Grasping Reality on TypePad, by Brad DeLong

Room for Debate: Did the Bank Bailout Do Enough for the Country?:

AMIR SUFI, UNIVERSITY OF CHICAGO: Housing Crisis Was Overlooked: Letting bankruptcy judges write down mortgages and providing an ambitious mortgage refinancing plan would have reduced foreclosures.

LEE SACHS, FORMER COUNSELOR TO THE TREASURY SECRETARY: Our System Is Safer and More Stable: Radical reshaping should not be an objective for its own sake. Rescue efforts and reforms protected consumers, taxpayers and the flow of credit.

DEAN BAKER, CENTER FOR ECONOMIC AND POLICY RESEARCH: Better No Bailout, Than the One We Got: Banks weren't forced to shrink and get boring. If they were allowed to fail, federal spending could have kept the economy afloat and led to recovery.

ANAT R. ADMATI, STANFORD UNIVERSITY: Too Much Debt and Not Enough Equity: Tougher requirements would have prevented banks from hiding their true losses, and loosened credit for businesses and individuals.

EDWARD HARRISON, CREDIT WRITEDOWNS: More Focus Is Needed on Deep Economic Flaws: Until we address stagnant income, high household debt, insufficient bank capital and excessive risk, another crisis may be inevitable.

GLENN HUBBARD, COLUMBIA UNIVERSITY: Too Narrow a Focus on Banks: There was little discussion of financial institutions other than banks and government institutions, which helped spread contagion.

Over at Equitable Growth--The Equitablog

• Reviewing Lawrence H. Summers's Review of Piketty III: The Rise of the Robots: Monday Focus: May 26, 2014
• Lunchtime Must-Read: Jérémie Cohen-Setton: The Piketty Data Controversy
• Morning Must-Read: Dylan Scott: The Toughest Questions The GOP Should Have To Answer On Obamacare
• Morning Must-Read: Charlie Stross: Amazon: Malignant Monopoly, or Just Plain Evil?

Plus:

• Things to Read on the Evening of May 26, 2014

And:

Should-Reads:

1. Echidne: The Day Of Retribution. On Elliot Rodger, the Butcher of Santa Barbara: "This post is about the slaughter carried out by Elliot Rodger in Santa Barbara. It is about violence, the hatred of women and the general hatred of humans. Consider carefully whether you wish to read it..."

2. Jonathan Hopkins: Piketty Debunked? Not So Fast: "Piketty's book was so universally lauded by such a chorus of great minds... that it was only a matter of time before someone pushed back.... Chris Giles in the FT takes issue with Piketty's data on rising wealth inequality... struck by the marked difference between the wealth figures used by Piketty for the UK, and those published recently by the UK Office for National Statistics, which suggest much lower levels of inequality.... By adding the raw data from the UK Inland Revenue figures... and the ONS data... Giles... [claims] that the books 'central findings... no longer seem to hold'. That's quite a big claim. Is it true? Well, here I'll just look at the data for the UK. There is a problem with [Giles's] chart.... By throwing in new data that gives a lower figure in the same chart, the visual impact is of a different trend that is not really supported by the data.... The fair test of whether Piketty's trend exists or not is to compare the IRS numbers with data for the earlier period. In fact those numbers track the trend of the Piketty series fairly closely, but with lower absolute values..."

3. Dan Alpert: Why Tim Geithner Is Wrong About the TARP Bailouts: "Former U.S. Treasury Secretary Timothy Geithner muses over the bailout of the financial system during the 2008-09 financial crisis. He concludes not only that, however flawed, the Troubled Asset Relief Program (TARP) was a 'best of all possible bailouts', given the constraints of contemporary politics and law, but also that it has ultimately been justified by the fact that it has made money for the American government and taxpayer. Both of these conclusions are inaccurate. While the first no doubt will continue to be the subject of debate for many years to come, the second is nothing short of a weak apologia, featuring an incomplete assessment of the collateral damage of the bailouts, including the enormous costs to Americans that don’t appear directly on the government’s balance sheets..."

4. Kevin O'Rourke: The Irish Economy: "The European election results are coming in, and in France they are catastrophic. There are two obvious points to be made which work in opposite directions. First, the vote for the FN and similar parties is an under-estimate of eurosceptic opinion, since these parties come with so much baggage that many voters who hate what Europe has become would never, ever dream of voting for them. And quite right too. Second, it may well be that these parties would have done less well if there had been national elections last weekend: voting for the EP is one thing, voting for national governments another. (But who really knows.) Expect many mainstream commentators to point out that the centre has held, that the EPP have won, that Juncker is the people’s choice for EC President, and all the rest of it. This strikes me as exactly the wrong response. My big worry this Monday morning is that Hollande and others (but I am mainly thinking of Hollande) will continue with their current economic strategy, which as far as I can see consists of crossing their fingers and hoping that something will turn up..."

Should Be Aware of:

• * Jane M. von Bergen:* Union workers see only part of big hourly markups at Convention Center
• Sarah Marshall: The Way We Live Now: The Adjunct
• Matthew Yglesias: How African-Americans in South Carolina invented Memorial Day
• Adrianna Macintyre: The NRA has been blocking a nominee for surgeon general since February because he thinks gun violence is a public health problem
• David Meyer: Bots were responsible for Bitcoin’s stratospheric ascent, anonymous report claims
• David Atkins: Eurojolt: Fascists win when the left embraces Bloomberg-style austerity
• Matthew Martin: Economic mobility is irrelevant
• Farangis Najibullah: Russian Television Fraudulently Reported Ukraine's Elections
• Reed Abelson: Insurers Once on the Fence Plan to Join Health Exchanges in ’15
• Annalee Newitz: The Rise of the Evolutionary Paychology Douchebag
• Andrew Solomon: How the worst moments in our lives make us who we are
• Paul Mason: Thomas Piketty's real challenge was to the FT's Rolex types

And:

The most remarkable thing about greater San Francisco is that, no matter what time of year it is, if you are going any significant distance, you will need if you are going to feel comfortable:

1. A t-shirt,
2. A long-sleeved shirt, and
3. A sweatshirt.

Plus, in the rainy season you may well need an umbrella, a very good raincoat, rain pants, and rain, depending on where you are...

Jérémie Cohen-Setton: The Financial Times Attack on Thomas Piketty: "Matt O’Brien writes that [Chris] Giles identifies...

...simple transcription errors... 1908 instead of 1920.... They're embarrassing, but they don't change the big picture.... [Chris] Giles thinks Piketty should average European data by population, not by country.... And Giles isn't sure why Piketty has put together some of his wealth data—which is sparse, and needs to be adjusted, if not constructed—the way that he has. But these aren't errors. They're questions....Ryan Avent writes that while some of the data and adjustments in the spreadsheets lack adequate documentation, Giles does not have the evidence to justify the implication that figures are drawn 'from thin air'. Data fabrication is a serious charge to make, and I am surprised Mr Giles would allege it without clearer proof. Simon Wren-Lewis writes that the only issue of substance involves trends in the UK wealth income ratio, but of course an article headlined ‘Data sources on UK wealth income ratio differ’ would not have had the same punch. Justin Wolfers writes that while it’s quite natural for a journalist to emphasize the differences between his findings and those of a famous author, the most striking fact is how closely The F.T.'s analysis agrees with Mr. Piketty’s. Their preferred time series for the evolution of wealth inequality are remarkably similar...

I would not bet on it...

Usually the Monday Smackdown Watch is focused on smacking-down me: to feature people who think that I have gotten something wrong, and who want to urge me to mark my beliefs to market.

But I am out of candidates. Step up your game, people!

So we do what we can:

Somewhat more than once a year Michael Kinsley writes another column about how hyperinflation threatens and (usually) about how Paul Krugman and company are mean, arrogant, and wrong. So last year when it happened I put a reminder in my tickler file to look around in May 2014 and see if:

• Kinsley has done it again; or

• Kinsley has marked his beliefs to market; admitted that Ben Bernanke and Janet Yellen are not Arthur Burns and G. William Miller, Barack Obama is not Gerald Ford; and recognized that taking Robert Samuelson and Allan Meltzer rather than Paul Krugman, Alan Blinder, and Larry Summers as your economic gurus is a really bad idea, atoning for which requires apology, correction, and a very substantial financial contribution to aid those Americans whom the intellectual climate he has promoted have robbed of their normal jobs.

So far we have neither: no additional doubling-down, no acknowledgement of error, no substantial charitable contributions to aid the excess unemployed...

• Kinsley 2010
• Kinsley 2011
• Kinsley 2012
• Kinsley 2013 (a)
• Kinsley 2013 (b)
• Dan Drezner's classic 2013 Kinsley smackdown: "Look, this isn't rocket science--Kinsley made an argument about austerity that got a lot of basic economic facts about the 1970s and the current era very, very wrong. Dare I say, spectacularly and obviously wrong. So there's really no point in further discussion..."

If you have done something for four years in a row--even as the mountain of evidence that you are wrong piles up higher and higher--you do owe something more than radio silence to your readership: you have already double-double-double-double-doubled-down; so double-down again, or fold. Radio silence is undignified, and cheap.

The Bombardment of May 26, 1944:

French schoolchildren and teachers killed by American bombs, Saint-Etienne, France

MAITRES

JACOB Alexandre, DESCOMBES Louis, DECRAT Charles, DEJOB Jean, DUCREUX Pierre, FRAPPA Pierre, PORTE Alexandre, GRANGER Pierre

ELEVES

CERVANTES Rosa, BROUILLAT Michel, BRUN Joseph, BURLET Philbert, CERVANTES François, BEBNI Zenon, DESCOT Benoit, FLORET Jean, MAGAND Paul, OTTOVIANO Joseph, PEJON Maurice, PEJON Pierre, SABATIER Henri, SOUVIGNET Marcel, TIBLIER Antoine, VIGOUROUX Roger, VACHER Marie Therese, CLEMONÇON Maurice, GOUTORBE Claude Francis, GUICHARD Georges GUY Jacques, HEYRAUD Henri, RICHARD Maurice, VALOT Bernard

Above is the rebuilt École de Tardy, one of 1100 buildings destroyed when American bombers targeted the railroad freight yards. Of the 984 people killed in Saint-Etienne that morning, 32 were here.

On the nearby grassy hilltop of the La Cotonne neighborhood is the 1954 Madonna and Child memorial.

Dylan Scott: The Toughest Questions The GOP Should Have To Answer On Obamacare: "Three Questions For Republicans...

...Who Want To Repeal The Affordable Care Act: 1. How would any alternative policy account for the millions of previously uninsured people who have gotten health coverage under Obamacare?... 2. Do you think covering the uninsured should be the goal of federal policy? If so, how would your alternative policy achieve that and keep insurance costs stable without an individual mandate?... 3. You have criticized President Obama for canceled policies under Obamacare. If your alternative policy is intended to expand health coverage, how would it achieve that without causing the same kind of disruption in the market?... Three Questions For Republicans Who Don't Want To Repeal The Affordable Care Act: 1. Would you oppose continued efforts by Republican leadership to repeal Obamacare or intentionally undercut its effectiveness?... 2. What serious improvements to the law are you ready to propose that could win support from congressional Democrats and the White House?... 3. If your state has not expanded Medicaid under the law, what are you willing to do to persuade GOP state leaders to accept expansion?

Charlie Stross: Amazon: malignant monopoly, or just plain evil?: "Last week, Amazon.com began removing...

...the pre-order links from titles by the publishing group Hachette. This is a cruel and unpleasant action, from an author's point of view; if you're a new author with a title about to come out, it utterly fucks your first-week sales and probably dooms your career from the outset. And if you're someone like me, with a title about to come out, it frustrates and irritates your readers and also damages your sales profile and screws your print run.... Forbes mostly calls it right, at least at the corporate level, and until the end of this paragraph, where their 'free-market' knee-jerk kicks in and they bottle it:

What we're really seeing is a battle between the people who make the product and the people who distribute it as to who should be getting the economic surplus that the consumer is willing to hand over. Like all such fights it's both brutal and petty. Amazon is apparently delaying shipment of Hachette produced books, insisting that some upcoming ones won't be available and so on. Hachette is complaining very loudly about what Amazon is doing, entirely naturally. The bigger question is what should we do, if anything, about it? To which the answer is almost certainly let them fight it out and see who wins.

Planet earth calling: Hachette is the publishing arm of... Lagardère... annual turnover of €7.37Bn.... Hachette turned over €2.1Bn in 2012.... Amazon's sales... €45-50Bn).... It's a big-ish corporation being picked on by a Goliath more than ten times its size, in an attempt to extort better terms.... Forbes seem to think that Hachette is a producer and Amazon is a distributor. This isn't quite true. I am a producer.... Amazon's strategy (as I noted in 2012) is to squat on the distribution channel... eventually... leaving just Amazon as a monopoly distribution channel retailing the output of an atomized cloud of highly vulnerable self-employed piece-workers like myself....

Mark Thoma sends us to Larry Summers at Michael Tomasky's Democracy Journal:

Lawrence H. Summers: The Inequality Puzzle "And there is the basic truth that technology and globalization...

...give greater scope to those with extraordinary entrepreneurial ability, luck, or managerial skill. Think about the contrast between George Eastman, who pioneered fundamental innovations in photography, and Steve Jobs.... Eastman Kodak Co. provided a foundation for a prosperous middle class in Rochester for generations, no comparable impact has been created by Jobs’s innovations....

Even where capital accumulation is concerned, I am not sure that Piketty’s theory emphasizes the right aspects. Looking to the future, my guess is that the main story... will be the devastating consequences of robots, 3-D printing, artificial intelligence, and the like for those who perform routine tasks. Already there are more American men on disability insurance than doing production work in manufacturing. And the trends are all in the wrong direction, particularly for the less skilled, as the capacity of capital embodying artificial intelligence to replace white-collar as well as blue-collar work will increase rapidly in the years ahead....

Jim Henley:

Memorial Day: Inadequate thanks are the only kind we have to offer those who gave “the last full measure of devotion” in service to the country. We the living, and we civilians, should be mindful that every one of those deaths betokened an awesome act of trust – trust that, when they made themselves into weapons, they would be wielded wisely; trust that, when they lay down their lives, we would use that coin for worthy purchase. As a nation we have only ever fitfully met the standards implicit in those deaths. Let us be humble, and let us try harder.

If Google Drive is going to start running at 100% of a CPU and Google Chrome is going to start running at 20% of a CPU, together lowering my MacBookAir's battery life to 90 minutes, you are toast!

Over at Equitable Growth--The Equitablog

• Physiocracy and Robotocracy: Not the Focus But Rather for My Clarification of Thought: May 24, 2014
• WCEG Brown-Bag Lunch: May 23, 2014: PikettyMania!
• Over at Grasping Reality: Weekend Reading: May 25, 2014
• Afternoon Must-Read: Paul Krugman: Crisis of the Eurocrats
• Monday Afternoon Must-Read: Brainwave: The Kynect Challenge

Plus:

• Things to Read on the Morning of May 25, 2014

And:

Should-Reads:

1. Julie Rovner: The Politics Of Health In 2014 Aren’t What You Think: "Last year, the GOP playbook for keeping the U.S. House in 2014 and winning the Senate consisted of a fairly simple strategy: Run against Obamacare. But now... that strategy is looking not so simple.... Republicans face two key problems using the law as a political cudgel, analysts say. One is that with millions of people now signed up for coverage, making the law go away would result in taking away something tangible for a large and growing group of voters. 'So in short order it’s going to be about what you lose as a consequence', Jennings says. The second problem is with the back half of what Republicans have continually branded as a 'repeal and replace' strategy, says Clancy. 'In my 20 years of following health care policy, (Republicans) have never been able to coalesce around en electorally inspiring alternative on health care.... [Republicans are] fundamentally divided between pro-market and pro-business factions' when it comes to health care... 'that makes it difficult for Republicans to come together over truly pro-patient reforms.'"

2. Carola Conces Binder: Kocherlakota's Case for Price Level Targeting: "Narayana Kocherlakota, President of the Federal Reserve Bank of Minneapolis, described the benefits of price level targeting to the Economic Club of Minnesota on May 21.... 'The low inflation in the United States tells us that resources are being wasted. What exactly are these wasted resources?.... The biggest and most disturbing answer is our fellow Americans.... The FOMC is undershooting its price stability objective and is expected to continue to do so. But we should all keep in mind that this outcome--and especially the forecast for continued undershootin--typically means that the FOMC is also underperforming on its other objective of promoting maximum employment.... If my inflation forecast is right, the price level in 2018 will be about 2.5 percent below what it would have been had the FOMC hit its inflation target over the preceding six years'.... He describes two main benefits of adopting price level targeting.... 'The first reason is that price level targeting makes long-term contracts safer'.... The second reason that the FOMC might want to use price level targeting is that it would serve as an automatic stabilizer.... I don't think a switch to price level targeting is likely in the near term. It would (nearly) be a global first. Only the Swedish Riksbank, from 1931-37, has explicitly targeted the price level. The Bank of Canada, an inflation-targeting regime since 1991, seriously considered switching to price level targeting, but decided against it in 2011.... A shift to treating the [inflation] target as a true target, with symmetric costs of overshooting and undershooting, and sufficient weight on the employment part of the mandate, may be an easier-to-implement solution than an explicit price-level target."

Should Be Aware of:

• Peter Bright: Surface Pro 3 review: Is the third time the charm?
• Squarely Rooted: Capital and Moral Inheritance
• Amy Lynn Smith: Pharmacy technician sees Obamacare working every day
• Farhad Manjoo: Amazon’s Tactics Confirm Its Critics’ Worst Suspicions
• Fabrizio Perri: Inequality, Recessions and Recoveries
• Mike Konczal: The FT Gets Piketty's Capital Argument Wrong
• Edmund Fawcett: How Republicans became the “stupid” party: Turning right, refusing to recognize facts and change
• Reading is for Snobs: Welfare Recipient Ben Carson Complains About Welfare Recipients On The View
• David Autor: Inequality Among the “99 percent”

And:

• Weekend Reading; Robert Skidelsky: Review of Thomas Piketty: Capital in the 21st Century (Brad DeLong's Grasping Reality...)
• Weekend Reading: Irving Fisher's 1918 Presidential Address to the American Economic Association (Brad DeLong's Grasping Reality...)

Operation Rösselsprung (1944) - Wikipedia:

A combined airborne and ground assault by the German XV Mountain Corps and their allies on the Supreme Headquarters of the Yugoslav Partisans located at the town of Drvar in western Independent State of Croatia (of which modern-day Bosnia and Herzegovina was a part) during World War II. The operation was launched on 25 May 1944, and was aimed at capturing or killing Marshal Josip Broz Tito and destroying the headquarters, support facilities and co-located Allied military missions.... Operation Rösselsprung was a coup de main operation... a parachute and glider-borne assault force based on 500th SS Parachute Battalion and their link-up with ground forces of the XV Mountain Corps converging on Drvar. The airborne assault was preceded by heavy bombing of the town by the Luftwaffe. The ground forces included Home Guard forces of the Independent State of Croatia. The operation was a failure, as Tito, his principal headquarters staff and the allied military personnel escaped, despite their presence in Drvar at the time of the airborne assault....

• Mr. Piketty and the 'Neoclassicists': A Suggested Interpretation
• Slides

Robert Skidelsky: Book review: Capital in the 21st Century by Thomas Piketty: "The early 19th-century founders of the classical school of economics..

...reasoned that the distribution of a society’s income depended crucially on who owned its productive resources. David Ricardo identified three classes of producer, landlords, capitalists and workers. Each of these classes owned a factor of production—land, capital and labour. With land and capital scarce relative to labour, landlords and capitalists could claim a disproportionate share of the produce that they and the workers jointly produced. Workers’ pay would be forced to subsistence. Classical socialism, as Karl Marx conceived it, was a branch of this tree. Abolish private ownership of land and capital (and the power which this gave) and one would abolish the “rents” to their owners, enabling workers to receive their proper share of production.

Paul Krugman: Crisis of the Eurocrats: "The bitter irony here is that Europe’s elite...

...isn’t actually technocratic. The creation of the euro was about politics and ideology, not a response to careful economic analysis.... The same can be said of the turn to austerity: All the economic research supposedly justifying that turn has been discredited, but the policies haven’t changed.... And the European elite’s habit of disguising ideology as expertise, of pretending that what it wants to do is what must be done, has created a deficit of legitimacy. The elite’s influence rests on the presumption of superior expertise; when those claims of expertise are proved hollow, it has nothing to fall back on.... There are some very scary people waiting in the wings. If we’re lucky--and if officials at the European Central Bank, who are closer to being genuine technocrats than the rest of the elite, act boldly enough against the growing threat of deflation--we may see some real economic recovery over the next few years. This could, in turn, offer a breathing space.... But economic recovery by itself won’t be enough; Europe’s elite needs to recall what the project is really about. It’s terrifying to see so many Europeans rejecting democratic values, but at least part of the blame rests with officials who seem more interested in price stability and fiscal probity than in democracy. Modern Europe is built on a noble idea, but that idea needs more defenders.

Irving Fisher: Economists in Public Service: Annual Address of the President: Source: The American Economic Review, Vol. 9, No. 1, Supplement, Papers and Proceedings of the Thirty-First Annual Meeting of the American Economic Association (Mar., 1919), pp. 5-21 Published by: American Economic Association. Stable URL: http://www.jstor.org/stable/1813978 Accessed: 17/04/2013 12:34

Of the many effects which the war has exerted on the minds of men, one of the most notable is the keener desire which we all now feel to be of genuine public service. During the war hundreds of our members have done "war work." In Washington alone one hundred and twenty of them have been in public service. During the impending world-reconstruction, economists will probably have more opportunity to satisfy this impulse than most students in other departments of human thought; for the great problems of reconstruction are largely economic.

The physiocrats of eighteenth-century France saw the country as having four kinds of jobs:

1. Farmers
2. Skilled artisans
3. Flunkies
4. Landowning aristocrats

Farmers, they thought, produced the net value in the economy--the net product. Their labor combined with water, soil, and sun grew the food they and others ate. Artisans, the physiocrats thought, were best seen not as creators but as transformers of wealth--transformers of wealth in the form of food into wealth in the form of manufactures. Aristocrats collected this net product--agricultural production in excess of farmers' subsistence needs--and spent it buying manufactured goods and, when they got sated with manufactured goods, employing flunkies.

Set the wage needed to attract people into the artisan professions as numeraire: set it equal to 1. Then in this framework, the key economic variables are:

• the fraction of the population who are farmers: f.
• the net product per farmer: n.
• the fraction of the population who can be set to work making manufactured goods that aristocrats can consume before becoming sated: m.

The key equilibrium quantity in this system is:

(nf-m)/(1-f-m) = w

This gives the standard of living of the typical flunky--say, a runner for His Grace the Cardinal. The numerator is the amount of resources on which flunkies can subsist: the net product received by landlords minus the amount of the net product spent employing artisans. The denominator is the flunky share of the population. The quotient of the two is the flunky wage: w.

If this flunky wage w is low, the country is poor. Flunkies are then ill-paid. Begging and thievery are then rampant. Moreover, the reserve army of underemployed and potentially-unemployed flunkies puts downward pressure on artisan and farmer living standards as well.

If this quantity w is high, the country is prosperous.

The physiocrats saw a France undergoing a secular decline in the farmer share f. They worried. A fall in f produced a sharper decline in w. Thus they called for:

• Scientific farming to boost n, and so boost the net product nf.
• A reallocation of the tax burden to make it less onerous to be a farmer--and so boost the farmer share f and thus the net product nf.

With the unquestioned assumption that there were limits on how high the net product per farmer n could be pushed, the physiocrats would have forecast that France of today, with only 5% of the population farmers, would be a hellhole: enormous inequality and absolute poverty, with huge numbers of ill-paid flunkies sucking up to the aristocratic landlords.

Well, the physiocrats were wrong about the decline of the agricultural share of the labor force...

And let us hope that the techno-pessimists are similarly wrong about the rise of the robots...

Brainwrap: ACA Signups: Presenting the Great Conservative Kynect Challenge!: "I present you with the following (thanks to Jed Lewison for the tip):

MCCONNELL: KY. EXCHANGE UNCONNECTED TO HEALTH LAW LOUISVILLE, Ky. (AP) -- Kentucky Sen. Mitch McConnell says he would try to repeal the Affordable Care Act.... But the veteran senator won't say what would happen to the 413,000 Kentuckians who have health insurance through the state's health care exchange. McConnell told reporters Friday that the fate of the state exchange is unconnected to the federal health care law. Yet the exchange would not exist, if not for the law that created it....

Now, supporters of the law in Kentucky... want people to have access to healthcare coverage even if the recipient is too intellectually lazy (or, gasp, racist?) to perform the most rudimentary research on the subject.... That brings us to the Mitch McConnell story above. Senator Turtle just flat-out lied about the fact that Kynect is Obamacare. He didn't exaggerate or tell a half-truth; he told a bald-faced lie about it. So, here's my challenge to you, Conservative Pundits: Will you tell your readers at Forbes, HotAir, the Daily Caller, NewsMax and (dare I say it) FOX News the truth? Will you state point-blank with no equivocation that Kynect, Obamacare and the Affordable Care Act are all the same Goddamned law?.... I'll make it easy for you; here's a simple graphic for you to share:

CBC Digital Archives: The Italian Campaign:

A full year before the D-Day landings in Normandy, there were the Allied invasions of Sicily and Italy. Canada played a major role in the Allies' first breach of Hitler's "Fortress Europe" in 1943 and 1944. Canadian soldiers defeated entrenched German forces but paid a terrible price. Seaside towns and mountain passes became places of horror: Ortona, Cassino, Rimini. But with the events of D-Day and the Allied push across Europe, the Italian Campaign became a forgotten front, a deadly sideshow that cost nearly 6,000 Canadian lives. Sixty years later, their bravery is remembered.

The Italian Campaign: Breaking the Hitler line From a farmhouse attic, Peter Stursberg describes a Canadian tank and infantry assault.

• Whiskey Tango Foxtrot Bang Query: Piketty's Numbers
• Morning Must-Read: David Dayen: Congress Is Blowing a Huge Opportunity to Rebuild America
• Reviewing Lawrence H. Summers's Review of Piketty II: The Post-1980 Rise of Extreme Inequality in America: Friday Focus: March 23, 2014
• Morning Must-Read: Antonio Fatas: The US labor market is not working
• Morning Must-Read: Ambrose Evans-Pritchard: Europe's Centre Crumbles as Socialists Immolate Themselves on Altar of EMU

Plus:

• Things to Read on the Morning of May 24, 2014

And:

Should-Reads:

1. Ta-Nehisi Coates: The Case for Reparations: "Reparations could not make up for the murder perpetrated by the Nazis. But they did launch Germany’s reckoning with itself, and perhaps provided a road map for how a great civilization might make itself worthy.... Ben-Gurion said: 'For the first time... a great State, as a result of moral pressure alone, takes it upon itself to pay compensation to the victims of the government that preceded it. For... a people that has been persecuted, oppressed, plundered and despoiled... a persecutor and despoiler has been obliged to return part of his spoils and has even undertaken to make collective reparation as partial compensation for material losses.' Something more than moral pressure calls America to reparations. We cannot escape our history. All of our solutions to the great problems of health care, education, housing, and economic inequality are troubled by what must go unspoken.... In the early 2000s, Charles Ogletree went to Tulsa, Oklahoma, to meet with the survivors of the 1921 race riot that had devastated 'Black Wall Street'.... A commission authorized by the Oklahoma legislature produced a report affirming that the riot, the knowledge of which had been suppressed for years, had happened. But the lawsuit ultimately failed, in 2004.... The crime with which reparations activists charge the country implicates more than just a few towns or corporations. The crime indicts the American people themselves, at every level, and in nearly every configuration. A crime that implicates the entire American people deserves its hearing in the legislative body that represents them..."

2. Douglas Holt-Eakin: "Many... [Republicans] are convinced [immigration reform is] bad [political] news [for them].: Right, and the sun revolves around the earth.... Conservative voters support the need for reform... the policies for reform... would not vote against someone with whom they disagreed on... reform.... [Republicans'] electoral future will benefit from passing an immigration reform. If the Hispanic vote migrates away from Republicans in states like Texas and Florida... these states will turn blue.... Mitt Romney won only 27 percent of the Hispanic vote in 2012) House Republicans may not be narrowly endangered, especially in 2014, but the larger political threat is real.... They do not have the luxury of waiting.... If they do not pass reform bills, the president will simply announce an executive order stopping or reducing deportations in August. Many Republicans will reflexively lash out at the administrative overreach, which the Democrats will quickly distort and paint Republicans as simply anti-immigrant. Voting on legislation of their choosing... is way better politics than doing nothing and playing on the president’s terms.  Good immigration reform will benefit the nation. It can also be better politics [for Republicans] in 2014..."

3. Jonathan Chait: What’s My Problem With Conservative Reformers?: "However loopy, bigoted, incompetent, or detached from the realities of economic life the Republican Party may be, it is always just one recession away from regaining political power. It is therefore of the highest importance that sane, non-sociopathic people regain some influence within the party for when that day arrives.... The deeper tension in the project lies between the political demands of the reform project and the demands of intellectual honesty. That’s the main tension I tried to highlight in a profile I wrote last year of Josh Barro, who simply grew tired of the contortions necessary for the far right. The contrasting point of view to Barro was supplied by Reihan Salam, who told me, 'The truly public-spirited person is part of a team, and makes their team smarter and better to the extent they can'. Being part of a team means that, in the service of a noble and public-spirited political goal, you are engaged in some form of spin. Dionne’s essay describes how Republican reformers demonstrate their partisan bona fides by engaging in elaborately overstated denunciations of President Obama while refusing either to grapple with the party’s reflexive opposition or acknowledge the ways that some of Obama’s proposals were, are, or could be the basis for compromise..."

4. Greg Sargent: Obama slams ‘both sides to blame’ media: "At a fundraiser last night, President Obama unleashed a surprisingly spirited and comprehensive attack on 'both sides to blame' media coverage. While he has taken issue with Beltway coverage before, what was particularly noteworthy this time is that he made the case that 'false equivalence' coverage is fundamentally misleading in the sense that it obscures the basic imbalance that currently exists between the two parties.... I’m not sure Obama has ever gone so directly at the idea that today’s GOP has become what some of us have been calling 'post-policy'; that the basic imbalance resulting from that is the primary cause of reigning Washington dysfunction; and that on a fundamental level, press coverage is failing to reckon with these realities. This will prompt the Green Lanternite pundits, who continue to trace the problem to Obama’s failure to move Congress, to argue that he is merely making excuses for failure. I would note, though, that in his remarks, he also said the only remedy for the problem is for Democrats to vote out Republicans, which is to say, it’s on Democrats to fix by winning elections..."

Should Be Aware of:

• Katie Lobosco: Army of robots to invade Amazon warehouses
• Ken French: Why you shouldn't pay an active investment manager
• Barry Ritholtz: Geithner's Stress Test Failure
• Mike Konczal: How Timothy Geithner failed his stress test
• Scott Andes and Mark Muro: China: A Manufactured Chimera?
• Paul Krugman (2010): Crises

And:

Matt Yglesias: (mattyglesias) on Twitter: "Maybe it’s just me, but this doesn’t look like a huge disagreement: http://pic.twitter.com/FO7V93tuXG"

Chris Giles: Piketty findings undercut by errors

I am with Matt on this one...

David Dayen: Congress Is Blowing a Huge Opportunity to Rebuild America: "The days of cheap borrowing have returned...

...Yields on the 10-year Treasury bond, a good benchmark for determining government borrowing costs, have fallen to the lowest level since last year’s government shutdown.... The economy remains sluggish enough to keep a lid on interest rates. Demand remains well below trend, the housing market has grown weaker, and inflation has not approached the Federal Reserve’s 2 percent target.... This confluence of factors has led to the re-emergence of the biggest bargain in America, an opportunity we have squandered amid years of low interest rates. Once again, we have a chance--perhaps the last chance--to use cheap borrowing to invest in priorities that will never be this affordable again.... Taking advantage of low rates and enacting a large infrastructure program would actually save money in the long-term, while strongly supporting economic recovery right now...

Ann Marie Marciarille: Missouri State of Mind: Defining Death: "Last week, I participated in a lunch time panel discussing the Marlise Munoz...

case with Terry Rosell of Kansas City's Center for Practical Bioethics.... So much ink and tears have been shed over Marlise Munoz that I doubted I could say anything original. I did think it might be interesting... [look at] the Texas death statute.... The way I see it, the hospital's hesitation between the medical record notation of brain death (two days post admission) and the official declaration of death (several weeks later, and under a court order noting Marlise Munoz had, in fact, been dead for several weeks) is even more interesting than the curious case of pregnancy exclusions from medical advance care directives....

Over at WCEG Equitablog: Mark Thoma sends us to Larry Summers at Michael Tomasky's Democracy Journal:

Lawrence H. Summers: The Inequality Puzzle: "I have serious reservations about Piketty’s theorizing as a guide...

...to understanding the evolution of American inequality.... Piketty['s]... rather fatalistic and certainly dismal view... presumes, first, that the return to capital diminishes slowly, if at all, as wealth is accumulated and, second, that the returns to wealth are [nearly] all reinvested.... Neither of these premises is likely correct as a guide to thinking about the American economy today....

Most economists would attribute both it and rising inequality to the working out of various forces associated with globalization and technological change.... Piketty... recognizes that at this point the gains in income of the top 1 percent substantially represent labor rather than capital income... a separate issue from processes of wealth accumulation.... So why has the labor income of the top 1 percent risen so sharply relative to the income of everyone else? No one really knows. Certainly there have been changes in prevailing mores regarding executive compensation... plenty to criticize in existing corporate-governance arrangements.... I think... those like Piketty who dismiss the idea that productivity has anything to do with compensation should be given a little pause.... The executives who make the most money are not for most part the ones running public companies who can pack their boards with friends. Rather, they are the executives chosen by private equity firms.... This is not in any way to ethically justify inordinate compensation-—only to raise a question about the economic forces that generate it.... And there is the basic truth that technology and globalization give greater scope to those with extraordinary entrepreneurial ability, luck, or managerial skill. Think about the contrast between George Eastman, who pioneered fundamental innovations in photography, and Steve Jobs.... Eastman Kodak Co. provided a foundation for a prosperous middle class in Rochester for generations, no comparable impact has been created by Jobs’s innovations... READ MOAR

Antonio Fatas: The US labor market is not working: "The US has gone through a major crisis after 2008 with devastating effects...

...on the labor market but so have other countries. In fact, most European countries have done much worse than the US in terms of GDP growth during the last 6 years. In fact, with the exception of Portugal, Greece and Ireland, the US is the country with the worst labor market record for this age group if we compare the 2012 to the 2000 figures...

Operation Shingle:

At 05:45 on May 23, 1944, 1,500 Allied artillery pieces commenced bombardment. Forty minutes later the guns paused as attacks were made by close air support and then resumed as the infantry and armour moved forward. The first day's fighting was intense: 1st Armored Division lost 100 tanks and 3rd Infantry Division suffered 955 casualties, the highest single day figure for any U.S. division during World War II. The Germans suffered too, with 362nd Infantry Division estimated to have lost 50% of its fighting strength.

Ambrose Evans-Pritchard: Europe's centre crumbles as Socialists immolate themselves on altar of EMU: "By a horrible twist of fate...

...Europe's political Left has become the enforcer of reactionary economic policies. The great socialist parties of the post-war era have been trapped by the corrosive dynamics of monetary union, apologists for mass unemployment and a 1930s deflationary regime that subtly favour the interests of elites. One by one, they are paying the price.... Contractionary policies are poisonous for countries leveraged to the hilt.... One can understand why the Left in small countries may feel too weak to buck the EMU system. The mystery is why a French Socialist president with a parliamentary majority should so passively submit to policies that are sapping the lifeblood of the French economy and destroying his presidency. Francois Hollande won the presidency two years ago on a growth ticket, vowing to lead an EMU-wide reflation drive that would lift Europe out of slump. He promised to veto the EU Fiscal Compact. He asked to be judged on his record in 'bending the curve of unemployment', and to his chagrin the people are holding him to his word...

Over at Equitable Growth--The Equitablog

• Afternoon Must-Read: Matthew Yglesias: Facebook Product Director Furious at Facebook’s Effect on News
• Morning Must-Read: Erik Loomis: Histories of the Gilded Age, Written by Hacks of the New Gilded Age
• Morning Must-Read: Lawrence H. Summers: Review of Thomas Piketty's "Capital in the Twenty-First Century" I: Piketty's Accomplishment
• The Honest Broker: Mr. Piketty and the “Neoclassicists”: A Suggested Interpretation: For the Week of May 17, 2014
• Morning Must-Read: Heather Boushey: It Wasn't Household Debt That Caused the Great Recession

Plus:

• Washington Equitable Center for Growth | Things to Read on the Evening of May 22, 2014

And:

Should-Reads:

1. Ben Casselman: Cutting Off Emergency Unemployment Benefits Hasn’t Pushed People Back to Work: "In 2013, people who likely qualified for emergency benefits had a monthly job-finding rate of 12 percent. In the four months since the program ended, the job-finding rate for likely cutoff victims... was slightly higher, at 14 percent. But the difference isn’t statistically significant. Even if it holds up as more data comes in, it could be the result of the improving economy rather than the direct impact of the end of the emergency program. The end of the program might have had another effect, however: It may have made people less likely to keep trying to find jobs. Unemployment programs usually require recipients to show that they’re actively applying for jobs.... About 19 percent of cutoff victims have dropped out of the labor force each month this year, meaning they stopped actively looking for work. That’s a bit higher than the 16 percent who dropped out each month last year; that difference, too, is at most marginally statistically significant. We don’t yet have enough evidence to draw a firm conclusion about what impact the end of emergency benefits has or hasn’t had.... This much is clear, however: There has been no sudden surge of former benefits recipients into jobs. Nor have they abandoned the labor force in droves. Most have done what Laurusevage has done: continued looking for work, but without the lifeline that benefits provided..."

2. Sarah Kliff: America is fat because we exercise a little more and eat a lot more: "Southern states, for example, tend to have higher obesity rates than those in the Northeast... lower-incomes than high earners... also higher in minority populations. But... Roland Sturm argues... across different geographies, ethnic groups and income-levels, obesity rates are growing just as quickly.... Sturm argues there are important policy implications from seeing the obesity crisis as something that's happening all over the country.... It's not... food deserts that are driving the obesity epidemic, if rates are going up just as quickly in places where there are ample food options.... Americans pretty much everywhere consume more calories than they did a few decades ago.... Exercise doesn't actually appear to be the problem: Americans are exercising slightly more than they did in late 1990s..."

Should Be Aware of:

• Hans-Joachim Voth: Nazi pork and popularity: How Hitler’s roads won German hearts and minds
• Narayana Kocherlakota: Monetary Policy Report to the Economic Club of Minnesota
• Mike Konczal: How Timothy Geithner failed his stress test
• Bryce Covert: No, Taking Away Unemployment Benefits Doesn't Make People Get Jobs
• Ta-Nehisi Coates: The Case for Reparations
• Nicholas Bagley: The Legality of Delaying Key Elements of the ACA
• Jeffrey Burgan: Behind the scenes with Google Fiber: Working with content providers to minimize buffering

And:

Matthew Yglesias: Facebook product director furious at Facebook’s effect on news: "Mike Hudak — who, importantly, is Director of Product at Facebook...

...has a little rant about the state of the media and his view that we at http://vox.com have failed to cure what ails it:

And we come to Ezra Klein. The great Ezra Klein of Wapo and msnbc. The man who, while a partisan, does not try to keep his own set of facts.... They write stupid stories about how you should wash your jeans instead of freezing them. To be fair their top headline right now is "How a bill made it through the worst Congress ever." Which is better than "you can't clean your jeans by freezing them."... It's hard to tell who's to blame. But someone should fix this shit.

Here's where I disagree--it is not hard to tell who is to blame for the fact that the jeans story (which is a great, interesting, informative story) got more readers than Andrew Prokop's excellent feature on the DATA Act. Facebook is to blame.... The jeans story has been shared 1,062 times on Facebook while the DATA Act story has been shared just 242 times. That's why the jeans story has been read by more people. We featured the DATA Act story much more prominently on our home page, but these days the bulk of web traffic is driven by social media and the bulk of social traffic is driven by Facebook.... Traffic on the internet right now is all about Facebook sharing behavior.... On Twitter if you share something, your followers see it. On Facebook, what is seen is driven by algorithm that Facebook controls--if they wanted to promote more hard news they could do it....

The Facebook Gods smiled upon my sharing of 'Buzzfeed's founder used to write Marxist theory and it explains Buzzfeed perfectly' and I hope the Gods will be as friendly to my share of Max Fisher's brilliant 4,000 word explanation of the endless political crisis in Thailand. But, frankly, my experience as a veteran professional in this field is that the Facebook Gods will not smile on Max's Thailand piece.... If Facebook executives don't like a world in which those are the kind of stories people read, they should do something about it...

Erik Loomis: Histories of the Gilded Age, Written by Hacks of the New Gilded Age: "National Review troll Amity Shlaes...

...in lamely attempting to write the “humanitarian case” for repealing the minimum wage, writes her own history of the Gilded Age.... 'Employers and employees believed that their relationship, the two-party one, was key. Outsiders... were intruders.... The two-party dynamic often succeeded. Because the employee-employer pair set their terms together, they trusted each other.... Andrew Carnegie and Henry Frick... shot at the workers.... What is mostly forgotten is that the workers also shot at the detectives. What is entirely forgotten is that Carnegie and Frick did much for workers, precisely because they felt responsible.... In 1905, the Supreme Court supported this old view when it held that New York State might not regulate the hours worked at a bakery because doing so interfered with the sanctity of the contract between worker and employer.'... Equality of contract between the billionaire employer and unemployed worker, now that’s bringing the first Gilded Age into the second Gilded Age! It’s also amazing how workers’ desires for a minimum wage are never taken into consideration...

Oh wow!

David: Ben Carson Defends Obamacare Remarks: 'In A Way, Anything Is Slavery That Robs You': Conservative darling Dr. Ben Carson on Sunday defended...

...comparing President Barack Obama's health care law to slavery by insisting that "anything is slavery that robs your of your ability to control your own life."

Mark Thoma sends us to Larry Summers at Michael Tomasky's Democracy Journal:

Lawrence H. Summers: The Inequality Puzzle: "Piketty’s treatment of inequality is perfectly matched to its moment....

His work richly deserves all the attention.... Painstaking empirical research... transformed political discourse... a Nobel Prize-worthy contribution... elegant framework for making sense of a complex reality... theorizing is bold and simple and hugely important if correct.... Piketty makes a major contribution by putting forth a theory of natural economic evolution under capitalism....

Books that represent the last word on a topic are important. Books that represent one of the first words are even more important. By focusing attention on what has happened to a fortunate few among us, and by opening up for debate issues around the long-run functioning of our market system, Capital in the Twenty-First Century has made a profoundly important contribution.

Yes, Thomas Piketty and Emmanuel Saez are now a lock on a Nobel Prize someday for their extraordinarily impressive empirical work on inequality...

Over at the WCEG Equitablog:

Mr. Piketty and the "Neoclassicists": A Suggested Interpretation

J. Bradford DeLong

U.C. Berkeley and NBER :: [email protected] :: http://equitablegrowth.org/blog/ :: @delong :: http://delong.typepad.com/

May 2014

Slides: https://www.icloud.com/iw/#keynote/BAJs-2mixMk5lB4hKcKBifsco49lBMrormKF/20140520_Mr._Piketty_and_the_%22Neoclassicists%22--A_Suggested_Interpretation.key

I. Introduction

The reference of course, is to Hicks (1937): “Mr Keynes and the ‘Classics’: A Suggested Interpretation”. An important, sprawling book of economic analysis. A complex and nonobvious relationship to a previous economics literature. Large political economy and policy stakes at hazard. Is this John Maynard Keynes's General Theory of Employment, Interest, and Money? Or is this Thomas Piketty’s Capital in the Twenty-First Century? READ MOAR

Heather Boushey: It Wasn't Household Debt That Caused the Great Recession: "Given the troubling rise in economic inequality over the past four decades, this research could not be more timely....

Mian and Sufi are part of a new generation of economists who examine detailed microeconomic data and analysis to understand the macroeconomy, giving us a deeper understanding of how inequality affects economic growth and stability.... Mian and Sufi’s research shows that the marginal propensity to consume... depends not just on the value of the asset but also the debt burden.... Mian and Sufi provide a definite 'yes' to the question of whether we could have prevented the Great Recession.... Policymakers could have seriously mitigated the damage, pointing out that debt forgiveness would have been much more effective that the policies implemented because it would have targeted households with the largest marginal propensity to consume. This is a failure on a massive scale, and more economists need to follow the lead of Mian and Sufi and look deep into the data to understand what we got wrong. Mian and Sufi’s argument hinges on the conclusion that it was the supply of credit that drove the bubble and the heightened debt burdens... people were just acting irrationally—given that the massive increase in borrows during the credit boom was among borrowers with declining incomes.... As families sought to cope with the slow-job growth economy in the 2000s and a labor market that still does not provide the kinds of supports and protections working parents need, many turned to increasingly-readily-available credit as a way to cope.... The story that emerged in the early days of the Great Recession was that too many people borrowed too much to afford fancy houses. That’s not what Mian and Sufi’s data show.... Subsequent reforms to our financial system give policymakers more tools to police housing finance, yet the continuing over-reliance on debt and a lack of good jobs leaves families at risk and exposes our economy to the whipsaw of another debt-fueled credit bubble...

Should-Reads:

1. Tim Duy: Dudley Revisits Exit Strategy: "William Dudley gave what was both an interesting and depressing speech.  Interesting in that he provides some new thoughts on the exit strategy. Depressing in that he outlines a case for persistently low interest rates. One wonders why, given such an outlook, the Fed is so firmly focused on the exit strategy to begin with, rather than accelerating the pace of the recovery.... Three percent growth is not exactly anything to write home about; the only thing exciting about 3 percent is that we just can't seem to get there.... Trend productivity growth of just 1 to 1.5 percent is very, very low and feeds into the Fed's belief that potential growth is in the 2.2 to 2.3 percent range.... Dudley anticipates that the tapering process will continue, and thus turns his attention to the lift-off from the zero bound. Here he admits the reality of the situation. They really have no idea when the first rate increase will occur.... He too expects rates will be subdued over the longer term.... Dudley is saying that the Fed can reduce accommodation via raising rates or reducing the balance sheet, and  they should should begin with the former to normalize policy. This reveals his confidence in being able to manage the balance sheet while raising rates.... Dudley reinforces expectations that the low rate environment will persist long into the future. The data flow is not providing reason to think otherwise at this point.... It remains interesting that the Fed does not view their own outlook as reason to accelerate the pace of activity. They seem relatively content to accept what they themselves acknowledge is an ongoing disappointment..."

2. Jesse Eisinger: The Buck Stops With Obama on Tepid Financial Reform: "These were Mr. Geithner's failures, but they were more deeply Mr. Obama's. The flaws we thought we were seeing during Mr. Geithner's tenure turn out to have replicated themselves in other Obama departments. And they have persisted after Mr. Geithner left. Why, it's almost as if the Treasury secretary wasn't the one making decisions and setting the tone after all.... Eric H. Holder Jr.... Mary L. Schapiro... oversaw the inadequate enforcement response to the crisis.... Ben S. Bernanke... didn't push for more aggressive regulatory and financial reform. Mr. Geithner didn't run those shops. And Geithner-like characters keep popping up, while appointees who are unlike the president get ousted. At the Federal Deposit Insurance Corporation, the outspoken Sheila Bair was replaced with the low-profile Martin J. Gruenberg. Gary S. Gensler... didn't get nominated to a second term. In his place, we got a Treasury official whose cipher of a record was almost treated as a virtue by the Obama administration.... Mary Jo White, has been disappointing on regulatory questions.... Reform health care? Take the right-of-center Heritage plan, hopeful of bipartisan support that never materializes. Reform the financial markets? Don't do anything that someone could deride as simplistic and unsophisticated.... The biggest disappointments were failing to be more aggressive on housing policy and failing to hold wrongdoers accountable in the aftermath of the crisis. But the Obama administration's failure on financial regulatory reform may be the most emblematic of the president's halting leadership qualities.... Give credit to Mr. Geithner: He was consistent in his hostility to significant action. In his book, Mr. Geithner reveals that he undercut the support of the British prime minister, Gordon Brown, for a financial transaction tax, knowing that such a global tax, which is backed by respected economists and is politically popular, had 'no chance without our support'. Even today, he doesn't believe we can--or should--solve 'too big to fail', calling it a 'Moby-Dick' policy. But if he ever steered a path too middling for Mr. Obama, the president never made it clear.... President Obama could consider financial regulatory reform a signature achievement and work to consolidate it. But he doesn't appear to. It's not surprising his appointees don't either..."

3. Nick Rowe: How long is the short run?: "The answer we normally give... is: 'It depends on price stickiness; if prices are very flexible it will be short, and if prices are very sticky it will be long'. A better answer would be: 'It depends on monetary policy; if monetary policy is very good it will be short, and if monetary policy is very bad it will last forever'.... In the AD-AS framework. Put the price level (P) on the vertical axis, and real output (Y) on the horizontal axis. Draw a downward-sloping AD curve, a vertical LRAS curve, and an upward-sloping (or horizontal) SRAS curve.... A shock shifts the AD curve to the left... there is a recession. But eventually, prices (including wages) adjust, the SRAS curve slowly shifts down/right, and the economy eventually returns to (a new) long run equilibrium at point C. And the time it takes for prices to adjust determines how long it takes for the economy to get to point C. We then say it might be better for the central bank to respond to the shock by loosening monetary policy and shifting the AD curve back to the original red curve, so the economy returns to long run equilibrium at point A more quickly.... We then talk about lags in monetary policy, and compare the speed of the central bank's response to the speed of price adjustment. And we discuss the difficulties the central bank may face in identifying shocks and responding appropriately, and discuss rules vs discretion, etc. It all makes for a nice little essay question.... But it does set up a false dichotomy between using the discretionary actions of the central bank vs relying on the 'natural' self-equilibrating properties of the economy.... If the central bank 'did nothing'... how long would it take for the economy to... return to long run equilibrium? That depends on what we mean by 'doing nothing'. And it could mean almost anything.... It makes no sense to say that the length of the short run depends on the degree of price stickiness, without mentioning monetary policy..."

4. Ezra Klein: The simple reason Republicans don’t have an answer on the minimum wage: "Ramesh Ponnuru... thinks there are better policies Republicans could propose that would help the same people... expanding the Earned Income Tax Credit.... There's only one problem: Republicans oppose expanding the Earned Income Tax Credit. In fact, they're trying to cut it. The most recent Republican budget lets a stimulus-era boost in the EITC to expire and, on top of that, includes huge cuts to the part of the budget... that houses the EITC. Meanwhile, President Obama and the Democrats do have a position on the EITC. They want to increase it, just like Ponnuru suggests. But they have not found Republican partners.... Ponnuru obviously doesn't answer for the Republican Party. But... his column [is] a bit odd. At no point does he mention that pretty much the entirety of the Republican Party is on record, within the last few months, voting to cut the EITC and refusing to join Democrats in their effort to expand it. Of late, the Republican Party is trying to figure out how to show they care more about people in and near poverty. That's led to a lot of good ideas about policies Republicans could support if they want to help people in or near poverty. In particular, it's led to a lot of praise for the EITC. The problem is that the Ryan budget has put almost all Republicans on record cutting spending on those policies. This has placed Republicans and their allies in a really difficult position. That includes [Paul] Ryan himself, who recently told Buzzfeed's McKay Coppins that he shouldn't have to answer for the budget he's written: 'I've got two roles', he says. 'I'm chairman of the House Budget Committee representing my conference... and I'm a House member representing Wisconsin doing my own thing. I can't speak for everybody and put my stuff in their budget. My work on poverty is a separate thing'.... Republican reformers... write or talk as if the problem is that the Republican Party has somehow just missed all these great programs that would show the American people they really care about the poor. But the GOP's problem is harder... they're on record trying to cut almost all those programs, and the main cutter is also the guy who's trying to present himself as the GOP's new face on poverty."

Should Be Aware of:

• John Aziz: Could a robot do my job?
• Adam J. Levitin: The Politics of Financial Regulation and the Regulation of Financial Politics: A Review Essay
• Jared Bernstein: Talking Manufacturing and Its Wage Premium
• Ashok Rao: Declining Consumption and Secular Stagnation
• James Kwak: Incentives and Ideology: Financial regulation is constrained by politics as well as bureaucracy

And:

Over at Equitable Growth--The Equitablog

• Evening Must-Read: William Dudley: What Kinds of Jobs Have Been Created During the Recovery?
• Afternoon Must-Read: Ezra Klein: Does David Brooks Know That Simpson-Bowles Failed?

Plus:

• Things to Read at Nighttime on May 21, 2014

And:

• Thursday Idiocy on Wednesday: Ezra Klein Does the Intellectual Trash Pickup: Afternoon Must-Read: Ezra Klein: Does David Brooks Know That Simpson-Bowles Failed? (Brad DeLong's Grasping Reality...)

Mark Thoma sends us to William Dudley: What Kinds of Jobs Have Been Created During the Recovery?: "A feature of the Great Recession...

...and indeed the prior two recessions, is that the middle-skill jobs that were lost don’t all come back during the recoveries that follow. Instead, job opportunities have tended to shift toward higher- and lower-skilled workers.... While there’s been a good number of both higher-skill and lower-skill jobs created in the region during the recovery, opportunities for middle-skilled workers have continued to shrink.... There have been significant and long-lasting changes to the nature of work... many middle-skilled workers displaced during the recession are likely to find that their old jobs will never come back... and workers are increasingly facing higher skill requirements in order to land a good job.... One thing is clear: workers will need more education, training and skills...

• Thursday Idiocy: Friedrich von Hayek Does Not Like Them "Levantines" - Loyal to the Group of Seventeen
• No. The American Enterprise Institute Has No Idea What America's Middle Class Is. Why Do You Ask? - Loyal to the Group of Seventeen

And we haven't even gotten to Michael Kinsley!

Plus:

Ezra Klein: Does David Brooks know that Simpson-Bowles failed?: "In a mighty odd column...

David Brooks pens a paean to technocratic autocracies like Singapore and suggests that the US needs to "make democracy dynamic again" if it's going to keep up. How will it make democracy dynamic again? Glad you asked:

The quickest way around all this is to use elite Simpson-Bowles-type commissions to push populist reforms. The process of change would be unapologetically elitist. Gather small groups of the great and the good together to hammer out bipartisan reforms--on immigration, entitlement reform, a social mobility agenda, etc.--and then rally establishment opinion to browbeat the plans through.

Of course, there already was a Simpson-Bowles-type commission that overwhelmingly rallied establishment opinion to its side. It was called the Simpson-Bowles commission. And it failed. So did its descendants like the Senate's Gang of Six and the Supercommittee. Whatever you think of the Simpson-Bowles plan, the outcome proved that these kinds of elite committees aren't able to browbeat their plans through Congress. The outcome of Simpson-Bowles is a big part of the reason some in Washington have begun envying the decisiveness of East Asian autocracies, not a model for how the US can mimic their decisiveness...

Over at Equitable Growth--The Equitablog

• Morning Must-Read: Ezra Klein: The Green Lantern Theory of the Presidency, Explained
• Federal Reserve Nominal GDP Growth Undershoot Episode VII: The Undershooting...: Wednesday Focus: May 21, 2014
• The Obama Stagnation: What Went Wrong? Yet Again!: Tuesday Focus: May 20, 2014
• Morning Must-Read: Paul Krugman: That 80s Show

Plus:

• Things to Read on the Morning of May 21, 2014

And:

Should-Reads:

1. Mark Thoma: 4 Reasons the Fed Should Not Raise Interest Rates: "No rule... can anticipate all contingencies, and when the economy is experiencing conditions a rule could not have foreseen... deviations from the rule are necessary.... Any benefit from the reduction in uncertainty would be small and would not compensate for the negative effect that higher interest rates would have.... Some have argued that we need to raise interest rates to help savers. But when the economy is experiencing a severe recession, the demand for investment is low, so low that even at zero interest rates there can be an excess of saving over investment... [and good policy] reduce[s] saving and increase[s] investment until equilibrium is restored.... There have been many calls to raise interest rates to reduce the risk of inflation, but there is no sign whatsoever of problematic inflation anywhere on the horizon. End of story.... Some economists have argued that when policymakers hold the nominal interest rate at the zero bound, it is deflationary.... Even if this does work in the long-run, in the short-run it would be a disaster..."

2. Eric Michael Johnson: On the Origin of White Power: "A Troublesome Inheritance has been roundly criticized by scientists and journalists alike. Biologists such as H. Allen Orr and Jerry Coyne.... Statistician and political scientist Andrew Gelman... anthropologist Agustin Fuentes observed, 'Wade ignores the majority of data and conclusions from anthropology, population genetics, human biology and evolutionary biology'. Even Wade’s former newspaper, the New York Times, carried a review panning the book. Unfortunately, readers lacking a background in science or journalism may not so easily spot Wade’s many errors. This could lead to even more troublesome issues given the excitement the book has generated among those predisposed to accept its conclusions. 'Wade says in this book many of the things I’ve been saying for the last 40 years of my life', said David Duke, the white nationalist politician and former Grand Wizard of the Knights of the Ku Klux Klan, on his radio program..."

3. Lloyd Grove: New York Times publisher Arthur Ochs Sulzberger Jr. has just suffered a miserable week nursing a PR black eye after his May 14 firing of executive editor Jill Abramson.... Things seemed to deteriorate as the week unfolded, culminating in... Sulzberger’s ill-advised decision to sit down on Sunday with Vanity Fair for his first press interview since Abramson’s sacking.... Sulzberger’s VF interview... was very off-message.... He elaborated on Abramson’s alleged flaws as a manager, blamed her for the unseemly public manner of her defenestration, defended himself against charges of sexism regarding Abramson’s compensation, expressed implied regret that back in 2011, he had chosen Abramson over Dean Baquet (who has the job now), and resisted taking responsibility for his own errors in judgment.... Abramson, reached by The Daily Beast, declined to comment... she has displayed the sort of restraint that has so far eluded Sulzberger.... Auletta’s stories have provoked Sulzberger, who initially vowed not to discuss Abramson’s dismissal further, to write several stunning staff memos concerning her compensation and alleged managerial failings. His VF interview 'was a disaster', said a prominent public relations executive who, not wishing to alienate the publisher/chairman of The New York Times Co., spoke on condition of anonymity. 'I can’t understand what possessed him to sit down with her'—a reference to the magazine’s ace media correspondent, Sarah Ellison. 'My sympathy for him arises from the fact that her contempt for him was so palpable… I suspect most readers will take the piece at face value and come away persuaded that Abramson was unfairly ditched by a sexist, privileged dilettante who doesn’t know what he’s doing.'... Ellison told The Daily Beast: 'I’ll let the piece speak for itself'. Eileen Murphy, the Times Co.’s vice president of corporate communications, likewise declined to address the interview..."

Should Be Aware of:

• Dylan Matthews: The case for raising chickens in virtual reality
• Matthew Yglesias: The plot to use Fannie Mae and Freddie Mac to steal billions from the taxpayer
• Charles Cao et al: Hedge fund holdings and stock market efficiency
• Arthur Okun (1975): Equality and Efficiency: The Big Tradeoff
• Tim Geithner (2004): Change and Challenges Facing the U.S. Financial System
• Anat Admati and Martin Hellwig: If Not Now, When?: Financial Reform Must Not Await Another Crisis
• Arindrajit Dube, T. William Lester, and Michael Reich (2013): Minimum Wage Shocks, Employment Flows and Labor Market Frictions
• Andrej Svorencik: Towards a Prosopography of the MIT Economics Department
• Rachel Feltman: The complete guide to fighting jet lag
• Teaching economics as if the last three decades had happened
• Bryce Covert: No, Taking Away Unemployment Benefits Doesn't Make People Get Jobs
• Joe Romm: Biggest Loser: Thawing Greenland Competes with Collapsing Antarctic for Fastest Ice Loss

And:

Ezra Klein: The Green Lantern Theory of the Presidency, explained: "Presidents consistently overpromise and underdeliver....

Obama... didn't just promise health-care reform, a stimulus bill, and financial regulation. It also promised a cap-and-trade bill to limit carbon emissions, comprehensive immigration reform, gun control, and much more. His presidency, he said, would be change American could believe in. But it's clear now that much of the change he promised isn't going to happen--in large part because he doesn't have the power to make it happen. You would think voters in general and professional media pundits in particular would, by now, be wise to this pattern. But they're not.... The criticism is always the same: why can't the president be more like the Green Lantern?... The Green Lantern Theory of the Presidency is "the belief that the president can achieve any political or policy objective if only he tries hard enough or uses the right tactics."... The Reagan version, he says, holds that "if you only communicate well enough the public will rally to your side." The LBJ version says that "if the president only tried harder to win over congress they would vote through his legislative agenda." In both cases, Nyhan argues, "we've been sold a false bill of goods."...

The Green Lantern Theory of the Presidency... denies the very real (and very important) limits on the power of the American presidency, as well as reduces Congress to a coquettish collection of passive actors who are mostly just playing hard to get.... The Green Lantern Theory isn't just false. It's often backwards. The basic idea is that more aggressive and consistent applications of presidential power will break down opposition. But political science research shows the truth is often just the opposite.... Elections are zero-sum affairs. The more the American people perceive the president as successful the less likely they are to vote for the opposition in the next election.... The Green Lantern Theory also infantilizes Congress.... This kind of thing both lets Congress off the hook and confuses Americans about where the power actually lies in American politics--and thus about who to hold accountable....

Why do so many people believe in the Green Lantern Theory of the Presidency?... Even as the US executive is structurally weak he's perceptually strong... dominates culture.... Both in fiction and in reporting American politics is a drama that is told through the character of the president.... Obama can do a good or bad job within the actual limits of the presidency. The problem with the Green Lantern Theory is that it focuses so much attention on the presidency that it lets everyone else off the hook--and thus makes it harder for voters to hold elected leaders accountable.... The executive branch is a big and powerful that manages programs of enormous consequence to Americans--and it's often run quite poorly. That's something the president really should answer for. But political reporting in America tends to focus more on new laws that are being pushed through congress than on... implementation...

The most wonderful thing about the Potomac Palisades neighborhood of Washington DC is the 5:40 AM alarm. Benjamin Franklin would be proud!