasy lineup of Lars Svensson, Stanley Fischer, Adam Posen, and Christina Romer, it would probably be a phenomenal investment. It'd pay for itself many, many times over. The biggest challenge is changing the norms around central banking. We shouldn't just consider the top American economists for the top spots.
We're a nation of immigrants. The Federal Reserve should reflect that.
The country's inability to pay it's debt or reach a deal makes it the largest nation in history to be in arrears to the IMF.
What happens now?
Greece’s missed payment to the IMF is a milestone—it’s both the first time a developed country has missed such a payment, and the first time a Eurozone country has defaulted on its debt. (Or it’s “in arrears”—as Bouree Lam explains below, the IMF isn’t using consistent terminology.)
But that doesn’t mean automatic expulsion from the Eurozone. Yanis Varoufakis, the country’s finance minister, made the case on his blog three years ago that “a defaulted Greece can easily remain in the Eurozone,” and that in fact “Europe’s optimal strategy is to let Greece default.” The Lisbon Treaty, which forms the legal basis of the European Union, actually makes no provision for a member’s expulsion. A 2009 legal analysis by the ECB found that, “while perhaps feasible through indirect means, a Member State’s expulsion from the EU or EMU [the European Monetary Union], would be legally next to impossible.”
People labeled “smart” at a young age don’t deal well with being wrong. Life grows stagnant.
ASPEN, Colo.—At whatever agesmart people develop the idea that they are smart, they also tend to develop vulnerability around relinquishing that label. So the difference between telling a kid “You did a great job” and “You are smart” isn’t subtle. That is, at least, according to one growing movement in education and parenting that advocates for retirement of “the S word.”
The idea is that when we praise kids for being smart, those kids think: Oh good, I'm smart. And then later, when those kids mess up, which they will, they think: Oh no, I'm not smart after all. People will think I’m not smart after all. And that’s the worst. That’s a risk to avoid, they learn.“Smart” kids stand to become especially averse to making mistakes, which are critical to learning and succeeding.
The star has been accused of having a “large blind spot” on issues of race—but testing the boundaries of jokes is part of the process of stand-up.
There’s a fine line in comedy between subversive and offensive, and with every meteoric rise from stand-up to film and television stardom these days, there tends to be controversy over whether or not that line has ever been crossed. Amy Schumer, whose Comedy Central sketch show Inside Amy Schumer has been dominating the Internet on a weekly basis since its third season debuted in April, and who stars in the upcoming Judd Apatow comedy Trainwreck, is the latest figure to experience the pitfalls of being under such sharp scrutiny. A recent profile of Schumer in The Guardian by Monica Heisey, although largely positive, criticizes the comedian for having a “shockingly large blind spot” on race—and cites some clunky jokes she’s made about Latinos as examples.
The social network learns more about its users than they might realize.
Facebook, you may have noticed, turned into a rainbow-drenched spectacle following the Supreme Court’s decision Friday that same-sex marriage is a Constitutional right.
By overlaying their profile photos with a rainbow filter, Facebook users began celebrating in a way we haven't seen since March 2013, when 3 million peoplechanged their profile images to a red equals sign—the logo of the Human Rights Campaign—as a way to support marriage equality. This time, Facebook provided a simple way to turn profile photos rainbow-colored. More than 1 million people changed their profile in the first few hours, according to the Facebook spokesperson William Nevius, and the number continues to grow.
“This is probably a Facebook experiment!” joked the MIT network scientist Cesar Hidalgo on Facebook yesterday. “This is one Facebook study I want to be included in!” wrote Stacy Blasiola, a communications Ph.D. candidate at the University of Illinois, when she changed her profile.
As sunny and smiley as gyms’ front-desk employees can be, they’re covering up a secret that keeps the industry going: Once you’ve signed up for a membership, they don’t want you to come in very often.
In fact, gyms are set up to entice the type of customer who will prepay for months or years and then rarely show up. In order to make money, private clubs need to bring in about 10 times as many members as their weight and cardio rooms can accommodate at any given time. This fact ends up shaping the way gyms are designed as physical spaces. In order to attract the type of people who will buy a membership but probably never work out with any regularity, designers give gyms sleek, hotel-like lobbies where membership paperwork is handled. Meanwhile, the intimidating equipment is kept in the back, out of sight—along with the sometimes intimidating brutes who grunt while using them.
The question is at the center of the Greek crisis.
In 1961, the economist Robert Mundell published a paper laying out, per the title, “A Theory of Optimum Currency Areas.” In it, he inquired about the appropriate geographic extent of a shared unit of money. Was it the world? A country? Part of a country? A border-spanning region of, say, the western parts of the United States and Canada, with a separate currency circulating in the eastern parts of the two countries?
“It might seem at first that the question is purely academic,” he wrote, “since it hardly seems within the realm of political feasibility that national currencies would ever be abandoned in favor of any other arrangement.” But it was worth considering anyway, in part because “certain parts of the world are undergoing processes of economic integration and disintegration,” and an idea of what an “optimum currency area” would look like could help “clarify the meaning of these experiments.”
The Islamic State is no mere collection of psychopaths. It is a religious group with carefully considered beliefs, among them that it is a key agent of the coming apocalypse. Here’s what that means for its strategy—and for how to stop it.
What is the Islamic State?
Where did it come from, and what are its intentions? The simplicity of these questions can be deceiving, and few Western leaders seem to know the answers. In December, The New York Times published confidential comments by Major General Michael K. Nagata, the Special Operations commander for the United States in the Middle East, admitting that he had hardly begun figuring out the Islamic State’s appeal. “We have not defeated the idea,” he said. “We do not even understand the idea.” In the past year, President Obama has referred to the Islamic State, variously, as “not Islamic” and as al-Qaeda’s “jayvee team,” statements that reflected confusion about the group, and may have contributed to significant strategic errors.
The second episode of the new season was a slow burner with a dramatic twist.
Let’s start at the beginning, with Frank in bed with his wife, Jordan, discussing water stains on the ceiling and childhood entombments. I don’t know about you guys, but I found this whole bit slack and familiar. Maybe there was a two-minute scene in there, but five? Maybe a more charismatic actor could have pulled off that lengthy monologue. But Vince Vaughn is no Robert Shaw, and his childhood basement is no U.S.S. Indianapolis.
For centuries, experts have predicted that machines would make workers obsolete. That moment may finally be arriving. Could that be a good thing?
1. Youngstown, U.S.A.
The end of work is still just a futuristic concept for most of the United States, but it is something like a moment in history for Youngstown, Ohio, one its residents can cite with precision: September 19, 1977.
For much of the 20th century, Youngstown’s steel mills delivered such great prosperity that the city was a model of the American dream, boasting a median income and a homeownership rate that were among the nation’s highest. But as manufacturing shifted abroad after World War II, Youngstown steel suffered, and on that gray September afternoon in 1977, Youngstown Sheet and Tube announced the shuttering of its Campbell Works mill. Within five years, the city lost 50,000 jobs and $1.3 billion in manufacturing wages. The effect was so severe that a term was coined to describe the fallout: regional depression.
The power in the president’s eulogy for Clementa Pinckney came not from his singing, but from the silence that preceded it.
Coverage of the memorial service held for Reverend Clementa Pinckney in Charleston last week focused largely on the surprising moment when the leader of the free world broke into song. That song, of course, was “Amazing Grace” and the president sang it distinctly in the style of the black church.
For all the attention Obama’s unexpected performance received, though, it’s worth taking another look at the “Amazing Grace” clip, this time watching for the silence. His singing seems to be a release of the collective tension that had been building for a week after the Emanuel A.M.E. shooting. But the preceding pause seems to hold its hearers captive. Though he is frequently interrupted with cheers and amens throughout his eulogy for Reverend Pinckney, the pause he takes 35 minutes into the speech is easily the longest break from the text before him.