Noted for January 24, 2013
FT Alphaville » Long Room » A Nominal GDP Level Target in All but Name - Goldman: "Fed officials may be contemplating an even more aggressive approach than we have assumed in our baseline forecast. This is evident from simulations by Vice Chair Janet Yellen that use the Fed staff’s large-scale econometric model, FRB/US, to generate an “optimal control” path for monetary policy. We believe that market participants have so far failed to grasp the full implications of Yellen’s approach."
Jonathan Chait: Boehner: Let’s Destroy Math Instead of Economy\: "John Boehner announced on Tuesday that he will proceed with a plan to… avoid crashing the world economy without voting for something that sounds like it increases the national debt. But, as part of his concessions to the looniest wing of the Republican party, he has also committed himself to passing a budget that would reach full balance within a decade. Paul Ryan's budget, even while employing all sorts of fanciful projections, didn't balance the budget until 2040.Why? Because the parameters Republicans have picked for the budget make balancing the budget utterly impossible. Moving that timetable up by seventeen years changes the plausibility level from Level: Unicorn to Level: Unicorn Being Ridden By Santa Claus Who Has Lost 50 Pounds Through One Weird Trick."
Innovation pessimism: Has the ideas machine broken down?: "Roughly a century lapsed between the first commercial deployments of James Watt’s steam engine and steam’s peak contribution to British growth. Some four decades separated the critical innovations in electrical engineering of the 1880s and the broad influence of electrification on economic growth. Mr Gordon himself notes that the innovations of the late 19th century drove productivity growth until the early 1970s…. And information innovation is still in its infancy…. As an example of this acceleration-of-effect they offer autonomous vehicles…. Across the board, innovations fuelled by cheap processing power are taking off…. Brynjolfsson and McAfee fear that the technological advances of the second half of the chessboard could be disturbingly rapid, leaving a scourge of technological unemployment in their wake. They argue that new technologies and the globalisation that they allow have already contributed to stagnant incomes and a decline in jobs that require moderate levels of skill…. Pattern-recognition software is increasingly good at performing the tasks of entry-level lawyers…. Algorithms are used to write basic newspaper articles…. Manual tasks are also vulnerable. In Japan, where labour to care for an ageing population is scarce, innovation in robotics is proceeding by leaps and bounds…. Such productivity advances should generate enormous welfare gains. Yet the adjustment period could be difficult."
David Glasner: The Social Cost of Finance « Uneasy Money
Mark Thoma: Economist's View: NGDP 'Targetry' Skepticism: "I guess that should be scepticism: Monetary targetry: Might Carney make a difference?, by Charles A.E. Goodhart, Melanie Baker, Jonathan Ashworth, Vox EU: 'The Bank of England’s Governor-elect has argued for a switch to a nominal GDP target. This column points out problems with nominal GDP targets, especially in levels. Among other issues, nominal GDP targeting means that uncertainty surrounding future real growth rates compounds uncertainty on future inflation rates. Thus the switch is likely to raise uncertainty about future inflation and weaken the anchoring of inflation expectations…'"
Funniest misreading of Thoukydides's Peloponnesian War ever: Dan Simmons (2006): You’ve understood nothing I’ve said. Nothing. Athens failed in Syracuse – and doomed their democracy – not because they fought in the wrong place and at the wrong time, but because they weren’t ruthless enough. They had grown soft since their slaughter of every combat-age man and boy on the island of Melos, the enslavement of every woman and girl there. The democratic Athenians, in regards to Syracuse, thought that once engaged they could win without absolute commitment to winning, claim victory without being as ruthless and merciless as their Spartan and Syracusan enemies. The Athenians, once defeat loomed, turned against their own generals and political leaders – and their official soothsayers. If General Nicias or Demosthenes had survived their captivity and returned home, the people who sent them off with parades and strewn flower petals in their path would have ripped them limb from limb. They blamed their own leaders like a sun-maddened dog ripping and chewing at its own belly."
Ta-Nehisi Coates: Fear of a Black Middle Class: "I went on a Twitter rant yesterday because I'd finished Isabel Wilkerson's phenomenal The Warmth Of Other Suns… a narrative history of the Great Migration through the eyes of actual migrants…. America's response to the Great Migration was to enact a one-sided social contract…. The black migrants did play by the rules, but they did not enjoy the right to compete. Black people have been repeatedly been victimized by the half-assed social contract. It goes back, at least, to Reconstruction. The half-assed social contract continues to this very day with policies under the present administration, like the bail-out of banks that left the homeowners whom the banks conned underwater. The results of the housing crisis for black people have been devastating. The response is to hector these people about playing video games and watching too much television. Or to tell them they've have 'an achievement gap'. It is sickening, dishonest, and morally repugnant…. Efforts to aid The People are engineered in such a way wherein they help black people a lot less. It is utterly painful to read about the New Deal being left in the hands of Southern governments which were hostile to black people, and then to today see a significant chunk of health care, again, left in the hands of Southern governments which are hostile to black people. At this point, such efforts no longer require open bigotry. They are simply built into the system. 'That the Negro American has survived at all, is extraordinary.' That is from the Moynihan report, which neo-liberals are fond of touting, while ignoring the report's lengthy policy recommendations."
Peter Orszag: Healthcare is America’s real problem: "Healthcare costs are the core long-term fiscal challenge facing the US – and yet also the best hope for cushioning workers from globalisation. This is why the recent deceleration of these costs is so encouraging – and why we should double down on them. Given the fragmented medical system in the US and its financial incentives for more – rather than better – care, health costs dominate the long-term fiscal picture. Official projections show federal health expenditure rising between now and 2050 from 5.5 per cent of gross domestic product to more than 12 per cent. Social Security spending, by comparison, is predicted to rise in the same period from 5 per cent of GDP to 6 per cent. It is not hard to work out what is driving our long-term fiscal gap. President Barack Obama is right. We do not have a spending problem – we have a healthcare problem."
