Ian Goldin on Ebola and the consequences of globalization

goldinIan Goldin, co-author (with Mike Mariathasan) of The Butterfly Defect: How Globalization Creates Systemic Risks, and What to Do About It, voiced (or rather, wrote) his opinion on the Ebola outbreak and the role globalization has played thus far. In his PBS Newshour article, which can be read in its entirety, here, Goldin states, “globalization does not only lead to the spreading of ‘goods,’ such as economic opportunity and vaccines, but also to the spreading of ‘bads,’ such as diseases, financial crises and cyber attacks.” Ebola is just the most recent “bad” to come from greater globalization.

Goldin’s solution to prevent future infectious disease outbreaks (and other “bads”)  may not be popular among government officials responsible for budgeting resources, but it may be the only option. Outbreaks, like we’ve seen with Ebola, might become more common in an age of higher population density and increased international travel, yet the organization most responsible for preventing the spread of these diseases, the World Health Organization (WHO), is terribly underfunded according to Goldin.

“A breakdown or absence of public health infrastructure is the driving factor in over 40 percent of infectious disease outbreaks internationally,” writes Goldin. He also notes that the international organizations–WHO, International Monetary Fund, World Bank and UN Security Council, to name a few–needed to handle international crises “lack the leadership, legitimacy or capability to manage the spill-overs of globalization or emergent threats” because “national governments have stymied vital reforms…and attempt[ed] to wrest power back from what they think are mysterious, distant institutions.”

Goldin concludes his article with an ultimatum: “In order to harvest the ‘goods’ of globalization we need to invest in the institutions that manage the ‘bads.’”

 

Congratulations to Jean Tirole, recipient of 2014 Nobel Prize in Economic Science

Around this time last year the Press could not have been more excited. Why? Two of the three 2013 Nobel Prize in Economic Sciences awards went to PUP authors Lars Peter Hansen and Robert J. Shiller, authors of Robustness and Irrational Exuberance, respectively. To see just how excited we were, click here, here, or here. Amazingly enough, there was no shortage of excitement at the Press following this year’s announcement of the 2014 Nobel Prize in Economic Sciences award as Jean Tirole, author of Financial Crises, Liquidity, and the International Monetary System, The Theory of Corporate Finance, and co-author of Balancing the Banks: Global Lessons from the Financial Crisis, is the sole recipient.


“If we had more researchers like Jean Tirole it would be a very good thing for the world.”


The official Nobel Prize press release states Jean Tirole, head of economics at Toulouse University in France, won The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel for 2014, “for his analysis of market power and regulation,” but this is just a fraction of the contribution he has made to economic theory and its real world implications. In an interview (which can be seen below) Chairman of the Committee for the Prize in Economic Sciences in Memory of Alfred Nobel, Tore Ellingsen, praised Tirole for his tireless efforts to better understand and explain how governments could regulate industries dominated by monopolies. When asked if it was difficult to choose a winner for the award this year, Ellingsen explained, “Yes and no. It’s been clear for some time now that Jean Tirole is a worthy recipient, but the question has been for what, alone or with whom, and when?” The interview concludes with wishful thinking; “If we had more researches like Jean Tirole it would be a very good thing for the world.”

Tirole has been an active member and contributor to economic theory since the 1980′s, and although “his work is largely theoretical…it has translated easily to practical use.” As a New York Times article further notes, “[Tirole's] work is also wide ranging. A description of his influence published by the prize committee cited more than 60 papers, an unusually large number.”

Peter J. Dougherty, Director of Princeton University Press had the following to say about Tirole’s impact on the field of economics and his much deserved recognition. “Jean Tirole’s 2006 book, The Theory of Corporate Finance, marked an important moment in economics as well as in the history of Princeton’s economics list. We extend our most heartfelt congratulations to Professor Tirole on the occasion of his Nobel prize.”

Again, on behalf of all of us at PUP, we would like to congratulate and thank Jean Tirole for keeping the Nobel Prize in Economic Sciences award in house. And who knows, maybe next year we’ll be posting about a three-peat… fingers crossed!

And the REAL World Cup Winner is…

IPHWell, surely everybody knows by now – the 2014 World Cup is over, and Germany went home with the trophy.

But there’s another “winner” worth mentioning: Princeton University Press author and London School of Economics professor Ignacio Palacios-Huerta, whose latest book, Beautiful Game Theory: How Soccer Can Help Economics, garnered some wonderful press over the course of the tournament. Mr. Palacios-Heurta not only received a mention in the Science section of the New York Times and was the subject of a full-length article in strategy+business; he also penned an op-ed for the New York Times’s Sunday Review and was featured in stories in both the Financial Times and Worldcrunch.

Sure, he can’t rally like Ronaldo or kick it like Klose; but this fùtbol fanatic’s research presents advantages that extend far beyond the pitch.

Palacios-Huerta is unique in that he utilizes soccer data to test economic theories. In his op-ed in the Times, Palacios-Huerta lays out the basics of this experiment by explaining its origins in the Nash Equilibrium, which analyzes how people should behave in “strategic situations” and stresses that, in order to “win,” they shouldn’t repeat their choices. He says that, “according to Mr. Nash’s theory, in a zero-sum game (i.e., where a win for one player entails a corresponding loss for the other) the best approach is to vary your moves unpredictably and in such proportions that your probability of winning is the same for each move.”

He chooses penalty kicks to demonstrate this theory because they’re zero-sum games, wherein it’s ill-advised to use a strategy repeatedly. The explanation for this is relatively simple: a player’s shots become predictable if he always kicks to the same side of the net, making them easier to block. A lot of legwork (pun somewhat-intended) has gone into proving this idea: Palacios-Huerta analyzed 9,017 penalty kicks between 1995 and 2012, to find that successful players typically distributed their shots unpredictably and in just the right proportions. We won’t get into the numbers here, but they’re abundant in both the book and the op-ed.


Other research by me and others has shown that data from soccer can shed light on the economics of discrimination, fear, corruption and the dark side of incentives in organizations. In other words, aspects of the beautiful game that are less than beautiful from a fan’s perspective can still be illuminating for economists.”


And penalty kicks are just one handy example. Data from soccer can also illuminate one of the most prominent theories of the stock market: the efficient-market hypothesis, which essentially posits that the market processes economic data so quickly that any news relating to a stock is incorporated into its price before anyone can even act on it, diminishing the risk of insider trading.

We’re excited to see more of what these soccer stats can do to advance economic theory, and more importantly, how Palacios-Huerta can translate something so complicated, using something so, well…beautiful.

__________________________________________________________________________________________________________________________________________________________________________

Ignacio Palacios-Huerta is the author of:

BGT Beautiful Game Theory: How Soccer Can Help Economics by Ignacio Palacios-Huerta
Hardcover | 2014 | $35.00 / £24.95 | ISBN: 9780691144023
224 pp. | 6 x 9 | 30 line illus. | eBook | ISBN: 9781400850310 | Reviews Table of Contents   Introduction[PDF] 

Princeton at Hay Festival


Hay on Monday evening
Blackburn at Hay
Simon Blackburn talks to Rosie Boycott
Mitton at Hay
Jacqueline Mitton broadens our knowledge of the solar system
Bethencourt at Hay
Francisco Bethencourt discusses “Racisms”

Last week was an important week in the British literary calendar–the week of Hay Festival! Set in beautiful Hay-on-Wye on the Welsh Borders, and running since 1988, the festival attracts thousands of book and culture enthusiasts from around the world every year. This year’s line-up was as strong as ever: with names such as Toni Morrison, Richard Dawkins, Stephen Fry, Mervin King, Jeremy Paxman, Simon Schama, Sebastian Faulks, William Dalrymple, Benedict Cumberbatch, Bear Grylls, Max Hastings, Rob Brydon, Bill Bailey and Dame Judi Dench (to name but a few to catch my eye in the jam-packed programme), 2014′s Festival could not fail to enthrall and delight anyone who walked its muddy paths.

And of course, Princeton University Press authors have been gracing the Hay stages this year, with a variety of wonderful events. From Diane Coyle, explaining GDP to us in plain English (and lo0king very stylish in her Hay wellies) to Michael Wood (translator of Dictionary of Untranslatables) discussing words that defy easy–or any–translation from one language and culture to another, to Ian Goldin’s talk about globalization and risk (The Butterfly Defect), last weekend got off to a great start.

Then, earlier in the week, Jacqueline Mitton (author of From Dust to Life) took a gripped audience on a journey through the history of our solar system in her “John Maddox Lecture”.  On Tuesday, Rosie Boycott spoke to Simon Blackburn about his book Mirror, Mirror–a fascinating conversation which covered everything from psychopathic tendencies displayed in senior management to whether Facebook is really that damaging to the young. Francisco Bethencourt, meanwhile, managed to squeeze a history of racisms into an hour and gave us lots to ponder.

If all this leaves you wishing you’d been there, there is still more to envy! Later in the week, Roger Scruton, Will Gompertz and others discussed the value of a Fine Art degree – does contemporary art celebrate concept without skill? On a parallel stage, renowned historian Averil Cameron (author of Byzantine Matters) convinced us that an understanding of the Byzantine era is just as important as studying, say, Rome or Greece. Finally, Michael Scott (author of Delphi), whom it is almost impossible to miss on the BBC these days, delivered a talk about Delphi: A History of the Center of the Ancient World on Friday.

Whether you swoon for science are potty for poetry, whether you want to dance the night away in a frenzy of jazz or are hoping to meet your favourite on-screen star, Hay Festival offers something new and exciting every year.

Watch Anat Admati’s entertaining TEDx talk “Seeing Through THE BANKERS’ NEW CLOTHES” at Stanford

Banking critic and Stanford finance prof Anat Admati recently gave a talk at TEDx Stanford titled “Seeing through THE BANKERS’ NEW CLOTHES,” based on her bestselling book, with Martin Hellwig, THE BANKERS’ NEW CLOTHES: What’s Wrong with Banking and What to Do about It. Check it out below.

Ian Goldin stopped by the USA Today offices to chat about his latest book THE BUTTERFLY DEFECT on video

Ian Goldin, director of the Oxford Martin School and professor of globalization and development at the University of Oxford, recently stopped by the USA Today offices to discuss his latest book THE BUTTERFLY DEFECT: How Globalization Creates Systemic Risks, and What to Do about It with editor-in-chief David Callaway. Check out their entertaining discussion below.

Forecasting & Business Charts [Slideshow]

The slideshow below, assembled by Walter Friedman, author of Fortune Tellers: The Story of America’s First Economic Forecasters, brings together several forecasting and business charts from the early twentieth century.

More information on many of these charts and the forecasters themselves is in Friedman’s book which you can sample here. If you would like to download a PDF of these images and captions, please right click and save this file.

Fortune Tellers 2
Fortune Tellers 1
1 The Babson Compositplot, 1921
2 Irving Fisher's Diagram of the Equation of Exchange, 1912
3 Irving Fisher's Diagram of the Equation of Exchange, 1912
4 John Moody's View of the Economy, 1904
5 James H Brookmire's Barometer, 1907
6 Brookmire's Barometer Chart
7 Harvard Economic Service Chart
Karl Karsten's Map of Business Conditions
9 Brookmire's Cycle Chart of Business and Banking
10 Malcolm Rorty's Depiction of the Business Cycle
11 Babson's Map of the United States for Merchants and Bankers, 1911
12 Brookmire's survey of business conditions in the United States

A new type of forecasting

The years from the turn of the century to World War I were a fertile time for many business analysts, including the scientific management exponent, F. W. Taylor. While some experts sought to improve the inner workings of firms, other tried to make sense of the very atmosphere in which business operated.

Who were the Fortune Tellers?

After the Panic of 1907, economic forecasters began producing newsletters.

Roger W. Babson published Babson’s Reports, which featured the Compositplot of ups and downs. In 1909, John Moody, who is today remembered for his credit rating company, started his own weekly market report. In 1910 Irving Fisher, a pioneer of mathematical economics, published the first of several charts, intended for economic prediction, in the Journal of Economics. Around this same time, James Brookmire, the son of a grocer in St. Louis, founded the Brookmire Economic Chart company and began publishing forecasts on a regular basis.

The most influential forecasting chart of the period belonged to the Harvard Economic Service, which, in 1922, founded a weekly newsletter that featured its A-B-C curve. Along with these charts were other efforts to map economic activity, including Malcolm Rorty’s sketch of the business cycle and several attempts to capture the geography of business within the U.S.

The Babson Compositplot, from 1921

The large shaded areas marked A, B, C, D, E, F, and G, represent depressions below and expansions above the “normal” line. Babson believed that areas of expansion (B, for instance), would be equal to areas of recession (C, for instance) that followed. The chart also contained a wealth of other information, including stock prices, bond prices, and commodity prices.

Source: Roger W. Babson, Business Barometers Used in the Accumulation of Money (Wellesley Hills, Mass: Babson Institute, 1921), insert.

Irving Fisher’s Diagram of the Equation of Exchange for use in forecasting, 1912

While Fisher did not produce a forecasting chart, he did create a diagram to illustrate the Equation of Exchange (MV + M’V’ = PT), which he depicted showing a mechanical balance. The left side of the balance symbolized the left side of the equation, with a small weight standing for M, the money in circulation, and a larger bank book standing for M’, deposits in checking accounts. The distance to the left of the fulcrum of the weight represented the velocity of circulation (V) and the distance of the bankbook, the velocity of circulation of bank deposits (V’).

(continued in the next slide)

Irving Fisher’s Diagram of the Equation of Exchange for use in forecasting, 1912

The volume of trade (T) was represented by a tray on the right, with the index of prices (P) at which these goods were sold, represented by the distance of the tray to the right. The diagram showed the changes in the values for all the components of the Equation of Exchange from 1896 to 1911. To predict the future, Fisher thought, one needed to look especially at recent changes in the bank deposits, which, if rising rapidly, indicated a coming crisis.

Source: Irving Fisher, “‘The Equation of Exchange,’ 1896-1910,” The American Economic Review 1:2 (Jun 1911): p. 299.

John Moody’s view of the economy

In this 1904 chart, Moody encapsulates a firm-centered view of the economy, in this case showing the dominance of the Morgan banking interests and Rockefeller’s Standard Oil. Moody wrote at the top of the chart, “The large circle in the center of the chart indicates the dominant position of the Trust-formed industries of the Nation; directly linked to and representing this dominant force we find two groups of capitalists, the Standard Oil, or Rockefeller, and the Morgan groups.” Moody’s diagram resembled something of a family tree of capitalism.

Source John Moody, The Truth about The Trusts: A Description and Analysis of the American Trust Movement (New York: Moody Publishing Company, 1904), between pages viii and ix.

James H. Brookmire’s Barometer, close-up

James H. Brookmire’s Barometer depicted three indexes of economic sectors—business activity, the stock market (an index of thirty-two stocks), and banking resources. The small print reads, “Condition of business, banking, and the stock market in February, 1907, foretelling the panic of October, 9 months later.”

Source: The Brookmire Economic Chart Company, A Graphic Record of Fundamental, Financial and Business Conditions Since 1885 (St. Louis: Brookmire, 1913).

Brookmire’s Barometer Chart

Here, Brookmire combined his barometer with a chart of values over time for general business (a black line), average stocks (in shaded line), and banking (in sold red).

Source: The Brookmire Economic Chart Company, A Graphic Record of Fundamental, Financial and Business Conditions Since 1885 (St. Louis: Brookmire, 1913).

Harvard Economic Service Chart

Harvard Economic Service Chart, like Brookmire’s Barometer, was a leading indicator model. Persons believed that Group A (representing stocks) forecast Group B (representing business activity); in turn Group B forecasted Group C (representing banking). In this way, the three indexes together created a view of overall business conditions and, in Person’s words, “future tendencies.” The graph above showed historical values from 1903 to 1908.

Source: Warren M. Persons, “The Index: A Statement of Results,” Review of Economic Statistics 1:2 (April 1919): 112.

Karl Karsten’s “Map of Business Conditions”

Economist Karl Karsten showed American states in relative proportion to their population and shaded according to condition of “business activity,” with the darkest states (New Hampshire and Vermont) representing poor levels. The chart revealed the relative geographic distribution of business activity and population—still very weighted toward New England, Pennsylvania (with the rise of the steel industry in Pittsburgh), and Illinois (with the growth of Chicago and its meatpacking plants and grain industry).

Source: Karl Karsten Papers, Library of Congress, Washington, D.C.

Brookmire’s Cycle Chart of Business and Banking

This chart shows how the ups and downs of business activity tended to deplete and then free up banking resources. As business activity ran from “normal” to “prostrate,” banking resources climbed from “normal” to “abundant” and even “plethoric.” When business activity subsequently climbed to “feverish” and “hazardous,” at the peak of the cycle, banking resources fell to “overextended” and even “critical.”

Source: The Brookmire Economic Chart Company, A Graphic Record of Fundamental, Financial and Business Conditions Since 1885 (St. Louis: Brookmire, 1913).

Malcolm Rorty’s depiction of the business cycle

In this graph, capitalist economies had four discernible phases: revival, prosperity, liquidation, and depression. Above each of these four, Rorty included a list of economic conditions common to each to help readers determine the end of one phase and the start of the next. Note that the chart showed an especially sharp drop of business activity during times of liquidation or crisis.

Source Rorty, Some Problems in Current Economics (1922).

Babson’s Map of the United States for Merchants and Bankers, 1911

The map showed regions where failures were increasing (shown in squares) and business declining (shown in circles).

Brookmire’s survey of business conditions in the United States

Regions were color-coded to indicate whether crop production was good, fair, or poor. Cities were marked with stars if they were numerous business failures, with diamonds if they held dull opportunities for salesmen, and ampersands if the opportunities for salesmen were improving.

Source: The Brookmire Economic Chart Company, A Graphic Record of Fundamental, Financial and Business Conditions Since 1885 (St. Louis, Mo., 1912).

Fortune Tellers 2 thumbnail
Fortune Tellers 1 thumbnail
1 The Babson Compositplot, 1921 thumbnail
2 Irving Fisher's Diagram of the Equation of Exchange, 1912 thumbnail
3 Irving Fisher's Diagram of the Equation of Exchange, 1912 thumbnail
4 John Moody's View of the Economy, 1904 thumbnail
5 James H Brookmire's Barometer, 1907 thumbnail
6 Brookmire's Barometer Chart thumbnail
7 Harvard Economic Service Chart thumbnail
Karl Karsten's Map of Business Conditions thumbnail
9 Brookmire's Cycle Chart of Business and Banking thumbnail
10 Malcolm Rorty's Depiction of the Business Cycle thumbnail
11 Babson's Map of the United States for Merchants and Bankers, 1911 thumbnail
12 Brookmire's survey of business conditions in the United States thumbnail

 

 

New documentary Ivory Tower explores the challenges of higher education in the 21st century

Watch this:

Then read this:

Delbanco_College

Andrew Delbanco recently attended Sundance Film Festival where he participated in a screening of Ivory Tower, a new documentary on the spiraling costs of higher education and the impact this has on students and their families. The director of the documentary is Andrew Rossi, who rose to prominence thanks to his earlier work Page One: Inside the New York Times. Delbanco is featured quite a bit in the movie which hopefully will have a greater distribution soon. In the meantime, to bone up on the challenges universities and colleges face, please check out College: What It Was, Is, and Should Be.

New book trailer for Eswar Prasad’s THE DOLLAR TRAP: How the U.S. Dollar Tightened Its Grip on Global Finance

This just in:
Check out the new book trailer for the eagerly-awaited new book THE DOLLAR TRAP: How the U.S. Dollar Tightened Its Grip on Global Finance, by Cornell and Brookings economist Eswar Prasad, due out the first week of February.

New Economics and Finance Catalog!

Be among the first to browse and download our new economics and finance catalog!

Of particular interest is The Great Escape: Health, Wealth, and the Origins of Inequality by Angus Deaton. In The Great Escape, Deaton—one of the foremost experts on economic development and on poverty—tells the remarkable story of how, starting 250 years ago, some parts of the world began to experience sustained progress, opening up gaps and setting the stage for today’s hugely unequal world. Deaton takes an in-depth look at the historical and ongoing patterns behind the health and wealth of nations, and he addresses what needs to be done to help those left behind. Demonstrating how changes in health and living standards have transformed our lives, The Great Escape is a powerful guide to addressing the well-being of all nations.

Also be sure to note Mass Flourishing: How Grassroots Innovation Created Jobs, Challenge, and Change by Edmund Phelps. In this book, Nobel Prize-winning economist Edmund Phelps draws on a lifetime of thinking to make a sweeping new argument about what makes nations prosper—and why the sources of that prosperity are under threat today. Why did prosperity explode in some nations between the 1820s and 1960s, creating not just unprecedented material wealth but “flourishing”—meaningful work, self-expression, and personal growth for more people than ever before? Phelps makes the case that the wellspring of this flourishing was modern values such as the desire to create, explore, and meet challenges. These values fueled the grassroots dynamism that was necessary for widespread, indigenous innovation. Most innovation wasn’t driven by a few isolated visionaries like Henry Ford; rather, it was driven by millions of people empowered to think of, develop, and market innumerable new products and processes, and improvements to existing ones. Mass flourishing—a combination of material well-being and the “good life” in a broader sense—was created by this mass innovation.

And don’t miss out on An Uncertain Glory: India and its Contradictions by Jean Drèze & Amartya Sen. The deep inequalities in Indian society tend to constrict public discussion, confining it largely to the lives and concerns of the relatively affluent. Drèze and Sen present a powerful analysis of these deprivations and inequalities as well as the possibility of change through democratic practice.

Even more foremost titles in economics and finance can be found in the catalog. You may also sign up with ease to be notified of forthcoming titles at http://press.princeton.edu/subscribe/. Your e-mail address will remain confidential!

 

Peter Dougherty and Robert Shiller off to the Nobel prize ceremony

Looking dapper in their tuxedos, 2013 Nobel in Economics co-winner Robert Shiller (r) and Princeton University Press Director Peter Dougherty (l) prepare for the awards ceremony today at the Stockholm Concer Hall in Sweden. Shiller, along with fellow economists Eugene Fama and Lars Peter Hansen (also a PUP author), were awarded the prize in October. Read all about winners of the The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2013, as it is officially called, on the official website.

dougherty nobel

The Buzz on Angus Deaton Events

The Great EscapeAngus Deaton, author of The Great Escape: Health, Wealth, and the Origins of Inequality recently did a podcast with Russ Roberts to talk about our standard of living and The Great Escape. Deaton surveys the improvements in life expectancy and income both in the developed and undeveloped world. Inequality of both health and wealth are discussed as well. The conversation closes with a discussion of foreign aid and what rich nations can do for the poor.

The interview was then discussed on another popular economics blog, Café Hayek, which includes an excerpt of the interview.

He will also be at an event at the World Bank on December 2nd at 12:30. Unfortunately, there isn’t an event page for this anywhere yet, but we’ll sure to post more about it when we can!