Noted for May 24, 2013
Andrew Sheng and Xiao Geng: The Night-Watchman State’s Last Shift | Linda Beale: Another reason for NOT cutting Social Security benefits--seniors poorer than you think | Kenneth Rogoff: Europe’s Lost Keynesians | Marty Weitzman: The Odds of Disaster: An Economist's Warning on Global Warming |
Paul Krugman: Macroeconomic Machismo: "It was obvious during the runup to the Iraq war that what was going on in the minds of many hawks — and not just the neocons — was not so much a deep desire to drop lots of bombs and kill lots of people (although they were OK with that) as a deep desire to be seen as people who were willing to Do What Has to be Done. Men who have never risked, well, anything relished the chance to look in the mirror and see Winston Churchill looking back…. And the austerian impulse is pretty much the same thing, except that in this case the mild-mannered pundits want to look in the mirror and see Paul Volcker. Much of the problem in trying to stop the march to war was precisely the fear of many pundits that they would be seen as weak and, above all, not Serious if they objected. Austerity has been very much the same thing — and again, it’s not just the right-wingers who are afflicted. Let me illustrate that point with two parallel diagnoses of economic crisis, 78 years apart. The first is from John Maynard Keynes, The Great Slump of 1930; the second from Barack Obama’s first inaugural, in January 2009…. Do you see where [Obama] goes wrong? Most of the way through, Obama is getting it right…. But then he suddenly swerves into the language of Very Serious People, talking about the need to make unpleasant decisions (which is always there, but if anything less so in a depression). I was very upset about this at the time, but not upset enough — for there, right at the beginning, was the austerian temptation, adulterating the message of the man who should have been that temptation’s fiercest opponent. So if you like, the problem is Seriousness rather than sadism. On foreign policy, it’s always 1938; on economic policy, it’s always 1979. And the colossal muddle goes on."
John Maynard Keynes: The Great Slump of 1930: This is a nightmare, which will pass away with the morning. For the resources of nature and men’s devices are just as fertile and productive as they were. The rate of our progress towards solving the material problems of life is not less rapid. We are as capable as before of affording for everyone a high standard of life—high, I mean, compared with, say, twenty years ago—and will soon learn to afford a standard higher still. We were not previously deceived. But to-day we have involved ourselves in a colossal muddle, having blundered in the control of a delicate machine, the working of which we do not understand. The result is that our possibilities of wealth may run to waste for a time—perhaps for a long time.
Barack Obama: We remain the most prosperous, powerful nation on Earth. Our workers are no less productive than when this crisis began. Our minds are no less inventive, our goods and services no less needed than they were last week or last month or last year. Our capacity remains undiminished. But our time of standing pat, of protecting narrow interests and putting off unpleasant decisions — that time has surely passed.
Victor Fuchs: GDP vs health care spending | The Incidental Economist: "An examination of data from the past 60 years for the economy as a whole and for health care expenditures indicates that there has been a robust relationship between the two. It seems premature to dismiss the sluggish economy as the major explanation for the spending slowdown of recent years. In the line graph, the economy is represented by the gross domestic product (GDP), which is the total value of all goods and services produced in a given year or its equivalent, the total income received by all contributors to production (e.g., labor, management, and capital). The GDP and national health care expenditures are adjusted for population growth and general inflation. Between 1950 and 2011, real GDP per capita grew at an average of 2.0% per year, while real national health care expenditures per capita grew at 4.4% per year. The gap between the two rates of growth — 2.4% per year — resulted in the share of the GDP related to health care spending increasing from 4.4% in 1950 to 17.9% in 2011. Most experts believe that a gap of close to this magnitude over many future years would have catastrophic consequences for the federal government and the U.S. economy."
Owen Zidar sends us to Facundo Alvaredo, Anthony B. Atkinson, Thomas Piketty, and Emmanuel Saez: The Top 1 Percent in International and Historical Perspective: "The top 1 percent income share has more than doubled in the United States over the last thirty years… other English speaking countries have also experienced sharp increases… [but] many high-income countries such as Japan, France, or Germany have seen much less increase…. Hence, the explanation cannot rely solely on forces common to advanced countries, such as the impact of new technologies and globalization on the supply and demand for skills. Moreover, the explanations have to accommodate the falls in top income shares earlier in the twentieth century…. We highlight four…. The first is the impact of tax policy…. Top tax rates have moved in the opposite direction from top income shares…. The second factor is indeed a richer view of the labor market, where we contrast the standard supply-side model with one where pay is determined by bargaining…. The third factor is capital income…. The fourth, little investigated, element is the correlation between earned income and capital income, which has substantially increased in recent decades in the United States."
Olivier Coibion, Yuriy Gorodnichenko, Lorenz Kueng, and John Silvia: Innocent Bystanders?: Monetary Policy and Inequality in the US: "We study the effects and historical contribution of monetary policy shocks to consumption and income inequality in the United States since 1980. Contractionary monetary policy actions systematically increase inequality in labor earnings, total income, consumption and total expenditures. Furthermore, monetary shocks can account for a significant component of the historical cyclical variation in income and consumption inequality. Using detailed micro-level data on income and consumption, we document the different channels via which monetary policy shocks affect inequality, as well as how these channels depend on the nature of the change in monetary policy."
Mark Schmitt: The emerald revolution: "It has become familiar to point out that Americans often think about politics in terms of the metaphor of family. Conservatives represent the strong father, liberals the nurturing mothers, government programmes denounced as the 'nanny state'. In the portrayal of politics on cable television and elsewhere in the media, though, it is not just family that supplies the metaphors, but a very particular and unlikely kind of family: the large Irish-American Catholic family. More specifically than that, the distinctive experience of the large Irish-American Catholic family in the north-east, in the years after World War II. Chris Matthews of MSNBC, perhaps the most obsessive promoter of the wait-till-Dad-gets-home school of politics, comes from a Philadelphia family of five brothers. Then there's Tim Russert, host of NBC's Meet the Press…. Maureen Dowd…. Patrick Buchanan…. Peggy Noonan…. Bill O'Reilly…. Is it any surprise that the first Democratic politician who has seemed to have O'Reilly's number was Senator Chris Dodd…. The thread linking these seven prominent voices is not religion so much as a common experience of family, economic mobility and the distinctive generational experience of the early Baby Boomers…. All of them promote a make-it-on-your own theory of politics, often illustrated by the point that growing up in a large family, you had to fight for whatever you could get: second helpings at dinner, a chance to talk or a moment of attention from that good-smelling dad in the few hours between the time he got home from work and when he turned the lights out at 9:30. Their family sagas involve chaos, bullying and endless competition among the siblings, offset by the adamantine moral truths of the father, the patient, quiet mother and the stable institutions of the community, a combination that to which they attribute their own success. All these observers also bring a sense of social class to their analysis of politics, but divorced from economic class. The fathers - Big Russ or O'Reilly's father - represent common sense. The key distinction is between the plain truths of working people - whether steelworkers or, as in O'Reilly's case, accountants - and the softer ideas of the elite…. Most Americans didn't grow up in large Irish-American families in the prosperous postwar suburbs…. Some of us are tired of our political discourse being dominated by the nostalgic metaphor of a certain kind of family that existed only briefly and probably wasn't really all that much fun to live in."
