Grasping Reality on TypePad, by Brad DeLong

Worth Reading:

• Tom Slee: No One Makes You Shop at Wal-Mart: The Surprising Deceptions of Individual Choice

• Roger Farmer: How effective is fiscal policy?: "I do not share the consensus view of self proclaimed Keynesians that a large fiscal expansion is the solution to our dilemma…. Why does high unemployment persist? Samuelsonian Keynesians see the issue as one of deficient nominal aggregate demand…. There is a group of DSGE models that account for unemployment by combining search theoretic models of the labor market with inter-temporal choice by maximizing households…. In these models there is a coherent account of the idea that there may be a continuum of steady state unemployment rates, and unlike bastard Keynesian analysis, the problem is real not monetary."

• Kevin Drum: Lead and Crime: Assessing the Evidence: "It's important to understand that there are at least three independent strands of evidence linking lead to violent crime: 1. Ecological studies… correlations between lead exposure and crime rates at a population level…. 2. Longitudinal studies. A University of Cincinnati team began following a group of children starting in the early 80s. Every six months they measured lead levels in their blood. At age 7, kids with higher lead levels were doing worse in school. At age 17 they were more heavily involved in juvenile delinquency. At age 27 they had higher arrest rates for violent crimes. 3. Imaging studies. The Cincinnati team recently did a series of MRI scans of their subjects and found that participants with higher childhood lead levels had permanent damage to areas of the brain…. For a more skeptical take on this, check out this post by Scott Firestone. I think he's right to question this stuff, but I also think he might be a little too skeptical here. If there were only one study showing a single correlation, that would be one thing. But there are multiple high-quality population studies showing the same result, and there also longitudinal studies and imaging studies to back them up."

• Jonathan Portes: Not the Treasury view...: The macroeconomics of recessions: AEA panel discussion: "[I]t is really quite remarkable how far the Fund has come (as I have previously chronicled here, on the myth of "credibility" and here, on multipliers).  They have got a lot of stick for this, but surely it is commendable that they are prepared to admit the flaws in their ealier analysis (which was, in any case, never nearly as bad as, say, the European  Commission and European Central Bank) rather than double down on their mistakes, as others have done?"

• Mark Dow: Behavioral Macro - The Effects of QE on UST Yields—Now the Answers Start to Matter: "LSAPs have almost certainly over time lowered the clearing rate for UST yields—even though the impulse correlation, driven by economic expectations, has worked in the short-term in the opposite direction. The second observation is that the “expectations effect” was of lesser amplitude with each Fed announcement, again, against the backdrop of an improving economy. In fact, after QE3, there was virtually no bump at all…. Two conclusions can be drawn from this. One, the end of LSAPs will matter for yield levels—even if the Fed decides not to sell any of its holdings and let their book run off. So, if you think it is entirely about economic expectations you are likely to underestimate the magnitude of yield “normalization”. Two, many investors and analysts have settled into the notion that we are in a liquidity trap, and that monetary policy here is largely “pushing on a string”. While this is still for the most part the current environment, it is finally, slowly, starting to change."