Grasping Reality on TypePad, by Brad DeLong

Norm Ornstein: "I've not seen anything like this before.

It is just such an interesting phenomenon--call it anthropological or sociological or pathological. An obsessive hatred with all things Obamacare that has infected everybody on the Republican side. They can't say anything positive about any element of a law that is based on their own fundamental ideas. It means that when anybody says something that could in any way be construed as positive regarding Obamacare it becomes fodder for attacks.... Conservatives are eating their own...

Steve Roth: Elephant in the Room: Upward Redistribution, Concentrated Income and Wealth, and Secular Stagnation:

Dean Baker quite rightly takes Robert Samuelson to task for his op-ed on the causes of secular stagnation.... But Dean’s explanation also misses the the 800-pound gorilla.... Brad Delong, likewise, reels off four possible explanations today while ignoring what seems to me to be the most obvious one. How about a three-decade upward redistribution of income, and massive increases in wealth and income concentration? Add declining marginal propensity to spend out of wealth/income, and you get a so-called “savings glut” (aka “not spending”) and secular stagnation. The arithmetic of this is straightforward and inexorable. Extreme inequality and upward redistribution kills growth.... Theoretically and arithmetically, it’s huge. Why is it not even part of the conversation?

Well, let me say that it ought to be part of the conversation, but that the pattern of asset prices is not what I would expect to see if it were a high propensity to save on the part of the rich coupled with high inequality that were driving our current (and likely future) destructive encounter with the zero nominal lower bound on short-term safe interest rates. I would expect greater inequality coupled with a higher propensity to save on the part of the rich to drive all asset yields down. Yet what we have seen has been a steep, prolonged fall in Treasury bond yields while stock-market equity yields have plateaued at about 5%/year:

That is what makes me (tentatively) side with Ricardo Caballero, and say that the asset market derangement is better conceptualized as inadequate risk tolerance and safe asset supply, rather than either a global savings glut or a global investment shortfall...

But I would be willing to be persuaded...

Guillermo Calvo et al.: Jobless Recoveries During Financial Crises: Is Inflation the Way Out?:

Three policy tools [could] mitigate jobless recoveries during financial crises: inflation, real currency depreciation, and credit-recovery policies. Using a sample of financial crises in Emerging Market economies, we document that large inflationary spikes appear to help unemployment to get back to pre-crisis levels. However, the counterpart of inflation is sizably lower real wages.... Interestingly, neither the change in the real exchange rate nor the change in output composition... displays a statistically significant relationship with inflation or jobless recovery. This suggests that currency depreciation can help reduce unemployment only insofar as it is associated with inflation, and that jobless recovery is likely due to nominal wage rigidity. The paper also shows that measures to reactivate credit flows could be beneficial to wage earners as a whole, as measured by the real wage bill.

Arindrajit Dube: The Minimum We Can Do:

During most of the 20th century, wages in the United States were set not just by employers but by a mix of market and institutional mechanisms. Supply and demand were important factors; collective bargaining and minimum wage laws also played a key role.... While we can set a wage floor using policy, should we? Or should we leave it to the market and deal with any adverse consequences, like poverty and inequality, using other policies, like tax credits and transfers?... The low-wage work force has become older and more educated over time.... The high-water mark for the minimum wage was 1968, when it stood at $10.60 an hour in today’s dollars, or 55 percent of the median full-time wage. In contrast, the current federal minimum wage is $7.25 an hour, constituting 37 percent of the median full-time wage....

Over at the New Republic, I see that the extremely thoughtful Henry Aaron and Harold Pollack are irate in their: "Single-Payer Healthcare Supporters Complain About Obamacare Problems":

It has been a rough two months for the Affordable Care Act and its defenders.... anger over the botched rollout is understandable, but these recriminations are poorly timed—and just plain wrong.... The ACA is working reasonably well in some places--California, Connecticut, Kentucky, Washington, and the District of Columbia.... These under-reported success stories show that insurance exchanges can work, if properly administered.... The human benefits are real, from California to Breathitt County in rural Kentucky. These successes make the federal government’s dismal rollout even more embarrassing.... Given that complexity, some on the left say, life would be simpler if only Congress had been willing--which it was not--to scrap all current arrangements and replace them with a single, federally administered health insurance plan. Those on the right regard this complexity and say that life would be simpler if only Congress had been willing—which it was not—to scrap all current arrangements and replace them with income-related vouchers people could use to help pay for private insurance of their choice.... These polar-opposite camps each disdain the kludgy fixes of incremental politics. And yet, incrementalism is what most Americans want....

Arindrajit Dube: The Minimum We Can Do:

During most of the 20th century, wages in the United States were set not just by employers but by a mix of market and institutional mechanisms. Supply and demand were important factors; collective bargaining and minimum wage laws also played a key role.... While we can set a wage floor using policy, should we? Or should we leave it to the market and deal with any adverse consequences, like poverty and inequality, using other policies, like tax credits and transfers?... The low-wage work force has become older and more educated over time.... The high-water mark for the minimum wage was 1968, when it stood at $10.60 an hour in today’s dollars, or 55 percent of the median full-time wage. In contrast, the current federal minimum wage is $7.25 an hour, constituting 37 percent of the median full-time wage....

Paul Krugman finds another example of an economist who does not seem to have thought about the disequilibrium foundations of his equilibrium economics, and writes about Immaculate Stability:

David Andolfatto [writes:]

One of the effects of QE... is to increase the real stock of currency held by the private sector, and agents require an increase in currency’s rate of return (a fall in the inflation rate) to induce them to hold more currency....

OK, so “agents require” a fall in the inflation rate to induce them to hold more currency. How does this requirement translate into an incentive for producers of goods and services--remember, we’re talking about stuff going on in the real economy--to raise prices less or cut them? Don’t retreat behind a screen of math--tell me a story. I don’t think either Andolfatto or Williamson have any such story in mind; they are, in some form, invoking the doctrine of immaculate inflation. And I don’t even think they realize that they have a problem....

Austin Frakt: Chart: Growth trajectory of national health expenditures | The Incidental Economist:

Aaron noted a recent JAMA study titled “The Anatomy of Health Care in the United States.” It turns out it’s chock full of great charts. We like charts! So, I’ll share some over the next few weeks. Here’s one that you’ve no doubt seen before, or part thereof. Still, it’s too nice a chart not to share. It certainly puts the recent slowdown (bottom time series) in perspective, doesn’t it? Unprecedented.

I interpret this as IMF chief economist Olivier Blanchard saying, as clearly and straightforwardly as his office allows him to, that in his judgment the 2% per year inflation target is past its sell-by date and rotted, and that the North Atlantic economies need to move to a 4% per year inflation target in order to reduce the risk of another 1932, or another 2010.

What do you think?

Olivier Blanchard writes:

Olivier Blanchard: Monetary Policy Will Never Be the Same:

Finally, turning to capital flows. In emerging markets (and, more generally, in small advanced economies, although these were not explicitly covered at the conference), the evidence suggests the best way to deal with volatile capital flows is by letting the exchange rate absorb most but not necessarily all the adjustment.

The standard argument in favor of letting the exchange rate adjust was stated by Paul Krugman at the conference. If investors want to take their funds out, let them: the exchange rate will depreciate, and this will lead, if anything, to an increase in exports and an increase in output.

Must-Reads:

1. Ezra Klein: Elizabeth Warren wants to spend more on Social Security. But she's not thinking big enough! "She joins a growing movement of Senate Democrats, including Tom Harkin, Mark Begich and Bernie Sanders. 'Social Security is incredibly effective, it is incredibly popular, and the calls for strengthening it are growing louder every day', Warren said.... Washington frets endlessly over the problems that Social Security, which is projected to exhaust its trust funds in the coming decades, might cause the budget. It frets about it so much, in fact, that it completely misses the problems Social Security is uniquely poised to solve for the country. For years, pension experts have spoken of the 'three-legged stool' of retirement savings: Social Security, employer pensions and private savings.... [But] today, Social Security is basically the only leg holding it up..."
2. Barry Eichengreen: Does the Federal Reserve Care about the Rest of the World?: " Many economists are accustomed to thinking about Federal Reserve policy in terms of the institution's "dual mandate," which refers to price stability and high employment, and in which the exchange rate and other international variables matter only insofar as they influence inflation and the output gap--which is to say, not very much. In fact, this conventional view is heavily shaped by the distinctive and peculiar circumstances of the last three decades.... The Federal Reserve paid significant attention to international considerations in its first two decades, followed by relative inattention... then back to renewed attention to international aspects... in the 1960s, before the recent period of benign neglect.... I argue that in the next few decades, international aspects are likely to play a larger role in Federal Reserve policymaking..."

Should-Reads:

1. Noam Levey: Healthcare plan enrollment surges in some states after rocky rollout: "A number of states that use their own systems, including California, are on track to hit enrollment targets for 2014 because of a sharp increase in November, according to state officials. 'What we are seeing is incredible momentum', said Peter Lee, director of Covered California.... California--which enrolled about 31,000 people in health plans last month--nearly doubled that in the first two weeks of this month. Several other states, including Connecticut and Kentucky, are outpacing their enrollment estimates, even as states that depend on the federal website lag far behind. In Minnesota, enrollment in the second half of October ran at triple the rate of the first half, officials said. Washington state is also on track to easily exceed its October enrollment figure, officials said..."
2. Burkhard Bilger: Inside Google\'92s Driverless Car
3. ProGrowthLiberal: EconoSpeak: John Taylor on Monetary Policy and Inflation: "If you were expecting John Taylor to address... Barry Ritholtz... stop holding your breath... Taylor of late has been saying that our current mess was created by a deviation from the Taylor rule. Here\'92s his evidence: 'Inflation was not steady or falling during the easy money period from 2003-2005... [the] Fed\'92s interest rate was too low... inflation... doubled from 1.7% to 3.4% per year... extraordinary inflation and boom in the housing market.... Finally, the unemployment rate got as low as 4.4% well below the natural rate.'... No one... was saying back then that the employment to population ratio had become dangerously high. The 4.4% unemployment rate... was not reached until late 2006... [after] two years of rising short-term interest rates. Now had Taylor and his fellow Bush economic advisors were very concerned about excessive aggregate demand--why did we not seen calls for fiscal restraint back then? If Taylor thinks this is a serious rebuttal to what Summers said, it is no surprise he has yet to acknowledge that 2010 forecast of inflation from QE."

Should Be Aware of:

Matt Schiavenza: A Chinese President Consolidates His Power | Mark Thoma sends us to Paul Krugman: The Geezers Are Not Alright | Menzie Chinn: An opinion piece by Sean Fieler in USAToday.... I found the reference to growing inflation of interest. Here are some data of relevance. They indicate low and declining inflation using various measures, CPI, PCE, PPI, core, headline | Marco Nappolini: Secular stagnation and post-scarcity | Joshua Angrist et al: Semiparametric Estimates of Monetary Policy Effects: String Theory Revisited | Mike Konczal: Given the Myth of Ownership, is the Idea of Redistribution Coherent? |

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OK. We are going to get deep into the history-of-thought, the intellectual-autobiographical, and the methodology-of-economics weeds here, so perhaps this should be called not "Wednesday Focus" but rather "Wednesday Unfocus". Go and talk among yourselves rather than reading this if you wish...

I find that Simon Wren-Lewis wants to stick his head in the lion's mouth by defending "rational expectations" as a working hypothesis:

Antonio Fatas on the Global Economy: Bubbles, interest rates and full employment:

Global [safe] real interest rates during the last expansion (2001-2007) were very low by historical standards. The main candidate to explain low real interest rates is the saving glut that Ben Bernanke referred to in his 2005 speech.... But if what we saw in these years was an increase in the pool of saving that drove down interest rates we should expect investment to increase.... And if investment increases we should expect an increase in growth rates. But none of this happened....

There have been profoundly unserious worries about the effects of ObamaCare implementation on the labor market as well as serious worries by people like Jed Graham.

A correspondent sends me some results from a survey of employers suggesting more of a reluctance to hire than I would have guessed: that the negative that the health-care plans one currently offers may not meet the "bronze" standard of minimum essential benefits is, in employers' current minds at least, slightly more of a minor negative factor than the positive that the coming of the exchanges means more opportunities due to less adverse selection is a minor positive factor:

105 words...

I can understand Barack Obama not yet realizing that after the news has filtered through five layers of bureaucracy, each with a direct incentive to take a step in the optimistic direction, what is reported to you is not what really exists. But Kathleen Sibellius was Governor of Kansas. And Marilyn Tavenner? They really have no excuse for not knowing better...

Indeed, Barack Obama really has no excuse.

The Seven Cardinal Virtues of Equitable Growth for America

1. Manage the macroeconomy to match aggregate demand to potential supply. Take the dual mandate seriously: maintaining full employment is as important a central bank goal as low and stable inflation--and much more important than preserving healthy margins for the banking sector. Run large deficits--run up the national debt--in times of war, depression, or other national emergency calling for government action. Pay down the debt in other times.

2. Invest. Invest in ideas, in equipment capital, in structures capital, in education: we need more of all forms of investment. Boost public and private investment: we need both kinds.

3. Over the past generation, America has shifted enormous resources into value-subtracting industries: health-care administration, prisons, finance, carbon energy. We need to reverse those shifts. We need to focus the American economy on the value-creating sectors rather than the value-subtracting ones.

4. We ought to have had a carbon tax 20 years ago. We still need one.

5. We need more immigration. It is much easier, worldwide, to move the people to where the institutions are already good than to make good institutions where the people are. More immigration produces a richer country for those already here. More immigration is a mitzvah for immigrants. More immigration is, to a a lesser degree, a mitzvah for those in poor countries outside, who see less population pressure on resources. And a U.S. in 2070 that has 600 million people is more of an international superpower than a U.S. in 2070 that has only 400 million people. If you would rather have the U.S. than China or Russia be the world's superpower in 2070, you should want more immigration into the U.S. now.

6. We need more equality. If we want to have equality of opportunity 50 years from now, we need substantial equality of result right now.

7. We are going to need a bigger and better government. The private unregulated market does not do well at health-care finance, at pensions, or at education finance. The private unregulated market does not do well at research and early-stage development. The private unregulated market does not do well with commodities that are non-rival, or non-excludible, or produced under conditions of greatly-increasing returns to scale. We are, in all likelihood, moving into a twenty-first century in which these sectors will all be larger slices of what we do. Thus in the twenty-first century a well-functioning economy will need a larger government share in the economy than was needed in the twentieth century.

420 words...

WCEG: Things to Read at Lunchtime on November 21, 2013

Must Reads:

1. Ezra Klein and Evan Soltas: Three reasons filibuster reform might actually happen today: "Could Democrats back out at the last minute, as they have so many times before? Absolutely. But there've been three big changes.... (1)... Back in January, the best arguments against filibuster reform had... to do with the rest of the Democrats' agenda.... But gun control died in the Senate.... Boehner refused to consider the Senate's immigration legislation.... So in pure 'getting-things-done' terms, Democrats are faced with a choice: keep the filibuster and get nothing done. Change the filibuster and get nothing done aside from staffing the federal government and filling a huge number of judicial vacancies with lifetime appointments. (2) Democrats believe Republicans will shred the filibuster as soon as they get a chance.... Senate Democrats just watched Republicans mount a suicide mission to shut down the government. Their confidence that Republicans will treat the upper chamber's rules with reverence is low, to say the least. This has led to some fatalistic thinking about filibuster reform: If Republicans are going to blow the filibuster up anyway, Democrats might as well take the first step and get some judges out of the deal. (3) Senate Democrats feel betrayed by Republicans. It's hard to overstate the pride senior Senate Democrats took in cutting their January deal.... But then Republicans filibustered more judges and executive-branch nominees. And the pride top Democrats took in their deal to avert filibuster reform has turned to anger that Republicans made them look like trusting fools..."

2. Lawrence Mishel, Heidi Shierholz, and John Schmitt: Don’t Blame the Robots: Assessing the Job Polarization Explanation of Growing Wage Inequality | Economic Policy Institute: "The tasks framework that Acemoglu and Autor developed... is a distinct improvement... [but] suffers from its own empirical failings.... The relatively smooth, long-standing nature of job polarization... appears poorly suited to explaining the abrupt rise in inequality at the end of the 1970s or... the sharp change in the path of the 50/10 wage differential after 1986–1987; the failure of the most conventional measure of job polarization... to show... occupational employment polarization in the 2000s, even as wage inequality continued to grow; and, the consistent lack of correspondence across the 1980s, 1990s, and 2000s between changes in occupational employment, occupational wages, and the overall wage distribution. Recent research that has focused on the role of typically low-wage service occupations has not rescued the tasks framework from these shortcomings.... Technology may be a factor in widening wage inequality, but, if so, the tasks framework is not the model that captures those dynamics."

Should-Reads:

1. David Keohane and Izabella Kaminska: Zhou seems a little flustered: "We were going to be slightly snarky in the face of Zhou Xiaochuan, head of the People’s Bank of China... the lack of a timetable and the ambiguity of phrasing making this seem rather similar to what we’ve heard in the past--but then we saw this from Neil Mellor at BoNYM and felt bad: 'However, although a timetable was absent... this announcement constituted the beginnings of a new era for financial markets and no superlative would overstate its significance.' Oops. Mellor may well have a point... rowing back a bit on timetable-snark [does] seem sensible..." ... people are still willing to look for a good deal on the Exchanges..."

2. Yao Yang: Yao Yang breaks down China's new reforms and considers what's missing: "This is related to the final document’s most significant lacuna: political reform. In fact, a Singapore-style approach--combining a freewheeling market economy and an authoritarian regime--has clearly emerged from the plenum. It is an approach that awaits the test of time.... Given China’s much greater size and complexity, the Chinese government’s pursuit of the Singaporean model, with its suppression of any and all social disorder, would ultimately undermine economic dynamism. To build the innovative economy envisioned by the third plenum, the CCP’s leadership needs to find a new governance model that fosters a vibrant society. Sooner rather than later, the crucially important economic reforms that have just been unveiled will not be enough."

3. Austin Frakt: Are Republicans really anti-exchange?: "My view is that Republicans are not generally, ideologically opposed to exchanges. Deep down, I think any pro-market health reformer knows exchanges are sensible. Consequently, at least some of the broad structure of the Affordable Care Act should be appealing to conservatives. To the extent elected officials most sympathetic to right-of-center health policy aren’t behaving accordingly, there would seem to be a disconnect between policy preferences and political tactics.[1] As I tweeted earlier this week: 'The ACA is a conservative reform not because of its pedigree, but because it is a sound chassis for almost everything conservatives propose'. [1] Just so you don’t have to, I will accuse myself of putting it mildly."

4. Aaron Carroll: A pickle for conservative states refusing the Medicaid expansion: "The ACA covers most Americans making less than 138% of the poverty line through the Medicaid expansion. Because everyone thought the expansion would happen nationwide, they only wrote in subsidies for people making more than 100% of the poverty line.... Now there’s a problem--people making too little in states that refuse the expansion may not get subsidies, and therefore they may not be able to get insurance in the exchanges.... Things are different for legal immigrants.... In order to make sure that all legal residents were covered, the ACA instead provides subsidies for legal immigrants to go get inurance in the exchanges, no matter how little they make. So we’re going to have a potential situation next year where poor non-immigrants will get nothing in states that refuse the Medicaid expansion, but poor immigrants will get subsidies to buy private insurance.... It’s hard to see this playing out well politically..."

5. David Glasner: The Internal Contradiction of Quantitative Easing: "I can’t help observing... that the two main arguments made by critics... do not exactly coexist harmoniously.... QE is ineffective... dangerous.... The tension might at least have given a moment’s pause.... Nor... does the faux populism of the attack on a rising stock market and... crocodile tears for helpless retirees living off... interest... coexist harmoniously with... the same characters... (e.g., Freedomworks, CATO, the Heritage Foundation, and the Wall Street Journal editorial page) for privatizing social security.... I am also waiting for an explanation of why abused pensioners... can’t cash in the CDs.... In which charter... does one find it written that a perfectly secure real rate of interest of not less than 2% on any debt instrument issued by the US government shall always be guaranteed?"

Should Be Aware of:

Jonathan Cohn: I Just Lost My Insurance Because of Obamacare. What Do I Do? A step-by-step guide to replacing your health insurance | David Dollar et al.: Growth still is good for the poor | Stephanie Paige Ogburn: Missing Data from Arctic One Cause of "Pause" in Temperature Rise | Q4 GDP Tracking: 1.4%/Yr |

Kevin Drum: The Filibuster is Dead (Partly):

CNN reports that by a vote of 52-48, the filibuster of judicial and executive branch nominees has been eliminated. The nuclear option has been detonated.

The National Memo Interviews Romneycare/Obamacare Architect Jonathan Gruber:

Aside from the bartender who recorded the notorious “47 percent” video, Jonathan Gruber may have become Mitt Romney’s least favorite person during the 2012 campaign. Gruber damned the former governor of the Bay State with praise that certainly did little to shore up his standing in the Republican base: “He is in many ways the intellectual father of national health reform.”... Recently, Gruber spoke with National Memo executive editor Jason Sattler....

Jason Sattler:  You’re estimating that a few million of the insured are in that so-called “losers” category. And you’ve recently described these people as winning the “genetic lottery” — suggesting they’ve been underpaying in the past?

Jonathan Gruber:  So basically there’s two different issues. One of them is, what does it mean to be a “loser?”… How many people are being asked to find more generous plans than before? That’s probably about six million people.... The other issue is, how many people going to end up paying more than they did before? That’s probably about four million people.... The point is that a lot of people who are healthier have benefited from existing discrimination in the market....

Sattler: Is the refusal of 25 states to expand Medicaid distorting the market?

Gruber: I think in those states, by my own estimates, it’s going to raise premiums by about 15 percent in the exchange because sicker people will be in the exchange. I think it’s really disgusting that these states aren’t providing their poorest residents free insurance [financed] by the federal government. It’s pretty amazing that they can get away with that.

Sattler: What do you think about the right-wing argument that having no insurance at all is better than Medicaid?

Gruber: It’s just incorrect. There’s no credible evidence to support that....

Sattler: What would success for this law look like?

Gruber: We’re looking for several million people to sign up by March 31. And we’re looking for a reasonable mix of not just sick people, but also healthy people joining too...

Sattler: What did the proportions look like in Massachusetts during the first year?

Gruber: The New England Journal of Medicine study [that] I was part of found that the healthiest people tended to wait until the very end. There was a huge spike among the healthy right near the end of the enrollment period...

That the political maneuvering so often--like now--appears incomprehensible: foolish actions by people who do not understand their own position or incentives--is why I am much happier talking and thinking about policy substance.

But let me note this from Markos Moulitsas Zuniga:

Maryn McKenna: Imagining the Post-Antibiotics Future:

A few years ago, I started looking online to fill in chapters of my family history.... My great-uncle Joe.... Through one of the scrapes, an infection set in.... Desperate to save his life, the men from his firehouse lined up to give blood. Nothing worked. He was thirty when he died, in March 1938.... Five years after my great-uncle’s death, penicillin changed medicine forever. Infections that had been death sentences—--from battlefield wounds, industrial accidents, childbirth--suddenly could be cured in a few days.... Lately, though, I read it differently. In Joe’s story, I see what life might become if we did not have antibiotics any more...

Tim Duy: Desperate to Taper:

The minutes of the October FOMC meeting leave little doubt that the Fed increasingly desires to end the asset purchase program, enough so to contemplate tapering regardless of seeing satisfactory improvement in labor markets.... The discussion of the specifics of the asset purchase program began with: 'During this general discussion... participants reviewed issues specific to the Committee's asset purchase program. They generally expected that the data would prove consistent with the Committee's outlook for ongoing improvement in labor market conditions and would thus warrant trimming the pace of purchases in coming months.' The mythical taper--just a few months away.  And it will always be just a few months away given the broad weakness in the labor chart. Recall the Yellen Charts: Unless they narrow their focus to only the unemployment rate, the argument to taper is challenged to say the least. It is even more challenged considering inflation indicators. Knowing that the data continuously refuses to cooperate, the Fed explores plan B: 'However, participants also considered scenarios under which it might, at some stage, be appropriate to begin to wind down the program before an unambiguous further improvement in the outlook was apparent...'

This Is Ashok: The Evolution of Larry Summers: November 14, 2011, February 11, 2013, and November 8, 2013:

Must-Reads:

1. Maryn McKenna: Imagining the Post-Antibiotics Future: "A few years ago, I started looking online to fill in chapters of my family history.... My great-uncle Joe.... Through one of the scrapes, an infection set in.... Desperate to save his life, the men from his firehouse lined up to give blood. Nothing worked. He was thirty when he died, in March 1938.... Five years after my great-uncle’s death, penicillin changed medicine forever. Infections that had been death sentences—--from battlefield wounds, industrial accidents, childbirth--suddenly could be cured in a few days.... Lately, though, I read it differently. In Joe’s story, I see what life might become if we did not have antibiotics any more..."

2. Tim Duy: Desperate to Taper: "The minutes of the October FOMC meeting leave little doubt that the Fed increasingly desires to end the asset purchase program, enough so to contemplate tapering regardless of seeing satisfactory improvement in labor markets.... The discussion of the specifics of the asset purchase program began with: 'During this general discussion... participants reviewed issues specific to the Committee's asset purchase program. They generally expected that the data would prove consistent with the Committee's outlook for ongoing improvement in labor market conditions and would thus warrant trimming the pace of purchases in coming months.' The mythical taper--just a few months away.  And it will always be just a few months away given the broad weakness in the labor chart. Recall the Yellen Charts: Unless they narrow their focus to only the unemployment rate, the argument to taper is challenged to say the least. It is even more challenged considering inflation indicators. Knowing that the data continuously refuses to cooperate, the Fed explores plan B: 'However, participants also considered scenarios under which it might, at some stage, be appropriate to begin to wind down the program before an unambiguous further improvement in the outlook was apparent..."

3. Ashok Rao The Intellectual Evolution of Larry Summers on the Possibility of a Long-Lasting Negative Real Natural Rate of Interest: November 14, 2011, February 11, 2013, and November 8, 2013...

Should-Reads:

1. Norm Ornstein: Republicans Forced Reid's Hand On The Nuclear Option: "For whatever reason, the Republicans decided to go nuclear first, with this utterly unnecessary violation of their own agreement and open decision to block the president from filling vacancies for his entire term, no matter how well qualified the nominees. It was a set of actions begging for a return nuclear response. McConnell's threat, it seems to me, makes clear the strategy: let Dems take the first step, and we will then bear no blame when we entirely blow up the Senate's rules after we take all the reins of power. That other Republicans like Corker, McCain, Alexander, Murkowski and so on, went along, shows how much the radicals and anti-institutionalists now dominate the Republican Party. Which is sad indeed."

2. Rachel Pearson: Life and Death in the "Safety Net": "The first patient who called me 'doctor' died a few winters ago.... His belly was swollen, his eyes were yellow and his blood tests were all awry. It hurt when he swallowed and his urine stank.... His disease seemed serious, but... the tests... are beyond our financial reach.... We decided to send him to the emergency room.... There’s a popular myth that the uninsured--in Texas, that’s 25 percent of us--can always get medical care through emergency rooms.... The myth is based on a 1986 federal law called the Emergency Medical Treatment and Labor Act (EMTALA), which states that hospitals with emergency rooms have to accept and stabilize patients who are in labor or who have an acute medical condition that threatens life or limb. That word 'stabilize' is key: Hospital ERs don’t have to treat you. They just have to patch you up to the point where you’re not actively dying.... My patient went to the ER, but didn’t get treatment.... He’d finally gotten so anemic that he couldn’t catch his breath, and the University of Texas Medical Branch (UTMB), where I am a student, took him in. My friend emailed me the results of his CT scans: There was cancer in his kidney, his liver and his lungs. It must have been spreading over the weeks that he’d been coming into St. Vincent’s.... UTMB sent him to hospice, and he died at home a few months later. I read his obituary in the Galveston County Daily News. The shame has stuck with me through my medical training—not only from my first patient, but from many more..."

3. Benjamin Wallace-Wells: 50 Years of Conspiracy Theories: "Every good conspiracy theory begins with the pawn.... Consider... Ricky Donnell Ross circa 1980... high-school dropout... part-time [crack] dealer.... Oscar Danilo Blandon.... Within two years, as drug use exploded and he supplied crack to both the Bloods and Crips, Ross became one of the dominant dealers in Los Angeles, moving 100 kilos each week.... Blandon was... a contra, a member of the militias organized and deployed by the CIA to overthrow the left-wing government in Managua. The contras had, it seems, long supplemented the funds Washington sent by helping Colombian traffickers ship cocaine north.... Because of Ross’s pivotal role in the early crack trade in L.A., this episode soon became fuel for perhaps the last great conspiracy of the twentieth century: that the CIA had spread crack throughout America’s inner cities.... The wider the aperture around this theory, the harder its proponents work to implicate Washington, the shakier it seems.... But keep the aperture tighter, around Ross himself, and you see American intelligence officials working comfortably in close proximity to drug traffickers in Central America and a remarkably short chain from powerful figures in American intelligence to this crack dealer in Los Angeles. What is left is a general sense that something is amiss.... If Ross sensed that he had been a pawn for forces he could barely understand, he probably wasn’t wrong. The question was: What forces? That the Ricky Ross story follows a familiar plot, that we know what a pawn is and that we understand the patterns of conspiracy, owes a great deal to the Kennedy assassination, which took place 50 years ago this month and which gave birth to the modern golden age of conspiracy..."

4. Joseph Cotterill: The Fed and Treasury default: a coda: "At some point in the great collective peyote dream that was last month’s debt ceiling crisis, we asked you to imagine the Fed buying defaulted US Treasuries. Fortunately, the US central bank was thinking about it too: 'Meeting participants saw no legal or operational need in the event of delayed payments on Treasury securities to make changes to the conduct or procedures employed in currently authorized Desk operations, such as open market operations, large-scale asset purchases, or securities lending, or to the operation of the discount window. They also generally agreed that the Federal Reserve would continue to employ prevailing market values of securities in all its transactions and operations, under the usual terms…' That’s from the latest Fed minutes’ account of an unscheduled videoconference held on October 16--ironically, the day John Boehner cracked, leading to a late-night House vote to raise the ceiling. Still, the Fed knows what to do next time."

5. Jérémie Cohen-Setton: Blogs review: Understanding New-Keynesian models: "A recent tractable formulation of the New-Keynesian liquidity trap by Ivan Werning has helped streamline the model to its essence and has generated important contributions that help clarify its mechanics.... Johannes Wieland writes that New-Keynesian models... robustly make two predictions at the ZLB... demand-side policies are very stimulative and, second, negative supply shocks are expansionary.... Paul Krugman writes the liquidity trap is puts us in a world of topsy-turvy.... Paul Krugman writes that the reason the classic Keynesian multiplier isn’t in NK models is not because it has been disproved, but because such models deliberately give hostages.... Johannes Wieland... writes that a less restrictive Euler equation is needed... if nominal wages are sticky and a large fraction of consumers are hand-to-mouth, then a negative supply shock can be contractionary... negative supply shocks [may] endogenously raise uncertainty.... Johannes Wieland focuses on another mechanism... In the calibrated model with credit frictions, demand-side policies are up to 50% less effective than in a standard new Keynesian model."

Things to Be Aware of:

Stan Collender: Nuclear Option Increases Chances Of Another Shutdown, Sequestration | Sarah Binder: Boom! What the Senate will be like when the nuclear dust settles | Brad DeLong: Genuinely New Ways of Understanding IS-LM Watch: Karl Smith Is Really Smart and Thoughtful: Wednesday Hoisted from the Archives Weblogging | Jon Schwarz: Wow, 2013 Samantha Power Was Just EXCORIATED by 2003 Samantha Power | Joe Romm: Shell Oil [Internal Accounting] Self-Imposes Carbon Pollution Tax High Enough To Crash Coal, Erase Natural Gas's Value-Added | Kevin Drum: The Media [John Harris, Mike Allen, and Company] Once Again Refuses to Answer Questions From the Media |

It is a great puzzle: tell me, what is to be done to raise the level of the debate in a politics that includes such people in high federal office?

Kevin Drum: Republicans Refuse to Cover the Poor, Then Complain that Obamacare Isn't Covering the Poor:

The New York Times has gotten hold of the "House Republican Playbook" on Obamacare, and I have to admit that it brought back warm memories. It's just like the launch kits I used to produce for our sales force.... It's all pretty predictable stuff: Obamacare is an abomination; people are losing their insurance; small companies are being ruined; etc. etc. But I have to say that this is my favorite talking point:

Millions more uninsured: the number of Americans left uninsured by ObamaCare has risen by 8 million from the initial estimate.

Needless to say, this is primarily because Republicans governors have refused to implement Obamacare's Medicaid expansion, even though it's 100 percent paid for at first and 90 percent paid for forever. These governors literally prefer to have their state's residents pay taxes and get nothing in return rather than give so much as an extra dime to poor people who need health care. It's truly hard to fathom what kind of human being is callous enough to do this, but apparently there are a bunch of them in the Republican Party. And then, just to add a cherry of chutzpah on top of this ice cream sundae of spitefulness, they crow about how Obamacare isn't covering as many people as Obama hoped it would. You really have to marvel.

One of the people you definitely should be reading is Igor Volsky over at our sister organization, the Center for American Progress. Careful, thoughtful, and indefatigable, you can trust what he writes to have the story straight and in context. And I envy his tight, concise prose.

Below the fold is a sample: eight things from him that I noted at the time that made me sit up, and taught me important things, as health care reform has slouched toward whatever its destination will be:

Must-Reads:

1. Dan Baum reports John Ehrlichman said: When Someone Claims the War on Drugs Is a War on Minorities…: "The Nixon campaign in 1968, and the Nixon White House after that, had two enemies: the antiwar Left, and black people. You understand what I’m saying? We knew we couldn’t make it illegal to be either against the war or black. But by getting the public to associate the hippies with marijuana and blacks with heroin, and then criminalizing both heavily, we could disrupt those communities. We could arrest their leaders, raid their homes, break up their meetings, and vilify them night after night on the evening news. Did we know we were lying about the drugs? Of course we did..."

2. Noam Levey: Healthcare industry vested in success of Obamacare: "Insurance companies, doctor groups and hospitals... are committed to the law's success despite persistent tensions with the White House. Many healthcare industry leaders are increasingly frustrated with the Obama administration's clumsy implementation.... Nearly all harbor reservations about parts of the sweeping law. Some played key roles in killing previous Democratic efforts.... But since 2010, they have invested billions.... Few industry leaders want to go back to a system that most had concluded was failing, as costs skyrocketed and the ranks of the uninsured swelled. Nor do they see much that is promising from the law's Republican critics. The GOP has focused on repealing Obamacare, but has devoted less energy to developing a replacement. Healthcare industry officials generally view several GOP proposals, such as limiting coverage for the poor and scuttling new insurance marketplaces created by the law, as more damaging than helpful to the nation's healthcare system..."

Should-Reads:

1. Miles Kimball: Even Economists Need Lessons in Quantitative Easing, Bernanke Style: "Feldstein’s argument boils down to saying, 'The Fed has done a lot of QE, but we are still hurting, economically. Therefore, QE has failed'. But here he misunderstands the way QE works. The special nature of QE means that the headline dollar figures for quantitative easing overstate how big a hammer any given program of QE is. Once one adjusts for the optical illusion that the headline dollar figures create for QE, there is no reason to think QE has a different effect than one should have expected. To explain why, let me lay out again the logic of one of the very first posts on my blog.... In that post I responded to Stephen Williamson, who misunderstood QE... in a way similar to Martin Feldstein..."

2. Timothy Egan: The South’s New Lost Cause: "What is distressingly similar today is how the South is once again committed to taking a backward path. By refusing to expand health care for the working poor through Medicaid... most of the old Confederacy is committed to keeping millions of its own fellow citizens in poverty and poor health... out of spite.... In the states that have embraced... [expansion] almost 500,000 people have signed up for health care in less than two months time... good for business... for state taxpayers... can do much to lessen the collateral damages of poverty.... In Kentucky, which has bravely tried to buck the retrograde tide, Medicaid expansion is projected to create 17,000 jobs.... Beyond Medicaid, the states that have diligently tried to make the private health care exchanges work are putting their regions on a path that will make them far more livable.... And those states aren’t going to turn back the clock... no matter how Republicans try to kill health care reform.... What we could see, 10 years from now, is a Mason-Dixon line of health care... the insured North... where health care coverage was affordable and available... the uninsured South, where health care for the poor would amount to treating charity cases in hospital emergency rooms.... But most of the South is defiant--their own Lost Cause for the 21st century."

3. Ed Kilgore: The Pure Meanness Litmus Test: "Partly as a byproduct of conservative optimism about rolling back ObamaCare and partly in conjunction with the Republican Governors Association meeting... there’s a lot of buzz right now about Medicaid expansion... a litmus test for conservative orthodoxy.... It’s no coincidence, of course, that one of the governors who did accept the expansion, Chris Christie, is the early MSM/Republican Establishment favorite for putting the Tea Folk back in their place and retaking the White House.... No one is being forced to drop private health insurance to enroll in Medicaid. No one can claim the president “lied” about Medicaid eligibility. The performance or non-performance of http://healthCare.gov isn’t really an issue. The pace at which eligible folks sign up mainly just affects them. And there’s no 'premium shock'.... And that is sort of why the issue makes the perfect ideological litmus test: opposing the expansion can’t be and isn’t being justified as a prudent objection to an unworkable program or as disruptive to the health care status quo... states refusing the Medicaid expansion are doing so on grounds that they don’t want their own citizens to benefit from it. And since opposition has centered in the South, there’s not any real doubt a big motive has been a continuation of that region’s longstanding effort to--choose your verb--(a) reduce dependence on government among, or (b) keep down--those people..."

4. Felix Salmon: Why guru ETFs beat human gurus: "Wall Street is no place for shrinking violets, but even by New York standards, Jason Ader has some serious chutzpah.... In principle, [he] makes sense. One common criticism of passive investing is that if everybody did it, then there would be no price discovery--and that the more passive investors there are... the easier it becomes to take advantage of them.... But the point at which passive investing becomes self-defeating is a bit like the point at which the gradient of the Laffer curve turns negative... far beyond any state of the world that obtains in real-life.... It’s a simple mathematical truth that activist investing has not outperformed passive investing this year.... Of course, if your dream is to beat the market, then you’re going to have to invest in something other than a passive index fund.... And don’t kid yourself, either, that paying 2-and-20 to anybody is a sensible way to try to achieve your goal. Indeed, there’s an increasing number of relatively low-fee ETFs which aim to replicate the results you’d get from investing with some of the biggest-name investors.... Buying one of these guru ETFs is no sillier than buying a typical actively-managed mutual fund. In fact, it’s probably more sensible, since the discipline of the ETF strategy is baked in to its structure, and it’s harder for an all-too-human manager to make silly mistakes... [and] the fees... will never come anything close to the kind of fees being charged by Jason Ader and his ilk..."

5. Harold Pollack: This drug could make a huge dent in heroin addiction. So why isn’t it used more?: "This week, the New York Times’ Deborah Sontag published an extensive two-part series, 'Addiction treatment with a dark side', on buprenorphine misuse. The piece is vividly written. It shows the human faces of many drug users. She frankly depicts underground market in buprenorphine, and describes unethical providers.... Like many addiction researchers, I’m uneasy.... The specific facts are well-researched. There’s some beautiful reporting.... Yet the very vividness of the human portraits leaves readers with powerful... misimpressions... that buprenorphine is more widely abused than it actually is, that buprenorphine is more dangerous than it generally is, and that buprenorphine providers are less ethical than they generally are. Sontag cites a statistic that buprenorphine was involved on the order of 42 deaths per year.... That’s a frightening thing, but it matters that these occur in a population that now experiences 19,000 overdose deaths every year..."

Things You Should Be Aware of:

Andy Harless: Can Knut Wicksell Beat Up Chuck Norris? | Iván Werning: Managing a Liquidity Trap: Monetary and Fiscal Policy | Killer Martinis: Why I Make Terrible Decisions, or, poverty thoughts | Krugman v Stiglitz on whether rising inequality is what's holding back the recovery | Garance Franke-Ruta: Why Is Maternity Care Such an Issue for Obamacare Opponents? |

1. John Aziz: The central banker who changed his mind: "When Narayana Kocherlakota was appointed president of the Federal Reserve Bank of Minneapolis in 2009, the University of Chicago-educated theoretical economist was best known for his insight that money is a system of memory.... In the year before his appointment, he had signed a CATO Institute petition to protest President Obama's fiscal stimulus program. And after his appointment to the Fed, he was concerned that the central bank was being too accommodative.... But by August 2012 he seemed to have changed his mind, noting that 'increasing policy accommodation might well be appropriate' and voting later that year for the new quantitative easing asset-purchasing program (QE3).... I don't think that Kocherlakota's shift has really been so very dramatic.... Inflation is currently below the Federal Reserve's target, while unemployment is above the target, so the Fed seems 'dovish'.... I think Kocherlakota simply updated his policy prescriptions based on new evidence about the state of the economy and the persistently high rate of unemployment..."

2. McSweeney’s Internet Tendency: Retail Therapy: Inside the Apple Store: It’s a Trap!: "New York Times... Catherine Rampell... 'Cracking the Apple Trap'. Online... 'Why Apple Wants to Bust Your iPhone', and I am still dumbfounded that it was considered news fit to print.... The piece meanders through pontifications... the author’s aggrieved imagination... the New York Times has stooped to link-baiting, and I fell for it... rather than state... that all batteries... degrade over time, Rampell deliberately writes that 'Apple phone batteries' do so, implying peculiarity and intention. One expects Fox News to lead off thinly veiled editorials posing as economics coverage with phrasing like, 'Some say', or 'Many may believe', but the Gray Lady? Say it ain’t so!... Rampell wrote a follow-up... 'Planned Obsolescence, as Myth or Reality?' Referencing no less than three economists by name and 'a lot of technology experts' not by name, she successfully recycled half of her first piece, which inferred Apple’s evil motives, to arrive at a new conclusion, 'It’s actually very hard to infer a company’s motives'. What a wonderful non-apology. Ironically, it rendered the older article obsolete. Was that planned? That’s pretty f^&%ing meta..."

Must-Reads:

1. Stephanie McCrummen: In rural Kentucky, health-care debate takes back seat as the long-uninsured line up: "On the campaign trail, Senate Minority Leader Mitch McConnell was still blasting the new health-care law as unsalvageable. At the White House, President Obama was still apologizing for the botched federal Web site. But in a state where the rollout has gone smoothly, and in a county that is one of the poorest and unhealthiest in the country, Courtney Lively has been busy signing people up: cashiers from the IGA grocery, clerks from the dollar store, workers from the lock factory, call-center agents, laid-off coal miners, KFC cooks, Chinese green-card holders in town to teach Appalachian students.... Now it was the beginning of another day, and a man Lively would list as Client 375 sat across from her in her office at a health clinic next to a Hardee’s.... This is how things are going in Kentucky: As conservatives argued that the new health-care law will wreck the economy, as liberals argued it will save billions, as many Americans raged at losing old health plans and some analysts warned that a disproportionate influx of the sick and the poor could wreck the new health-care model, Lively was telling Noble something he did not expect to hear. 'All right', she said. 'We’ve got you eligible for Medicaid'. Places such as Breathitt County, in the Appalachian foothills of eastern Kentucky, are driving the state’s relatively high enrollment figures, which are helping to drive national enrollment figures..."

2. Joe Blasi et al.: The Citizen's Share: Putting Ownership Back into Democracy: "As a result, surprisingly large numbers of American workers share in some way in their employers’ success. Based on a series of national surveys, the authors reckon that some 47% of full-time workers have one or more forms of capital stake in the firm for which they work, whether from profit-sharing schemes (40%), stock ownership (21%) or stock options (10%). About a tenth of Fortune 500 companies, from Procter & Gamble to Goldman Sachs, have employee shareholdings of 5% or more. Almost a fifth of America’s biggest private firms, including behemoths like Cargill and Mars, have profit-sharing or share-ownership schemes. Some 10m people work for companies with ESOPs."

Should Reads:

1. Matthew O'Brien: The Singular Waste of America's Healthcare System in 1 Remarkable Chart: "The U.S. spends far, far more per person than any other rich country on healthcare. We don't get more for it....
   
   Something has to change. We can't afford our healthcare exceptionalism.

2. Josh Marshall: Boehner Fails to Fail on Obamacare: "Late last week Speaker John Boehner (R-OH) made a big show of trying but failing to sign up for Obamacare because of the notoriously buggy website. (Actually he appears to have been using the DC exchange site.) He even did a special tweet noting his hopeless situation. Not terribly surprising given the frustrating experiences so many have had. Actually, it turns out he had successfully enrolled and got a call confirming that about an hour after his tweet. But it gets better. According to Scott MacFarlane, a reporter for the local NBC affiliate in Washington, reports that a DC Health Care exchange representative actually tried to contact Boehner by phone during the enrollment process but was put on hold for 35 minutes, after which time the representative finally hung up."

3. The Economist: Post-crisis economics: Keynes’s new heirs: "It is not just students who are dissatisfied with economics. Professional economists can spot easy wins too. Many think economic history should be more widely taught, citing the fact that Ben Bernanke’s Federal Reserve, influenced by his knowledge of the Great Depression and of Japan’s slump in the 1990s, outperformed rich-world peers. It is not merely American financial history that matters, either. Stanley Fischer, governor of Israel’s central bank between 2005 and 2013, says he found economic history (including Walter Bagehot’s famous rule—to provide generous amounts of cash to troubled banks, but to charge them for it) useful in combating the 2008 crisis. This material had long fallen off the syllabus in most universities before the crash. A new group of teachers is now listening. Led by Wendy Carlin, an economist at University College London, they are designing a new university-level curriculum. The project, which aims to launch for the 2014-15 academic year, will change things in a number of ways."

4. Daniel Davies: If this is “secular stagnation”, I want my old job back: "Here’s my version of the economic history of the pre-crisis years.... Welcome to the world you made guys. These are the consequences of globalization, entirely predictable and in fact predicted (by Dean Baker, among others). The final conclusion is probably the same as if it was a mysterious secular stagnation; fiscal policy. But the need for fiscal policy is such an obviously correct and obvious fact that more or less any economic argument is going to end up there unless it has major logical or accounting errors. But really--there is no need to tell ourselves ghost stories about animal spirits. There’s no puzzle here. We got this outcome because we wanted it..."

Should Be Aware of:

1. Ed Kilgore: Republicans and Health Insurance Exchanges: "Ezra Klein reminds us today in a more comprehensive way than we’ve seen so far that the Republican caterwauling about complex government-run private insurance exchanges and the disruption of existing insurance plans disguises the fact that their own health reform plans involve both... would very deliberately disrupt existing insurance plans more than fifty Obamacares.... But hey, I guess the Ted Cruz health reform plan, due any day now, will solve all these problems and avoid all these massive acts of hypocrisy..."

2. Michelle Goldberg: Right-Wing Author Abandons Cultural Populism, Decries ‘White Trash’: "Charlotte Hays... has a new book out, titled When Did White Trash Become the New Normal? A Southern Lady Asks the Impertinent Question. A broadside against the moral and aesthetic failures of the lower orders, it’s... fascinating work... the right are abandoning the NASCAR-fetishizing Palinesque faux-populism of recent decades for a more overt style of class warfare. A chapter on the foreclosure crisis and crushing student debt, for example, is called 'White Trash Money Management'. 'There are, I thus adduce, two keys to not being White Trash: having a job and paying your bills on time', Hays sniffs..."

3. David Abrams et al.: Patent Value and Citations: Creative Destruction or Strategic Disruption?: "We attempt to explain... innovation, allowing for both productive and strategic patents. We find evidence of greater use of strategic patents where it would be most expected: among corporations, in fields of rapid development, in more recent patents and where divisional and continuation applications are employed. These findings have important implications for our basic understanding of growth, innovation, and intellectual property policy..."

4. Free Exchange (October 22, 2008): Analysis!: "We faced the risk, the experts said, of a breakdown in the markets.... Had we done nothing, to paraphrase Ben Bernanke, we might have woken up one day to find ourselves without an economy. Or so they would have you believe, says Alex Tabarrok! For some time now, he has been pushing the argument that we may face recession, but that the financial crisis never threatened the real economy.... And now he has proof. Three economists [Chari, Christiano, and Kehoe] from the research department of the Federal Reserve Bank of Minneapolis have produced a working paper purporting to debunk four myths about the financial crisis.... There are a few problems with all of this. First of all, some of the conclusions drawn are simply false... the broader, unwarranted credulity of the authors.... Maybe at some point we'll see some careful research that suggests that the threat the financial crisis posed to the real economy was drastically oversold. This, I'm afraid, isn't it."

Ed Kilgore: It's The Fundamentals, Stupid: Elections Aren't Determined By Short-Term 'Game Changes' | James Plunkett and Joao Paulo Pessoa: A Polarising Crisis: The changing shape of the UK and US labour markets from 2008 to 2012 | Harriet Beecher Stowe (1854): Key to Uncle Tom's Cabin: "Poor White Trash" | Brian Buetler: Whoops! Obamacare turns out to be great deal personally for Boehner | Fed chair nominee Janet Yellen wins Senate committee backing |

Must-Reads:

1. Paul Krugman: Nowhere Near The Exit: "Greg Mankiw... suggesting that the time for a Fed exit strategy may be drawing near. Dean focuses mainly on Greg’s use of what he considers a [single] misleading wage number.... We have multiple measures of wage developments.... One of these numbers, wages of production and nonsupervisory workers, shows a modest uptick, the others not. All three remain well below their pre-crisis rates of increase. Is this the kind of evidence on which you want to base a major policy change? Not in my world.... [And] it makes no sense at all to tighten until we see wage inflation rise, not just from its current level, but several points higher.... Arguments that the full-employment rate of unemployment has risen tend to rely on the claim that sustained high unemployment, even if it starts out cyclical, eventually becomes structural. But if that’s true, there are very high costs to premature policy tightening... this adds up to a strong argument for waiting to see overwhelmingly clear evidence of an overheated economy before beginning any kind of policy exit..."

2. Tim Jost: Implementing Health Reform: State Exchange Enrollment: ""Covered California, the California exchange, reported that as of November 19, 2014, almost 80,000 Californians had selected a health plan through the exchange. Almost 31,000 had enrolled in October.  Of these, almost 5,000 were subsidy-eligible while 26,000 were not, suggesting that the Californians at the front of the line were higher-income applicants, who likely understand the need for insurance and may well need it for immediate health needs.  Almost 83 percent of enrollees were English speaking, while fewer than 5 percent spoke Spanish. Twenty-two percent of enrollees were between the ages of 18 and 34, roughly equal to the percentage of the total population in this age group. But 34 percent of enrollees were between the ages of 55 and 64, compared to 11 percent of the total population.  Adverse selection is thus a concern..."

3. Sy Mukherjee: Stubborn Opposition To Medicaid Expansion Is Forcing Hospitals In The Poorest States To Shut Down: "At least five public hospitals have shuttered their doors and many more are cutting staffing and services in non-Medicaid expansion states, according to Bloomberg. Three such hospitals have shut down in Georgia, while North Carolina and Virginia are experiencing similar closures.... The closures are tied directly to Republicans’ refusal to accept generous federal funding to expand Medicaid. And experts warn that even more closures may be on the horizon in poor states... that have also refused the Medicaid expansion. Safety-net hospitals... depend on federal money to make up for the uncompensated care costs.... The health law reduced payments to these so-called “disproportionate share hospitals”.... Lawmakers figured that Obamacare’s Medicaid expansion... would mitigate the cuts’ effects.... But... the Supreme Court ruled Obamacare’s Medicaid expansion to be optional, and about 26 states with GOP chief executives or legislatures have have refused to expand the program. Congress also rejected the Obama administration’s proposal to delay DSH payment cuts by a year to give safety net hospitals some breathing room..."

Should-Reads:

1. Matthew Yglesias: Bay Area: If you want to talk housing, you have to talk zoning: "Another day, another frustrating article about rising housing prices in the Bay Area that doesn't mention the supply-side at all.... The high-tech economy is booming... affluent skilled workers want to move to the Bay Area... naturally the prices that people are willing to pay for housing are skyrocketing.... The city of San Francisco... [has] many low-rise districts of the city [that] could and should be redeveloped as denser high-rise areas. I'm often accused of wanting every city to turn itself into my native Manhattan, but San Francisco has about half the population density of Brooklyn.... But the even more egregious issues are in the suburban areas stretching south of San Francisco.... The reasonable thing to do would be to use the land intensively—some more apartment buildings, some more rowhouse neighborhoods, some more detached houses on slightly smaller plots—-but Valley politics have been relentlessly hostile to real-estate development. The shortage of both houses and commercial office space that results from this dynamic is a substantial driver of economic problems in the Bay Area... [and] also throughout the country. The supercharged growth in the high-tech sector ought to be creating massive spillovers of prosperity.... Instead, it's mostly creating windfall profits for a relatively small number of people and cost-of-living spirals for others...

2. Miles Kimball and Noah Smith: The shakeup at the Minneapolis Fed is a battle for the soul of macroeconomics--again: "A personnel shakeup at the US Federal Reserve Bank of Minneapolis last week... may be a part of big changes... at the Fed, as well as a tectonic shift in the field of economics itself. Two of the Minneapolis Fed’s most eminent and long-serving economists, Patrick Kehoe and Ellen McGrattan, have been fired.... They believed that... recessions are not economic failures, but instead are inevitable, healthy outcomes of economies responding to the uneven pace of technological progress.... If the Fed prints money to try to stimulate demand, they say, it will only succeed in creating inflation.... The researchers at the University of Minnesota and the Minneapolis Fed have largely hung onto the belief that monetary policy can affect inflation, but can’t fight recessions.... In 2008, on the eve of the crisis, even as Saltwater economist Olivier Blanchard published a paper arguing that the two schools had essentially reached agreement, Kehoe published his own paper arguing vehemently that models with any Saltwater taint (in particular, the so-called “New Keynesian” models) were fundamentally flawed. A few months later, at the end of 2008, America tumbled into its biggest economic slump since the Great Depression, soon followed by much of the rest of the world. Freshwater macroeconomists were left scratching their heads. How could this calamity represent the efficient outcome of a well-functioning economy?..."

Should Be Aware of:

1. Scott Lemieux: Four Reasons the Nuclear Option Was a Liberal Win: "Here are some of the major arguments being made against the deal from a Democratic perspective--and why they're wrong. 1. Democrats Will Be Sorry, Because This Means Republicans Will Keep Doing What They've Been Doing Since the Reagan Administration.... 2. Pretending that the Filibuster Is the Only Political Constraint on the President.... 3. But Isn't the House of Representatives Terrible?.... 4. Liberal Sentimentality about the Filibuster..."

2. John Cole: Resentment: "Just read this on facebook from a guy I know from the military: 'After having to spend almost $200 on work boots,the hell happened to the America I grew up with. Are people and ceo’s that stupid. We are selling out at an alarming rate. Try finding american made anything without paying arm an leg.We need to make a stand an take our country back/ I use to wear only Levis’s. After buying some that ripped in 2 weeks I bought something else.The country we have sent our manufactoring jobs to also owns most of out debt.I remember when made in USA meant something. I remember when I joined military an heard star spangled banner, it had a whole differnt meaning. I also think you need to be a citizen to own a buisness. Take a look who owns motels,subways,gas stations and even kfc. This is America or it was. There should be no second langauge. People use to think it was honor to come here. Now we hand money out at airport.There should be a limit to time in office. Also no trust fund babies.' This guy isn’t a white supremacist, but there are a whole lot of people who feel that way."

Paul Krugman: Bubblephobia and Monetary Policy | Izabella Kaminska: Non-monetary effects of research evolution | Dean Baker: Technology didn't kill middle class jobs, public policy did | Ann Marie Marciarille: Physician Boundary Crossing in the Face of Health Care System Failure | Martin Longman: High on Their Own Supply |

Larry Summers: IMF Economic Forum, November 8, 2013:

Now think about the period after the financial crisis. I always like to think of these crises as analogous to a power failure, or analogous to what would happen if all the telephones were shut off for a time. The network would collapse. The connections would go away. Output would of course drop very rapidly. There'd be a set of economists who would sit around explaining that electricity was only four percent of the economy, and so if you lost eighty percent of electricity you could not possibly have lost more than three percent of the economy. There would be people in Minnesota and Chicago and stuff who'd be writing that paper. But it would be stupid. It would be stupid...

Izabella Kaminska: Evangelii One Percentium:

While the earnings of a minority are growing exponentially, so too is the gap separating the majority from the prosperity enjoyed by those happy few. This imbalance is the result of ideologies which defend the absolute autonomy of the marketplace and financial speculation... reject the right of states, charged with vigilance for the common good, to exercise any form of control. A new tyranny is thus born, invisible and often virtual, which unilaterally and relentlessly imposes its own laws and rules. Debt and the accumulation of interest also make it difficult for countries to realize the potential of their own economies and keep citizens from enjoying their real purchasing power. To all this we can add widespread corruption and self-serving tax evasion.... The thirst for power and possessions knows no limits. In this system, which tends to devour everything which stands in the way of increased profits, whatever is fragile, like the environment, is defenseless before the interests of a deified market, which become the only rule... http://www.vatican.va/holy_father/francesco/apost_exhortations/documents/papa-francesco_esortazione-ap_20131124_evangelii-gaudium_en.pdf

That is to say, the word from the Macro Advisers and the Morgan Stanleys and the others who do real-time tracking is that it now looks most likely that the value of production (adjusted for inflation, and for the normal seasonal cycle in production) over October-December is going to be somewhere between 0.25% and 0.375% above the value of production in July-September. No signs of closing any of the 8% gap between the current level of production and what I think the economy's stable-inflation productive potential currently is. Increasingly strong signs that the large amount of idle potentially-productive labor, idle capital, and slack investment is casting a dark shadow on our productive capacity in the future: the way I put it is that each month now we lose $100 billion in useful goods and services we would have produced if the macroeconomy were properly balanced at its stable-inflation potential, and that we lose another $300 billion from the drag that delaying recovery from this deep downturn for yet another month imposes on the future potential productive powers of the American economy.

This is a disaster...

And it was not that long ago that I was debating with myself about whether the long-run rate of real GDP growth in the American economy was closer to 2.5%/year, 3.25%/year, or 4.0%/year...

http://larrysummers.com/imf-fourteenth-annual-research-conference-in-honor-of-stanley-fischer/

Must-Reads:

1. Francis: Evangelium ad Unum Per Centum: "While the earnings of a minority are growing exponentially, so too is the gap separating the majority from the prosperity enjoyed by those happy few. This imbalance is the result of ideologies which defend the absolute autonomy of the marketplace and financial speculation… reject the right of states, charged with vigilance for the common good, to exercise any form of control. A new tyranny is thus born, invisible and often virtual, which unilaterally and relentlessly imposes its own laws and rules. Debt and the accumulation of interest also make it difficult for countries to realize the potential of their own economies and keep citizens from enjoying their real purchasing power. To all this we can add widespread corruption and self-serving tax evasion…. The thirst for power and possessions knows no limits. In this system, which tends to devour everything which stands in the way of increased profits, whatever is fragile, like the environment, is defenseless before the interests of a deified market, which become the only rule… http://www.vatican.va/holy_father/francesco/apost_exhortations/documents/papa-francesco_esortazione-ap_20131124_evangelii-gaudium_en.pdf

2. Larry Summers: Speech at the IMF Economic Forum, November 8, 2013: "Now think about the period after the financial crisis. I always like to think of these crises as analogous to a power failure, or analogous to what would happen if all the telephones were shut off for a time. The network would collapse. The connections would go away. Output would of course drop very rapidly. There’d be a set of economists who would sit around explaining that electricity was only four percent of the economy, and so if you lost eighty percent of electricity you could not possibly have lost more than three percent of the economy. There would be people in Minnesota and Chicago and stuff who’d be writing that paper. But it would be stupid. It would be stupid…"

Should-Reads:

1. Tim Jost: Implementing Health Reform: State Exchange Enrollment: "Covered California, the California exchange, reported that as of November 19, 2014, almost 80,000 Californians had selected a health plan through the exchange. Almost 31,000 had enrolled in October.  Of these, almost 5,000 were subsidy-eligible while 26,000 were not, suggesting that the Californians at the front of the line were higher-income applicants, who likely understand the need for insurance and may well need it for immediate health needs.  Almost 83 percent of enrollees were English speaking, while fewer than 5 percent spoke Spanish. Twenty-two percent of enrollees were between the ages of 18 and 34, roughly equal to the percentage of the total population in this age group. But 34 percent of enrollees were between the ages of 55 and 64, compared to 11 percent of the total population.  Adverse selection is thus a concern..."

2. Sy Mukherjee: Stubborn Opposition To Medicaid Expansion Is Forcing Hospitals In The Poorest States To Shut Down: "At least five public hospitals have shuttered their doors and many more are cutting staffing and services in non-Medicaid expansion states, according to Bloomberg. Three such hospitals have shut down in Georgia, while North Carolina and Virginia are experiencing similar closures.... The closures are tied directly to Republicans’ refusal to accept generous federal funding to expand Medicaid. And experts warn that even more closures may be on the horizon in poor states... that have also refused the Medicaid expansion. Safety-net hospitals... depend on federal money to make up for the uncompensated care costs.... The health law reduced payments to these so-called “disproportionate share hospitals”.... Lawmakers figured that Obamacare’s Medicaid expansion... would mitigate the cuts’ effects.... But... the Supreme Court ruled Obamacare’s Medicaid expansion to be optional, and about 26 states with GOP chief executives or legislatures have have refused to expand the program. Congress also rejected the Obama administration’s proposal to delay DSH payment cuts by a year to give safety net hospitals some breathing room..."

3. Matthew Yglesias: Bay Area: If you want to talk housing, you have to talk zoning: "Another day, another frustrating article about rising housing prices in the Bay Area that doesn't mention the supply-side at all.... The high-tech economy is booming... affluent skilled workers want to move to the Bay Area... naturally the prices that people are willing to pay for housing are skyrocketing.... The city of San Francisco... [has] many low-rise districts of the city [that] could and should be redeveloped as denser high-rise areas. I'm often accused of wanting every city to turn itself into my native Manhattan, but San Francisco has about half the population density of Brooklyn.... But the even more egregious issues are in the suburban areas stretching south of San Francisco.... The reasonable thing to do would be to use the land intensively—some more apartment buildings, some more rowhouse neighborhoods, some more detached houses on slightly smaller plots—-but Valley politics have been relentlessly hostile to real-estate development. The shortage of both houses and commercial office space that results from this dynamic is a substantial driver of economic problems in the Bay Area... [and] also throughout the country. The supercharged growth in the high-tech sector ought to be creating massive spillovers of prosperity.... Instead, it's mostly creating windfall profits for a relatively small number of people and cost-of-living spirals for others...

4. Paul Krugman: Nowhere Near The Exit: "Greg Mankiw... suggesting that the time for a Fed exit strategy may be drawing near. Dean focuses mainly on Greg’s use of what he considers a [single] misleading wage number.... We have multiple measures of wage developments.... One of these numbers, wages of production and nonsupervisory workers, shows a modest uptick, the others not. All three remain well below their pre-crisis rates of increase. Is this the kind of evidence on which you want to base a major policy change? Not in my world.... [And] it makes no sense at all to tighten until we see wage inflation rise, not just from its current level, but several points higher.... Arguments that the full-employment rate of unemployment has risen tend to rely on the claim that sustained high unemployment, even if it starts out cyclical, eventually becomes structural. But if that’s true, there are very high costs to premature policy tightening... this adds up to a strong argument for waiting to see overwhelmingly clear evidence of an overheated economy before beginning any kind of policy exit..."

Should Be Aware of:

1. Scott Lemieux: Four Reasons the Nuclear Option Was a Liberal Win: "Here are some of the major arguments being made against the deal from a Democratic perspective--and why they're wrong. 1. Democrats Will Be Sorry, Because This Means Republicans Will Keep Doing What They've Been Doing Since the Reagan Administration.... 2. Pretending that the Filibuster Is the Only Political Constraint on the President.... 3. But Isn't the House of Representatives Terrible?.... 4. Liberal Sentimentality about the Filibuster..."

2. John Cole: Resentment: "Just read this on facebook from a guy I know from the military: 'After having to spend almost $200 on work boots,the hell happened to the America I grew up with. Are people and ceo’s that stupid. We are selling out at an alarming rate. Try finding american made anything without paying arm an leg.We need to make a stand an take our country back/ I use to wear only Levis’s. After buying some that ripped in 2 weeks I bought something else.The country we have sent our manufactoring jobs to also owns most of out debt.I remember when made in USA meant something. I remember when I joined military an heard star spangled banner, it had a whole differnt meaning. I also think you need to be a citizen to own a buisness. Take a look who owns motels,subways,gas stations and even kfc. This is America or it was. There should be no second langauge. People use to think it was honor to come here. Now we hand money out at airport.There should be a limit to time in office. Also no trust fund babies.' This guy isn’t a white supremacist, but there are a whole lot of people who feel that way."

Paul Krugman: Bubblephobia and Monetary Policy | Izabella Kaminska: Non-monetary effects of research evolution | Dean Baker: Technology didn't kill middle class jobs, public policy did | Ann Marie Marciarille: Physician Boundary Crossing in the Face of Health Care System Failure | Martin Longman: High on Their Own Supply |

Whether you call it James Scott (as in his Seeing Like a State) or Friedrich von Hayek ("The Use of Knowledge in Society") or Adam Smith (An Inquiry into the Nature and Causes of the Wealth of Nations) or even Bernard de Mandeville (The Fable of the Bees), it is a very powerful insight to recognize that in the economy we want, as much as possible, to push the making of decisions out to the periphery--where the direct knowledge is, and where the direct impact of individual decisions are felt. And this is what the property-contract-market system is (or can be) good for. And this is the insight that we in North America call "neoliberalism".

Must-Reads:

1. Stan Collender: The 10 Reasons There Won't Be A Grand Budget Bargain Until 2019: "1. Democrats won't agree to the big changes in Social Security, Medicare and other mandatory programs that Republicans want without getting a substantial revenue increase. Republicans won't agree to a revenue increase without big changes in Social Security, Medicare and other entitlements. 2. Republicans absolutely can't and won't increase taxes until after the 2016 presidential election.... 3. Because of the problem with raising taxes before 2016, changes in mandatory spending are on hold until after 2016 as well.... 4. Therefore, there will be no big budget deal for the next three years.... 5. That means that, if it happens at all, the serious work... won't begin until early 2017. 6. As the effort in the 1980s showed, tax reform is difficult and lengthy process.... 7. It also means that most members of Congress will have to express their dissatisfaction.... 8. The 1985 tax reform act took three years to enact. It was relatively easy from a budget point of view because from the start the bill was going to be 'revenue neutral'... 9. Before Republicans will even be able to start to negotiate with Democrats, there will have to be a GOP vs GOP debate.... 10. The tax reform debate from the 1980s also took place when there was no tea party wing of the GOP and no social media.... Given these 10, it's hard to see (1) how a process that could produce a grand bargain could get under way before 2017, and (2) how it could take less time than than it did in the 1980s."

2. Kevin Drum: Janet Yellen Is Now a Litmus Test for Right-Wing Sanity: "Steve Benen notes that the increasingly shrill and hyperbolic Heritage Foundation has decided to make opposition to Janet Yellen a 'key vote'. That is, they'll count it on their end-of-the-year scorecard that tells everyone just how conservative you are.... 'It now seems likely that most Senate Republicans will oppose the most qualified Fed nominee since the institution was founded.' That's true, which means this has become sort of a litmus test for wingnuttery. There's simply no serious reason to oppose Yellen, who is outstandingly qualified to be Fed chair by virtually any measure. So opposition to Yellen is now a pretty simple proposition: you oppose her if you're some kind of hard money lunatic or if you feel like you have to pander to the hard money lunatics. That's it. Everyone else votes to support her confirmation. Should be an interesting roll call..."

Should-Reads:

1. Daniel Strauss: McConnell Challenger: Mitch Is Working 'Actively' To Make Sure Obamacare Is 'Not Ended': "Kentucky Republican Matt Bevin accused Senate Minority Leader Mitch McConnell (R-KY)... of 'working actively' to make sure Obamacare is not repealed. 'We wanted to just call attention to frankly what we're seeing as a rather disturbing trend which is the fact that we've thought for some time that most of Mitch McConnell's bluster about yanking out Obamacare root and branch was really just that. But we're seeing yet again the fact that behind the scenes and now with increasing amounts of overtness he's really working actively to ensure that this is not a piece of legislation that is ended'. Bevin's comments are in response to a report saying McConnell suggested he is not averse to discussing changes of the health care law. McConnell is quoted in that report saying that the law 'was so botched from the beginning, that it's not fixable'. Bevin said that despite McConnell saying that the law has been botched, the fact that he suggested some level of openness to changing the law shows that he does not totally want to repeal Obamacare."

2. Ezra Klein: Obamacare is a Done Deal: "A spin through HealthCare.Gov this morning went smoothly. The site loaded quickly. The process progressed easily. There were no error messages or endless hangs.... My experience isn't rare.... Reports from inside the health care bureaucracy are also turning towards optimism.... A political system that's become overwhelmingly oriented towards pessimism on Obamacare will have to adjust as the system's technological infrastructure improves.' I think the best translation of that last sentence is, 'Republicans will soon have to find something else to gripe about"

3. Kevin Drum: Obamacare is a Done Deal: Conservatives have always known that once Obamacare is up and running, it will become a popular program.... In a few months, it will be nearly as enshrined in the American social welfare firmament as Social Security and Medicare. Republicans have run out of time, and they know it. Their fixation on Obamacare already looks sort of balmy--this weekend's deal with Iran was designed to draw attention away from Obamacare? Seriously?--and it's only going to look loopier as time goes by. Getting Obamacare to the end zone wasn't easy, and Obama almost fumbled the ball at the one-yard line, but he's finally won..."

Should Be Aware of:

Burkhard Bilger: Inside Google’s Driverless Car | Ryan Avent: Monetary policy: Low rates forever | Jeff Spross: Rapid Plankton Decline Puts The Ocean's Food Web In Peril | ProGrowthLiberal: Dean Baker v. Greg Mankiw on Wage Inflation: I may have been too nice to Greg Mankiw... | David Keohane: Let a hundred moles be whacked | Unofficial Transcript of Larry Summers's Speech at the IMF Economic Forum, Nov. 8, 2013 | Lawrence Summers: Edited Transcript: IMF Fourteenth Annual Research Conference in Honor of Stanley Fischer |

I have always thought that the idea that there is a lot of "there" there is, at best, unproven--and given the energy that has been devoted to trying to prove it, that the failure to connect the links is strong evidence that there is not much there there at all,

Thus one of the analytical points made about the past six years I have not understood is a focus on "policy uncertainty" a la Baker, Bloom, and Davis as a factor holding back the U.S. economy. Residential construction is 1.5%-points of GDP below its level the last time the U.S. was at full employment, government purchases its 2.5%-points below its peak level, business equipment investment is nearly at its peak level, and exports are 1.5%-points of GDP above their level at the last peak. Add these up and we get a 2.5%-point of GDP drag. Apply today's standard multiplier and add on a little bit for depressed household wealth and we have explained the shortfall in real GDP relative to potential.

A footnote to: Deficiencies of Bureaucratic Planning: Reading Jacobo Timmerman on Gabriel Garcia Marquez on Fidel Castro…. Courtesy of Patrick Iber:

From Jacobo Timmerman (1990): Cuba: A Journey:

Gabriel García Márquez, of course, is uncensored [by Castro], except when he enthusiastically refers, as he often does, to perestroika. His famous dialogue with Mikhail Gorbachev at the Moscow Film Festival in 1987, transmitted by Soviet news agencies, was not published in the Cuban press. The Colombian writer is the man who can perhaps influence Fidel Castro most. He is El Comandante’s most important instrument of public relations on the international front.

The sect of "neoliberalism" I belonged to (or thought I belonged to) believed not that wherever possible the private sector should be left to deliver goods and services, but rather that it often made sense for the government to incentivize the private sector to deliver the right goods and services to the right people and then stand back and let it do so. It often makes sense. But it often doesn't: consider war, education, pensions, health insurance, research and development, and the spread of knowledge and information more generally.

But perhaps the lesson is that even though "neoliberalism" a la Charlie Peters and the Washington Monthly has an honorable history, it is time to let the term simply stand for BAD THINGS and thus send it off to the intellectual glue factory...

Other than that quibble, a nice piece by John Cassidy:

John Cassidy: Liberalism Will Survive Obamacare:

How much Grand Marnier is it proper to add to the cranberry sauce?

Agreement Between the Settlers at New Plymouth : 1620

IN THE NAME OF GOD, AMEN. We, whose names are underwritten, the Loyal Subjects of our dread Sovereign Lord King James, by the Grace of God, of Great Britain, France, and Ireland, King, Defender of the Faith, &c. Having undertaken for the Glory of God, and Advancement of the Christian Faith, and the Honour of our King and Country, a Voyage to plant the first Colony in the northern Parts of Virginia; Do by these Presents, solemnly and mutually, in the Presence of God and one another, covenant and combine ourselves together into a civil Body Politick, for our better Ordering and Preservation, and Furtherance of the Ends aforesaid: And by Virtue hereof do enact, constitute, and frame, such just and equal Laws, Ordinances, Acts, Constitutions, and Officers, from time to time, as shall be thought most meet and convenient for the general Good of the Colony; unto which we promise all due Submission and Obedience. IN WITNESS whereof we have hereunto subscribed our names at Cape-Cod the eleventh of November, in the Reign of our Sovereign Lord King James, of England, France, and Ireland, the eighteenth, and of Scotland the fifty-fourth, Anno Domini; 1620.

Mr. John Carver,
Mr. William Bradford,
Mr Edward Winslow,
Mr. William Brewster,
Isaac Allerton,
Myles Standish,
John Alden,
John Turner,
Francis Eaton,
James Chilton,
John Craxton,
John Billington,
Joses Fletcher,
John Goodman,
Mr. Samuel Fuller,
Mr. Christopher Martin,
Mr. William Mullins,
Mr. William White,
Mr. Richard Warren,
John Howland,
Mr. Steven Hopkins,
Digery Priest,
Thomas Williams,
Gilbert Winslow,
Edmund Margesson,
Peter Brown,
Richard Britteridge,
George Soule,
Edward Tilly,
John Tilly,
Francis Cooke,
Thomas Rogers,
Thomas Tinker,
John Ridgdale,
Edward Fuller,
Richard Clark,
Richard Gardiner,
Mr. John Allerton,
Thomas English,
Edward Doten,
Edward Liester.

Must-Reads:

Over at the WCEG Equitablog:

• Not My Great^(11) Grandfather William Bradford’s Thanksgiving: Thursday Focus
• John Cassidy Explains That Those Parts of ObamaCare That Are “Liberal” Are Working Very Well
• A Longer Version of the Accusations Jacobo Timmerman Lays Before the Bar of History Regarding Gabriel Garcia Marquez and Fidel Castro
• How Much There Is There in Attempts to Ascribe Any Significant Component of Our Current Economic Distress to “Policy Uncertainty”?: Wednesday Focus
• The Deficiencies of Bureaucratic Planning: Reading Jacobo Timmerman on Gabriel Garcia Marquez on Fidel Castro…: Tuesday Focus
• Afternoon Must-Read: Larry Summers at the IMF: Approved Transcript

Plus:

1. Diana Rattray: Leftover Turkey Recipes: "Leftover Turkey Pie... Turkey Quiche With Peppers and Green Onions​... Turkey Empanadas... Cajun Turkey Jambalaya... Turkey Curry... Creamy Turkey With Artichokes... Turkey Divan Recipe... Hot Turkey Sandwich... Turkey and Mashed Potato Croquettes... Basic Turkey Stock... Turkey Broccoli Quiche... Creamy Turkey Pie With Biscuit Mix Topping... Turkey, Ham, and Swiss Casserole Turkey Salad With Red Grapes... Turkey Pasta Casserole With Asparagus and Cheddar Cheese... Turkey and Rice Bake... Savory Turkey Cobbler... Curried Turkey Salad with Cranberries... Kentucky-Style Hot Brown Sandwiches... Turkey Supreme... Turkey Pie With Mushrooms... Turkey, Cheese, and Pasta Wheels... Turkey and Stuffing Bake... Turkey Casserole With Havarti Cheese Turkey Macaroni Casserole... Turkey Rice Casserole With Curry Powder... Turkey a la King... Turkey Bake with Asparagus... Scalloped Turkey or Chicken... Hot Brown Sandwiches... Turkey Rice Bake... Cheddar Turkey and Rice Casserole... Easy Turkey Sandwich Melt... Open-Face Turkey Sandwiches with Cheese Sauce... Slow Cooker Turkey and Rice... Turkey Pot Pie... Turkey Pot Pie with Cornbread Topping... Turkey, Stuffing, and Broccoli Pie... Turkey Tetrazzini... Turkey Noodle Casserole... Turkey Croquettes... Roasted Turkey Broth... Louisville Creamed Turkey... Curried Turkey Salad... Crockpot Corn Pudding With Turkey... Turkey Divan Soup... Family Style Turkey pie... Easy Turkey & Rice Casserole IV... Turkey Enchiladas... Turkey Hash Recipe..."

2. Josh Marshall: A Realist's Take on Obamacare: "Here's why I think the... law will be a success. Much of what I'm going to say below is based on worst case scenarios, most of which I don't think will materialize.... I base this relative optimism on four assumptions. The first is legislative... this law will not undergo substantive changes before January 2017... Obama has complete control over this part of the equation.... This is a cardinal fact. Second and under-appreciated: the major national insurance carriers have heavily bought into the "Obamacare"/exchange model.... Third: By early next year you will have millions of new people enrolled in Medicaid, large numbers of people who have health care covered who couldn't get it at any reasonable price before... and you will have large numbers of people who have care that is better or cheaper and often both.... It's one thing to have millions of uninsured or people boxed out because of pre-existing conditions. But once they have affordable coverage, I don't think you're going to be able to take it back. Fourth... I think Obamacare is good policy.... Now, one response... goes something like this: Sure, most of the uninsured will get covered and people will preexisting will be protected and you won't be able to be dropped if you get sick but it's just going to be an endless PR nightmare and the Dems will be paying for it in 2014 and 2016 and maybe 2018 and it may 'work' but never be popular.... But here is where the question comes to the prism and the standard of success. We didn't pass Health Care Reform for it to reap electoral gains for Democrats (though I think it still will) or to have it be popular.... The aim was to get people covered... reduce the scale of human suffering... tied to your wealth and your luck. By that standard, I think it will be a success and I think there will be no going back. And that's the only standard that matters."

3. Nicole Huberfeld: Medicaid is expanding faster than you may think: "[The Supreme Court ruling that made the Medicaid expansion a state option] led to constant speculation regarding which states would exercise the ability to opt-in or opt-out of Medicaid.... Though the media have reported that only half of states are participating, of the remaining states categorized as not participating or leaning toward not participating, all but about six are actively debating and planning to expand. The future of Medicaid expansion is not nearly as bleak as the media suggests... beginning to expose an animated set of political choices at both the state and the federal level that feed a dynamic federalism story that has so far evaded the Court’s understanding. The story of the Medicaid expansion is just beginning... but the preliminary enquiry indicates strong prospects..."

Should-Reads:

The problem of economists not understanding what the equilibrium positions of their models mean is a serious one. So, in my mind at least, it is worth a Focus. Unfortunately, it is also a problem that is only understandable and of interest to perhaps 1/50 of the readers of this weblog. To deal with this quandary, I am making it the focus on the day after Thanksgiving, when people should be frantically reading turkey-leftover recipes, like:

Diana Rattray: Leftover Turkey Recipes: "Leftover Turkey Pie... Turkey Quiche With Peppers and Green Onions​... Turkey Empanadas... Cajun Turkey Jambalaya... Turkey Curry... Creamy Turkey With Artichokes... Turkey Divan Recipe... Hot Turkey Sandwich... Turkey and Mashed Potato Croquettes... Basic Turkey Stock... Turkey Broccoli Quiche... Creamy Turkey Pie With Biscuit Mix Topping... Turkey, Ham, and Swiss Casserole Turkey Salad With Red Grapes... Turkey Pasta Casserole With Asparagus and Cheddar Cheese... Turkey and Rice Bake... Savory Turkey Cobbler... Curried Turkey Salad with Cranberries... Kentucky-Style Hot Brown Sandwiches... Turkey Supreme... Turkey Pie With Mushrooms... Turkey, Cheese, and Pasta Wheels... Turkey and Stuffing Bake... Turkey Casserole With Havarti Cheese Turkey Macaroni Casserole... Turkey Rice Casserole With Curry Powder... Turkey a la King... Turkey Bake with Asparagus... Scalloped Turkey or Chicken... Hot Brown Sandwiches... Turkey Rice Bake... Cheddar Turkey and Rice Casserole... Easy Turkey Sandwich Melt... Open-Face Turkey Sandwiches with Cheese Sauce... Slow Cooker Turkey and Rice... Turkey Pot Pie... Turkey Pot Pie with Cornbread Topping... Turkey, Stuffing, and Broccoli Pie... Turkey Tetrazzini... Turkey Noodle Casserole... Turkey Croquettes... Roasted Turkey Broth... Louisville Creamed Turkey... Curried Turkey Salad... Crockpot Corn Pudding With Turkey... Turkey Divan Soup... Family Style Turkey pie... Easy Turkey & Rice Casserole IV... Turkey Enchiladas... Turkey Hash Recipe..."

And we now resume our normal programming:

I think that the solution is to make every economist pass an exam on Franklin Fisher's "The Stability of General Equilibrium" and Disequilibrium Foundations of Equilibrium Economics. But that is just me. The problem is urgent. For example, it appears to have led Nick Rowe into a situation in which he appears to be in need of having his meds adjusted:

Nick Rowe: Why inflation will not fall off a bottomless cliff:

"Microfoundations": I Do Not Think That Word Means What You Think It Means: Friday Focus **David Glasner:** Microfoundations (aka Macroeconomic Reductionism) Redux | Uneasy Money: >In this [UCLA] context microfoundations meant providing a more theoretically satisfying, more micreconomically grounded explanation for a phenomenon--“sticky wages”--that seemed somehow crucial for generating the results of the Keynesian model. >I don’t think that anyone would question that microfoundations in this narrow sense has been an important and useful area of research. And it is not microfoundations in this sense that is controversial. The sense in which microfoundations is controversial is whether a macroeconomic model must show that aggregate quantities that it generates can be shown to consistent with the optimizing choices of all agents in the model.... >If the model is not derived from or consistent with the solution to such an intertemporal optimization problem, the macromodel is now considered inadequate and unworthy of consideration. Here’s how Michael Woodford, a superb economist, but very much part of the stifling microfoundations consensus that has overtaken macroeconomics, put in his paper “The Convergence in Macroeconomics: Elements of the New Synthesis.” >>But it is now accepted that one should know how to render one’s growth model and one’s business-cycle model consistent with one another in principle, on those occasions when it is necessary to make such connections. Similarly, microeconomic and macroeconomic analysis are no longer considered to involve fundamentally different principles, so that it should be possible to reconcile one’s views about household or firm behavior, or one’s view of the functioning of individual markets, with one’s model of the aggregate economy, when one needs to do so.... >If the world--the data generating mechanism--is not like the world assumed by modern macroeconomics, the estimates derived from econometric models reflecting the worldview of modern macroeconomics will be inferior to estimates derived from an econometric model reflecting another, more accurate, world view.... Rather than optimize, agents may simply follow certain simple rules of thumb. But, on methodological principle, modern macroeconomics treats the estimates generated by any alternative econometric model insufficiently grounded in the microeconomic principles of intertemporal optimization as illegitimate.... >Now let us compare the methodological demand for microfoundations for macroeconomics, which I would describe as a kind of macroeconomic methodological reductionism, with the reductionism of Newtonian physics. Newtonian physics reduced the Keplerian laws of planetary motion to more fundamental principles... achieved an astounding increase in explanatory power and empirical scope. What has the methodological reductionism of modern macroeconomics achieved?... Carlaw and Lipsey... [see that] methodological reductionism in macroeconomics has resulted in a clear retrogression in empirical and explanatory power. Thus, methodological reductionism in macroeconomics is an antiscientific exercise in methodological authoritarianism...

Duncan Black remembers Charles Krauthammer (2005):

Senate Majority Leader Bill Frist seems intent on passing a procedural ruling to prevent judicial filibusters.... The Democrats have unilaterally shattered one of the longest-running traditions in parliamentary history worldwide. They are not to be rewarded with a deal. They must either stop or be stopped by a simple change of Senate procedure that would do nothing more than take a 200-year-old unwritten rule and make it written. What the Democrats have done is radical. What Frist is proposing is a restoration...

And Charles Krauthammer (2013):

The violence to political norms here consisted in how that change was executed. By brute force--a near party-line vote of 52 to 48. This was a disgraceful violation of more than two centuries of precedent. If a bare majority can change the fundamental rules that govern an institution, then there are no rules. Senate rules today are whatever the majority decides they are that morning...

Must-Reads:

1. Evan Soltas: "U1 through U6 don't collapse to one single measure of unemployment... [but] to... two dimensions... the narrow side and... the farther-out reaches of unemployment.... Narrower definitions of unemployment are improving more quickly than wider definitions of unemployment... labor markets are probably looser than the normal measures suggest... underemployment [is] a real, serious concern..."

2. Jonathan Bernstein: The minimum wage and the post-policy GOP: "When both parties are healthy... popular, high-priority policy preferences of one party are bundled with the popular, high-priority policy preferences of the other. However, what exactly do Republicans have[?]... The Republican policy cupboard is pretty much empty.... It’s not clear that Republicans would accept any deal, given their paranoia about primary challenges based on accepting any kind of accommodation with the Kenyan socialist in the White House... conservatives are rejecting getting some of their priorities passed if it means accepting anything that Democrats want.... This just isn’t how the American political system is supposed to work. There really is an opportunity here for a deal that could enact popular policy ideas from both sides. But thanks to a dysfunctional Republican Party, it’s very hard to see it happening."

Should-Reads:

1. Francesco Saraceno: What is Mainstream Economics?: "Paul Krugman and Simon Wren-Lewis have been widely criticized... as defending 'mainstream' economics that spectacularly failed.... Krugman has a point, a very good one, when claiming that standard textbook analysis is (almost) all you need to understand the current crisis.... The point is what we define as 'textbook analysis'. Krugman refers to IS-LM models. But these... disappeared from graduate curricula because supposedly too simplistic, not grounded on optimization, not intertemporal, and so on and so forth.... They were nowhere to be found during my graduate studies at Columbia (certainly not a freshwater school). None of the macro I studied in graduate school (Real Business Cycle models, or their fixed-price variant proposed by New Keynesians)... could give me insight.... The IS-LM model with minor amendments (most notably properly accounting for expectations to deal among other things with liquidity traps) remains a powerful tool to understand current phenomena. The problem is that it is not mainstream at all. What bothers me in Krugman’s post is the word 'standard', not 'textbook analysis'."

2. Charlie Stross: Trotskyite singularitarians for Monarchism! A political speculation: "The 20th century spanned the collapse of the Monarchical System, the rise and fall of Actually Existing Socialism, a bunch of unpleasant failed experiments in pyramid building using human skulls, and the ascent to supremacy of Neoliberalism and the Washington Consensus. In 2007/08, the system malfunctioned spectacularly: it's clearly unstable and has huge problems, but what's going to replace it?... Neo-reactionaries... are effectively libertarians who have thrown up their hands in disgust.. and the appropriate political solution to the problem is to go back to aristocracy... Geeks for Monarchy.... We have Accelerationism... the notion that rather than halting the onslaught of capital, it is best to exacerbate its processes to bring forth its inner contradictions and thereby hasten its destruction.... Despair is a common reaction to defeat, as is Stockholm syndrome.... Libertarians... assumed [neoliberalism] would bring about the small government/small world goals.... As it becomes clear that the fruits of neoliberalism are instability and corporate parasitism rather than liberty and justice for all--is it unreasonable of them to look to an earlier, superficially simpler settlement?"

Should Be Aware of:

1. Mark Kleiman: Against Symmetry: Republicans-love-being-lied-to Edition: ">Liberals felt sorry for Dan Rather for having used... fabricated documents in reporting on George W. Bush’s derelictions of duty.... But... no liberal blogger--let alone any liberal politician--called Rather a 'hero'.... Contrast Mike Huckabee, who... might actually be President some day. He’s 'shocked' that the 'hero journalist' Lara Logan has been suspended from her job at CBS. It’s simply not the case that the Red Team and the Blue Team are symmetric. Yes, they both act factionally, and both camps include some lunatics. But we don’t let ours run the asylum..."

Barry Ritholtz: "No, David Rosenberg’s Bullishness Was Not 'Purchased for $3M': I was going to write a long point-by-point rebuttal to a Zero Hedge post about David Rosenberg that is factually erroneous, biased, defamatory and just plain wrong; instead, I will offer my correction" | Franklin Fisher: The Stability of General Equilibrium | Franklin Fisher: Disequilibrium Foundations of Equilibrium Economics | Firat Kayakiran & Thomas Biesheuvel: Zeppelins Seen Hauling Caterpillars to Mine Siberia: Commodities | Henry Blodget: Rich People Actually Don't Create The Jobs |

[Attention Conservation Notice: Harley Shaiken at the Berkeley Center for Latin American Studies asked me if I could write a short comment on a piece he was running by Javier Couso about Chilean politics, "neoliberalismo", once-and-future President Michelle Bachelet, and the electoral victory of her New Majority Coalition--Couso being one of the co-authors of the currently highly influential El Otro Modelo: Del Orden Neoliberal al Regimen de lo Publico. The piece got out of control, and is not a success...

But if you are interested in my not-very-well-connected thoughts on Chilean politics, "neoliberalismo", once-and-future President Michelle Bachelet, Seeing Like a *State the really-existing socialist and neoliberal projects of the twentieth century, and the electoral victory of her New Majority Coalition, they are below the fold...

The Economist's Democracy in America has this morning's policy must-read: Health care in America: An insider-outsider problem:

THE hopeless, hapless launch of Obamacare.... There is a lot that can be said (and is being said) about the president’s management skills, and how the administration did not see this coming.... Obamacare was always going to be a hard sell because it is an attempt to fix an insider-outsider problem. At root, its supporters do not think it right for a country as rich as America to be home to tens of millions of people who do not have health coverage, or who have such skimpy insurance that they risk financial ruin if they fall gravely ill....

How to Apply:

WHO AND WHAT WE FUND... researchers affiliated with U.S. universities, including graduate students, post-doctoral researchers, and professors... [with] a university to act as a fiscal agent....

HOW TO APPLY: After reviewing WCEG’s grant program description and information on who and what we fund, researchers interested in applying for a WCEG grant should submit a letter of inquiry (LOI) no longer than three pages... includ[ing] the WCEG cover sheet with their application....

REVIEW PROCESS: Letters of inquiry will be reviewed by WCEG staff economists. Full proposals will be reviewed by WCEG staff economists, external reviewers when necessary, and the WCEG steering committee.

If you are interested in serving as an external reviewer for future solicitations, please email grants@equitablegrowth.org.

Over at The Economist: Unconventional monetary policy: More than the sum of its parts:

On November 14th the McKinsey Global Institute published a report assessing the distributional effects of unconventional monetary policy. We are hosting a round-table discussion on the report and related issues. Richard Dobbs and Susan Lund, Joseph Gagnon, Stephen King, and Scott Sumner previously contributed. Up next is Brad DeLong, professor of economics at the University of California, Berkeley...

RICHARD DOBBS and Susan Lund are trying to gauge what the effects of the by now $5 trillion liquidity tsunami with which the Big Four central banks have hit the world economy since 2007 have been. They have six candidates:

1. The tsunami, by reducing government interest costs, has allowed governments constrained by the political system to moderate their deficits to shift spending from low-multiplier interest payments to high-multiplier government purchases.
2. The tsunami, by reducing risk premia and safe interest rates, has boosted the prices of real assets like equities and houses, and so boosted household spending out of wealth.
3. The tsunami, by reducing risk premia and safe interest rates, has boosted the prices of nominal assets like bonds, and so boosted household spending on consumption out of wealth.
4. The tsunami, by reducing risk premia and safe interest rates, has enabled businesses to invest more in plant, machinery, and equipment.
5. The tsunami, by reducing business interest costs, has enabled businesses to invest more in plant, machinery, and equipment.
6. The tsunami, by reducing household interest earnings, has caused a reduction in household spending on consumption out of income.