Grasping Reality on TypePad, by Brad DeLong

AP: "European politicians, particularly in Germany, are visibly sick of Americans and others telling them that imposing uniform austerity beyond Greece and Portugal is in error. But facts are facts, and it is an error. The experience of the Asian Financial Crisis is directly relevant, and the willingness of the IMF to reconsider its position in the time since would be a good example to follow. What matters is getting policies right, not adhering to a foolish consistency, either in policy recommendations across countries or in publicly taken positions."

JG&DW: "The recession that began in late 2007 severely reduced state tax revenue and increased demand for many public services. In the near term, institutional and political factors limit the options states have for cutting spending and raising taxes. Aid to states in the federal economic program is winding down next year and the situation is likely to get worse before it gets better. Painful budgetary choices lie ahead for many states, though the drag on the national economy should be modest."

"Contained in the Healthy San Francisco program is a mandate on employers in San Francisco to offer health insurance coverage to their employees. If failing to do so, the employer can meet the requirement by paying into the public program. Small employers and non-profits are exempt. A very similar approach was adopted in many of the national health care reform proposals. The Golden Gate Restaurant Association unsuccessfully challenged this requirement in the 9th U.S. Circuit Court of Appeals in 2008. Today, the US Supreme Court decided to not hear the final appeal from the Restaurant Association, ending their battle to eliminate this employer mandate."

MY: "Will Wilkinson notes that “a solid background in the philosophy of science is especially useful when it comes to explaining why many economic theories fail to meet the basic standards of adequate science.” That certainly seems true to me.... [I]t would be better if ideas as good as Minsky’s could be put into a more formal framework since that would make them more useful. But the correct ordering is... start with theories that are doing some good and try to make them formal to make them more useful. Starting with formalisms that would be useful if they were accurate, and then endlessly tweaking the inputs so that in retrospect they give you the right answer... there’s a reason policymakers don’t rely on this work."

HB, CR, & LR: "There are currently nearly 15 million Americans unemployed, with the unemployment rate hovering at or just under 10 percent for nearly a year. At the end of May, nearly half of those unemployed... have been out of work and actively seeking a job for at least six months... there are nearly five workers actively searching for work for every job available, compared to just one and a half job searchers per job opening before the Great Recession began. Worse still, the labor market problems we see right now will be with us for some time. The massive employment hole left by the Great Recession will take years to fill. If we added 218,000 private sector jobs each month... it would still take almost five years to fill the hole. That’s why ensuring that unemployment insurance reaches the unemployed remains a critical component of any serious effort to help stem the harmful effects of this recession and to help the American economy recover."

MT: "When I first heard her say that, I thought to myself, "That has to be a joke. It's sarcasm, right?" But then I went back and replayed the clip – no sarcasm! She meant it! If I'm hearing [Lara] Logan correctly, what Hastings is supposed to have done in that situation is interrupt these drunken assholes and say, "Excuse me, fellas, I know we're all having fun and all, but you're saying things that may not be in your best interest! As a reporter, it is my duty to inform you that you may end up looking like insubordinate douche bags in front of two million Rolling Stone readers if you don't shut your mouths this very instant!" I mean, where did Logan go to journalism school – the Burson-Marsteller agency?"

RA: "Positive experiences with budget cuts are almost always associated with devaluations, which are off the table for euro area members. They're usually combined with structural reforms, but Ireland has already rid itself of much of the burdensome economic rules that held back its economy in earlier decades. Austerity can also boost growth by reducing interest rates, but this isn't helpful when markets shrug off the cost-cutting (as they have where Ireland is concerned) or when rates are already low (as they are in America and Britain)... it's far from clear that austerity can ultimately lead to growth in an environment where global demand remains weak and many countries are simultaneously making fiscal (or other economic) adjustments. Economists observed high debt levels and market panic and seemed to assume that austerity for every country with a big deficit was the right prescription. That may well prove to have been a big mistake."

MY" "Take, for example, the slides (PDF) Paul Krugman posted yesterday that accompany a talk he gave on whether there’s a causal link between income inequality and giant economic collapses. The barest outline of a case that there is such a link is that you have two giant increases in inequality, one that ended with the Great Depression and one that ended with the current recession. The barest outline of a case against the existence of such a link is that it’s hard to understand what the causal mechanism here. This, though, is one stab at identifying a mechanism.... Maybe inequality leads to growing indebtedness and this leads to financial crisis. Maybe."

DD: "If this isn’t a Lucy-with-the-football moment, I don’t know what is. Brian Beutler reports that Hill aides told him President Obama’s Treasury Department sided with Scott Brown in the waning moments of the Wall Street reform conference committee, favoring his loophole for the Volcker rule designed to help asset management companies in Massachusetts. In the process they shot a giant hole through the efforts to stop the mega-banks from investing in private equity or hedge funds, allowing them to use up to 3% of Tier One Capital. Even the two main Senators involved in crafting a strong Volcker rule, Carl Levin and Jeff Merkley, consider the “de minimus” exception a “flaw” that is “problematic,” though they highlight other protections and provisions on proprietary trading. The point is, if you asked them whether they favored the Brown loophole, they would have said no. And at the key moment, the Obama Treasury Department stood with Scott Brown and carried the loophole over the line."

MK: "And speaking as someone who has taken graduate coursework in “continental philosophy”, and been walked through the big hits of structural anthropology, Hegelian marxism and Freudian feminism, that graduate macroeconomics class was by far the most ideologically indoctrinating class I’ve ever seen. By a mile. There was like two weeks where the class just copied equations that said, if you speak math, “unemployment insurance makes people weak and slothful” over and over again. Hijacking poor Richard Bellman, the defining metaphor was that observation that if something is on an optimal path any subsection is also an optimal path, so government just needs to get out of the way as the macroeconomy is optimal absent absurdly defined shocks and our 9.6% unemployment is clearly optimal. (An unfair description perhaps, but I wasn’t an actual student."