The Ambrosini Critique

This one’s only 6.0.

UPDATE: No injuries. No damage. No power outages. They’re not even letting the kids out of school.

From an article about Haitian coffee (ht MR):

Atlantic Food Channel contributor Jerry Baldwin, co-founder of Starbucks and the company’s first roaster and buyer, agrees. He now owns Peet’s Coffee and Tea, and he says the relatively low-altitude Haitian coffee doesn’t have the taste his company seeks. Still, he suggests that coffee drinkers who want to help Haiti donate to long-term agriculture projects.

I emailed Peet’s after the earthquake to ask about Haitian coffee. They said the distribution network isn’t there yet and the quality is low. I simple-mindedly suggested Peet’s throw money at the problem, perhaps funded by customer donations. Peet’s representative Ginny replied (Technoserve is an NGO Peet’s works with that has a very small team in Haiti working with farmers):

I don’t think it’s overly optimistic to think that eventually Technoserve or another similar NGO might help Haitian growers start producing really high quality beans, and that Peet’s might be a part of this, just as we have been in East Africa. But our main contribution in this kind of endeavor is expertise, not money. Jerry Baldwin, who bought Peet’s from Alfred Peet many years ago, and our buyers Jim Reynolds, Doug Welsh, and Shirin Moayyad have all lent their coffee expertise to growers all over the world (not just those served by Technoserve). And a Peet’s employee left Peet’s about a year ago to go work for Technoserve full time – his many years at Peet’s as a coffee and tea trainer helped to give him the expertise that Technoserve looks for.

So the issue is not simply money. Producing coffee of the very high quality that Peet’s looks for can take years. When I started with Peet’s 11 years ago, the only East African country producing coffee of the quality Peet’s looks for was Kenya. Now we are buying from Burundi, Rwanda, Malawi, and Tanzania. But this certainly didn’t happen overnight and it wasn’t just money that made it happen. Issues that have to be addressed include proper care of the land, the soil, and the coffee trees themselves, selective picking of the coffee cherries, proper processing techniques, etc. It’s a long process of education, training, and feedback from experts.

She suggested to me that I take a look at Technoserve (which looks to be legit). Here’s their reply to my email to them about “my” idea to work in Haiti:

While I certainly like your idea and we do work in Haiti, we do not have the capacity or funding at the moment to certify farmers to sell to Peet’s Coffee. We do hope to have the capacity to do this in the future.

Incidentally, the Haiti – Integrated Financing for Value Chains and Enterprises (HIFIVE) team that TechnoServe is a part of does some work involving coffee. We assist small and medium enterprises (SMEs) or associations that could include coffee producers or coffee traders. With only a three-person team, however, we do not have the capacity to work with farmers directly as we do in other countries and other programs. Therefore, I am afraid that our partnership with Peet’s Coffee in other countries could not apply to our work in Haiti.

In the Atlantic article, someone is quoted as saying Haitian coffee is a “cause” coffee not a “quality” coffee. If the long-run recovery of Haiti concerns you, supporting groups like TechnoServe might be the way to go.

I was reading a very important article linked to by The Economist when I noticed the domain name was bakadesuyo. This is an expression the Real Scientist uses all the time, often in reference to things I’ve said or done.

I think it means “very good!” or “you’re so smart and good looking!”, but sometimes I think it may mean “please continue doing that because its not annoying at all!” or “you’re really good at Wii Super Mario!”.

I’m filling this one under “William Wallace Watch” (ref). Is there a difference between level targeting and Taylor rules if there’s no zero bound?

Pleasantries: brilliant blog. Anyone remotely interested in monetary policy, a.k.a. “the only remotely possible technocratic method to manage an economy”, should read it.

Ok. Prof. Sumner is absolutely right that the Fed made a mistake in fall of 2008. This is illustrated by the sharp decline in inflation expectations as illustrated in this graph (stolen from here):

But Sumner often slips from this valid critique into a claim that the Fed continues to make a mistake (e.g. here: “Throughout much of 2009 I kept challenging liberals to push harder for monetary stimulus.”). This is not a valid argument. For example, the Fed made a mistake in the late 1920’s trying to prick what they thought was a stock bubble. Their actions helped precipitate the Great Depression. Flippantly: this doesn’t mean policy is still too tight today. More relevantly: its not the reason why policy was too tight in 1930, 1931, 1932 and early 1933. The mistakes they made in those years where independent of the original mistake.

The sharp up-tick in inflation expectations through 2009, as seen in the graph above, suggests the Fed is no longer making a mistake; policy is no longer too tight.

What to do about high unemployment (illustrated below)?

First, unemployment has — hopefully! — topped out. This is more evidence that policy is, if not appropriately loose, at least loosening. Second, we don’t know the mechanisms linking macro policies to employment. The Fed doesn’t (and can’t!) determine the unemployment rate in any given month even if completely ignored inflation. Its hubris to suggest that it can. Third, even if money policy’s effects on inflation expectations is immediate, in a world of very slow moving wages, there’s long lags between policy changes and employment changes. The current policy could be producing improvements in the unemployment rate maybe today, maybe in three months, maybe in nine months… we don’t know.

All this said, I support Sumner’s goal of moving the Fed towards history dependent policy (aka “level targeting”). This policy, if even implementable, would make mistakes like the one the Fed made in fall 2008 less severe. I’m just not sure why Prof. Sumner insists on arguing policy is still too tight today, nearly 16 months later, when he doesn’t need to in order to make a case for this policy change.

From a letter sent to NPR:

I think you should interview Peter Lindert at UC-Davis. He’s an economic historian (perhaps THE economic historian) that welfare state scholars look to. His book Growing Public: Social Spending and Economic Growth Since the Eighteenth Century asserts that there is not a tradeoff between economic growth and taxes. He says there really is such a thing as a free lunch. Seriously, check him and his book out. He’s tremendously respected in the field and his life’s work is exactly this question.

Here’s his book.

So they’re going to torpedo Bernanke’s nomination because they need his blood to placate their base. Ms McArdle says:

I see the political logic, but the economic logic is pretty poor. Bernanke didn’t become Fed chair until 2006, long after it was realistically possible to do much about the bubble except wait for it to pop. He shepherded us through the financial crisis without another Great Depression–maybe not perfectly, but no Fed chair would have been perfect. The markets have confidence in him. Spiking his nomination may have grim effects on 401(k)s throughout the land.

But doesn’t this suggest the political logic is piss poor, too? The uncertainty of monetary policy (not to mention financial regulation) hurts the voters’ 401(k)s. I don’t take this stuff that seriously, but reading tealeaves of stock market movements, one could easily attribute the 5% drop in markets this week to this uncertainty. Voters who are 5% less wealthy are less likely to vote for you.

But individually, it makes sense for Senators to vote against Bernanke’s reappointment. They can tell their inattentive constituents they’re “doing something” about something. Or something else of the “off with his head” flavor. This will work for the marginal voter, thus marginally improving the chance of reelection for each Senator that votes no.

Uncertainty is pollution created by Senators doing what’s in their own best interest. As theory predicts, there’s more uncertainty than is socially optimal. Because this pollution is created by the government, what we need is a benevolent super-government to fix this “market” failure. Somebody call the UN or maybe after they fix this global warming thing the IPCC can help out.

Yuriy Gorodnichenko does some of the funnest research in macroeconomics. I’ve seen him talk about the Finnish Great Depression (subtitle: “From Russia with Love”) and his test of some theories of informational rigidity. His work is very empirically oriented, but takes theories seriously.

Today on voxeu he explores the question of whether the most recent recession implies the end of the Great Moderation. His answer: no.

I’m a political newb, but even I can see why progressives would concern themselves with “stagnating” middle class wages rather than poverty (e.g. here). Poor folks don’t vote, but if you can convince the middle class (which is like everybody if you ask ‘em) they’re getting screwed and you’ll fix it, then you’ll get elected.

The thing is, you’re already elected, progressives!

And if you’re looking for more electoral advice from a political naif: everybody cares about poverty. Nobody likes to see people suffer. If you want to broaden your political base even further, tackle poverty.

I recently learned of a group of people called the “undeserving poor”. These people, apparently, don’t deserve to not be poor. You don’t want to associate your anti-poverty rhetoric with them, of course. What you do then, is talk about how the current social safety net actually encourages people not to work!

In fact, progressives, if you want to have the greatest chance of helping people — you know, to make progress— you might consider non-state-based anti-poverty programs. Half of folks think the government can’t do anything about poverty anyway. You come up with a way to help poor people that doesn’t involve the government and you’ll win a lot of those folks over to your camp. An idea I haven’t heard a good argument against is to replace the current welfare state (including tax deductions and credits and the minimum wage) with a basic income guarantee or the EITC on steroids.

In the end, its about making progress, right?

… is where we donated. They had 300 staff in Haiti already and they have a large existing staff in the Dominican Republic. They can hit the ground running, so to speak. Also because a large majority of the population of Haiti are practicing Catholics, I’d imagine church is the first place many folks will go for help.

UPDATE: Their BBB page and from their “accountability” page: “we follow the tenet of subsidiarity: A higher level of government—or organization—should not perform any function or duty that can be handled more effectively at a lower level by people who are closer to the problem and have a better understanding of the issue.”