Chart of the Day

How to interpret this, I'm not exactly sure. Provisionally I'm going with a combination of "closed capital market" and "the Chinese government is not at all infallible when making investment decisions", but that's pretty knee-jerk.

Via.

Shenanigans!

Evan Resnick has an article in the new International Security called "Strange Bedfellows: U.S. Bargaining Behavior with Allies of Convenience". I'm sure this isn't intentional, but I have to point out that our own Stephen Gent got to that title first with his "Strange Bedfellows: The Strategic Dynamics of Major Power Military Interventions", published in JoP back in 2007. They appear to be about somewhat similar topic matter too. An ungated copy of Gent's is here. I can't find an ungated copy of Resnick's, and UNC's library web site isn't giving me access to IS right now, so I can't read the paper or see if Gent is cited. Not saying anything is untoward is going on. Just saying it's kind of funny.

Someone Is Wrong on the Internet

Likely me. I'm sure no one is interested in anything more from me on this, but over the course of the past 24 hours or so I've had a long Twitter conversation with Steve Randy Waldman (aka Interfluidity) about finance, political economy, etc., spread across several sessions. I think we both clocked close to 200 Tweets all told. I'm not going over it all again, but if you're so inclined you can follow it on his feed and mine, plus these two longer Tumblr posts.

Why Imbalances Will Persist, For Awhile At Least

Martin Feldstein is bullish on macroeconomic imbalances, and walks through the relevant savings-over-investment accounting identities (pdf available here). I recommend reading the whole thing, as its short and gives a very good overview of the situation. Basically, what he's saying is that the U.S.' current account deficit can be, and likely will be, shrinking sharply over the coming years, and it may disappear entirely:

Feldstein imagines the U.S. national saving rate rising by 2% of gross domestic product and budget deficits declining to 3% of GDP from 8%, producing a combined saving rise of 7% of GDP.

“These assumptions about private and public saving may be too optimistic but they indicate that closing the U.S. current account deficit is potentially feasible,” he said.

Meanwhile, China is directing more investment internally–spending more on health care, education and housing–as it looks to raise living standards.

“If China reduces its national saving rate from the current 45% of [gross domestic product] to 40% without a corresponding fall in investment, the result would be to shift China from having a current account surplus to a current account balance or even a small deficit,” he said.

If savings increase in the U.S. and investment does not, our current account deficit necessarily narrows. Likewise, if savings shrink in China and investment does not, their current account surplus necessarily narrows. It's as simple as that, and yet the political and economic forces behind those movements are a bit more complex. So as an outline of what is feasible his analysis is correct. As an outline of what is likely I'm not so sure. I do think imbalances will shrink some over the coming years, but probably not as much as Feldstein alleges. Here's why.

It will likely take five or more years for the U.S. to get back to full employment, which means that the public deficit is not likely to shrink to 3% of GDP any time soon. Politicians talk a lot about that, and so do voters, but I haven't seen any real momentum to get it done. In the meantime, as the financial sector strengthens and the real economy stays weak (prompting the Fed to continue to make cash available at low rates), credit will likely become more available more rapidly than incomes rise. When that happens I would expect savings rates to grow less slow or even decline. Moreover, the continuing aging of the population means that more and more of us will be drawing down private (and public) savings rather than building them up.

It's true that China is allowing the RMB to appreciate at 5% a year, and that internal inflation changes the real exchange rate faster than that, but it's not clear how long those two things will persist. If China has its own property bubble that then pops, we may see savings rates there increase or at least hold steady. Or we may see lower growth rates that again cause savings to go up as wealth creation drops. To me, political reform will have to happen in China before major economic reform happens, and that doesn't seem likely over any short time horizon. In any case, China is only one country, so even if the bilateral Sino-U.S. imbalance lessens, U.S. imbalances with other countries might increase. If enough of that happens simultaneously the overall effect is not clear.

Consider Europe. Europe's real exchange rate has depreciated fairly significantly over the past few years, and Germany has benefited from that as an export-oriented economy. Is it likely that the euro will appreciate much over the next few years? It doesn't look that way to me. How about Africa? While not without problems, several African countries have been growing recently, and the medium-run prospects for the region appear to be improving. This development will likely occur by running current account surpluses with Europe and the U.S. Meanwhile, resource-exporters in the Middle East and elsewhere will continue to benefit from increasing demand and will maintain high current account surpluses.

The politics of current account imbalances is clear: there is no coordination now, and as the global economy remains weak there is not likely to be. Everyone wants everyone else to adjust. Eventually this will change, since things cannot persist this way forever. But over the time period Feldstein is talking about I'm not so sure.

Not Everyone Had a Guarantee

One of the first criticisms to the line of logic I've pursued below regarding finance and politics is: what about bailout guarantees? They increase the moral hazard trade, which allows banks to extract rents from the real economy via the state. See, e.g., this post from Macro Resilience and this one by Derek Thompson.

My answer? That doesn't explain hedge funds, which are not TBTF and do not have a bailout guarantee. Nor does it explain insurance, which might have a guarantee post AIG but not before. Nor non-bank mortgage lenders like Countrywide which certainly didn't have a guarantee.

Keep in mind that the top 25 hedge fund managers made more than the CEOs of all of the S&P 500 in one recent year (I think 2007). If that's not coming from the moral hazard trade, then from where?

The criticism I'd anticipate is that hedge funds don't need bailout guarantees if their counterparties in the big banks have one. But that's clearly not true. Tons of hedge funds have lost tons of money in the crisis, and even Bear Stearns' shareholders were practically wiped out. The guarantee might shore up one side of the transaction but not both, and it takes (at least) two to tango.

The Politics and Economics of Finance

Related to my previous post, as well as other recent discussion from Cowen and others. Graph taken from a commenter at Sumner's place (click for larger image).

I've been in a late night Twitter discussion with Steve Randy Waldman over that Sumner post. I summarized much of what I think about it in the post below, but Waldman (and others) think that rent-seeking behavior deserves a much greater role. I disagree, and I also disagree with Sumner on some key points, so here's more fully what I'm thinking right now. I think there are two major shifts, one political and one economic, that does the best job of explaining inequality and finance's role in it:

1. Sumner probably shouldn't've phrased things in terms of "discoverers", nor in terms of "deserve". The former conjures venture capitalists and start-up funding, and that is clearly at least part of what Sumner had in mind originally, but not all. The latter ascribes some normative aspect that i don't think he meant to convey. He would have done better to simply say that finance has done very well at responding to the incentives given them. Those incentives are shaped by a government that wants to please its constituents. Its constituents want funding for houses, for cars, for expensive health care and well-funded retirements. The government incentivizes finance to provide those things at relatively low cost, in exchange for subsidies of various kinds.

Is this capturing of rents? On the one hand, finance has profited very greatly from this arrangement. On the other hand, so have many others, from "subprime" folks who would never have gotten to purchase a home before, to real estate owners/developers, to construction workers, to millions of kids getting student loans. In other words, if there is a "public interest" in having debt spread through the system, can that political economy really be characterized as rent capture by bankers? It seems more nuanced than that.

This is not to suggest that finance doesn't lobby in favor of their interests. They do, as they would be expected to do. Sometimes they win, and their managers and shareholders (including those who invest their pensions and savings in the market) benefit from that. And surely there is some direct sleaziness that goes on, and outright fraud as well.

But that has always been true. That hasn't changed in the past 15-20 years. It hasn't changed in the past 500. It was true in the 1820s, and the 1950s, and the 1980s. What has changed is the rewards going to that sector, and not just in the U.S. You can't explain variation with a static variable. Which makes me think that there is an overarching, dynamic, structural economic story beyond the political dimension, which is my next point.

2. Finance was dealt a very good hand. Technological advances massively reduced transaction costs for capital allocation. Institutional advances -- e.g. the WTO and capital account liberalizations of the past quarter century -- have increased scale opportunities for capital allocation. And, yes, skills investments in things like quantitative finance have also pushed finance's PPF outward. The previously-established financial centers -- New York, London, Frankfurt -- took advantage of those developments. It's not that our generation's financiers on the whole were more gifted than those of previous generations; it's just that the world opened up for finance in a way it hadn't before.

Take an analogy. Professional baseball players make much more money than they used to make. Is this because they are better baseball players? Not necessarily. Is this because society values baseball more than it used to? Probably not, in any normative sense. It's because technological advances have made it possible to watch every game of every team at very low cost. Thus the audience increases, the demand curve shifts right, and the value of a baseball player's labor goes up. Yes, the superstars -- the Jeters and A-Rods and Buffetts and Soroses -- reap much of the reward, but even the average major leaguers and role players make much much more than they used to.

In fact, even if baseball players (financiers) were actually worse than they used to be in absolute terms, their remuneration could still go way up because of advances in other sectors, like technology, that allow them to reach a much larger audience. Going back to finance, there has been a huge global demand-curve shift, and economies that are capable of satisfying that demand (read: first-wave industrialized economies like the U.S. and U.K. that developed large, liquid, robust financial sectors a long time ago) have seen their economies orient more towards finance than in previous generations. We're exporting a lot of that finance as well, in exchange for agricultural and manufactured goods that are often facilitated by our finance sector. And it isn't just the Buffetts and Soroses that benefit, but the typical finance professional as well.

I think that that is what Sumner meant by "deserve" and "discovery" and "capital allocation". At least that's how I read him, and that's what my own thoughts are.

None of this is to say that finance is perfect, or even especially good at efficiently allocating capital to useful purposes. Obviously they mess up, quite horribly at times. Partially because their incentives are screwed up by markets, partially because their incentives are screwed up by public policy, and partially because they just make mistakes. But with the hand they've been dealt it would be almost impossible to not get paid off. And so they have been.

The normative question is whether this shift -- in which more of the economy in housed in finance rather than manufacturing or agriculture, with a concomitant rise in income inequality -- represents a problem for society. The positive question is whether these outsized gains for finance will be competed away once rising economies develop larger, stronger financial sectors of their own, and whether increased competition will lead to increased volatility in the system. This is already too long, so those will have to be the subject of other posts.

An Inequality Post

In the middle of a pretty good post on inequality, Ezra Klein writes:

In the 1970s, median household income begins stagnating. But it's not until the mid-1980s -- and really beginning in 1987 -- that the income share of the top 1 percent begins skyrocketing. ...

What happened in 1987? From about 1952 to about 1986, the top 1 percent's share of income fluctuates between 7 percent and 10 percent. But between 1987 and 1988, it jumps sharply -- rising from 10 percent to 13 percent in a single year -- and never comes back down. So what happened in 1987? There's a massive stock market crash that year, but it's not a crash that's considered to have had profound or lasting impacts on the real economy. Most explanations peg it as a market-driven, rather than economy-driven, event. And yet something that year does seem to have profoundly changed income equality in this country, and in a lasting way. But what?

As it happens I wrote my senior undergrad thesis largely on this question. It's almost a very good question. I say "almost" because Klein (I assume) is using pre-tax/pre-transfer tax return data. If so, 1987 returns reflect 1986 income, so the question should really be "What happened in 1986?" And the answer to that is, quite simply, one of the largest restructurings of the tax code since WWII, the Tax Reform Act. As Showdown at Gucci Gulch describes in detail, TRA86 was all about the distribution of benefits via the tax code, but a few changes would have an especially large effect on measured income inequality after passage.

First, it eliminated many deductions and loopholes, especially for real estate holdings. That meant that a lot of income that was going essentially unreported in 1986, because it was being sheltered, was now reported in 1987. Almost all of that income belonged to the upper tiers of the tax code that could take advantage of those loopholes, so TRA86 shone the light on a lot of income that was previously held in the dark. Second, capital gains income was taxed at the same rate as labor income. Previously, capital gains were taxed at much lower levels than ordinary income -- 20% versus 50% for the top earners. After TRA86, capital gains taxes would rise from 20% to 28%. This heavily incentivized workers that were able to do this to take income in the form of capital rather than cash. These gains would be taxed when realized... but not until then. So quite a lot of income was given to richer workers in the form of stock options and the like, and these were all exercised in 1986 to take advantage of the low rate before it went up. All of this is explained in the very long "summary" report issued by the Joint Committee on Taxation (very large pdf). Third, once corporate and individual tax rates were brought into balance by TRA86, there was a lot of "income shifting" from corporate to individual tax returns.

The net result of these for our purposes is that, among the rich but not the poor and middle classes, a lot of income was reported in 1987 that was not reported previously. So the jump in 1987 was largely a statistical artifact. The rich in 1987 were essentially as rich as they were in 1986, but the vagaries of the tax code meant that the situation looked quite a bit different when looked at in a time series. Alan Reynolds of Cato has written about this quite a lot, see e.g. here. He goes so far as to say that income inequality has basically not changed at all since 1988 (and thus since 1979 or so), and for this he has been beaten down quite severely (e.g. here and here and here and here etc.). But I think he's got this one point -- about 1987 -- basically right.

So do the academics. In their landmark inequality 2003 QJE study, Thomas Piketty and Emmanuel Saez write:

One additional motivation for constructing long series is to be able to separate the trends in inequality that are the consequence of real economic change from those that are due to fiscal manipulation. The issue of fiscal manipulation has recently received much attention. Studies analyzing the effects of the Tax Reform Act of 1986 (TRA86) have emphasized that a large part of the response observable in tax returns was due to income shifting between the corporate sector and the individual sector [Slemrod 1996; Gordon and Slemrod 2000]. We do not deny that fiscal manipulation can have substantial short-run effects, but we argue that most long-run inequality trends are the consequence of real economic change, and that a short-run perspective might lead to attribute improperly some of these trends to fiscal manipulation.

So the shift in 1987 is probably just a statistical mirage. The longer-run shift, encapsulated somewhat by this graph reproduced by Klein, is not.



Derek Thompson takes a stab at it here, and comes away perplexed. Scott Sumner characterized this as a shift in compensation from "producers" (the 1945-1973 economy) to "discoverers" (1973-2010 economy):

Today the most productive members of society are not those who produce things, they are those who discover the things that need to be produced. Once you have the blueprint, it is easy to produce many types of software and pharmaceuticals. The big money goes to those who figure out the blueprint, but also to those who allocate capital to the guy who has the idea for a Google, or Facebook, or Twitter. In contrast, the technicians who actually implement the vision often earn modest salaries. Thus companies are “discovered” in much the same way as an iron deposit is discovered by a skilled geologist.

I think that's part of it. Viewed in that light, the "breaking" of productivity and median compensation comes from the fact that productivity has not gone up because the skills of the median worker have improved, but because the skills of the "discoverer" and those who give him capital have improved. They have improved because of political and technological developments over the past quarter-century or so have pushed the production possibilities frontier way out for those with good ideas and access to capital to develop them. The nouveau riche are not Andrew Carnegie and John D. Rockefeller, but Bill Gates and Roc-A-Fella, and those who finance them.

"Discovery" has become more important because the world's labor supply and consumption markets are now essentially globalized. There isn't anything an American worker can do that a worker someplace else can't do. That wasn't necessarily true in 1945. And even if it was, corporations didn't have the same access to foreign workers that they have now. At the same time, we now have many machines that allow us to produce much more with much less labor. So the supply of labor accessible to markets has increased tremendously over the previous three or four decades at the same time the demand for labor has slowed. If the labor supply curve shifts right, the price of labor goes down. If the labor demand curve shifts left, the price of labor goes down. Viewed in that light it's no surprise that median incomes have stagnated in richer countries.

So, basically, I'd boil it down to two factors:

1. Labor supply (demand) has gotten larger (smaller), depressing the price of labor.

2. Consumption markets have gotten much larger, heightening the price of invention.

Put together, this means rising inequality and stagnating median wages.

This view is not incompatible with Cowen's "short on volatility" story, nor with the economics of superstars. But it doesn't require either of those either, and ultimately I find it more satisfying because it incorporates elements outside the domestic economy. It is mostly incompatible with stories from Pierson/Hacker and Krugman and others that inequality is about rent-seeking and manipulation of the state for private ends, although I think a lot of that goes on too (maybe another post on that soon). In other words, it's mostly an economic story rather than a political story, which is why we see some common trends across countries and not just within them.

The plus side of this, for workers, is that nonmonetary standards of living are going up even if monetary rewards are not. I find the argument that consumption inequality has decreased even as income inequality has increased to be pretty persuasive, and I don't think all of that was pre-crisis credit-based. In 1975 the richest person in the world couldn't own an iPhone; now everyone I know has one. I don't, but I have a Macbook and a flat screen television and easy access to more information and entertainment than almost anyone in history. To paraphrase Eddie Izzard, my standard of living would make King Solomon blush. It just doesn't show up in the statistics.

The Afghan Currency Along the Pakistani Border

Many traders in East Afghanistan will not accept their own currency as payment. They would rather sell their goods for Pakistani rupees - to the anger of the Central Bank. Whether cookies or cars: salesmen prefer rupees.

An afghani is actually worth almost twice as much as a Pakistani rupee. But taxi drivers in East Afghanistan think otherwise, which often leads to conflict. Recently, for instance, in the vegetable market in the centre of Jalalabad, a rickshaw driver got into a fight with a customer. The client paid the agreed 50 rupees with a 50 afghani note and demanded change. About 25 afghani. But the driver refused, saying: “As far as I’m concerned, afghanis and rupees are the same”.

For decades, the Pakistani rupee was the main currency in markets and shops in Jalalabad. It still is, despite President Karzai’s financial reforms a few years ago, whereby the introduction of the afghani provided a stable currency for the first time in many years.

1 afghani is worth 1.88 rupees - at least in theory

Pakistan is only a few kilometres away from Jalalabad. Most imports and exports come across this border. Because Afghanistan does not have its own access to the sea, it depends on the Pakistani port of Karachi. Furthermore, roughly 1.7 million Afghan refugees still live in Pakistan. They also contribute to the fact that the economies of both countries in the border region are so closely linked.

Bilal, for example, has a fruit and vegetable shop near Jalalabad. He buys his produce mostly with rupees, so prefers his clients to also pay him in Pakistani money. When he himself goes shopping, he likes to pay in the foreign currency. In this way, he saves himself the hassle of having to exchange money. He also saves money, since money changers give him only half an afghani for every rupee, despite rupees and afghanis having equal value in the market place.

I also found this nugget of information incredibly interesting:

Many government workers benefit from being paid in afghani. As the head of the union of money changers, Ghulam Mustafa Rahimi, confirms, many employees immediately exchange their salary into rupees at the official rate, and so receive more for their money.

There's more on the Afghan currency at Afghanistan Today.

Dodd-Frank: The Good Stuff

Economics of Contempt has a wonderful two-post series on the importance of resolution authority for bank regulators. Basically, this means that when a large bank goes under, there needs to be a process in place for dealing with the bank's creditors. Why is this important? He lays it out in part one:

To take one example: Lehman’s holding company (LBHI) filed for bankruptcy, but at the last minute its US broker-dealer (LBI) was kept out of bankruptcy by the NY Fed. The problem was that no one knew about this — most people thought LBI had filed too. Lehman had all sorts of problems getting employees to even show up for work; JPMorgan, which was LBI’s clearing bank, unilaterally shut off LBI’s access to its accounts for several days, and actually started seizing assets of LBI’s prime brokerage clients (a huge no-no); clearinghouses improperly limited LBI’s trading activity; the NSCC mistakenly seized a large amount of LBI’s customer securities; Lehman’s European broker-dealer (LBIE) stopped payments to LBI’s omnibus account even though LBI continued to make payments to LBIE; incoming customer securities to LBI weren’t getting properly segregated; counterparties simply stopped posting collateral they owed on OTC derivatives with LBI; and so on. That first week, the biggest challenge was simply getting someone at Lehman on the phone. (I saw a 63-year-old senior partner do a fist-pump you’d have to see to believe when he finally got an account executive at Lehman on the phone. Unquestionably the highlight of my week.)

You get the picture: it was utter chaos, in no small part due to sheer confusion about what was going on.

He argues that a big reason why Lehman's collapse had such a huge effect on financial markets is that nobody knew what was going on, how much of their money was lost, or even who to call to try to get it back. Given the similar concerns about basically every other Wall Street firm, investors had no idea if their funds were safe, or if/when they'd be repaid if their counterparties went under.

This gets even more complicated when you consider international firms. Which country's creditors get paid, and which get left in the cold? This is part of the ongoing Basel negotiations:

Lehman’s collapse also showed the need for a cross-border mechanism to wind down failing banks that have a global reach. More than 80 proceedings against the firm, involving hundreds of subsidiaries worldwide, have complicated recovery by creditors and destroyed much of the value of its assets.

The Financial Stability Board, which includes most Basel committee members as well as finance ministers from the Group of 20 nations, struggled to come up with such a resolution mechanism this year. The FSB postponed a decision until next year after divisions among nations proved too wide to bridge, members said. The group has been unable to agree on how to distribute losses among countries when a global bank fails and how different legal jurisdictions can recognize a single authority to pay creditors, the members said.

Fortunately, the Dodd-Frank bill gives the U.S. government resolution authority, and there is a similar mechanism in place in the U.K. As Econ of Contempt notes in part two, those are the only two countries that really matter:

What about all those thorny international problems? Well, the truth is that in terms of systemic risk, there’s only one other jurisdiction that really matters: the UK. New York and London are still the two dominant financial centers, and the vast majority of transactions at the major US banks flow through either New York or London. It’s important to understand that it was the UK’s ridiculously backward somewhat dated insolvency regime that forced the liquidators of Lehman’s European broker-dealer to seize so many client assets and assets of affilates. Fortunately, the UK now has their own version of the OLA, which they call the “Special Resolution Regime,” and was enacted as part of the Banking Act of 2009. The Special Resolution Regime is, like the OLA, modeled explicitly on the FDIC resolution authority, and gives the Bank of England the same wide-ranging tools to wind down a London broker-dealer in an orderly fashion — including, significantly, the power to create “bridge banks” to ensure that key functions can continue uninterrupted. Cross-border problems that aren’t identified and dealt with in the resolution plan can, if necessary, be dealt with by bridging the relevant entities until a solution can be fashioned.

I like this line of argument, and I've made the case several times before that basic ignorance was a major problem in the crisis. In my first post on Dodd-Frank I argued that the provisions that increased transparency in the financial system, like resolution authority, were much better than trying to create the perfect regulatory structure that would prevent financial crises from occurring in the first place. The latter approach is sure to fail. The former can do some real good.

I strongly recommend reading both of these posts. They are wonky, but if you are interested at all in what Dodd-Frank did, or why it's important, you'll learn quite a lot.

2010 Listicle

This is some of the stuff I liked from the past year.

Best Music:

-- Album, rock: The Monitor, Titus Andronicus

-- Album, pop: Body Talk, Robyn

-- Album, R&B: The ArchAndroid (Suites II and III), Janelle Monae

-- Album, hip-hop: My Beautiful Dark Twisted Fantasy, Kanye West

-- Album, mash-up: All Day, Girl Talk

-- Song, rock: "Rill Rill," Sleigh Bells:



-- Song, pop: "I Can Change," LCD Soundsystem:



-- Song, R&B: "Tightrope," Janelle Monae:



-- Song, hip-hop: "POWER," Kanye West:



-- Playlist: "The Songs of the Years", Ben Greenman (for The New Yorker)

Best Movies (Note, there are some definite contenders I've yet to see like Restrepo, True Grit, and Black Swan, so this is definitely provisional):

-- Released in 2010, INPO: Scott Pilgrim vs. The World, The Town, The American, Black Dynamite, Shutter Island

-- Old French movies new to me: The films of Jean-Pierre Melville, many of which I watched this year for the first time (I'd only seen Le Samourai previously). My favorites were Bob le Flambeur, Le Circle Rouge, and Army of Shadows.

-- Most Overrated: The Social Network

Best TV Shows:

-- New Comedy: "Louie"

-- New Drama: "Rubicon" (Tragically canceled after its first season)

-- Most Underwhelming/Overrated: "Boardwalk Empire"

-- Also Disappointing: "Running Wilde"

Best Video Games:

-- Sports: "FIFA 2011"

-- Action: "Call of Duty, Black Ops"

(Note: I barely played this year, and didn't touch Red Dead Redemption, but I enjoyed these two. )

Best Books:

-- Nonfiction Released in 2010 (I didn't read enough non-academic nonfiction to have a ranking, so here's a list of what I liked), INPO: Hitch-22: A Memoir, Christopher Hitchens; Denialism: How Irrational Thinking Hinders Scientific Progress, Harms the Planet, and Threatens Our Lives, Michael Spector; Medium Raw: A Bloody Valentine to the World of Food and the People Who Cook, Anthony Bourdain; Game Change: Obama and the Clintons, McCain and Palin, and the Race of a Lifetime, John Heilemann and Mark Helperin;

-- Nonfiction Not Released (But Read) in 2010, INPO: The Big Questions: Tackling the Problems of Philosophy with Ideas from Mathematics, Economics, and Physics, Steven Landsburg; Cultural Amnesia: Necessary Memories from History and the Arts, Clive James; The Bottom Billion, Paul Collier; Unacknowledged Legislation: Writers in the Public Sphere, Christopher Hitchens

-- Academic (Not necessarily released in 2010, but read by me this year), INPO: States and the Emergence of Global Finance, Eric Helleiner; Capital Ideas: The IMF and the Rise of Financial Liberalization, Jeffrey Chwieroth; This Time Is Different: Eight Centuries of Financial Folly, Carmen M. Reinhart and Kenneth S. Rogoff; Domestic Processes and Financial Markets: Pricing Politics, William T. Bernhard and David Leblang; Exporting Environmentalism: U.S. Multinational Chemical Corporations in Brazil and Mexico, Ronie Garcia-Johnson; Networks, Crowds, and Markets: Reasoning About a Highly Connected World, David Easley and Jon Kleinberg; Internationalization and Domestic Politics, Robert O. Keohane and Helen Milner (eds.);

Best Articles:

-- Non-Academic: "Beware of Greeks Bearing Bonds", Michael Lewis; "The Brain That Changed Everything", Luke Dittrich; "The High Is Always the Pain and the Pain Is Always the High", Jay Caspian Kang; "Why Conservatives Should Read Marx", Jonny Thakker; "Death Is Not the End", Jon Baskin; "The Cocktail Renaissance", Robert Messenger; "What Good is Wall Street?", John Cassidy; "The Japan Syndrome", Ethan Devine;

-- Academic: Too long to list right now.

(Note: I read a lot this year, so these are just some favorites, but there's plenty more.)

Best Moment:

-- Alex says it's this one. I think he's right: