OCTOBER 19 2017

Olivier Blanchard Lawrence Summers. PIIE: Rethinking Stabilization Policy. Back to the Future. The crisis has forced macroeconomists to (re)discover the role and the complexity of the financial sector, and the danger of financial crises. But the lessons should go largely beyond this, and force us to question a number of cherished beliefs. Among other things, the events of the last ten years have put into question the presumption that economies are self-stabilizing, have raised again the issue of whether temporary shocks can have permanent effects, and have shown the importance of non linearities. These call for a major reappraisal of macroeconomic thinking and macroeconomic policy.

Wouter den Haan, Martin Ellison, Ethan Ilzetzki, Michael McMahon, Ricardo Reis, VOX: Global risks from rising debt and asset prices. The outgoing German finance minister, Wolfgang Schäuble, has recently expressed concerns about the risks posed to the world economy by high levels of debt. This column presents the latest Centre for Macroeconomics and CEPR survey of leading economists, in which a strong majority of respondents agree that an excess of public and private debt together with inflated asset prices mean that the world economy faces heightened risks. A similarly strong majority of the experts also agree that the loose monetary policy of major central banks is responsible for the recent increase in global leverage and asset values.

Zhi Soon, Raj Chande and Susannah Hume, Behavioural Insights Team: Helping everyone reach their potential: new education results. Some young people simply don’t have access to someone who asks them about their learning. We wanted to change this. Our trial invited students to nominate a ‘study supporter’ – a parent, older sibling, mentor or friend – to receive regular text messages, written in conjunction with English and maths tutors. These messages prompted the supporters to start regular conversations with the student about their studies: chatting through a recent topic, or encouraging revision for an upcoming test. Over 1,800 students across 9 further education colleges took part: half their study supporters were sent texts, and half were not. . The supportive text messages resulted in a 4.1 percentage point (7%) increase in attendance and 6 percentage point (27%) increase in attainment for students whose study supporters were texted, compared to those who didn’t receive texts.

Stephen Nickell and Jumana Saleheen, IZA Journal of Development and Migration: The impact of EU and Non-EU immigration on British wages. There is a consensus among academics that immigration has little or no effect on native British wages, but these studies have not refined their analysis by occupations. Our contribution is to extend the literature to incorporate occupations. Doing so, we find that immigration has a small negative impact on average British wages, with a somewhat larger impact within the semi/unskilled service occupations. This paper also explores if there is any differential impact between EU and non-EU immigration on wages. We find there to be none. These findings are likely to be useful for shaping future immigration policy in Britain.

Luigi Guiso, Helios Herrera, Massimo Morelli, Tommaso Sonno, VOX: The spread of populism in Western countries. Populism – on both the left and right – has recently become a powerful force in western politics. This column uses individual data on political attitudes to argue that economic drivers are the most important factors influencing the demand for, and supply of, populist parties. The rare combination of markets’ and governments’ inability to guarantee economic security has shaken the confidence in traditional political parties and institutions, leading to an increase in fear that has been aggravated by other threats such as mass migration. Recent data also show that as these parties gain support, their political rivals adapt to embrace populism.

David Silver et al, Nature: Mastering the game of Go without human knowledge. A long-standing goal of artificial intelligence is an algorithm that learns, tabula rasa, superhuman proficiency in challenging domains. Recently, AlphaGo became the first program to defeat a world champion in the game of Go. Starting tabula rasa, our new program AlphaGo Zero achieved superhuman performance, winning 100–0 against the previously published, champion-defeating AlphaGo. Our results comprehensively demonstrate that a pure reinforcement learning approach is fully feasible, even in the most challenging of domains: it is possible to train to superhuman level, without human examples or guidance, given no knowledge of the domain beyond basic rules. Furthermore, a pure reinforcement learning approach requires just a few more hours to train, and achieves much better asymptotic performance, compared to training on human expert data. Using this approach, AlphaGo Zero defeated the strongest previous versions of AlphaGo, which were trained from human data using handcrafted features, by a large margin. Humankind has accumulated Go knowledge from millions of games played over thousands of years, collectively distilled into patterns, proverbs and books. In the space of a few days, starting tabula rasa, AlphaGo Zero was able to rediscover much of this Go knowledge, as well as novel strategies that provide new insights into the oldest of games

Christina Anderson, NYT: Allah’ Is Found on Viking Funeral Clothes. The discovery of Arabic characters that spell “Allah” and “Ali” on Viking funeral costumes in boat graves in Sweden has raised questions about the influence of Islam in Scandinavia. The grave where the costumes were found belonged to a woman dressed in silk burial clothes and was excavated from a field in Gamla Uppsala, north of Stockholm, in the 1970s, but its contents were not cataloged until a few years ago, Annika Larsson, a textile archaeologist at Uppsala University, said on Friday. Among the contents unearthed: a necklace with a figurine; two coins from Baghdad; and the bones of a rooster and a large dog. The evidence, she added, supported the theory that the Viking settlements in the Malar Valley of Sweden were, in fact, a western outpost of the Silk Road that stretched through Russia to silk-producing centers east of the Caspian Sea.