Economists as Worldly Philosophers

While leading figures in the early history of economics conceived of it as inseparable from philosophy and other humanities, there has been movement, especially in recent decades, towards its becoming an essentially technical field with narrowly specialized areas of inquiry. Certainly, specialization has allowed for great progress in economic science. However, recent events surrounding the financial crisis support the arguments of some that economics needs to develop forums for interdisciplinary interaction and to aspire to broader vision.Economic methodology, Specialization, Behavioral economics, Psychology, Rational expectations, Economics as a moral science, Pareto criterion, Interdisciplinary, Journal of Economic Perspectives

Economists as Worldly Philosophers

While leading figures in the early history of economics conceived of it as inseparable from philosophy and other humanities, there has been movement, especially in recent decades, towards its becoming an essentially technical field with narrowly specialized areas of inquiry. Certainly, specialization has allowed for great progress in economic science. However, recent events surrounding the financial crisis support the arguments of some that economics needs to develop forums for interdisciplinary interaction and to aspire to broader vision

Understanding Inflation-Indexed Bond Markets

This paper explores the history of inflation-indexed bond markets in the US and the UK. It documents a massive decline in long-term real interest rates from the 1990's until 2008, followed by a sudden spike in these rates during the financial crisis of 2008. Breakeven inflation rates, calculated from inflation-indexed and nominal government bond yields, stabilized until the fall of 2008, when they showed dramatic declines. The paper asks to what extent short-term real interest rates, bond risks, and liquidity explain the trends before 2008 and the unusual developments in the fall of 2008. Low inflation-indexed yields and high short-term volatility of inflation-indexed bond returns do not invalidate the basic case for these bonds, that they provide a safe asset for long-term investors. Governments should expect inflation-indexed bonds to be a relatively cheap form of debt financing going forward, even though they have offered high returns over the past decade.Expectations hypothesis, Liquidity, Term premia, TIPS

Understanding Inflation-Indexed Bond Markets

macroeconomics, inflation, inflation-issued bond markets, interest rates, bond risks, liquidity

Comparing Wealth Effects: The Stock Market Versus the Housing Market

We examine the link between increases in housing wealth, financial wealth, and consumer spending. We rely upon a panel of 14 countries observed annually for various periods during the past 25 years and a panel of U.S. states observed quarterly during the 1980s and 1990s. We impute the aggregate value of owner-occupied housing, the value of financial assets, and measures of aggregate consumption for each of the geographic units over time. We estimate regressions relating consumption to income and wealth measures, finding a statistically significant and rather large effect of housing wealth upon household consumption.

Wealth Effects Revisited 1978-2009

We re-examine the link between changes in housing wealth, financial wealth, and consumer spending. We extend a panel of U.S. states observed quarterly during the seventeen-year period, 1982 through 1999, to the thirty-one year period, 1978 through 2009. Using techniques reported previously, we impute the aggregate value of owner-occupied housing, the value of financial assets, and measures of aggregate consumption for each of the geographic units over time. We estimate regression models in levels, first differences and in error-correction form, relating per capita consumption to per capita income and wealth. We find a statistically significant and rather large effect of housing wealth upon household consumption. This effect is consistently larger than the effect of stock market wealth upon consumption. This reinforces the conclusions reported in our previous analysis. In contrast to our previous analysis, however, we do find -- based on data which include the recent volatility in asset markets -- that the effects of declines in housing wealth in reducing consumption are at least as large as the effects of increases in housing wealth in increasing the course of household consumption.Consumption, Nonfinancial wealth, Housing market, Real estate

Comparing Wealth Effects: The Stock Market versus the Housing Market

We examine the link between increases in housing wealth, financial wealth, and consumer spending. We rely upon a panel of 14 countries observed annually for various periods during the past 25 years and a panel of U.S. states observed quarterly during the 1980s and 1990s. We impute the aggregate value of owner-occupied housing, the value of financial assets, and measures of aggregate consumption for each of the geographic units over time. We estimate regressions relating consumption to income and wealth measures, finding a statistically significant and rather large effect of housing wealth upon household consumption.Consumption, nonfinancial wealth, housing market, real estate

Continuous Workout Mortgages

This paper models Continuous Workout Mortgages (CWMs) in an economic environment with refinancings and prepayments by employing a market-observable variable such as the house price index of the pertaining locality. Our main results include: (a) explicit modelling of repayment and interest-only CWMs; (b) closed form formulae for mortgage payment and mortgage balance of a repayment CWM; (c) a closed form formula for the actuarially fair mortgage rate of an interest-only CWM. For repayment CWMs we extend our analysis to include two negotiable parameters: adjustable "workout proportion" and adjustable "workout threshold." These results are of importance as they not only help understanding the mechanics of CWMs and estimating key contract parameters. These results are of importance as they not only help in the understanding of the mechanics of CWMs and estimating key contract parameters, but they also provide guidance on how to enhance the resilience of the financial architecture and mitigate systemic risk.Continuous Workout Mortgage (CWM), Repayment, Interest-only, House price index, Prepayment intensity, Cap and floor on continuous flow

Hydrogen Peroxide in Deep Waters of the North Pacific Ocean

Hydrogen peroxide is a reactive oxygen intermediate that can play a role in a variety of redox cycles. In the ocean, it is generally considered to be dominantly photo-produced with negligible concentrations in deep waters. We have utilized a highly sensitive analytical method to investigate hydrogen peroxide in deep waters of the North Pacific Ocean. We present evidence that hydrogen peroxide exists in low nanomolar concentrations in these deep waters with an apparent minimum in the depth range of the oxygen minimum. A consideration of possible mechanisms and rates suggests both a short (similar to12 day) residence time as well as a biological origin for this deep hydrogen peroxide. Hydrogen peroxide is probably of minor importance to metal cycling in the deep ocean except in low oxygen environments

Nutrient Depletion as a Proxy for Microbial Growth in Deepwater Horizon Subsurface Oil/Gas Plumes

The Deepwater Horizon accident resulted in a substantial uncontrolled hydrocarbon release to the northern Gulf of Mexico, much of which was entrained in deep submerged plumes. While bio-degradation of the hydrocarbons has been inferred from microbial biomass and genetics, the amount of conversion of oil and gas carbon to biomass remains uncertain having only been estimated in modeling studies. Here we examine correlated depletions of nitrate, phosphate and oxygen in the submerged plumes and conclude that a substantial portion of hydrocarbons in these plumes was converted to biomass (0.8-2 x 10(10) mol C). This contrasts with nutrient-limited surface waters where other work has suggested hydrocarbon-induced microbial growth to have been minimal. Our results suggest the need for better monitoring of changes in nutrients as well as study of nutrient recycling in similar future hydrocarbon releases