Catalina and Hutong in four days

Well, it's not quite as incredible as "Around the World in 80 Days" must have seemed to contemporaries of Jules Verne, but it was pretty good in terms of culinary range within a handful of days. Saturday night, I went to Catalina, just off Via Augusta in the upper part of Barcelona. It's a culinary delight "worth a detour" in the Michelin jargon. It wasn't a bad finish to a week during which I already got to sample the delights of Hutong, the restaurant on the 28th floor of a skyscraper by the shoreline of Victoria Harbour in Tsim Sha Tsui. Catalina's setting is appropriate for a place that shares its name with the conspiring politician once exposed by Cicero -- it's a small restaurant with no more than 8 tables; simple black and white photographies on the exposed-brick walls; just the right kind of mood lighting that still allows you to read the menu. Josep Lacambra and Catalina Ballesté prepare some incredible cod concoctions and the lobster rice is amongst the best I have had in years. I just realized that I don't say nearly enough in these pages about the food in Barcelona, which is one of the city's biggest strengths. True, it's not that cheap any more. Ten years ago, you could eat at a fraction of the Northern European prices; now I can often get cheaper restaurant meals in Germany. What remains startling is how quickly the food becomes very good indeed - the gradient of quality improvement remains very steep. Catalina is fully in line with that observation -- cheap for what it is, even if a meal for €35 a head is not a steal.

Asian regionalism

I just got back from a few days in Hong Kong, courtesy of the Asian Development Bank and the HK Monetary Authority. The view of Victoria Harbor from the 55th floor of the HKMA building alone was worth the trip. The conference was about "Quantifying Cost and Benefits of Regional Economic Integration", organized by Robert Barro and Jong-Wha Lee. The subtext is that a lot of policy discussion in Asia is about the extent to which the region should follow the EU's lead in integrating more in terms of customs unions and monetary arrangements. Barro and Lee presented a paper that used measures of political proximity (derived from UN voting patterns) to argue that the EU was much more similar in terms of political outlook. They also offered some interesting calculations on the value of avoiding wars as a result of deeper political and economic integration for Asia (it would be fun to see how big the EU's value in these terms is). Pol Antras and Fritz Foley looked at regional integration and FDI from third countries. They argue that US multinationals increased investment in the ASEAN area above and beyond what could otherwise have been expected, tweaking a version of the Melitz model. Andy Rose argued that inflation targeting increased business cycle sychronization, and that currency areas could prepare for monetary union by adopting inflation targeting. Kris Mitchener and I presented a paper on the 19th century silver standard and its impact on trade (confirming some of the Andy Rose results that trade gets a big boost from a common currency). We find that while silver was good for trade, gold was a lot better. Since Asian countries often had their currency arrangements decided for them by colonial powers, one can credibly argue that switching from one currency to another was reasonably exogenous. Andy was our discussant. He used a last-minute visit to the HK monetary authority's museum to do some field research, and he pointed out that strictly speaking, 19th century Hong Kong shared the same currency standard only with Mexico (since the Mexican silver dollar was legal tender).

CREI inspiration

Students and professors in the the CREI building (where the Barcelona GSE is also housed) can regularly hear strange wild noises from the other side of the tramway while they are discussing papers or batting ideas back and forth. Quite a few visitors seem a little incredulous when they learn that the sounds come from our neighbours, the lions in the Barcelona zoo. Here, via Jordi Gali, is a picture showing the red panels of the CREI building in the background, and a pride of feline predators in the foreground... Personally, I find the roars inspiring when grading exams and writing referee report ;-)

Death in Harare

Cholera is raging in Zimbabwe, thanks to the brilliant leadership of Robert Mugabe and his competent administrators. Close to 2,000 people have died already. Combined with hyperinflation, it's the last sign of total breakdown in civic order. We have long known that inflation isn't "always and everywhere a monetary phenomenon", as Milton Friedman would have it, but a sign of political and social collapse. Competing claims on output are not resolved properly; the tension is resolved through the printing press, which creates the illusion of giving everything to all who ask for something. The new 50 billion Zimbabwe dollar bill just introduced will buy you three newspapers (today - and one tomorrow, probably).

What is more striking is how good an indicator of governance quality cholera seems to be over the centuries. Richard Evans wrote a brilliant book about the politics of cholera prevention in Hamburg, called Death in Hamburg. He argued that it was the Hanseatic cities laissez-faire policies that made a deadly outbreak possible that killed 10,000, while most of Germany experienced hardly any problems. Patriarchal senators basically decided not to invest in a new sewage system; it wasn't their problem anyway. What you do with sewage is key for cholera; where the civic authorities don't provide for sewage treatment and clean drinking water, a single outbreak will spread quickly.  Of course, it's not laissez-faire that is adding another dimension to Mugabe's rule of terror and murder, it's the worst form of African kleptocracy since the days of Idi Amin and Jean-Bedel Bokassa. Of course, if you follow the Malthusian logic of Alwyn Young (on AIDS in Southern Africa), and of me and Nico Voigtländer (on early modern Europe), then epidemics have a silver lining for the survivors - they reduce downward pressure on the land-labor ratio...

YoY Growth: 50%

What's still growing these days? Applications to the ITFD M.Sc., that's what. Last year, our first one, we had quite a few applications by the end of January (and ended up with 70+ for the year as a whole). We aren't even half-way through January, but we already have 50% more applications than by end-Jan 08... oh, and due to the charming elves toiling away in the dungeons of the BGSE, we have a pretty, revamped broschure (thanks to our student Simin Yousefi for agreeing to have her picture taken for the cover!), and a brand-new ad in the Economist.

Core deflation

Why have the long-winded discussion of core vs. headline price changes suddenly disappeared from the media? Last summer, with oil prices spiking upwards, there was a constant trickle of articles arguing that things were not so bad, that only oil was going through the roof, and that policy should not overreact. Stripping out non-core sources of price changes has some things going for it... but shouldn't it apply symmetrically? Now that headline figures of inflation are way down, do we hear much discussion about the fact that lots of prices are actually still rising - but that the collapse in oil prices has dominated? Not so. Try the following link. You get two panels, both with two lines - red and blue. Red measures how often google users search for "deflation", and blue measures how often they search for "core inflation". Below, in the second panel, you see the number of news stories for both. Deflation is back as a topic, as the recent downturn is looking more like the remake of a black and white Hollywood horror movie ... "The Return of the Great Depression" every day (have a look at an insightful article by Paul Krugman on the topic). And sure enough, core inflation and all those volatile components of the consumption price index have disappeared from sight, both in the google searches and in the news media. This goes against the very logic of distinguishing core vs. non-core price changes -- if oil-related prices should be ignored on the way up, we should also ignore them on the way down. I agree that deflation (a fall of all prices) presents hairy problems for economic policy, but the asymmetry in reactions to core vs non-core sounds like a bad idea for monetary policy to me.