links for 2008-07-04

• National Economic Update - FRB Dallas
• The Everyday Economics Bubble -  Zubin Jelveh
• Better Living Through Game Theory: At the Dentist - Economic Investigations
• Income Inequality - St Louis Fed
• Stagflation, Not Strong Growth, Justifies Pause - Gene Sperling
• Natural clusters: Policies promoting agglomeration are unnecessary - Vox EU
• Don’t blame the speculators - Economist.com
• Frederick Douglass: Fourth of July address, 1852 - Comment is free

Comments

[Farrar]

Glaeser's Revolution of Urban Rebels in the Boston Globe does not strike me as universal truth. As a counter example, i immediately think of Shays's Rebellion, where a democratic rural rebellion was put down by the urban power structure, arguably a combination of profiteering war time speculators.

[anne]

http://www.nytimes.com/2008/07/04/business/worldbusiness/04euro.html?hp&pagewanted=print

July 4, 2008

Fighting Inflation, Europeans Raise Rate
By MARK LANDLER

FRANKFURT — For the European Central Bank, dedicated to slaying the dragon of inflation, the moment of truth arrived Thursday. The bank raised its benchmark interest rate a quarter of a percentage point to 4.25 percent, making good on a promise last month that it would act to curb food and fuel prices.

But with Europe’s economy slowing, the bank stopped well short of signaling the beginning of a new round of rate increases, as a lot of bank watchers had expected. “Starting from here, I have no bias,” the bank’s president, Jean-Claude Trichet, declared at a news conference here.

Mr. Trichet’s measured words soothed markets, helped halt a slide in the dollar against the euro, and may have mollified European leaders worrying that higher exchange rates could choke their weakening economy.

The bank’s decision to tighten credit has been watched, and debated, as much as any in its 10-year history because it comes just as economic growth appears to be deteriorating in Europe. It also widens the gulf in monetary policy between Europe and the United States, where the number of jobs declined for the sixth straight month in June.

The Federal Reserve, with interest rates half those in Europe, has so far not raised them, though it has indicated that inflation is a growing concern. Other central banks, from Scandinavia to Southeast Asia, lifted rates this week to combat a global wave of inflation.

“The E.C.B. is the only major central bank that is joining the smaller central banks in raising rates,” said Thomas Mayer, the chief European economist at Deutsche Bank in London. “The others are talking tough but the E.C.B. is the only one that is putting action to words.”

This has put the bank in an awkward position. Politicians in France and Germany urged it not to raise rates at such a fragile moment. Even within the bank’s 21-member governing council, there was a raging debate about whether to act now or hold off, to avoid jeopardizing growth.

The latest statistics, which showed inflation in Europe spiking to 4 percent in June — twice the upper limit set by the bank — seems to have settled the debate for the moment, according to economists. Mr. Trichet said the vote to raise rates a quarter point was unanimous.

Underlining the argument that the move was more of a one-time gesture than the beginning of a trend, he repeated a warning to unions not to use inflation as a pretext to demand steep wage increases. The bank frets as much about so-called second-round effects as it does about inflation itself, according to economists.

“They’ve really gotten everyone’s attention,” said Holger Schmieding, chief European economist at Bank of America. “Trade unions, governments, and others know the bank is dead serious.” ...

[anne]

http://www.nytimes.com/2008/07/04/arts/design/04museums.html?hp&pagewanted=print

July 4, 2008

China's Legacy: Let a Million Museums Bloom
By HOLLAND COTTER

XI'AN, China — This year, in a drive to promote awareness of China's national heritage, the government introduced a free-admission policy at the country's public museums. Officially the cultural establishment greeted the news with smiles.

But the look of anxious exasperation on the face of a curator watching crowds of schoolchildren swarm through a gallery of ancient ceramics here on a recent morning told a different story. They touched every exposed surface, leaned on glass cases and smeared them with fingerprints. Body contact and the art experience seemed to be inseparable.

A running joke is that once only a few people came to these institutions to see the art; now many will come, not for the art but for the air-conditioning.

Such are the growing pains of museums in a country that feels both older and newer than any place on the planet. Archaeology pushes its history ever deeper into the past; a racing market economy makes Chinese-ness a mutable identity, under continuous revision. The country and its art institutions seem caught in the tension between self-images: the sovereign civilization apart on one hand, the ambitious scrambler in the global game on the other.

Or so it feels to an art critic on a monthlong visit here, taking the measure of the Chinese art world against a panorama of devastating earthquakes and hectic preparations for the Olympic Games.

China's museums come in all sizes and types, from the majestic Shanghai Museum to shabby rooms in small-town Confucian temples. The artifacts are fabulous; what looks from afar like a dim little nothing display can leave you floored. (Contemporary-art museums are for the most part in a separate, still shaky category, an amalgam of public and corporate, for-hire affairs and collectors' vanity showcases.)

Yet most art is an unsettled category in China — "cultural relics" is the preferred term — and museums have complicated uses. They provide aesthetic delectation to be sure, but also moral education, pop entertainment and political propaganda. In a country that, culturally speaking, always has one foot on the gas and the other on the brake, art museums tend to be both innovative and conservative. They're postmodern or premodern but skip the in between.

There are exceptions. The new city museum in Suzhou is a Modernist showcase par excellence, pitched to international consumption. Designed by I. M. Pei, who spent part of his youth in that city of canals and scholars' gardens, its clean lines and cream-and-gray architecture would look equally at home in Paris or New York. So would the spartan galleries, which exude art-speaks-for-itself Western taste and are as suited to party giving as art viewing.

From outside, the splendid Shanxi Museum in Taiyuan looks far more exotic to the Western eye. Its inverted-pyramid shape is a kind of Chinese version of chinoiserie, like the New Agey mood music that emanates from fake rocks in public parks here. Yet the installation of archaic ritual bronzes will feel familiar to anyone who frequents the Metropolitan Museum of Art's display of the same type of material in New York, so similar is the presentation.

Almost shocking in their fierce, ponderous delicacy, they are joined here by complete sets of caldrons for ancestral offerings, carillons of giant bells and entire herds of fantastically fashioned beasts. The sight of them lined up in spotless cases, as if in a celestial department store, is an experience of formal perfection that an art specialist dreams about and comes to China for.

The History of Chinese Art

But it is not necessarily a typical experience here. With the goal of emphasizing the history over the art, other museums reject this "pure" form-as-content mode. Instead they emphasize not the precious object but the glorious, time-honored civilization that produced it. And in a country that has no encyclopedic world-culture museums, or even significant pan-Asian museums, that civilization is almost invariably China's.

To do so they call on exhibition devices — dioramas, stage props, ambient sound, films, interactive digital displays, extensive interpretive texts — often associated with museums of natural science, ethnology and archaeology. In utterly un-Met style, for example, the Shanxi Museum sets its magnificent group of Buddhist sculptures in a gallery of rough-textured, faux-sandstone walls honeycombed with niches.

The intent is to evoke the famous rock-cut grottoes at Yungang elsewhere in Shanxi Province and visually to reconnect a religious art to its original concept. While a handful of progressive art institutions in the West have experimented with this sort of approach, it is routine in museums in China.

Even less acceptable from a Western viewpoint is the casual approach some Chinese museums take toward exhibiting copies of artworks in place of originals. Fragile works that cannot survive gallery exposure may be represented by photographs. And when a well-known piece of art is unavailable, it may be considered preferable to display a copy — perhaps not acknowledged as such — rather than disappoint visitors.

One kind of art in short supply, except at major museums like the Shanghai Museum and the Palace Museum at the Forbidden City in Beijing, is old masterpiece ink-and-brush scroll painting. Its absence may seem odd, considering that for centuries traditional scholarship has celebrated painting and calligraphy as China's peak aesthetic achievements. An explanation lies at least partly in politics....

[Winslow R.]

Biofuels behind food price hikes: leaked World Bank report

Biofuels have caused world food prices to increase by 75 percent, according to the findings of an unpublished World Bank report published in The Guardian newspaper on Friday......

The daily said the report was finished in April but was not published to avoid embarrassing the US government, which has claimed plant-derived fuels have pushed up prices by only three percent.

http://news.yahoo.com/s/afp/20080704/ts_afp/climateenvironmentbiofuelsworldbankusbritain

My guess is rising fuel prices due to 'speculators' keeping fuel in the ground can be linked to the rise in prices of ALL commodities.

Yes, economists must appear fair and balanced, but we've seen where that gets us when the facts are overwhelmingly pointing towards monopoly power.

Sad to see the fire drill, once again, distract us from the real cause of the fire.

[anne]

http://www.nytimes.com/2008/07/04/world/asia/04japan.html?hp&pagewanted=print

July 4, 2008

Japan Sees a Chance to Promote Its Energy-Frugal Ways
By MARTIN FACKLER

KUMAGAYA, Japan — With its towering furnaces and clanging conveyer belts carrying crushed rock, Taiheiyo Cement's factory looks like an Industrial Revolution relic. But it is actually a model of modern energy efficiency, harnessing its waste heat to generate much of its own electricity.

Engineers from China and elsewhere in Asia come to study its design, which has allowed the company to slash the amount of power it buys from the grid.

The plant is just one example of Japan's single-minded dedication to reducing energy use, a commitment that dates back to the oil shocks of the 1970s that shook this resource-poor nation.

Now, with oil prices hitting dizzying levels and the world struggling with global warming, the country is hoping to use its conservation record to take a rare leadership role on a pressing global issue. It will showcase its efforts to export its conservation ethic — and its expensive power-saving technology — at next week's meeting in Japan of the Group of 8 industrial leaders.

"Superior technology and a national spirit of avoiding waste give Japan the world's most energy-efficient structure," Prime Minister Yasuo Fukuda said in a speech outlining his agenda for the meeting. Japan "wants to contribute to the world," he said.

Mr. Fukuda has already urged the leaders of the Group of 8 nations to adopt numerical targets as they discuss new ways to curb carbon dioxide emissions, a focus of treaty talks aimed at a new global agreement by the end of 2009. The existing pacts, the original climate treaty from 1992 and the Kyoto Protocol, which expires in 2012, have been called failures by energy and climate experts.

The rising cost of energy is expected to dominate the meeting, on Hokkaido, the northern island of Japan. President Bush and other leaders are facing calls to expand offshore drilling and to rein in hedge funds and other investors blamed for speculating on world energy markets.

Japan is by many measures the world's most energy-frugal developed nation. After the energy crises of the 1970s, the country forced itself to conserve with government-mandated energy-efficiency targets and steep taxes on petroleum. Energy experts also credit a national consensus on the need to consume less.

It is also the only industrial country that sustained government investment in energy research even when energy became cheap again.

"Japan taught itself decade s ago how to compete with gasoline at $4 per gallon," said Hisakazu Tsujimoto of the Energy Conservation Center, a government research institute that promotes energy efficiency. "It will fare better than other countries in the new era of high energy costs."

According to the International Energy Agency, based in Paris, Japan consumed half as much energy per dollar worth of economic activity as the European Union or the United States, and one-eighth as much as China and India in 2005. While the country is known for green products like hybrid cars, most of its efficiency gains have been in less eye-catching areas, for example, in manufacturing.

Corporate Japan has managed to keep its overall annual energy consumption unchanged at the equivalent of a little more than a billion barrels of oil since the early 1970s, according to Economy Ministry data. It was able to maintain that level even as the economy doubled in size during the country's boom years of the 1970s and '80s.

Japan's strides in efficiency are clearest in heavy industries like steel, which are the nation's biggest consumers of power. From 1972 to 2006, the Japanese steel industry invested about $45 billion in developing energy-saving technologies, according to the Japan Iron and Steel Federation.

The results are visible at the Keihin mill on Tokyo Bay, run by Japan's No. 2 steelmaker, JFE Steel. Massive steel ducts snake from the blast furnaces and surrounding buildings. These capture heat and gases that had previously been released into the air or burned off as waste. Now, they are used to power generators that produce 90 percent of the plant's electricity. (The plant's main fuel remains the coal used to heat its huge blast furnaces.)

Such innovations allow the mill to produce a ton of steel using 35 percent less energy than it did three decades ago, said Yoshitsugu Iino, group leader of JFE Steel's climate change policy group. Mr. Iino calculates that if the global steel industry adopted Japanese conservation measures, it could reduce carbon emissions by some 300 million tons a year....

[alex]

Don't Blame The Speculators, Economist Article.
"In essence, these are bets on which way the oil price will move. Since the real currency of such contracts is cash, rather than barrels of crude, there is no limit to the number of bets that can be made. And since no oil is ever held back from the market, these bets do not affect the price of oil any more than bets on a football match affect the result."

- is it correct that price of oil futures do not affect the price of oil? I thought some firms use those to purchase oil, etc. Still, if only cash is involved, the high oil premium would definitely be noticed by firms that physically move and sell the oil. Therefore the price of the futures would reflect on the price of "real" oil.

Am I wrong, or should economist hire better stuff?

[kthomas]

Hear hear, Winslow! We are all tired, deathly tired, of the distractions. Leaked report, my arse.

[anne]

http://krugman.blogs.nytimes.com/2008/07/04/dont-keep-on-truckin/

July 4, 2008

Don't Keep on Truckin'
By Paul Krugman

Greater fuel theory [Chart]

Everyone is upset at gas prices. But if you really want to see a radical cost shift, look at the real price of diesel fuel.

No wonder Walmart has suddenly discovered the virtues of local produce. *

* http://ap.google.com/article/ALeqM5ghQqDXMxs1hrKN5FHcgclPZy5msQD91LG6A01

[anne]

http://www.earthpolicy.org/Updates/2008/Update72_data.htm#table14

January 23, 2008

U.S. Fuel Ethanol Use, Grain Production, 1990-2007

(Million Tons - Percent)

1990 9 of 310 2.9%
1991 10 of 278 2.8
1992 11 of 350 3.1
1993 12 of 257 4.7
1994 14 of 353 4.0

1995 10 of 275 2.8
1996 11 of 333 3.3
1997 12 0f 334 3.6
1998 13 of 347 3.7
1999 14 of 332 4.2

2000 16 of 340 4.7
2001 18 of 321 5.6
2002 25 of 294 8.5
2003 30 of 345 8.7

2004 34 of 386 8.8
2005 41 of 363 11.3
2006 54 of 336 16.1
2007 81 of 414 19.6

2008 114 of 400 28.5 (Projection)

* Grain for fuel ethanol assumes 80 percent of ethanol distilleries currently under construction will be completed to draw from the 2008 harvest projection.

Note: Values are for crop years which begin in September of the calendar year.

[anne]

http://www.earthpolicy.org/Updates/2008/Update72_data.htm#table14

January 23, 2008.

U.S. Grain Export, 1990-2007

(Million Tons)

1990 83
1991 87
1992 90
1993 76
1994 98

1995 99
1996 81
1997 76
1998 87
1999 89

2000 88
2001 84
2002 73
2003 89
2004 84

2005 91
2006 86
2007 106

[anne]

http://krugman.blogs.nytimes.com/2008/02/22/demon-ethanol/

February 22, 2008

Demon Ethanol
By Paul Krugman

I'm almost never censored at the Times. However, I was told that I couldn't use the lede I originally wrote for my column * following the 2007 State of the Union address, in which Bush made ethanol the centerpiece of his energy strategy: "Before the State of the Union address, there had been hints and hopes that President Bush would offer a serious plan to reduce our dependence on imported oil. Instead, however, he took refuge in alcohol."

Well, anyway — the news on ethanol just keeps getting worse. ** Bad for the economy, bad for consumers, bad for the planet — what's not to love?

* http://select.nytimes.com/2007/01/29/opinion/29krugman.html

** http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aUIPybKj4IGs

[anne]

http://www.irinnews.org/Report.aspx?ReportId=78842

June 20, 2008

Maize - the Unaffordable Staple
By IRIN

JOHANNESBURG - With global high food prices apparently here to stay, economists in South Africa warn that despite a bumper maize harvest, worldwide demand and soaring agricultural input prices mean that even maize-meal, the country's staple, could be off the menu.

Food prices in South Africa have risen by 15.7 percent since April 2007, and maize-meal – a stiff porridge, the starch of choice - had gone up by over 25 percent, Patrick Kelly, Consumer Price Index Manager at Statistics South Africa (STATSSA), told IRIN.

John Rook, Programme Manager of the Regional Hunger and Vulnerability Programme in South Africa, told IRIN that when over half the family income was spent on food, even a slight price hike on maize-meal could really hurt.

"The poorest are hardest hit; they spend the highest portion of their income on food," he said, and with meagre budgets already overstretched, "they can't keep on absorbing food price rises."

According to the latest Income and Expenditure survey by STATSSA, income deciles 1, 2 and 3 - each representing 10 percent of the total South African population, starting with the poorest - respectively spend 80, 45 and 36 percent of their income on food.

Bad for the pocket and bad for health

A year ago, one kg of maize-meal cost around US$0.60, now it sells for $0.75. Average income in the lowest 10 percent of the population is less than $19 per month, and the average consumption of maize-meal is 10kg per person per month, making the implications of a price rise painfully clear: for 4.7 million South Africans one year ago, just over 30 percent of income would have been spent on maize-meal, compared to nearly 40 percent today....