Archive for July 21st, 2021

Global reflation?

July 21, 2021

BIS Bulletin on rising inflation across countries:

  • Inflation has risen in many countries. In conjunction with a rebound in GDP growth and evidence of significant bottlenecks in some sectors, this has prompted concerns that the low inflation era of recent decades could be nearing its end.
  • A closer look at the data reveals that the pickup in inflation can be ascribed largely to base effects, increases in the prices of a small number of pandemic-affected items and higher energy prices. A common thread through these causes is that their effect on inflation is likely to be temporary.
  • A more persistent increase in inflation would likely require a material pickup in labour costs and an unmooring of inflation expectations. However, wage growth remains contained and the medium-term inflation expectations of professional forecasters and financial markets show little sign of de-anchoring. These developments are consistent with medium-term inflation moving towards central bank targets.

Moving from a poor economy to a rich one: The role of migrant job tasks

July 21, 2021

Prof Eran Yashiv of Tel Aviv University in this voxeu research shows what happens to a migrant moving from a poor economy to a rich economy:

Should Facebook (and other Social Media platforms) ban world leaders?

July 21, 2021

Courtney C. Radsch, former advocacy director at the Committee to Protect Journalists in this Proj Syndicate piece does not mince words. She says Facebook should ban more world leaders just as it has done for Trump.

Like it or not, Facebook wields tremendous power. In many countries, it is one of the few alternatives to the government-aligned outlets that dominate national media ecosystems. For users, it is often synonymous with the internet. That is why authorities have devoted so many resources to manipulating it, and why Facebook must take responsibility for stopping them.

To be sure, regulators also have a role to play. But, so far, their approach has been deeply flawed. Some – including in Florida, Texas, and Poland – have been pushing in the opposite direction, seeking to prohibit social-media platforms from removing content or accounts that are not illegal. Regulators in the US and the European Union are considering whether some elements of the internet should be treated essentially as public utilities or “common carriers.” But, overall, regulators need to focus less on content and more on platform design, advertising technology, and monopolistic power.

In the meantime, it is up to Facebook to rid itself of genocidal militaries, government propaganda that targets and manipulates populations, and leaders who block users. The algorithmic intermediation of the public sphere by private, for-profit platforms designed to maximize engagement and polarization has been anything but emancipatory. For many, it has been deadly. Governments, public officials, and political parties must face swift and severe consequences if they violate a platform’s terms of service and use it to violate people’s rights.

How market design can help solve problem of water allocation

July 21, 2021

Nice article by Paul Milgrom and Silvia Console Battilana:

Misallocation of scarce resources too often deprives users of them even as others waste their supply. Well-designed markets can overcome such problems by enabling voluntary transactions that allow existing users to retain their allotments while enabling higher-value uses.

Market design will also play a critical role in solving the problem of water allocation. Many of the world’s existing rights to fresh water – both surface water and groundwater – have already been granted and grandfathered in complex ways to cities, farmers, and industrial users. In some cases, each individual trade of these rights requires governmental approval; other jurisdictions prohibit such trading entirely.

These restrictions and historical rules have led to highly inefficient allocations. Water may be unavailable to towns that require more of it as they grow, even when those urban and residential uses are a hundred times more valuable than the rural ones they would supplant. Certain industrial firms whose rights are based on historical use may have an incentive to overuse water, even during droughts, to retain their rights to future allotments. Where trading of rights is limited or prohibited, poor price signals make it difficult even to assess which uses are most valuable. And water demand will increase and shift as climate change continues to upend historical usage patterns.

The success of the US radio spectrum auction points to a solution. Instead of revoking incumbents’ spectrum rights unilaterally, Congress redefined them in a way that made trading them possible and simple, and then allowed TV broadcasters to decide for themselves whether to continue their previous uses or decline to participate. The rights that were sold were then reconfigured to be suitable for new uses and efficient trading, while those that were unsold remained fit for existing purposes.

A similar reorganization of water rights could protect existing users not wishing to sell, while creating tradeable rights for others that would allow water to flow to its most valuable use. Any attempt to compel all current users to participate will likely be thwarted by legal and political opposition, but a fully voluntary market styled on the same principles as the one for radio spectrum could accommodate resisters while drastically improving the allocation of water rights. Moreover, policymakers could use a portion of the value freed by any reallocation to offset inequities – for example, by granting credits to rural towns or small agricultural producers so that they receive the water resources they need.

Allocating water efficiently and fairly will require innovation, collaboration, and regulation. In this and other domains, market design puts practical economic theory in the service of establishing rights and introducing effective rules and algorithms. That way, we can accommodate diverse market participants, harness new technologies, and maximize the public good.

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