I make the big time

My first appearance, as far as I know, in The Onion.

Update: I am wrong.  A reader points out a previous brief appearance.

Should the United States depend on foreign suppliers for vital resources?

The University of Chicago's Allen Sanderson takes up the question.

A Striking Scatterplot

This graphic is from John Taylor, who plots it using quarterly seasonally adjusted data from 1990Q1 to 2010Q3.  Investment here is fixed investment. 

Of course, causality goes in both directions: Strong investment demand leads to lower unemployment, and a stronger economy, reflected in lower unemployment, encourages investment spending.   As a result, the interpretation of this scatterplot can be debated.  But there is no doubt that the strength of the correlation is impressive.

Updates: Justin Wolfers takes John Taylor to task. John responds.

Scott Sumner to the rescue

Life is too short to defend myself against all the silly, groundless attacks I run across in the blogosphere.  So I am delighted when smart commentators like econ prof Scott Sumner help with the job.  For Scott's latest effort, click here.  Thank you, Scott.  Unfortunately, Scott has announced that he is taking a break from blogging.

Stiglitz on the Deficit

Readers of this blog have a pretty good understanding of my view of the long-run fiscal situation.  (If not, click here, here, and here.)  Joe Stiglitz has a very different view.

Our Children's Financial Crisis

Click here to read my article in Sunday's New York Times.

Even terrorists have downward-sloping demand curves

The AP reports:

When an admitted al-Qaida operative planned his itinerary for a Christmas 2009 airline bombing, he considered launching the strike in the skies above Houston or Chicago, The Associated Press has learned. But tickets were too expensive, so he refocused the mission on a cheaper destination: Detroit.

The Citation Impact of Open Access

I pointed out in a recent post that the Brookings Papers has become open access.  Common sense suggests that this change should increase readership and thus citations to articles published in the journal.  Indeed, some recent research on law journals confirms this:

Open access legal scholarship – which today appears to account for almost half of the output of law faculties – can expect to receive 50% more citations than non-open access writings of similar age from the same venue.

The bottom line: If a professor is interested in raising his or her citation ranking, he or she should should prefer a journal with open access.

crocheted lion mane hat

What do you think of my new digs?   I decided the old blog could use a spruce and decided to get professional help this time.  Kate from Smitten Blog Designs took excellent care of me and I am thrilled with the new look.  Thanks, Kate!

Last night as it was all being installed, I was poking around with things, reorganizing some labels, and editing my archives.  When I first started blogging (all the way back in 2006), I had no idea how to operate a sewing machine.   Instead, I was an avid crocheter.  In fact, my very first post ever was a crocheted bear hat.

I made a lot of animal hats that winter, but only kept one, which I realized is the perfect size for Oscar now.

This lion hat is kind of funny looking, but I love it.  As with all of my animal hats, I just made it up as I went along, so unfortunately there is no pattern to share.  But I will try to explain how I made the curly mane.

Single crochet tends to curl into itself, so I did fingers of single crochet off of a chain stitch.   Basically, you chain stitch however long you want the piece to be, then single crochet a long finger, turn and single crochet back the other direction toward your chain stitches.  Move to the next chain and do it again (repeat, repeat).  The single crochet strands will curl into twisty spirals.  I hope that makes sense to you if you are a crocheter.  There is a reason I've never tried to write down my crochet patterns!  :)

Check out my past posts to see my bear, frog, puppy, hippo, fish, pig, blue tiger (ha!), and monkey hats (but beware of the icky photography).

CEA Chairs on the Budget Deficit

Click here to read an important article signed by a bipartisan group of ten former chairmen and chairwomen of the Council of Economic Advisers.  I have never before had such a large and distinguished group of coauthors.

BPEA is open access

Here is some interesting news.  The Brookings Papers on Economic Activity, one of the best applied macro journals around, is making all journal issues available to the public without charge.  Click here for the recent conference papers and here for back issues.

What nation has the most progressive tax system?

Click here for the answer.

Update: Wow.  This brief post--really just a link to another blog--proved more controversial than I expected.  Matthew Yglesias accuses me of irresponsibly misleading America's youth.  Scott Sumner responds to Yglesias, pointing out "if you are going to argue that people who make mistakes should be ostracized, it’s best not to make a serious mistake in your attack." 

The issue is what to make of this table:

Click on graphic to enlarge.

Over at the Yglesias blog, a commentor named Peter Whiteford very usefully explains the table as follows:

I am the person who wrote the chapter in the OECD report that is the basis of these figures. It is part of a report on the distribution of income to households, so it doesn’t include taxes that are not directly paid by households, since these are not included in income surveys....[T]he table also calculates the distribution of taxes for the household as whole after adjusting for the number of people in the household, so it will differ from data calculated on income tax returns which are not adjusted for household size.

As others have pointed out this measure includes all direct taxes on individuals so it includes income taxes and employee social security contributions, but not employer payroll taxes. It also doesn’t include sales taxes, but these are much heavier in most other OECD countries, and not as progressive as direct taxes, so if you added indirect taxes in through some sort of modelling it is almost certain that the USA would still have the most progressive overall tax system.

However, as the OECD report points out, progressivity is not the same as redistribution. Progressivity measures how the distribution of the tax burden is shared, while redistribution measures how much the tax system reduces inequality. Redistribution is influenced both by the progressivity of taxes and the level of taxes collected.

In fact, the US system of direct taxes actually reduces inequality more than any other country as well. But overall, the USA reduces inequality a lot less than most other countries, because the other thing that you need to take into account is what taxes get spent on.

Now the US system of social security and cash benefits reduces inequality by less than any other OECD country except Korea. The US social security system is marginally less progressive then the OECD average, but the level of spending is very low – only Mexico and Korea spend less in the OECD.

So while the US tax system is progressive and reduces inequality, the US welfare state is much less effective at reducing inequality. And because the US has a very unequal distribution of income from capital and a much wider wage distribution than many other OECD countries, it ends up as a relatively unequal country after taxes and benefits.

If you look at Nordic countries, they all have much less progressive tax systems than the USA, but they collect a lot more in taxes (including in VAT). They then spend this much higher tax revenue on social security and services, and it is this side of the equation that is most important in reducing inequality.

So the implication is not that the USA either needs to increase or reduce the progressivity of the tax system. If you want to reduce inequality, you need to increase the level of taxes collected and spend it more effectively.

Flower Hair Clip Tutorial with Silhouette Fabric Interfacing

Did you know you can now cut fabric with the Silhouette?  Over the weekend, I tested the new fabric interfacing and fell in love with my Silhouette all over again.

 The Sewable Fabric Interfacing has a thin adhesive which allows you to temporarily adhere your cut shape to your project while sewing (and is sewing machine friendly).  The Clean-Cut Interfacing has a stronger adhesive for a cleaner cut and less fraying over time, and is meant for projects that don't need to be washed and will be hand-stitched.

I used the Clean Cut Interfacing to make some pretty flower hair accessories.  I love that they are far more detailed than anything I typically make by hand, but the best part is how fast they come together.  I can't tell you how much I enjoy having a machine do all my cutting for me.

 First, I got my document ready, inserting the 3D Ruffle Flower template from the online store.  Then I prepared my fabric, following the instructions on the package.  The interfacing is an easy iron-on.  It literally takes 2 seconds with a hot iron to adhere the interfacing to your fabric.  When you are ready to cut, change the Silhouette settings to about a 30 thickness and slow the cutting speed down to about a 3.

When the cut was finished, I was able to pop many of the fabric flowers right out, although I did have to use my scissors to snip a thread here and there to release others.  I noticed that when I used fabric with a tighter weave, the cut was cleaner.

The interfacing is fusible on both sides.  It is smooth and kind of shiny, but unless you apply heat, it doesn't feel sticky.

I stacked the flowers, applying the iron to the center only to fuse them together.

Then I sewed a few pearls to the center.  I'm not going to lie - it was tough to push my needle through all those gluey layers, but it was manageable.

I attached one flower to a stretch headband, and the rest to hair clips and bobby pins.  And I kind of love them.  If they weren't so easy to make, I'd have a tough time giving them away.  I have a family wedding coming up ... maybe all the cute little nieces need coordinating hair accessories?

Check out the Silhouette blog to see more ways the fabric interfacing can be used.

Silhouette America is running special promotions this week (March 21-27) featuring the new Fabric Interfacing.  Using the promo code JILL at checkout when you purchase a Silhouette SD, you will also receive one package of each fabric interfacing (clean cut & sewable) and a roll of white flocked heat transfer material for only $229.  

If you already have a Silhouette, use the promo code JILL at checkout to receive a 25% discount on fabric interfacing through March 27th. 

p.s.  I know I post a lot about Silhouette projects these days, and I really hope it doesn't bother those of you who aren't Silhouette-users.  This little machine truly has changed the way I do crafts, so I can't help posting about it frequently, since I use it on, well ... everything!

CBO on the President's Budget

The bottom line from the CBO report:

Compared with the Administration's estimates, CBO's estimates of the deficit under the President's budget are lower for 2011 (by $220 billion) but higher for each year thereafter (by a total of $2.3 trillion over the 2012–2021 period).

The Nerdiest Ripple Effect

...of the Tiger Woods scandal.

Some Commentary

A couple bloggers I follow have posted comments on my new paper with Matthew Weinzierl on optimal stabilization policy.   Scott Sumner likes it.  Paul Krugman is predictably snarky.

Update: Greg Ip of The Economist weighs in.

disneyland outfits for the girls

We did two days of Disneyland, so of course, Ruby needed two days of outfits.  I already showed you the Belle Dress.  I was sad because we never ran into Belle for a photo.  Better luck next time!

For the second day, we dropped the Disney princess stuff and went for full-on FUN.  Because looking like a polka dot explosion is completely acceptable at Disneyland (actually, if you are a baby it is acceptable anytime).

T-shirt dresses are easy-peasy.  All you do is add a few inches of fabric to the bottom of a t-shirt.  I also like a little gather, so I cut the fabric 1.5 times the width of the t-shirt.  The length of the skirt can vary - I think Ruby's skirt was about 4 inches long after hemming, and her cousin's was about 6 inches long.  The flower was made using a Make It and Love It tutorial.

Of course, the girls needed coordinating leggings (pattern by Lil' Blue Boo).

Ruby's cousin is a big Minnie/Mickey fan.  Minnie's face was made with the Silhouette heat transfer.  Before cutting, I edited out her bow so I could add my own fabric bow to match the skirt.

Ruby was a real trooper all through Disneyland.  Her favorite stop was definitely the little petting zoo in Frontierland.  She would grab the goats' ears and laugh hysterically.  I love big baby laughs.  Oh, and did I mention that Oscar rode the Matterhorn?  He was one tough cookie.

Hurray for Disneyland!  I really do love it.  I'm sure you are sick of hearing about it, so back to non-disney crafts next week.  :)

The Coase Theorem in Action

Click on graphic to enlarge.

Optimal Stabilization Policy

Here is my latest research paper, An Exploration of Optimal Stabilization Policy, coauthored with Matthew Weinzierl.  We are presenting it this afternoon at a Brookings conference.

disneyland shirts for boys

Hi, friends!  Did you think I got lost forever at Disneyland?  Maybe stuck somewhere in Small World?   We had such a fun weekend - I finally got to ride Space Mountain for the first time ever (it was SO awesome!), and of course Oscar had a very magical time.  My new favorite spot in Disneyland is the Baby Center.  Who knew?

It took me a few days to get back into the swing of things, but we are back to real life and now I want to show you the t-shirts I made for Oscar.

Last fall, Dana from MADE posted about some Disney shirts she made for a friend using freezer paper stencils, and in passing, mentioned how cool it would be to use the images of the retro-styled Disneyland ride posters to make shirts.  A brilliant idea (as her ideas usually are).   The designs are far too intricate to cut out by hand (at least for me), but this is the perfect project to do on the Silhouette.

I started with an image from the Jungle River cruise ride:

The most common questions I get about the Silhouette are:

1. How do I import my own images?
2. How do I trace images to get cut lines?

Both are very easy to do.  To import an image, simply click on File, then Import to my Library.  That's it!  Then you can add the image to your document just like any other image in your library.  Your imports should be stored in your library in the folder marked "My Own Designs" (rather than "Recent Downloads").

However, it won't automatically have cut lines.  That's where the tracing feature comes in.  Open the Trace menu and click on Select Trace Area.  You will then be able to click and drag a rectangle around your image to select the area.  Once it is highlighted, adjust the trace settings to get the image how you want it to be traced.

Then you choose your trace method.  For this project, I just clicked Trace, and it does all the lines.  You can also trace the outer edge only (for something line a silhouette of a face), or you can trace and detach.  The trace and detach feature doesn't add cut lines, but instead separates whatever you've traced from the rest of the image, in case you want to isolate something.

Once the image is traced, the red cut lines and the original image are separate and you can drag them apart easily.  I used the eraser in the tool bar to clean up some of the lines and removed some of the small text that wouldn't trace clearly.

If you have text in your image, don't forget to flip it horizontally before cutting, otherwise all the words will be backwards and you will be very sad.  Ask me how I know.  :)

Then I cut the image out of the Smooth Heat Transfer material on the Silhouette.  For an intricate design like this, I recommend slowing down the cutting speed to a 3 or 4.  It just seems to produce better results.

Peel away all the negative space around your cut image.  I LOVE the little hook tool to pick up small pieces (and to hold little pieces in place that I don't want to come up).  I don't think I would have been able to pull the negative space away without the hook on this project.

 Here's what it will look like when it is all done:

Then place it on your shirt.  The heat transfer material works very well when you follow the directions.  Set your iron to the Cotton Setting (and no higher, or it can ruin the heat transfer), and make sure you use a press cloth so you don't melt the plastic.  I just use a thin scrap of cotton jersey, and it works very well.

After I peel away the protective plastic, I typically cover it with the press cloth and iron it again, just for good measure.

Then you can sit back and enjoy your totally cool, one-of-a-kind t-shirt that is sure to be the envy of Jungle Cruise lovers everywhere.

Don't sit back too long though, because you should probably make another shirt or two.  :)  Lightning McQueen is a celebrity and hero at our house.  Did you know that you can layer different colors of the heat transfer?  Because you totally can.

I didn't get any good action shots of Oscar in his shirts, but this was the face he wore all weekend:

He was one happy boy.

One more Disneyland post with more girl outfits coming up later this week!

March Madness, Econ-Style

If basketball teams were replaced by economics departments....

Broadway Producers as Risk-taking Entrepreneurs

"six out of seven musicals fail to recoup their investment."
Source.

What's new in the new edition?

As I have noted in a previous post, the sixth edition of my principles text has recently been released.  Finding things to update was easy.  When the last edition was sent to the printer, President Obama had not yet clinched the Democratic nomination!  Just think of everything that has happened in the economy and economic policy since then.

If you wonder more specifically what you will find in the new edition that was not in the last one, here is a list.

Chapter 1
New Case Study: The Incentive Effects of Gasoline Prices
New paragraph on the recent downturn added under Principle 10
Two new problems

Chapter 2
New In the News box: The Economics of President Obama
Table 1 updated and substantially expanded
New Cartoon in Appendix

Chapter 3
Tiger Woods changed to Tom Brady in in-text example.
New Question for Review
New problem

Chapter 4
New article for the In the News box: Price Increases After Disasters

Chapter 5
New FYI box: A Few Elasticities from the Real World

Chapter 6
New In the News box: Should Unpaid Internships Be Allowed?

Chapter 7
New problem

Chapter 8
New In the News box: New Research on Taxation

Chapter 9
New In the News box: Trade Skirmishes, about U.S. tariffs on Chinese tires and the retaliatory response
New problem

Chapter 10
New In the New box: The Externalities of Country Living
New In the News box: Cap and Trade
New problem

Chapter 11
Introduce new term: Club goods.
New In the News box: The Case for Toll Roads
Two new problems

Chapter 12
New In the News box: The Temporarily Disappearing Estate Tax
New In the News box: The Value Added Tax

Chapter 13
New problem

Chapter 14
New problem

Chapter 15
New In the News box: President Obama’s Antitrust Policy
Two new problems

Chapter 16
Two new problems

Chapter 17
New In the News box: The Next Big Antitrust Target?
New problem

Chapter 18
New problem

Chapter 20
New In the News box: What’s Wrong with the Poverty Rate?
New In the News box: The Root Cause of a Financial Crisis
New problem

Chapter 21
New In the News box: Backward-sloping Labor Supply in Kiribati
Three new problems

Chapter 22
New In the News box: Arrow’s Problem in Practice
New In the News box: Sin Taxes

Chapter 23
New In the News box: Beyond Gross Domestic Product
New problem

Chapter 24
New In the News box: Shopping for the CPI
New problem

Chapter 25
New In the News box: One Economist’s Answer (to what makes a nation rich)

Chapter 26
New FYI box: Financial Crises
Two new problems

Chapter 27
New In the News box: A Cartoonist’s Guide to Stock Picking
New In the News box: Is the Efficient Markets Hypothesis Kaput?
Two new problems

Chapter 28
New In the News box: The Rise of Long-term Unemployment
New In the News box: How Much Do the Unemployed Respond to Incentives?

Chapter 29
New In the News box: Mackereleconomics
New Section on Bank Capital, Leverage, and the Financial Crisis of 2008-2009
Much revised section on the tools of monetary policy. It now includes a discussion of the Term Auction Facility and the Fed’s payment of interest on reserves.
New In the News box: Bernanke on the Fed’s Toolbox
New Question for Review
New problem

Chapter 30
New FYI box: Hyperinflation in Zimbabwe
New section: Inflation is Bad, But Deflation May Be Worse
New In the News box: Inflationary Threats

Chapter 31
Box on Euro updated to discuss problems in Greece
New problem

Chapter 32
New In the News box: Alternative Exchange-Rate Regimes

Chapter 33
New In the News box: The Social Influences of Economic Downturns
New Case Study: The Recession of 2008-2009
New In the News box: Modern Parallels to the Great Depression

Chapter 34
New FYI box on the Zero Lower Bound
New In the News box: How Large is the Fiscal Policy Multiplier?

Chapter 35
New In the News box: Do We Need More Inflation?

Chapter 36
New (sixth) debate added on spending hikes vs tax cuts to fight recessions
New FYI box on inflation targeting
New In the News box: What is the Optimal Inflation Rate?
New In the News box: Dealing with Debt and Deficits

Fed News

Senator Shelby blocks Peter Diamond.

I am personally saddened by this decision, for Peter is a very smart guy and a highly accomplished economist, as well as a former teacher of mine.  There is no doubt in my mind that Peter was fully deserving of the Nobel Prize.  But I have to admit that, given Senator Shelby's political preferences regarding economic policy, his reasons for blocking the nomination to the Federal Reserve Board are not wholly unreasonable.  Click through to the link above (or here) to read the Senator's explanation.

Striking Fact of the Day

From the Political Calculations blog:

in percentage terms of the change in total employment level from 2006 to 2010, jobs affected by the federal minimum wage hikes of 2007, 2008 and 2009 account for 41.8% of the total reduction in jobs seen since 2006.

baby belle dress

We are heading to Disneyland this weekend, and since it is Ruby's first time, she demanded a special outfit.  While I've always expected that we'd reach the princess stage, I didn't think it would be as early as 8 months.

I kid.  Obviously Ruby doesn't know anything about princesses, and this is all about her mama getting a little giddy at the sewing machine.  But when I saw the Belle Dress Tutorial at Crafterhours last summer, I just couldn't resist.  Princess dress up clothes made out of knits?  Genius!  This pretty dress is just as comfy as all her other baby clothes.

Squeal!  Ok, just had to get that out of my system.  :)

Ruby is a crawler now, so this little dress only comes to about her knees (which only happens to up the cuteness factor about tenfold).  We'll save the floor length gowns for later.

Like I said, I used Crafterhour's dress tutorial as my guide, and the Sweet Little Dress pattern by Leila and Ben as my peasant dress starter.  I used two men's t-shirts and only materials I had on hand.

Now the wheels in my head are turning, because she might need a whole collection of baby princess dresses.  Too young?  Nah ... you're never too young for dress up.

A Shoutout

From a book review of Spousonomics:

If you've taken an Econ 101 course in the past decade or so, there's a good chance that somewhere on your bookshelf is a dog–earred copy of Gregory Mankiw's Principles of Economics. The Harvard professor's textbook has become a classic, thanks to its simplicity and clarity — two qualities appreciated by gawky undergrads facing first–year distractions. After all, the dismal science never looks more dismal than when there's a choice between staying in to study Keynes or going out to flirt with strangers at a party.

easy fabric baskets

If you like super quick sewing projects, this post is for you.  These little baskets take only about 20 minutes to make.

I started with the Tidy Tray tutorial at The Sewing Republic, which is a very simple project.  You basically sew a square and then sew the corners together to create a little basket.  I didn't change much, but did take a few shortcuts.   First, I substituted fusible fleece interfacing so I wouldn't have to pin much.  Also, I didn't mark full lines on the fabric and eliminated the stitching on the bottom of the basket.  I just marked little dots equal distances in from each corner, and then folded the square on the diagonal to make the dots meet up.  Sew a straight seam perpendicular to the finished edge, and you're done!

Then I experimented with making larger baskets with deeper sides.  I didn't like how much the corners stuck out, so I folded them in onto the sides and then stitched them down.

The original squares on these two nesting boxes were 12.5 inches and 8.5 inches.  I marked each corner at 2.5 inches before sewing and folding.  I think they are cute - like little folded fabric boxes.  So simple, and seriously quick.  They are perfect as a little catch-all to hold spare change, jewelry, or whatever else you need to keep contained!

Richard Freeman on Unions

An interview and book recommendations from my Harvard colleague.

giddy-up cowboy (and girl) vests

Did you see the tutorial for the Frontier Vest on MADE?  Super cute.  Oscar loves dress up, but our collection mostly consists of Ruby's tu-tu's at this point.  While we are equal opportunity fun around here (no boy-stuff/girl-stuff yet), it was time to beef things up.

 The faux cowhide came from one of my favorite old skirts.  In high school, I was a big fan of animal prints.  :)  I've been saving it for years for just this kind of project!  The denim came from a pair of my husband's jeans and the khaki from another old skirt, so this project was entirely refashioned.

I used Dana's template but added extra seam allowance at all the finished seams. 

Ruby's vest was actually a happy mistake.  I printed the template to the wrong size, and plowed ahead despite it looking rather small.  Luckily it turned out to be a perfect 12 month size!

My kids are not at a happy picture-taking stage.  Ruby can't sit still and Oscar is just kind of uncooperative.  Even with a bribe, this is the best I could get.

Have a great weekend!

retro baby sneakers

You know how some bloggers plan things weeks in advance and do awesome photo shoots to show off their projects?  Not me.  This is what I was sewing at 1 a.m. last night.  These little retro sneakers were made with another Sweet Pea Pattern (I really like them!) using faux leather and some yummy Amy Butler on the inside.

The shoes are a really great fit on Ruby, and even stay on her busy feet, but she was not interested in taking photos this morning (unless of course, you are interested in seeing a blurry baby crawling away from the camera).  I'll try to snap a photo of them in action at some point.

Tobin's Q

Click on graphic to enlarge.
Source.