And: Jim Henley on the "Realism" of Timothy B. Lee: #2 Wednesday Whiskey-Tango-Foxtrot-Bang-Query-Bang-Query Weblogging
Liveblogging World War II: July 18, 1943

Noted for July 18, 2013

  • Simon Wren-Lewis: Economic History and Krugman’s Crib Sheet: "Here are two seemingly unconnected posts: Paul Krugman’s discussion of how he came to do his path breaking research in international trade and economic geography, and Kevin O’Rourke’s post on why economics needs economic history…. What is so great about formalism, you might ask. The trouble with just talking and writing about the way the world works is that it is quite easy to become confused or to make mistakes. Macro, because it deals with a highly interconnected system, is full of these pitfalls. The example I use with undergrads when they first come to IS/LM is as follows. Cutting taxes may appear to boost the economy, but if it is financed by more government borrowing, to persuade people to lend more will probably push up interest rates. These higher interest rates reduce output, so as a result tax cuts could end up reducing output. Sounds reasonable, but the reasoning is incorrect. The worst that can happen with a tax cut is that people save it all, in which case output does not change, and neither do interest rates. IS/LM shows us that if interest rates rise it is because output has increased. So it is good to be able to express ideas about how the world works in terms of simple models. But creating a new type of model for the first time is not an easy thing to do, which is why you get prizes for this kind of thing…. However there is a real danger that teaching this stuff crowds out all else. I used not to be concerned about this for macro, because I saw the discipline as inherently progressive, where the data would naturally push advances in the right direction…. If that is your view, you are likely to be a little dismissive about things like economic history, economic methodology or the history of economic thought…. I changed my view in the last few years as a result of both the financial crisis and the subsequent domination of austerity policies. Teaching just what can be currently formalised in what now passes as a rigorous manner excludes too much of what is important."
  • Barry Ritholtz: Curse of the Macro Tourists: "Every now and again, a phrase catches my ear that perfectly sums up some phenomena. Recently, that phrase has been 'Macro Tourist'. I do not recall exactly when I first heard it (nor who can lay claim to inventing it) but I suspect I first noticed it in this Mark Dow post from last summer…. What is the relationship between the Macro Tourists and last night’s dinner? As the conversation turned to all things Fed, Global, and economic, I found myself wanting to liquidate all of our equities and hide in a cave…. This emotional reaction to narrative (such as the above) is the source of many an investor’s biggest problem…. I consider myself fortunate to have developed enough self-awareness over the years to recognize and contextualize these inputs for what they are: Transitory, compelling, ruinous bedtime stories…. When considering Macro Tourism as an investing approach, ask yourself these simple questions: Is this known? Has it already been acted on? Is this trade late to the party? How early might it be, and how upside are you willing to get before it begins to pay off? Search for the rare bird, but do not be confused by the common street pigeon… lest you become one."

  • Jim Tankersley: Have the robots come for the middle class?: "Despite rising fears of technology displacing huge swaths of the workforce, there remain huge classes of jobs that robots (and low-wage foreign workers) still can’t replace in the United States, and won’t replace any time soon. To land the best of those jobs, workers need sophisticated vocabularies, advanced problem-solving abilities and other high-value skills that the U.S. economy does a good job of bestowing on young people from wealthy families — but can’t seem to deliver to poor and middle-class kids. That is the alternatively optimistic and bleak picture of the domestic labor market sketched by economists Frank Levy of MIT and Richard J. Murnane of Harvard, who conducted a detailed study of what jobs have been lost to automation in recent years and which jobs are likely to be lost as technology keeps advancing…. MIT professors Erik Brynjolfsson and Andrew McAfee penned an e-book, “Race Against the Machine,” blaming automation for the sluggish job growth of the last decade-plus. They predict worse employment effects to come. The professors cite the recent — and historically anomalous — 'decoupling' of productivity and growth in the United States: The economy is producing more per worker, but that extra efficiency isn’t translating into a corresponding rate of hiring…. Levy and Murnane don’t think such breakthroughs in artificial intelligence are anywhere close to at hand."

  • Tom Streithorst: Post-Scarcity Economics: "We fly across oceans in airplanes, we eat tropical fruit in December, we have machines that sing us songs, clean our house, take pictures of Mars. Much the total accumulated knowledge of our species can fit on a hard drive that fits in our pocket. Even the poorest among us own electronic toys that millionaires and kings would have lusted for a decade ago. Our ancestors would be amazed. For most of our time on the planet, humans lived on the knife-edge of survival. A crop failure could mean starvation and even in good times, we worked from sun up to sundown to earn our daily bread. In 1600, a typical workman spent almost half his income on nourishment, and that food wasn’t crème brûlée with passion fruit or organically raised filet mignon, it was gruel and the occasional turnip. Send us back to ancient Greece with an AK-47, a home brewing kit, or a battery-powered vibrator, and startled peasants would worship at our feet…. It is a paradox: our ever-growing productivity and our more insecure lives. Our understanding of economics is stuck in the past, in a world of scarcity, a world without advertising, where making things rather than selling them was the fundamental economic problem. Technology and the free enterprise system, to an extent that would amaze our ancestors, have solved much of the problem of supply…. It is important to understand that making bombs and blowing up cities is not what shrunk unemployment [during World War II]. It was the printing of money, the hiring of workers, the creation of demand by deficit spending. Had the US government spent as much as it had on fighting Hitler on promoting the arts, or building schools or even digging ditches and then filling them, it would have had just as beneficial an economic effect as did the war…. Austerity has been a dreadful failure. A return to sensible Keynesian policies is the first step to restoring prosperity. But in the longer run we need to figure out a better way to stimulate demand than either war or going into debt to buy more stuff. Personally, I favor government spending targeted on making the lives of citizens richer and more cultured."

  • Evan Soltas: Boehner’s funny definition of ‘relief’: "On Tuesday, House Speaker John Boehner… arguing that if Obamacare’s employer mandate was to be delayed, then the individual mandate should be delayed, too. 'It’s unfair to protect big businesses without giving the same relief to American families and small businesses', Boehner said…. It’s a funny kind of relief in that it leaves 13.7 million more people uninsured…. The mechanism here isn’t simply that the mandate forces 13.7 million people to buy insurance that they wouldn’t otherwise want. It’s that it brings in healthy, younger people who might prefer to wait on buying health insurance, but whose presence in the risk pool is necessary if coverage is going to be affordable for everyone else. Eliminating the individual mandate basically keeps health insurance unaffordable for millions of older, sicker people who don’t get coverage through their employers or through government programs."

  • LW: Liz Cheney’s Fatal Career Move?: "FWIW, I think Liz Cheney just made a fatal career move. Having lived in WY for 35 years, I do not believe that Liz can beat Enzi. I think this is going to cause all kinds of hard feelings in Wyoming because this kind of disrespect to a man who has done nothing to deserve being disrespected in this way will simply not sit well…. Liz Cheney has absolutely no real history in Wyoming… we have same day voter registration and Democrats routinely turn into Republicans when they walk into the polling place for the primary and then switch back to Democrat on their way out… a lot of Dems will happily switch just for the joy of voting against Liz Cheney. Yes, she will have a bundle of money. But Enzi will have enough and money just doesn’t matter much in WY elections… Liz will have what? Money? A father? And the carpetbag she brought with her. I’ll be stunned if it works. And where does Liz Cheney go after she loses a primary to a man as non-charismatic as Mike Enzi? I’d say that’s pretty much the end of her career…. Because we’re not big on dynasties here. And we’re not fond of people who think they are entitled to anything."

  • Assembling the Tesla:

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