Wisdom Central

CREI is holding another summer school in Barcelona. CREI's best and brightest are offering classes; I am going to talk about Sovereign Debt Crises, combining theory and empirics (both historical and recent). What's on the menu? Here is the summary:

Sovereign Debt Crises: Past, Present and Future

Instructor: Hans Joachim Voth

Selected Topics:

• Is this time different? Sovereign debt crises over the long run
• Illiquidity and insolvency: Measurement and conceptual issues
• Punishment vs reputation in theory and practice
• The price of default: Investor returns from sovereign debt, 1850-2010
• Stability at what price? Solvency, austerity, and social instability
• Regulating stability: Plans for a “New Financial Architecture”

Dates: July 2 – 6

Time: 13:30 – 15:30 h

Price: 600 Euros (Students: 400 Euros)

As you can see, I will cover a bunch of things, from a conceptual framework for sovereign debt crises, the risk of self-fulfilling "debt runs" and the absence of state-contingent debt to important empirical regularities over the last 200 years (with a detailed discussion of Reinhart and Rogoff's classic This Time Is Different). I will also talk about some of my recent research on the link between political and social instability and austerity (short summary over at VOX here).

You can sign up here. 

An incredibly good deal...

courtesy of Forbes.com

A friend recently sent me, for entertainment, the latest update on Forbes' "Cost of Living Extremely Well" (CLEWI). If you were thinking about having a spa treatment, or buying that Learjet, Steinway, or Beluga, better hurry; nothing that is really nice is getting any cheaper. As a matter of fact, the Cost of Living Extremely Well has risen much more than the cost of living index in general. Of course, that is partly because statistical offices seem to see it as their job to define ordinary living cost so that almost everything that goes up in price is not counted or explained away by "quality improvements". It's not as bad as in Argentina, but the way that indices have gone in the last 20 years makes them increasingly remote from people's experience (with the biggest howler the Eurostat decision not to include owner-occupied housing in the harmonized price index - they claim it is too difficult. I am not making that up - but they are working on it).

One thing that goes into the CLEWI is the cost of Harvard tuition, room, and board, which is up another 4%, to $52,652 - just like every year, a rise ahead of headline US inflation. Actually, there are very good reasons why we SHOULD expect the cost of education to rise faster than the CPI.

So is there one thing that ISN'T up? That offers the same or better value than, say, six years ago - and doesn't cost a penny extra? That's right - attending the Master's programs at Barcelona GSE. They were €12,000 in 2007-08, 2008-09, 2009-10, 2010-11, 2011-12, and in 2012-13, they will still exactly and precisely cost €12,000. Everything else costs more - coffee, electricity, subway tickets, restaurant meals. But you can get a sterling education in Europe's most glorious city by the Med for what must be one of the best prices in the world of higher education... Of course, tuition revenues don't cover all the costs of running world-class econ departments; there is a large subsidy here somewhere from the hard-pressed taxpayers in Catalunya. Buy while it lasts, I say.

Greece burning

I was on German radio yesterday morning, commenting on unrest in Greece. You can read (if your German is up to it) most of what I had to say in an interview with Der Standard from Austria. The punchline? We need to do what Wolfgang Schäuble already hinted at last week - reduce the extreme level of austerity in the policy mix, quickly, before most of Europe starts to look like Greece. 

When you don't want to be this right...

(image via libcom.org)

Last year, Jacopo Ponticelli and I wrote a paper looking at the link between austerity measures and unrest. We found a close one. The dramatic images from yesterday - with wide-spread rioting in Athens, building burning, etc. could not bear out our thesis with more force. And there is no question that this was about austerity, either ... normally a tough nut to crack in this context is the question if the link is really causal. Of course, academics always enjoy being able to say "I told you so", but this time, I would have preferred it if the Greeks had proven us wrong.

While there is a lot of understandable frustration with Greece's unwillingness or inability to implement reforms, the riots illustrate that austerity is reaching its limit. How many more budget bills can the government and the troika push through parliament? And what is the implication for the rest of Europe? For the moment, bond markets are a bit calmer, and equity markets are in party mood. The pictures from Greece tell us that the cheer of markets thanks to more austerity is bought in an unsustainable fashion. It's not the most likely scenario, but we may very well see a rapid deterioration in the growth outlook in Spain and Portugal, thanks to all the cuts and tax hikes being implemented now. If this produces yet more deficits and another round of austerity, the Greek scenario is beginning to look much more likely; somewhere along the way, the bond market will panic, and the mother of all bailouts could be on the agenda by mid-summer. Let's hope I am wrong. Even Wolfgang Schaeuble, whose pleasure in forcing austerity on deadbeat ClubMed countries has a been a constant at EU summits, seemed to hint last week that he is starting to change his mind. 

Remembering Berthold Guthmann

I am sometimes asked if my research on anti-Semitism (with Nico Voigtländer, now forthcoming in the Quarterly Journal of Economics) isn't hugely depressing - spending so many hours on a topic that is so harrowing. It is true that I don't always find it easy to deal with the emotional impact. Statistical analysis showing that things don't change a great deal in the average location doesn't exactly leave one optimistic about the future of mankind; at the same time, Nico and I find some small rays of hope -- like an identifiable subset of cities in which persistence was much lower than elsewhere (essentially open, outward-looking trading cities and places with a lot of migration.)

One of the false claims that was used to create ill-will against Jews during and after World War I was that they didn't serve at the front. The German Army High Command actually ordered a count of all Jews in uniform, allegedly to counter such rumors - only to keep the results secret. We do have detailed information on casualties, now beautifully compiled for the web by Leo Finegold. Jews died, if anything, at a higher rate than non-Jewish Germans in uniform.

I was browsing around, gathering some background information, when I stumbled across a small snippet of information. As so often, it's the little details that get you. Here is one that I found particularly moving: It's that little picture of Berthold Gutmann in this post, a German-Jewish aviator during World War I, that I found on Leo Finegold's site. He won an Iron Cross and survived the war. His brother (pictured, together with their sister) died in Verdun. Berthold had a successful career as a lawyer in Wiesbaden after the war. The remembrance book compiled by the German archival service actually has an entry for him:

Deported from Frankfurt to Theresienstadt on June 16, 1943, he was sent to Auschwitz on the 29th of September, 1944, where he was murdered, aged 51.