Bill Clinton in Haiti

A few years ago, I had the pleasure of meeting Patrick Moynihan, a Catholic deacon who is the president of The Haitian Project and head of its Louverture Cleary School, in Haiti, for gifted but poor children. Our paths crossed because Patrick was helping to launch a course in introductory economics at the school, and my publisher generously donated copies of my favorite textbook.

Patrick recently sent me a link to his article about the role Bill Clinton has played in Haiti. It is not a pretty picture.

Hear Me Squawk

From Richard Thaler

A great article in today's NY Times.

Why I invest in index funds

The NY Times reports:

For investors in hedge funds, like big pension funds, 2014 was not a lucrative year. But for those who managed their money, the pay was spectacular. 

The top 25 hedge fund managers reaped $11.62 billion in compensation in 2014, according to an annual ranking published on Tuesday by Institutional Investor’s Alpha magazine. 

That collective payday came even as hedge funds, once high-octane money makers, returned on average low-single digits. In comparison, the benchmark Standard & Poor’s 500-stock index posted a gain of 13.68 percent last year when reinvested dividends were included.... 

For investors, 2014 was the sixth consecutive year that hedge funds have fallen short of stock market performance, returning only 3 percent on average.

Where I will be on Monday

Here: 40 years later- The relevance of Okun’s "Equality and Efficiency: The Big Tradeoff"

TPP is a trade agreement

Oddly, Paul Krugman thinks that TPP is not really about trade. CEA Chair Jason Furman, however, writes the following:

The starting point of TPP is the contrast between U.S. tariffs and those of our partner countries. Our trade-weighted average applied tariff rate is 1.4 percent and 70 percent of imports already enter our economy duty free. In contrast, on average, our TPP partners report simple average applied tariffs 1.5 percentage points higher than our equivalent rate. In some TPP countries, average tariffs are up to 4 percentage points higher, though this difference masks considerable industry-specific variation; the United States faces tariffs of up to 30 percent on auto exports to Malaysia and 40 percent on agricultural goods to Vietnam. Many TPP countries also have substantially higher non-tariff barriers, particularly in the area of services trade, where the United States maintains a strong comparative advantage. As a result, TPP will disproportionately decrease foreign barriers to U.S. exports....  

The most comprehensive estimates of the benefits of TPP are those of Peter Petri, Michael Plummer, and Fan Zhai, who employ an 18-sector, 24-region computable general equilibrium model to simulate policy changes in more than twenty different areas including tariffs, non-tariff barriers, and rules governing foreign direct investment. They find that by 2025, TPP would raise U.S. incomes by 0.4 percent per year, the equivalent of $77 billion in 2007 dollars, although the actual estimate could vary somewhat depending on the details of the agreement and alternative modelling assumptions. The European Union has said that the United States would gain a comparable amount from T-TIP. Some have described these totals as small, but I think I would risk losing my license to offer economic advice if I counseled anyone to leave $77 billion lying on the sidewalk each year.

The Case for Trade

Click here to read my piece in Sunday's NY Times.