Bluematter.

In a 2003 study at Harvard, Dr. Carson and other researchers tested students’ ability to tune out irrelevant information when exposed to a barrage of stimuli. The more creative the students were thought to be, determined by a questionnaire on past achievements, the more trouble they had ignoring the unwanted data. A reduced ability to filter and set priorities, the scientists concluded, could contribute to original thinking.

The NY Times has more.

I'm clearing out my inbox of its 400+ emails, and many of these relate to stuff I wanted to post here - so expect a regular stream of content. Even if a couple years old, good links always stay fresh!

Greece and Ireland need to depreciate their currencies, but exiting the Euro is unworkable for either of them. Extraordinary times call for extraordinary measures, so they could both temporarily introduce import tariffs for EU products, as well as potentially recycle some of the money generated to export tariffs.

Imports go down, exports go up, GDP increases, deficit goes down. Of course this doesn't work in the long-run the way depreciation would, but it would work a treat as a short-run stimulus and deficit-reducing measure.

Stata now has an official blog, Not Elsewhere Classified. And here's a list of a few unofficial ones.

Whether you believe aid is effective or not, it has always struck me that, as a quantitative matter, it is a drop in the ocean. I am not saying that we should abandon aid; I am convinced it mostly makes things better. What I am saying, however, is that given how little it is and how widespread poverty is, the effect on national-level indicators can only be very, very small.

While aid can realistically only ever be a small part of the solution, other policies pursued by rich countries can have very widespread effects, and have perhaps received less attention than is warranted. In other words, we may be giving x euros in aid, but how much are we taking back by pursuing a Common Agricultural Policy? How much aid would a country have to give to make up for the effect on the poor of tight immigration policies?

The excellent Owen Barder links to a worthwhile attempt to rank rich countries according to how well they perform on development along these dimensions:

Though the effects of aid on development are uncertain, there is a huge amount that industrialised countries can do – or not do – which affects how quickly countries develop.  The policies of rich countries on trade, investment, migration, the environment, security and technology can make a huge impact on how quickly poor countries are able to develop. Yet we tend to judge industrialized countries too much according to how much aid they give, and too little to how they behave in all these other ways.

The Center for Global Development provides an essential service by ranking the rich each year so we can see how we are doing.  They use a series of quantitative measures on all these dimensions to create a composite picture of how a country’s policies affect development. 

The 2010 results are now in. An excellent effort; I hope the next step is an attempt to monetize the value of the different policies pursued. However arbitrary this exercise may be, it will be another step in going beyond a qualitative understanding of the effect of aid, trade policies, etc, allowing us to better focus our collective efforts.

A beatiful presentation by Jeremy Rifkin:



Eat your heart out, Powerpoint.

A Nicaraguan military commander recently invaded Costa Rican territory, and ordered troops to take down a Costa Rican flag and replace it with Nicaragua's. Was this the work of a brash commander, going rogue on his superiors? A new policy of Nicaraguan imperialism? Neither. The incident was caused by an error in Google Maps. [...] commander Eden Pastora blamed the incursion on a misleading border on Google Maps that was off by some 3000 meters.

La Nación points to a disparity between the borders on Bing and Google. We've highlighted the area in question:

Thanks Austin Carr.

As I've noted before, one thing I've learned from this recession is that it's not as easy to increase the money supply as I thought.

This is Mark Thoma. But how about a big bond bonfire? (call it a bondfire if you must) How about direct financing of government debt?

I never got why Japan's lost decade was accompanied with such an explosion of government debt. The way I see it, below target inflation (let alone deflation) is a license to print money, and if the banks will do nothing with it, then the government should.

We seem to have forgotten the oldest trick in the book.

Joe Wight has created the Kawaii Star Wars alphabet, with a different character for each letter of the alphabet. D, of course, is for that mean-looking fella above.

HT (and a full list of the letters in alphabetical order) Designers Couch.

I quit smoking four days ago.  I am (was?) a very keen smoker, but after ten happy years of inhaling burnt tobacco I felt that the risk of cancer was starting to outweigh the pleasure of smoking.

Well, I said I quit, but I need to qualify that. I have not decided to quit for ever; I have only decided to quit for three weeks, and I will then evaluate whether I want to continue abstaining from smoking. This helps for two reasons:

1. Quitting for three weeks is easier than quitting for ever. The former is a project I was willing to undertake; the latter sounded (and still sounds) too daunting to attempt.
2. My nicotine addiction has already subsided somewhat, and will have subsided a lot more by the end of week three. So when at the end of week three I pose the question of what I want to do next, I'm more likely to opt for the 'quit' than the 'restart' option compared to making that decision at the height of my addiction.

A second, related, trick is this. I've promised myself that I will allow me to have one more cigarette, and one more cigarette only. Well, I've been feeling like having a cigarette about every 20 seconds, but given that I really want to enjoy and savour my one cigarette I keep postponing it for tomorrow. You can think of it as an inverse application of the Akerlof procrastrination observation. I realised this could work when last week I realised it's actually been six months in which I've had a bottle of expensive champagne in my fridge, always meaning to drink it tomorrow. Well, I'll hopefully be popping that cork to celebrate six months as a non-smoker.

Trick number three, I've started telling people - I find it hard, and painful, to break commitments and go back on my word, and even though I'm not really making any explicit commitments or promising anything to anyone, announcing that I'm undertaking this project creates expectations and I do not want to disappoint. Trick number four, I'm buying myself an iPad for Christmas, but if and only if I am still a non-smoker in two months' time.

The self-deception is, of course, crystal clear. But so far it's working.

When inflation is too low and you've hit the zero bound on the monetary side, and debt is too high to do anything on the fiscal side, you need to break the last taboo: direct financing of government debt by the Fed.

The only thing the Fed needs to do is to announce it fully intends to keep x amount of government bonds purchased under QE in its books till maturity - with the benefit naturally accruing to the Treasury. There would need to be some clarity on exact numbers so that nobody panics, but that's basically it.

A crazy idea - but note that this is merely a quantitative, not qualitative, deviation from the standard arrangement (even in normal times).