Say It Ain't So, Alberto!
Marty Feldstein Told Us So: The Euro and International Conflict Weblogging

Noted for March 22, 2013: Larry Mishel Is Tired of Reasoning with David Brooks, etc.

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  • Larry Mishel: David Brooks is wrong on the CPC’s Back to Work budget. In other news, the sun rose in the east today: "David Brooks recently wrote a misguided column…. Brooks sees an economy that “is finally beginning to take off” and no longer has 'a large and growing gap between the economy’s current output and what it is capable of producing.'… [But] the U.S. economy in late 2012 was running $985 billion (5.9 percent) below potential output for the year—which is equivalent to each person losing $3,100 (annually). I will grant Brooks that this 'output gap' is not currently growing larger… it is just 'large and not shrinking'…. Brooks snidely describes those who wrote the Back to Work budget as “people hermetically sealed in the house of government.” I think the stronger case is that people who see today’s economy as not needing any additional support are hermetically sealed in the house of privilege…. [T]he Back to Work budget actually greatly boosts the incentives and payoffs to working for lower-wage workers. It reinstates an expanded Making Work Pay tax credit for three years and permanently extends the recent expansion of the earned income tax credit and other tax credits benefiting low-income households. Policies such as these would increase incentives for low-income workers to work. So it boosts the payoffs to low-wage workers from adding hours to the labor force, but may provide some slight disincentives to those at the very top of the distribution. I can live with that tradeoff—why can’t Brooks?"

  • Simon Wren-Lewis: The 2013 Budget and UK Monetary Policy: "[R]ead the minutes just released of the last MPC meeting, where the committee voted 6 to 3 not to undertake any further Quantitative Easing… which basically boil down to: 'Inflation was above the 2% target and was likely to stay above it for an extended period, and there was a risk that could lead to inflation expectations drifting upwards with adverse consequences for wage and price setting behaviour. Further monetary stimulus might increase that risk. It might also lead to an unwarranted depreciation of sterling if it were misinterpreted as a lack of commitment to maintaining low inflation in the medium term.' In other words, any attempt to use the very flexibility that the Treasury emphasises the MPC has risks a loss in the credibility of the medium term inflation target. So 6 of the 9 member committee decided it was best not take take that risk. I cannot see anything in the new guidance issued by the Treasury yesterday that would have influenced any of the 6 who voted to do nothing to change their minds. Now I guess the Treasury is hoping that the new governor will persuade some on the committee to vote the other way…. But surely the key question is why they need persuading in the first place. Why are possible risks to the credibility of the medium term inflation target allowed to outweigh the current almost 100% certainty that we have chronic demand deficiency which no one else is going to do anything to change? Perhaps a remit that places medium term inflation stability at its core, and says nothing about eliminating demand deficiency, might just have something to do with it."

Tim Duy: If Communication Is Effective... | Paul Krugman: Cyprus: The Sum of All FUBAR | Federal Reserve: Oversight and Disclosure | Center for American Progress |

  • David Glasner: Keynes v. Hawtrey on British Monetary Policy after Rejoining the Gold Standard: The close, but not always cozy, relationship between Keynes and Hawtrey was summed up beautifully by Keynes in 1929 when, commenting on a paper by Hawtrey, 'Money and Index Numbers', presented to the Royal Statistical Society, Keynes began as follows: 'There are very few writers on monetary subjects from whom one receives more stimulus and useful suggestion… and I think there are few writers on these subjects with whom I personally feel more fundamental sympathy and agreement. The paradox is that in spite of that, I nearly always disagree in detail with what he says! Yet truly and sincerely he is one of the writers who seems to me to be most nearly on the right track!' The tension between these two friendly rivals was dramatically displayed in April 1930…. Keynes’s position was that, having mistakenly rejoined the gold standard at the prewar parity in 1925, Britain had no alternative but to follow a policy of high interest rates to protect the dollar-sterling exchange rate that had been so imprudently adopted. Under those circumstances, reducing unemployment required a different kind of policy intervention from reducing the bank rate, which is what Hawtrey had been advocating continuously since 1925…. In his questioning [of Hawtrey], Keynes focused on an apparent asymmetry in Hawtrey’s argument. Hawtrey had argued that allowing an efflux of gold would encourage credit expansion in the rest of the world, which would make it easier for British prices to adjust to a rising international price level rather than having to fall all the way to a stable or declining international price level. Keynes countered that, even if the rest of the world adjusted its policy to the easier British policy, it was not plausible to assume that the effect of British policy would be greater on the international price level than on the internal British price level. Thus, for British monetary policy to facilitate the adjustment of the internal British price level to the international price level, cheap money would tend to be self-defeating, inasmuch as cheap money would tend to raise British prices faster than it raised the international price level. Thus, according to Keynes, for monetary policy to close the gap between the elevated internal British price level and the international price level, a dear-money policy was necessary, because dear money would reduce British internal prices faster than it reduced international prices. Hawtrey’s response was that the export of gold would induce a policy change by other central banks."

  • Doug J.: "As I’ve mentioned before, I don’t know what most of my departmental colleagues’ politics are. That’s why I find the conservative obsession with LIBERAL ACADEMIA a bit puzzling. Metavirus at Library Grape points me to the latest, a conservative study on why conservatives don’t go to graduate school…. 'A freshman orientation session that divides white males from everyone else, incessant talk about diversity, multiculturalist reading assignments, and so on may not bother them that much (and they can always find safe spaces such as College Republicans), but such things do convince young conservatives that staying on campus as a career move is foolish. An English major who reveres Great Books needs only one occasion of a teaching assistant ridiculing him for a dead-white-male fixation to decide, "I don’t need this".' I don’t buy this, because in the hard sciences, nearly everyone is a white male (or an Asian male), there’s nothing multicultural going on, and not that much talk about diversity… yet there are still very few conservatives…. [T]here are few conservative scientists… [because] science is a reality-based endeavor that doesn’t pay very well."

  • Ezra Klein: Google’s trust problem: "Google now has a clear enough track record of trying out, and then canceling, 'interesting' new software that I have no idea how long Keep will be around…. Now, most people don’t use Google Reader, or even know it’s being canceled. Same for Google Wave, Google Buzz, Google Health and Picnik, and all the rest of the beloved little apps that have been sent to that cloud above the cloud, where data is stored forever and servers never overload. This is a pained whine emanating almost exclusively from Google power users. Most people, however, also aren’t the sort of early adopters who will rush to download Google Keep. But Fallows is that kind of early adopter. So am I. And Google needs early adopters…. But I’m not sure I want to be a Google early adopter anymore. I love Google Reader. And I used to use Picnik all the time. I’m tired of losing my services. In fact, I’m starting to worry a bit about Gmail…. [T]he Gmail experience, the death of Google Reader, and the closure of Picnik all have me questioning whether I want to keep investing time and energy in “free” Google products or whether I need to start looking for paid services that are explicitly making money off the thing I am paying them to do. And if more and more of the people who would be Google’s early adopters feel as I do, and as Fallows does, then that could become a problem for Google."

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On March 21, 2013: