David Backus (1953-2016)

It is with profound sadness that the Economics Faculty at New York University and the Stern School of Business mark the passing of our beloved colleague David Backus. Dave, the Heinz Riehl Professor of Economics at New York University’s Stern School of Business died on June 12, 2016. The cause of death was leukemia.

Dave was a renowned economist. He pioneered a new approach to international macroeconomics, infusing it with tools from finance. His approach shapes our understanding of credibility and monetary policy, exchange rate behavior and international finance. His work on asset markets, with a wide variety of authors, helped lay the foundation for the thriving new research area at the intersection of macroeconomics and finance.

In addition to being an intellectual leader at the Stern School, Dave served for seven years as the Vice Dean for Faculty and as Chair of the Economics Department and the Accounting Department. Dave was much loved by his colleagues and by generations of Stern students for his strength of character, his generosity and kindness, and his sharp wit. Dave was a gifted teacher. Driven by his own deep intellectual curiosity, he developed and spearheaded many visionary courses for both undergraduates and graduate students.

Dave was the consummate modern academic. He loved research, teaching, and students. He was also a skilled leader who valued and strengthened the culture of academic institutions. Dave was never happier than when he could bring people together socially to share a beer and talk about research and ideas. Dave you will be deeply missed, you left us too soon. Friday afternoons will never be the same.

Prior to joining Stern in 1990, Dave studied at Hamilton College (BA, 1975) and Yale University (PhD, 1981), taught at Queen’s University and the University of British Columbia, and served at the Federal Reserve Bank of Minneapolis. He grew up in Pittsburgh and remained an avid supporter of the Pirates, Steelers, and Penguins.

Dave is survived by his wife Marilyn Jason, his children Paul and Melanie Backus, his mother Marjorie Backus, and his sisters and brother Lois Backus, Laura Hoffman, Ruth Grillo, and Rudolf Ramsauer.

What else would you expect in Philly?

Tim B. Lee has an interesting piece about the Philadelphia Parking Authority’s attempts to throttle Lyft and Uber (edited for continuity):

The PPA is a taxpayer-supported government agency, so you might have expected it to remain neutral. But according to records obtained by the Philadelphia Daily News, senior PPA officials actively strategized with taxi officials to preserve PPA’s authority over Uber and other ride-hailing companies and appears to have used taxpayer funds to lobby against Uber.

Well put, but the phrase “might have expected” suggests a curiously innocent view of government regulation — and Philadelphia. It’s not all bad: My sister tells me Parking Wars was terrific.

World’s worst drinking game

Conversation at lunch yesterday:

• “Was there any sensible economics in the debate?”
• Venky: “That’s the world’s worst drinking game, drink when someone makes sense.”
• Ruhl: “I think Rubio said something sensible about tariffs”

Here’s the relevant excerpt from the transcript (lightly edited, emphasis added):

CAVUTO: So you’re open to a tariff?
TRUMP: I’m totally open to a tariff.
RUBIO: I think we need to be very careful with tariffs, and here’s why. China doesn’t pay the tariff, the buyer pays the tariff. If you send a tie or a shirt made in China into the United States and an American goes to buy it at the store and there’s a tariff on it, it gets passed on in the price to the consumer.

If we were picky, we’d say something about the slopes of the supply and demand curves, but this is close enough to take a drink.

“Maple syrup is a sickness”

Let’s step back from maple syrup for a minute. A price-fixing cartel is an agreement among producers to reduce supply in order to maintain a high price. Producers face two classic problems in doing this. One is deciding whose supply gets restricted. The other is that once they deliver a high price, members have an obvious incentive to increase production, which (of course) undercuts the point of the cartel. So the question is how to determine and enforce supply limits.

One of the most effective ways is to get the government to do it for you. Which brings us to maple syrup. Our Montreal correspondent Allan Collard-Wexler sends this wonderful piece from Canada’s National Post. Some of the highlights (lightly edited):

The Swedish utopia

I thought this interview was fascinating. Two soundbites:

• [W]hy [are people] so sure that [with a more generous welfare state] you will become Scandinavia? Maybe you become Italy instead.
• About 85% of ethnic Swedes work, one of the highest numbers in the world, higher than the US but not higher than that of Scandinavian Americans. And this is a prerequisite to have generous welfare state: almost every able bodied person works. Non Western European [immigrants]: 50% work, and these numbers have looked the same for the last thirty years.

Thanks to MR for the link.

Advertising and analytics

I just read a great piece by Ian Leslie on the advertising business. It’s an exceptionally good read. Do read the whole thing, but here are some highlights (quotes lightly edited for continuity):

Angus Deaton awarded Nobel

Angus Deaton has long been one of my favorite economists, with work that ranges from the technical to the extremely practical. I particularly enjoyed his thoughtful comments on GDP in rich and poor countries (they consume different products, hard to compare) and happiness research (what does it mean when poor people tell us they’re happy?). Quartz has the best short summary, but see also his collection of popular writing and Google Scholar page. Also the Nobel announcement.

Update:  Good link, and another.

Regulating taxis

In Global Economy, our discussion of the pros and cons of regulation goes like this:

• There’s often a legitimate rationale for regulation (eg, safety).
• Real-world regulation often goes well beyond the rationale, typically because incumbents use it to protect themselves from competition (eg, Tesla, chickens, braiding hair).

Global poverty hits all-time low

From the World Bank:

The number of people living in extreme poverty around the world is likely to fall to under 10 percent of the global population in 2015, according to World Bank projections released today, giving fresh evidence that a quarter-century-long sustained reduction in poverty is moving the world closer to the historic goal of ending poverty by 2030.

A lot of this comes from China and India, but you see similar patterns across the board.

What’s up with China?

China has been a constant source of speculation in the econ group here. Some thoughts (quotes approximate):

• Slowdown or crisis? Nouriel Roubini: “I don’t see a hard landing. Growth should be 6-6.5% over the next two years, 5% in the medium term.” That’s slower than we’ve seen, but would look pretty good anywhere else.
• Impact on the US? Lew Alexander, at the CGEB’s forum last week, thought the impact on the US would be small: “The US is still to a remarkable degree a closed economy. A slowdown in China is not that big a deal to the US — unless there’s a financial crisis.” That fits lots of evidence that shows only modest relations between economic fluctuations across countries. The 2008-09 financial crisis was an obvious exception, but that’s the point: it was an exception.