Misc IPE Developments and Research...

... That I won't properly blog.

-- US and Mexico finally reach agreement on cross-border trucking. This issue has been festering since NAFTA's beginning, but came to a head a few years ago when Mexico got fed up and enacted retaliatory tariffs. To be clear: the US has been in the wrong here all along. Via Greg Weeks on Twitter, who also noticed Chomsky criticizing Chavez.

-- US, EU, and Mexico win case against China in the WTO over Chinese restrictions of exports of rare earth metals. China said the restrictions were for environmental reasons, but they were pretty clearly intended to benefit domestic manufacturers by subsidizing the price of an important input into production.

-- Brazil's real continues to rise, and they don't like it. Is this what adjustment looks like? And is it just me, or do all of Latin America's major economies look fairly fragile right now?

-- John Quiggin has an excellent series of posts [1, 2, 3] on what remains of Marxism if we ditch the assumption that revolution is both necessary and sufficient for positive social change. The answer, it seems to me, is very little that we can't get elsewhere. I've been thinking about this a lot lately, prompted by this awful book by Terry Eagleton (and even worse promo essay). I will probably be returning to the topic eventually.

-- Chinn, Eichengreen, and Ito do a "forensic analysis" on global macro imbalances in the run-up to the crisis. They aren't very optimistic about corrections in the near future. And Chinn describes an important-looking paper by Rose and Eichengreen on the effects of abandoning currency pegs for gaining policy flexibility elsewhere.

-- Tim Harford explains what all the fuss about bank capital is about. Excellent intro for those unfamiliar with the topic.

-- An aggravated take on the current US political economy of banking and bailouts.

-- The BIS compares the internationalization of the 2008 banking crisis, as compared to the 1931 banking crisis. The takeaway is that we only got a Great Recession (Little Depression? What are we calling this?) in 2008 because the lack of a gold standard allowed large liquidity injections.

-- Ha-Joon Chang and Jagdish Bhagwati debate the merits of a strong manufacturing base in The Economist. I wonder if the vote tally is a sign of the times? Ryan Avent adds some levity.

-- Cosma Shalizi reviews the new Easley-Kleinberg book on networks in The American Scientist. A free pre-print of the book is still available here (very large pdf).

Politics Everywhere or Markets in Everything? Fake Brazilian Currency Edition

An interesting Planet Money podcast on Brazil's economic turnaround. How did they reverse decades of economic stagnation, excessive inflation, and severely-underdeveloped markets? Four grad school drinking buddies invented a fake currency. The summary:

For a while, inflation was so high that grocery stores were raising their prices every day. Shoppers would run ahead of the guy changing the price tags, so they could pay the previous day's price.

A series of leaders tried and failed to stop inflation. One guy instituted a price freeze. Another froze peoples' bank accounts. None of it worked.

Then, the government brought in in four economists who had been talking to each other for years about how to fix Brazil's inflation problem. Their solution: Create a currency that doesn't exist. No coins, no bills.

Brazil is now the Western hemisphere's second largest economy (take that, Canada), the world's 8th largest, and is growing at 7% a year.

ht: Modeled Behavior's Twitter.

Incentives Matter

President Lula da Silva doesn't understand public choice theory. He also can't outsmart a cheeky Newsweek reporter:

Newsweek: You often criticize the privatization process. But thanks to the sale of state companies even the poorest Brazilians have cell phones, and former public companies like Vale have become world-beaters under private ownership.

Lula: But the state could have done the same things.

Newsweek: Except that it didn't.

Lula: It didn't because the Brazilian elite used public companies for their own ends. When you do that, any company will go broke, anywhere in the world.

Er, yep.

Via KPC, who also quote Lula's views on the state of Venezuelan democracy.