Grasping Reality on TypePad, by Brad DeLong

Karl Polanyi's The Great Transformation is certainly the right place to start in thinking about "neoliberalism" and its global spread. But you are right to notice and do need to keep thinking that Polanyi is talking about pre-World War II classical liberalism, and that modern post-1980 neoliberalism is somewhat different.

First, as I, at least, see it, there are three strands of thought that together make up the current of ideas and policies that people call "neoliberalism":

The Serbian Response to the Austro-Hungarian Ultimatum:

The Royal Government has received the communication of the Imperial and Royal Government of the 23rd inst. and is convinced that its reply will dissipate any misunderstanding which threatens to destroy the friendly and neighbourly relations between the Austrian monarchy and the kingdom of Serbia.

Casey Schoeneberger: Washington Center for Equitable Growth Announces Inaugural Class of Grantees: "Equitable Growth will award $481,000 to 15 grantees...

...with additional funding for two of those grantees provided by the Russell Sage Foundation.... “Motivating academic economists to investigate whether and how structural changes in the U.S. economy, particularly those related to the distribution of wealth and the provision of opportunity, affect economic growth is exceedingly important,” says Heather Boushey, executive director and chief economist at Equitable Growth.... Philip Cohen... economic inequality [and] women’s employment patterns.... Ariel Kalil... inequality... parenting and the acquisition of skills.... Jesse Rothstein... school finance reforms [and] educational equity.... Michael Barr... how families manage different kinds of debt.... Will Dobbie... the impact of debt forgiveness on economic stability and recoveries.... Timothy Smeeding... how inequality in the distribution of income and wealth affect consumption... David Howell... cross-country trends in “good jobs”... William Lester... how regional variations in labor market regulation influence business decisions.... Joan Williams... workplace scheduling practices conflict with family care-giving needs.... Young scholar grantees... Pascal Noel... Shayak Sarkar and Ryan Sakoda... Stefanie Stancheva... Vanessa Williamson at Harvard... Danny Yagan... Owen Zidar...

As we often say around here, since the days of Lyndon Johnson's Great Society discussions of equitable growth here in the United States have revolved around Arthur Okun's metaphor of the "leaky bucket": the market produces unequal distribution of income, and the government has a bucket that it can use to redistribute income from rich to poor, but the bucket leaks and so more is taken from the rich and is received by the poor. The efficiency-equity trade-off. Policies that would move toward more equity would also move toward slower economic growth.

But the question of whether our Bergson-Samuelson social welfare function has a higher value with a smaller pie more equally divided or a bigger pie with some slices much larger than others is only one of the ways that the question can be conceptualized.

A second way is to deny that the size of the pie has relevance because those who get the big slices are not "us" but "them". That was how David Lloyd-George did his political economy and politics in Wales and in London's East End back in 1909. To quote from George Dangerfield's great The Strange Death of Liberal England:

Lloyd George... one July evening in 1909... went down to Limehouse... a packed and partisan audience of East End cockneys.... England has scarcely known a greater demagogue than this pre-war Lloyd-George.... Without the magic of face and voice to support them, his speeches are not likely to survive; and one can only imagine the effect of this, the most famous passage in that famous Limehouse speech:

I was telling you I went down a coal-mine the other day. We sank into a pit half a mile deep. We then walked underneath the mountain, and we did about three quarters of a mile with rock and shale above us. The earth seemed to be straining--around us and above us--to crush us in. You could see the pit props bent and twisted and sundered until you saw their fibers split in resisting the pressure. Sometimes they give way and then there is mutilation and death. Often a spark ignites, the whole pit is deluged in fire, and the breath of life is scorched out of hundreds of breasts by the consuming flame. In the very next colliery to the one I descended, just a few years ago three hundred people lost their lives that way.

And yet when the Prime Minister and I knock at the door of these great landlords and say to them—-’Here, you know these poor fellows who have been digging up royalties at the risk of their lives, some of them are old, they have survived the perils of their trade, they are broken, they can earn no more. Won’t you give them something [Page 23] towards keeping them out of the workhouse?’—-they scowl at us and we say—’Only a ha’penny, just a copper.’ They say, ‘You thieves!’ And they turn their dogs on to us, and you can hear their bark every morning....

Lloyd George was having the time of his life. He kept his audience howling with alternate rage and laughter; moment by moment, sentence by sentence, he assaulted the landlords, and outraged the gentry, and invited the dispossessed, and cozened the dissatisfied; he shouted and implored and wheedled and mimicked. It was a great performance.

And yet this spirited voice was not quite the voice of revolution--though thus it sounded in the anxious imagination of the Conservative press.... It was also Liberalism’s extravagant last will and testament. All it really said was this--that the rich, who are beginning to get too much in their own hands, have got to pay... his revolutionary language [was] nothing more than the language of super-taxes and old age pensions.

But in the meantime, the speech had done its work. If their lordships had been violent about the Budget before, they were twice as violent now. Mr. Lloyd-George redoubled his efforts... and up and down the country certain noblemen emerged from the rustic obscurity to which history had consigned them and began to trade public insults with their persecutor...

My favorite passage from the Limehouse speech is different. Mine is Lloyd-George's claim that:

a fully-equipped duke cost[s] as much to keep up as two [naval] dreadnought [battleships]... [but is] much less easy to scrap...

Lloyd-George lived in a mental universe in which the dukes had their ownership of broad acres and their claims on GDP not because they did anything useful and entrepreneurial but rather because their very distant ancestor had laid Anglo-Saxon England waste in 1066 with King William the Bastard, or their distant ancestor had slept with King Charles II Stuart, or their not-so-distant ancestor had bribed enough members of Parliament to get an Enclosure Bill.

That was class war!

Or was it?

As Dangerfield points out, while the Tory squires and the titled members of the House of Lords in 1909 heard David Lloyd-George and thought "REVOLUTION!!", the policies of the so-called People's Budget of 1909 involved less income-tax progressivity ("supertaxes") and less social insurance ("old age pensions") than even the old Paul Ryan budget. And now that Paul Ryan has begun talking about how he wants to expand the EITC and the Ryan budget wasn't his budget but rather the House Republican Conference's budget, David Lloyd-George appears very far to his right indeed in everything but rhetoric.

I think that we here at Equitable Growth want to conceptualize the issues in yet a third way. If Arthur Okun was right, and if the bucket is indeed leaky, then the sharp reduction in the progressivity of the income tax and the reduction in union power to extract quasi-rents should both have given a significant boost to economic growth since 1980 or so. Yet that has not been the case. Is it the other factors reduced the underlying growth rate, and that Reaganomics actually did considerable good for growth but its effects have been masked? Is it that our Second Gilded Age is not gilded enough, and that growth will accelerate if we make just one more push to further widen the income distribution? Or is it that the leaky budget paradigm is wrong, and that there are at least as many channels by which greater inequality erodes investments, especially investments in human capital, and slows growth as channels by which it boosts growth?

We would really like to know which of these three is true. For unless we know, it will be hard to have an even semi-rational policy debate even were we to find a critical mass of people who wanted to have one.

So: in this round, half a million dollars out to some very smart and energetic people looking for answers to pieces of this big question. I am very interested to see and very hopeful about what the recipients will come up with.

Over at Equitable Growth--The Equitablog

• Nick Bunker: The very real success of the Earned Income Tax Credit | Washington Center for Equitable Growth
• Casey Schoeneberger: Washington Center for Equitable Growth Announces Inaugural Class of Grantees | Washington Center for Equitable Growth
• Lunchtime Must-Read: Ezra Klein: Paul Ryan's Poverty Plan | Washington Center for Equitable Growth
• Morning Must-Read: Brian Buetler: The Adler-Cannon Halbig v. Burwell Argument Is a Fraud—Just Ask Scott Brown | Washington Center for Equitable Growth
• Morning Must-Read: Guido Matias Cortes et al.: The Micro and Macro of Disappearing Routine Jobs: A Flows Approach | Washington Center for Equitable Growth
• Morning Must-Read: James Pethokoukis: The Weird Obsession That's Ruining the GOP | Washington Center for Equitable Growth
• Nighttime Must-Read: Eric Chemi and Ariana Giorgi: For CEOs, Correlation Between Pay and Stock Performance Is Pretty Random | Washington Center for Equitable Growth
• Additional Dimensions of Inequality: Wednesday Focus for July 23, 2014 | Washington Center for Equitable Growth

Plus:

• Things to Read at Night on July 24, 2014 | Washington Center for Equitable Growth

Should-Reads:

1. Aida Caldera Sánchez et al.: Improving Well-Being in the United States: "Life is quite good in the United States compared to other OECD countries, thanks to strong economic growth and technological progress having lifted average income to high levels. Nonetheless, there is evidence that the benefits from growth have not been sufficiently broad based. Self-reported happiness increases with income, an issue particularly resonant in a country with among the highest levels of income inequality in the OECD and a pattern of inequality that appears to be moving toward even more concentration at the very top at the expense of the middle class and the poor. Working hours that remain among the longest in the OECD are also creating challenges for work-life balances, child education, personal care and leisure. These pressures are contributing to higher job strain and work-related stress with unhealthy consequences, including for mental health, and a detrimental impact on employability and medical costs. While these trends cannot be easily reversed, a number of policy options are being usefully rolled out and other initiatives are being considered: federal-level policies improving access to health care and early-childhood education, state-level initiatives favouring workplace flexibility, firm-level investments in job quality and greater attention to the health consequences of job-stress. If successfully adopted, they would go a long way toward improving the well-being of American working families..."

2. Cory Doctorow: When all the jobs belong to robots, do we still need jobs?: "Where Tufekci's analysis falls short is in her willingness to think outside the market box. She implies that the solution to this all is some kind of market reform, but doesn't suggest that, perhaps, markets can't efficiently organize abundant things--only scarce things. If we persist in the view that the dividends from robots' increased productivity should accrue to robot owners, we'll definitely come to a future where there aren't enough owners of robots to buy all the things that robots make.... There's a real scarcity of economists willing to think about the possibility that abundance makes markets obsolete altogether. Property rights may be a way of allocating resources when there aren't enough of them to go around, but when automation replaces labor altogether and there's lots of everything, do we still need it?..."

3. James Heckman (2010): I could tell you a story about... Milton Friedman. In the nineteen-seventies, we were sitting in the Ph.D. oral examination.... After he’d left, Friedman turned to me and said, 'Look, I think it is a good idea, but these guys have taken it way too far.' It became a kind of tautology that had enormously powerful policy implications, in theory. But the fact is, it didn’t have any empirical content. When Tom Sargent, Lard Hansen, and others tried to test it using cross equation restrictions, and so on, the data rejected the theories. There were a certain section of people that really got carried away. It became quite stifling.... The further down the food chain you go, the more the zealots take over.... We knew Keynesian theory was still alive in the banks and on Wall Street. Economists in those areas relied on Keynesian models to make short-run forecasts. It seemed strange to me that they would continue to do this if it had been theoretically proven that these models didn’t work.... The underlying ideas of the Chicago School are still very powerful. The basis of the rocket is still intact. It is what I see as the booster stage--the rational-expectation hypothesis and the vulgar versions of the efficient-markets hypothesis--that have run into trouble.... People got too far away from... confronting ideas with data.... When Friedman died... we had a symposium.... Lucas was talking about rational expectations.... One woman... said, 'Look at the evidence on 401k plans and how people misuse them, or don’t use them. Are you really saying that people look ahead and plan ahead rationally?' And Lucas said, 'Yes, that’s what the theory of rational expectations says, and that’s part of Friedman’s legacy.' I said, 'No, it isn’t. He was much more empirically minded than that'..." Via Lars Syll

4. Jesse Rothstein: Is the EITC as Good as an NIT? Conditional Cash Transfers and Tax Incidence: "The EITC is intended to encourage work. But EITC-induced increases in labor supply may drive wages down. I simulate the economic incidence of the EITC. In each scenario that I consider, a large portion of low-income single mothers’ EITC payments is captured by employers through reduced wages. Workers who are EITC ineligible also see wage declines. By contrast, a traditional Negative Income Tax (NIT) discourages work, and so induces large transfers from employers to their workers. With my preferred parameters, $1 in EITC spending increases after-tax incomes by $0.73, while $1 spent on the NIT yields $1.39..." Via Owen Zidar

And:

• Claire Cain Miller: How Technology, Aided by Recession, Is Transforming the Work World
• Margot Sanger-Katz: Two Americas on Health Care, and Danger of Further Division

And Over Here:

Ezra Klein: Paul Ryan's Poverty Plan: "P The most important idea in Paul Ryan's poverty plan...

...reverses the most important idea in Paul Ryan's budgets. Those budgets... [made] deep cuts to spending on programs for the poor the cornerstone of Republican fiscal policy... cut spending on the programs that fight poverty. Ryan's poverty plan is... a sharp break with his budgets... an attempt to change the Republican Party's view--a view driven, in large part, by Paul Ryan and his budgets--of what to do with programs for the poor....

This was a bit like hearing the Kool-Aid Man say that he only ever drank Kool-Aid for the money, and in truth, he thinks kids should drink more tap water, instead. But... this is a return to Ryan's roots. Though he's made his name as the GOP's chief crusader against deficits... Ryan's actual record... included a series of votes that massively increased the deficit... to wrench policy... conservative... George W. Bush's tax cuts... the war in Iraq... the unfunded Medicare Prescription Drug Benefit. Prior to Barack Obama's presidency, Ryan was best known for the Social Security Personal Savings Guarantee and Prosperity Act... $2.4 trillion in additional costs over the first 10 years... [that] the Bush administration ultimately dismissed... as 'irresponsible'...

A correspondent writes, apropos of http://fivethirtyeight.com:

Nate Silver's extraordinary and unique excellence is to take a look at a complicated but relatively unsophisticated spreadsheet model of a situation and then, every day, telling an excellent narrative story about a piece of the model. That is the way that http://fivethirtyeight.com could be a huge success. But he seems to be following a different strategy. The stories are more:

Here is some data, here is how we built it, here is the chart, here is an interesting fact about the chart...

That is unlikely to get Nate to where he wants to be, and should be...

I think this is insightful. If I were Nate Silver, therefore, I would focus on building a relatively small number of quantitative models of complicated situations, and then turn my energy to successfully telling a series of narrative stories about each of them...

Richard Atkinson: The Guns at Last Light:

Operation COBRA, that biggest thing, was Bradley’s plan, although not his plan alone. Montgomery for one had encouraged a sledgehammer blow on a narrower front than the Americans commonly preferred; this was sound advice, deftly delivered. “Take all the time you need, Brad,” the British commander had urged, pressing two slender fingers together against a map. “If I were you, I think I should concentrate my forces a little more.” Joe Collins, whose VII Corps would serve as the point of the spear, had chosen the precise spot to attack: a bocage copse just west of St.-Lô, on the old Roman road to Périers. Fifteen U.S. divisions—six in Collins’s corps alone—would blow through the battlefront to eventually reach Avranches, thirty miles south, opening the route to Brittany and the vital Breton ports. “Pursue every advantage,” Eisenhower had urged, “with an ardor verging on recklessness.”

Scott Lemieux: "And, In Conclusion, KU's Teams Will Now Be Known As the Kansas Reagans": "Shorter Sam Brownback:

My crazy Democratic opponent thinks that raising taxes is a way to solve the disastrous fiscal meltdown caused by the tax cuts I favored. But everyone knows this solution is insufficiently Reagan because Reagan, and in addition Reagan.

Note: this “Reagan” bears no resemblance to the actual Reagan...

Brian Buetler: The Adler-Cannon Halbig v. Burwell Argument Is a Fraud--Just Ask Scott Brown: "It is now an article of faith on the right that Congress meant to condition the subsidies...

...as an inducement to states, but overestimated the power of that inducement. I suspect many of the people advancing this claim realize that it is false, and are engaged in an elaborate gaslighting campaign. Others have probably convinced themselves that they are correct.... They need both an elaborate theory of legislative intent, and judges who are happy to treat the theory as plausible, even though it makes no sense. They've now found two such judges. Maybe their argument will carry in the Supreme Court, too. Or maybe the conservative justices will just say Congressional intent doesn't matter and rule against the government anyhow. (I still tend to think that the government will prevail, assuming the case ever reaches the Supreme Court.)

But as far as... what Congress intended... there can be no debate. You can ask the people who wrote the bill. You can ask the reporters who chronicled the legislative process.... You can ask state officials, who were advised that federal Medicaid dollars were conditional upon the Medicaid expansion (as originally envisioned) but not that the subsidy dollars were conditional upon establishing an exchange.... You can ask Democratic legislators.... Or you can ask Scott Brown. When he was still a senator from Massachusetts, Brown sponsored legislation with Senator Ron Wyden of Oregon to hasten the availability of Wyden's State Innovation Waivers.... Neither the existence of the waiver program, nor the desire among members to hasten its implementation, are consistent with the idea that Congress intended to allow states to essentially waive out of these same requirements simply by doing nothing...

Guido Matias Cortes et al.: The Micro and Macro of Disappearing Routine Jobs: A Flows Approach: "The U.S. labor market has become...

...increasingly polarized since the 1980s, with the share of employment in middle-wage occupations shrinking over time. This job polarization process has been associated with the disappearance of per capita employment in occupations focused on routine tasks. We use matched individual-level data from the CPS to study labor market flows into and out of routine occupations and determine how this disappearance has played out at the 'micro' and 'macro' levels. At the macro level, we determine which changes in transition rates account for the disappearance of routine employment since the 1980s. We find that changes in three transition rate categories are of primary importance: (i) that from unemployment to employment in routine occupations, (ii) that from labor force non-participation to routine employment, and (iii) that from routine employment to non-participation. At the micro level, we study how these transition rates have changed since job polarization, and the extent to which these changes are accounted for by changes in demographic composition or changes in the behavior of individuals with particular demographic characteristics. We find that the preponderance of changes is due to the propensity of individuals to make such transitions, and relatively little due to demographics. Moreover, we find that changes in the transition propensities of the young are of primary importance in accounting for the fall in routine employment...

James Pethokoukis: The weird obsession that's ruining the GOP: "Call it doomsday prepper economics...

...For more than five years, many Republicans and conservatives have warned that catastrophe is nigh. Washington's deficit spending and the Federal Reserve's excessive money printing will lead to a financial crisis worse than the Great Recession, they prophesied. Inflation will skyrocket, the dollar will collapse, and the Chinese will dump treasuries, they swore. As Ron Paul, the libertarian former GOP congressman and presidential candidate, said back in 2009: 'More inflation is absolutely the wrong way to go. We're taking a recession and trying to turn it into a depression. We're going to see a real calamity'. Many GOP politicians have since echoed Paul's prediction. But the Next Great Inflation never happened....

The inflation alarmism driving them is taking a weird turn.... Conservative author Amity Shlaes approvingly cites ShadowStats as supporting her thesis that "inflation is higher than what the official data suggest." Others fans include conservative intellectual Niall Ferguson, Sen. Tom Coburn (R-Okla.), and a good chunk of the conservative blogosphere. ShadowStats' popularity on the right is crazy.... If GOP inflationistas had their way, the weak U.S. recovery would almost surely be even weaker. Just look at Europe.... Why this GOP inflation obsession? Maybe it's a legacy of how rapidly rising prices in the 1970s swept conservatives into power in both America and Great Britain. Maybe it's how many conservative talk radio shows are sponsored by gold companies who stand to benefit from inflation hysteria. Maybe it's a belief that every single economic metric must be a nightmare under President Obama. But whatever the reason, the GOP's preoccupation with phantom price increases is distracting it from the actual problems afflicting the U.S. economy...

Eric Chemi and Ariana Giorgi: For CEOs, Correlation Between Pay and Stock Performance Is Pretty Random: "With all the public chatter about exorbitant executive compensation and income inequality...

...it’s useful to look at the relationship between chief executive officer pay and corporate performance. Typically, when the subject of their big pay packages arises, CEOs—usually through their spokespeople—say they are paid for performance. Does data back that up?... Equilar ranked the salaries of 200 highly paid CEOs. When compared to metrics such as revenue, profitability, and stock return, the scattering of data looks pretty random.... Check the comparison of the ranking of the 200 CEOs Equilar looked at to their company’s stock returns.... If 'pay for performance' was really a factor in compensating this group of CEOs, we’d see compensation and stock performance moving in tandem.... They certainly wouldn’t look like this:

Over at Equitable Growth: Lawrence Summers: Advantages the Rich Have That Money Cannot Buy: "The primary reason for concern about inequality is that lower- and middle-income workers have too little...

...not that the rich have too much... the criterion should be... [the] impact... on the middle class and the poor.... Important aspects of inequality are unlikely to be transformed just by limited income redistribution. Consider... health and... opportunity for children. Barry Bosworth and his colleagues... [the] cohort[s]... born in 1920 and... 1940.... The richest men gained roughly six years in life expectancy... the lowest... two years... lifestyle and variations in diet and stress [rather] than the ability to afford medical care.... READ MOAR

Over at Equitable Growth--The Equitablog

• Nick Bunker: Saving our way to less wealth inequality? | Washington Center for Equitable Growth
• Evening Must-Read: Mike Konczal: Dodd-Frank Reforms Are Finally Paying Off | Washington Center for Equitable Growth
• Evening Must-Read: James Hamilton: The Changing Face of World Oil Markets | Washington Center for Equitable Growth
• Does Ms Market Reject the National Income Identities?: Afternoon Comment | Washington Center for Equitable Growth
• Afternoon Must-Read: Sarah Kliff: Halbig Says Congress Meant to Limit subsidies. Congress Disagrees | Washington Center for Equitable Growth

Plus:

• Things to Read on the Evening of July 23, 2014 | Washington Center for Equitable Growth

Should-Reads:

1. Tim Jost:Will Was the ACA Dicision Based on a Mistake?: "In a recent blog post, Cato scholar Michael Cannon admitted that he and his colleague, Case Western University professor Jonathan Adler, had made a mistake in an amicus brief they submitted to the courts in the Halbig and King cases.... This mistake... goes to the central argument that he and Jonathan have relied on.... Cannon’s error is one of a flood of misstatements that the opponents of the ACA have propagated, from 'death panels' at the outset to 'no federal exchange tax credits' now.  The real danger is the disinformation about the ACA could infect a decision in the Halbig case.... I can find no evidence in the extensive debates that accompanied the Affordable Care Act or in the relevant committee reports  that Congress modeled the ACA premium tax credit structure after the Trade Adjustment Act tax credit program.... An individual’s receipt of a Trade Adjustment Act tax credit was not dependent on a state doing anything.... The ACA is quite different from the Trade Adjustment Act in that under the ACA exchanges are in effect in every state, while there is no such system set up in the Trade Adjustment Act.... Other misunderstandings on the part of Judge Randolph abounded in the argument.... One hopes that by the time the D.C. Circuit announces a decision in this case, the judges will have reread the briefs and supporting record and have corrected any erroneous first impressions.... The courts have to get this right."

2. Michael Cannon: Erratum In The Adler-Cannon Amicus Briefs Filed In 'Halbig' & 'King': "On pages 11-12 of our Halbig brief and pages 14-16 of our King brief, we claimed the bipartisan Small Business Health Options Program Act, introduced in 2008 (S.2795) and again in 2009 (S.979) by Sen. Richard Durbin (D-IL), conditioned tax credits to small businesses on states establishing 'SHOP' Exchanges.  Those bills in fact explicitly authorize tax credits to participating employers whether a state or the federal government established the Exchange. The error was mine. I apologize to the courts and my coauthor."

3. Jonathan Cohn: Halbig and King Rulings: What They Mean for Obamacare: "According to the lawsuits, which are the brainchild of Michael Cannon from the Cato Institute and Jonathan Adler from Case Western University... Obamacare’s architects intended to use the subsidies as incentive for states to manage their own marketplaces.... As many experts (and I) have written before, the theory is inconsistent with the rest of the statute, the discussions of the law prior to passage, and what the people who wrote the statute say now. An amicus brief from the law's sponsors attests to the fact that they never intended to deny anybody subsidies just because states asked HHS to handle the work of regulating its insurance policies. Also among those who think the Cannon-Adler theory is nonsense is Liz Fowler... chief health care counsel on the Senate Finance Committee during the law's crafting probably understood congressional intent better than anybody.... That argument prevailed in two lower federal courts.... And it prevailed again on Tuesday, in the Fourth Circuit Court of Appeals, when a three-judge panel ruled unanimously that the subsides are ok. But a three-judge panel from the D.C. Circuit, also ruling on Tuesday, split along partisan lines. The two Republican appointees ruled in favor the lawsuits..."

4. Scott Lemieux: They Criticize What They Can't Understand: "To the extent that there’s an argument against reading the ACA to include subsidies on the federal exchanges, it has to be that while Congress intended the subsidies to be available on both, reading the literal language of an isolated provision it says that the subsidies are only available on state exchanges, so tough luck.  This is, to be clear, a terrible argument, but it’s the best one available.... [But] some conservatives are arguing that Congress actually intended for the federal exchanges not to include subsidies.... Ramesh Ponnuru.... 'If Obamacare had proven more popular... most states would have established exchanges. And if the law were put in place as written... the few holdouts would be under pressure to establish exchanges to get credits.... It’s wrong, then, to say that Congress obviously didn’t intend to include this restriction.' This argument is... amazing.... We also know that Congress anticipated that some states would not create their own exchanges... because the statute gave the federal government the power to create exchanges when states wouldn’t.... The actually existing Congress assumed that some states would not participate but wanted the exchanges available in all 50 states.... There’s a more fundamental problem with the arguments made.... The ACA was... written by public officials who wanted to substantially increase access to medical care. The central function of the subsidies wasn’t to create incentives for state governments; it was to ensure that the non-affluent uninsured who didn’t qualify for Medicaid could purchase insurance on the exchanges.... Conservatives trying to evaluate the goals of the ACA are like elephants trying to play a toy piano..."

5. James J. Heckman: Randomization and Social Policy Evaluation: "This paper considers the recent case for randomized social experimentation and contrasts it with older cases for social experimentation. The recent case eschews behavioral models, assumes that certain mean differences in outcomes are the parameters of interest to evaluators and assumes that randomization does not disrupt the social program being analyzed. Conditions under which program disruption effects are of no consequence are presented. Even in the absence of randomization bias, ideal experimental data cannot estimate median (other quantile) differences between treated and untreated persons without invoking supplementary statistical assumptions. The recent case for randomized experimentation does not address the choice of the appropriate stage in a multistage program at which randomization should be conducted. Evidence on randomization bias is presented..."

And:

• Andrew Odlyzko: The early British railway system, the Casson counterfactual, and the effectiveness of central planning
• Mike Konczal: Dr. Strangelove and the Halbig Decision
• Richard Mayhew: Obamacare in an import-export regional economic modeling view
• John Authers: Long-term returns boosted by illiquidity
• Michael Tomasky: Conservatives Find Typo in Obamacare, Try to Kill People with It

And Over Here:

Mike Konczal: Dodd-Frank Reforms Are Finally Paying Off: "This past year has seen significant advances...

...with at least four major wins. And crucially, the battles that still remain are coming clearly into focus. First, banks are now required by regulators to hold higher levels of capital.... Last fall, the Commodity Futures Trading Commission oversaw the launch of the exchanges for trading derivatives.... Part of the goal of this reform was to enforce price transparency.... Another win was the ruling on the Volcker Rule.... There will be a long implementation process as regulators make calls about what falls inside and outside of the rule, but the fact that it survived this process is important.... The FDIC this past year started to put serious meat on the process of how it would create a death panel for a failed large financial firm.... Conservatives should rejoice. I consistently hear about how Dodd-Frank is a 'corporatist' bill that protects firms by labeling them systemically important. And if being seen as systemically important and subject to Dodd-Frank rules was an implicit subsidy—-the 'biggest kiss', as Mitt Romney put it during the 2012 debates—then firms should be running toward the designation. The opposite of that happened in 2013....

The Tea Party narrative [now] officially absolv[es]... Wall Street from any and all dubious activity or need for reform.... Jeb Hensarling... mocks the idea that 'an alchemy of Wall Street greed, outsized risk and massive Washington de-regulation almost blew up the planet'.... In recent years Republicans would at least reference the idea that some reforms were needed, even if they were minimal. That is no longer in play. [Peter] Suderman and other critics are wrong in arguing that there’s no logic behind Dodd-Frank. Dodd-Frank was to port the regulatory system of banks that had kept the economy working during the Golden mid-century period over to the capital markets that have exploded in the past 30 years. This process is slowly working...

James Hamilton: The Changing Face of World Oil Markets: "1. World oil demand is now driven by the emerging economies...

...2. Growth in production since 2005 has come from lower-quality hydrocarbons.... 3. Stagnating world production of crude oil meant significantly higher prices.... 4. Geopolitical disturbances held back growth in oil production.... 5. Geological limitations are another reason that world oil production stagnated.... More recently, the decline in U.S. production has turned around dramatically with the exploitation of tight oil formations.... Many analysts are optimistic that the trend of growing production from this resource will continue.... But even if this forecast proves accurate, it is abundantly clear that it would not return real oil prices to their values of a decade ago.... Rather than a force pushing oil prices back to historical lows, it seems more accurate to view the emerging tight-oil plays as a factor that can mitigate for a while what would otherwise be a tendency for prices to continue to rise in the face of growing demand from emerging economies and stagnant supplies from conventional sources...

NIMBYism taken to extremes with astroturf "neighborhood associations":

April Gilbert: Berkeley restaurant has been approved: Let’s let it open: "I am a homeowner on Russell Street just below College...

and thus an Elmwood resident. A year ago, I heard that the owners of Comal on Shattuck Avenue were proposing a restaurant for the old Wright’s Garage space on Ashby and I was thrilled. It sounded like just the ticket to round out the dining options in our little neighborhood. Finally, we would have an upscale spot with a nice atmosphere and a small bar space--just what I felt had been missing. Then, I heard there was opposition from a group called the “Elmwood Neighborhood Association”(ENA)--strange given that I’d never heard of this organization despite living smack in the middle of Elmwood for eight years.... In all my years in Berkeley, I have never encountered this group. I have not gotten an email, a phone call, or a flyer in my mailbox. ENA is positioning itself as the voice of our neighborhood, which it is not. In contrast, I am quite familiar with CENA, the Claremont-Elmwood Neighborhood Association. CENA has not taken a stand on the proposed new restaurant on Ashby, but when it polled its members, the majority of its Elmwood resident members was enthusiastic about having a good restaurant open and supported the Comal owners’ efforts.

It now looks like that, instead of the 3.3% real GDP growth 2014 that we expected at the end of last fall, we are going to have half that: a 1.7% real GDP growth 2014. But the having of growth is coming 100% out of productivity: all labor market indicators are on the track that was expected late last fall.

Sarah Kliff: Halbig says Congress meant to limit subsidies. Congress disagrees: "Did Congress intend for Obamacare's federal-run exchanges...

...to distribute tax credits to millions of enrollees? Two circuit courts have spent a combined 116 pages opining on the issue.... For staffers who helped write Obamacare though, there isn't really a debate at all. The answer, for them, is crystal clear: they definitely meant to have subsidies available in all 50 states, regardless on who ran the marketplace. 'It was always intended that the federal fallback exchange would do everything that the statute told the states to do, which includes delivering the subsidies',"says Chris Condeluci, who worked as tax and benefits counsel for the Senate Finance Committee Republicans during the Affordable Care Act debate.... 'The evidence of Congressional intent here is overwhelming', John McDonough, who worked on the Health, Education, Labor and Pension committee during the health reform debate, wrote in an email. 'There is not a scintilla of evidence that the Democratic lawmakers who designed the law intended to deny subsidies to any state, regardless of exchange status'...

She writes:

Tanvi Misra: How Turbans Helped Some Blacks Go Incognito In The Jim Crow Era: "There's a weekly trial on the Internet...

...about who may be stealing culture from whom. Earlier this week, the defendants were Iggy Azalea and white gay men. A while back, it was Macklemore and the Harlem Shakers...

But after diligent searching for the website at which the records of these weekly trials are held, I am forced to conclude that she was just using a metaphor. There are not any real such trials--and that is a bitter disappointment to me...

The Austro-Hungarian Ultimatum to Serbia:

Vienna, July 22, 1914

Your Excellency will present the following note to the Royal Government on the afternoon of Thursday, July 23:

On the 31st of March, 1909, the Royal Serbian Minister at the Court of Vienna made, in the name of his Government, the following declaration to the Imperial and Royal Government:

Serbia recognizes that her rights were not affected by the state of affairs created in Bosnia, and states that she will accordingly accommodate herself to the decisions to be reached by the Powers in connection with Article 25 of the Treaty of Berlin. Serbia, in accepting the advice of the Great Powers, binds herself to desist from the attitude of protest and opposition which she has assumed with regard to the annexation since October last, and she furthermore binds herself to alter the tendency of her present policy toward Austria-Hungary, and to live on the footing of friendly and neighborly relations with the latter in the future.

Over at Equitable Growth--The Equitablog

• Afternoon Must-Read: Bob Laszewski: Halbig Decision Puts Obamacare Back on the Menu | Washington Center for Equitable Growth
• The 4th Circuit Bigfoots the Republican DC Panel's Attempt to Win the Day with Its Anti-ObamaCare Decision... | Washington Center for Equitable Growth
• Investment in Equipment (and Software): What Are Neil Irwin and Tyler Cowen Thinking? Tuesday Focus: July 22, 2014 | Washington Center for Equitable Growth
• Morning Really Must-Read: Nicholas Bagley: ObamaCare and Halbig: What Does This Morning's Decision Mean? | Washington Center for Equitable Growth
• Morning Must-Read: Robert Waldmann: Anchored Perceived Inflation, or How Fox News Helped Obama | Washington Center for Equitable Growth
• Morning Must-Read: Scott Lemieux: The Teleological Fallacy | Washington Center for Equitable Growth
• Nick Bunker: The curious incidence of the corporate income tax | Washington Center for Equitable Growth

Plus:

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

On Twitter:

• @shaneferro: Today is full of much-needed explainer journalism takedowns.
• .@shaneferro I need an explainer to explain the various explainer journalism takedowns. Can U provide 1?
• @shaneferro: @delong When you try to provide nuanced statistical analysis quickly and cheaply for a mass audience often it comes out pretty sloppy.
• .@shaneferro & so it’s better to report one probably-unrepresentative anecdotal case that you can (sometimes) thickly-describe?
• @shaneferro: @delong No, and the argument isn't that explainer or data journalism is bad, just that a lot of the posts from the new sites have been bad
• @shaneferro: @delong Tl;dr the new sites overpromised and underdelivered, which I largely agree with.
• @shaneferro: @delong But the solution isn't going back to the old model. The new sites just need to get better.
• @BenDWalsh: @shaneferro @delong Also: "all you need to know" is a reductionist cliche , but the information contained in said posts can be informative

• Edpilkington: Top US judge calls for return of firing squad - no really!
• .@Edpilkington @moorehn Is the firing-squad federal judge also the nude-women-painted-to-look-like-cows judge?‏
• @moorehn: @delong @Edpilkington if only. history is never that kind to us
• @TeamAir:** @delong Yes. Was in my law school class.

• @dmarron: Are there any ACA opponents who disagree with Halbig ruling? ACA proponents who agree? Policy views need not = legal views.
• .@dmarron I think John Roberts is an ACA opponent who disagrees with the Halbig ruling…

Should-Reads:

1. Nicholas Bagley: The government may have lost in D.C., but it just won in the Fourth Circuit: "Just hours after the D.C. Circuit invalidated an IRS rule extending tax credits to federally established exchanges, the Fourth Circuit issued an opinion upholding the very same rule.... In the Fourth Circuit’s view, the relevant ACA language—the language that pins the calculation of tax credits to the cost of a plan purchased on an exchange that was 'established by the State under 1311'--is 'ambiguous and subject to multiple interpretations'.... The context... cuts against the challengers’ interpretation.... In the court’s view, 'it makes sense to read § 1321(c)’s directive that HHS establish "such Exchange" to mean that the federal government acts on behalf of the state when it establishes its own Exchange'.... At the end of the day, the court said that it could not definitively 'discern whether Congress intended one way or another to make the tax credits available on HHS-facilitated exchanges'. As such, the court reasoned, under basic principles of Chevron deference, the IRS’s interpretation of the ambiguous statute was owed deference. That’s especially so, the court reasoned, since 'the plaintiffs do not dispute that the premium tax credits are an essential component of the Act’s viability'..."

2. Mary Daly and Bart Hobijn: Downward Nominal Wage Rigidities Bend the Phillips Curve: "Both the slope and curvature of the Phillips curve depend on the level of inflation and the extent of downward nominal wage rigidities.... Downward nominal wage rigidities likely have played a role in shaping the dynamics of unemployment and wage growth during the last three recessions and subsequent recoveries."

3. Brianna Cardiff-Hicks et al.: Do Large Modern Retailers Pay Premium Wages?: "With malls, franchise strips and big-box retailers increasingly dotting the landscape, there is concern that middle-class jobs in manufacturing in the U.S. are being replaced by minimum wage jobs in retail. Retail jobs have spread, while manufacturing jobs have shrunk in number. In this paper, we characterize the wages that have accompanied the growth in retail. We show that wage rates in the retail sector rise markedly with firm size and with establishment size. These increases are halved when we control for worker fixed effects, suggesting that there is sorting of better workers into larger firms. Also, higher ability workers get promoted to the position of manager, which is associated with higher pay. We conclude that the growth in modern retail, characterized by larger chains of larger establishments with more levels of hierarchy, is raising wage rates relative to traditional mom-and-pop retail stores..."

4. Josh Barro: Not Everyone Is Addicted to Inflation: "The fight over monetary policy is rather similar to the fight over Common Core curriculum standards. These reforms, born out of a years-long bipartisan consensus process and supported by policy wonks on both sides of the aisle, have become the latest object of conservative opposition now that President Obama is taking credit for them. The obvious move for a Republican politician wishing to please the conservative base is to oppose Common Core.... Bobby Jindal... who listed Common Core as a plank of his education reform agenda in 2012, is now an ardent foe. Yet withdrawing from Common Core has proved surprisingly hard, even in places where Republicans control all branches of government.... Look at Wisconsin. Gov. Scott Walker has decided he wants out of Common Core. But Common Core opponents have run into a roadblock in the form of the Republican chairmen.... It’s one thing to oppose Common Core when your career is not steeped in education policy; it’s another thing to throw away years of work toward a policy you’ve long thought was good. On inflation, as on curriculum, the conservatives who matter most have been generally able to resist the demands of their base."

5. Ryan Sweet and Adam Ozimek: The U.S. Labor Market's Chicken-Egg Dilemma: "Policymakers can approach the situation in several ways. One would be to assume that labor force participation will not respond to wage growth... and unless the Fed raises rates soon inflation will accelerate. Second, they can assume the labor force will respond... and simply wait for that to happen, holding to the current course of near-zero interest rates.... A third approach would focus on productivity growth, which could remain suppressed by underinvestment over the next couple of years. This would hurt wages and thus keep many out of the labor force longer. Since higher interest rates would likely undermine investment, the Fed should be patient. One advantage of the wait-and-see approach is that will at least allow economists and policymakers to see which story is correct.... In contrast, acting now by raising rates will leave the answer unknown to the structural-versus-cyclical question..."

And Over Here:

Bob Laszewski: Halbig Decision Puts Obamacare Back on the Front Burner and Will Give Republicans a Huge Political Headache: "In the DC Court ruling one of the majority judges said...

...'The fact is that the legislative record provides little indication one way or the other of the Congressional intent, but the statutory text does. Section 36B plainly makes subsidies only available only on Exchanges established by states.'... This issue never came up.... About everyone also believed some states would not establish their own exchanges. Smaller states, for example, might opt out because they just didn't have the scale needed to make the program work. I don't recall a single member of Congress, Republican or Democrat, who believed that if this happened those states would lose their subsidies. At worst, this is clearly a drafting error that in the old days would have been quickly fixed in a technical corrections bill. But these aren't the old days.... No one risks losing their subsidies until this issue is finally decided....

This would put Republicans in the federal exchange states in a heck of a political bind.... The political consequences for all of these people losing their subsidies and their coverage would immediately shift to the Republicans who control these state governments. Proponents of Halbig argue that the fault for people losing their coverage would be on the Obama administration because they have operated Obamacare in an illegal manner.... Millions of people would have their insurance yanked out from under them in what people will see as part of the ongoing partisan political wars being waged by people out of touch with life in the rest of the country. The fundamental problem the Halbig proponents have here is that common sense, whatever a court rules, tells people that denying subsidies in half the states was never the intent of the Congress--that this is all about political point scoring and stopping a law Republicans hate.... Obamacare's most partisan and ideologically opposed enemies scored a big victory today.... But below the surface lots of sensible Republicans must be sweating bullets.

Sarah Kliff: Separate circuit court rules in favor of Obamacare subsidies: "The Fourth Circuit Court of Appeals...

ruled Tuesday afternoon that Obamacare subsidies could be offered through federally-run insurance marketplaces.

It is... clear that widely available tax credits are essential to fulfilling the Act’s primary goals and that Congress was aware of their importance when drafting the bill," the Fourth Circuit Court ruled.

We'll have more coverage soon...."

From the archive: Bretton Woods:

On July 22nd 1944, finance experts who had spent the past three weeks gathered at a hotel in New Hampshire, produced two documents setting out their plan for the post-war monetary system. In response, The Economist published this leader article on July 29th, paying particular attention to whether the British government should ratify the Bretton Woods Agreements:

Over at Equitable Growth The estimable Neil Irwin and Tyler Cowen get, I think, things wrong here.

First, Tyler, commenting on Neil:

Tyler Cowen: Facts about non-residential investment: "One simple hypothesis is that it’s not worth spending more on American workers at current wage levels.  As workers, while Americans are quite good, they are just not that much better than a variety of high-IQ individuals in cheaper countries, many of whom now have acceptable infrastructure to work with. READ MOAR

Over at Equitable Growth: Nicholas Bagley: ObamaCare and Halbig: What Does This Morning's Decision Mean?: "In a major setback for the Affordable Care Act...

...the D.C. Circuit just released a fractured opinion invalidating the IRS’s rule extending tax credits to federally facilitated exchanges.... About two-thirds of the states... declined to establish exchanges. In those states, the federal government stepped in and established the exchanges on the states’ behalf. In today’s opinion, the D.C. Circuit held that a federally facilitated exchange isn’t “established by the State under 1311.” As a result, the IRS can’t offer tax credits to those who purchase plans on such exchanges... the average estimated tax credit in 2014 is $4,700.... READ MOAR

Robert Waldmann: Anchored Perceived Inflation, or How Fox News Helped Obama: "A huge recession, sluggish recovery and gigantic persistent output gap....

...Core PCE inflation... fell from sticking close to 2% to fluctuating in the range of 1% to 2%. The standard lowbrow backward-looking forecasting equation... completely failed.... There are two candidate explanations for this surprising behavior of inflation. One is that there is strong downward nominal rigidity.... Another quite different explanation is that expected future inflation has a very important role in wage and price setting and that inflation expectations are anchored.... The median respondent in the Michigan University/IPSOS Reuters survey persistently expected future inflation of almost exactly 3% in almost all surveys since mid 2009... in period after period a majority of survey participants have been surprised by actual inflation lower than their forecast. This is a new phenomenon.... [Perhaps,] like inflation expectations, inflation perceptions have delinked from reality.... I give the credit to Fox news.... People... [who] rely on Fox News... are out of touch with reality--their expectations and perceptions are what Roger Ailes wants them to be.... Fox News convinces people that inflation has been and will be high.... [Thus] actual inflation is low but positive. It fits the facts which I reported. You decide.

Scott Lemieux: The Teleological Fallacy: "A good point about... Thomas Frank...

...[by] fearless navigator of our new comment system JeremyW....

[W]hat strikes me... is that... rather than a system where actual progressive change is difficult to win support for and subject to several veto points, he seems to think we have one where radical changes are constantly on the cusp of occurring and the whole neoliberal enterprise must be held together by a dastardly sellout president who can subvert the will of the people.

The most crucial underlying premise of Frank’s argument is that the American political economy was on the verge of a radical transformation in 2008, and this was prevented from happening because Barack Obama saved neoliberalism’s bacon. This is a rather problematic for his argument given its transparent falsity. It’s simply not true that most Americans drew the same conclusions from the financial meltdown that Frank did, and even they did the elites who control or strongly influence many key veto points in the American system certainly didn’t.... Similar premises are also generally seen on attacks on the ACA from the left. To argue that the ACA isn’t better than the status quo ante from a progressive standpoint would be ridiculous, so the strategy is to change the baseline and compare the ACA to another alternative. In policy terms, this isn’t challenging, since you could throw a dart and Western Europe and get a health care system preferable to the ACA. But it’s also completely irrelevant...

Left ACA critics smart enough not to argue that Barack Obama could have forced the Senate to pass single payer through such brilliant strategery as promising senators that he would campaign for them in states where he’s enormously unpopular turn to assertions that the American insurance industry was on the verge of collapse before Barack Obama saved it... sheer lunacy.... To people who confuse American politics with the Oxford debating society, the success of Medicare should make Medicare for all highly popular. In reality, the overwhelmingly conservative white beneficiaries of Medicare are much more likely to take the lesson of 'I’ve got mine and to hell with you'.... What’s going on with Republican statehouses and the Medicaid expansion should draw a line under that. The typical Republican state politician is willing to turn down huge pots of free money from the federal government to validate the principle that if the working poor get sick it should be left to the Great Market in the Sky to sort things out. To believe in this context that the collapse of the private American health insurance industry was inevitable absent the ACA is to enter a land of fantasia.

Adrian Florido: California's uninsured cut in half under Obamacare, survey finds | 89.3 KPCC:

The percentage of uninsured Californians has been cut in half since the federal health law began expanding coverage nine months ago, according to a new national survey. In September of 2013, 22 percent of California adults were uninsured. By last month, that number had fallen to just 11 percent, the biggest drop among the nation’s six largest states. The survey of more than 4,400 people by the Commonwealth Fund, a national healthcare foundation, also found that nationwide, the uninsured rate fell from 20 percent to 15 percent during the same period.... The Commonwealth Fund survey found that 61 percent of those who were newly insured said they felt better off thanks to their new coverage. And nearly four out of five said they were somewhat or very satisfied with their new coverage.

The survey also found that since last year, awareness of the Affordable Care Act has increased significantly, although that awareness still lags among poorer Americans. For example, more than half of the poorest people surveyed still did not know that the federal health law makes subsidies available to help pay for health insurance.

I must say that where the rubber meets the road this thing is doing somewhat better than I expected back at the end of 2009. But the big question will be: what will be the deltas for health and economic security?

Reading Francis Parkman's Montcalm and Wolfe and remembering one reason why I was so annoyed at Edward Said's Orientalism. The rhetorical moves that Said denounces as orientalist are made by Parkman, but they are not directed at Beijing or Delhi or Baghdad or Cairo: they are directed at Paris. Said never bothered to read deeply enough in the British literature on history and in the history of British political attitudes to realize that what he objected to was not specifically orientalist but rather British nationalist, with its core expression being: "No Popery or wooden shoes!"...

Over at Equitable Growth--The Equitablog

• Afternoon Must-Read: Paul N. van de Water: New CBO Long-Term Budget Projections Tell Familiar Story | Washington Center for Equitable Growth
• The State of Macroeconomics? Not Good...: Monday Focus for July 21, 2014 | Washington Center for Equitable Growth
• Afternoon Must-Read: David Cay Johnston: State’s Job Growth Defies Pessimistic Predictions After Tax Increases | Washington Center for Equitable Growth
• Afternoon Must-Read: Ray Fisman: Sweden School Choice | Washington Center for Equitable Growth
• Nick Bunker: The troubling trend in subprime auto loans | Washington Center for Equitable Growth

Plus:

• Things to Read on the Afternoon of July 21, 2014 | Washington Center for Equitable Growth

Should-Reads:

1. Robert Lucas (2003): Chicago Follies (IV): "Macroeconomics was born as a distinct field in the 1940s, as a part of the intellectual response to the Great Depression. The term then referred to the body of knowledge and expertise that we hoped would prevent the recurrence of that economic disaster. My thesis in this lecture is that macroeconomics in this original sense has succeeded: Its central problem of depression-prevention has been solved, for all practical purposes, and has in fact been solved for many decades..." Via Lars P. Syll

2. Matthew Rabin (1999): Risk Aversion and Expected-Utility Theory: A Calibration Theorem: "Within the expected-utility framework, the only explanation for risk aversion is that the utility function for wealth is concave: A person has lower marginal utility for additional wealth when she is wealthy than when she is poor. This paper provides a theorem showing that expected-utility theory is an utterly implausible explanation for appreciable risk aversion over modest stakes: Within expected-utility theory, for any concave utility function, even very little risk aversion over modest stakes implies an absurd degree of risk aversion over large stakes. Illustrative calibrations are provided..."

3. Matt O'Brien: Dear inflation truthers: This is how averages work: "Call it Amity[ Shlaes]'s Law. As a debate with an inflation truther grows longer, the probability of them asking how inflation could be low when some prices are rising faster than the average of all prices approaches one.... Inflation truthers will darkly note that the costs of stamps, coffee, haircuts, movie tickets, summer cottages, college tuition, and, of course, gasoline are all increasing more than the overall inflation rate. And they won't mention anything that's increasing less, let alone things that are falling in price.... Then they'll triumphantly raise an eyebrow from beneath their tinfoil hats.... [but] unless every price is changing by the exact same amount, some of them will be increasing more than average and some of them will be increasing less. That's how averages work. But in the hands of an inflation truther, this mathematical banality achieves a kind of totemic significance... the grassy knoll inside Area 51 where Janet Yellen is playing a record backwards that say hyperinflation is coming.... This isn't an indictment of the government's credibility. It's an indictment of their own..."

4. Nick Bunker: The troubling trend in subprime auto loans: "The sudden subprime bubble in used car loans.... The causes of the financial crisis and the Great Recession of 2007-2009 are many and interconnected, but at the heart of the matter was the tendency of the financial system to channel debt to low-income households.... Today’s new lending bubble is similar to the subprime mortgage bubble--except that when it pops it won’t be as economically destructive... used cars aren’t as large a source of wealth as housing... there’s no evidence that securitized used car loans are a major part of the financial system today.... The problem is that the U.S. financial system still has the facility to create debt bubbles that target low-income Americans, fueled in part by high and rising levels of income inequality. Our financial system is less fragile since the housing and financial crises, but clearly there’s room for improvement."

And Over Here:

Ray Fisman: Sweden school choice: The country’s disastrous experiment with Milton Friedman and vouchers: "Americans wring their hands over the state of our schools...

...The angst over U.S. student performance—and its implications for the American workforce of the near future—is inevitably accompanied by calls for education reform: greater accountability, more innovation.... Advocates for choice-based solutions should take a look at what’s happened to schools in Sweden, where parents and educators would be thrilled to trade their country’s steep drop in PISA scores over the past 10 years for America’s middling but consistent results. What’s caused the recent crisis in Swedish education? Researchers and policy analysts are increasingly pointing the finger at many of the choice-oriented reforms that are being championed as the way forward for American schools. While this doesn’t necessarily mean that adding more accountability and discipline to American schools would be a bad thing, it does hint at the many headaches that can come from trying to do so by aggressively introducing marketlike competition to education...

David Cay Johnston: State’s Job Growth Defies Pessimistic Predictions After Tax Increases: "Dire predictions about jobs being destroyed...

...spread across California in 2012 as voters debated whether to enact the sales and, for those near the top of the income ladder, stiff income tax increases in Proposition 30. Million-dollar-plus earners face a 3 percentage-point increase on each additional dollar.

It hurts small business and kills jobs,” warned the Sacramento Taxpayers Association, the National Federation of Independent Business/California, and Joel Fox, president of the Small Business Action Committee.

So what happened?... Last year California added 410,418 jobs, an increase of 2.8 percent over 2012, significantly better than the 1.8 percent national increase in jobs. California is home to 12 percent of Americans, but last year it accounted for 17.5 percent of new jobs, Bureau of Labor Statistics data shows.... Eleven California counties, including Sacramento, accounted for almost 1 in every 7 new jobs in the U.S. last year.... Only three California counties lost jobs.... The empirical evidence also shows that the best-paying jobs tend to be clustered in states (and countries) with high taxes. The same tends to be true of wealth creators, including the most money-motivated among scientists, and existing wealth holders not actively engaged in business.... So next time someone tries to tell you that raising income taxes will destroy jobs, tell them the evidence just does not support that claim.

Ann Marie Marciarille: Berkeley's Medical Marijuana Dispensaries Required to Engage in Charity Care: "Berkeley California has been agonizing for years...

...about whether to authorize a fourth medical marijuana dispensary within city limits. The City Council's deliberations on this are always interesting, particularly involving the distinction between "coops" and "dispensaries" and the grandfathering in of "certain entities". So, whatever the number and configuration of Berkeley's medical marijuana facilities, more do appear to be in the offing.

Adolf Hitler, from William L. Shirer's The Rise and Fall of the Third Reich:

Robert Waldmann: Comment on Intellectual Origins of Reagan-Thatchernomics: "That is a long and interesting list...

...Somewhere the crime wave seems to have fallen between to stools (between 17 and 18). I think that, to be fair to both, especially Feldstein, you should number separately.

Huntington's willingness to criticize democracy and praise deference to superiors is amazingly frank...

On Huntington:

Trying to be quicker on (18)-(30) which I will ascribe to "Mad Dog" (to avoid an concerns about context)

On (18) ["the democratic surge of the 1960s raised again in dramatic fashion the issue of whether the pendulum had swung too far..."]: His courage amazes me. Even George Will doesn't question Democracy so bluntly any more.

On (19) ["the vigor of democracy in the United States in the 1960s thus contributed to a democratic distemper... the expansion of governmental activity... and the reduction of governmental authority..."]: The word "distemper" is pejorative. Think of trying to tell a Tea Partier that a reduction in "government authority" is "distemper". I think they would lose their tempers. Again amazing frankness (I refer to Mad Dog, who may or may not have anything to do with a Harvard prof.)

Over at Equitable Growth: The intelligent Lars P. Syll depresses me by reminding me of some of the many economists of note and reputation who simply have not done their homework--or, rather, either they or I have not done our homework, and I am pretty confident it is not me--by linking to Robert Lucas:

Robert Lucas: Modern Macroeconomics: "I was convinced by Friedman and Schwartz...

...that the 1929-33 down turn was induced by monetary factors (declined is money and velocity both) I concluded that a good starting point for theory would be the working hypothesis that all depressions are mainly monetary in origin.... As I have written elsewhere, I now believe that the evidence on post-war recessions (up to but not including the one we are now in) overwhelmingly supports the dominant importance of real shocks... READ MOAR

Selwyn Duke: Valkyrie: The Real Col. von Stauffenberg:

On a sultry July day in 1944, a man walks into the "Wolf's Lair" carrying a briefcase. He is initiating a bold plot, one that aims to assassinate one of the world's most ruthless and powerful men, Adolf Hitler, and topple the whole of his Nazi government. Integral to this ambitious coup is what lies in his briefcase, a bomb.  It is set to detonate... the wheels are in motion. It is only a matter of time now.

Paul N. van de Water: New CBO Long-Term Budget Projections Tell Familiar Story: "The Congressional Budget Office (CBO)’s new long-term budget projections...

...show that the nation’s fiscal outlook is stable for the rest of this decade and then worsens gradually.... Beyond the first ten years, CBO has made some small revisions in assumptions that, on balance, leave the projected path of debt largely unchanged. When we released our long-term estimates in May, we said:  'No deficit or debt crisis looms, and the weak labor market remains the nation’s most immediate economic concern. But policymakers and the public should not ignore the long-run budget problems, which remain challenging'.  That conclusion still holds...

Over at Equitable Growth--The Equitablog

• Is Choosing to Believe in Economic Models a Rational Expected-Utility Decision Theory Thing?: Friday Focus for July 19, 2014 | Washington Center for Equitable Growth
• Marshall Steinbaum: The value of search-and-matching models for the labor market | Washington Center for Equitable Growth
• Carter Price: Who are Today’s Supermanagers and Why Are They So Wealthy? | Washington Center for Equitable Growth
• Nick Bunker: The importance of CBO’s new interest rate projections | Washington Center for Equitable Growth
• Nick Bunker: Are employer tax credits the best way to deliver paid leave? | Washington Center for Equitable Growth
• Nick Bunker: Stock repurchases, economic growth and inequality | Washington Center for Equitable Growth
• Afternoon Must-Read: Aaron Carroll: The Social Contract and Health-Care Reform | Washington Center for Equitable Growth
• Afternoon Must-Read: John Maynard Keynes (1926): The End of Laissez-Faire | Washington Center for Equitable Growth
• Morning Must-Read: Ed Glaeser et al.: Unhappy Cities | Washington Center for Equitable Growth
• Afternoon Must-Read: Simon Wren-Lewis: Further Thoughts on Phillips Curves | Washington Center for Equitable Growth
• Afternoon Must-Read: Anil Kashyap et al.: Making Macroprudential Regulation Operational | Washington Center for Equitable Growth
• Afternoon Must-Read: Carola Binder: Thoughts on the Fed's New Labor Market Conditions Index | Washington Center for Equitable Growth
• Afternoon Must-Read: Gillian Tett: A Peek into the IMF Machine | Washington Center for Equitable Growth
• Nick Bunker: Weekend reading | Washington Center for Equitable Growth

Plus:

• Things to Read on the Afternoon of July 19, 2014 | Washington Center for Equitable Growth

And:

Aaron Carroll: The Social Contract and health care reform: "The social contract is an implicit understanding...

between people and the society in which they live about how society should be organized, how benefits are distributed, and how shared responsibilities are defined for all citizens. The beauty of the social contract is that it conveys many messages, not a singular one. It conveys the message of shared decisionmaking, but equally it conveys a political message of accountability and responsibility.... Rousseau... society organizes itself according to the expectations that people have for human flourishing.... Hobbesian... limited rights and freedoms.... The beauty and the frustration of using social-contract speak is that it can convey political messages across the entire spectrum, from the most conservative to the most progressive...

Gillian Tett: A peek into the IMF machine: "Liaquat Ahamed, a Washington-based fund manager turned writer...

...flew to Tokyo to participate in the annual meeting of the International Monetary Fund.... Ahamed was not lobbying for policies, cutting business deals or reporting. Instead, for a few days he observed the IMF circus as if he were an ethnographer plunged into a strange tribe... A monograph, Money and Tough Love: On Tour with the IMF, are not just hilarious but shrewdly provocative.... Ahamed lifts the lid on seemingly irrelevant details about the fabric and rhythm of IMF life and on the myriad subtle cultural symbols that are used to signal hierarchy, tribal affiliation and power--and which the IMF economists themselves almost never talk about. Ahamed describes, for example, the dress code patterns, noting that:

Carola Binder: Thoughts on the Fed's New Labor Market Conditions Index: "The Fed economists employ a widely-used statistical model...

called a dynamic factor model.... The LMCI is the primary source of common variation among 19 labor market indicators.... The main reason I'm not too excited about the LMCI is that its correlation coefficient with the unemployment rate is -0.96. They are almost perfectly negatively correlated--and when you consider measurement error you can't even reject that they are perfectly negatively correlated-- so the LMCI doesn't tell you anything that the unemployment rate wouldn't already tell you. Given the choice, I'd rather just use the unemployment rate since it is simpler, intuitive, and already widely-used...

Anil Kashyap et al.: Making macroprudential regulation operational: "Do the extant workhorse models used in policy analysis...

...support macroprudential and macrofinancial policies?... A new macroprudential model that stresses the special role played by banks.... Three theoretical channels through which intermediaries can improve welfare... extending credit to certain types of borrowers (e.g. Diamond 1984)... improving risk-sharing... creating liquid claims that are backed by illiquid assets (Diamond and Dybvig 1983).... It is imperative to start with a general model where the financial system plays all three of these roles....

Simon Wren-Lewis: Further thoughts on Phillips curves: "This recent JEL paper by Mavroeidis, Plagborg-Møller and Stock....

...As Plagborg-Moller notes in an email to Mark Thoma:

Our meta-analysis finds that essentially any desired parameter estimates can be generated by some reasonable-sounding specification. That is, estimation of the NKPC is subject to enormous specification uncertainty. This is consistent with the range of estimates reported in the literature…. Traditional aggregate time series analysis is just not very informative about the nature of inflation dynamics...

This had been my reading based on work I’d seen.

Ed Glaeser et al.: Unhappy Cities: "There are persistent differences...

...in self-reported subjective well-being across U.S. metropolitan areas, and residents of declining cities appear less happy than other Americans. Newer residents of these cities appear to be as unhappy as longer term residents, and yet some people continue to move to these areas. While the historical data on happiness are limited, the available facts suggest that cities that are now declining were also unhappy in their more prosperous past. One interpretation of these facts is that individuals do not aim to maximize self-reported well-being, or happiness, as measured in surveys, and they willingly endure less happiness in exchange for higher incomes or lower housing costs. In this view, subjective well-being is better viewed as one of many arguments of the utility function, rather than the utility function itself, and individuals make trade-offs among competing objectives, including but not limited to happiness...

Operation Goodwood - Wikipedia:

Shortly before dawn on 18 July, the Highland infantry in the south of the Orne bridgehead, quietly retired 0.5-mile (0.80 km) from the front line. At 05:45, 1,056 Handley Page Halifax and Avro Lancaster heavy bombers flying at 3,000 feet (910 m) dropped 4,800 long tons (4,900 t) of high explosive bombs around Colombelles, the steelworks, on the positions of the 21st Panzer Division and on the village of Cagny, reducing half of it to rubble. At 06:40 the British artillery opened fire and twenty minutes later, the second wave of bombers arrived. From 10,000–13,000 feet (3,000–4,000 m), American B-26 Marauders released 563 long tons (572 t) of fragmentation bombs on the 16th Luftwaffe Division, as fighter-bombers attacked German strong points and gun positions. During the 45-minute bombardment, the troops and tanks of the 11th Armoured Division moved out of their concentration areas towards the start line.[109] H Hour was set for 07:45 and on schedule the artillery switched to a rolling barrage, which moved ahead of the 11th Armoured Division....

From John Maynard Keynes's 1926 pamphlet The End of Laissez-Faire13: "The economists... furnished the scientific doctrine...

by which the practical man could solve the contradiction between egoism and socialism which emerged out of the philosophising of the eighteenth century and the decay of revealed religion. But... I hasten to qualify it. This is what the economists are supposed to have said. No such doctrine is really to be found in the writings of the greatest authorities. It is what the popularisers and the vulgarisers said.... The language of the economists lent itself to the laissez-faire interpretation. But the popularity of the doctrine must be laid at the door of the political philosophers of the day, whom it happened to suit, rather than of the political economists.