Grasping Reality on TypePad, by Brad DeLong

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Lecture Audio: Econ 115-14--World War II (10.15.2009 12-42-37 PM).aac

Posted via email from http://braddelong.posterous.com/econ-115-lecture-notes-october-15-2009-world at Brad DeLong's Scrapbook

Eastern and Western Hemispheres...

Posted via email from http://braddelong.posterous.com/the-globe-for-mapquiz at Brad DeLong's Scrapbook

Unemployment Insurance claims rose from 452,000 last week to 504,000 this week, but the seasonal adjustment factor fell from +72,000 to +10,000, leaving seasonally-adjusted claims falling from 524,000 to 514,000.

The seasonal adjustment factors in a normal year tell us that weekly unadjusted claims should now rise by an additional 150,000 between now and January (with a partial rollback for the Christmas rush). But does anybody think that the seasonal adjustment factors are the same in deep recession than they are in normal times? And does anybody know what the right seasonal adjustment factors in deep recession are?

Talk about your one-data-point regressions.

Just when you think it cannot get any worse, it does. No excuse. No excuse for anything in the company to survive. Shut it down now. People who take Stanley Kaplan courses to prep for tests are guilty of great moral fault, as are all others who fund and enable this load of slime.

William Saletan on Roman Polanski's drugging and raping thirteen year olds:

Human Nature : The Polanski Affair: The average age of menarche... has fallen two to four months per decade, depending on the country.... It's quite plausible that the 13-year-old girl Polanski had sex with in the late 1970s was, to some degree, sexually mature. Having sex at 13 is a bad idea. But if you're pubescent, it might be, in part, your bad idea.... A guy who goes after a womanly body that happens to be 13 years old is failing to regulate a natural attraction. That doesn't excuse him. But it does justify treating him differently.... There's a difference between pedophilia and taking advantage of somebody who's old enough to be interested in sex but too young to judge the physical and emotional risks of messing around. If the legal officers and moral critics of the 1970s saw that distinction more clearly than we do, the shame is ours.

No, Mr. Saletan, the shame is yours. And the shame is that of all the editors and executives of the Washington Post Company.

Patterico has a measured response:

Patterico’s Pontifications: Saletan: Polanski Just Made A “Spontaneous” Error of “Judgment” in Going After a “Womanly Body” That Happened to Be 13 Years Old: If Saletan had just studied up on the case a little bit before writing about it for a national publication, he might have avoid making several foolish remarks.... We went through this when Whoopi Goldberg claimed that Polanski’s offense wasn’t “rape rape” — but I guess Saletan didn’t get the message. Fine; we’ll repeat it. Here again are excerpts from the girl’s grand jury testimony:

A. I was going, “No, I think I better go home,” because I was afraid. So I just went and I sat down on the couch.

Q. What were you afraid of?

A. Him.

. . . .

Q. What happened then?

A. He reached over and he kissed me. And I was telling him, “No,” you know, “keep away.”

But I was kind of afraid of him because there was no one else there.

. . . .

Q. What did he do when he placed his mouth on your vagina?

A. He was just like licking and I don’t know. I was ready to cry. I was kind of — I was going, “No. Come on. Stop it.” But I was afraid.

. . . .

Q. What happened after that?

A. He started to have intercourse with me.

Q. What do you mean by intercourse?

A. He placed his penis in my vagina.

Q. What did you say, if anything, before he did that?

A. I was mostly just on and off saying, “No, stop.”

But I wasn’t fighting really because I, you know, there was no one else there and I had no place to go.

And then he rapes her anally and ejaculates in her anus. As for whether this was some kind of spontaneous, isolated, single instance of bad judgment by a non-pedophile, let’s remember that this is the man who said in 1979:

If I had killed somebody, it wouldn’t have had so much appeal to the press, you see? But… fucking, you see, and the young girls. Judges want to fuck young girls. Juries want to fuck young girls. Everyone wants to fuck young girls!...

Saletan says:

A guy who goes after a womanly body that happens to be 13 years old is failing to regulate a natural attraction. That doesn’t excuse him. But it does justify treating him differently...

Uh, except that here is a set of pictures of the “womanly body”.... Saletan’s piece makes for a nice philosophical discussion of how various factors might have relevance to another case. But as applied to this case, it’s a joke.

UPDATE: Saletan digs in here:

If you have the goods to convict a man of rape, prosecute him for rape. Don’t invite him to plead guilty to sex with a teenager. That kind of plea deal, coupled with a stiff jail sentence, just furthers the conflation of sexual assault defined by force with sexual assault defined by age.

Not one word about the way that Polanski’s lawyers planned to drag the victim through the mud in international media — which is, of course, the reason the plea went down the way it did.

Why oh why can't we have a better press corps?

UPDATE: Mark Kleiman:

Saletan on Polanski: “Failing to regulate a natural attraction”: The only premise that would fill in Saletan’s argument is that it’s not that bad for a 13-year-old girl to be molested by a 40-year-old man.   I suppose Saletan is entitled to his opinion on that point.  But his opinion isn’t the law.... Saletan thinks that the 1970s, when a judge might have cut someone like Polanski some slack, were simply capable of finer moral distinctions than we Puritanical moderns can handle.  Well, I suppose that’s one way to think about it.  Maybe so.  Whatever distinction Saletan thinks he’s making is certainly too subtle for me.

• Dirk: The Lucas Paradox
  Macroeconomics was born as a distinct field in the 1940s, as a part of the intellectual response to the Great Depression. The term then referred to the body of knowledge and expertise that we hoped would prevent the recurrence of that economic disaster. My thesis in this lecture is that macroeconomics in this original sense has succeeded: Its central problem of depression-prevention has been solved, for all practical purposes, and has in fact been solved for many decades. (Lucas, 2003, Presidential Address to the American Economics Association)
• Lindsay Beyerstein: Contrarian Double-X hires sociopath as friendship expert
  Double-X shrewdly hired noted sociopath Lucinda Rosenfeld to write its friendship column. This is precisely the kind of fresh, contrarian perspective we've come to expect from the Slate/Double-X brand.  Double-X racks up a lot of hits by hiring anti-feminists to diagnose the ills of contemporary feminism. Retaining a psychopath as a friendship guru is the logical next step.  On Monday, Rosenfeld answered a later from a woman who woke up in the gutter after someone spiked her drink. She later learned that her friends ditched her after she went to the washroom and didn't come back
• John Gapper: A credibility problem for Goldman
• Josh Marshall: Grand Unified Theory of #GopComFail
  In addition to the weird and now deleted reference to Ronald Reagan as "Ronaldus Magnus", you may have noticed that the site is filled with a lot of what might generously be called non-standard history -- like the idea that the Republican party is made up mainly of people from the 19th century, about half of whom are black. Well we did a little digging and it turns out Steele turned over a lot of the job to a fringe-ish amateur historian named Michael Zak. Meet him here.
• Yves Smith: Massachusetts Land Court Upholds Ruling Reversing Thousands of Foreclosures « naked capitalism
• RealClearPolitics October 14, 2009 Archives
• Maury Obstfeld and Ken Rogoff: Global Imbalances and the Financial Crisis: Products of Common Causes
• Ken Rogoff: China's Dollar Problem
• Robert Reich: Empty Hands on the Climate, and What Obama Needs to Do
  Climate change legislation is moving forward -- but big polluters have shaped much of it. As I noted recently, the Waxman-Markey climate bill, passed by the House last June, gives away 85 percent of pollution permits to the nation's biggest polluters, and the "cap" it proposes on overall carbon emissions would cut greenhouse gas emissions only by an estimated 2 to 4 percent by 2020 compared to the UN reference year of 1990. The Kerry-Boxer bill has a stronger cap on emissions but it's still far short of what's necessary -- and it leaves out the hardest part, which is the actual cap-and-trade mechanism. Why has so little been accomplished? Because coal, shale, oil, big manufacturers, and utilities -- the big old polluters (BOPs) -- have beaten back anything better.
• Matthew Yglesias: Health Care Experts Release Statement on Misleading AHIP Report
• David Roberts: Seven reasons for optimism about the Senate climate bill
• John Maynard Keynes, “From Keynes to Roosevelt: Our Recovery Plan Assayed,” New York Times, December 31, 1933
• James Hamilton: Targeted liquidity operations
• Joe Nocera: Subprime and the Banks: Guilty as Charged
• Ken Livingstone Interviews Iain Banks
• Mark Thoma: "How the Servant Became a Predator: Finance’s Five Fatal Flaws"
  am not as negative about banking and financial intermediation as William Black, I think intermediaries perform essential functions that, for example, pools risk across individuals, pools deposits over time (i.e. allows long-term loans with short-term deposits), pools small deposits to allow large loans, they help to overcome adverse selection and moral hazard problems by providing monitoring of loans and expertise on the ability of buyers to repay loans that individuals do not have. By providing pooling functions, solving asymmetric information problems, and so on, financial intermediaries allow productive activity to take place that wouldn't occur otherwise, and we are better off because of it.
• Ben Hyde: Widening Gyre
• Evan Osnos: The Future of Caijing: Letter from China
• Aimai on Robert Frank's "Economic Naturalist"
  To each he and his students give patently made up, economist answers. To the first his student offers the explanation that it must be cheaper to simply put braille on all ATM machines than to spend time/money putting it on some and then trying to make sure that the ones with braille go where they need to be and the ones without go to the drive in ATM sites. Fair enough. Economies of scale and all that, putting braille dots on is probably pretty cheap to begin with. Blah Blah sounds good to me.... At the end of that chapter a moment of reality intervenes. A reader writes in and explains that there's actually something that comes between the ATM machine vendor, the bank, and sheer dollar push/pull and that is, of course--the government, regulation, law and custom. In other words: the ADA requires that all bank ATMs have braille. Never mind! It was still very logical for Frank and his students to try to figure out the basic economic rationality...
• Matthew Yglesias: Christina Romer vs Political Reality
  ut what Lizza is telling us is that on the two biggest pieces of macroeconomic management, the Obama administration is pursuing policies that its in-house expert on macroeconomic crisis management believed were far too timid. He’s also telling us that this was done primarily not because people disagreed with her analysis, but because they felt it wasn’t possible, legislatively speaking, to do what was objectively necessary. It’s a bit of a scary situation.
• Nate Silver: Can Offshore Drilling Save the Climate Bill?
• Jonathan Cohn: The Top Ten Things in Health Care Worth Fighting For
• Texas Creationists Wave Another Tentacle

Glenn Greenwald issues marching orders:

How to avoid the GOP's mistakes during the Bush years?: The Atlantic's Marc Ambinder makes the following observation: "From day one of his administration, the left has held Barack Obama's feet to the fire way more than the right ever did to George W. Bush..." Is there any doubt that this is accurate?  I can't imagine how there could be.  And is there anyone who believes that this is a bad thing?  

It's worth remembering how the GOP and the Right treated Bush and the role they played in his presidency.... The Right's leading commentators saw their role as defending the Bush administration no matter what it did, rather than expressing their honest opinions.... Personalized hagiographies were churned out glorifying the President in borderline-religious tones. Conservative groups devoted themselves to blind defense of the White House.... Conservatives who criticized Bush were deemed the enemy and were excommunicated.... Those who, in general, criticized the President too harshly were deemed unpatriotic, standing with Terrorists, and suffering from personalized and emotional hatred (Bush Derangement Syndrome)....

One need only look at the entrenched rot that is now the conservative movement and the Republican Party to see what happens when that mentality prevails, when internal dissent is treated as blasphemy and well-intentioned critics are deemed suspect and even harmful to The Cause...

We hear and obey.

On my issues:

(1) The Obama administration argued in December and January that it should seek a consensus position on dealing with the financial crisis and recession rather than push for first-best policies--larger short-term deficit spending, more money for banking recapitalization, more stringent regulation of and control of financial services (especially much more aggressive regulation of executive compensation to make every thirty-five year old a risk manager who prospered only in the long run, only if the firm's strategies proved profitable over several cycles, and only if the firms never blew up).

This was a mistake: the 80-20 votes in the Senate and the 390-40 votes in the House for "national unity" economic policies did not materialize, and we are left with insufficient regulation of the financial system to protect the consumer and guard against the next crisis, and with too-small a stabilization policy that threatens now to give us 10% unemployment as far as the eye can see.

(2) The Obama administration started by proposing a cap-and-trade environmental policy with current greenhouse polluters grandfathered in--and with the political dynamic such that, as with the AMT and the R&D tax credit, the grandfathering will be extended year-by-year forever as legislators find one-year-at-a-time extensions to be an extraordinarily good tool for raising campaign contributions from corporate PACs.

This was a mistake. The administration should have started with the right first-best policy: a carbon tax with the revenues dedicated to paying people's FICA contributions. Then, if necessary, it could have let itself be negotiated down to cap-and-trade with some--not 100%--grandfathering.

(3) I simply do not know what the Obama administration's desired health-care reform bill looks like, or what steps the Obama administration is taking to make the congressional reform process reach a good end, or what the economic theory is that suggests that these particular reforms are the right thing to do. I am scared of guaranteed issue and community rating without a real mandate to curb adverse selection and a strong public option as a safety valve. I am very scared of a congress that seems to, with every day, seek to bend the curve of health care costs upward by prohibiting things like comparative effectiveness research. And I am very, very scared of a mandate without an adequate subsidy pool.

I want to see real white papers from the administration explaining why whatever is going to emerge from the congress is a good thing--and why it is the best thing that we could have gotten out of congress this year or next year.

(4) Tim Geithner should have gone to the wall for the requirement that [banks offer "plain vanilla" mortgages and credit cards. The Democratic Party should not be in the business of encouraging banks and other financial service companies into making money by tricking households into bearing risks that they do not understand. And he certainly should not say that he is "supportive of the changes." If he really is, he is in the wrong job. If he is merely grudgingly willing to accept the changes, he should say that instead. The Treasury Secretary's credibility is, after all, his onlly asset.

(5) Nor has the Obama administration yet gone to the wall for long-run fiscal discipline: by now we ought to have standby tax increases or spending cuts written into the law for the out-years a decade or more from now to reassure everyone that the American government does understand and take seriously what the long-run trends--the aging of America and medical-care cost growth--mean for public finances

Don't get me wrong: My complaint is not that the Obama administration has not been liberal enough. My complaint is that the Obama administration, so far, has not been devoted enough to good policy--to the good technocratic policies of what I used to see as the bipartisan center--and has been unwilling to use any leverage at all against a congress that is underbriefed, unfocused, and easily captured by special interests. You can only use such leverage if you have a moment arm--allow daylight to open up between the President's position and the position of the marginal senator, and say that the President's policies are those he and has staff have concluded after sober reflection are best for the nation but that he will take what he can get from congress.

Lance Knobel emails:

Your style of leaping from Erasmus to Tolkien to Clark Kerr to Californium is hard to capture in words, but I've had a go.

Clearly I read The Glass Bead Game at a too-impressionable age. The chain of associations Erasmus-Tolkien-Clark Kerr-Californium makes perfect sense to me...

He attaches a link to:

DeLong view of the future – Berkeleyside: Oct 14th, 2009 by Lance.

Ask Berkeley economist and blogger Brad DeLong about the future of higher education as digital technology develops and you’ll get a disquisition about Erasmus of Rotterdam and the puzzle about how the idea of the university survived Gutenberg and 1435. DeLong enjoys pointing out that UC Berkeley is the only university to have named four elements (Chicago only counts two). His blogging occasionally plunges into detailed macroeconomic arguments,  but he seems happiest when drawing on a seemingly inexhaustible trove of economic, political and social history to make cogent points about the present day. I caught up with DeLong in the new Peet’s in the university’s gleaming CITRIS building for some blogger-to-blogger chat, but also to see what he thought of UC Berkeley’s future given its dire budgetary straits.  DeLong has written frequently about the importance of Berkeley as a public university, often contrasting it with his own alma mater, Harvard. It was a day after the particular highpoint for a Berkeley economist of seeing yet another colleague, Oliver Williamson, awarded the Nobel prize for economics (the fifth Berkeley economist to win that honor).

Berkeleyside: Does Berkeley have a future as a great public university?

DeLong: There’s one view that it’s going to be absolutely fine. You look at the University of Michigan and UVa and they have made successful transitions to this mixed public/private institution. Berkeley should do even better. We are close enough to Silicon Valley and the extraordinarily unequal California economy that they money will flow. Not at a Harvard scale, but it will flow.

Berkeleyside: Is it just the California advantage?

DeLong: We’re Oxford 1880. Everyone at the rising superpower across the ocean wants their children to come. We’re culturally more friendly to Asia in lots of ways than other institutions. Then you think that there are 80 million 18-year olds in Asia. There are 800,000 of them in the top 1 per cent of income. There are 16,000 of them in the top 2 per cent of intellect and achievement. If we fumble that market position, we don’t deserve to survive. But we are also an amazingly bureaucratic organization and it’s conceivable that we could fumble the whole thing.

Berkeleyside: But if Berkeley and other UC campuses end up serving the Asian elite, what does that mean for its public role in California?

DeLong: There will still be pressures to fulfill Clark Kerr’s vision of creating a broad UC system. Since 1950 the system went from admitting 4,000 undergraduates a year to 50,000 a year. That’s institutional success at an extraordinary level.

Berkeleyside: Do feel the budget cuts directly?

DeLong: No, not me personally__but all kinds of administrators around me are feeling it. And economics has had a greater than normal number of faculty losses recently. It’s hard to know whether that’s just part of the cycle, or whether it’s people leaving because of the prospects. There’s also the fact that life for Berkeley economics faculty always becomes more stressed when there’s a Democratic administration in Washington. You lose some colleagues to that, but you also go from being someone who is carping on the sidelines to someone who’s ideas are sought.

For all the pressures, being a tenured professor at a research university is still an amazing deal. It’s the closest thing in our age to being landed gentry.

Berkeleyside: You’ve talked about the rosy scenario for Berkeley, but what could take it in the wrong direction?

DeLong: You could have a situation where more and more money gets sucked up into keeping our old tenured faculty. Instead of hiring new tenure track people you hire lecturers who are less expensive. You get the grant-running done by non-tenured researchers. Then we have something like the old regime in France where the aristocracy--the tenured faculty--is corralled into Versailles...

Berkeleyside: You’ve written often on your blog about the virtual university that exists in the blogosphere. Is the information age going to create something that supplants the university?

DeLong: Why didn’t this happen after 1435 when the price of a book fell 30-fold? The book is a sophisticated multimedia device. Reading takes place between the ears in a brain that is capable of extraordinary things. There were plenty of people who were disappointed when The Lord of the Rings movies came out because the characters didn’t look anything like the characters they had created in their own minds. So what you suggest ought to have happened in the 15th century.

Berkeleyside: But now in addition to books you can go online and follow courses at MIT or Berkeley.

DeLong: I’m going to teach my 20th century economic history course online next summer. I feel that if anyone is going to be making money or having influence teaching 20th century economic history, I want it to be me...

Hoisted from Comments: Kaleidescope writes:

It's Like Rain...: Typhoon Melor. During the Thirties, scores of Soviet citizens named their children Melsor, which stood for Marx, Engels, Stalin, October Revolution. After Khruschev's 1956 speech to the 20th Party Conference, the Melsors changed their names to Melor.

UPDATE: The hamsters were overstressed and died.

Leigh Shaw Taylor writes:

Dear Brad,

Thanks for publicising Bob Allen's Tawney lecture. This was so succesful that we had to take it down briefly (there 10,000 downloads in half a day and it was a problem for the hoster). We have now resolved that issue and it is back online. I see your website indicate it is still offline: http://delong.typepad.com/sdj/2009/10/why-was-the-industrial-revolution-midlandish.html?

Would it be possible to update this again? Thanks.

To which the only response I can give is that the embed appears to be failing for reasons I do not understand, but the clickthrough to: http://www.yada-yada.co.uk/tawney2009/Tawney2009.html appears to be working...

Leigh Shaw-Taylor writes:

A podcast of Professor R.C. Allen's, 2009 Tawney lecture, Why was the Industrial Revolution British?, given at the Economic History Society annual conference, is now available on the EHS website at http://www.ehs.org.uk/downloads.asp

http://www.yada-yada.co.uk/tawney2009/Tawney2009.html

It writes:

Dear Reader,

On Tuesday, we made certain sections of our site inaccessible to non-subscribers, including:

• The print edition contents page, which offers a convenient way to browse articles from the latest issue of The Economist

• Our new Which MBA? ranking tool, a customisable guide to the world's best MBA programmes

• Searchable archives expanded to include articles and commentary older than 90 days

Subscribe today and expand your access to Economist.com

When you subscribe to The Economist, you’ll receive unrestricted access to the premium online content at Economist.com.

You can now purchase a print subscription for only $12--a deeply discounted 85% savings. This special offer ends tomorrow and comes with a money-back guarantee in case you’re not fully satisfied.

I hope you'll consider expanding your access with a subscription to The Economist.

Macro Advisers:

The unexpected strength in core sales in September implies more growth of PCE in the fourth quarter, but also more growth of imports and less inventory investment. We raised our tracking forecast of GDP growth in the fourth quarter by two-tenths to 3.8%...

Because of the peculiar ways our data system works, 1/3 of the data needed to calculate the 4Q real GDP growth rate is already in (and half the data has already happened). The growth rate from the third to the fourth quarter is, after all, 1/9 the growth rate from July to August, 2/9 the growth rate from August to September, 3/9 the growth rate from September to October, 2/9 the growth rate from October to November, and 1/9 the growth rate from November to December.

And so far, it does look a lot like 4% real GDP growth rate, -2% work hours, 6% productivity for the fourth quarter...

Full text of "Gotha Programme":

I. Labor is the source of all wealth and all culture, and since universal productive labor is possible only through society, therefore to society, that is to all its members, belongs the collective product of labor. With the universal obligation to labor, according to equal justice, each should have in proportion to his reasonable needs.

In the present society the means of labor are the monopoly of the capitalist class; the servitude of the laboring class, which is the outgrowth of this, is the cause of misery and of slavery in all forms.

The liberation of labor demands the transformation of the means of production into the common property of society and the associative regulation of the collective labor with general employment and just distribution of the proceeds of labor.

The emancipation of labor must be the work of the laboring class, opposed to which all other classes are only a reactionary body.

II. Proceeding from this principle the Socialist Labor party of Germany seeks through all legal means the free state and the socialist society, the destruction of the iron law of wages, the overthrow of exploitation in all forms and the abolition of all social and political inequality. The Socialist Labor party of Germany, though working chiefly in national boundaries, is conscious of the international character of the labor movement and is resolved to fulfill every duty which is laid on the workers in order to realize the brotherhood of humanity.

The Socialist Labor party of Germany demands as a step to the solution of the social question the erection, with the help of the state, of socialistic productive establishments under the democratic control of the laboring people. These productive establishments are to place industry and agriculture in such relations that out of them the socialist organization of the whole may arise.

The Socialist Labor party of Germany demands as the foundation of the state:

1. Universal, equal and direct suffrage, with secret, obligatory voting by all citizens at all elections in state or community.
2. Direct legislation by the people. Decision as to peace or war by the people.
3. Common right to bear arms. Militia instead of the standing army.
4. Abolition of all laws of exception, especially all laws restricting the freedom of the press, of association and assemblage; above all, all laws restricting the freedom of public opinion, thought and investigation.
5. Legal judgment through the people. Free administration of law.
6. Universal and equal popular education by the state. Universal compulsory education. Free instruction in all forms of art. Declaration that religion is a private matter.

The Socialist Labor party of Germany demands within the present society:

1. The widest possible expansion of political rights and freedom according to the foregoing demands.
2. A progressive income tax for state and municipality instead of all those existing, especially in place of the indirect tax which burdens the people.
3. Unrestrained right of combination.
4. Shortening of the working day according to the needs of society. Abolition of Sunday labor.
5. Abolition of child labor and all female labor injurious to health and morality.
6. Protective laws for the life and health of the worker. Sanitary control of the homes of the workers. Supervision of the mines, factories, workshops and hand industries by an officer elected by the people. An effectual law of enforcement.
7. Regulation of prison labor.
8. Full autonomy in the management of all laborers' fraternal and mutual benefit funds.

---

Source of English translation: Theodore S. Hamerow, ed., The Age of Bismarck: Documents and Interpretations. New York: Harper & Row, 1973, pp. 230-32.

Original German text printed in Protokoll des Vereinigungs-Kongresses der Sozialdemokraten Deutschlands, abgehalten zu Gotha vom 22. bis 27. Mai 1875 [Protocol of the Consolidation Congress of German Social Democrats, held at Gotha from May 22-27, 1875. Leipzig, 1875, pp. 78-79. Original German text reprinted in Hans Fenske, ed., Im Bismarckschen Reich 1871- 1890[ln the Bismarckian Reich 1871-1890]. Darmstadt: Wissenschaftliche Buchgesellschaft, 1978, pp. 141-42.

---

The first workers' association in Germany, the General German Workers' Association [Allgemeiner Deutscher Arbeiterverein, or ADAV], was founded in 1863 by Ferdinand Lassalle (1825-1864). His idea of defeating capitalism through the establishment of producers' cooperatives was strongly opposed by several socialists who supported the teachings of Karl Marx (1818-1883). In August 1869, Wilhelm Liebknecht (1826-1900) and August Bebel (1840-1913) founded the Social Democratic Workers' Party [Sozialdemokratische Arbeiterpartei, SDAP], sometimes referred to as the Eisenach wing of German Social Democracy. Together with their followers, they endorsed Marx's teachings and his commitment to class struggle and revolution. The ADAV and the SDAP differed markedly in their views on socialist theory, the First International, the role of the state, trade unions, and universal suffrage--and on Bismarck.

Despite these differences, members of both parties knew that unity meant strength. At the socialist congress held in the central German city of Gotha from May 22-27, 1875, the Lassallean and Marxist wings debated a new program and founded the Socialist Workers' Party of Germany [Sozialistische Arbeiterpartei Deutschlands, SAPD], which was renamed the Social Democratic Party of Germany [Sozialdemokratische Partei Deutschlands, SPD] in 1890. The program contained some of Lassalle's controversial ideas, whereas socialist commitment to revolution did not appear in the text.

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...well, it is somebody's wedding day.

But it is not supposed to rain--hard--in Berkeley on October 13. I'm told they opened the ski runs at Lake Tahoe yesterday...

From <>:

Loretta Kalb: California: Typhoon remnants threaten to bring Central Valley flooding, mudslides, weather service says: The remains of super typhoon Melor, which is barreling across the Pacific at high speed today, threaten to bring flooding to some areas of California's Central Valley and mud slides in recently fire-ravaged areas, the National Weather Service reports. Up to 6 inches of rain could fall starting Tuesday in the foothills and mountains east of the Sacramento Valley in the season's first major storm for Northern California, meteorologist Felix Garcia of the National Weather Service said. The valley could see up to 2 inches of rain during the entirety of the storm, he said.

The snow level will stay above 7,000 feet or 8,000 feet, meaning virtually all the precipitation will be in the form of rain, Garcia said.... Growing winds will accompany the heavy rain, with gusts of up to 40 mph on Tuesday at lower elevations and higher in the mountains.

Typhoon Melor clobbered the Philippines and Japan in the western Pacific before its remnants were swept into the jet stream now West Coast bound. "The typhoon intensified so that the remnants were caught up with the jet stream and carried the moisture," Garcia said. He said the fast-moving storm front should reach the West Coast by Monday afternoon, then slow somewhat, and begin dumping its wet cargo in the Central Valley in earnest starting Tuesday morning. That will push rivers and creeks higher and cause local flooding in areas unable to absorb the heavy rainfall...

We are live at The Week: We Can Afford More Short-Run Deficit Spending:

This is an exceptional time—a time in which many of the normal rules of the Dismal Science don't apply because, as Paul Krugman puts it, "depression economics" is in the driver's seat. The normal benefits and costs of government borrow-and-spend policies are overturned for now—and for as long as the crisis of high unemployment lasts.

Yet I find that many people do not understand why arguments that make perfect sense in normal times do not apply today. Let's run through the arithmetic—first in normal times, and then in a financial crisis like this one.

In normal times, a boost to government purchases:

• Produces a limited increase in production and employment;
• Creates a substantial increase in national debt;
• And requires that this new debt be financed at a sizeable interest rate.

Consequently, only government spending initiatives that promise a high value for the dollar are worth undertaking. Consider a $100 billion boost to government purchases. In a normal year, the Federal Reserve will worry about inflation, and raise interest rates somewhat to offset the inflationary impact of the fiscal boost. The multiplier effect of the purchases will therefore be something like 0.4—we will spend $100 billion on government purchases and gain perhaps $40 billion in extra production and associated employment out of it. Those who earn that extra $40 billion will pay taxes—perhaps $16 billion. So the net impact on government debt is this: by spending an extra $100 billion we will have added some $84 billion to the national debt.

That debt must then be amortized. At a five-percent-per-year long-run real rate of interest on government bonds, amortizing that debt will cost Americans $4.2 billion a year.

But wait—there is more. The Federal Reserve's compensatory increase in interest rates will also reduce investment. Because of the $100 billion in government purchases, perhaps $60 billion of private investment that would have been made won't be made—it will be crowded out. As a result of the lower capital stock, some $6 billion a year of income that would have been earned won't be.

Thus the net cost will be a reduction in Americans' disposable incomes of $10.2 billion per year.

That is not an attractive bargain: to purchase $40 billion of extra production now at the expense of a reduction in incomes of $10.2 billion in every year in the future. That is a usurious real interest rate of 25.5 percent. No sane economist would recommend a policy with such costs and benefits.

But how different everything looks in those rare times—like now—when depression economics applies!

First, more government spending will not lead the Federal Reserve to raise interest rates to fight inflation; the Federal Reserve has pushed interest rates to the floor right now and wishes it could push them lower still—perhaps another 5 percent into negative terrain. Given that, the multiplier on government spending is not 0.4, but more like 1.5. In other words, we do not get $40 billion of additional production and employment for $100 billion in government spending: We get $150 billion.

How? The federal government spends money to buy something it would not otherwise have purchased, thereby taking that product out of business inventories. Typically, businesses would respond by saying, "Our goods are flying off the shelves; we should raise our prices." As businesses raise their prices, (most of) what the federal government bought would be offset by a decline in private purchases because private buyers, confronting increased prices, decide to hold off on purchases.

But, again, now is not normal. Now, businesses respond to the federal government's purchases by saying, "Demand for our goods is greater than we thought; we don't need to fire as many people." The workers who they don't fire retain incomes they would not otherwise have had, and so they are a bit freer with their spending than they would be otherwise. Add up the extra spending by the federal government, and the extra spending by people who would have been fired but for the spending by the federal government, apply the appropriate offsets, and you wind up with a multiplier that most forecasters—by which I mean people who actually make their livings selling forecasts to businesses—think is probably around 1.5. Thus we get $1.50 of economy-wide spending for each $1 of stuff bought by the federal government.

Second, that boost to production creates a substantial reflow in taxes that makes the spending program lunch not free, but cheaper; $150 billion of added production leads to $60 billion of additional tax revenue, leading to only $40 billion in increased debt.

Third, depression economics means not only that there is no offsetting Federal Reserve interest rate increase, but also that the government can borrow at uniquely favorable terms: 2 percent per year in real terms for the next 30 years. Amortizing the $40 billion of additional government debt requires only $800 million a year in additional interest payments and taxes.

Fourth, the absence of interest rate increases means that there is no crowding-out of private investment. Private-sector incomes down the road are unchanged—or increased.

So the net cost of gaining $150 billion in increased production and incomes this year is $800 million a year going forward. It's not a free lunch—they take away my union card as an economist if I start claiming that things are free lunches—but it is a very cheap lunch: like getting a 2 lb. lobster with all the trimmings for $1.95.

Clearly, a second round of stimulus right now would be a very good deal for the American economy. But how big should the fiscal boost be?

Given the arithmetic, it is a no-brainer that we should be doing an extra $100 billion in stimulus. In fact, it is a no-brainer that we should be doing several $100-billion tranches.

How many? Well, the arithmetic holds until:

• Further tranches of additional deficit spending stoke inflation and lead the Federal Reserve to offset their impact on production and employment;
• Further tranches lead to a deterioration in the long-term corporate bond market and crowd-out private investment;
• Further tranches undermine confidence in U.S. long-term public finances and must be financed at higher Treasury interest rates.

Last December, Lawrence Summers and the rest of Obama's incoming National Economic Council feared that increasing the size of the stimulus program from $800 billion to $1.2 trillion would bring the above factors into play. It is now reasonably clear that they were overly pessimistic about the effects of additional short-term government spending, in large part because they were overly optimistic about the state of the economy.

So how much should the government spend? I would favor starting with $100 billion next month, and continuing with an additional $100 billion every month thereafter. Meantime, we should keep an eye on the bond market and inflation forecasts. As long as the terms on which the U.S. government can borrow are exceptionally advantageous, and the unemployment rate remains exceptionally high, the benefits of government spending will continue to be exceptionally large.

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  Elinor Ostrom's work culminated in Governing the Commons: The Evolution of Institutions for Collective Action which uses case studies to argue that around the world private associations have often, but not always, managed to avoid the tragedy of the commons and develop efficient uses of resources.  (Ostrom summarizes some of her findings from this research here).  Using game theory she provided theoretical underpinnings for these findings and using experimental methods she put these theories to the test in the lab.  For Ostrom it's not the tragedy of the commons but the opportunity of the commons.  Not only can a commons be well-governed but the rules which help to provide efficiency in resource use are also those that foster community and engagement.  A formally government protected forest, for example, will fail to protect if the local users do not regard the rules as legitimate.  In Hayekian terms legislation is not the same as law.  Ostrom's work is about understanding how the law
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  Erich Auerbach:
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Erich Auerbach: Mimesis: The Representation of Reality in Western Literature:

• "The Arrest of Peter Valvomeres": Download 20091012 ammianus
• "Sicharius and Cramnesindus": Download 20091012 gregory

Posted via email from http://braddelong.posterous.com/two-chapters-from-the-best-book-of-literary-c at Brad DeLong's Scrapbook

Glenn Greenwald writes:

Gay issues, the "fringe left" and the liberal veal pen: Thousands of Americans marched in Washington yesterday to demand a fulfillment of Obama's long-stated and oft-repeated commitments on issues of gay equality, in what the NYT calls "the largest demonstration for gay rights here in nearly a decade."  That protest was preceded the day before by a virtual consensus 0f gay rights activists expressing extreme disappointment and frustration with Obama's speech to the Human Rights Campaign on Saturday night, where he merely repeated the same pledges he's been making for two years with no added specificity or time commitment.

About those protests -- and Democratic and progressive criticisms of Obama generally -- NBC's John Harwood "reported" the following last night:

Sure but if you look at the polling, Barack Obama is doing well with 90% or more of Democrats so the White House views this opposition as really part of the "internet left fringe" Lester.  And for a sign of how seriously the White House does or doesn’t take this opposition, one adviser told me today those bloggers need to take off their pajamas, get dressed and realize that governing a closely divided country is complicated and difficult.

In the updates to her post about all of this last night, Pam Spaulding notes with exasperation the excuses and denials flying around everywhere, with all sorts of people expressing doubt that anyone in the Obama White House could possibly be capable of such an ugly sentiment, particularly in light of the President's eloquent, on-the-record commitment to gay equality (other than marriage).  As is true for all instances of reckless and petty uses of anonymity like this, it's impossible to know how reflective it is of administration sentiment generally -- was this a senior White House official or some obscure low-level aide?...

Well, almost surely neither. A senior White House official would be called "a senior White House official." An obscure low-level aide would be called "a White House official."

Someone who doesn't actually have a job in the administration, but gets to go into the EEOB once a week or so to whine and otherwise holds court at Caribou Coffee at 17th and Pennsylvania is an "advisor."

In highlighting this quote, Harwood is trying to start a fight--not to inform anybody about anything.

Why oh why can't we have a better press corps?

He writes:

D-squared Digest -- FOR bigger pies and shorter hours and AGAINST more or less everything else: Economics and similar, for the sleep-deprived

Does anyone have any idea what might be done about the pointless blob of white space above this paragraph? It seems to be resistant to all my efforts. Update haha, it succumbed.

Monday, October 12, 2009

It's like raaaaaaiiiiieeeeeeeain on your wedding day

Ross Douthat of the New York Times writes on the subject of Obama's Nobel Peace Prize. I cannot help noticing that when the New York Times came and offered him a column, he did not turn it down saying "no, I clearly do not deserve this honour, others are far more qualified for it that me".

posted by the management 10/12/2009 01:53:00 AM

I blush when I remember my belief that Ross Douthat was one of the least-bad choices for the New York Times's mandatory conservapundit slot. This makes me further hide my head in shame.

Why oh why can't we have a better press corps?

Ooo boy. David Warsh:

It is last year’s solo prize in economics to Paul Krugman, of Princeton University and The New York Times, which poses the more interesting question. Are Scandinavians getting carried away with the US elections? Not that Krugman didn’t deserve a Nobel soon for his work on the “new” economics of trade--or a half-portion of the prize, anyway.

For there were several other ways to make an award for the work on trade, most obviously jointly to Elhanan Helpman, of Harvard University, who teamed up with Krugman for a few crucial years in the early 1980s to overcome resistance to what were then regarded as thoroughly unorthodox ideas. Their 1985 monograph, Market Structure and Foreign Trade: Increasing Returns, Imperfect Competition and the International Economy, firmly established the new understanding of the strategic basis of much international trade, all but replacing a doctrine of natural “comparative advantage” that dated back 165 years to David Ricardo. Lost in the shuffle, too, was Avinash Dixit, of Princeton University. It was Dixit, who, with co-author Joseph Stigliz (an earlier Nobel laureate, in 2001, for his work on winnowing information), developed the model of product diversity and monopolistic competition with which Krugman and Helpman quickly made their point--whereupon the Dixit-Stiglitz model became the workhorse by which several other major fields were similarly transformed. Wilfred Ethier, of the University of Pennsylvania, lost out on a plausible claim as well, as noted here last year. By giving the prize to Krugman alone, the Royal Swedish Academy of Sciences may have given a mistaken impression of his importance as a contributor to this tapestry, relative to the others...

You could also add Maury Obstfeld my next-door office neighbor--who I would certainly rank as contributing more to the development of trade economics than the average member of Helpman, Dixit, and Ethier. Jagdish Bhagwati certainly deserves a share of a trade albeit not of a new trade prize.

But as to whether Paul is primus--take a look at Krugman's cv, "“Increasing Returns, Monopolistic Competition, and International Trade” (1979), “Scale Economies, Product Differentiation, and the Pattern of Trade” (1980), “Intraindustry Specialization and the Gains from Trade” (1981), “New Theories of Trade Among Industrial Countries” (1983), “Trade in Differentiated Products and the Political Economy of Trade Liberalization” (1982), “Import Protection as Export Promotion: International Competition in the Presence of Oligopoly and Economies of Scale” (1984), and "Increasing Returns and the Theory of International Trade" (1988) are certainly enough of a grand slam to justify a Nobel Prize for Paul Krugman.

Nobody disputes that.

Which is why Warsh turns to disputing the value of the literature:

Most significantly, in giving the prize to Krugman in 2008, the Swedish Academy vaulted the work on international trade over developments in several others fields that, in any coherent account, was done earlier: in the economics of organizations, the organization of industries, measurement economics, public finance, auction theory, market design, environmental economics and the significance of entrepreneurs to economic growth, to mention only some of the areas that have seen significant gains in recent decades...

To which one can only say: "Huh? Did Paul Krugman run over David Warsh's dog?"

But wait! There's more! David Warsh also writes:

Economic Principals » Blog Archive » Get a Grip on It: The Nobel Prize is among the world’s most successful brands. Since 1901, the program has enabled Scandinavians to have a resonant voice in world affairs despite their relative isolation in northern latitudes. They’ve done it by taking great pains to be convincing. The science prizes created a master narrative for one of the great stories of the age. The prizes for literature and peace, while more controversial, carry considerable cultural and moral weight. The problem with giving this year’s Nobel Peace Prize to President Barack Obama is obvious, at least when viewed from the perspective of American politics. So far he’s done little more than get elected...

David seems not to understand that, from the Scandinavian point of view, that is not a problem at all. By getting elected to replace George W. Bush Barack Hussein Obama has, Scandinavians think, done more to advance the cause of world peace than anybody else.

I find it sobering that the Scandinavians think that. I find it even more sobering to think that they have reasons to think that.

The award of the Peace Prize to Barack Hussein Obama is a message from the Scandinavians to all of us Americans--including David Warsh. I think he would be well-advised to listen, rather than covering his ears with his hands and saying: "na-na-na-I-can't-hear-you!"

John Taylor:

Economics One: To Prevent Bubbles, Don’t Create Them: Even putting aside the problems of identifing asset bubbles, pointed out by Donald Luskin, or the danger of creating collateral damage by doing so, adding asset prices to the equation would not address the real problem. Saying that adding asset prices to the central bank’s rule would prevent bubbles is like saying that requiring hikers in the forest to carry cell phones to call the fire department will prevent the damage from forest fires they start...

Would somebody please tell John Taylor that citing Donald Luskin as an expert an anything--let alone the difficulty of reading the current macroeconomic and financial situation--makes you a figure of fun and mockery?

I mean, words fail. Anyone who writes in September 2008 that "we're on the brink not of recession, but of accelerating prosperity..."; that "today's mortgage difficulties are probably a side effect of the otherwise happy fact that, over the past several years, millions of Americans of modest means have come to own their own homes for the first time..."; that "[t]here have been 11 recessions since the Great Depression, and we're nowhere close to being in the 12th one now..."; and that "anyone who says we're in a recession, or heading into one--especially the worst one since the Great Depression--is making up his own private definition of "recession," and probably for his own political purposes..."...

Donald Luskin, September 14, 2008, in (why am I not surprised?) the Washington Post:

Stupidest Man Alive (Washington Post Death Spiral Watch): Quit Doling Out That Bad-Economy Line: By Donald Luskin. Sunday, September 14, 2008; B01: [T]he relentless drumbeat of pessimism in the media and on the campaign trail. In the past two months, this newspaper alone has written no fewer than nine times, in news stories, columns and op-eds, that key elements of the economy are the worst they've been "since the Great Depression."... Overall, the pessimists are up against an insurmountable reality: In the last reported quarter, the U.S. economy grew at an annual rate of 3.3 percent, adjusted for inflation. That's virtually the same as the 3.4 percent average growth rate since -- yes -- the Great Depression.

Why, then, does the public appear to agree with the media?... Politics. Patient zero in this epidemic is the Democratic candidate for president.... Barack Obama... during a campaign speech... said that the "percentage of homes in foreclosure and late mortgage payments is the highest since the Great Depression." At best, this statement is a good guess. To be really true, it would have to be heavily qualified with words such as "maybe" or "probably." According to economist David C. Wheelock of the Federal Reserve Bank of St. Louis, who has studied the history of mortgage markets for the Fed, "there are no consistent data on foreclosure or delinquency going all the way back to the Depression."... Moreover, MBA data show that today's foreclosures are concentrated in that small fraction of U.S. homes financed by subprime mortgages. Such homes make up only 12 percent of all mortgages, yet account for 52 percent of foreclosures. This suggests that today's mortgage difficulties are probably a side effect of the otherwise happy fact that, over the past several years, millions of Americans of modest means have come to own their own homes for the first time....

Full disclosure: I'm an adviser to John McCain's campaign.... At a campaign news conference in July, my fellow adviser Steve Forbes warned that Obama was seeking "the biggest tax increase since Herbert Hoover and the Great Depression." Factual? Almost certainly not. But at least Forbes wasn't dissing the economy -- he was dissing Obama....

So much for Obama's hyperbole about our terrible economy. But what about the media's? A housing "slump," a housing "crisis"? A "severe" price decline? According to the latest report from the National Association of Realtors, the median price of an existing home is up 8.5 percent from the low of last February.... So why keep proclaiming a "crisis" after it's over? "Turmoil" in the debt markets? Sure, but we've seen plenty worse.... Some economic indicators -- export growth and non-defense capital goods orders such as industrial machinery, for example -- are running at levels associated with brisk expansion.... There have been 11 recessions since the Great Depression. And we're nowhere close to being in the 12th one now. This isn't just a matter of opinion. Words -- even words as seemingly subjective as "recession" -- have meaning.... [A]nyone who says we're in a recession, or heading into one -- especially the worst one since the Great Depression -- is making up his own private definition of "recession." And probably for his own political purposes.

McCain campaign adviser and former U.S. senator Phil Gramm was right in July when he said that our current state "is a mental recession." Maybe he was out of line when he added that the United States has become "a nation of whiners." But when it comes to the economy, we have surely become a nation of exaggerators. Yet Gramm was pilloried for his remarks.... What does it say about our nation that it has become political suicide to state the good news that our economy is not in recession?...

[An] iron law of economics and markets: The sentiment of the majority is always wrong at key turning points. And the majority is plenty pessimistic right now. That suggests that we're on the brink not of recession, but of accelerating prosperity.

The first of many U.C. Berkeley Oliver Williamson Nobel Prize receptions... ---- Posted via web from delong's posterous ---- Justin Fox: >Elinor Ostrom and Oliver Williamson with the Economics Nobel: In a new peak of econogeekiness for me, I actually watched the webcast of the announcement of the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel (a.k.a. the economics Nobel, or the fake Nobel, as detractors of the field put it). So I heard it announced in Swedish that Elinor Ostrom of Indiana University and Oliver Williamson of UC Berkeley would share the prize. >Ostrom studies commons, Williamson corporations. So their link is that they "both analyze economic transactions outside markets." I knew about Williamson, and even own one of his books (Markets and Hierarchies). But Ostrom is new to me. She has a better-tended Wikipedia page than Williamson, though—hers was updated with the prize news within seconds of the announcement; his took a few minutes.... I can report that this means Williamson now gets the most coveted possession in Berkeley: his own free campus parking spot... Paul Krugman: >An institutional Economics Prize: Congratulations to Elinor Ostrom and Oliver Williamson. What a day for them! >The way to think about this prize is that it’s an award for institutional economics, or maybe more specifically New Institutional Economics. Neoclassical economics basically assumes that the units of economic decision-making are a given, and focuses on how they interact in markets. It’s not much good at explaining the creation of these units — at explaining, in particular, why some activities are carried out by large corporations, while others aren’t. That’s obviously an interesting question, and in many cases an important one. For example, in my own home field of international trade, the basic models don’t assign any particular role to multinational corporations; how do we get them into the story, and what difference do they make? >There was an old tradition of economics that focused on the origins and nature of economic institutions. This tradition was very influential before World War II. But it proved not at all helpful during the Great Depression. My caricature version is that when the Depression hit, institutional economics, asked for advice about what to do, replied that well, it’s all very complicated, and has deep historical roots, and … Meanwhile, Keynesian economists, using very simple mathematical models, basically said “Push this button — we need more G”. And this had a somewhat perverse effect. The rise of Keynesian economics also meant the rise of the equations guys (Samuelson in particular), and in the end the equations crowded out institutional economics even as Keynes fell into disfavor. But the questions didn’t go away. And institutional economics has been making a quiet comeback for the past several decades. >Oliver Williamson’s work underlies a tremendous amount of modern economic thinking; I know it because of the attempts to model multinational corporations, almost all of which rely to some degree on his ideas. I wasn’t familiar with Ostrom’s work, but even a quick scan shows why she shared the prize: if the goal is to understand the creation of economic institutions, it’s crucial to be aware that there is more variety in institutions, a wider range of strategies that work, than simply the binary divide between individuals and firms. >The prize is also, of course, a happy reminder that most of the profession is not caught up in the macro wars! >Add: Don’t tell Senator Coburn, but the NSF Political Science program has supported a lot of Elinor Ostrom’s research.

Ezra Klein:

Ezra Klein: The Insurance Industry's Deceptive Report: In the hallowed tradition of the tobacco and energy industries, the health insurance industry has commissioned a report (pdf) projecting doom and despair for those who seek to reform its business practices. The report was farmed out to the consultancy PricewaterhouseCoopers, which has something of a history with this sort of thing: In the early-'90s, the tobacco industry commissioned PWC to estimate the economic devastation that would result from a tax on tobacco. The report was later analyzed by the Arthur Andersen Economic Consulting group, which concluded that "the cumulative effect of PW’s methods... is to produce patently unreliable results." It's perhaps no surprise that the patently unreliable results were all in the tobacco industry's favor. He who pays the piper names the tune, and all that.

All that makes it a bit hard to respond to this analysis. Seriously engaging with its methodology probably gives it more credit than it deserves, making this seem like an argument between two opposing sides as opposed to a predictable industry hit job. But totally ignoring its claims means some of them might live unchallenged. So rather than a full tour through the "analysis," here are a couple of its more representative moments. A footnote -- how come the good stuff is always in the footnotes? -- on page E-2 of the report sort of gives away the game. It reads: "Impact assumes payment of tax on high- value plans, full cost-shifting of cuts to public programs, and full passthrough of new industry taxes." That's written to obscure, but what it means is that the report assumes no behavioral changes in response to new policies.... Economists think that the tax on high-cost health-care plans will lead employers and consumers to demand cheaper plans that do more to control costs. In fact, PWC expects that, too. They just don't build it into their estimate. On Page 6, they say, "Although we expect employers to respond to the tax by restructuring their benefits to avoid it, we demonstrate the impact assuming it is employed." That's a bit like saying although I expect to eat doughnuts this morning, I will instruct my scale to act as if I had abstained.

Or take the assumption of "full cost-shifting of cuts to public programs." What that means, essentially, is that health-care spending is considered a constant, and every dollar that a public program cuts from its payments to hospitals is a dollar the private health-care industry has to add to its reimbursements to hospitals. Have you ever heard of that before, in any industry? If Blockbuster decides to cut costs to consumers by negotiating lower payments to movie studios, does Netflix send out a sorrowful e-mail explaining that it will have to increase its membership fee because it now needs to make higher payments to movie studios?...

[T]he PWC's report doesn't offer much in the way of trustworthy policy analysis, it is an interesting looking at the changing politics of the issue. In short, the insurance industry is getting scared...

You know, Ceci Connolly of the Washington Post could actually try to do her job if she wanted to.

Today Ceci Connolly of the Washington Post carries a lot of water for the lobbyists. What she writes:

Insurance Group Says Health Bill Will Mean Higher Premiums: After months of collaboration on President Obama's attempt to overhaul the nation's health-care system, the insurance industry plans to strike out against the effort on Monday with a report warning that the typical family premium in 2019 could cost $4,000 more than projected.

The critique, coming one day before a critical Senate committee vote on the legislation, sparked a sharp response from the Obama administration. It also signaled an end to the fragile detente between two central players in this year's health-care reform drama.

Industry officials said they intend to circulate the report prepared by PricewaterhouseCoopers on Capitol Hill and promote it in new advertisements. That could complicate Democratic hopes for action on the legislation this week.

Administration officials, who spent much of the spring and summer wooing the insurers, questioned the timing and authorship of the report, which was paid for by America's Health Insurance Plans (AHIP), an industry trade group...

A correspondent emails me what Ceci Connolly does not write:

In the early 1990s, Price Waterhouse did similar handiwork on behalf of Big Tobacco, serving up allegedly hard data to bolster arguments that a new excise tax on tobacco (a proposed mechanism to fund Clintoncare) would destroy hundreds of thousands of good American jobs. Dire predictions. But a subsequent review of Price Waterhouse’s methods by an independent team at Arthur Andersen revealed that Price Waterhouse’s “grossly exaggerated” and “one-sided analyses” were so “flawed” as to produce “patently unreliable results.”

http://legacy.library.ucsf.edu/tid/qat76d00

Some quotes: “The PW Report relied on methods and assumptions that create false and misleading results.” “There are serious methodological problems and errors of omission (one-sided analyses likely to lead to misinterpretation) in... the PW Report.” “The PW Report... attributes 161,601 mining and construction jobs to the tobacco industry. This is approximately equal to the entire employment of the coal mining industry.” “These and other serious flaws in the Price Waterhouse Report and the Tobacco Institute Estimates build upon one-another in a cumulative fashion to present grossly exaggerated and misleading estimates.” “The cumulative effect of PW’s methods... is to produce patently unreliable results."

Jon Gruber of MIT's first reaction to AHIP/PWC is: "highly implausible."

Why oh why can't we have a better press corps? Shut the Washington Post down by 2012

Winners of the 2009 Nobel Prize in Economics...

• Glenn Fleishman: Cloud Data Blown Away for Sidekick Users
• Michael Scherer: Calling 'Em Out: The White House Takes on the Press
  There was never a single moment when White House staff decided the major media outlets were falling down on the job. There were instead several such moments. For press secretary Robert Gibbs, the realization came in early September, when the New York Times ran a front-page story about the bubbling parental outrage over President Obama's plan to address schoolchildren.... For deputy communications director Dan Pfeiffer, the more hyperbolic attacks on health-care reform this summer, which were often covered as a "controversy," flipped an internal switch. "When you are having a debate about whether or not you want to kill people's grandmother," he explains, "the normal rules of engagement don't apply." And for his boss, Anita Dunn, the aha moment came when the Washington Post ran a second op-ed from a Republican politician decrying the "32" alleged czars...
• Bob Somerby: Edsall and Matthews help us see how a decade has been disappeared
• Dean Baker
• Glenn Greenwald: On the government's owners
  The most revealing political quote of the last year came, in my view, from the second-highest ranking Democratic Senator, Dick Durbin, who told a local radio station in April:  "And the banks -- hard to believe in a time when we're facing a banking crisis that many of the banks created -- are still the most powerful lobby on Capitol Hill. And they frankly own the place."
• Steve Benen: More Non-Crazy Republicans on Health Care
  Former Sen. Chuck Hagel (R-Neb.) implicitly endorsed Democratic efforts. "Right now in this country we have the best opportunity we've had in recent history to begin to create real health care reform that will expand coverage for those who don't have it and lower costs for those who do," the conservative Nebraskan said. He added that policymakers should "put aside their narrow partisan differences" on health care reform, and that "access to affordable quality health care for all Americans should be our nation's goal." That Hagel issued his statement through the White House made it clear that the former Republican senator is standing with the president on the issue. He joins a growing list of non-Democrats backing reform.
• Peter Dorman: Really Bad Journalism About Europe
  Nelson D. Schwartz and Matthew Saltmarsh really need to go work in some industry other than journalism...

Via Atrios, via Dan Gillmore. Weston Kosova writes:

Techtonic Shifts : Rupert Murdoch Says Google Is Stealing His Content. So Why Doesn't He Stop Them?: The executives who run big, ailing news organizations—in particular Tom Curley of AP and News Corp.'s Rupert Murdoch—complain every chance they get that search engines—in particular Google—are stealing from them, because Google links to their stories but doesn't pay the AP or News Corp. to do so. The way the news bosses see it,  that is theft, plain and simple. They say Google is making tons of money by shamelessly lifting their content, and it's driving newspapers out of business. At a meeting of media executives going on this week in Beijing, Murdoch and Curley gave impassioned speeches, saying they're mad as hell and they aren't going to take it anymore. They warn that aggregators like Google had better start paying up, or else....

Curley and Murdoch's macho outrage is calculated to be quotable, but it is fake. Here's why: go to Google News, or type a newsy topic like "Obama wins Nobel" into Google's search box. What do you get? Headlines and very brief teasers linking to news stories from news sites. If you click on them, you are taken to that news site, where you can read the story, which is surrounded by that site's ads. What, exactly, did Google steal in this scenario? If you don't click on the link, you don't see the story. If you do click on the link, you see the story on the originator's Web site. Instead of stealing, I would call this something else: a free service that drives lots of readers to news Web sites that wouldn't get nearly as much traffic, if any at all, if Google didn't link to their sites for free. That may not be as pithy as crying "thief!" But it has the advantage of being true.

Murdoch and Curley know this. How do we know they know? Because if they really thought Google was stealing from them, and if they really wanted Google to stop driving all those readers to their Web sites at no charge, they would simply stop Google from linking to their news stories.... All they have to do is go to the Web site's robot.txt file and type this:

User-agent: Googlebot

Disallow: /

Poof, the site becomes invisible to Google. Their stories will no longer show up in Google searches. It will be as if they don't exist....

Perhaps... Curley and Murdoch really didn't know that they had the power all along to rid themselves of the Google scourge any time they wanted to. If that's so, they know now. So go right ahead, gentlemen. Stop the thievery. Pull the plug on Google right now. I double-dog dare you.

Why oh why can't we have a better press corps?

James Fallows on why all the works of Fred Hiatt and his colleagues in Washington Post editorial are bad fishwrap:

Don't these people have The Google?: Would it have been so hard to mention the complicating fact that Nobel prizes are only for still-living people? And that this is a basic element of discussion when, for example, the literature prize rolls around each year?... The FAQ page at NobelPrize.org (yes! there is such a site) makes this clear... Maybe they should have exceptions for deaths within the calendar year. Etc. But these are the widely-understood rules. Who is on the copy desk these days? Or writing editorial like this?

As I have said, grave moral fault attaches to all who enable this by paying money to the Washington Post company for any purpose. And Princeton Review does a much better job of running test preparation courses than Stanley Kaplan does.

Even worse: Fred Hiatt this morning:

Re-Stimulating. Unemployment is bad. More fiscal debt might be worse: AT 9.8 PERCENT, the unemployment rate is higher than it has been since it hit 10.1 percent in June 1983. Since the recession began 21 months ago, the economy has shed nearly 7 million jobs. Whole industries -- cars, housing, finance -- have been devastated and may never recover fully. Nevertheless, White House economists reported in September that "employment is estimated to be between 600,000 and 1.1 million higher than it would otherwise have been" because of the Obama administration's stimulus plan and other government policies, especially the Fed's monetary expansion. While no one can prove or disprove that -- much less apportion credit between fiscal and monetary policy -- basic economics suggests that things might have been even worse if the government had done nothing...

It does not necessarily follow, however, that the economy needs more stimulus now. Government has managed to blunt the recession, but at a cost -- a higher national debt burden, which future Americans must pay off by working harder and saving more than they otherwise would have...

Ummm...

So far the stimulus spendout has been some $160 billion. The midpoint estimate by Christy Romer and company is that GDP is now 1% higher than it would have been otherwise. That higher level of production and employment than we would have seen otherwise is going to lead to the collection of an extra $80 billion in tax revenues. That means that the net effect of the $160 billion we have pushed out the door has been to raise the national debt by $80 billion. The Treasury can now borrow through its TIPS program for 20 years at an interest rate of 2% plus inflation. That means that taxes in the future have to be higher by $1.6 billion per year--by $5 per person per year.

Thus the stimulus package so far:

• Incur an extra forward-looking tax burden per person of 1.3 cents per day...
• Get an extra 800,000 people productively at work--and get all the stuff they make and do--this year...

That looks like a very good deal: buying an extra productive job for an American today at a cost of $2000 per year in higher taxes looking forward--particularly when you think that some of those extra jobs build up our productive capacity to make us richer in the future as well.

The stimulus arithmetic suggests we should be doing more of it. The benefit-cost ratio at current stimulus spending levels is very good, and there is no reason to think that Olympia Snowe was a proper judge last February of when the benefit-cost ratio turns down.

But nobody on Fred Hiatt's staff realized this. For nobody on Fred Hiatt's staff thinks that doing any arithmetic is part of their job description. Indeed, nobody on Fred Hiatt's staff is capable of doing any arithmetic at all.

They blather on:

The real question is whether the benefits of pumping even more government fuel into America's engine outweigh the risks. We see several reasons to doubt it. The first is the sheer immensity of stimulus policies already in place.... A second reason for skepticism is the intellectual poverty of some policy proposals.... [B]orrowing new money to move demand from the future to the present -- whether it's demand for houses, cars, or workers -- is a dubious proposition.

Let's set ourselves a national goal: close down the Washington Post down by July 2012.

• Thomas Mallory vs Albert Abossi: Trouble a Head
• Chris Ziegler: T-Mobile: we probably lost all your Sidekick data
  Well, this is shaping up to be one of the biggest disasters in the history of cloud computing, and certainly the largest blow to Danger and the Sidekick platform: T-Mobile's now reporting that personal data stored on Sidekicks has "almost certainly has been lost as a result of a server failure at Microsoft/Danger." They're still looking for a way to recover it, but they're not giving users a lot of hope -- meanwhile, servers are still on the fritz and customers are being advised not to let their devices power down because anything that's still on there will be lost the next time the device is turned on. Another communique is promised from T-Mobile on Monday to give everyone a status update on the recovery efforts, but at this point, it's not looking good at all. Update: Apparently T-Mobile has paused the sale of new Sidekicks, as all models are now listed as "temporarily out of stock" on the company's site. Additionally, a warning as been added to the post on T-Mobile's forum which re
• John Herman: Windows Mobile 6.5 Review: There's No Excuse For This
• Whiskey Fire: But Arlen Specter Is OUR Pathetic Figure of a Man!
  All true! Arlen Specter is a hack and a half, an opportunist whose most attractive quality is that his shamelessness tends to overshadow his pomposity. Never liked Arlen Specter, never will. We're with ya, Dan! Until this bit: "One doesn't need any more reason than this to back Pat Toomey, regardless of his political views. Character matters."The hell it does, for Senators. If we're going to have a Senate at all -- and I don't think we should, but that's beside the point -- it will necessarily be filled with pompous, shameless, opportunistic hacks-and-a-half. The best that can ever be hoped for out of Senators is that they can be properly browbeaten into producing tangible political results for constituents. This rarely happens, so when it does, as appears to be the case with Specter, hooray! He's a weasel, sure, and nobody's about to turn their back on him, but if a legit primary challenge and his need for union GOTV (which he probably needs a lot more than "union money") make him
• The madness of the monetary hawks (wonkish) - Paul Krugman Blog - NYTimes.com
• Barack Obama o Bipartisan Health Care Reform
  The president noted, for example, that as the reform proposal advances, it "includes the best ideas from Republicans and Democrats, and people across the political spectrum." The plan has generated broad consensus among "everyone from doctors and nurses to hospitals and drug manufacturers." And then, of course, there are the Republicans: "And earlier this week, Governor Arnold Schwarzenegger of California and New York City Mayor Michael Bloomberg came out in support of reform, joining two former Republican Senate Majority Leaders: Bob Dole and Dr. Bill Frist, himself a cardiac surgeon. Dr. Louis Sullivan, Secretary of Health and Human Services under President George H.W. Bush, supports reform. As does Republican Tommy Thompson, a former Wisconsin governor and Secretary of Health and Human Services under President George W. Bush. These distinguished leaders understand that health insurance reform isn't a Democratic issue or a Republican issue, but an American issue that demands a solut
• Florence Waters: Ten artists in praise of the Polaroid

20091008 115 climb out.pdf

.m4a audio files:

Download 10_8_09 12_41 PM

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The leaves are turning here in Arkham, Massachusetts, as we welcome to his padded cell our new Dread Cthulhu Professor of Health Policy, Thomas Levenson. Watch his mad ululations beneath the uncaring stars:

It’s not that McArdle can’t read... it’s that she can’t (won’t) think: part four (and last, thank FSM). « The Inverse Square Blog: OK, by now it’s clear that this is overkill.  One post by Megan McArdle does not need this kind of rant; it’s like using a howitzer to plink a tin can off a fence.  [For grotesque demonstration of my logorrhea problem, check out parts one, two, and three of this series]

But in some sense, all I’m doing is channelling my inner John Foster Dulles:  McArdle, and her ilk are not going away.  Sadly, no amount of day-by-day debunking seems able to evoke the kind of respect for their claimed craft that would produce even a smidgeon more care and honor in their ongoing attempt to write into reality their unexamined assumptions.  So, after Dulles, consider this a kind of blogospheric massive retaliation, an attempt to shock and awe the recalcitrant into the virtues of intellectual honesty.

Which brings us to one more thing that McArdle did not do in her attempt to recruit what she claims as the gold-standard of authority, the academic literature, to bolster her assertion that any attempt to control drug expenditures in the US medical system is tantamount to a pact to kill nice old people...

Ph'nglui mglw'nafh Levenson R'lyeh wgah'nagl fhtagn!!

Now we are all going to go watch the football game against Innsmouth Tech: Go 'Pods!

Helps reduce those global imbalances, y'know. Jus' sayin:

UPDATE:China Yuan Ends Up; FX Interventions In Asia Cap Gains: China's yuan ended slightly higher against the dollar Friday, the first day of trading after the National Day holiday, taking its cue from the U.S. unit's broad weakness on global markets in the past week. However, dollar purchases by Asian central banks as they sought to limit strength in their own currencies curbed the yuan's gains....

During China's holiday, the dollar fell sharply against other currencies due to an expected interest rate hike by Australia's central bank, rising gold prices and better-than-expected economic data globally.... The dollar recovered some of its recent losses against other currencies in Asia on Friday after Federal Reserve Chairman Ben Bernanke reiterated the U.S. will need to raise interest rates once the recovery takes hold.... "China's central bank continued to rein in the yuan's rise against the dollar through the central parity rate, so traders didn't sell the dollar aggressively during the session," said a Shanghai-based trader at a foreign bank. The People's Bank of China set the dollar-yuan central parity rate at 6.8270 Friday, down from 6.8290 on Sept. 30. "The dollar's decline against the yuan was also capped by Asian central banks' foreign-exchange intervention to prop up the U.S. unit," said another Shanghai-based trader at a European bank....

Offshore, one-year dollar-yuan nondeliverable forwards were at 6.6791/6.6831, down from 6.6970/6.7020 on Sept. 30.

Rose Yu contributed to this article

• Barry Ritholtz: CATO: Sub-Prime, Rates, Leverage Did NOT Cause Crisis
  You gotta love the hard core ideologues: Its almost cute they way they stick to their theories, facts be damned. Cute, except for the amount of damage they caused. (Hmmm, this Kool aid is delicious!) Case in point: The latest work of fantasy from the CATO Institute. They are now insisting that a stricter fed policy wouldn’t have helped, nor regulation, nor less leverage: “Many commentators have argued that if the Federal Reserve had followed a stricter monetary policy earlier this decade when the housing bubble was forming, and if Congress had not deregulated banking but had imposed tighter financial standards, the housing boom and bust—and the subsequent financial crisis and recession—would have been averted. In this paper, we investigate those claims and dispute them . . .” Their name may be CATO — but that’s only because OUR UNIVERSE IS NOTHING BUT COGNITIVE DISSONANCE UNFETTERED BY REALITY wont fit on their letterhead!
• Gillian Tett: Dangers of silo thinking
• Igor Volsky: GOP ignores CBO score of health care reform
• Jill Lawrence: Another Republican for Reform: Bush Medicare Chief Likes Baucus Bill
  Add another name to the parade of high-profile Republicans who have endorsed efforts by President Obama and congressional Democrats to achieve health reform. The latest is Thomas Scully, who ran the Centers for Medicare and Medicaid Services (CMS) during former president George W. Bush's first term. "Health reform in general is way overdue and we ought to do it," Scully told me in an interview. He supports the approach taken by the Senate Finance Committee, chaired by Montana Democrat Max Baucus. If the bill produced by that committee became law, Scully said, "the world would be a better place."
• Jamison Foser: I swear I am not making this up
  You know what'll ruin your day like nothing else? Winning the Nobel Peace Prize. Time magazine explains, in two separate pieces: "Why Winning the Nobel Peace Prize Could Hurt Obama." "Obama's Nobel: The Last Thing He Needs." This is so true.  Sure, some people may think finding out you have cancer is the last thing you need.  Or that your kid has cancer.  But not me.  I spend every day of my life grateful that I'm never going to win a Nobel Peace Prize.  'Cause that would really be terrible.  It's literally the last thing anyone needs.  You know, what with it being the most prestigious award in the entire world and all.  Nobody wants that.
• Daniel Davies: How Freaked Is Freakanomics?
  Well, I promised myself I'd finish this before the sequel appeared in the shops, and the conclusion has been made, shall we say, somewhat easier by the fact that the burden of my conclusion - that there is something terribly, horribly wrong with the state of modern economics - has become somewhat of an open door to push against. I swear that my notes for this review (begun in 2003!) contain the draft passage: "When future generations ask the economics profession 'What were you doing while the great bubble built up ahead of the Second Great Depression?', and we have to reply 'Lots and lots of quirky little working papers about sumo wrestling and speed-dating', it is going to be really, really, fucking embarrassing" And we did, and it was; thank God nobody told the truth to HM The Queen, or the high brows of the economics profession might be decorating a series of pikestaffs outside Traitors' Gate...
• Don Kohn: Monetary Policy Research and the Financial Crisis
• Paul Krugman: Beware the dollar hawks
• Mike the Mad Biologist: How Krugman Is Wrong About "Centrist" Democrats
• Amy Dockser Marcus: Cancer-Causing Virus Linked to Chronic Fatigue
• Fafblog!: The Iranian Nuclear Threat
  Q: Is Iran a threat? A: Oh yes. Even as we speak Iran is potentially starting the beginnings of a very possibly quite almost-real hypothetically nuclear weapons program! Q: Oh no! How many nuclear weapons does Iran already have? A: Counting warheads, ICBMs, mid- and long-range missiles, ABMs, tactical nukes, bunker-busters and submarine-based weaponry, the full nuclear arsenal of Iran at this moment is very rapidly just beginning to quite possibly approach a number just short of one! Q: That makes them almost as deadly as the rogue nation of Whoville or the Islamic Republic of Candyland! A: And they could be just months away from an actual bomb! Q: But they've been just months away from a bomb for years now. A: I know! Which means in terror years, Iran already has a bomb... in your child's precious brain! Q: But that's where she keeps her sugarplum dreams! A: That's why it's up to us to already have being stopped them! Q: What will Iran do with nuclear weapons? A: Terrible things. For
• APOD: 2006 November 19 - The Car, the Hole, and the Peekskill Meteorite
  Explanation: The Peekskill meteor of 1992 was captured on 16 independent videos and then struck a car. Documented as brighter than the full Moon, the spectacular fireball crossed parts of several US states during its 40 seconds of glory before landing in Peekskill, New York. The resulting meteorite, pictured here, is composed of dense rock and has the size and mass of an extremely heavy bowling ball. If you are lucky enough to find a meteorite just after impact, do not pick it up -- parts of it are likely to be either very hot or very cold. In this weekend's Leonid meteor shower, few meteors, if any, are expected to hit the ground.
• Mark Kleiman: Why do the wingnuts so hate America?
  The President of the United States has won the Nobel Peace Prize.  Naturally, the Taliban is outraged. And of course all American patriots are proud.  Oh, wait … Maybe not. I hope that Dan Riehl, David Bernstein, and Mullah Omar will be very happy together. But couldn’t they be happy together somewhere far away? Update Hamas and the Pakistani extremist party Jamaat-i-Islami agree with the Taliban, Riehl, and Bernstein. Nelson Mandela, Desmond Tutu, Mikhail Gorbachev, Mohamed ElBaredei, Morgan Tsvangirai agree with the Nobel committee. Second update Erick Erickson joins the Taliban’s side of the argument with a little bit of racist sneering about “affirmative action” thrown in. Michael Steele, naturally is dismayed at the honor paid to our country.  Maybe this is good electoral strategy, but I doubt it.
• The Week Magazine - News reviews and opinion, arts, entertainment & political cartoons

Twitter:

Twitter / daveweigel: BREAKING: Obama named God Emperor of Dune. Sandworm transformation in rose garden 8:30 am tomorrow...

Dirk Krueger and Hanno Lustig destroy another literature I had thought was promising...

In retrospect, I suppose it should have been obvious that uninsurable idiosyncratic risk that doesn't widen the distribution of consumption in downturns cannot help account for a large equity premium. To account for an equity return premium, you do need to make those states of the world in which stocks lose money extremely unpleasant for the marginal agent--you have to produce extremely high marginal utilities of consumption in those states of the world. And, given the correlations, you have to do so without moving aggregate consumption spending very much.

Idiosyncratic risk uncorrelated with systematic risk simply doesn't, to first order, move marginal utility away from average consumption. So it simply cannot do the job.

Hanno Lustig and Dirk Krueger (2009), "When is Market Incompleteness Irrelevant for the Price of Aggregate Risk?"

In a model with a large number of agents who have constant relative risk aversion (CRRA) preferences, market incompleteness has no effect on the premium for aggregate risk if the distribution of idiosyncratic risk is independent of aggregate shocks and aggregate consumption growth is distributed independently over time. In the equilibrium, which features trade and binding solvency constraints, as opposed to Constantinides and Duffie (1996), households only use the stock market to smooth consumption; there is no trade in bond markets. Furthermore, we show that the cross-sectional wealth and consumption distributions are not affected by aggregate shocks. These results hold regardless of the persistence of idiosyncratic shocks. A weaker irrelevance result survives when we allow for predictability in aggregate consumption growth.

As Tbogg says: we are long past low-hanging fruit and have moved on to rotting fruit fermenting on the ground.

Grave moral fault attaches to anybody who pays money to or receives money from the Washington Post Company for any purpose or reason.

Shut it down. Shut it down immediately. There is no point to trying to reform it. There is no point to continuing it.

Matt Corley:

Think Progress: Hiatt Dismisses Criticism Of His Publication Of Misleading ‘Czars’ Op-Eds: ‘I Did Question It’: In July, the Washington Post published an op-ed by Rep. Eric Cantor (R-VA), in which the House Minority Whip claimed, “At last count, there were at least 32 active czars that we knew of, meaning the current administration has more czars than Imperial Russia.” “Vesting such broad authority in the hands of people not subjected to Senate confirmation and congressional oversight poses a grave threat to our system of checks and balances,” wrote Cantor.

At the time, ThinkProgress pointed out that several of the “czars” named by Cantor were in fact confirmed by the Senate. Noting that White House Communications Director Anita Dunn recently criticized the Post for running the op-ed without even questioning Cantor’s facts, The Washington Post’s Howard Kurtz asked Editorial Page Editor Fred Hiatt to explain how Cantor’s column got published:

Post Editorial Page Editor Fred Hiatt tells me: “Actually, I did question it. The senator’s staff responded that the 32 number was based on research they had done at the Commerce Committee, and they backed it up with various media reports (they cited a Politico report of 29, but said there were three unfilled), some of which we also found.

“We also ran a piece shortly after this one, by David Rivkin, challenging the criticism and saying there is nothing unconstitutional about having ‘czars.’ “

Considering that Cantor is in the House, not the Senate, it appears that Hiatt is referring to the other factually-challenged “czar” column by a GOP member of Congress. Even though people publicly pointed to inaccuracies in Cantor’s article, the Post nevertheless allowed Sen. Kay Bailey Hutchison (R-TX) to publish a piece in September making almost the exact same claims. “A few of them have formal titles, but most are simply known as ‘czars,’” wrote Hutchison, which is not true.

In her comments to Time, Dunn specifically griped about the Post running the claim that all the so-called “czars” bypassed Senate confirmation, despite the fact that many of them did go through that process or hold positions statutorily created by Congress. In fact, the Politico list that Hiatt cites in his defense makes this issue clear.

This isn’t the first time Hiatt has stood by columns that he’s published despite their serious factual flaws. When Post columnist George Will included multiple errors about climate change in a column, Hiatt defended Will, saying that “in general we do careful fact checking.”

Why oh why can't we have a better press corps?

Menzie Chinn:

Buce writes:

Underbelly: Feldstein on Health Care: Martin Feldstein offers the best possible two-paragraph summary of the health care problem:

The American health-care system suffers from three serious problems: Health-care costs are rising much faster than our incomes. More than 15 percent of the population has neither private nor public insurance. And the high cost of health are can lead to personal bankruptcy, even for families that do have health insurance.

These faults persist despite annual federal government spending of more than $700 billion for Medicare and Medicaid as well as a federal tax subsidy of more than $220 billion for the purchase of employer-provided private health insurance.

Feldstein writes:

Martin Feldstein - A Better Way to Health Reform - washingtonpost.com: Let's scrap the $220 billion annual health insurance tax subsidy, which is often used to buy the wrong kind of insurance, and use those budget dollars to provide insurance that protects American families from health costs that exceed 15 percent of their income.

Specifically, the government would give each individual or family a voucher that would permit taxpayers to buy a policy from a private insurer that would pay all allowable health costs in excess of 15 percent of the family's income. A typical American family with income of $50,000 would be eligible for a voucher worth about $3,500, the actuarial cost of a policy that would pay all of that family's health bills in excess of $7,500 a year.

The family could give this $3,500 voucher to any insurance company or health maintenance organization, including the provider of the individual's current employer-based insurance plan. Some families would choose the simple option of paying out of pocket for the care up to that 15 percent threshold. Others would want to reduce the maximum potential out-of-pocket cost to less than 15 percent of income and would pay a premium to the insurance company to expand their coverage. Some families might want to use the voucher to pay for membership in a health maintenance organization. Each option would provide a discipline on demand that would help to limit the rise in health-care costs...

There are two problems with Marty's plan. First--this "15% of family income" business: the voucher buys a policy which is a lot more costly to the insurance company if you are poor than if you are rich, and that creates yet another adverse selection weak point in the system.

Second, people are really lousy consumers of medical services when they have to spend their own nickel. Why, just this morning Anthem Blue Cross waived the copays on all flu shots. That's not something you would want to do if people were anything more than jumped-up monkeys with brains designed to figure out whether the fruit is ripe..

1) The WSJ editorial page is wrong about everything. 2) If you think the WSJ editorial page is right about something, see rule #1.

Paul Krugman:

Modified goldbugism at the WSJ: So I was peacefully drinking my coffee this morning, and was accosted by someone waving the latest WSJ editorial on the dollar in my face, demanding my reaction. Um, this is not cool. Also, with apologies to Brad DeLong, when reading WSJ editorials you need to bear two things in mind:

1. The WSJ editorial page is wrong about everything.
2. If you think the WSJ editorial page is right about something, see rule #1.

After all, here’s what you would have believed if you listened to that page over the years: Clinton’s tax hike will destroy the economy, you really should check out those people suggesting that Clinton was a drug smuggler, Dow 36000, the Bush tax cuts will bring surging prosperity, Saddam is backing Al Qaeda and has WMD, there isn’t any housing bubble, US households have a high savings rate if you measure it right. I’m sure I missed another couple of dozen high points.

Today’s editorial was in the grand tradition. A few months ago falling stock prices showed Obama’s failure — never mind, we meant the falling dollar. And just to provide extra spice, the editorial cited David Malpass as the wise expert on all this. But more specifically, you need to see the Journal’s fear of a weak dollar in terms of its long-term gold-bug position. The Journal has always maintained that changes in exchange rates play no useful role, that stable exchange rates — preferably enforced by some barbarous relic like the gold standard — are the essence of sound policy. I explained why this is all wrong a long time ago. But it’s especially important to understand the wrongness of this view right now. If there’s one overwhelming lesson from the Great Depression, it is that putting a higher priority on stabilizing your currency than on domestic recovery is utterly disastrous. Barry Eichengreen pointed out years ago that major economies went off gold in the following order: Japan, Germany, Britain, US, France.... The WSJ may not realize it, but it wants us to be France in the 1930s. Let’s not.

Barack Hussein Obama:

Good morning. Well, this is not how I expected to wake up this morning. After I received the news, Malia walked in and said, "Daddy, you won the Nobel Peace Prize, and it is Bo's birthday!" And then Sasha added, "Plus, we have a three-day weekend coming up." So it's good to have kids to keep things in perspective.

I am both surprised and deeply humbled by the decision of the Nobel Committee. Let me be clear: I do not view it as a recognition of my own accomplishments, but rather as an affirmation of American leadership on behalf of aspirations held by people in all nations.

To be honest, I do not feel that I deserve to be in the company of so many of the transformative figures who've been honored by this prize -- men and women who've inspired me and inspired the entire world through their courageous pursuit of peace.

But I also know that this prize reflects the kind of world that those men and women, and all Americans, want to build -- a world that gives life to the promise of our founding documents. And I know that throughout history, the Nobel Peace Prize has not just been used to honor specific achievement; it's also been used as a means to give momentum to a set of causes. And that is why I will accept this award as a call to action -- a call for all nations to confront the common challenges of the 21st century.

These challenges can't be met by any one leader or any one nation. And that's why my administration has worked to establish a new era of engagement in which all nations must take responsibility for the world we seek. We cannot tolerate a world in which nuclear weapons spread to more nations and in which the terror of a nuclear holocaust endangers more people. And that's why we've begun to take concrete steps to pursue a world without nuclear weapons, because all nations have the right to pursue peaceful nuclear power, but all nations have the responsibility to demonstrate their peaceful intentions.

• We cannot accept the growing threat posed by climate change, which could forever damage the world that we pass on to our children -- sowing conflict and famine; destroying coastlines and emptying cities. And that's why all nations must now accept their share of responsibility for transforming the way that we use energy.

• We can't allow the differences between peoples to define the way that we see one another, and that's why we must pursue a new beginning among people of different faiths and races and religions; one based upon mutual interest and mutual respect.

• And we must all do our part to resolve those conflicts that have caused so much pain and hardship over so many years, and that effort must include an unwavering commitment that finally realizes that the rights of all Israelis and Palestinians to live in peace and security in nations of their own.

• We can't accept a world in which more people are denied opportunity and dignity that all people yearn for -- the ability to get an education and make a decent living; the security that you won't have to live in fear of disease or violence without hope for the future.

And even as we strive to seek a world in which conflicts are resolved peacefully and prosperity is widely shared, we have to confront the world as we know it today. I am the Commander-in-Chief of a country that's responsible for ending a war and working in another theater to confront a ruthless adversary that directly threatens the American people and our allies. I'm also aware that we are dealing with the impact of a global economic crisis that has left millions of Americans looking for work. These are concerns that I confront every day on behalf of the American people.

Some of the work confronting us will not be completed during my presidency. Some, like the elimination of nuclear weapons, may not be completed in my lifetime. But I know these challenges can be met so long as it's recognized that they will not be met by one person or one nation alone. This award is not simply about the efforts of my administration -- it's about the courageous efforts of people around the world.

And that's why this award must be shared with everyone who strives for justice and dignity -- for the young woman who marches silently in the streets on behalf of her right to be heard even in the face of beatings and bullets; for the leader imprisoned in her own home because she refuses to abandon her commitment to democracy; for the soldier who sacrificed through tour after tour of duty on behalf of someone half a world away; and for all those men and women across the world who sacrifice their safety and their freedom and sometime their lives for the cause of peace.

That has always been the cause of America. That's why the world has always looked to America. And that's why I believe America will continue to lead.

Thank you very much.

In a world in which George Akerlof is not allowed to say "boo" about monetary policy because he is First Spouse of the Federal Reserve Bank of San Francisco, this is remarkable...

Free Exchange writes:

What are these Fed presidents up to?: CALCULATED RISK notes that Federal Reserve governors aren't exactly singing the same tune in public comments on the likely path of monetary policy. Nemo points out that the public disagreements have become remarkably common and overt—and, he says, pointed:

As a general rule, the guys (and gal) on the FRB do not even blow their noses in public without permission. They do not simply stand up and “speak their minds”. Had it started and ended with Warsh going off the reservation two weeks ago, then it might be an anomaly. But that was followed by Richard “speed and intensity” Fisher (speech), Charles “Great Inflation” Plosser (speech), Jeffrey “show stopper” Lacker, and Thomas “sooner rather than later” Hoenig (speech). On the flip side, we heard from William “extended period” Dudley (speech - try searching it for “not well founded”) and Daniel “overstated” Tarullo (speech).

Whew!

This appears to be a deliberate attempt to introduce uncertainty into the market about the future course of monetary policy. Why might they want to do that?

John Jansen has an explanation:

RBS Securities (the firm formerly known as Greenwich Capital) mentioned an interesting article by well respected research firm Wrightson in which Wrightson posits that some of the recent hawkish comments by Federal Reserve officials are a shot across the bow of leveraged speculators. Wrightson makes the salient point that if the trajectory of rates is unclear then leveraged positions are not such safe bets. That is I think a key and under appreciated point with the new world of Federal Reserve transparency regarding policy.

The last Federal Reserve tightening cycle was completely transparent and consisted of 17 consecutive 25 basis point rate hikes which took the funds rate target to 5.25 percent from 1 percent. But Mr Greenspan diminished the effect of the tightening and never thoroughly damped down speculative excess as he made it manifestly clear that he would not raise rates in anything other than discrete 25 basis point intervals. In so doing he allowed the junk which led to the current financial debacle to flourish.

There is an interesting similarity in this to an argument Larry Summers made several years ago, which was highlighted in the recent Ryan Lizza profile:

In 2007, Summers started looking at the looming economic crisis. Back in 2003, he had attended a Federal Reserve conference in Jackson Hole, Wyoming, in which economists were celebrating the fact that central bankers seemed to have mastered the use of monetary policy to tame inflation without causing the economy to slip into a recession, as had happened in the past. Summers warned that perhaps the victory over inflation meant only that the next recession would be caused by some new phenomenon...

In the fall of 2007, his Financial Times columns took on a more urgent tone, starting with a piece on November 25th, titled “Wake Up to the Dangers of a Deepening Crisis.” There had been at least six major financial crises that affected the United States over the past twenty years: the 1987 stock-market crash, the 1990 savings-and-loan crisis, the Mexican-peso crisis, the East Asian economic crisis, the failure of Long Term Capital Management, and the tech-bubble crash. Summers had a theory that tied them together: whereas for many decades most recessions were caused by the Federal Reserve’s attempts to curb inflation, the Fed’s recent mastery of keeping inflation in check had given rise to the financial crisis. Summers explained that, just as the success in curing infectious disease will allow some people to live longer only to die of cancer, the success in battling inflation will prolong an economic expansion only to lead to overconfidence and a financial crisis...

Perhaps the Fed is beginning to think that having control over the business cycle is more important than producing long expansions and frequent bubbles.

The things that have been useful in analyzing what has been going on in the past two years have been things written by Bernanke and Gertler. Otherwise--not so much: Tobin has been useful, Metzler has been useful, Kindleberger, Minsky, and Hicks have been useful. They, alas, are all dead.

So, winner, whoever you are, you are a good economist, but Beyonce is the greatest economist of all time!!!!

Justin Lahart:

Handicapping the 2009 Economics Nobel: Adherents of the efficient-markets hypothesis might say that University of Chicago Booth School of Business economist Eugene Fama has an excellent chance of winning the Nobel Prize in economics. Then again, recent events have thrown the idea that markets accurately reflect information available to investors — the efficient-markets hypothesis the Mr. Fama first proposed in the 1960s — into doubt.

Mr. Fama is once again the frontrunner for the Nobel — which is really “The Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel” — for British betting firm Ladbrokes, garnering two-to-one odds. That seems rich coming in the wake of a world-wide economic crisis that is being pinned, in part, on economists, policymakers and investors putting too much faith in markets. One suspects that the disconnect comes because Ladbrokes clientele includes a lot of traders — and Mr. Fama is the one economist whose work they know best.

(Of course, he could really win, which would represent the triumph of the rational-expectations model over this blog post).

Second in the Ladbrokes pool for the Bank of Sweden Prize in Dismal Sciences in Memory of Alfred Nobel is Stanford University’s Paul Romer, who’s most famous for his work on how technological change affects growth. He’s now championing the idea of “charter cities” — special administrative zones modeled after Hong Kong when it was under British rule — that he believes could foster economic development around the world.

In a three-way tie for third on Ladbrokes are Dartmouth’s Kenneth French, Harvard’s Robert Barro and University of Zurich’s Ernst Fehr, each with six-to-one odds. Mr. French is a frequent collaborator with Mr. Fama. Mr. Barro is a macroeconomist whose neoclassical leanings (prefaced on the idea that people and markets act rationally) may mean this isn’t his year. Mr. Fehr is a leading light in the emerging field of neuroeconomics, which studies how the brain responds to economic decisions.

A Harvard prediction pool, started in 1982, points to Jean Tirole of the Toulouse School of Economics as the most likely winner of the Bank of Sweden Prize for Invisible Handymen in Memory of Alfred Nobel this year. Mr. Tirole is a wide-ranging economist whose work spans from game theory to finance to industrial organization to behavioral economics.

Second in the Harvard pool is Stanford’s John Taylor, famous for the “Taylor rule,” which dictates where a central bank should set interest rates based on gross domestic product and the rate of inflation. Third is Paul Milgrom, also of Stanford, who’s best known for his work on auction theory. Harvard’s Martin Weitzman is next, followed by Mr. Romer.

Thomson Reuters, meantime, makes predictions on who will win the Bank of Sweden Prize in the Science of Holding Several Conflicting Opinions at Once in Memory of Alfred Nobel based on paper citations. Mr. Fehr, who’s written nine of the most cited economics papers in the past decade, leads that tally. Next is Berkeley’s Matthew Rabin, who’s made his mark in behavioral economics and finance. Just 45, Rabin would be young to earn the economics laureate. Yale’s William Nordhaus, best known for his work on environmental economics, follows.

Informal polling of economists yield several other possibilities. Among them: Princeton’s Christopher Sims, Chicago Booth’s Richard Thaler, Harvard’s Oliver Hart, UCSD’s Halbert White, New York University’s Thomas Sargent, Chicago’s Lars Hansen and MIT’s Peter Diamond.

• Isaiah 6: LOLCat Bible
  O hai! Isaiah iz here: this me book. Chiefcat Uzziah waz ded. Me seez teh Ceiling Cat. Big chair, hi-up. Ceiling cat haz klothz. Lotsa klothz! (An a train. Who knu?) An brnin wngz guyz. With fyer! Lotsa brnin wingz guyz! to wngz hId Iz! to wngz hId fete! 2 wngz: Flii, mnkEs, fliii!! An yelped: Mega-733t, mega-733t, mega-733t be ceiling cat, an he maded starz! Starz-boss ceiling cat! An smok! An more smok! An Rikter ScAL 9 San Andreas! An Rikter ScAL 9 San Andreas! Srsly! I sez: I iz pwnd! I iz totly pwnd! Srsly! Iz sad! I iz drty-mout un-733t cat. I livz wit drty-mout bad kittehs! I seez ceiling cat, he maded starz, starz-boss ceiling cat! I seez! I iz pwnd!! 1 Den a wngz guy bringed a fyer rock to me.7 He tuch it on mai mouf an sez "Hot fyer tuch ur lipz.. Yoo iz furgiben nao. An ceiling cat is liek "Me want senz a gai, who want go?!" [hint hint lol] an I sez: "mE here. Senz mE pl0x! An ceiling cat is liek: "I senz U. U 733t. U sez to kittehs: U kittehs herz and no herz, U kittehs...
• Felix Salmon: John Thain comes clea
  Financial News has a quote from John Thain, at “a speech this month: “To model correctly one tranche of one CDO took about three hours on one of the fastest computers in the United States. There is no chance that pretty much anybody understood what they were doing with these securities. Creating things that you don’t understand is really not a good idea no matter who owns it.”
• Michelle Cottle: No Exit
• Ryan Chittum: Nonsense at Newsweek on Overdrafts
  Steve Tuttle of Newsweek has one of the worst columns I’ve seen in a good long time, arguing “Why Banks Should Charge Hefty Overdraft Fees.” Really.
• Felix Salmon: Krugman on the end of trade
• Matthew Kahn: Smart Buildings will Shrink Our Carbon Footprint
• Simon Johnson: Too Politically Connected To Fail In Any Crisis
• Justin Fox Optimistically Claims We Are in a Jobless Recovery
  The weekly unemployment-insurance claims numbers are out, and the number of new claims—a seasonally adjusted 521,000—was the lowest since January. (Claims peaked in late March, at 674,000.) The four-week moving average, at 539,750, continues to trend downward as well. Good news. But man, what a slow trend! It's like watching paint dry. Especially slow-drying paint. Claims are still in deep-recession territory, and much higher than they were at any point last year. So is this a jobless recovery, or a labor market so bad it may take the economy back down with it again? I'm still going with the former, but that could just be because I'm congenitally optimistic.
• Robert Waldmann: Labor market rents can cause business cycles
• Eric Alterman: Where Have You Gone, William Safire?
• Eric Alterman and Mickey Ehrlich: CBS and Dan Rather—Doing the Right’s Dirty Work
• Andrew Lamey: Reckless Falsehoods
  What is at issue is not that McCaughey and Sullivan attacked the bill. It was how they went about it. Many objections to the Clinton bill were made, from those who preferred a single-payer system to Republican Senator Phil Gramm, who proposed a plan which encouraged people to go without any insurance except for “catastrophic” medical expenses.... Sullivan’s contribution, on the other hand, was logically incoherent: he ran two conflicting articles, only one of which could be true...
• A.M.Lamey on Andrew Sullivan and Betsy McCaughey: No Exit From No Exit
  Curtis’s letter puts paid to the idea that McCaughey’s article was simply a “provocation to debate.” Publishing both Kaus and McCaughey raises fundamental questions about accuracy that Sullivan has never adequately answered. The fact that Curtis and the other judges did not have all the relevant information when they chose McCaughey’s piece calls into question the legitimacy of the National Magazine Award. Finally, the fact that Sullivan declined to publish Curtis’s letter makes a mockery of his claim to have “fully aired” criticisms of her piece. I admire Sullivan for admitting he made an error of judgment in supporting the Iraq War. He needs to do the same thing here, and admit he made a serious mistake in the way he handled McCaughey. Only then will he have lived up Orwell’s dictum that “to see what is in front of one’s nose is a constant struggle.” I argue that McCaughey was a worse journalist than Stephen Glass in reckless-falsehoods.pdf.

Justin Fox:

A post about EMH, CAPM and MBAs: [T]he insiders get so caught up in their insider debates that they forget what it was they were talking about in the first place. The EMH that emanated from the University Chicago in the late 1960s was a theory not just that market movements can't be reliably predicted but that prices are right. Here's Eugene Fama, in the famous efficient market paper he delivered in 1969 and published in 1970:

The primary role of the capital market is allocation of ownership of the economy's capital stock. In general terms, the ideal is a market in which prices provide accurate signals for resource allocation: that is, a market in which firms can make production-investment decisions, and investors can choose among the securities that represent ownership of firms' activities under the assumption that security prices at any time “fully reflect” all available information. A market in which prices always “fully reflect” available information is called “efficient.” (Eugene F. Fama, “Efficient Capital Markets: A Review of Theory and Empirical Work,” The Journal of Finance, May 1970, p. 383.)

Fama said that in order to test whether markets were efficient in this sense you needed an economic theory of how prices were determined. He chose the Capital Asset Pricing Model, devised a few years before by Jack Treynor, Bill Sharpe and John Lintner. It said risky stocks would outperform less-risky ones, with the risk that mattered being something called beta—the correlation of a stock's movements to those of the overall market.

Roll started pointing out issues with CAPM in the 1970s, and Fama and French concluded in 1992 that the conjunction of CAPM and the EMH simply didn't match the data. They chose to jettison CAPM, not the EMH (Fischer Black made more or less the opposite choice). But without an economic theory of how stock prices should move, there's no way of testing the claim that markets are efficient in the "price is right" sense. Pricing models like the arbitrage pricing theory or the Fama-French factor models simply assume that prices are right, then extrapolate from that what the relevant risk factors must be that determine prices. But this assumption that prices are right is now based on no empirical evidence at all. In fact, both Fama and Roll have said that there's just no way to tell whether prices are right or not.

That leaves us with an efficient market hypothesis that merely claims, as John Cochrane puts it, that "nobody can tell where markets are going." This is an okay theory, and one that has held up reasonably well—although there are well-documented exceptions such as the value and momentum effects. But if "we can't tell where the markets are going" was all the finance professors had to offer, they wouldn't have had much influence. They certainly wouldn't be paid as well as they now are. (You just got a Ph.D in not knowing where the markets are going? Great! Have $120,000 a year. And hey, how about a couple of lucrative consulting gigs?)

The price-is-right combo of EMH and CAPM allowed finance professors to say much more than "we dunno." They may not have known exactly where a stock's price was headed, but thanks to CAPM they could confidently predict the bounds within which it would move. Thus armed they went on to conquer the world, eventually transforming MBA curricula, legal thinking, corporate governance, financial regulation and many aspects of investment practice. It's admirable that finance scholars—especially Fama, since it was his theory in the first place—kept sniffing around and eventually concluded that the EMH/CAPM combo didn't match the evidence. It's not so great that some of them now pretend that the price-is-right version of the efficient market hypothesis never existed, and fail to fully confront what its demise means for a lot of the other things taught in finance and investment classes.

Matthew Kahn posts a picture:

He worries about its carbon footprint.

I think its footprint footprint may well be larger than its carbon footprint...

I really think Robert's head exploded somewhere in here:

Cochrane Vs Krugman ~ Angry Bear: According to Fox, [Cochrane] wrote:

The centerpiece of our crash was not the relatively free stock or real estate markets, it was the highly regulated commercial banks...

Now he can't believe that.... No one could be that ignorant... fail to have noticed that commercial banks are more tightly regulated than investment banks (especially recently after capital requirements for investment banks were massively relaxed). Writing "commercial banks" when everyone knows that "investment banks" would be closer to the truth is not plausible ignorance.

Cochrane may be completely ignorant about the macro literature except for that recently written somewhere near a great lake, but he must know that investment banks suffered more dramatically than commercial banks. I'm not sure he has noticed that there are no longer any investment banks -- that is all banks in the US are now parts of partly FED-regulated firms, but I am sure that he knows that Bear Sterns, Lehman, and Merrill Lynch are not commercial banks.

One more thing about [Justin] Fox, he concedes that Krugman's arguments are not based on formal models, he fails to note that the arguments made by the Fresh water economists aren't based on any models at all.

I'd be the first to agree with Cochrane that Krugman's vigorous pro-stimulus arguments are based more on hunches and guesswork and politics and history than on any kind of rigorous economic model. I've been even less impressed, though, with anti-stimulus arguments that claim to be based on rigorous models but are utterly devoid of historical perspective, curiosity and common sense.

They have models in which the labor market clears, they are not quite crazy enough to argue that there is no unemployment right now. They make arguments which don't make sense... certainly are less based on any formal model than Krugman's arguments. Fox clearly knows this. That's why he puts in the disclaimer "claim to be based". However, he is a journalist so he can't note that the arguments are definitely not based on formal models. This is he-says-she-says journalism. I'm sure Fox has read Krugman and DeLong on the lack of a model behind the arguments.

It is easy to see if there is a model or there isn't (hint there are models on Krugman's blog -- Fox can check if Fama or Cochrane have presented a model which supports their conclusions. He can ask them to send him their model. He should be able to tell if there is a model of if there isn't and if the model leads to the conclusion.

Let me say that I am with Robert in the exploding-head brigade. Two years ago, if you had asked me, I would say that practically all economists shared a consensus theory of nominal spending and income. It is Milton Friedman's theory. It goes like this:

• Demand for money is proportional to the benefits of holding money--which are in turn proportional to nominal income.

• Demand for money is also a declining function of the costs of holding money: the short-term nominal interest rate on Treasury securities.

• You can flip the money demand function around and get a prediction of what spending will be as an increasing function of the money stock and of the interest rate, and of other things.

• Expansionary open-market operation monetary policies that raise the money stock also lower interest rates, and have strong effects on nominal spending and income when interest rates are normal, but have weak effects on spending when interest rates are very low and bank reserves and short-term Treasury securities are close substitutes.

• Banking and fiscal policies can affect interest rates and thus change the level of spending holding the money stock constant, but there is lots of uncertainty and disagreement about how well these policies work.

Yet now I find that Luigi Zingales does not know what I thought was this consensus theory. David K. Levine does not know this consensus theory. John Cochrane does not know this consensus theory. Edward Prescott does not know this consensus theory. Eugene Fama does not know this consensus theory but somehow thinks the equilibrium condition that is the savings-investment identity is also a behavioral relationship. Michele Boldrin does not know this consensus theory. Peter Diamond assures me that Robert Lucas does know this consensus theory of nominal income but you could have fooled me from what he has been writing over the past year.

Due Friday October 16, 5 PM, in GSI mailboxes:

Download .pdf: 20091008 115 gd.pdf

I find that on the internet ease-of-use is all: things that take one click happen; things that take one click, one click-and-drag happen, and then a second click happen; things that require that one download files, type in file names, upload files, and type in link ids... they simply do not happen.

Lots of times I find that I want to grab an image or an image with a little bit of associated text and keep it--either for myself, or to republish it on the web.

Skitch is by far the easiest way I have found to do this, and has become a very normal part of my day.

3.1% for the third quarter, 3.6% for the fourth quarter.

That is all.