Over at Equitable Growth: In Which I Make Myself Very Confused About Cyclical Recovery: Monday Focus for August 18, 2014
Lunchtime Must-Read: Dean Baker: Stock Returns: Between Shiller and DeLong

Noted for Your Lunchtime Procrastination for August 18, 2014

Over at Equitable Growth--The Equitablog


Must- and Shall-Reads:

  1. Ethan Zuckerman: The Internet's Original Sin: "It's not too late to ditch the ad-based business model and build a better web. What we wanted to do was to build a tool that made it easy for everyone, everywhere to share knowledge, opinions, ideas and photos of cute cats. As everyone knows, we had some problems, primarily business model problems.... At the end of the day, the business model that got us funded was advertising... [the] revenue source is investor storytime: Investor storytime is when someone pays you to tell them how rich they’ll get when you finally put ads on your site.... The key part of investor storytime is persuading investors that your ads will be worth more than everyone else’s ads.... Demonstrating that you’re going to target more and better than Facebook requires moving deeper into the world of surveillance..."

  2. Wolfgang Münchau: Wolfgang Munchau: Draghi is running out of legal ways to fix the euro "The ECB is failing to deliver on its inflation target not because it has run out of instruments but because it has based its policy on a poorly performing economic model... [and so] has committed three errors.... The ECB should have embarked on large asset purchases and cut interest rates to zero early on.... Mr Draghi’s promise to buy eurozone government debt... made everybody, including the ECB itself, complacent... [and] ended all crisis resolution. The third mistake was to misjudge the dynamics of the fall in inflation rates late last year.... By pussyfooting around... the ECB has signalled that it is safe to bet against the inflation target.... To undo this would take some heavy lifting.... The ECB should start by ditching the inflation target and replacing it with a price-level target.... The ECB should starting buying equities and junk bonds. It should subsidise mortgages and consumer credit. It could fund an investment programme in transport infrastructure, energy networks and scientific research.... All these measures would be effective. Most would be illegal. The one thing the central bank can do without any legal problems would be to drop the silly macroeconomic model--known as the Smets-Wouters model, after its authors--on which it has been relying for too long. My guess is that the ECB will not do any of these..."

  3. Alon Levy: Zoning and Market Pricing of Housing: "The question of the effects of the supply restrictions in zoning on housing prices has erupted among leftist urbanist bloggers again. On the side saying that US urban housing prices are rising because of zoning.... On the side saying that zoning doesn’t matter and the problem is demand (and by implication demand needs to be curbed).... This is not a post about why rising prices really are a matter of supply. I will briefly explain why they are, but the bulk of this post is about why, given that this is the case, cities need to apportion the bulk of their housing via market pricing and not rent controls, as a matter of good political economy. Few do, which is also explainable in terms of political economy..."

  4. Nick Bunker: The downside of declining domestic migration: "Over the past 30 years or so, U.S. workers have become less likely to move.... An emerging hypothesis is that migration is declining because the benefits of migration are, too... structural changes in the labor market.... Research by economists at the International Monetary Fund shows a negative side to the decline in mobility. The paper considers migration as a way for workers to respond to a job loss.... Instead of moving on, workers drop out..."

  5. Mark Thoma (2011): Income Redistribution: The Key to Economic Growth?: "There is an equivalent of a Laffer curve for inequality, but the variable of interest is economic growth rather than tax revenue. We know that a society with perfect equality does not grow at the fastest possible rate.... We also know that a society where one person has almost everything while everyone else struggles to survive... will not grow at the fastest possible rate either.... We may be near or even past the level of inequality where growth begins falling.... But... why take a chance? I’d prefer to see policies implemented to reduce inequality--given the present, elevated level of inequality, a reduction is unlikely to have much of an impact on incentives. But at a minimum we should resist further increases.... I’ve never favored redistributive policies, except to correct distortions in the distribution of income resulting from market failure, political power, bequests and other impediments to fair competition and equal opportunity. I’ve always believed that the best approach is to level the playing field.... But increasingly I am of the view that even if we could level the domestic playing field, it still won’t solve our wage stagnation and inequality problems.... We’ve given the market economy 40 years to solve the problem of growing inequality, and the result has been even more inequality.... If we want to preserve a growing and socially healthy economy, and avoid moving to lower growth points on the inequality curve, then we will need to do much more redistribution of income than we have done over the last several decades..."

  6. Tim Harford: Monopoly is a bureaucrat’s friend but a democrat’s foe: "No policy can guarantee innovation, financial stability, sharper focus on social problems, healthier democracies, higher quality and lower prices. But assertive competition policy would improve our odds.... Such structural approaches are more effective than looking over the shoulders of giant corporations and nagging them.... As human freedoms go, the freedom to take your custom elsewhere is not a grand or noble one – but neither is it one that we should abandon without a fight."

  7. Kris James Mitchener and Kirsten Wandschneider: Great Depression recovery: The role of capital controls: "The IMF has recently revised its position on capital controls, acknowledging that they may help prevent financial crises.... During the Great Depression capital controls appear not to have been successfully used as tools for rescuing banking systems, stimulating domestic output, or for raising prices. Rather they appear to have been maintained as a means for restricting trade and repayment of foreign debts."

And Over Here:


Should Be Aware of:

  1. Joshua Gans: The ownership of the machines: "The story in the video is that if you don’t think the robots can replace you (a) look back at the horses and (b) look forward at what’s happening in robot technology now. But because it does its job so clearly, I thought it would be useful to consider a little more carefully the economics of all this and whether, indeed, there will be mass unemployment in the future.... For a human to be displaced by a robot in a job the robot (a) has to have a quality advantage and (b) the human productivity must be so low that even if the wage drops to minimum (by law or subsistence or opportunity cost), they will be uncompetitive.... The Brynjolfsson-McAfee line is that they will need to acquire other skills and, more to the point, it is not clear the market can work (or at least work fast enough for our liking) to make that happen.... A collective agency will step in to ensure those people can pay for the product so that normal market based prices will be formed and transactions will take place. That agency is obvious in democratic society: the government.... I have faith that if it is in the interests of both business and consumers that money go from the employed to unemployed, it will.... But there is another mechanism which goes back to the title of this post. The presumption is always that the bourgeoisie rather than the proletariat owns the machines. But why should that be the case?"

  2. John Scalzi: Thoughts On the Hugo Awards, 2014 "What did I really think of the 'sad puppy' slate of nominees championed by Larry Correia?... They played within the rules, so game on, and the game is to convince people that your work deserves the Hugo. It does not appear the voters were convinced.... Correia was foolish to put his own personal capital as a successful and best selling novelist into championing Vox Day and his novelette, because Vox Day is a real s---hole of a human being, and his novelette was, to put it charitably, not good.... Doing that changed the argument from something perfectly legitimate, if debatable--that conservative writers are often ignored for or discounted on award ballots because their personal politics generally conflict with those of the award voters--into a different argument entirely, i.e., 'f--- you, we got an undeserving bigot s---hole on the Hugo ballot, how you like them apples?'... Correia will be happy to tell you that his Hugo loss doesn’t matter to him.... I do wonder if he considered how other people that were seen as part of his slate feel the same way.... If he really wanted to make the argument that a particular set of writers are ignored by award voters, that he went about making the argument in just about the worst way possible. Bad strategy, bad tactics, bad result."

  3. Daron Acemoglu and James Robinson: Do People Really Dislike the State So Much? "David Nugent... the department and city of Chachapoyas in Northeastern Perú... the extension of state authority and power to integrate Chachapoyas more firmly into the Peruvian state. Nugent shows that though this might have been highly adverse for the castas, it was not so for everyone. Most important, what put this dynamic of expansion into motion was not some autonomous impulse from Lima coercively imposed, but local demands from Chachapoyas. Chachapoyas was the fiefdom of the castas, but Perú had a constitution which enshrined things like the rule of law, security of property. During the 1920s Nugent shows how social mobilization in Chachapoyas, mostly started by a few elites who had got an education in Lima, began to demand the end of casta rule. Critically, they demanded the expansion of state power as a tool to free the society from the rule of the castas who they saw as violators of their basic rights as Peruvian citizens.... So this is James Scott’s thesis upside down! Rather than fleeing from the state and resisting it, ordinary people are demanding the expansion of its authority in order to attain freedom from arbitrary and coercive local elites..."