Ryan Avent, Armed Cap-a-Pie, Enters the Lists Against the R-Team: Fiscal Expansion Is the Real Fiscal Prudence Weblogging
The Tribal Dislike of John Hicks and IS-LM: Wednesday Hoisted from the Archives from 1 1/2 Years Ago: History of Economic Thought Weblogging

Noted for May 29, 2013

Ampersand: "we know that free birth control can reduce abortion by 60%" | Mark Thoma sends us to Lucrezia Reichlin, Adair Turner, and Michael Woodford: Helicopter money as a policy option | 2013 Industry Studies Association Program | 4th Banque de France – Deutsche Bundesbank Macroeconomics and Finance Conference | Josh Israel: Former GOP Senators Bob Dole and Olympia Snowe: Republicans Must 'Rethink Their Approach As A Political Party' |

  • Simon Wren-Lewis: mainly macro: Debating Helicopter Money (while the lunatics continue to run the asylum): "Vox has published an excellent summary account of a debate between Adair Turner and Michael Woodford (skilfully moderated by Lucrezia Reichlin) on helicopter money. My line on helicopter money has been that it is formally equivalent to fiscal expansion coupled with an increase in the central bank’s inflation target (or whatever nominal target it uses), and so adds nothing new to current policy discussions.  I think the Woodford/Turner debate confirms that basic point, but as this may not be obvious from the discussion (it was a debate), let me try to make the argument here."

  • Ezra Klein and Evan Soltas: Wonkbook: The GOP’s dangerous Obamacare strategy: "They may be right about that, or they may be very wrong. But this is a theory that requires Republicans to knowingly damage America’s health-care system on the off-chance the damage is severe enough to help them accomplish a much larger policy goal. It’s a theory that requires them to choose to let problems fester because the pain is more politically useful than the cure. There’s an emergent argument, and some strong evidence, that Obamacare is going to work much better in 2014 than Republicans realize, at least in the states that are actually trying to implement it… even under the most optimistic possible future for the Republican Party, they don’t have anyone in the White House willing to sign repeal until 2017 — by which point it will likely be far too late. The question then is when the GOP makes sufficient peace with Obamacare that they can begin engaging with it constructively and passing bills that fix the parts they and their constituents don’t like. Those laws can, of course, be framed as victories for the Republican Party and admissions by Democrats that Obamacare is imperfect. That’s politics, and it’s fine. What’s dangerous is if the heighten-the-contradictions strategy the GOP is currently previewing persists after 2014, or even after 2016. At some point, if they can’t repeal Obamacare, they need to learn to live with it."

  • Walter Hickey: How The 1% Came To Dominate: "5 Charts That Show Why Some Countries Are Dominated By The 1%, And Others Are Not: Facundo Alvaredo, Anthony Atkinson, Thomas Piketty and Emmanuel Saez break down what it really means to be part of the top 1% of the income distribution. The paper diagnoses the resurgence of the economic domination of the top 1% in certain parts of the industrialized world as the result of four different causes: (1) The impact of tax policy, specifically cuts to the top rate. (2) A 'richer' view of the labor market, where cuts to the top tax rates lead management to increase their own compensation rather than growing enterprise employment. (3) Inherited wealth making a comeback. (4) The correlation between earned income and capital income. The paper has a wealth of great charts that point out why some industrialized nations have a top 1% that dominates their economy and others don't."

  • Andrew Fieldhouse: A review of the economic research on the effects of raising ordinary income tax rates: Higher revenue, unchanged growth, and uncertain but potentially large reductions in the growth of inequality: "Past reductions in top marginal individual income tax rates have had a statistically insignificant impact on growth and its driving factors—labor supply, savings, investment, and productivity growth. However, they have discernibly widened structural budget deficits and exacerbated income inequality…. The top U.S. income tax rate is currently well below best estimates of the optimal rate for revenue maximization… a revenue-maximizing top effective federal income tax rate of roughly 68.7 percent… nearly twice the top 35 percent effective marginal ordinary income tax rate that prevailed at the end of 2012…. Tax reform that broadens the tax base and minimizes tax avoidance opportunities actually increases the revenue-maximizing top marginal tax rate…. Analyses of top tax rate changes since World War II show that higher rates have no statistically significant impact on factors driving economic growth—private saving, investment levels, labor participation rates, and labor productivity—nor on overall economic growth rates…. Historically, decreases in top marginal tax rates have widened inequality of both pre- and post-tax income. This has been interpreted by some economists as marginal rate reductions providing a higher payoff to rent-seeking (i.e., using influence to 'bargain' a higher share of income at the expense of other workers)."

  • Diego Comin and Martí Mestieri: Technology and income dynamics: 1800-2000: "Two-hundred years ago, cross-country differences in income were relatively small…. Most economic studies of long-run development have tried to relate current income differences to pre-determined factors, such as genetic endowments, cultural differences, climate and institutions…. The contribution of technology to a country's productivity growth can be decomposed in two parts. One part is related to the range of technologies used, or equivalently to the lag with which they are adopted…. Productivity is also affected by the penetration rate of new technologies…. Comin and Hobijn (2010) showed that the diffusion curves for different countries have similar shapes, but displaced vertically and horizontally…. The horizontal shifter informs us about when the technology was introduced in the country. The vertical shifter captures the penetration rate the technology will attain when it has fully diffused…. We identify the extensive and intensive adoption margins for 25 significant technologies invented over the last 200 years…. Adoption lags have declined more in poor/slow adopter countries than in rich/fast adopter countries… the gap in penetration rates between rich and poor countries has widened over the last 200 years, inducing a divergence in the intensive margin of technology adoption."

  • Heebie-Jeebie: Minivet writes: "I'm pretty impressed at the reception Covered California (our health insurance exchange) has gotten for its unveiling of participating plans and their rates next year. (Detailed document here.) Short version: by aggressively negotiating with plans and pitting them against each other on a level playing field, rates might actually go down with health reform, even before subsidies. Even a naysayer declared himself impressed. Also, in California, 5 out of the 13 selected plans are publicly operated or affiliated, and so in their counties (which include some very populous ones) could conceivably act a bit like a public option over time. Lots and lots of caveats, but still, how far that little candle throws his beam, &c."