Category Archives: Economics

Economics, Financial Crisis, Public Policy, Risk and Uncertainty, The Real World

House of Debt

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House of Debt – http://bit.ly/1rulBgN

This 1 hour long video (@ http://bit.ly/1rulBgN) featuring Amir Sufi (who is the Chicago Board of Trade Professor of Finance at the University of Chicago Booth School of Business) was recorded last Monday evening as part of the Myron Scholes Global Markets Forum at Chicago Booth. Here’s a description of his talk:


“The Great American Recession resulted in the loss of eight million jobs between 2007 and 2009. More than four million homes were lost to foreclosures. Is it a coincidence that the United States witnessed a dramatic rise in household debt in the years before the recession—that the total amount of debt for American households doubled between 2000 and 2007 to $14 trillion? Definitely not. Armed with clear and powerful evidence, Professor Sufi will discuss his forthcoming book, House of Debt, and how it reveals the Great Recession and Great Depression, as well as the current economic malaise in Europe, were caused by a large run-up in household debt followed by a significantly large drop in household spending.”

Economics, Finance, Financial Crisis, Public Policy, Risk and Uncertainty, The Real World

The Economist: Essay on the history of finance in five crises

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From The Economist:

“This week we publish an essay on the history of finance in five crises. They have a common theme: in each case the state increased the subsidies and guarantees it gave to finance—and helped set up the next crisis. Our cover leader points out that this is happening again. An American can now blindly put $250,000 in a bank, knowing his deposit is insured by the state. Finance, we say, should be treated more like other industries.”

Economics, Politics, Public Policy, The Real World

The '77 Cents on the Dollar' Myth About Women's Pay

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The ’77 Cents on the Dollar’ Myth About Women’s Pay

In The Wall Street Journal, Mark J. Perry and Andrew G. Biggs write that once education, marital status and occupations are considered, the ‘gender wage gap’ all but disappears.
An important problem with the “equal pay” canard is its simplistic comparison of female versus male wages; as if the sole determinant of compensation were gender. We live in a multivariate world where all sorts of factors jointly determine outcomes.  Economists June and David O’Neill understand this and find, after controlling for various wage determinants such as education, experience, industry, occupation, time spent as an active labor force participant, risk, and so forth (see “The Declining Importance of Race and Gender in the Labor Market: The Role of Employment Discrimination Policies”), that labor market discrimination is unlikely to account for more than 5% but may not be present at all.

But then the “equal pay” canard really has nothing to do with economics. It has everything to do with identity politics. Identity politics is a long-time, proven formula for political success. You divide people into groups based upon ethnicity, gender, sexual preference, income, and so forth and then promise to deliver group-specific benefits at the expense of the rest of society. Politicians get away with this because the public at large is innumerate and not able (or lack incentives) to grasp even the basic statistical concepts and principles (such as the idea that there are multiple determinants of wages other than gender differences).
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