Is Growth Getting Harder? If so, Why, and What Can We Do About It?: The Honest Broker for the Week of December 1, 2013
Things to Read on the Morning of December 3, 2013

Things to Read at Lunchtime on December 2, 2013


  1. Henry Aaron and Harold Pollack: Now's Now Is Not the Time for Liberals to Say "I Told You So" About Obamacare: "It has been a rough two months for the Affordable Care Act and its defenders.... The performance failures in the rollout of have triggered cries of 'I told you so!' from some liberals. This wouldn’t have happened, they say, if only Obama had supported some form of single-payer plan, such as Medicare for all. The anger over the botched rollout is understandable, but these recriminations are poorly timed--and just plain wrong. For starters, the ACA is working reasonably well in some places--California, Connecticut, Kentucky, Washington, and the District of Columbia, for example. 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.... The real beef of those who seek a more radical rewiring of our healthcare system is not with the president. It is with the coalition of labor, healthcare, disability, and anti-poverty groups that coalesced during 2007 and 2008 around a health reform model that later became the ACA.... We wish ACA had gone farther. It could have provided more generous premium assistance and cost-sharing for working families. It could have allowed people near retirement to buy into Medicare. Alas, senators such as Joe Lieberman--not Obama--scuttled these possibilities. The ACA is only the first step in a long journey of needed health reforms.... There was and is no alternative to the messy incremental politics that produced Obamacare. Liberals such as then–House Majority Speaker Nancy Pelosi didn’t make unpalatable compromises because they held pallid aspirations for health reform. They compromised because they knew that they could not impose their will on querulous colleagues, because they needed 60 Senate votes, because millions of Americans needed help, and because it is better to win messily than to lose gloriously..."

  2. Ryan Avent: Economic growth: On the inevitability of justice: "The Pope... offered a lengthy statement on economic justice.... 'Some people continue to defend trickle-down theories which assume that economic growth, encouraged by a free market, will inevitably succeed in bringing about greater justice and inclusiveness in the world...This opinion, which has never been confirmed by the facts, expresses a crude and naive trust in the goodness of those wielding economic power and in the sacra­lized workings of the prevailing economic system.' On Saturday Greg Mankiw... weighed in.... 'It is sad to see the pope using a pejorative, rather than encouraging an open-minded discussion of opposing perspectives.Third, as far as I know, the pope did not address the tax-exempt status of the church. I would be eager to hear his views on that issue. Maybe he thinks the tax benefits the church receives do some good when they trickle down.' This is just the sort of response that leads non-economists to detest economists: condescending, callous, and, worst of all, intellectually lazy. It is also an example of some truly epic point-missing.... The Pope does not appear to be attacking growth. Rather, he is attacking the view that 'economic growth, encouraged by a free market, will inevitably succeed in bringing about greater justice and inclusiveness in the world'.... Mankiw... certainly seems to be displaying precisely the viewpoint that the Pope is warning about: don't worry about the outcomes of growth (and for heaven's sake don't do anything about them), because growth is pretty rad. But let's be clear. Historically it has taken quite a lot of hard work to ensure that economic growth does bring about greater justice and inclusiveness.... Mankiw might argue that growth enabled the generosity the led to social pressure for change.... If you want to praise growth as justice-enhancing because growth improves our moral intuition, then you also have to praise those who act on their moral intuition in an effort to create institutions that deliver greater justice. Mr Mankiw would rather be snide and complain that the Pope is name-calling..."


  1. George W. Evans, Eran Guse, and Seppo Honkapohja (2007): Liquidity Traps, Learning and Stagnation: "We examine global economic dynamics under learning in a New Keynesian model in which the interest-rate rule is subject to the zero lower bound. Under normal monetary and fiscal policy, the intended steady state is locally but not globally stable. Large pessimistic shocks to expectations can lead to deflationary spirals with falling prices and falling output. To avoid this outcome we recommend augmenting normal poli- cies with aggressive monetary and fiscal policy that guarantee a lower bound on inflation. In contrast, policies geared toward ensuring an output lower bound are insufficient for avoiding deflationary spirals."

  2. Scott Sumner: TheMoneyIllusion » Nick Rowe explains how to avoid reasoning from a price change: "If I was told by Nostradamus that the Fed kept the interest rate on reserves at 0.25%/year for the next 20 years, I’d certainly revise downward my inflation forecast.  But that’s because I would assume the causation runs from a lower rate of inflation to a lower policy rate.  And that’s because I assume the Fed has a model in its head where raising the policy rate is contractionary.... I had thought it was widely understood that QE has been modestly expansionary for nominal spending and inflation.  Recall that markets have responded to QE announcements by changing asset prices in a way that implied higher inflation expectations. So what is the 'data' that Andolfatto refers to when he says that Williamson’s post is motivated by 'data'? It’s a simple time series graph showing that the inflation rate has been fairly low since 2009--rising after QE1, and then falling after QE3. But why would that graph have any bearing on the inflationary impact of QE? Surely you’d want to look at market responses to QE announcements, not the actual path of inflation. As far as I know everyone who seriously follows QE knows that the program is inflationary.  The only serious debate is whether it has only a tiny inflationary effect, or whether it has a modest inflationary effect. I can’t imagine anyone claiming it’s been deflationary.For God’s sake the dollar fell by 6 cents against the euro on the day QE1 was announced! Does anyone seriously think a 6 cent depreciation in the dollar is deflationary? So why develop models to explain empirical results that don’t exist? I don’t get it."

Should Be Aware of:

  1. Karl Smith (December 2011): Bitter Medicine: "Before anything else, the banks must be saved, most likely through an open-ended lending facility like the Federal Reserve's Term Auction Facility (TAF). They must come before taxpayers, before pensioners, before the reforms that might transform southern Europe into a dynamic player in the global economy. Not because it is fair or just or right. It is none of these things. It must happen because we have constructed a global economy that has massive international banks at its heart. Money, banking, and credit lubricate the billions of transactions that happen around the world every day. If the global financial system collapses, so will trade. Stopping that collapse will involve central banks around the world loaning enormous sums of money to their private banks at very low interest rates. It will also mean that they do this as the private banks constrict their lending to businesses and families. Cash will pile up in global banks as a war chest in case things take a turn for the worse. As with the U.S. bailout, it will seem awful and it will be awful. But it will be necessary..."

  2. Ta-Nehisi Coates: In Defense of a Loaded Word: "MY father’s name is William Paul Coates.... I have never called my father Billy. I understand, like most people, that words take on meaning within a context.... But as with so much of what we take as human, we seem to be in need of an African-American exception.... A fairly regular ritual debate over who gets to say 'nigger' and who does not.... 'If you call yourself the n-word', said the Rev. Al Sharpton, 'you can’t get mad when someone treats you like that'. This is the politics of respectability--an attempt to raise black people to a superhuman standard. In this case it means exempting black people from a basic rule of communication--that words take on meaning from context and relationship. But as in all cases of respectability politics, what we are really saying to black people is, 'Be less human'. This is not a fight over civil rights; it’s an attempt to raise a double standard.... To prevent enabling oppression, we demand that black people be twice as good. To prevent verifying stereotypes, we pledge to never eat a slice a watermelon in front of white people. But white racism needs no verification from black people. And a scientific poll of right-thinking humans will always conclude that watermelon is awesome.... A separate and unequal standard for black people is always wrong. And the desire to ban the word “nigger” is not anti-racism, it is finishing school. When Matt Barnes used the word “niggas” he was being inappropriate. When Richie Incognito and Riley Cooper used “nigger,” they were being violent and offensive. That we have trouble distinguishing the two evidences our discomfort with the great chasm between black and white America..."

Nick Rowe: The effect of nominal interest rates on inflation | Kathleen Geier: ≠ Inequality Matters |