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December 2013

Assessing Bernanke: It Seems to Me That Neil Irwin Is Wrong Here...

Neil Irwin writes: This is how history should judge Ben Bernanke:

The most common knock on Bernanke’s crisis performance was his failure (along with Treasury Secretary Hank Paulson and then-New York Fed chief Timothy Geithner) to prevent the Lehman Brothers bankruptcy.... It’s a fair criticism, except for this: I have interviewed enough people and read enough internal e-mails from that period to conclude that no one at the time had come up with a plan to resolve Lehman that was legal and actionable. The Lehman failure wasn’t a case of Bernanke and his fellow officials facing a choice and deciding wrong. They weren't able to come up with a better option...

On March 15, 2008, Lehman Brothers was both liquid and solvent.

On September 15, 2008, Lehman Brothers was both illiquid and--so the story goes--too insolvent for the Federal Reserve to be able to claim that its loans to keep Lehman operating were simply providing liquidity to a fundamentally-solvent institution.

By continuity, at some point between March 15 and September 15, there was a last day on which the Federal Reserve had the power to provide the money to force an orderly liquidation of Lehman. On that date, they should have forced its liquidation. They did not.

The first rule of being a lender of last resort is that you do not get yourself into a position where you cannot act as a lender of last resort when a systemically-important financial institution fails. Paulson, Bernanke, and Geithner broke that rule when they let Lehman slide into insolvency at some date between March 15 and September 15, 2008, and they have never explained why they let their last opportunity to resolve Lehman pass by.

And then Neil Irwin says that it did not matter, anyway:

If they had found a way to save Lehman, soon enough there would have come another breaking point, with another institution on the brink and deep-seated demand to let it fall...

And that makes no sense at all. If letting Lehman fail didn't hurt things, why take over AIG two days later? Why set up the TARP? Either these policies matter--in which failure to take the right policy steps at the right time is a mistake. Or these policies don't matter--in which case why take any policy steps at all?


Are We Getting the Better Public Sphere That We Need for a Fruitful Intellectual Dialogue About Equitable Growth Issues?: Paul Krugman Is a Happy Camper and Says Yes, But David Brooks Sys No...

Top 200 Influential Economics Blogs Aug 2013 Onalytica Indexes 3

To nobody's surprise, I am going to side with Paul here...

I do, however, think that a big source of the difference between their takes is a result of the much sunnier climate for technocratic rational policy on the center-left than on the currently-beleaguered center-right...

Paul Krugman: The Facebooking of Economics:

David Brooks has a funny piece... about... Thought Leaders.... [In] my own neck of the woods... the rules of the game in economics are... nothing like what David describes....

Continue reading "Are We Getting the Better Public Sphere That We Need for a Fruitful Intellectual Dialogue About Equitable Growth Issues?: Paul Krugman Is a Happy Camper and Says Yes, But David Brooks Sys No..." »


Afternoon Must-Read: Greg Sargent: Prioritize Combatting Inequality. It’s Popular.

Greg Sargent: Democrats should prioritize combatting inequality. It’s popular.:

Short version: While generic “government” still polls badly, the notion that government should act to combat inequality is popular, even among independents and moderates.... A sizable majority of Americans, 57 percent, believes that 'the federal government should pursue policies that try to reduce the gap between wealthy and less well-off Americans'.... Only Republicans and conservatives believe government should not act to reduce inequality, but even among them the numbers are surprising.... Among Republicans the numbers are 40-54, and among conservatives they are 45-48.... Though it’s often said Americans reject 'class warfare', individual government policies to fight inequality--higher taxes on the rich, strengthening the safety net, funding for education, infrastructure spending to create jobs, hiking the minimum wage--are broadly popular. Also, as Paul Krugman and Alec MacGillis argue, treating inequality as a central challenge is the right thing to do.


Things to Read on the Afternoon of December 18, 2013

Must-Reads:

  1. Budget Deal s Impact Is Only a Blip NYTimes com Jared Bernstein: Budget Deal's Impact Is Only a Blip:

  2. Noah Smith: I love microfoundations. Just not yours: "Check out the debate between Tony Yates and Simon Wren-Lewis.... It was kind of cute that Yates singled out Calvo pricing as an unrealistic, kludgey, hold-your-nose sort of microfoundation.... Lagos-Wright (2005)... is every bit as unrealistic as Calvo pricing, but you don't hear Freshwater guys like Yates kvetching about that.... In the comments to Wren-Lewis' post, I wrote 'YES YES A THOUSAND TIMES YES'. In a follow-up post, Yates caricatures my comment as 'NO NO GET RID OF ALL THE MOTHER&&&&&&G MICROFOUNDATIONS WHILE YOU ARE AT IT'. But let us ignore that particular flerp-o'-derp for now, and focus on why Wren-Lewis is so very very right....

    "Yates says I just want to get rid of all the microfoundations. But that is precisely, exactly, 180 degrees wrong! I think microfoundations are a great idea! I think they're the dog's bollocks! I think that macro time-series data is so uninformative that microfoundations are our only hope for really figuring out the macroeconomy. I think Robert Lucas was 100% on the right track when he called for us to use microfounded models. But that's precisely why I want us to get the microfoundations right. Many of microfoundations we use now (not all, but many) are just wrong..."

  3. Greg Sargent: Prioritize combatting inequality. It’s popular: "Short version: While generic “government” still polls badly, the notion that government should act to combat inequality is popular, even among independents and moderates.... A sizable majority of Americans, 57 percent, believes that 'the federal government should pursue policies that try to reduce the gap between wealthy and less well-off Americans'.... Only Republicans and conservatives believe government should not act to reduce inequality, but even among them the numbers are surprising.... Among Republicans the numbers are 40-54, and among conservatives they are 45-48.... Though it’s often said Americans reject 'class warfare', individual government policies to fight inequality--higher taxes on the rich, strengthening the safety net, funding for education, infrastructure spending to create jobs, hiking the minimum wage--are broadly popular. Also, as Paul Krugman and Alec MacGillis argue, treating inequality as a central challenge is the right thing to do"

  4. C. Northcote Parkinson: Parkinson's Law: "When first examined under the microscope, the cabinet council usually appears--to comitologists, historians, and even to the people who appoint cabinets--to consist ideally of five. With that number the plant is viable, allowing for two members to be absent or sick at any one time. Five members are easy to collect and, when collected, can act with competence, secrecy, and speed. Of these original members four may well be versed, respectively, in finance, foreign policy, defense, and law. The fifth, who has failed to master any of these subjects, usually becomes the chairman or prime minister..."

Continue reading "Things to Read on the Afternoon of December 18, 2013" »


Things to Read on the Morning of December 17, 2013

Must-Reads:

  1. Richard Leon: This Is The Most Important Paragraph In The Court Decision Against The NSA: "he question in this case can more properly be styled as follows: When do present-day circumstances--the evolutions in the Government’s surveillance capabilities, citizens’ phone habits, and the relationship between the NSA and telecom companies--become so thoroughly unlike those considered by the Supreme Court thirty-four years ago that a precedent like Smith simply does not apply? The answer, unfortunately for the Government, is now."

  2. Anil Dash: What Medium Is: "MEDIUM IS BLOGGING IN FORM, BUT NOT IN STRUCTURE: Ev explicitly evokes blogfather Dave Winer’s definition of blogging as the 'unedited voice of a person'.... I think that’s an adequate description of the content of blogging, but that the reverse-chronological structure that’s defined blogging and its descendants such as Twitter’s timeline and Facebook’s news feed is just as essential.... Medium eschews reverse chronology, organizing instead by 'collections' (which seem to be an aspect of the platform that is in significant, if largely behind-the-scenes, evolution).... The abandonment of reverse chronology has the effect of undoing a core tenet of blogging: The social contract... an implicit promise from the blogger that more content will appear in the future, and the expectation changes the nature of reading what’s written. The promise of updates to a blog has positive impacts... but it’s also been the biggest cause of stress for bloggers: Having to keep updating is seen as an overwhelming obligation by many, and the requirement of newest-on-top has frustrated countless bloggers who want to assign some semblance of editorial judgment (or simply want to inflict their authorial authority) on behalf of readers. Trying to fight reverse chronology has been the impetus behind most of Gawker’s never-ending parade of reader-enraging redesigns.... Despite the good reasons for Williams, Winer, Denton and many others to resist the tyranny of reverse chronology has triumphed.... So what does Medium resemble more, with its organization-by-collection, diminished prominence of the creator’s identity, and easy flow between related pieces of content? It’s simple: YouTube.... Medium is evolving to be the same; We get sent an article that someone wants us to read.... Medium is much closer to 'YouTube for Longform' than it is 'Blogger Revisited'...

  3. Jesse Rothstein: Teacher Quality Policy When Supply Matters: "Recent proposals would strengthen the dependence of teacher pay and retention on demonstrated performance. One intended effect is to attract those who will be effective teachers and repel those who will not. I model the teacher labor market, incorporating ability heterogeneity, dynamic self-selection, noisy performance measurement, and Bayesian learning. Simulations with plausible parameter values indicate that labor market interactions are important to the evaluation of alternative teacher contracts. Reasonable bonus policies create only modest incentives and thus have very small effects on selection. Tenure and firing policies can have larger effects, but must be accompanied by substantial salary increases. Both bonus and tenure policies pass cost benefit tests, though the magnitudes of the benefits are quite sensitive to parameters about which little is known."

Continue reading "Things to Read on the Morning of December 17, 2013" »


Afternoon Must-Read: Martin Wolf: Why Abenomics Will Disappoint

Martin Wolf: Why Abenomics will disappoint:

Abenomics consists of 'three arrows'. The first is a monetary policy aimed at eliminating deflation. The second is a flexible fiscal policy, aimed at supporting the Japanese economy in the short run and at fiscal stability in the long run. The third is structural reform, aimed at raising investment and trend growth.... Supported by the new monetary policy, Japan is enjoying a cyclical upswing. Deflation may disappear. But hopes for faster trend economic growth are too optimistic and the discussion of structural obstacles too limited. Given its demography, Japan would do well to attain growth of 1-1.5 per cent a year. The country will be unable to combine economic dynamism with fiscal consolidation without a rise in consumption’s share in GDP. Since household savings rates are low, this can only happen if income is transferred from corporations. Nobody seems to be willing to recognise this challenge. It is assumed, instead, that Japan’s already excessive investment should rise still further. This is mistaken. How, then, can the first year of Abenomics be assessed? As an early success, but a far from complete one.


Things You Should Read on the Evening of December 17, 2013

Must-Reads:

  1. Martin Wolf: Why Abenomics will disappoint: "Abenomics consists of 'three arrows'. The first is a monetary policy aimed at eliminating deflation. The second is a flexible fiscal policy, aimed at supporting the Japanese economy in the short run and at fiscal stability in the long run. The third is structural reform, aimed at raising investment and trend growth.... Supported by the new monetary policy, Japan is enjoying a cyclical upswing. Deflation may disappear. But hopes for faster trend economic growth are too optimistic and the discussion of structural obstacles too limited. Given its demography, Japan would do well to attain growth of 1-1.5 per cent a year. The country will be unable to combine economic dynamism with fiscal consolidation without a rise in consumption’s share in GDP. Since household savings rates are low, this can only happen if income is transferred from corporations. Nobody seems to be willing to recognise this challenge. It is assumed, instead, that Japan’s already excessive investment should rise still further. This is mistaken. How, then, can the first year of Abenomics be assessed? As an early success, but a far from complete one."

  2. Economist: The ECB’s online game: Being Mario Draghi: "A game to educate Europeans about monetary policy skips some detail.... The instructions have a clarity that induces nostalgia: “Keep the inflation rate just under 2% and stable. Raise the interest rate to push inflation down. Lower the interest rate to push inflation up.”... Extra guidance is provided by a ragtag group of advisers, including a hippy, a narcoleptic and a gambler—which may be how Bundesbank officials now view their euro-zone colleagues.... €conomia badly needs an update if the ECB really wants to educate Europeans about its current job. Players need more data on sovereign-borrowing costs, cross-border deposit flows and Target 2 balances. They should also have many more tools at their disposal, such as unlimited loans for troubled banks and programmes to buy unlimited amounts of sovereign debt.... Instead of stabilising the rate of euro-zone inflation, players should prevent any country from leaving the single currency. The crisis-hit countries will exit if they become trapped in recession but the northern-tier nations will quit if their domestic inflation rates exceed an annual average of, say, 3%. Anyone who succeeds should go on the shortlist to be the next ECB president."

Continue reading "Things You Should Read on the Evening of December 17, 2013" »


Let Me 110% Endorse Antonio Fatas's Mini-Macroeconomic Manifesto...

Antonio Fatas: Four missing ingredients in macroeconomic models:

oI would like to go further and add a few items to their list that I wished could become part of the mainstream modeling in economics. In random order:

  1. The business cycle is not symmetric....
  2. As much as the NBER methodology emphasizes the notion of recessions (which, by the way, are asymmetric in nature), most academic research is produced around models where small and frequent shocks drive economic fluctuations, as opposed to large and infrequent events. The disconnect comes probably from the fact that it is so much easier to write models with small and frequent shocks than having to define a (stochastic?) process for large events. It gets even worse if one thinks that recessions are caused by the dynamics generated during expansions. Most economic models rely on unexpected events to generate crisis, and not on the internal dynamics that precede the crisis....
  3. There has to be more than price rigidity.... Price rigidities are important and they help us understand some of the features of the business cycle. But there must be more than that. There are other frictions.... They might not be easy to measure or model, they might be different across different economies but it is difficult to imagine that an adjustment of prices and wages to their optimal level would automatically restore full employment....
  4. The notion that co-ordination across economic agents matters to explain the dynamics of business cycles receives very limited attention in academic research....

Continue reading "Let Me 110% Endorse Antonio Fatas's Mini-Macroeconomic Manifesto..." »


(Late) Tuesday Focus: Responses to Ezra Klein's Worries About Over Focus on Inequality, and Ezra Klein's Response...

Ezra Klein's attempt to provide some pushback and context to--well, to the mission of Equitable Growth--has gone semi-viral, or, rather, as semi-viral as things can go in this restricted technocrat-wannabe circle. So let me pick up that thread again

If I may paraphrase Ezra, or rephrase Ezra, or chop his argument into bits and reassemble the bits into something of my own liking, Ezra sees three dangers:

  1. A left that primary focuses on distribution will focus on raising taxes on the rich, and neglect issues of investment in technologies, structures, ideas, and people and so neglect growth, and also neglect aggregate demand and so neglect restoring full employment.
  2. A left that focuses primarily on growth will focus only on various forms of investment, and so neglect issues of distribution and equity and also issues restoring full employment.
  3. A left that primarily focuses on employment will focus only on boosting aggregate demand, and neglect issues of spurring growth and also issues of distribution.

Ezra thinks--I think--that what we need is a balance, and if we are going to fall off balance in any direction it should be in direction (3).

Continue reading "(Late) Tuesday Focus: Responses to Ezra Klein's Worries About Over Focus on Inequality, and Ezra Klein's Response..." »


Tomas Piketty: Inequality and Capitalism in the Long Run

The English-language translation (by Arthur Goldhammer) of Tomas Piketty's Capital in the Twenty-First Century is coming out in March. And he gave a talk on it in Helsinki.

The hawk-eyed Cardiff Garcia writes:

Piketty previews Piketty | FT Alphaville: A hat tip to reader @zapatique for sending us to Thomas Picketty’s recent lecture, which previews the forthcoming English-language edition of his new book...

Continue reading "Tomas Piketty: Inequality and Capitalism in the Long Run" »


Robert Waldmann: Hoynes, Schanzenbach, and Almond with Convincing Evidence That Food Stamps--SNAP--Really Do Work: Monday Focus

From Robert Waldmann @ Angry Bear Food Stamps:

Hilary W. Hoynes, Diane Whitmore Schanzenbach, Douglas Almond made a genuinely important contribution in “Long Run Impacts of Childhood Access to the Safety Net”. They took advantage of a quasi-natural experiment to estimate the long-run effects of access to Food Stamps (SNAP) in utero and in early childhood. From 1964, when counties could first provide food stamps, until 1973, participation in the program increased pretty much linearly: in 1968 food stamps were provided in roughly half of US counties. Thus they can estimate the effect of Food Stamps by comparing the experience of people whose parents did not have high school diplomas born at the same time in counties with and without Food Stamps, they can estimate the effect of food stamps.

Continue reading "Robert Waldmann: Hoynes, Schanzenbach, and Almond with Convincing Evidence That Food Stamps--SNAP--Really Do Work: Monday Focus" »


Morning Must-Read: Anil Dash: What Medium Is

Anil Dash: What Medium Is:

MEDIUM IS BLOGGING IN FORM, BUT NOT IN STRUCTURE: Ev explicitly evokes blogfather Dave Winer’s definition of blogging as the “unedited voice of a person”.... I think that’s an adequate description of the content of blogging, but that the reverse-chronological structure that’s defined blogging and its descendants such as Twitter’s timeline and Facebook’s news feed is just as essential.... Medium eschews reverse chronology, organizing instead by “collections” (which seem to be an aspect of the platform that is in significant, if largely behind-the-scenes, evolution).... The abandonment of reverse chronology has the effect of undoing a core tenet of blogging: The social contract... an implicit promise from the blogger that more content will appear in the future, and the expectation changes the nature of reading what’s written. The promise of updates to a blog has positive impacts... but it’s also been the biggest cause of stress for bloggers: Having to keep updating is seen as an overwhelming obligation by many, and the requirement of newest-on-top has frustrated countless bloggers who want to assign some semblance of editorial judgment (or simply want to inflict their authorial authority) on behalf of readers. Trying to fight reverse chronology has been the impetus behind most of Gawker’s never-ending parade of reader-enraging redesigns.... Despite the good reasons for Williams, Winer, Denton and many others to resist the tyranny of reverse chronology has triumphed.... So what does Medium resemble more, with its organization-by-collection, diminished prominence of the creator’s identity, and easy flow between related pieces of content? It’s simple: YouTube.... Medium is evolving to be the same; We get sent an article that someone wants us to read.... Medium is much closer to “YouTube for Longform” than it is “Blogger Revisited”...


Things to Read on the Morning of December 15, 2013

Must-Reads:

  1. Preview of Things to Read on the Morning of December 15 2013 Jared Bernstein: Inequality, Ezra, Paul, and the Unifying Theory (and Evidence): "There’s an interesting back and forth going on.... The President recently averred that inequality is the defining challenge of our time.  Ez[ra Klein] argues that perhaps growth and unemployment better represent that challenge. Paul [Krugman] offers four strong reasons why, no, inequality is a fine candidate.... Well, here’s a unifying theory: demand-side policies that that significantly lower unemployment will also reduce inequality.... Over the period when labor markets were tight 2/3′s of the time, incomes grew together.  Over the period when labor markets were tight 1/3 of the time, they grew apart.... So we don’t have to choose whether to fight weak demand or high inequality.  Fight the former and you’ll help reduce the latter. And yes, it’s a bit of a strange discussion given that the political system is fighting neither, though that’s not entirely true.  Sub-nationally, there’s stuff going on here..."

  2. Chang-Tai Hsieh et al.: The Allocation of Talent and U.S. Economic Growth: "In 1960, 94 percent of doctors and lawyers were white men. By 2008, the fraction was just 62 percent. Similar changes in other highly-skilled occupations have occurred throughout the U.S. economy during the last fifty years. Given that innate talent for these professions is unlikely to differ across groups, the occupational distribution in 1960 suggests that a substantial pool of innately talented black men, black women, and white women were not pursuing their comparative advantage. This paper measures the macroeconomic consequences of the remarkable convergence in the occupational distribution between 1960 and 2008 through the prism of a Roy model. We find that 15 to 20 percent of growth in aggregate output per worker over this period may be explained by the improved allocation of talent."

  3. Josh Marshall: Paper Tiger, Past Their Prime, or Something Else?: "I'm generally of the opinion that 'the Tea Party' is... a rebranding of... the base right-wing of the GOP.... But... I think we should speak of two 'Tea Parties'. There's there's that 20% or so of the electorate that is right-wing and moving further right, deeply hostile to President Obama and generally feeling they're trying to hold their ground in what is likely a losing fight against the transformation of America by immigrants, urban values, 'socialism' and the rest. Then you've got... Club for Growth, FreedomWorks and Heritage Action. These are each groups funded by extremely wealthy donors and... almost exclusively driven by enforcing tax cuts, anti-regulatory politics and laissez-faire economics. As Boehner suggested, they don't even seem particularly focused on policy anymore but rather on keeping politics maximally polarized and aggrandizing their own power and fundraising ability. I don't go so far as to say they're wholly distinct or unconnected. The two groups have a common interest in maintaining a climate of political confrontation and crisis. But for not altogether similar reasons."

Continue reading "Things to Read on the Morning of December 15, 2013" »


Firearms and Suicide Risk...

I had one great-grandfather and one great-great-grandfather commit suicide-by-firearm--that's a hazard of 2 out of 15 Y-chromosome near-ancestors. I know of two suicides and two tragic deadly accidents involving firearms among immediate families of other relatives and close friends. I know of nobody who was ever really glad that they had a gun in the house.

Social science says: Keep your guns at the shooting range people! For your sake, your relatives' sake, and the sake of those they come in contact with!

Justin Briggs and Alex Tabarrok: Gun ownership causes higher suicide rates:

In the year since Adam Lanza used a Bushmaster rifle to gun down 20 children in Newtown, Conn., the discourse on gun control has focused on mass shootings and homicides. That’s not surprising: Terrible events dominate the cable news cycle, and murders get reported every day in our nation’s newspapers. But if we want to talk about the effects of guns, we should remember this: In a typical year, suicides outnumber homicides by 3 to 1 and a majority of suicides are by firearm. Suicides come in ones and twos, here and there; they rarely make the national news, and when they are reported at all they are veiled in euphemism (“He died suddenly”). Suicides go so underreported that Slate’s Gun Deaths Project, which collects data from news articles and other online sources, categorizes only roughly one-tenth of the reported deaths as suicides....

Continue reading "Firearms and Suicide Risk..." »


Morning Must-Read: Phil Swagel: A Take at the Volcker Rule

Phil Swagel: A Modest Volcker Rule:

It is hard to know the full impact on markets until the Volcker Rule is fully in place in 2015, but my sense is that the regulations put out on Tuesday will allow banks to continue in their roles as facilitators of trading.... Regulators stated that they would collect and analyze data relating to firms’ trading activities, and make adjustments in response. This data-driven approach... is heartening for the regulators to put in writing.... Banks might wish that the Volcker Rule did not exist, but that discussion is long moot. It turns out that the rule as promulgated could add some useful risk-management processes by ensuring that firms understand their own hedging strategies while doing only modest harm to the economy through the impacts of reduced liquidity in financial markets. An irony is that Volcker Rule proponents see the final result as “tougher than expected,” pointing to symbolic measures such as requiring chief executives to attest that the required processes are in place. This might be an instance in which both banks and their critics are satisfied with a regulation—though perhaps only until the banks’ critics realize the situation...


A Note on the Importance of Administrative Follow-Through and Implementation

Shouldn't, at this point in any administration, all of the numbers in the first column be in single digits?

Judicial Vacancies

Can somebody please explain to me what is going on? Is this powerful evidence that only administratively-successful sitting and ex-governors should be considered for the presidency?

And I look over at the Federal Reserve Board of Governors, and I see two of the seven seats filled next February--Yellen and Tarullo--I see one current vacancy, I see Bloom Raskin gone to the Treasury, I see Powell's term expiring, I see Bernanke back at Princeton, and I see Powell's term expiring. Shouldn't there be five Federal Reserve Board of Governors nominees in the pipeline by now, simply as a matter of basic administrative competence?


No, the Human-Driven Processes Warming the Globe Have Not Paused. Why Do You Ask?

You know, I think that my colleague Richard Muller and the New York Times did a very bad thing when he wrote and they printed this:

Richard Muller: A Pause, Not an End, to Warming:

THE global warming crowd has a problem. For all of its warnings, and despite a steady escalation of greenhouse gas emissions into the atmosphere, the planet’s average surface temperature has remained pretty much the same for the last 15 years...

Even though Muller concludes:

Most of us hope that global warming actually has stopped. (Not everyone; some argue that the warming is good.) Perhaps the negative feedback of cloud cover has kicked in... or the ocean absorption of atmospheric heat is playing a new and more decisive role. Alas, I think such optimism is premature. The current pause is consistent with numerous prior pauses...

The initial claim that global warming has in any sense "paused" seems to me to be very misleading indeed.

Continue reading "No, the Human-Driven Processes Warming the Globe Have Not Paused. Why Do You Ask?" »


Things to Read on the Evening of December 15, 2013

Must-Reads:

  1. Phil Swagel: A Modest Volcker Rule: "It is hard to know the full impact on markets until the Volcker Rule is fully in place in 2015, but my sense is that the regulations put out on Tuesday will allow banks to continue in their roles as facilitators of trading.... Regulators stated that they would collect and analyze data relating to firms’ trading activities, and make adjustments in response. This data-driven approach... is heartening for the regulators to put in writing.... Banks might wish that the Volcker Rule did not exist, but that discussion is long moot. It turns out that the rule as promulgated could add some useful risk-management processes by ensuring that firms understand their own hedging strategies while doing only modest harm to the economy through the impacts of reduced liquidity in financial markets. An irony is that Volcker Rule proponents see the final result as “tougher than expected,” pointing to symbolic measures such as requiring chief executives to attest that the required processes are in place. This might be an instance in which both banks and their critics are satisfied with a regulation—though perhaps only until the banks’ critics realize the situation..."

  2. Laura Tyson: Raising the Minimum Wage: Old Shibboleths, New Evidence: "For a good overview, look to a paper by Arindrajit Dube of the University of Massachusetts, Amherst; T. William Lester of the University of North Carolina, Chapel Hill; and Michael Reich of the University of California, Berkeley. Using two decades of data and side-by-side comparisons of bordering counties in the United States, they find that higher minimum wages raise the earnings of low-wage workers and have negligible effects on employment levels.... In 1996, the prevailing view among economists was that an increase in the minimum wage would reduce employment. But opinions have changed in response to the evidence..."

  3. Bruce Greenwald: Interest Rates and Monetary Policy: "All the empirical evidence we have is that interest rates within the range of variation we see do not affect investment. Investment is driven by perceptions of risk and accelerators in demand that drive the demand for investment. So it's not a surprise I think that the zero interest rates have not stimulated investment. Because nobody has ever been able to find a significant interest rate effect on investment..." http://www.youtube.com/watch?v=M3quayhKZ0M#t=32m31s

Continue reading "Things to Read on the Evening of December 15, 2013" »


Things to Read on the Morning of December 14, 2013

Must-Reads:

  1. Paul Krugman: The Biggest Losers: "The pundit consensus seems to be that Republicans lost in the just-concluded budget deal.... But... the unemployed lost even more... 1.3 million workers will be cut off at the end of this month, and many more... in the months that follow. And if you take a longer perspective... what you see is a triumph of anti-government ideology that has had enormously destructive effects... we’ve been living through an era of unprecedented government downsizing.... What has been cut?... Education, infrastructure, research, and conservation. While the Recovery Act (the Obama stimulus) was in effect, the federal government provided significant aid to state and local education. Then the aid went away.... Meanwhile, public investment fell sharply.... These harsh cuts... were unnecessary. The Washington establishment may have hyperventilated about debt and deficits, but markets have never shown any concern at all.... The cuts did huge short-term economic damage... [and] cut... investing in the future..."

  2. Cardiff Garcia: Stanley Fisher’s views on monetary policy: "He does believe in the efficacy of asset purchases when rates have hit the zero lower bound... "by the provision of liquidity... by changing interest rates other than the central bank’s interest rates...". But he does add that asset purchases are imperfect: their benefits simply outweigh the costs.... He appeared to favour a tapering.... have raised questions about whether he would support the Fed’s use of forward guidance.... Fischer said he tried, on becoming governor of the Bank of Israel in 2005, to give signals to the market – but quickly gave up as he realized it restricted the bank’s future actions when circumstances changed..."

  3. Https courseworks columbia edu access content group c5a1ef92 c03c 4d88 0018 ea43dd3cc5db Working 20Papers 20for 20website Anchored 20SPM December7 pdf Christopher Wimer et al.: Trends in Poverty with an Anchored Supplemental Poverty Measure: "Poverty measures set a poverty line or threshold and then evaluate resources against that threshold. The official poverty measure is flawed... it uses thresholds that are outdated and are not adjusted appropriately... and it uses an incomplete measure of resources which fails to take into account the full range of income and expenses that individuals and households have.... In recent work, we have produced SPM-like estimates for the period 1967-2012.... In this report we apply an alternative poverty measure which differs from the SPM in only one respect. Instead of having a threshold that is re-calculated over time, we use today’s threshold and carry it back historically by adjusting it for inflation using the CPI-U-RS. Because this alternative measure is anchored with today’s SPM threshold, we refer to as an anchored supplemental poverty measure or anchored SPM for short.... Another advantage of an anchored SPM (or any absolute poverty measure, for that matter) is that poverty trends resulting from such a measure can be explained by changes in income and net transfer payments (cash or in kind)..."

  4. Kevin Drum: Repeat After Me: There's No Such Thing as Socialsecurityandmedicare: "You may see some headlines today that report on a new study showing that boomer retirees will receive way more in Social Security and Medicare benefits than they pay in taxes. But be careful. Technically, that's true, but it's like saying the combined population of China and Vietnam is 1.4 billion. It's true, but all the heavy lifting is being done by China. In this case, all the heavy lifting is being done by Medicare..."

Continue reading "Things to Read on the Morning of December 14, 2013" »


The Keynesian Revolution, the Monetarist Counterrevolution, the New Classical Purge, the Neo-Keynesian Restoration: Saturday Focus (December 14, 2013)

I think that the intelligent and thoughtful Binyamin Applebaum gets it somewhat wrong here:

Binyamin Applebaum: Young Stanley Fischer and the Keynesian Counterrevolution:

Consider the 1977 paper for which [Stanley Fischer] is most famous. It helped to transform the practice of monetary policy, creating the world in which Ben S. Bernanke has operated, but its opening lines sound like conventional wisdom, which now it is.... Central banks, in other words, have the power to stimulate economic activity. Monetary policy can help countries to recover from recessions.... You’re underwhelmed. I can tell. But this really was a big deal. And the key part is those last three words: “Rational expectations notwithstanding.”... During the 1970s, it gradually became orthodox among economists to regard governments as impotent in the face of recessions. The field was dominated by proponents of the view that people behaved rationally, or close enough. People could not be fooled by policies that effectively let them eat today and pay tomorrow. Rational people would only eat as much as they could afford to pay tomorrow.... “By about 1980, it was hard to find an American academic macroeconomist under the age of 40 who professed to be a Keynesian,” the Princeton economist Alan S. Blinder has written. “By 1980 or so, the adage ‘there are no Keynesians under the age of 40’ was part of the folklore of the economics profession.”

But in truth, by 1980, the counterrevolution was well underway...

Continue reading "The Keynesian Revolution, the Monetarist Counterrevolution, the New Classical Purge, the Neo-Keynesian Restoration: Saturday Focus (December 14, 2013)" »


Brad DeLong (2000 Vintage) Smackdown Watch: History of Macroeconomics Weblogging

I click the "publish" button at . I go out to mail Christmas presents and buy a panettone. I return to find that it only took 98 minutes for Paul Krugman to write the needed critique of DeLong, 2000 vintage:

Paul Krugman: The Neo-paleo-Keynesian Counter-counter-counterrevolution:

OK, I can’t resist this one — and I think it’s actually important.

Brad DeLong reacts to Binyamin Appelbaum’s piece on Young Frankenstein Stan Fischer by quoting from his own 2000 piece on New Keynesian ideas in macroeconomics, a piece in which he argued that New Keynesian thought was, in important respects, a descendant of old-fashioned monetarism. There’s a lot to that view.

But...

Continue reading "Brad DeLong (2000 Vintage) Smackdown Watch: History of Macroeconomics Weblogging" »


Kevin Drum: Being Smart Isn't Always Enough to Make it in America

Kevin Drum: Being Smart Isn't Always Enough to Make it in America:

Via James Pethokoukis, here's an interesting tidbit of income mobility data from a new Brookings report by Richard Reeves and Kerry Searle Grannis.... If you have high cognitive ability, you have a 24 percent chance of becoming a high earner as an adult. That's not too bad. But if you come from a high-income family, you have a 45 percent chance of becoming a high earner as an adult. Same smarts, different outcome.... Better schools, more extracurricular opportunities, different skin color, bigger networks of connected friends, higher odds of going to college, and the simple ability to get in the door all give richer kids a huge leg up...

And, of course, this has significant costs not just for those whose upward mobility is blocked but for everybody else as well. Chang-Tai Hsieh et al. find that between one-fifth and one-sixth of all American economic growth since 1960 is driven by the fact that the race- and sex-discrimination gates keeping the right people from getting the jobs were reduced.


Morning Must-Read: Chang-Tai Hsieh et al.: The Allocation of Talent and U.S. Economic Growth

Chang-Tai Hsieh et al.: The Allocation of Talent and U.S. Economic Growth:

In 1960, 94 percent of doctors and lawyers were white men. By 2008, the fraction was just 62 percent. Similar changes in other highly-skilled occupations have occurred throughout the U.S. economy during the last fifty years. Given that innate talent for these professions is unlikely to differ across groups, the occupational distribution in 1960 suggests that a substantial pool of innately talented black men, black women, and white women were not pursuing their comparative advantage. This paper measures the macroeconomic consequences of the remarkable convergence in the occupational distribution between 1960 and 2008 through the prism of a Roy model. We find that 15 to 20 percent of growth in aggregate output per worker over this period may be explained by the improved allocation of talent.


The Washington Center for Equitable Growth Needs a New Chair, Paul...

I am going to have to unplug from the internet or I am never going to get through cracking Reifschneider, Wascher, and Wilcox...

Now I am once again distracted by Paul Krugman...

Paul Krugman: Inequality As A Defining Challenge:

Inequality is finally surfacing as a significant unifying issue... and there... [are] a couple of backlashes. One comes from groups like Third Way; Josh Marshall... characterized that kind of position best....

A fossilized throwback to a period in the late 20th century when there was a market for groups trying to pull the Democrats ‘back to the center and away from the ideological extreme’ in an era when Democrats are the fairly non-ideological party and have a pretty decent record of winning elections in which most people vote.

But there’s also an intellectual backlash...

Continue reading "The Washington Center for Equitable Growth Needs a New Chair, Paul..." »


Afternoon Must-Read: Jared Bernstein: Inequality, Ezra, Paul, and the Unifying Theory

Jared Bernstein: Inequality, Ezra, Paul, and the Unifying Theory:

There’s an interesting back and forth going on.... The President recently averred that inequality is the defining challenge of our time.  Ez[ra Klein] argues that perhaps growth and unemployment better represent that challenge. Paul [Krugman] offers four strong reasons why, no, inequality is a fine candidate.... Well, here’s a unifying theory: demand-side policies that that significantly lower unemployment will also reduce inequality.... Over the period when labor markets were tight 2/3′s of the time, incomes grew together.  Over the period when labor markets were tight 1/3 of the time, they grew apart.... So we don’t have to choose whether to fight weak demand or high inequality.  Fight the former and you’ll help reduce the latter. And yes, it’s a bit of a strange discussion given that the political system is fighting neither, though that’s not entirely true.  Sub-nationally, there’s stuff going on here...

Pictures of Job Market Slack and Its Costs in Terms of s of Jobs Jared Bernstein On the EconomyPictures of Job Market Slack and Its Costs in Terms of s of Jobs Jared Bernstein On the Economy


What Are the Conservative-Republican Ideas for Health Care Reform, Anyway?

Six years ago I knew what the Conservative-Republican ideas were:

  • Give people skin in the game via high deductibles and high copays.
  • Push people out of tax-subsidized employer-sponsored insurance into individual-marketplace exchanges as fast as possible.
  • Encourage insurers to shrink their networks in order to bargain more aggressively with health-care providers.
  • Cut Medicare.

Today?

Continue reading "What Are the Conservative-Republican Ideas for Health Care Reform, Anyway?" »


Morning Must-Read: Christopher Wimer et al.: Trends in Poverty with an Anchored Supplemental Poverty Measure

Christopher Wimer et al.: Trends in Poverty with an Anchored Supplemental Poverty Measure:

Poverty measures set a poverty line or threshold and then evaluate resources against that threshold. The official poverty measure is flawed... it uses thresholds that are outdated and are not adjusted appropriately... and it uses an incomplete measure of resources which fails to take into account the full range of income and expenses that individuals and households have.... In recent work, we have produced SPM-like estimates for the period 1967-2012.... In this report we apply an alternative poverty measure which differs from the SPM in only one respect. Instead of having a threshold that is re-calculated over time, we use today’s threshold and carry it back historically by adjusting it for inflation using the CPI-U-RS. Because this alternative measure is anchored with today’s SPM threshold, we refer to as an anchored supplemental poverty measure or anchored SPM for short.... Another advantage of an anchored SPM (or any absolute poverty measure, for that matter) is that poverty trends resulting from such a measure can be explained by changes in income and net transfer payments (cash or in kind)...

Https courseworks columbia edu access content group c5a1ef92 c03c 4d88 0018 ea43dd3cc5db Working 20Papers 20for 20website Anchored 20SPM December7 pdf


Morning Must-Read: Cardiff Garcia's Stanley Fisher’s Views Roundup

Cardiff Garcia: Stanley Fisher’s views on monetary policy:

He does believe in the efficacy of asset purchases when rates have hit the zero lower bound... "by the provision of liquidity... by changing interest rates other than the central bank’s interest rates...". But he does add that asset purchases are imperfect: their benefits simply outweigh the costs.... He appeared to favour a tapering.... have raised questions about whether he would support the Fed’s use of forward guidance.... Fischer said he tried, on becoming governor of the Bank of Israel in 2005, to give signals to the market – but quickly gave up as he realized it restricted the bank’s future actions when circumstances changed...


Morning Must-Read: Paul Krugman: The Biggest Losers from the Budget Deal Are All of Us

Paul Krugman: The Biggest Losers:

The pundit consensus seems to be that Republicans lost in the just-concluded budget deal.... But if Republicans arguably lost this round, the unemployed lost even more... 1.3 million workers will be cut off at the end of this month, and many more will see their benefits run out in the months that follow. And if you take a longer perspective... what you see is a triumph of anti-government ideology that has had enormously destructive effects on American workers.... Over the past three years we’ve been living through an era of unprecedented government downsizing.... What has been cut?... Education, infrastructure, research, and conservation. While the Recovery Act (the Obama stimulus) was in effect, the federal government provided significant aid to state and local education. Then the aid went away.... Meanwhile, public investment fell sharply.... These harsh cuts... were unnecessary. The Washington establishment may have hyperventilated about debt and deficits, but markets have never shown any concern at all.... The cuts did huge short-term economic damage.... Finally, if you look at my list of major areas that were cut, you’ll notice that they mainly involve investing in the future...


Is the American Left Wrongheaded? And Is the WCEG Part of the Problem?: Ezra Klein vs. Ashok Rao and Brad DeLong and **UPDATE** Steve Randy Waldmann: Friday Focus (December 13, 2013)

The extraordinarily capable and thoughtful Ezra Klein thinks that the [Washington Center for Economic Growth]() is wrongheaded--indeed, that the entire American left is now wrongheaded. And a number of us wish to register our dissent from his theses:

Ezra Klein: Inequality isn’t ‘the defining challenge of our time’:

The organizing economic concern of the American left is--or is becoming--income inequality... Zucotti Park... Bill DeBlasio... President Obama.... Income inequality is easy to worry about. It offend.... Those who aren’t unnerved by the datum that the income share of the top one percent has shot from about 10 percent in 1980 to more than 20 percent today can worry instead about inequality’s attendant consequence: declining social mobility.... But is inequality really the country’s most pressing problem?...

Continue reading "Is the American Left Wrongheaded? And Is the WCEG Part of the Problem?: Ezra Klein vs. Ashok Rao and Brad DeLong and **UPDATE** Steve Randy Waldmann: Friday Focus (December 13, 2013)" »


A Debate on the Risks of Quantitative Easing: Stan Fischer and Glenn Hubbard and Ben Bernanke vs. Joe Gagnon: Thursday Focus (December 12, 2013)

On the one side, Eric Morath reports from the Wall Street Journal's annual CEO Council:

Eric Morath: Fed Effort to Boost Growth ‘Dangerous’ But Necessary:

The Federal Reserve is in “dangerous territory” in its effort to boost growth, said [Glenn Hubbard,] a former economic adviser to President George W. Bush, but it’s hard to fault the central bank for the effort.... It does create the risk of asset bubbles....[But] “The problem is not the Federal Reserve, the problem has been the government,” said Mr. Hubbard....Rather than buying $85 billion a month in securities, the more appropriate policy response would have been a big government investment in infrastructure and other needs, he said....

Stanley Fischer, former governor of the Bank of Israel, agrees that the Fed’s early action helped avoid an even deeper crisis. He added that the Fed can successfully unwind its stimulus programs. “Everyone knows now about asset prices and presumably they’ll take that into account and moderate policy accordingly,” he said. The Fed’s actions were “dangerous, but necessary.”

On the other side, Joe Gagnon:

Continue reading "A Debate on the Risks of Quantitative Easing: Stan Fischer and Glenn Hubbard and Ben Bernanke vs. Joe Gagnon: Thursday Focus (December 12, 2013)" »


Things to Read on the Morning of December 12, 2013

Must-Reads:

  1. Robert Greenstein: On the Murray-Ryan Budget Agreement: "The budget agreement...represents an improvement... albeit a modest one.... Lawmakers should make every effort to accompany it with an extension of federal emergency unemployment benefits that will otherwise expire the week after Christmas... scale back a number of damaging cuts that they imposed in 2013 in areas ranging from education and Head Start to low-income housing and medical research.... It modestly promotes economic growth by somewhat easing the sequestration cuts in the near term while the economy remains weak and spreading out the offsets over a 10-year period.... It gives appropriators an opportunity to set funding priorities for 2014 and 2015, rather than mechanically extending last year’s funding levels....

    "But the agreement also has limitations...fails to extend emergency jobless benefits... replace less than half of the total sequestration cuts in 2014 and a much smaller share in 2015... leaving non-defense discretionary funding at levels too low.... Its $22 billion in savings that would go for deficit reduction will barely make a dent in our longer-term fiscal challenges, and those savings would have been better used to extend the expiring emergency unemployment benefits or scaling back the sequestration cuts to a greater degree."

  2. Paul Krugman: Upstairs, Downstairs, Outside: "Via Mark Thoma, David Cay Johnston has a great piece noting that today’s service economy is in many ways like the Edwardian-era economy in which a small number of wealthy people employed a large number of servants — except that we tend to outsource the service, relying on restaurants and cleaning services instead of cooks and maids. And our outsourced servants are, he notes, arguably paid and treated worse than the in-house servants of the past, even in absolute terms--let alone relative to per capita GDP. It’s a novel and useful way to think about just how unequal our society has grown."

  3. Robert E. Rubin, Roger C. Altman and Melissa Kearney: Making the poor--and the U.S.--poorer still: "Congress... cut[ting] food stamps. The Senate passed a bill in June mandating $4 billion in cuts over 10 years; the House version, passed in September, imposes nearly $40 billion in reductions.... This negotiation is occurring amid the worst poverty levels in two decades, a weak overall economy and rapidly falling budget deficits...economically and morally unsound.... 15 percent of the population--nearly 47 million people--lives in poverty, including 22 percent of children.... For a family of four, the poverty threshold is $24,000 or less.... Roughly 18 million other people are near-poor, living within 130 percent of the poverty line.... Most Americans living in poverty experience hunger or the pervasive fear of it.... Total federal spending on the Supplemental Nutrition Assistance Program (SNAP), this country’s main hunger prevention program, was $82.5 billion in fiscal 2013... [in a] $16 trillion economy.... It is hard to reconcile traditional American values of hard work and generosity with the levels of poverty and fear of hunger in our country.... It has been a generation since our country last had a robust conversation about combatting poverty. Now is the time to reinvigorate that conversation, not cut needed benefits."

  4. Austin Frakt: To avoid failure, the Affordable Care Act must evolve: "The participation of the young and healthy is supposed to be required, of course, by the individual mandate. But the mandate’s penalty is relatively modest and its enforcement mechanisms relatively weak... its power... depends... on civic duty....Matt O’Brien...'real people', he argued, 'aren’t rational self-maximizers… We don’t like to feel like we’re doing the wrong thing. We like to follow the rules instead. Feel like we’re a good person'. That the viability of the new marketplaces rests on convincing people that it is their civic duty to purchase health insurance is a weak link. I expect it will break in some markets.... Sure, you can call it a 'mandate'. But it’s just a choice. Play or pay.... And yet, within the community rating/guaranteed issue framework, the non-participation by younger and healthier people imposes a cost on others..."

Continue reading "Things to Read on the Morning of December 12, 2013" »


Morning Must-Read: Vermont Is Kicking Everyone's A-- at Signing Up People for Obamacare

Vermont Is Kicking Everyone s Ass at Signing Up People for Obamacare Mother Jones Kevin Drum: Vermont Is Kicking Everyone's A-- at Signing Up People for Obamacare:

The number of people who have completed an application and been confirmed eligible to purchase private insurance via the exchange. They still have the final enrollment step left, but they've obviously navigated everything successfully.... The chart below shows the results for 49 states (there's no data for Massachusetts). States in red are running their own websites. States in blue are using the federal website. Vermont and Kentucky are way ahead of everyone else, and demonstrate how well the Obamacare rollout is doing in places where the website is working and the state government is doing a good job of marketing and operations.


Morning Must Read: Dani Rodrik: Sub-Saharan Africa's Growth Performance Is Not Sustainable

Dani Rodrik: Sub-Saharan Africa's Growth Performance Is Not Sustainable:

The underlying problem is the weakness of these economies’ structural transformation. East Asian countries grew rapidly by replicating, in a much shorter time frame, what today’s advanced countries did following the Industrial Revolution. They turned their farmers into manufacturing workers, diversified their economies, and exported a range of increasingly sophisticated goods. Little of this process is taking place in Africa.... In principle, the region’s potential for labor-intensive industrialization is great. A Chinese shoe manufacturer, for example, pays its Ethiopian workers one-tenth what it pays its workers back home. It can raise Ethiopian workers’ productivity to half or more of Chinese levels through in-house training. The savings in labor costs more than offset other incremental costs of doing business in an African environment, such as poor infrastructure and bureaucratic red tape.But the aggregate numbers tell a worrying story. Fewer than 10% of African workers find jobs in manufacturing.... Sub-Saharan Africa is less industrialized today than it was in the 1980s.... Farmers in Africa are flocking to the cities.... Rural migrants do not end up in modern manufacturing industries, as they did in East Asia, but in services such as retail trade and distribution. Though such services have higher productivity than much of agriculture, they are not technologically dynamic in Africa and have been falling behind the world frontier...


Morning Must Read: Adam Ozimek on Tyler Cowen: The Future Of Work (And Life) Is Conscientiousness

Adam Ozimek: Tyler Cowen: The Future Of Work (And Life) Is Conscientiousness:

His most recent book Average Is Over. In what is both his most fun and also his scariest book yet, he emphasized conscientiousness will be more important in workers in the future:

Team production makes the quality of “conscientiousness” a more important quality in laborers. Managers need workers who are reliable. If you have a team of five, one unreliable worker is wrecking the work of four others. If you have a team of twenty-five, one unreliable worker can negate the work effects of twenty-four others. managers will stay away from possibly destructive labor and they will put a lot of care into building and managing their teams.

This came to mind recently while reading an article from Derek Thompson at the Atlantic about the most used words in 259 million LinkedIn profiles in 20 countries. The most common word was “responsible”.... More surprising is the 5th most common word: patient.... Another word associated with conscientious is the 4th most common: effective.... Like Tyler I’m not necessarily an optimist about all of these changes....If all of this future seems tiring or overbearing perhaps you can take comfort in the idea that behavior modification drugs will make conscientiousness a lot easier for you. My guess is most won’t find this comforting.


Chuck Lane of the Washington Post Is an Unhappy Camper...

Chuck Lane writes:

Hmmm... Did I run over Chuck Lane's dog? What have I said about Chuck Lane in the past?

Here is the top hit for "Chuck Lane" on my old weblog, Grasping Reality. It is me quoting Ezra Klein on Chuck Lane:

Ezra Klein: Venomous responsibility: My colleague Chuck Lane accuses me of a "venomous smear" against Joe Lieberman.... What is surprising is that Lane, well, agrees with my venomous smear. "I understand that [Lieberman] seems to bear a grudge against the Democratic liberals who tried to unseat him in 2006 because of his vote for the war in Iraq," writes Lane, "and that he might be engaged in a little pay back right now." That's pretty much the ballgame....

Continue reading "Chuck Lane of the Washington Post Is an Unhappy Camper..." »


Evening Must-Read: Nick Hanauer and Eric Beinhocker: Capitalism Redefined

Nick Hanauer and Eric Beinhocker: Capitalism Redefined:

For everyone but the top 1 percent of earners, the American economy is broken.... Our economic policy discussions are nearly always focused on making us wealthier and on generating the economic growth to accomplish that.... Kuznets and other economists highlighted that GDP was not a measure of prosperity.... Moses Abramovitz cautioned that “we must be highly skeptical of the view that long-term changes in the rate of growth of welfare can be gauged even roughly from changes in the rate of growth of output.”... Prosperity in a society is the accumulation of solutions to human problems... prosaic, like a crunchier potato chip, to the profound, like cures for deadly diseases. Ultimately, the measure of a society’s wealth is the range of human problems that it has found a way to solve and how available it has made those solutions to its citizens.... This all implies that we must find new ways to measure progress. In the same way that no good doctor would measure the health of a person by just one factor—her temperature, say—the economy shouldn’t be measured with just GDP...


Things to Read on the Evening of December 12, 2013

Must-Reads:

  1. Vermont Is Kicking Everyone s Ass at Signing Up People for Obamacare Mother Jones Kevin Drum: Vermont Is Kicking Everyone's A-- at Signing Up People for Obamacare: "The number of people who have completed an application and been confirmed eligible to purchase private insurance via the exchange. They still have the final enrollment step left, but they've obviously navigated everything successfully.... The chart below shows the results for 49 states (there's no data for Massachusetts). States in red are running their own websites. States in blue are using the federal website. Vermont and Kentucky are way ahead of everyone else, and demonstrate how well the Obamacare rollout is doing in places where the website is working and the state government is doing a good job of marketing and operations."

  2. Dani Rodrik: Sub-Saharan Africa's Growth Performance Is Not Sustainable: "The underlying problem is the weakness of these economies’ structural transformation. East Asian countries grew rapidly by replicating, in a much shorter time frame, what today’s advanced countries did following the Industrial Revolution. They turned their farmers into manufacturing workers, diversified their economies, and exported a range of increasingly sophisticated goods. Little of this process is taking place in Africa.... In principle, the region’s potential for labor-intensive industrialization is great. A Chinese shoe manufacturer, for example, pays its Ethiopian workers one-tenth what it pays its workers back home. It can raise Ethiopian workers’ productivity to half or more of Chinese levels through in-house training. The savings in labor costs more than offset other incremental costs of doing business in an African environment, such as poor infrastructure and bureaucratic red tape.But the aggregate numbers tell a worrying story. Fewer than 10% of African workers find jobs in manufacturing.... Sub-Saharan Africa is less industrialized today than it was in the 1980s.... Farmers in Africa are flocking to the cities.... Rural migrants do not end up in modern manufacturing industries, as they did in East Asia, but in services such as retail trade and distribution. Though such services have higher productivity than much of agriculture, they are not technologically dynamic in Africa and have been falling behind the world frontier..."

  3. Nick Hanauer and Eric Beinhocker: Capitalism Redefined: "For everyone but the top 1 percent of earners, the American economy is broken.... Our economic policy discussions are nearly always focused on making us wealthier and on generating the economic growth to accomplish that.... Kuznets and other economists highlighted that GDP was not a measure of prosperity.... Moses Abramovitz cautioned that 'we must be highly skeptical of the view that long-term changes in the rate of growth of welfare can be gauged even roughly from changes in the rate of growth of output.'... Prosperity in a society is the accumulation of solutions to human problems... prosaic, like a crunchier potato chip, to the profound, like cures for deadly diseases. Ultimately, the measure of a society’s wealth is the range of human problems that it has found a way to solve and how available it has made those solutions to its citizens.... This all implies that we must find new ways to measure progress. In the same way that no good doctor would measure the health of a person by just one factor—her temperature, say—the economy shouldn’t be measured with just GDP..."

  4. Adam Ozimek: Tyler Cowen: The Future Of Work (And Life) Is Conscientiousness: "His most recent book Average Is Over. In what is both his most fun and also his scariest book yet, he emphasized conscientiousness will be more important in workers in the future: 'Team production makes the quality of "conscientiousness" a more important quality in laborers. Managers need workers who are reliable. If you have a team of five, one unreliable worker is wrecking the work of four others. If you have a team of twenty-five, one unreliable worker can negate the work effects of twenty-four others. managers will stay away from possibly destructive labor and they will put a lot of care into building and managing their teams.' This came to mind recently while reading an article from Derek Thompson at the Atlantic about the most used words in 259 million LinkedIn profiles in 20 countries. The most common word was 'responsible'.... More surprising is the 5th most common word: 'patient'.... Another word associated with conscientious is the 4th most common: 'effective'.... Like Tyler I’m not necessarily an optimist about all of these changes....If all of this future seems tiring or overbearing perhaps you can take comfort in the idea that behavior modification drugs will make conscientiousness a lot easier for you. My guess is most won’t find this comforting..."

Continue reading "Things to Read on the Evening of December 12, 2013" »


Afternoon Must-Read: Robert E. Rubin, Roger C. Altman and Melissa Kearney: How We Are Making the Poor Poorer Still

Robert E. Rubin, Roger C. Altman and Melissa Kearney: Making the poor--and the U.S.--poorer still:

Congress may take up legislation this week to cut food stamps. The Senate passed a bill in June mandating $4 billion in cuts over 10 years; the House version, passed in September, imposes nearly $40 billion in reductions.... This negotiation is occurring amid the worst poverty levels in two decades, a weak overall economy and rapidly falling budget deficits. Under these circumstances, it would be economically and morally unsound to carry out the cuts.... 15 percent of the population--nearly 47 million people--lives in poverty, including 22 percent of children.... For a family of four, the poverty threshold is $24,000 or less.... Roughly 18 million other people are near-poor, living within 130 percent of the poverty line.... Most Americans living in poverty experience hunger or the pervasive fear of it.... Total federal spending on the Supplemental Nutrition Assistance Program (SNAP), this country’s main hunger prevention program, was $82.5 billion in fiscal 2013... [in a] $16 trillion economy.... It is hard to reconcile traditional American values of hard work and generosity with the levels of poverty and fear of hunger in our country.... It has been a generation since our country last had a robust conversation about combatting poverty. Now is the time to reinvigorate that conversation, not cut needed benefits.


Afternoon Must-Read: David Cay Johnston on Our Unequal Neo-Upstairs, Downstairs Economy

Paul Krugman: Upstairs, Downstairs, Outside:

Via Mark Thoma, David Cay Johnston has a great piece noting that today’s service economy is in many ways like the Edwardian-era economy in which a small number of wealthy people employed a large number of servants — except that we tend to outsource the service, relying on restaurants and cleaning services instead of cooks and maids. And our outsourced servants are, he notes, arguably paid and treated worse than the in-house servants of the past, even in absolute terms--let alone relative to per capita GDP. It’s a novel and useful way to think about just how unequal our society has grown.


I Agree with Bob Greenstein and Larry Mishel: Budget Deal Does Little **Almost Nothing at All** to Address the **Dire** Needs of the Economy

Perhaps a couple of charts from the estimable Barry Ritholtz (but Barry is still estimable) very estimable [Calculated Risk](http://www.calculatedriskblog.com) will help get the point across: one of the many big problems of the U.S. economy is that the U.S. government has indeed--as Barack Obama wrongly urged us to do in his 2010 State of the Union Address--tightened its belt in the aftermath of the crisis. As almost every real economist knows, a time in which government credit is extraordinarily good and idle resources are extraordinarily large is a time for government to borrow-and-spend, to leverage up, and so keep the private sector's desire to leverage down from causing lost decades--yes, we are now going to start speaking of "lost decades" in the plural:

Calculated Risk Public and Private Sector Payroll Jobs Reagan Bush Clinton Bush Obama

Calculated Risk Public and Private Sector Payroll Jobs Reagan Bush Clinton Bush Obama 2

Continue reading "I Agree with Bob Greenstein and Larry Mishel: Budget Deal Does Little **Almost Nothing at All** to Address the **Dire** Needs of the Economy" »


It Really Looks Like ObamaCare Implementation Is Proceeding Relatively Well in Half the Nation...

...That half of the nation where states built their own exchanges and have begun the expansion of Medicaid, that is:

And:

Dylan Scott: Iowa's Medicaid Expansion Plan Gets Federal Approval:

The Obama administration has approved Iowa's alternative plan for expanding Medicaid under Obamacare--but with one important tweak.... Branstad had asked the Centers for Medicare and Medicaid Services to allow the state to use Medicaid expansion money to pay for people to purchase private health coverage on http://healthCare.gov--similiar to what Arkansas had already received approval for. That would cover people between 100 and 138 percent of the federal poverty level. People below the poverty level would be covered by a modified version of the state's traditional Medicaid program. But Iowa also wanted to require those covered by the expansion to contribute money toward their coverage. CMS said Tuesday that Iowa could implement that requirement for people above the poverty line, but not for people below it...

But:

Continue reading "It Really Looks Like ObamaCare Implementation Is Proceeding Relatively Well in Half the Nation..." »


Lunchtime Must-Read: Robert Greenstein, President of CBPP: On the Murray-Ryan Budget Agreement

Robert Greenstein: On the Murray-Ryan Budget Agreement:

The budget agreement between Senate Budget Committee Chair Patty Murray and House Budget Committee Chair Paul Ryan represents an improvement over current law, albeit a modest one.  Congress should approve it, but lawmakers should make every effort to accompany it with an extension of federal emergency unemployment benefits that will otherwise expire the week after Christmas.... Policymakers could scale back a number of damaging cuts that they imposed in 2013 in areas ranging from education and Head Start to low-income housing and medical research, among others.... It provides equal relief from sequestration for non-defense and defense programs.... It offsets the cost of sequestration relief without imposing cuts in key mandatory programs.... While the agreement does not close a single tax loophole, it does secure some of its offsets from fees and other measures that increase federal revenues.... It modestly promotes economic growth by somewhat easing the sequestration cuts in the near term while the economy remains weak and spreading out the offsets over a 10-year period.... It gives appropriators an opportunity to set funding priorities for 2014 and 2015, rather than mechanically extending last year’s funding levels....

But the agreement also has limitations.... It fails to extend emergency jobless benefits for long-term unemployed workers.... It would replace less than half of the total sequestration cuts in 2014 and a much smaller share in 2015... leaving non-defense discretionary funding at levels too low to meet national needs.... Its $22 billion in savings that would go for deficit reduction will barely make a dent in our longer-term fiscal challenges, and those savings would have been better used to extend the expiring emergency unemployment benefits or scaling back the sequestration cuts to a greater degree.


Things to Read on the Morning of December 11, 2013

Must-Reads:

  1. John Podesta: Income Inequality’s Ripple Effect: "Last week, Barack Obama, delivering the clearest and most powerful economic policy speech of his presidency at an event sponsored by the Center for American Progress, identified 'the combined trends of increased inequality and decreasing mobility' as 'the defining challenge of our time'. The week before, in his first papal exhortation, Pope Francis robustly criticized 'trickle-down theories' of economic growth as having 'never been confirmed by the facts'.... Soon after being awarded the Nobel Prize in Economics, Robert Shiller told the Associated Press that inequality was 'the most important problem that we are facing now today'....

    "The fact is that we don’t know nearly enough about what high inequality means for economic growth and stability. We need a better understanding of how inequality affects demand for goods and services and macroeconomic and financial imbalances. We are in the dark on whether and how inequality affects entrepreneurship, or whether it alters the effectiveness of our economic and political institutions, or how it affects individuals’ ability to access education and productively employ their skills and talents. That’s why we’ve established the new Washington Center for Equitable Growth (WCEG), a long-term effort to support serious, sustained inquiry into structural challenges facing our economy. Our aim is to enable rigorous research on the relationship between inequality and growth through a competitive, peer-reviewed, academic grant program; to elevate the work of young scholars and new voices; and to help make sure cutting-edge research is relevant and informative to policymaking debates.

    "The basic facts bear repeating. Income inequality in the United States today has reached levels last seen during the Roaring ’20s. Over the last three decades, the top 1 percent of incomes have risen by 279 percent, while the bottom fifth of workers have seen an increase of less than 20 percent. In 1979, the middle 60 percent of households took home 50 percent of U.S. income. By 2007, their share was just 43 percent. These trends have continued since the end of the Great Recession... are aided and abetted by a dominant narrative defining how the economy grows. According to conventional wisdom, inequality may upset or offend us, but it’s a necessary part of a competitive economy.... 'Over the years, as I’ve looked for the evidence behind this story, I’ve found it to be flimsy', Nobel Prize laureate Robert Solow says in a video that premiered last month at WCEG’s launch. 'Sometimes there’s not much evidence there at all.'"

    "This tough-love, winner-take-all narrative dominating policymaking is far too limited a way to think about how a complex, modern, diverse economy like ours expands and thrives. The strongest periods of economic growth in the 20th century were also times when incomes rose across the board..."

  2. Alan Blinder: The Fed Plan to Revive High-Powered Money: "Don't only drop the interest paid rate paid on banks' excess reserves, charge them:** Unless you are part of the tiny portion of humanity that dotes on every utterance of the Federal Open Market Committee, you probably missed an important statement regarding the arcane world of 'excess reserves' buried deep in the minutes of its Oct. 29-30 policy meeting. It reads: '[M]ost participants thought that a reduction by the Board of Governors in the interest rate paid on excess reserves could be worth considering at some stage.' As perhaps the longest-running promoter of reducing the interest paid on excess reserves, even turning the rate negative, I can assure you that those buried words were momentous. The Fed is famously given to understatement. So when it says that "most" members of its policy committee think a change 'could be worth considering', that's almost like saying they love the idea. That's news because they haven't loved it before..."

  3. Via Jason Kottke, Adrian Hon: A History of the Future in 100 Objects: Every century is extraordinary.... Some may be the bloodiest or the darkest; others encompass momentous social revolutions... scientific advances... religious and philosophical movements. The 21st century... [was] the first time in our history that we have truly had to question what it means to be human. It is the stories of our collective humanity that I hope to tell... how we became more connected... with objects like Babel, Silent Messaging, the Nautilus-3, and the Brain Bubble--and how we became fragmented... physically and culturally, with the Fourth Great Awakening, and the Biomes. With the Braid Collective, the Loop, the Steward Medal, and the Rechartered Cities, we made tremendous steps forward... but the Locked Simulation Interrogations, the Sudan-Shanghai Letter, the Collingwood Meteor, and the Downvoted all showed how easy it was for us to lapse back into horror and atrocity. We automated our economy with the UCS Deliverbots, the Mimic Scripts, the Negotiation Agents, and the Old Drones, destroying the entire notion of work and employment in the process; and we transformed our politics with Jorge Alvarez's Presidential Campaign, and the Constitutional Blueprints...

  4. Joe Romm: Arctic Warming Drives More Extreme Summer Heat Waves, Droughts And Deluges: "A new study links the past decade’s “exceptional number of unprecedented summer extreme weather events” in the U.S. and Europe with the “record declines in both summer Arctic sea ice and snow cover on high-latitude land.” Researchers at the Chinese Academy of Sciences, along with Rutgers Prof. Jennifer Francis, make the case in a Nature Climate Change study, “Extreme summer weather in northern mid-latitudes linked to a vanishing cryosphere”. Scientists predicted a decade ago that Arctic ice loss would shift storm tracks and bring on worse western droughts of the kind we are now seeing. Recent studies find that Arctic sea ice loss may well usher changes in the jet stream that lead to more U.S. extreme weather events…. Global warming melts highly reflective white ice and snow, which is replaced by the dark blue sea or dark land, both of which absorb far more sunlight and hence far more solar energy. That is one of the many sources of “polar amplification,” whereby the Arctic warms much faster than other parts of the globe. Now it seems increasingly clear that the amplified Arctic warming in turn amplifies extreme weather by shifting and weakening the jetstream…"

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