It's all about shelter

 
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This figure shows that the PPI for final demand tracks the CPI less shelter very closely. By both measures, inflation is now very much under control. The problem is that the CPI for shelter is up 5.6 percent, so the overall CPI looks quite hot.

Some would argue that leaving out shelter is misleading because shelter is such a large fraction of the typical household budget. On the other hand, the CPI for shelter is well known to be a lagging indicator of rents by virtue of how it is constructed, and other more current series show no recent inflation in rents. This latter argument puts me in the optimistic camp on inflation.

By the way, I recently made a bet with my friend Larry Ball that the overall CPI from February 2024 to February 2025 will rise by less than 2.5 percent. I am writing the bet here as a sort of contract. We will check back next year.

The bet is for $5. That is in nominal terms. So, in real terms, I get more if I win than Larry gets if he wins.

A Romantic Comedy for the Pigou Club

My friend Yoram Bauman, the stand-up economist (who I first met because of his parody of my ten principles), says he’s working on a play... and that it’s a romantic comedy about carbon tax ballot measures! Details on his Kickstarterpage and his blog.

Summer Camp for Economic Theorists and Computer Scientists

 Run by my colleague Eric Maskin.

Memo to Fed: Stop the News Conferences

In watching part of Jay Powell's news conference yesterday, I realized that what he is doing to just the opposite of good economics communication. When I write an article, give a lecture, or draft a textbook chapter, my goal is to convey maximum information in the fewest words possible. But when the Fed chair answers reporters' questions, he seems to be conveying the least possible information in the most words possible. 

Every answer the Fed chair gives is, more or less, a new paraphrasing of what the FOMC has already said in their statement or the chair has said many times before.  From the Fed's perspective, the ideal news conference contains no news and is mainly repetition and platitudes. "Our decisions are data-dependent....The future is uncertain....Blah blah blah...."

It is almost as if the news conference should come with a disclaimer: "I do not intend to say anything interesting. If you think I have said something interesting, please ignore because I misspoke."

Here is my recommendation: Stop giving news conferences. The Fed's policy decision and statement should stand by themselves. The Supreme Court does not give news conferences after announcing decisions. They explain their judgment once in writing and then let that stand. The Fed should do the same.

History of Economics Summer Camp

Grad students with an interest in the history of economic thought should click here.

Life after Ec 10

Did you know that Kendall Roy (of Succession fame) graduated from the Harvard economics department? You can bid on his diploma here. He must have been in ec 10, though I don't recall him.

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A New Journal Ranking

 ...based on relevance for central banks.  At the top is the Brookings Papers on Economic Activity, followed by the Quarterly Journal of Economics and the Journal of Monetary Economics.

This Year's First-Year Seminar

In recent years, I have been teaching a seminar to a small group of Harvard freshmen. I described the seminar in this essay in the NY Times. 

The assigned readings change a bit from year to year. In case any of my blog readers are interested, here are the books I chose for this year:

• The Worldly Philosophers, by Robert Heilbroner
• Capitalism and Freedom, by Milton Friedman
• Equality and Efficiency: The Big Tradeoff, by Arthur Okun
• We’ve Got You Covered: Rebooting American Health Care, by Liran Einav and Amy Finkelstein
• Open Borders: The Science and Ethics of Immigration, by Bryan Caplan and Zach Weinersmith
• The Two-Parent Privilege: How Americans Stopped Getting Married and Started Falling Behind, by Melissa Kearney

Chip War

I just finished reading Chip War by Chris Miller (a professor of international history at Tufts). It is a fascinating history of the semiconductor industry. Relevant for not only economics but also geopolitics. Highly recommended.

What I've been watching

These TV shows aren't new, but they were new to me, and I enjoyed them both: Borgen (a Danish political drama) and Caliphate (a Swedish drama about an impending ISIS attack). Both are on Netflix, available dubbed in English or in the original language with subtitles. Thanks to Olivier Blanchard for the Borgen recommendation.

Happy Birthday, Professor Smith

Adam Smith's exact birth date is unknown, but it was sometime in June 1723.  So, 300 years ago this month.  I thought I should not let the month go by without acknowledging the father of modern economics. If you want to celebrate, I suggest reading this book about Smith's friendship with David Hume.

Five Economics Primers

I make some recommendations in the Wall Street Journal.

A Lonely Place to Be

 

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This graph from David Leonhardt's column is illuminating. Now I understand why those of us who are fiscally conservative and socially liberal have trouble finding political candidates to fully represent our views. There are too few of us!

Random Political Thought of the Day

 

Isn't it a bit odd to base your candidacy on the sunk cost fallacy?

Congrats (?), Charles