Grasping Reality on TypePad, by Brad DeLong

A Dozen Keepers from May 2005:

• Brad DeLong : Limitations of the Marshallian Toolkit
• Brad DeLong : Statement on Social Security Reform | Notes on Senate Hearing on Social Security Proposals
• Brad DeLong : Bernanke's Global Savings Glut Argument
• Brad DeLong : Guenter Grass Denounces Globalization as a New Totalizing Ideology | Bonus Grass writes on May 8 for a reason
• Brad DeLong : Alamedia of "Unfogged" Is Puzzled by Investment Banker Compensation Levels On the mysteries of "Chethood"
• Brad DeLong : Class, Status, Prada
• Brad DeLong : Why Oh Why Are We Ruled by These Idiots? (Yet Another Social Security Edition) Andrew Biggs now has to find something that the Bush Social Security plan closes 70% of
• Brad DeLong : God! I'm Glad I'm Not a Republican! Dan Drezner edition
• Brad DeLong : Why Oh Why Can't We Have a Better Press Corps? (Who's Going to Pay to Read John Tierney? Department)
• Brad DeLong : Why Oh Why Can't We Have a Better Press Corps? (Yet Another New York Times Edition) More misrepresentations from Danny Okrent weblogging, this time carrying water for Alberto Gonzales
• Brad DeLong : Paul Krugman Gets in Touch with His Inner Friedrich Hayek
• Brad DeLong : Diego Rivera's "The Flower Carrier"

Martin Wolf:

Britain’s perilous austerity bunker: David Cameron’s “there is no alternative” speech last week on the UK economy has aroused much criticism. This is justified. The British prime minister’s arguments for sticking to the government’s programme of fiscal austerity were overwhelmingly wrong-headed….

How does one defend this record?…. Mr Cameron argues that those who think the government can borrow more “think there’s some magic money tree. Well, let me tell you a plain truth: there isn’t.” This is quite wrong. First, there is a money tree, called the Bank of England, which has created £375bn to finance its asset purchases. Second, like other solvent institutions, governments can borrow. Third, markets deem the government solvent, since they are willing to lend to it at the lowest rates in UK history. And, finally, markets are doing this because of the structural financial surpluses in the private and foreign sectors.

• David Winer: Thread: Charles Pierce is wrong about Ezra Klein being wrong: "I'm a big fan of both…. [T]he epiphany of Klein's that Pierce mocks happens to be one that I have been writing about for almost 20 years, over and over. Think of all the time everyone could have saved if they deigned to pay attention to people who don't do what they do. It's tragic that it took a smart guy like Klein so long to understand such a basic structural truth about how news, his own profession, has been working for the last 15 years. Gives you some idea about the power of the blinders this community puts on…. [B]ecause we live in the times of the Internet and what Klein calls The Revenge of the Sources, I can go ahead and be heard without them listening. I call this Sources Go Direct…. It's not revenge, it's more pragmatic. The old system didn't work. So we use the new one instead…. Do I think either of them will read this piece? Nah. :-)"

I had no idea that people building marine oil wells live for weeks at a time at depths of 1000 feet | Beverly Mann: Paul Ryan is the Joe McCarthy of Our Era. Maybe the Mainstream Media Finally Will Recognize That. Then Again, Maybe It Won’t. | Breitbart/O’Keefe partner Hannah Giles pays $50K to fired ACORN worker Juan Carlos Vera | Curiosity Rover Finds Evidence That Mars Could Have Hosted Life | Duncan Black: 401Ks are a disaster | Ezra Klein: Five huge things we still don’t know about Paul Ryan’s budget | Pope Francis I | DeLong Says Not Time to Cut U.S. Budget With Free Lunch | David Dayen: The Budget/Austerity/Catfood Moebius Strip | Igor Volky: Paul Ryan Makes Big Admission: Republicans Helped Write Obamacare | Peter Temin and David Vines: The leaderless global economy: Can economic history suggest lessons? | Tim Duy: Economist's View: Fed Watch: The Importance of Printing Your Own Currency | Osip Mandelstam | New Beijing Leader's 'China Dream' | Juan Cole: Falsity of Nuclear Accusation against Iraq Was Known before Bush's Invasion |

The sins of the Argentine church | Hugh O'Shaughnessy | Comment is free | guardian.co.uk:

The Catholic Church was complicit in dreadful crimes in Argentina. Now it has a chance to repent.

Uki Goni and Jonathan Watts: Pope Francis: questions remain over his role during Argentina's dictatorship:

The Catholic church and Pope Francis have been accused of a complicit silence and worse during the "dirty war" of murders and abductions carried out by the junta that ruled Argentina from 1976 to 1983.

The evidence is sketchy and contested. Documents have been destroyed and many of those who were victims or perpetrators have died in the years that followed. The moral argument is clear, but the reality of life at that time put many people in a grey position. It was dangerous at that time to speak out and risk being labelled a subversive. But many, including priests and bishops, did so and subsequently disappeared. Those who stayed silent have subsequently had to live with their consciences — and sometimes the risk of a trial.

Its behaviour during that dark period in Argentine history was so unsaintly that in 2000 the Argentine Catholic church itself made a public apology for its failure to take a stand against the generals. "We want to confess before God everything we have done badly," Argentina's Episcopal Conference said at that time.

In February, a court noted during the sentencing of three former military men to life imprisonment for the killings of two priests that the church hierarchy had "closed its eyes" to the killing of progressive priests.

As head of the Jesuit order from 1973 to 1979, Jorge Bergoglio – as the new pope was known until yesterday – was a member of the hierarachy during the period when the wider Catholic church backed the military government and called for their followers to be patriotic. Bergoglio twice refused to testify in court about his role as head of the Jesuit order. When he eventually appeared in front of a judge in 2010, he was accused by lawyers of being evasive.

The main charge against Bergoglio involves the kidnapping of two Jesuit priests, Orland Yorio and Francisco Jalics, who were taken by Navy officers in May 1976 and held under inhumane conditions for the missionary work they conducted in the country's slums, a politically risky activity at the time.

His chief accuser is journalist Horacio Verbitsky, the author of a book on the church called "El Silencio" ("The Silence"), which claims that Bergoglio withdrew his order's protection from the two priests, effectively giving the military a green light for their abduction.

The claims are based on conversations with Jalics, who was released after his ordeal and later moved to a German monastery.

Bergoglio has called the allegations "slander" and holds that, on the contrary, he moved behind the scenes to save the lives of the two priests and others that he secretly hid from the death squads. In one case, he claims he even gave his identity papers to one dissident who looked like him so that he could flee the country.

For some, that makes him a hero. Other are sceptical. Eduardo de la Serna, co-ordinator of a left-wing group of priests who focus on the plight of the poor, told Radio del Plate that: "Bergoglio is a man of power and he knows how position himself among powerful people. I still have many doubts about his role regarding the Jesuits who went missing under the dictatorship."…

Six years ago I would have agreed with Greenlaw et al. that pushing U.S. net federal government debt up to more than 100% of a year's GDP would be very likely to be inconsistent with long-term Treasury yields in the range we have seen since 2000. Today I would change "inconsistent" to "consistent", and say that they are probably wrong.

Why? Because figure 3.14 of "Crunch Time: Fiscal Crises and the Role of Monetary Policy":

would appear to commit the authors to a currentcast that Japan's 10-year JGB interest rate is 25%/year rather than 1%/year. They escape this implication, of course, by allowing their regression to include "a country fixed effect that implies there is something very special about Japan".

Indeed.

When Paul Krugman and Matt O'Brien ask why the assumption is that there is "something special about Japan" rather than "something special about currencies that are not part of the eurozone", "Crunch Time" coauthor Jim Hamilton answers:

Ezra Klein:

Our deficits aren’t as bad as Washington thinks: On Tuesday, Rep. Paul Ryan presented the budget for House Republicans…. In honor of the season, Americans everywhere will wear traditional budget-season hats and eat the customary budget-season meals, which include, of course, a rich dessert that we assume will be offset by future weight loss.

Okay, that last part is just what we do in my house. Behind all these appendix-heavy documents lurks the specter of our budget deficits, which have emerged as pretty much the only problem in Washington that both parties can agree to focus on (sorry, millions of jobless Americans). But what kind of problem, exactly, do our budget deficits present? Here are three ways to think about them:

1. We’re experiencing severe and measurable economic drag from today’s deficits.

2. We’re not experiencing measurable economic drag from today’s deficits, but we’re worried about future deficits implied by today’s policies and demographic trends.

3. We’re not experiencing severe and measurable economic drag from today’s deficits, but we’re worried about future deficits implied by today’s policies and demographic trends, and we’re also concerned about the likelihood of additional budget-busting policies that some future Congress might pursue.

If you guessed No. 3, then congratulations! You get a double serving of budget-season cake. Delicious.

Tyler Cowen:

Can we agree that…

1. Debt-financed government spending must eventually be paid off and the estimated deadweight loss of taxation is at least twenty percent.  That immediately puts a hurdle rate of twenty percent or more on projects, even when real borrowing rates are very low….

2. Private companies, when making investment decisions, often use hurdle rates as high as twenty or thirty percent… to constrain overeager empire builders, or “cowboys”… there should be a “cowboy premium” for the public sector as well, even if that premium should be lower for the public sector.

3. The real risk of public sector investment is not measured by the borrowing rate, but rather by the covariance of the value of public sector outputs with a very broad notion of the market portfolio.  I call this the Jensen premium, since Michael Jensen first outlined this argument clearly.

This is all standard stuff, none of it is like reading the “he said, she said” debates over the proper size of the fiscal policy multiplier.

Nope. It is not standard stuff. The standard stuff is:

1. The effect of taxation deadweight losses is to increase the hurdle rate not by 20% but by 20%/duration of the debt undertaken to finance the spending. That is a very different thing from 20%.

2. The right way to do benefit-cost calculations is to get the benefits and costs and discount rate right, not to overestimate the benefits and then screw up the discount rate by overstating it. Cowen's proposal creates a systematic bias against thinking about the long run--a pronounced myopia.

3. Since the residual risk from public investments is borne by the taxpayer, the right cost is the risk-free real rate plus (coefficient of risk aversion) x (covariance of public output with wealth as a whole). The covariance of public output with a market portfolio when the equity premium tells us that the market does a really lousy job of mobilizing societal risk-bearing capacity is neither here nor there.

4. It's not the Jensen premium, it's the Marglin premium. Stephen Marglin is much clearer on this stuff then Jensen...

We're talking about an adjustment to the real risk-free rate of less than 50 basis points here…

Do you like magic tricks? Paul Ryan's budget is about $1 trillion MORE MAGICAL now. bit.ly/Z1oOqa

— Matt O'Brien (@ObsoleteDogma) March 13, 2013

Matt O'Brien:

Paul Ryan's Tax Math Just Became More Magical :

There's something breathtaking about any Paul Ryan budget. There are the savage cuts to healthcare and safety-net spending for the young and poor. The deep cuts to education, research, and infrastructure. The way current seniors are spared from any of this fiscal pain. The increased defense spending. And the tax cuts -- heavily tilted towards the rich, of course -- that will supposedly be paid for by eliminating loopholes….

Ryan wants to radically simplify the tax code… radically reduce rates…. Oh, and he wants revenue to average 18.8 percent of GDP for the next decade. The only way to do all of this is to radically cut tax expenditures too. But Ryan doesn't name a single expenditure he wants to cut. Instead, he bridges the gap with a magic tax reform asterisk. This isn't a new magic trick for Ryan. It's just a bigger one… his magic asterisk needs to be even more magic…. About a trillion dollars more….

You're not alone if you think magic is more fun than math. Paul Ryan certainly agrees.

Cosma Shalizi:

The Singularity in Our Past Light-Cone: Attention conservation notice: Yet another semi-crank pet notion, nursed quietly for many years, now posted in the absence of new thoughts because reading The Half-Made World brought it back to mind.

The Singularity has happened; we call it "the industrial revolution" or "the long nineteenth century". It was over by the close of 1918 http://inversesquare.wordpress.com/2010/11/11/on-veterans-day/:

• Exponential yet basically unpredictable growth of technology, rendering long-term extrapolation impossible (even when attempted by geniuses http://vserver1.cscs.lsa.umich.edu/~crshalizi/future.html)? Check.

• Massive, profoundly dis-orienting transformation in the life of humanity, extending to our ecology, mentality http://vserver1.cscs.lsa.umich.edu/~crshalizi/reviews/flynn-beyond/ and social organization? Check http://vserver1.cscs.lsa.umich.edu/~crshalizi/reviews/nations-and-nationalism/.

• Annihilation of the age-old constraints of space and time? Check http://www.powells.com/partner/27627/biblio/9780674021693.

• Embrace of the fusion of humanity and machines? Check http://vserver1.cscs.lsa.umich.edu/~crshalizi/T4PM/futurist-manifesto.html.

• Creation of vast, inhuman distributed systems of information-processing, communication http://www.powells.com/partner/27627/biblio/9780801846137 and control http://vserver1.cscs.lsa.umich.edu/~crshalizi/reviews/beniger/, "the coldest of all cold monsters"? Check; we call them "the self-regulating market system" http://www.econlib.org/library/Essays/hykKnw1.html and "modern bureaucracies" (public or private) http://www.powells.com/partner/27627/biblio/9780674940529, and they treat men and women, even those whose minds and bodies instantiate them, like straw dogs http://www.powells.com/partner/27627/biblio/9780807056431.

• An implacable drive on the part of those networks to expand, to entrain more and more of the world within their own sphere? Check. ("Drive" is the best I can do; words like "agenda" or "purpose" are too anthropomorphic, and fail to acknowledge the radical novely and strangeness of these assemblages, which are not even intelligent, as we experience intelligence http://vserver1.cscs.lsa.umich.edu/~crshalizi/reviews/cognition-in-the-wild/, yet ceaselessly calculating.)

Why, then, since the Singularity is so plainly, even intrusively, visible in our past, does science fiction persist in placing a pale mirage of it in our future? Perhaps: the owl of Minerva flies at dusk; and we are in the late afternoon, fitfully dreaming of the half-glimpsed events of the day, waiting for the stars to come out.

Liquidation of the Krakow Ghetto:

On 13 March 1943, the commander of the SS and Police in Krakow district, Julian Scherner ordered the liquidation of the Krakow Ghetto.

Following the invasion of Poland in 1939 Nazi forces turned Krakow into the capital of the general Government. Shortly after the invasion, as part of an operation called Sonderaktion Krakau 183 German academics were sent to Sachsenhausen and Dachau camps and the town’s Jewish population were forced to take part in forced labour and to wear identifying armbands.

In 1941, the Krakow ghetto was established in the Podgórze area of the city. 15,000 Jews were crammed in an area previously inhabited by 3,000 people. The ghetto was surrounded by walls that kept it separated from the rest of the city.

From 30 May 1942 onward the Nazis implemented systematic deportations from the Ghetto to surrounding concentration camps. The first transport consisted of 7,000 persons, the second, of additional 4,000 Jews deported to Belzec extermination camp on 5 June 1942.

On 13 and 14 March 1943 the Nazis carried out the final ‘liquidation’ of the Ghetto. 8,000 Jews deemed able to work were transported to the Plaszow labour camp. Those who were considered unfit for work – some 2,000 Jews – were murdered in the streets of the Ghetto or sent Auschwitz-Birkenau

Richard Posner never managed to find the guts to apologize to Christina Romer, or Larry Summers, or his readers…

Brad DeLong : The Chicago School's Intellectual Collapse Continued: Richard Posner Is Uranus...: When I was a child, one of my favorite stories was that of the discovery of the planet Neptune on September 23, 1846 by Johann Galle, Heinrich D'Arrest, and Urbain Le Verrier. The astronomers of the nineteenth century found an anomaly in the orbit of Uranus: it was not going where Newton's law of gravitation said that it ought to be going

I wasn't going to revisit this, but I finally had enough time to think about Menzie Chinn's and Justin Wolfers's very useful attempts to strike a blow in the long twilight struggle for rational economic analysis of the stimulus package, and it struck me that here Richard Posner really is Uranus.

• Paul Krugman: The Market Speaks: "Stocks are high, in part, because bond yields are so low, and investors have to put their money somewhere. It’s also true… that… corporate profits have staged a strong recovery… workers [are] failing to share in the fruits of their own rising productivity [and] hundreds of billions of dollars are piling up in the treasuries of corporations that, facing weak consumer demand, see no reason to put those dollars to work…. What the markets are clearly saying, however, is that the fears and prejudices that have dominated Washington discussion for years are entirely misguided. And they’re also telling us that the people who have been feeding those fears and peddling those prejudices don’t have a clue about how the economy actually works."

James C. W. Ahiakpor: Project MUSE - Hawtrey on the Keynesian Multiplier: A Question of Cognitive Dissonance? | CBO May Have Undershot Medicare's Future Deficit Reduction By Over $300 Billion | How An Austrian Blogger's (fake) Report That Paul Krugman Filed For Bankruptcy Ended Up On Boston.com | George R.R. Martin: Maurice Druon's The Iron King is the original Game of Thrones |

BBC: Hitler assassination plotter von Kleist dies:

A former German army lieutenant who took part in a plot to assassinate German leader Adolf Hitler in 1944 has died. Ewald-Heinrich von Kleist died aged 90 at his home in Munich last Friday, his wife Gundula told the Associated Press.

Mr von Kleist was just 22 when he volunteered to wear a suicide vest at a meeting with Hitler. The meeting did not come off, but months later he played a key role in what became known as the 20 July plot. He was supposed to carry a briefcase packed with explosives to a meeting with the Nazi leader, but in a change of plan the bomb was planted by plot mastermind Colonel Claus von Stauffenberg…. Col Von Stauffenberg, along with von Kleist's father - a known opponent of Hitler - and others involved in the plot were arrested and later executed. Ewald-Heinrich von Kleist was arrested and sent to a concentration camp, but was later allowed to return to combat duty.

Born in 1922 in an area of north-eastern Germany that is now part of Poland, Mr von Kleist came from a long line of Prussian landowners. While an infantry officer, he was approached by Col von Stauffenberg - who suggested he wear a suicide vest under a new uniform he was due to be modelling for Hitler. Mr von Kleist later recalled how his father gave his blessing to the suicide mission.

Fathers love their sons and mine certainly did, and I had been quite sure he would say no. But as always, I had underestimated him…

The meeting with Hitler never happened.

In later life, Ewald-Heinrich von Kleist founded the annual Munich Conference on Security Policy.

Brad DeLong : Economics 236: Your Last Course in Macroeconomics

PART I: A QUICK OVERVIEW

January 22: Introduction

• Olivier Blanchard (2000), "What Do We Know About Macroeconomics that Fisher and Wicksell Did Not?" Quarterly Journal of Economics 115:4 (November), pp. 1375-1410.
• Olivier Blanchard (1990), "Why Does Money Affect Output? A Survey", in B.M. Friedman and F. Hahn eds, Handbook of Monetary Economics, 1990, Vol 2, 779-835.

January 29: Unemployment and Institutions

• Dale Mortensen and Christopher Pissarides (1994), "Job Creation and Job Destruction in the Theory of Unemployment," Review of Economic Studies 61, pp 397-416.
• Olivier Blanchard and Justin Wolfers (2000) "The Role of Shocks and Institutions in the Rise of European Unemployment: The Aggregate Evidence," Economic Journal, 110 (March), pp. C 1 —33.
• Olivier Blanchard and Lawrence Katz (1997), "What We Know and Do Not Know About the Natural Rate of Unemployment", Journal of Economic Perspectives 11-1 (Winter), pp. 51-73.
• Steven Nickell (1997), "Unemployment and Labor Market Rigidities: Europe versus North America", Journal of Economic Perspectives 11-3 (Summer), pp. 55-74.

February 5: Contracts and Aggregate Output

• Robert Townsend (1979) "Optimal Contracts and Competitive Markets with Costly State Verification", Journal of Economic Theory 21 (October), pp. 265-293.
• Benjamin Bernanke and Mark Gertler (1989), "Agency Costs, Net Worth, and Business Fluctuations," American Economic Review 79 (March), pp . 14-31.

Ryan Cooper:

How Does Jeff Sachs Explain the Great Recession?: I want to circle back to one particular point…. [Sachs:]

One of the Obama arguments at the time was that the rush in the stimulus program was needed to avoid a Great Depression…. The US economic emergency in late 2008 and early 2009 wasn’t really an aggregate demand crisis but a financial crisis…. The Fed therefore needed to flood the markets with liquidity, which it rightly did….

I was under the impression that the basic consensus economic story of the 2008-9 crisis was that yes, we had a banking crisis… [that] involved the repo market and a bank run driven by institutions, not individuals, but was of basically the same character of financial panics of ages past. And financial panics cause aggregate demand crises. Banks fold up or get very shy with credit, suddenly nonfinancial institutions can’t get loans and they fold up or shrink, leading to layoffs, which means people have less money, which means less total spending, further hurting businesses, in a self-perpetuating cycle…. [S]aying it “wasn’t really an aggregate demand crisis but a financial crisis” is like saying “this man doesn’t have blood loss, he has a gunshot wound!”…

So, Professor Sachs, what did cause the enormous collapse in GDP?… The Great Vacation theory, what?

Franklin D. Roosevelt and the Press Liveblog WWII:

THE PRESIDENT: I want to give you something here that I think will be of great value… a statement made by the Generalissimo, Chiang Kai-shek…. I haven't seen anything printed about it…. I think this probably is your lead: He states that he can, therefore, give his solemn word that China as well as her allies have no territorial ambitions in Thailand, and have no intentions of undermining her sovereignty and independence. The Thais, however, should recognize the fact that the territory and freedom of Thailand can only be restored to her through the victory of China and her allies. That is a pretty simple, straight declaration of the policy not only of China but also of the United Nations, in regard to Thailand….

I am trying to excerpt a short paragraph from John Holbo for my "Noted for [Day X]" feature: This is what I come up with…

• John Holbo: Weird Arguments About Love and Marriage: "Douglas Wilson… [makes] bad arguments… from a failure to appreciate the sense in which theological arguments ‘can’t be offered’…. The problem isn’t that they can’t be offered – it’s a free country!… It’s that the person offering the argument can’t reasonably expect it to be accepted. It will be – should be – weighed in the balance as a private expression of preference. But someone else’s preference as to how I should behave doesn’t, automatically, carry much weight. Suppose your neighbor leans over the fence and says, 'Dear neighbor, I notice you tend to sleep in until noon on Saturdays. I wish you would get up by 8 AM. I have a moral view according to which people should get up by 8 AM on Saturday morning.' Your neighbor is free to say this. But he isn’t entitled to you taking him seriously. If you tell him to keep his opinions to himself and he gets indignant – 'that is a rigid standard for public discourse!' – the scene has crossed over into comedy. Best of all would be if he developed a mild persecution complex, slinking along your fence of a Saturday morning, a cross between the Underground Man and the Soup Nazi. Imagine a character who is always telling people what to order in restaurants and, when they refuse, rolling his eyes unto heaven: 'The early Christians were persecuted, too!'… [T]here is some confusion about what ‘respect’ for religious liberty properly entails. Legally and morally, people are inclined to treat religious convictions as more than mere 'private preference'. (If this weren’t the case, there wouldn’t be so many efforts to accommodate religious belief.) But obviously there is something problematic about obligatory 'respect' that treats everyone as having a duty to, sort of, half believe everything that anyone wholly believes, on religious grounds. (The Flying Spaghetti Monster is designed to embarrass this way of thinking, and rightly so.)… That’s not quite like having an established religion, more like semi-establishing all religions. Which some people may think sounds pretty good, actually. But it shouldn’t."

This is far too long. But I cannot compress it and stll do it justice. What do I do? To have every single "Noted for [Day X]" to have a:

• John Holbo: What John Holbo said

line is deeply inadequate as well…

• Paul Krugman: The Market Speaks: "What, then, are the markets actually telling us?… [L]ow interest rates are the sign of an economy that is nowhere near to a full recovery… high level of stock prices… a reflection of the growing disconnect between productivity and wages…. [A]lmost all of the economy’s major players are simultaneously trying to pay down debt by spending less than their income… this means a deeply depressed economy… [and] low interest rates… loosely… everyone wants to save and nobody wants to invest. So we’re awash in desired savings with no place to go… Under these conditions, of course, the government should ignore its short-run deficit and ramp up spending to support the economy. Unfortunately, policy makers have been intimidated by those false priests, who have convinced them that they must pursue austerity or face the wrath of the invisible market gods."

Jeffrey Frankel: Ronald McKinnon Claims that If RMB-$ Appreciation Does Not Reduce Trade Imbalances, Then RMB-$ Appreciation Would Not Reduce Trade Imbalances | Mummy CT scans show preindustrial hunter gatherers had clogged arteries | Brett Blakemore | National Geographic Found | Kit Whitfield's Blog | Volcanic Aerosols Tamped Down Recent Surface Warming | Jay Rosen: The present situation in the American press: a sketch for media historians | Ayelet the Forester and John the Shoeless on Used E-Book Sales |

Felix Salmon:

Where banks really make money on IPOs: Every time an IPO has a big pop on its opening day, the same tired debate gets reprised: did the investment banks leading the deal rip off the company raising equity capital?… I had sympathy with the bankers…. Today, however, I have to take all of that back. And it’s all thanks to Joe Nocera, who has a great column this weekend, where he uncovers a bunch of documents in one of those interminable securities lawsuits against Goldman Sachs. The documents should have been sealed; they weren’t. And now, thanks to Nocera, we can all see exactly where Goldman makes its money, when it comes to IPOs….

The lawsuit in question concerns the IPO of eToys, back in 1999. The company sold 8.2 million shares, raising $164 million; Goldman’s 7% fee on that amount comes to $11.5 million. If Goldman had sold the shares at $37 rather than $20, it would have received an extra $10 million — and what bank would willingly leave $10 million on the table?

What Nocera has discovered, however, is that Goldman was not leaving $10 million on the table. Instead, it was making more than that — much more — in kickbacks from the clients to whom it allocated hot eToys stock...

Scott Lemieux's Shorter Glenn Kessler: Raise the Green Lantern, Fact Chuck Edition:

Republicans aren’t lying when they say that President Obama doesn’t have a plan. Because if he was really behind a plan, he could shove it right down Congress’s throat. By having the leadership to lead, with leadership. Like that time Bill Clinton gave a speech and then something happened after that.

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

Jérémie writes:

Monetary policy and the search for yield: Neil Irwin writes that the S&P is yielding 6.7 percent right now (this is just 1 over a P/E ratio of 14.8). Now compare that yield of 6.7 percent to what a risk-free asset is paying right now. For 10-year Treasury bonds, that’s 1.8 percent. The gap between those two numbers, nearly 5 percentage points, is, in effect, the extra compensation investors receive for investing in risky stocks instead of safe bonds…. In the summer of 2007, the stock market earnings yield was 5.8 percent… [and] 10 year Treasury bonds were yielding 5.1 percent. And the current boom has almost nothing in common with the bubble that ended in March 2000… a 3.2 percent earnings yield… Treasuries… yielding 6 percent.

The S&P earnings yield is a real return. The 10-Year Treasury yield is a nominal return. He should be comparing the 6.7%/year equity yield to a -2%/year real return on short-term safe nominal Treasuries, or to the -0.3%/year real return on Treasury inflation-indexed securities.

We currently have an expected equity return premium of 7%/year or 8.7%/year, depending on how you measure it. Stocks are cheap.

Are there no conservative or lib-den members of parliament in Britain who love their country, and will vote no confidence tomorrow to end this disaster?

Jonathan Portes:

Not the Treasury view...: Believing in "miracles"? Self-defeating austerity and self-financing stimulus: Believing in "miracles"? The Prime Minister's speech on the economy on Thursday was, leaving the policy aside, notable for some of its analytical claims.  Simon Wren-Lewis's dissection is thorough and comprehensive; Danny Blanchflower and Adam Posen have a lengthy discussion here. In particular, much has already been written about the Prime Minister's misinterpretation of the OBR's position on the impact of fiscal consolidation on growth; for a thorough explanation, see Duncan Weldon.

German Heavy Tank, WWII Tactical and Technical Trends, No. 20, March 11, 1943:

As reported in the press and as previously indicated in Tactical and Technical Trends (No. 18, p. 6) a German heavy tank has been in action in Tunisia. So far as can be definitely determined, this is the first time the Germans have used a heavy tank in combat. Whether or not it is the Pz.Kw. 6 cannot be definitely stated. At least one heavy tank has been captured, and while complete details are not yet available, there is sufficient reasonably confirmed data to warrant at least a partial tentative description at this time.

The chief features of this tank are the 88-mm gun, 4-inch frontal armor, heavy weight, and lack of spaced armor. The accompanying sketch roughly indicates the appearance of the tank, but should not be accepted as wholly accurate.

John Maynard Keynes:

The General Theory of Employment, Interest and Money, chapter 24: [My] theory is moderately conservative in its implications…. The State will have to [i] exercise a guiding influence on the propensity to consume partly through its scheme of taxation, partly by fixing the rate of interest, and partly, perhaps, in other ways… [ii] influence… the rate of interest… [iii moreover] a somewhat comprehensive socialisation of investment will prove the only means of securing an approximation to full employment; though this need not exclude all manner of compromises and of devices by which public authority will co-operate with private initiative. But beyond this no obvious case is made out for a system of State Socialism…. If the State is able to determine the aggregate amount of resources devoted to augmenting the instruments [i.e., the level of public plus private investment,] and the basic rate of reward to those who own them [i.e., the interest rate], it will have accomplished all that is necessary….

Mark Thoma tries, but he fails. Either I am a bear of very little brain indeed, or Sachs is just not making any sense at all:

Economist's View: Crude Sachsism: On Twitter, [Sachs] goes a bit further:

@madarts13 @ktguru @joenbc @kdrum I don't. I think short-run stimulus has little effect on GDP. I want long-term growth strategy instead. — Jeffrey D. Sachs (@JeffDSachs) March 9, 2013

He can think whatever he wants, but the evidence says otherwise. In a severe recession government spending multipliers are much larger than in normal times. That's why this statement is so puzzling:

…First off, here is what I mean when I say that Krugman is a crude Keynesian... There are four elements of crude Keynesianism and, indeed, of Krugman's position: (1) The belief that multipliers on tax cuts and transfers are stable, predictable and large; (2) The belief that America's employment and growth problems are overwhelmingly cyclical, not structural, and therefore remediable by short-term aggregate demand management; (3) The belief that a growing debt burden is a minor nuisance as long as the economy is in recession; (4) The belief that for practical purposes, the most urgent need is to raise aggregate demand rather than to focus on the quality and type of public spending. I believe that all of these positions are misguided.

Again, he can believe whatever he wants, but the evidence is against him.

• Sheryl Sandberg: Anna Holmes: Maybe You Should Read the Book: The Sheryl Sandberg Backlash | Katha Pollitt: Who's Afraid of Sheryl Sandberg? | Rebecca Traistor: Sheryl Sandberg's 'Lean In' offers a feminist view from the top

• Paul Krugman: The Market Speaks: "What the [repeated] bad predictions [from economists, politicians, and lobbyists] tell us is that we are, in effect, dealing with priests who demand human sacrifices to appease their angry gods — but who actually have no insight whatsoever into what those gods actually want, and are simply projecting their own preferences onto the alleged mind of the market."

• Peter Dorman: Sinnlos, Part II: "Just when you thought it might be possible to have a rational discussion about the Eurozone situation that included mainstream German opinion, along comes Hans-Werner Sinn… to prove that you can’t…. They begin by announcing, 'There is a large body of literature on global imbalances. To date, however, little attention has been paid to the imbalances within the EU or the Eurozone…' Yes, why stoop to read Paul Krugman, George Soros, Martin Wolf or any of the thousands of less prominent writers on this topic, who have been fixated on these imbalances from the moment peripheral bond spreads exploded?  This keeps our thinking pure. But let’s not get distracted.  Their real point is that they have discovered something new and significant: there are large trade imbalances within Europe, augmented by capital flight!  Who could have imagined?"

It is a mystery. You do not say "X says Y" and then cite to a work in which "X says not Y". You simply do not do that:

Mark of West Coast Stat Views: Joe Scarborough and Jeffrey D. Sachs… start with the following paragraph:

Dick Cheney and Paul Krugman have declared from opposite sides of the ideological divide that deficits don’t matter, but they simply have it wrong….

As a commenter on Krugman's blog pointed out, if you click on Krugman's name in that paragraph, you'll end up at a post that starts as follows:

Right now, deficits don’t matter — a point borne out by all the evidence. But there’s a school of thought — the modern monetary theory people — who say that deficits never matter, as long as you have your own currency. I wish I could agree with that view — and it’s not a fight I especially want, since the clear and present policy danger is from the deficit peacocks of the right. But for the record, it’s just not right.

In other words, to support the claim that Krugman said deficits don't matter, Scarborough and Sachs point to Krugman saying explicitly that people who say deficits don't matter are wrong. Krugman then spends pretty much the entire post arguing that deficits will matter a great deal once we're out of the liquidity trap.

Hans Roth: Eastern Inferno:

The muddy season! Bright sunshine follows snow and hailstorms which have swept across the steppe. The thaw starts to settle in after three sunny days. On the fourth day it is so warm that the water mixes with the soil and dissolves everything into layers of mud and dirt.

Last weekend the melt water reached up to our knees and filled up the creeks and gardens. The surrounding landscape is a giant lake. Our vehicles are stuck. It takes us three to four days to move a single vehicle which before took only an hour.

Paul Krugman:

Gone Deficit Gone: So says the CBO, although not directly…. [W]hen the economy slumps, revenues fall and some kinds of expenditure, like unemployment benefits, rise. You want to take out these “automatic stabilizers” when assessing the underlying state of the budget…. [W]e don’t have to balance the budget to have a sustainable fiscal position; all we need is to ensure that debt grows more slowly than GDP. So CBO… estimates that in fiscal 2013 these stabilizers will amount to $422 billion, accounting for just about half of a projected $845 billion deficit…. [T]here’s about $11.5 trillion in federal debt in the hands of the public…. [N]ominal GDP will in future grow by [more than] 4 percent per year, half from real growth and half from inflation. This means that the sustainable deficit is 4 percent of $11.5 trillion, or $460 billion. Hey, we’re there! And next year the adjusted deficit is projected to be much smaller

Yes, late this decade deficits will start to rise again thanks to rising health costs and an aging population, yada yada. But I have yet to hear a coherent argument about why the long-term problem of paying for the benefits we want — which will eventually have to be resolved through a combination of cost savings and revenue increases — should constrain our fiscal policy right now, in the midst of what remains a terrible economic slump. And I would say that the figure above is, in fact, a portrait of deeply irresponsible fiscal policy — because it is just crazy that in this deeply depressed economy we are now pursuing a fiscal policy that is tighter than the policy we followed at the height of the housing bubble.

So let’s try to stop doing that. And everyone repeat with me: there is no deficit problem.

• Cosma Shalizi (November 16, 2010): The Neutral Model of Inquiry (or, What Is the Scientific Literature, Chopped Liver?): "There is, so far as I know, no Journal of Evidence-Based Haruspicy filled, issue after issue, with methodologically-faultless papers reporting the ability of sheeps' livers to predict the winners of sumo championships, the outcome of speed dates, or real estate trends in selected suburbs of Chicago. But the difficulty can only be that the evidence-based haruspices aren't trying hard enough, and some friendly rivalry with the plastromancers is called for. It's true that none of these findings will last forever, but this constant overturning of old ideas by new discoveries is just part of what makes this such a dynamic time in the field of haruspicy. Many scholars will even tell you that their favorite part of being a haruspex is the frequency with which a new sacrifice over-turns everything they thought they knew about reading the future from a sheep's liver! We are very excited about the renewed interest on the part of policy-makers in the recommendations of the mantic arts…"

• Caroline Minter Hoxby and Chris Avery: The Missing "One-Offs": The Hidden Supply of High-Achieving, Low Income Students: "We show that the vast majority of very high-achieving students who are low-income do not apply to any selective college or university. This is despite the fact that selective institutions would often cost them less, owing to generous financial aid, than the resource-poor two-year and non-selective four-year institutions to which they actually apply. Moreover, high-achieving, low-income students who do apply to selective institutions are admitted and graduate at high rates. We demonstrate that these low-income students' application behavior differs greatly from that of their high-income counterparts who have similar achievement. The latter group generally follows the advice to apply to a few 'par' colleges, a few 'reach' colleges, and a couple of 'safety' schools. We separate the low-income, high-achieving students into those whose application behavior is similar to that of their high-income counterparts ('achievement-typical' behavior) and those whose apply to no selective institutions ('income-typical' behavior). We show that income-typical students do not come from families or neighborhoods that are more disadvantaged than those of achievement-typical students. However, in contrast to the achievement-typical students, the income-typical students come from districts too small to support selective public high schools, are not in a critical mass of fellow high achievers, and are unlikely to encounter a teacher or schoolmate from an older cohort who attended a selective college. We demonstrate that widely-used policies–college admissions staff recruiting, college campus visits, college access programs–are likely to be ineffective with income-typical students, and we suggest policies that will be effective must depend less on geographic concentration of high achievers."

• Alexis C. Madrigal: A Day in the Life of a Digital Editor, 2013: "You hope hope hope that this amounts to something sustainable. Because I owe it to this institution to help ensure its survival. I'll be damned if The Atlantic dies with my generation, if all that is left of it when I leave is some moldering books and cold servers. Quite possibly, I would get to the gates of heaven and Ida Tarbell would be sitting there like, 'Wait, wait, you're one of those guys who let The Atlantic die?' And poof: trapdoor in the clouds, burning in hell for all eternity. Actually, strike that, I'd probably get stuck in purgatory rewriting press releases about corporate sustainability, forced to eat tuna sandwiches every day for lunch. Anyway, the biz ain't what it used to be, but then again, for most people, it never really was. And, to you Mr. Thayer, all I can say is I wish I had a better answer."

Matt O'Brien:

No, the United States Will Never, Ever Turn Into Greece: Have you read the opinion section of any newspaper in the last three years? Yes? Then there is a better-than-even chance you have come across some impressive-sounding analyst predict that the United States is "turning into Greece."… As far as scare stories go, this is pretty damn scary. It's also just a story….

[An] 80 percent… [debt-to-annual-GDP ratio] was the bright white line drawn in a recent paper by David Greenlaw, James Hamilton, Peter Hooper and Frederic Mishkin. Greenlaw & Co. ran regressions on 20 advanced economies from 2000 to 2011 to see if there's a relationship between a country's borrowing costs one year and its… debt… the previous one…. They found a link… increasing… debt levels [above 80%] by 1 percentage point of GDP would increase borrowing costs by 4.5 basis points (or 0.045 percentage points)… This is a big deal…. Our gross debt to GDP is already at 102 percent -- enough to send our borrowing costs soaring…. If they are right. They almost certainly are not…. (1) For countries that can borrow in their own currency, like the U.S., higher debt doesn't clearly lead to higher interest rates. (2) For countries that don't control their currencies, like Greece, it's borrowing too much from foreigners (NOT borrowing too much in general) that clearly leads to much higher borrowing costs….

The American Experience: America and the Holocaust: People & Events :

We Will Never Die Pageant: On a stage in Madison Square Garden, in front of a backdrop of two towering tablets inscribed in Hebrew with the Ten Commandments, a rabbi opened a performance dedicated to the murdered Jews of Europe. "We are here to say our prayers for the two million who have been killed in Europe," he announced, "because they bear the names of your first children -- the Jews.... We are not here to weep for them." He continued, "We are here to honor them and to proclaim the victory of their dying. For in our Testament are written the words of Habakkuk, prophet of Israel, 'They shall never die.' "

Look at the bleeding edge of urban North Atlantic or East Asian civilization, and you see a world fundamentally unlike any human past. Hunting, gathering, farming, herding, spinning and weaving, cleaning, digging, smelting metal and shaping wood, assembling structures--all of the “in the sweate of thy face shalt thou eate bread” things that typical humans have typically done since we became jumped-up monkeys on the East African veldt--are now the occupations of a small and dwindling proportion of humans. And where we do have farmers, herdsmen, manufacturing workers, construction workers, and miners, they are overwhelmingly controllers of machines and increasingly programmers of robots. They are no longer people who make or shape things--facture--with their hands--manu.

At the bleeding edge of the urban North Atlantic and East Asia today, few focus on making more of necessities. There are enough calories that it is not necessary that anybody need be hungry. There is nough shelter that it is not necessary that anybody need be wet. There is enough clothing that it is not necessary that anybody need be cold. And enough stuff to aid daily life that nobody need feel under the pressure of lack of something necessary. We are not in the realm of necessity.

What do modern people do? Increasingly, they push forward the corpus of technological and scientific knowledge. They educate each other. They doctor each other. They nurse each other. They care for the young and the old. They entertain each other. They provide other services for each other to take advantage of the benefits of specialization. And they engage in complicated symbolic interactions that have the emergent effect of distributing status and power and coordinating the seven-billion person division of labor of today’s economy. We have crossed a great divide between what we used to do in all previous human history and what we do now. Since we are not in the realm of necessity, we ought to be in the realm of freedom.

• Rick Perlstein reads Bob Woodward: "Woodward's three-volume series of books… 2002… Bush At War…. 'The George W. Bush who strides across the pages of Bush at War', I wrote, 'was a superhero.... And while the picture of the commander in chief in Plan of Attack (2004)… was rounder, the White House found if flattering enough to put it on the recommended reading list as they prepared for the Bush-Cheney re-election campaign.'… Then came 2006… State of Denial… depicted [Bush as] a dangerous idiot…. Descriptions that were deferentially polite in 2002—'Bush, 55, has a quick, joshing manner'—became downright rude by 2006. ('Bush and Rove in particular dwelled on "flatulence"—passing gas—and they shared an array of fart jokes.' In 2002 Woodward's Bush was a careful empiricist…. In 2006? He's an ignoramous…. As I wrote, 'The two most recent books end with the same interview: Mr. Woodward’s several hours with the President on Dec. 10 and 11, 2003. Both books contain the same exchange: Mr. Woodward says, "But we have not found any weapons of mass destruction", and Mr. Bush replies, "We have found weapons programs that could be reconstituted."… the 2004 and 2006 versions end with him characterizing the same interview entirely differently. 'True, true, true', the President is quoted as saying in Plan of Attack. Mr. Woodward then offers this paraphrase of what Bush said next: 'He contended that they had found enough'. That line, in 2004, 'He contended that they had found enough', comes off as Woodwardian self-criticism: the last word belongs to the president, turning the reporter into a quisling who would happily leave a dictator in power because he only had a little bit of weapons of mass destruction. In 2006, however, [Woodward] gives himself the last word, as an internal dialogue: 'It had taken five minutes and 18 seconds for Bush simply to acknowledge the fact that we hadn’t found weapons of mass destruction.' It completely changes the meaning of the very same discussion: the man who came off as a steely protector of the nation when he was up above 50 percent in the approval ratings has suddenly become feckless now that he was below 40…. Continue reading Bob Woodward. But not the prose. You won't learn much from that. Read the man instead. That way you'll learn what the people in power think about what you're supposed to think."

• Teresa Nielsen Hayden: tnielsenhayden (tnielsenhayden) on Twitter: "The role of journalism in a democracy is a public trust. It is much abused. It is a scandal. Writers aren't expensive, but they aren't free. If Atlantic isn't paying them, someone else is. By not paying its writers, the Atlantic has thrown itself open to manipulation, astroturfing, and other disinformation. The principle you learn in Cinema 101 is that movies don't film themselves. There's always someone behind the camera. The same goes for journalism. We thought we knew what it was: this publication hires these writers. Now we know other agendas and relationships were in play, and we don't know what they were. So yes, we feel betrayed."

You know who else besides Theodore Adorno thought that German jazz was a degenerate art form?

Robin Harding:

US adds 236,000 jobs in February - FT.com: Non-farm payrolls rose by 236,000 in February, compared with analyst forecasts of 165,000, as the US labour market continues to strengthen. The unemployment rate fell from 7.9 per cent to 7.7 per cent…

Note that the employment-to-population ratio is exactly where it was a year ago:

In fact, note that the employment-to-population ratio today is exactly where it was three-and-a-half years ago, at the recession trough:

There has been no closing of the output gap and no decline in the unemployment rate from putting a greater share of the adult population to work. All of the decline in the output gap and all of the decline in the unemployment rate is from the collapse in labor force participation. It is true that demography would lead us to expect labor force participation to fall by between 0.1 and 0.2 percentage points per year. But even over 3.5 years that 0.5 percentage point decline in potential labor force participation is absolutely dwarfed by the 5 percentage-point decline in the employment-to-population ratio: one-tenth of our labor market shift relative to 2007 can be attributable to demography; nine-tenths are the result of the Lesser Depression.

The parry I get from the people in Washington is: "Britain, Japan, and Europe are doing much worse!" True. So?

Boris Gorbachevsky and the rest of the Red Army fail to trap the Nazi Ninth Army in the Rzhev Salient:

After the liberation of Rzhev, our forces kept moving forward, pursuing the Germans as they withdrew from the Rzhev salient. We didn`t have time to stop and rest, for it was important not to let the enemy withdraw without hindrance and consolidate in new positions.

With constant skirmishing against enemy rear guard units, we advanced, winning back a mutilated and emptied native land. But we also confronted another familiar antagonist. The first warm breath of spring had melted almost all the snow, turning it into slush, and soon the roads turned into a swampy sludge – we marched, barely able to move our feet.

Overcoming with unbelievable labors the onset of the spring rasputitsu, the division moved westward, approaching Smolensk.

The land around had been disfigured by the blasts of bombs and shells and had been filled with mines,There was a lot of trouble with the mines, which also slowed our movement. At the same time, we had to lug everything for ourselves-our rifle, cartridges, kit bag, gas mask, sapper’s shovel, canteen, and grenades.

Outsourced to Kevin Drum:

Quote of the Day: Joe Scarborough vs. Joe Scarborough: Compare and contrast. Here is Joe Scarborough during his debate with Paul Krugman on Monday:

Q: Would you support an extra $200 billion a year in spending on infrastructure and education right now?

A: Oh yeah. I talk about it all the time. I go around and I talk to Republicans all the time.

And here is Scarborough writing with Jeffrey Sachs in the Washington Post today:

Both of us opposed the [2009] stimulus package, the increased spending in Afghanistan and Washington’s fixation on short-term thinking. We said that the only result of this short-termism would be exploding deficits. And well before Obama himself acknowledged the point, we said that there was no such thing as “shovel-ready” projects worthy of public investment in the 21st century.

I'm confused. During the worst of the financial crash, with GDP plummeting like a rock, Scarborough opposed stimulus spending and believed that there were no infrastructure investments worth pursuing. But today, with the economy fragile but recovering, he thinks it would be great to spend $200 billion more on infrastructure and education.

Something ain't right here. And I have to say, for a guy who talks about this extra spending "all the time," he sure missed a chance to do it again in today's op-ed. I wonder what Joe really thinks?

L'Esprit de l'Escalier:

• Re: 'Lebergott’s reference to the German “labor-force camps” and Soviet “labor camps” in the quotation is, I would say, unfortunate, inasmuch as it could perhaps be read as drawing or implying some kind of ‘moral equivalence’ between those labor camps and the “made work” or “emergency work” of the New Deal. All I can say is I very much doubt that Lebergott intended to suggest or assert, as the OP puts it, that “people working for the WPA were morally the same as concentration camp workers in Germany in the 1930s.” But the quote is, at best, inartfully worded and is open to more than one interpretation.' I would say differently: I would say that it is all but impossible to read Lebergott without seeing him as implicitly drawing some sort of equivalence between Nazi Labor Camps and the WPA. "Labor Camps" is, however, important. It might not be wise for me to point out that the people actually in the camps found very important differences between being in a Nazi Labor Camp (Masurian Lakes), a Nazi Concentration Camp (Dachau), and a Nazi Extermination Camp (Auschwitz). You survived the first and were then drafted into the army upon release. You maybe survived the second. You did not survive the third…

• Mr. Kristof, last week New York Times reporter Jodi Kantor ripped a quote from Facebook COO Sheryl Sandberg out of context--turning musing about how she had never thought that she would wind up as a corporate executive into an arrogant claim to entitlement, thus creating a situation in which, in the words of Anna Holmes, people were issuing "damning verdicts on a book they had not even bothered to read." A couple of months ago you wrote a column headlined "Profiting from a Child's Illiteracy" that produced extremely strong criticism as badly misinformed from people like Peter Edelman of Georgetown, Harold Pollack of Chicago, and Robert Greenstein at the Center for Budget and Policy Priorities who really ought to be at the front of your Rolodex for you to talk to before you write columns about social policy. I have a sense that for a while--ever since the runup to the Iraq War, perhaps--there has been diminishing energy on the part of New York Times reporters and columnists to familiarize and educate themselves about the subject matter before they start writing, and as a result diminished influence on the New York Times of what people in places like this do and know. Do you see the same diminishing energy spent on acquiring substantive subject-matter knowledge that I see? If not, why not? If you do, what steps are you taking to try to fix it?

• Mark Thoma sends us to Richard Schmalensee and Robert Stavins: Economist's View: 'The Sordid History of Cap-and-Trade': "The sordid history of Congressional acceptance and rejection of cap-and-trade: Implications for climate policy, by Richard Schmalensee and Robert N. Stavins, VoxEU.org: Not so long ago, cap-and-trade mechanisms for environmental protection were popular in Congress. Now, such mechanisms are denigrated. What happened? This column tells the sordid tale of how conservatives in Congress who once supported cap and trade now lambast climate change legislation as ‘cap-and-tax’. Ironically, conservatives are choosing to demonize their own market-based creation. The successful conservative campaign that disparaged cap-and-trade means it may now be politically impossible to promote it in the US. The good news? Elsewhere, cap and trade is now a proven, viable option for tackling large-scale environmental problems…"

• Gavyn Davies: Is financial risk becoming excessive again?: "Fed Governor Jeremy Stein… concluded that a potentially dangerous 'reach for yield' might be taking place in US credit markets, and argued further that it might become appropriate to deal with this by raising interest rates…. The Fed doves have, however, now fought back….. So how can we tell whether this really is becoming a problem? This is where the BIS research enters the picture. In the past, the key metric used by central bankers in deciding whether the economy is becoming overheated has been the output gap. When output is above “potential”, the traditional argument is that policy should be tightened to prevent consumer price inflation from rising. The mistake made before 2008 was to place so much weight on this metric, and on the actual behaviour of the CPI, that all other evidence was ignored. In particular, falling real interest rates, surging credit growth and rocketing house prices, were given no weight in the monetary policy debate. Absolutely none!

• Paul Krugman: Progressives Worry Too Much About Being 'Respectable': "Larry Summers is… indistinguishable from me on macro-policy. And he may be a bit to the left, because he’s even more certain than I am… that some extra spending now will actually help us more in fiscal terms. So he published a piece in the Financial Times that was meant to be a big statement about this. But before he got to that, he spend three paragraphs about the importance of dealing with the deficit in the medium term… to establish that ‘I am a respectable person; I am not like that rabble-rouser, Krugman.’ And… nobody inside the Beltway… got past those first three paragraphs. Larry['s] clearing his throat… drowned out the message."

Harold James of the "Chindits", behind Japanese lines in Burma:

The dropping area was strewn with ration tins, parachutes and mule fodder, and the men soon got to work collecting the stores. Burmese from the nearest village were called in to help, and in return were given the parachutes which they greatly prized, cloth being a scarcity. We soon learned that valuable information could often be obtained for a piece of parachute. The Gurkhas made handerchiefs and ration bags for themselves, and lanyards from the cords.

Four tins were dropped with each parachute, padded with a shock absorber fastened by thick webbing – although this did not always work if the parachute should break loose. The four tins could conveniently be loaded each side of a mule, allowing extra rations to be carried as reserve, and, as on this occasion, the supplies could be easily transported from the dropping zone to our camp for distribution to the men.

Middle Class Political Economist:

Last week the Washington Post ran a story on the weaknesses of 401(k) retirement accounts, focusing on the the fact that 1/4 of Americans with 401(k)'s have used them to meet current income needs. Among people in their forties, the share rises to 1/3,  an astounding figure considering how close this group is to retirement. In the wake of the Great Recession and continuing job market problems, it is perhaps not surprising that 28% of 401(k) account holders presently have loans against their accounts. As the Post delicately puts it,

Many employers have embraced 401(k) and other defined-contribution accounts as a way of helping workers save for retirement while relieving themselves of the financial risks that come with managing a traditional pension plan. In theory, 401(k) accounts are better suited to an economy in which workers are changing jobs more frequently than ever because the accounts can be rolled over from previous employers.

A more accurate way of saying this would be that employers have embraced 401(k) plans because they are less expensive than providing pensions, thereby "cut(ting) overall employee compensation," and that 401(k) plans don't take into account the stagnation of real wages, points well made by commenter "Sean2020." Moreover, as I reported before, 49% of private sector worker have neither a 401(k) or a defined benefit pension plan. Thus, they have no supplement to their eventual Social Security benefits unless they are able to save outside of a 401(k).

Mark Thoma sends us to Neil Irwin on Bernanke and Yellen versus Stein:

Jeremy Stein… argued… that there are already signs of overheating in the markets for certain kinds of securities, including junk bonds and real estate investment trusts…. If the last 15 years have taught us anything, it is that financial bubbles can wreak huge damage to the economy, so it’s worth it to try to nip them in the bud. The two most powerful Fed officials… offered… riposte[s]…. 'Long-term interest rates in the major industrial countries are low for good reason', Chairman Ben Bernanke said Friday evening…. Vice-chair Janet Yellen chimed in Monday morning… "there are some signs that investors are reaching for yield, but I do not now see pervasive evidence of trends such as rapid credit growth, a marked buildup in leverage, or significant asset bubbles that would clearly threaten financial stability." So the Bernanke-Yellen response to the Stein-George argument boils down to a polite version of this: Are you crazy? Unemployment is really high! Inflation does not appear to be much of a threat! Why should we cripple the prospects of economic recovery just because investors may be paying too much for certain types of corporate bonds and end up losing money?

Ben S. Bernanke: Thoughts on Long-Term Interest Rates

Why are long-term interest rates so low in the United States and in other major industrial countries? At first blush, the answer seems obvious: Central banks in those countries are pursuing accommodative monetary policies to boost growth and reduce slack in their economies…. [But a] more complete explanation of the current low level of rates must take account of the broader economic environment…. [I]t is useful to decompose longer-term yields into three components… expected inflation… the expected path of short-term real… rates; and… the term premium….

The recent emergence of Obama Federal Reserve Board appointee Jeremy Stein as the intellectual leader of those engaged in trying to push the Federal Reserve to abandon its policy of persistent low interest rates and massive asset purchases as soon as possible raises the task of understanding the argument for monetary tightening now--and, if it turns out to be wrong, critiquing it--to PRIORITY #1 RED DELTA OMEGA.

In general, when I embark on an understanding-and-critique task, I find myself in one of four situations. Sometimes the people I am reading are not as smart as I am and have not done their homework: they are my lawful prey. Sometimes the people are smarter than I am but have not done their homework: I critique them by doing yet more homework. Sometimes the people have done their homework but are not as smart as I am: I critique them by working hard to be smart.

Jonathan Chait:

World’s Wrongest Man Ventures Latest Prediction: Michael J. Boskin — former George W. Bush economic adviser, Hoover Institute fellow, and staunch advocate of conservative anti-tax doctrine — appears today, as is his wont, in The Wall Street Journal op-ed pages to warn that the Democratic president’s economic policies will lead us to misery…. Four years ago, Boskin penned a Journal op-ed whose thesis was captured in the headline, “Obama’s Radicalism Is Killing The Dow.” That was the signal for the Dow to go on a tear…. In 1993, Bill Clinton enacted an economic program centered around some public investment, coupled with deficit reduction with higher taxes on the rich. Boskin was very, very sure it would fail…. He made a series of predictions: “The new spending programs will grow more than projected, revenue growth will be disappointing, the economy will slow, and the program will reduce the deficit much less than expected.” Boskin repeated his prophecies of doom in a summerlong media blitz. Boskin labeled Clinton’s plan “clearly contractionary,” insisted the projected revenue would only raise 30 percent as much as forecast by dampening the incentive of the rich, insisted it would “take an economy that might have grown at 3 or 4 percent and cause it to grow more slowly,” and insisted anybody who believed in it would “Flunk Economics 101.” (The preceding pre-Internet quotes are all via a Lexis-Nexis search.) As it happened, literally every Boskin prediction turned out to be the opposite of reality….

Boskin decided to take his talents back to Washington. He had spotted a brilliant new economic mind in Texas governor George W. Bush. "These people were immensely impressed with him, how quick he was to pick stuff up," Boskin said. "His instincts were all very good, very much market-oriented; that created a very, very favorable impression." Boskin… did return to public punditry to insist that George W. Bush’s tax cuts would reduce revenue by far less than the official forecasts predicted….

Now, in defense of Boskin, he is probably suffering from a large dose of bad luck on top of a horrendously wrong ideology…. If you chained a thousand Boskins to a thousand keyboards for a thousand years, eventually one of them would make a correct prediction…. [I]n addition to being in thrall to a rigid and disproven ideology, Boskin suffers from unbelievably bad timing. Any investors who have actually put real money on the line after listening to him deserve the punishment they’ve received.

• Joe Weisenthal: Bersani's First Priority: Get Out Of The Austerity Cage: "Bersani… is… attempting to form a government… [and] has a good first priority: 'Michael McKee…. First priority: get out of "austerity cage."' The idea of loosening the austerity cage is growing a bit more popular in Europe. Yesterday Bloomberg reported that EU Commissioner Olli Rehn said it may be appropriate to loosen some deficit targets."

• Steve Benen: A tale of two falsehoods: "Education Secretary Arne Duncan and House Speaker John Boehner both… made claims that were not true…. Duncan acknowledged that he'd made a mistake, apologized, and set the record straight…. Boehner told NBC, "[T]here's no plan from Senate Democrats or the White House to replace the sequester." This, too, was fact-checked and also proven to be incorrect…. Boehner's office actually doubled-down on the lie, saying the falsehood is true if Republicans are allowed to change the meaning of basic words [like 'plan' and 'replace']"

• Timothy Burke: The reality of MOOCs is something hypesters remain defiantly unacquainted with: "Digitization in higher education has already often been a powerful, transformative force…. MOOCs… may pretty much kill off preceding forms of for-profit online education, most of which make even the most half-assed MOOC look good by comparison…. MOOCs do their business out in the open…. The University of Phoenix and its ilk made it impossible for to see who was teaching, what their qualifications or skill as a teacher might be, or what a class was like until you were signed on as a paying customer…. [E]ven if they don’t succeed in being either the magic edu-topia or devilish capitalist plot… they… [bring] academics into contact with a wider range of the public… [like] Wikipedia, digital culture, crowdsourcing and so on…. MOOCs aren’t the best or most generative way I can think of to open classrooms and subject expertise to different kinds of feedback and pressure, but they are A way for that to happen. Yes, that means that Thomas Friedman’s latest blandulations have some validity to them, but roughly for the same reason that it’s possible to think that an astrological forecast has some truth in it: throw enough conventional wisdom and irrefutable fortune-cookie sloganeering at the wall and some of it’s bound to stick."

Henry Farrell:

Great sentences on the modern condition: This Strossian insight brought to you by The Browser

Amazon isn’t a store, not really. Not in any sense that we can regularly think about stores. It’s a strange pulsing network of potential goods, global supply chains, and alien associative algorithms with the skin of a store stretched over it, so we don’t lose our minds.

Shares of GDP

The housing boom reached its peak in mid-2005. Thereafter, for two and a half years, from mid-2005 to the end of 2007, the economy underwent a smooth long-run adjustment to changing expectations about the future. Housing went from being a sector to invest in to a sector to avoid. Residential construction fell by 2.5% points. But the money that would have funded housing went elsewhere--0.5% points of it into business equipment investment, and 2.0% points of it into exports--and full employment was maintained.

The original argument against expansionary fiscal policy in the current conjuncture was that it was not worth undertaking because of crowding-out. Fiscal expansion would push up long-term real interest rates and that would diminish private investment. The net effect on demand, employment, and spending would be zero--or even less than zero: the "expansionary austerity" meme.

The Keynesian counter-argument was that accommodative monetary policy would prevent any crowding out. That counter-argument was dismissed with the claim that while central banks controlled short-term interest rates, long-term rates had a mind of their own, and that bond markets would require sacrifices to make it clear that debt would never explode in order to maintain or restore their confidence.

Years passed, It became clear that unprecedented volumes of bond issues issues were not in fact putting upward pressure on long-term interest rates--save in eurozone countries that had a hard exchange rate peg and no ability to control their own monetary policy.

The argument against expansionary fiscal policy was counterproductive shifted.

Brad DeLong : Great Depression Revisionism Blogging: The Council on Foreign Relations Crashes-and-Burns in Real Time...: The speaker's list for the Council on Foreign Relations "A Second Look at the Great Depression" conference on March 30 is out, and it is a doozy--even the Heritage Foundation would never have dared to put forward a speaker's list so partisan, so biased, and with so few speakers with more than an inch-deep knowledge of the Great Depression. Jamie Galbraith, Nick Taylor, and Jonathan Alter are all by themselves holding down the center and the left of the political spectrum. And Jamie and Richard Sylla are the only people holding down the non-Chicago and non-goldbug-wingnut part of the economic spectrum.

In general, when you have a panel at a conference about an issue, you find (a) the smartest and best-informed person who thinks "yes," (b) the smartest and best-informed person who thinks "no," and (c) somebody thoughtful in the middle to hold the balance. That is... not the strategy that the Council on Foreign Relations has followed in this case.

Over the weekend I have gotten two three four copies of the program in the email--all with accompanying commentary that sounds somewhat... panicked:

The CFR Board is aware of the situation...

Who would you recommend as replacement speakers? Preferably not more New Deal-denialists..."

The CFR... is... perhaps belatedly getting worried about a lack of balance...

A perverse part of me wants to watch them go ahead...

They are looking to make the speaker's list less biased...