Noah Smith Eats Greg Mankiw's Just Desserts
A Gallon of Milk, a Loaf of Bread, Homosexuals and Mexicans Who Know Their Place--and an End to the Acela--and Wilderness Is Paradise Enow!: I Am Now More than Half-Convinced That Erick Erickson Is a False-Flag Troll Weblogging

Noted for June 28, 2013

  • Mike Konczal: Can the Taper Matter? Revisiting a Wonkish 2012 Debate: "An objective bystander would say that if the taper is being read as tightening even though future expectations language is the same, it means that we should be throwing everything we have at the problem…. As Woodford writes, '[t]he most obvious source of a boost to current aggregate demand that would not depend solely on expectational channels is fiscal stimulus.' We should be expanding, rather than contracting, the portfolio channel, while also avoiding the sequester and extending the payroll tax cut. Arguments, like Woodford's, about the supremacy of any one approach tend to get knocked down by all the other concerns."
  • Joseph Fishkin: The Dignity of the South: "The North—the Union—won the Civil War. But to a remarkable extent, the South’s twentieth-century apologists won the peace. That is why we are having a conversation right now about the equal dignity of the Southern states rather than the equal dignity of Southern black voters."

  • Johannes Wieland: Just how helpful is inflation?: "In any data-consistent model the rise in inflation expectations from higher marginal costs cannot be expansionary, so that fiscal policy becomes much less effective. Consequently, in the calibrated model with credit frictions, demand-side policies are up to 50% less effective than in a standard new Keynesian model. This suggests that policy makers should be cautious in expecting large positive outcomes from such policies at the ZLB."

  • Corey Robin: If Reagan Were Pinochet… Sigh: "I want to highlight… the frequent comparisons members of Hayek’s circle made between Pinochet’s Chile and other countries. In a lot of the debate… defenders of Hayek von Pinochet tend to invoke Stalin, Pol Pot, or Mao. What’s interesting about that move is that a previous generation of defenders felt no need to go there at all. They actually thought Pinochet’s Chile compared favorably with…Reagan’s America: 'But even David Stockman, in his most ambitious budget cutting dreams, could not envision what is politically possible in the land of Augusto Pinochet. The Fortune article claims that in Chile, “the market’s invisible hand is an iron fist.”… But what is politically possible in authoritarian Chile, may not be possible in a republic with a congress filled with “gypsy moths” for whom political expediency often takes precedence over economic realities, especially in an election year.' That was Eric Brodin… of the Mont Pelerin inner circle."

  • Noah Smith: Noahpinion: Podcast: All about Abenomics: "The FT's Alphachat podcast. The main themes were: 1. Abe, and BOJ governor Kuroda, really did surprise me…. But that doesn't mean the monetary stimulus of Abenomics is necessarily going to work, because A) no one really knows how or if QE really works to raise inflation, and B) there are still doubts about the willingness of the powerful and conservative Japanese Ministry of Finance to allow higher inflation in the future. 2. The BOJ is wary of capital flight, which would raise government borrowing costs. Japanese investors and policymakers may not understand or recognize the difference between interest rate rises from a recovering economy and interest rate rises from capital flight. This may make the BOJ reluctant to follow through on its promises…. 3. Structural change might help the Japanese economy a lot, but it would involve wrenching social change that nearly everyone in Japan is dreading (though many believe the changes are inevitable). So don't expect too much out of the 'third arrow' of Abenomics: Audio

  • Matthew Yglesias: Obama climate speech: What the GOP should but won’t do in response: "In the real world, we know that whatever Obama says, Republicans will denounce it as job-killing overreach. But if they could take a deep breath and consider the national interest for a moment, they’d see that the best cure for the very real flaws in EPA regulation is comprehensive climate legislation featuring cap-and-trade or a carbon tax…. The right solution here is still what it was when Obama was first elected. Republicans ought to suck it up and recognize that a real legislative framework for tackling climate change is better than an ad hoc, executive-branch response…. There are serious problems with the path of unleashing the EPA on existing power plants, and if the GOP actually cares about making the situation better, they’ll do what they should have done years ago and come to the table with a serious alternative proposal."

  • Noah Smith: Some essential papers in behavioral finance: "Modern finance theory began with the notion of 'efficient markets', risk-return tradeoffs, and complete markets. That theory remains the mainstream in academic circles. But at least since the 80s, finance researchers have been noticing 'anomalies'… behavioral finance… includes a whole big eclectic mix of ideas and observations about market institutions, overall market movements, and information processing, and at this point is really just 'anything that isn't efficient-markets finance'… here are a few foundational papers…. "Speculative Investor Behavior in a Stock Market With Heterogeneous Expectations", by J.M. Harrison and David Kreps (1978)…. "On the Impossibility of Informationally Efficient Markets", by Sanford Grossman and Joseph Stiglitz (1980)…. "Do Stock Prices Move Too Much to be Justified By Subsequent Changes in Dividends?", by Robert Shiller (1981)…. "Information, Trade, and Common Knowledge", by Paul Milgrom and Nancy Stokey (1982)…. "Does the Stock Market Overreact?", by Werner DeBondt and Richard Thaler (1985)…. "Bubbles and Crashes in Experimental Asset Markets", by Vernon Smith, Gerry Suchanek, and Arlington Williams (1988)…. "Noise Trader Risk in Financial Markets", by J. Bradford De Long, Andrei Shleifer, Lawrence H. Summers, Robert J. Waldmann (1990)…. "Returns to Buying Winners and Selling Losers: Implications for Stock Market Efficiency", by Narasimhan Jegadeesh and Sheridan Titman (1993)…. "Boys Will Be Boys: Gender, Overconfidence, and Common Stock Investment", by Brad Barber and Terrence Odean (2001)…. "Hedge Funds and the Technology Bubble", by Markus K. Brunnermeier and Stefan Nagel (2004)…. "Subjective Expectations and Asset-Return Puzzles", by Martin Weitzman (2007)…. Anyway, these papers will get you started thinking about behavioral finance!"

  • Barry Eichengreen: Eurocrisis Conversation: "European officials and leaders were telling us at the beginning of the year that the crisis was over. I doubt that most people believed them, although the markets were surprisingly sanguine for a time… no real re-balancing within Europe, no progress on banking union, and no agreement on limited fiscal union. So, I do not think anything has been solved, which renders me more pessimistic with the passage of time.  My view has always been that there would be no Eurozone collapse… no signs of a miraculous resumption of growth… leaves only the option of a lost decade…. But increasingly I worry that the political system cannot support a lost decade." Screenshot 6 27 13 9 58 AM

  • * John Holbo:* The Original Liberal Fascist World War Z – Now on Blu-Ray! Liberal Fascism: Wings Over the World Edition Denial of (Security) Service Attacks & Zombie Film History Lesson Victorians in Orbit - or - How H.G. Wells Prevented Steampunk H.G. Wells's "Liberal Fascism" The Shape of Things to Come, by H. G. Wells Things to Come--Montage

Rob Wile: An Oral History of the Murphy-Ackroyd-Curtis "Trading Places" | Daron Acemoglu and James Robinson: Natural Resources and Political Institutions: The Rentier State | Charles Cook Political Report: "Two weeks ago, we moved this [Massachusetts Senate Markey-Gomez] race to 'Toss Up' based on polling, particularly Democratic U.S. Rep. Ed Markey’s less than stellar numbers, and the unpredictable nature of special elections. At the time, we did put a thumb on the scale for Markey. Not all that much has changed…" | Sticky Prices vs. Sticky Wages: A Debate Between Miles Kimball and Matthew Rognlie | a href="">Spartacus Script | Max Blau: This Georgia hospital shows why rejecting Medicaid isn’t easy | Why Can't I Own a Canadian? | Johannes Wieland | Janelle Jones and John Schmitt: Has Education Paid Off for Black Workers? | John Lauritz Larson: Internal Improvement: National Public Works and the Promise of Popular Government in the Early United States |