Marginal Revolution

Richard Thaler joins *Economic View*

His first column is on behavioral economics and mortgages; excerpt:

Some critics contend that behavioral economists have neglected the obvious fact that bureaucrats make errors, too. But this misses the point. After all, wouldn’t you prefer to have a qualified, albeit human, technician inspect your aircraft’s engines rather than do it yourself?

The owners of ski resorts hire experts who have previously skied the runs, under various conditions, to decide which trails should be designated for advanced skiers. These experts know more than a newcomer to the mountain. Bureaucrats are human, too, but they can also hire experts and conduct research.

Blame it on the young

Nir Jaimovich and Henry Siu write:

We investigate the consequences of demographic change for business cycle analysis. We find that changes in the age composition of the labor force account for a significant fraction of the variation in business cycle volatility observed in the U.S. and other G7 economies. During the postwar period, these countries experienced dramatic demographic change, although details regarding timing and nature differ from place to place. Using panel-data methods, we exploit this variation to show that the age composition of the workforce has a large and statistically significant effect on cyclical volatility. We conclude by relating these findings to the recent decline in U.S. business cycle volatility. Through simple quantitative accounting exercises, we find that demographic change accounts for approximately one-fifth to one-third of this moderation.

That's in the June 2009 American Economic Review (somewhat different version).  One ungated earlier version is here.  A later NBER version is here.  The very useful PowerPoints are here.

Assorted links

1. There seems to be a Flynn Effect for memory.

2. How to use Kindle in foreign countries.

3. Few people want to improve their empathy.

4. Should Manhattan buses be free?

5. Negative interest rates in Sweden; not everyone likes the idea.

*Other* notable events from July 4

1803 – The Louisiana Purchase is announced to the American people.

1826 – John Adams and Thomas Jefferson, the second and third President of the United States respectively, both die on the fiftieth anniversary of the United States Declaration of Independence, of which they were both signatories.

1827 – Slavery is abolished in New York State.

1837 – Grand Junction Railway, the world's first long-distance railway, opens between Birmingham and Liverpool.

1855 – In Brooklyn, New York, the first edition of Walt Whitman's book of poems, titled Leaves of Grass, is published.

1865 – Alice's Adventures in Wonderland is published.

1946 – After 381 years of near-continuous colonial rule, the Philippines attains full independence from the United States.

Here is the link, so your celebration should be a good one.