Grasping Reality on TypePad, by Brad DeLong

Loukas Karabarbounis and Brent Neiman: The Global Decline of the Labor Share: "The stability of the labor share of income is a key foundation in macroeconomic models. We document, however, that the global labor share has significantly declined since the early 1980s, with the decline occurring within the large majority of countries and industries. We show that the decrease in the relative price of investment goods, often attributed to advances in information technology and the computer age, induced firms to shift away from labor and toward capital. The lower price of investment goods explains roughly half of the observed decline in the labor share, even when we allow for other mechanisms influencing factor shares such as increasing profits, capital-augmenting technology growth, and the changing skill composition of the labor force. We highlight the implications of this explanation for welfare and macroeconomic dynamics."

Charles Pierce: Politico's John Harris and Jim VandeHei, Starving and Dysentery-Ridden in the Jungle, Continue the War on Nate Silver Seven Months Past VE Day: "OK, so it's not really in Tiger Beat On The Potomac, but the interview granted to The New Republic by the Two Presiding Geniuses would 'win the morning' if it appeared in their own little fanzine. It's just that Drudge-whorish and link-baity…. 'IC: "What did you think of Nate Silver's coverage of the last election? Did you read it?"' 'JH: I will be drummed out of the profession, but I didn't. My plate is full here.' (Maureen Dowd taxes my intellect and I have to lay down for a spell, and then there's refreshing the Drudge site all day.) 'I know why people found him interesting and entertaining, and some people found him illuminating.' (Because he was right, and you people were idiots?) 'There are people in our gang' (Many of them journalists in the same sense that Jim Nabors was a Marine.) 'who think he is overblown and get worked up about Nate Silver. I don't give a damn.' (A well-wrought explanation of not doing your real job.)… 'I admire how he has built a franchise. I roll my eyes at how he gets up on his high horse quite a lot on different topics.' (Your high horse won't win you the morning, wonk. The morning is won in the gutter with Drudge.)"

Ryan Cooper: On Inflation Expectations and Central Bank Credibility: "I don’t think this about being irresponsible. I think the Fed has run into political and institutional barriers. They have no problem being irresponsible when it comes to unemployment because unemployed people have no power and the American power structure doesn’t care about them at all. Trying to boost inflation, on the other hand, means a direct threat to nominal creditors, i.e., rich people. To the extent that the expectations channel isn’t working, I doubt that this is about “credibility.” Instead people are rightly skeptical that the Fed could sustain even a mild burst of inflation in the face of what would be ferocious backlash from the creditor class."

Ed Luce: The Edward Luce Review of Hubbard and Kane: "Which brings me to the book’s two chief problems. The first is the history, which, while engagingly rendered, is too obviously retrofitted to the present. The authors’ choices tell a story in themselves. Rome, dynastic China, imperial Spain, the British and the Ottomans make sense. Each was the great power of its day. But the inclusion of Japan, the European Union and California is eccentric. The EU and California have no greater claim to having been great powers than Sacramento or Strasbourg have to being imperial cities. By including two relatively high tax and politically dysfunctional entities, Hubbard and Kane show their hand…. The second problem is the book’s diagnosis of what is ailing the US. Hubbard and Kane are right to see gridlock as a big problem. But their view of what is causing it is bizarre. …Forget the rise of China, the stagnation of US middle class incomes, or the drop down the ranks of international education tables. The biggest threat to US power comes from the mild (and ineffectual) attempts to curb how much money the rich can spend to influence elections. It is hard to know how to react to such reasoning, except to say that it is a pity."

Tim Kane replies to The Edward Luce Review of BALANCE: "Selecting the case studies was one of the biggest challenges we faced, and one we took seriously. To the charge of selecting cases that would help sell books, I plead guilty, but I don’t think that makes us eccentrics, nor should you buy the argument that these contemporary cases are irrelevant…. I find it hard to accept an argument against the inclusion of the Japan chapter because it may be the single most important contribution BALANCE makes: the idea of its Development Fuseki supermodel which is the standard growth strategy across Asia and arguably the rest of the world. Glenn and I also point out the limits of that supermodel, which is vital to understanding modern China (Luce’s main objected omission) and why America’s power is not threatened externally. America’s internal threat, however, can only be appreciated by examining failing modern welfare states in Europe and, importantly, California…. Gridlock is a symptom, not the core problem, which I hope we made plain enough in the text. There is a weakness in any democracy to tend away from responsiveness to the people and toward special interests, either rich external groups or incumbent internal groups. We finger both…. In fairness, Luce strikes many other points into our narrative that should give you, as they gave me, pause. More attention to Germany is deserved, and more as well to the attitudes of the voters and protesters in southern Europe. It may well be wishful thinking to imagine that the young realize the folly of welfare states erected by previous generations. I am guilty of hope, but also vigilance as the reason to hope. In other words, I remain confident that better days are ahead for America and Europe — though perhaps not immediately ahead."