Graph of the Week: No Longer Growing Together since 1975
John Podesta as Lamplighter in the Obama White House?: Monday Focus (December 23, 2013)

Things to Read on the Evening of December 23, 2013


  1. Mike Konczal: It’s still too early for Congress to stop worrying about unemployment: "This is the month that unemployment officially fell off the agenda in Washington, D.C.... There are three major levers that policymakers can use to push for full employment... additional deficits... monetary stimulus... fix the broken housing market to allow for quicker deleveraging and to prevent destabilizing foreclosures. But policymakers are now easing up on all three levers... “taper”... emergency unemployment insurance is unlikely to be extended in 2014. But there are other, less-noticed ways.... One example: There's the looming expiration of the Mortgage Forgiveness Debt Relief Act.... Is this pullback justified? Some economists have suggested that broad-based unemployment is no longer the nation’s biggest problem.... But I find this story incomplete, and too narrow. For one: The economy isn’t just terrible for people who have been out of work for a long time. It’s still terrible even for people with jobs. Quit rates, for instance, are still much lower than they were on the eve of the Great Recession. The rate at which people are voluntarily quitting their jobs has only recovered approximately half of its value. It dropped a point from 2.2 percent, and it stands at only roughly 1.7 percent. Wage growth is also still anemic..."

  2. Paul Krugman: Bits and Barbarism: "This is a tale of three money pits... of monetary regress... the strange determination of many people to turn the clock back.... The first money pit is an actual pit--the Porgera open-pit gold mine in Papua New Guinea.... The mine has a terrible reputation.... But gold prices... are still three times what they were a decade ago, so dig they must. The second money pit is a lot stranger: the Bitcoin mine in Reykjanesbaer, Iceland. Bitcoin is a digital currency that has value because... well, it’s hard to say exactly why, but for the time being at least people are willing to buy it because they believe other people will be willing to buy it.... The third money pit is hypothetical. Back in 1936 the economist John Maynard Keynes argued that increased government spending was needed to restore full employment. But then, as now, there was strong political resistance to any such proposal. So Keynes whimsically suggested an alternative: have the government bury bottles full of cash in disused coal mines, and let the private sector spend its own money to dig the cash back up. It would be better, he agreed, to have the government build roads, ports and other useful things--but even perfectly useless spending would give the economy a much-needed boost. Clever stuff--but Keynes wasn’t finished. He went on to point out that the real-life activity of gold mining was a lot like his thought experiment..."


  1. Nick Rowe: Worthwhile Canadian Initiative: Long run, medium run, and short run Fisher curves: "Here is a simple way to think about the correlations between nominal interest rates and inflation rates.... We need to distinguish between: the actual inflation rate; the central bank's inflation target; and what people expect the central bank's inflation target to be (the 'markets-expected inflation target').... The Long Run Fisher curve... shows a positive correlation between nominal interest rate and inflation... when you vary the inflation target and... the markets-expected inflation target, so that the two are always equal.... If we look at long run or cross-country data, where inflation targets differ a lot, we should observe the LRFC.... When we hold the inflation target fixed and assume the market-expected inflation target equals the actual inflation target... [there is] zero correlation between nominal interest rate and inflation.... When we hold the markets-expected inflation target fixed, and vary the actual inflation target we observe a negative correlation between nominal interest rates and inflation.... When we have a transition from one inflation target to the next, and if the expected inflation target does not immediately adjust, we would observe the SRFC..."

  2. Jeff Reeves: 7 things you should have learned in 2013 — but didn’t: "Here are strategies that will serve you well in 2014 — and perhaps longer — that you should have learned if you were watching something other than Carl Icahn, Twitter or Tesla in the past 12 months: 1. Buy and hold works.... 2. Forecasting doesn’t work.... 3. Stop buying negative yield TIPS.... 4. Be careful with long-term bond funds.... 5. You have a LONG way to go.... 6. Personal preference is not an investing strategy.... 7.You can’t win if you don’t play..."

  3. Laurence Ball et al. (1995): The Deficit Gamble: "The historical behavior of interest rates and growth rates in U.S. data suggests that the government can, with a high probability, run temporary budget deficits and then roll over the resulting government debt forever. The purpose of this paper is to document this finding and to examine its implications. Using a standard overlapping-generations model of capital accumulation, we show that whenever a perpetual rollover of debt succeeds, policy can make every generation better off. This conclusion does not imply that deficits are good policy, for an attempt to roll over debt forever might fail. But the adverse effects of deficits, rather than being inevitable, occur with only a small probability."


Should Be Aware of:

  1. Echidne of the Snakes: On The Trivers-Willard Hypothesis and Ross Douthat. A look at the Conley & Rauscher Article on Party Affiliation And Having Daughters.#: "This post is about the study Ross Douthat was so very happy about: 'The Effect of Daughters on Partisanship and Social Attitudes Toward Women'.... The Conley-Rauscher paper is not about conservative parents cherishing their daughters or traditional morality, as Douthat interprets it. It is about evolutionary psychology, my dears!... The Trivers–Willard hypothesis, formally proposed by Robert Trivers and Dan Willard, predicts greater parental investment in males by parents in "good conditions" and greater investment in females by parents in "poor conditions"... red deer mothers would produce more sons when they are in good condition, and more daughters when in poor condition.... Those who apply the TWH to humans seem to argue that social class, say, can stand in for the kinds of conditions that apply to red deer.  Thus, people who belong to higher social classes are theorized to have more sons and daughters and to treat their sons better than daughters.... People who belong to lower social classes are theorized to have more daughters than sons and to treat their daughters better than their sons (more food for daughters, more education for daughters etc.). This is not what one observes.... So what were the actual findings of the Conley-Rauscher article?  Astonishingly, very muddled.... Lower social status families should invest more in their daughters than in their sons, and because the Republican Party, in the authors' opinion, is the party which maximizes the number of future offspring from daughters, lower social status families should show a greater preference for the Republican... Party. But the study didn't find that..."

  2. Marginal Revolution University: Great Economists: Classical Economics and its Forerunners: "This course covers the history of economic thought up until the 'Marginal Revolution' in the 1870s and features a video for each chapter of Adam Smith's The Wealth of Nations. The videos will answer important questions such as: Who were the first economic thinkers? What are the very origins of economic thought? What did earlier economists understand but has been lost to the modern world? Why is Adam Smith the greatest economist of all time? How did the economic issues of the 18th and 19th centuries shape the thoughts of the classical economists? This course is non-technical and is accessible to a beginner. If you pass the final exam, you will earn our 'Great Economists' certificate on your profile."


Will Truman: Thanks, Obama | Kileh Kroh: Conservative Donors Pump $1 Billion A Year Into Climate Denying Groups | Andrew Haldane: The Banker Who Cried 'Simplicity' | Richard B. Freeman and Xiaoying Li: Has China’s new labour contract law worked? | Alex Payne: Former Twitter Engineer Blasts Bitcoin | Evan Soltas: North Carolina Shows How to Crush the Unemployed | Jonathan Chait: Paul Ryan’s Secret Love for Poor Exposed Again |