Knowing and Making

Mixed news coming in from Washington - in the 14th minute of a 15 minute vote. On the radio (BBC World Service): 9 votes still needed - 207 yes votes so far cast. On CNN: voting has started. On the NYT : House is voting on the Senate bill. Other votes still to happen. On some random spam site : " Health care reform passes - live video ". Only notable because it has successfully gamed Google News and comes up at the top of the search results. On Yahoo: ' White House Press Secretary Robert Gibbs just tweeted: "About 40 staff in Roosevelt  Room with VP to watch the vote - President walked into the room to sustained applause." ' On the radio: applause is being heard... And, it seems: a historic moment, with 219 votes to 210 (some sources reporting 212), the healthcare reform bill has passed. Speculation on the BBC that the Republicans are nailing their campaign flag to the anti-reform mast because they believe the voters don't want this bill....

Brad DeLong complains that Obama is cutting spending in next year's budget . Greg Mankiw complains that Obama is increasing spending in next year's budget . Fortunately there is no discrepancy here, because both of them are saying the same thing: the President isn't doing what I want him to, therefore he's wrong.

Surprising but (I think) nice news that Barack Obama has won the Nobel Peace Prize. I thought it was a joke when I first saw it, but on balance it is a good decision. Obama's inspiring message, philosophy and personal example are worth remembering, especially when obscured by fights over healthcare and climate change policy. It's a somewhat risky prize - presuming a successful presidency before it's a quarter (and probably not even an eighth) finished. But the Peace Prize committee is a strange beast - always keen to be topical, even more than is the Economics committee. Talking of which, Greg Mankiw has a sneak preview of the winner of that prize. Update : Michael Tomasky's well-judged take on how Obama should respond and the political consequences.

My latest guest post at missmarketcrash, with fun videos Stuart Derbyshire's attack on behavioural economics  - I don't agree with him about the field in general, but he has some good arguments against aspects of it. I am debating Stuart at the Battle for the Economy next week so if you come along you'll have the chance to see us have it out in person Tim Harford on why promises are important (for policymakers, but there's a similar argument for individuals too) Danny Devito sets prices without a behavioural model to help him

Last year Myron Scholes predicted the credit crisis would be over on 7th March 2009. That's coming up this Saturday, so how's the prediction looking? Well, AIG has lost $60bn and received a further capital injection; the US government has just converted a bunch of debt into 30-odd percent of Citigroup; Martin Wolf has written another article with some nasty-sounding predictions. We're running short of time to fix the system if Myron is to be proved right. To be clear, this is not about the recession. I don't think we expect economic growth to start in the next four days. It's about fixing the problems in the financial system so that money can start flowing and the recovery can properly begin. The debate in the US over nationalisation is growing louder. Unusually, the argument is getting simpler rather than more complicated: the losses are there, shareholders have been (as close as makes no difference) wiped out, so do the remaining losses go to creditors or taxpay...

I believe this piece is referring to the position of Secretary of 'Elf and 'Uman Services.

Looks like the UK is just as bad as the US at protectionism. Energy workers are on strike demanding that Total not be allowed to hire Italian workers at one of its plants. Never mind that Total is a French company investing in the UK; never mind that free movement of labour is guaranteed in the EU; never mind that twice as many British people work in the rest of Europe than vice versa. Apparently we are supposed to kick out a supplier with whom Total has freely contracted. Unfortunately this seems to be an example of rational ignorance in the political market. It requires a certain effort to educate oneself about an issue and make sufficient political fuss about it to influence anyone. The typical protectionist policy creates worthwhile benefits for a small consituency (let's say steelworkers) while the costs are spread among a far larger population. It's worth it for the steelworkers to run a campaign (or pay their unions to do so) to grab their $20,000 each; but too much tr...

I would like to come up with a justification in economic theory for mentioning this, but so far I haven't. In reality I just want to complain that, on the week of my first visit to the US in seven years, the pound has fallen to its lowest level against the dollar since 1985. Aside from the possibility that all 2 million of Tuesday's visitors to Washington came from Britain, exchanging billions of pounds into US currency on the same day, I don't think I can manufacture a connection. Just bad luck. Is there a macroeconomic theory for that?

Not so many posts this week as I am in Washington, DC. Today was both a very moving and a spectacular day. Watching the inauguration from beside the Washington Monument, there were undoubtedly a few moments in the speech that the people around us found very special. My own favourites: "Now, there are some who question the scale of our ambitions — who suggest that our system cannot tolerate too many big plans. Their memories are short. For they have forgotten what this country has already done; what free men and women can achieve when imagination is joined to common purpose, and necessity to courage." "And so to all other peoples and governments who are watching today, from the grandest capitals to the small village where my father was born: know that America is a friend of each nation and every man, woman, and child who seeks a future of peace and dignity, and we are ready to lead once more." "...because we have tasted the bitter swill of civil war and segregat...

It seems it is not too presumptuous now to celebrate: Iowa : Obama New Mexico: Obama Pennsylvania : Obana Ohio : Obama Virginia : Obama Colorado : Obama Congratulations to President Barack Obama - the next leader of the most influential, unusual, innovative, and democratic nation humanity has had.