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Over at Project Syndicate: Try Everything: When it became clear in late 2008 that the orgy of deregulation coupled with global imbalances was confronting the global economy with a shock at least as dangerous as the Great Crash that had initiated the Great Depression, I was alarmed but hopeful. We had, after all, seen this before. And we had models from the Great Depression for how to mitigate the damage--basically, try everything that might work to boost demand and production and reduce jobless workers, and reinforce success. READ MOAR
...It's all the usual discussions, and they don't like to talk domestic U.S. politics, but then at some point, somebody says, what if we had another major financial crisis? What if we really needed something like TARP again? What are the chances that something like TARP could actually happen in this political environment? And everybody goes quiet, and looks down at their blotter...
- Musings on 25-54 Employment-to-Population Rates and the Macroeconomy
- Laura Tyson and Lenny Mendonca: Obamacare and Effective Government
- Paul Krugman: The Volcker Disinflation
- Duncan Black: Does Anybody Remember MOOCs?
- William Barnett, ed.: Rational Expectations: A Panel Discussion
Must- and Shall-Reads:
- Stock Picking Will Never Die :
- The Real Wolves of Wall Street :
- "In the GOP debate about... [King] one side would prefer to wait for the judicial rapture to arrive.... [But] the 17% of U.S. GDP that is health care has spent five years reorganizing to accommodate ObamaCare's dictates, and the watch-it-burn caucus is underestimating the economic, political and media blowback...1. :
- Rational expectations: A Panel Discussion :
- Does Anybody Remember MOOCs? :
- Keynesians and the Volcker Disinflation :
- Obamacare and Effective Government :
- Eschaton: Um Because Even Proponents Never Had Any Explanation For How It Would Work? :
And Over Here:
You know, before I read this I had not grasped the extent to which, for Robert Lucas and company, rational expectations is not a simplifying modeling assumptions that we hope will be good enough not to betray us retake our models to try to understand the data, but rather the sine qua non of any macroeconomic science. To Lucas, if it does not incorporate rational expectations, it can only be what he calls "schlock macroeconomics". Hence the resort to calibration: rational expectations cannot fail econometric tests, instead it is econometrics that fails the rational expectations test...
No. I mean, you can’t read Muth’s paper as some recipe for cranking out true theories about everything under the sun.... My paper on expectations and the neutrality of money was an attempt to get a positive theory about what observations we call a Phillips curve. Basically it didn’t work.... I thought my model was going to explain price stickiness, and it didn’t. So we’re still working on it.... I don’t think we have a satisfactory solution... but I don’t think that’s a cloud over Muth’s work. If Jack [Muth] thinks it is, I don’t agree with him. Mike [Lovell] cites some data that Jack [Muth] couldn’t make sense out of using rational expectations.... There’re a lot of bad models out there. I authored my share, and I don’t see how that affects a lot of things we’ve been talking about earlier on about the value of Muth’s contribution....
You know, people had no trouble having financial meltdowns in their economies before all this stuff we’ve been talking about came on board. We didn’t help, though; there’s no question about that. We may have focused attention on the wrong things; I don’t know...'
...would talk about for awhile. Where did that all go? Apparently administrators finally figured out that a 'course in a box' actually costs a lot of money, that it doesn't scale nearly as well as they hoped, that they are a substitute for 'learning from a book' not 'learning from a person,' and you can't charge $50,000 per year tuition simply because your prestigious name will be on the online course degree. I knew all of this because I saw people experimenting with online courses... 15 years ago. The technology, except maybe easy use of video (you could use video, it was just a bit more of a pain), was all there then...
"A substitute for learning from a book" is not quite fair. What we want is an experience machine that is a good enough replica for learning 5-on-1 from a person or, if we cannot get that, a good enough replica of learning from a really good lecturer. For something like 1% of the population--which includes me--a simple book is a good enough replica experience machine. For something like 10% of the population a book is an OK-but-not-good-enough replica. But we now have much better technologies then books at our fingertips, eardrums, and eyeballs, and so we should be able to build experience machines that will push that 1% up to 20% or so and that 10% up to 70% or so. But we are not doing so well so far...
Wingnuts gotta nut. And Krugmans gotta Krug. I score this for Krugman, 6-0, 6-0, 6-0:
... One... is that the experience of disinflation in the 1980s was a huge shock to Keynesians, refuting everything they believed. What makes this belief curious is that it’s the exact opposite of the truth. Keynesians came into the Volcker disinflation... with a standard... model.... And events matched.... Cutting inflation would require a temporary surge in unemployment. Eventually, however, unemployment could come back down to more or less its original level; this temporary surge in unemployment would deliver a permanent reduction in the inflation rate, because it would change expectations.... [That's] what the Volcker disinflation actually looked like.... It was the other side of the macro divide that was left scrambling for answers. The models Chicago was promoting in the 1970s, based on the work of Robert Lucas and company, said that unemployment should have come down quickly.... Those models were unsustainable in the face of the data. But... most of those guys went into real business cycle theory--basically, denying that the Fed had anything to do with recessions. And from there they just kept digging ever deeper into the rabbit hole...
The lessons everyone serious who does forecasting drew from the Volcker Disinflation were three:
Talk is cheap, and so credibility is hard to establish. Shifting expectations rapidly and substantially requires real policy régime change--which is much more than just announcing: "this time we really are serious!"
As a consequence, expectations in the real world are going to be either anchored or adaptive in the absence of real policy régime change.
The adaptive-expectations Phillips Curve is relatively flat: you need big shifts in unemployment to reliably generate small shifts in current inflation.
Lucas drew a different set of lessons from the Volcker Disinflation et sequelae:
The main finding that emerged from the research of the 1970s is that anticipated changes in money growth... are not associated with the kind of stimulus to employment and production that Hume described.... The importance of this distinction between anticipated and unanticipated monetary changes is an implication of every one of the many different models, all using rational expectations, that were developed during the 1970s to account for short-term trade-offs.... The discovery of the central role of the distinction between anticipated and unanticipated money shocks resulted from the attempts... to formulate mathematically explicit models... addressing the issues raised by Hume. But... none of the specific models... can now be viewed as a satisfactory theory of business cycles.... Much recent research has followed the lead of Kydland and Prescott (1982) and emphasized the effects of purely real forces on employment and production...
Whenever I read this, I can only think that Lucas uses "finding", "are", and "discovery" in a manner of which Inigo Montoya would disapprove.
Lucas seems to say that rational-expectations monetary models of the business cycle had their chance, failed, and so it is time to move on to rational-expectations real models of the business cycle in which recessions come about because of engineers' losses of knowledge how to produce things efficiently--the Great Forgetting theory--of workers' reduced desire to work--the Great Vacation theory--or of a sudden increase in the depreciation rate on capital--the Great Rusting theory.
Moving backward, and dropping the straitjacket of the rational-expectations representative-agent framework was just not considered.
[Today's Document: december 31 1944](https://www.tumblr.com/search/december 31 1944):
On the lookout for German snipers, a squad of Third Army Infantrymen move cautiously through the streets of Moircy, Belgium. 12/31/44. Co. C, 1st Bn., 345 Reg’t., 87th Inf. Div.
I really would like to understand the thought processes by which anyone would think that raising $900K, giving $100K to family members, and spending $600K on other overhead would be a thing to do...
Kudos to Hunter Walker!
...The Born Fighting PAC... in recent years has paid nearly $100,000 to his wife and daughter.... The committee, which received nearly $1 million in donations... nearly 10% of the contributions received by the PAC went to Webb's family.... Neither Webb Hogan nor Hong Le Webb responded to requests for comment from Business Insider on Monday....
I moved the weblog over to TypePad and http://delong.typepad.com in March 2005, having gotten tired of trying to maintain it on my own using Movable Type.
Back then, the Social Security Privatization War was in full swing. We in the Rubin wing of the Democratic Party were prepared to endorse and support--nay, be enthusiastic about--private Social Security accounts, provided that they were (1) structured so as to be a good investment vehicle for Americans rather than a lousy investment vehicle that was a profit center for Wall Street, and (2) a substantial net addition to the flow of retirement savings--primarily an add-on to the existing Social Security system, rather than a carve-out from it.
The piece of the launch of ObamaCare--Blue State ObamaCare, that is, for Red State ObamaCare has not really been launched yet, and the Red States are more than $100 billion/year poorer for it--that puzzles me the most is the extraordinary slowdown in the rate of growth of health care costs that accompanied it. None of our standard economic models have channels plausibly large enough to make such a slowdown a conceivable consequence of the ObamaCare launch, get the striking coincidence in time makes it very difficult to believe that ObamaCare is not in some way largely responsible...
Obamacare and Effective Government: "When historians look back...:
...on the United States’ Patient Protection and Affordable Care Act... they will not devote much attention to its regulations, its troubled insurance exchanges, or its website’s flawed launch... [but] on how ‘Obamacare’ encouraged a wave of innovation that gradually tamed the spiraling costs of a dysfunctional system, even as millions of previously excluded Americans gained access to health insurance...
Over at Equitable Growth: Musings on 25-54 Employment-to-Population Rates and the Macroeconomy: Daily Focus
(1) If the US economy were operating at its productive potential, the share of 25 to 54-year-olds who are employed ought to be what it was at the start of 2000. Back then there were few visible pressures leading to rising inflation in the economy.
Does anybody disagree with that? READ MOAR
- Evan Soltas: Falling Labor Force Participation Update
- Paul Krugman (2010): Mysteries Of Deflation
- Matthew Yglesias: Lyndon Johnson’s Aides Mad MLK Is Hero of Selma
- Kevin Murphy: How Gary Becker Saw the Scourge of Discrimination
Must- and Shall-Reads:
- "The American public and its political leadership will do anything for the military except take it seriously. The result is a chickenhawk nation in which careless spending and strategic folly combine to lure America into endless wars it can’t win..." :
- "A few weeks ago I offered some calculations suggesting that lower demand for oil might account for about $20/barrel of the dramatic decline in the price of oil since last summer. Here I point to some other evidence consistent with that conclusion" :
- A Quick Note on Different Views of Potential GDP :
- Falling Labor Force Participation Update :
- How Gary Becker saw the scourge of discrimination :
- Mysteries Of Deflation :
- Lyndon Johnson’s Aides Mad MLK Is Hero of Selma :
- Prosecute Torturers and Their Bosses :
And Over Here:
Hoisted from Other People's Archives: From Parker (1994): "The Rise and Fall of The Wonderful Wizard of Oz as a 'Parable on Populism'"
The big arguments against interpreting the echoes of the Populist Free Silver movement of the 1890s as an important part of the message sent by the author and received by the contemporary readers of L. Frank Baum's The Wizard of Oz are:
- Nobody who interpreted it such a way wrote down that they did so until the 1960s.
- L. Frank Baum was not a Bryanite Free-Silver Democrat, but a Republican.
In my view, the echoes--Silver Slippers, Greenback City, Yellow Brick Road--are much better understood as a wink from Baum to the adults reading the book out loud to his principal audience rather than as evidence of the Wizard of Oz as monetary allegory.
As always, with things Ozish, read: Martin Gardner: The Royal Historian of Oz
From: David B. Parker (1994): "The Rise and Fall of The Wonderful Wizard of Oz as a 'Parable on Populism'", Journal of the Georgia Association of Historians 15: 49-63:
...for seeing The Wonderful Wizard of Oz as a Populist allegory. Citing Gardner, Littlefield mentioned Baum's support for Democratic candidates and, of course, the torchlight parades for Bryan. "No one who marched in even a few such parades could have been unaffected by Bryan's campaign," Littlefield asserted. If one begins with the assumption that Baum was a Bryan Democrat, it is easy to read a Populist (or at least a pro-silver) message into the book.
But was Baum a Bryan Democrat?
Early this morning, about 2:00 A.M., I was waked by the ‘general quarters’ alarm and by the blaring PA, ‘All men man your battle stations.’ I dressed and took my life preserver and headed for the deck. In the ‘tween deck I heard the pounding of ack-ack and the chatter of machine guns. Upon reaching the deck, I saw that all fire was directed immediately over our heads.
It was a very bright night, full moon, and the luminous plane was easily spotted quite high up. With red lines of bullets chasing him and ominous black puffs of exploding 90s all around, he flew very fast, headed away from us toward open sea and a thinnish cloud bank.
Evan Soltas reports one of the smaller estimates of the permanent labor-side hysteresis damage done to the American economy by the Lesser Depression: 1.2/60 = 2% permanent decline in the American labor force relative to the previous trend. Something to make my less pessimistic on New Year's Eve Eve...
...of the 3.1 percentage-point decline in the participation rate between March 2007 and March 2014, 1.9 p.p (three-fifths) is explained demographic change and 1.2 p.p (two-fifths) of it is unexplained by demographic change. Of the explained portion, almost all of that (1.6 p.p.) is aging..."
...Obama has said multiple times that ‘we need to look forward as opposed to looking backwards,’ as though the two were incompatible. They are not. The nation cannot move forward in any meaningful way without coming to terms, legally and morally, with the abhorrent acts that were authorized, given a false patina of legality, and committed by American men and women from the highest levels of government on down.... These are, simply, crimes.... No amount of legal pretzel logic can justify the behavior detailed in the report. Indeed, it is impossible to read it and conclude that no one can be held accountable. At the very least, Mr. Obama needs to authorize a full and independent criminal investigation... former Vice President Dick Cheney; Mr. Cheney’s chief of staff, David Addington; the former C.I.A. director George Tenet; and John Yoo and Jay Bybee... Jose Rodriguez Jr., the C.I.A. official who ordered the destruction of the videotapes; the psychologists who devised the torture regimen; and the C.I.A. employees who carried out that regimen.... Republicans... with one notable exception, Senator John McCain, they have either fallen silent or actively defended the indefensible...
...in the 60s, applied macroeconomics has relied on some kind of inflation-adjusted Phillips curve.... But here’s the thing: the [Friedman-Phelps] inflation-adjusted Phillips curve predicts not just deflation, but accelerating deflation in the face of a really prolonged economic slump.... This doesn’t happen.... So what’s going on? There’s a body of work I’m surprised we haven’t been hearing more about: the downward nominal wage rigidity literature. I learned about the concept from Pierre Fortin; Mr. Janet Yellin, aka George Akerlof, and co-authors wrote quite a lot about it.... It’s important to take account of downward rigidity so as not to get fooled into accepting a persistently depressed economy as normal.... It’s time to start focusing on downward rigidity and what it implies. After all, all indications are that we’re going to be dealing with a depressed economy for a long time to come.
How Gary Becker saw the scourge of discrimination: "The legal remedies sought by the [civil-rights] campaigners...:
...played no significant role in his analysis. From an economic perspective, legal remedies have corrected some problems but exacerbated others.... Firms intent on discriminating in their hiring practices can move to locations without significant minority populations.... If people have a tendency to discriminate on the basis of race, legislation cannot eliminate that tendency. Politicians cannot merely legislate a new outcome, or legislate preferences away. They can only change the way discrimination manifests itself.... One obvious question begged by Becker’s work was, who benefits from discrimination? While he did not directly address this, he did suggest that one beneficiary might be labor unions, which have traditionally represented white workers...
That legislation cannot do anything other than change the way that racial discrimination manifests itself and that the first big beneficiary from racial discrimination one thinks of are (or were) (white) labor unions seems to me to have much more to do with Kevin Murphy's views than Gary Becker's...
...[but] tell[s] a story in which King and his collaborators are the key actors.... Johnson['s]... notion of doing the War on Poverty first and voting rights second isn't obviously wrongheaded or pernicious, but King doesn't agree.... Johnson tries a couple of times to talk them out of it... fails... swings around to King's viewpoint.... Certainly one could image an excellent Lincoln-esque film that primarily highlighted the legislative machinations among white politicians and cast LBJ as the hero (I would watch). But the choice to make a different film that highlights activist demands and casts MLK as the hero isn't a form of historical inaccuracy or grounds for dismissing the movie. The idea that a film should be ruled out for having the temerity to focus on black people's agency in securing their own liberation is completely absurd. We've had too few such films in American history and everyone could stand to watch some more...
I gotta say, I really do not think David Bell has a clue how badly he looks to every liberal under 40--and even to some of us who are 54--when he feels he has to:
- cut all ties with The New New Republic upon the firing of Franklin Foer and Leon Wieseltier and their replacement by Gabriel Snyder;
- proudly and blithely and without protest continued his association with The Old New Republic when its editor-and-chief Martin Peretz writes: "Muslim life is cheap, most notably to Muslims. And among those Muslims led by the Imam Rauf there is hardly one who has raised a fuss about the routine and random bloodshed that defines their brotherhood. So, yes, I wonder whether I need honor these people and pretend that they are worthy of the privileges of the First Amendment which I have in my gut the sense that they will abuse."
To be the kind of person who doesn't quit in protest but stays to influence is one thing. But if one is the kind of person who quits in protest, when one does not do so ones silence speaks loudly indeed.
Ann Leckie on David Graeber's "Debt: The First 5000 Mistakes": Handling the Sumerian Evidence Smackdown
I am once again out of DeLong Smackdowns of sufficiently high quality...
That means that it is time to (shudder) read the next page in chapter 11 of David Graeber's Debt: My First 5000 Mistakes.
But I cannot face it.
However, a correspondent sends me a piece from an extremely sharp observer--Ann Leckie, author of the devastatingly-good Ancillary Justice.
She worries that the rot in the book begins much earlier than chapter 11:
Grandview Dec. 29, 1914
Here goes for your Wednesday letter since it looks very much as if I shall stay at home for the most of this week. Tonight the O.E.S. and Masons are going to have a blowout. I am one of the assistant performers as usual at such Grandview doings.
I auctioned off a box supper the other evening for the Grandview school and actually got as much as 3.00 for a box. There were 29 and they brought $23.00. Very good considering that I am not a born auctioneer nor an educated one either.
Every time I visit the Weekly Standard--or National Review, or the American Spectator--I wonder: how do its writers (and editors!) deal with the fact that the money that is in their paychecks is obtained by scaring and then picking the pockets of mentally ill and paranoid people, and further feeding their paranoia?
It remains a mystery to me...
...By MONEY MORNING STAFF REPORTS
Should the rise of conflicts across the Middle East and Ukraine serve as a warning sign that something much more dangerous is approaching?
According to Jim Rickards, the CIA's Asymmetric Warfare Advisor, the answer is yes.
In a startling interview he reveals that all 16 U.S. Intelligence Agencies have begun to prepare for World War III.
Making matters worse, his colleagues believe it could begin within the next 6 months.
However, the ground zero location for this global conflict is what makes his interview a must-see for every American.
Take a few moments to watch it below and decide for yourself...
It grevies me exceedingly that I still date my Letters from this place, & That I am so far distant from the dearest object of my affections. This War with all its variety is not able to banish your much lov’d Idea from my heart. Whatever I am employ’d about still you are with me – I often say to myself no my Lucy not so your Harry will return as soon as the sacred calls of his Country will permit – will return with the permission of heaven and enjoy all the blessings of [struck: nuptial] conjugal affection, – I wrote you a few days past by Mr Shaw. it was short as my then [hurry] would not suffer me to [to do otherwise]
On this day in 1944, as World War II dragged on, President Franklin D. Roosevelt orders his secretary of war to seize properties belonging to the Montgomery Ward company because the company refused to comply with a labor agreement.
From Perry Anderson (1976): Considerations on Western Marxism: "The consequence of this impasse...
...was to be the studied silence of Western Marxism in those areas most central to the classical traditions of historical materialism: scrutiny of the economic laws of motion of capitalism as a mode of production, analysis of the political machinery of the bourgeois state, strategy of the class struggle necessary to overthrow it. Gramsci is the single exception to this rule--and it is the token of his greatness, which sets him apart from all other figures in this tradition....
- Robert Rubin and Nicholas Turner: The Steep Cost of America’s High Incarceration Rate
- Noah Smith: Ten Investing Facts of Life
- Martin Feldstein: The Fed’s Needless Flirtation With Danger
- Nighttime Must-Read: David Beckworth: Follow-Up to: The Fed's Dirty Little Secret
Must- and Shall-Reads:
- She Short Sells Shoes On A Shopping Site :
- The Secret Life of Money: Everyday Economics Explained ::
- "Some believe the central political issue of our era is the size of the government. They’re wrong. The central issue is whom the government is for..." :
- How Compound Interest Affects Retirement Savings: Every 25-Year-Old In America Should See This Chart :
- The Real Story of How America Became an Economic Superpower: Adam Tooze's study of the two world wars traces a new history of the 20th century :
- "War did not break out in the Pacific Rim.... Bilateral deals on climate... and trade... a robust Sino-American relationship.... The longest post-Westphalian streak of ‘no great power war’... continue[s].... [No] next U.S. recession.... Even in the parts of the world where bad things happened, the worst-case scenarios did not materialize.... Ebola... did not spread into Nigeria..." :
- Rising Oceans Force Bangladeshi Farmers Inland for New Jobs :
- Follow-Up to: The Fed's Dirty Little Secret :
- Ten Investing Facts of Life :
- The Steep Cost of America’s High Incarceration Rate :
- The Fed’s Needless Flirtation With Danger :
- Nothing Non-Gold Can Stay :
- 1980 and All That-checking, and for that matter professional journals that erect high barriers.... :
And Over Here:
...But why do we think that fiscal policy would work any better given the Fed's dedication to its low inflation target?... If the U.S. Treasury Department sent $5000 checks... and... [people] began to spend... we would begin to see inflation go up.... The Fed would tighten.... For the same reason QE was limited from the beginning it also true that fiscal policy was limited from the beginning. With highly-credible inflation targeting central banks, both monetary and fiscal policy require monetary regime change to work at the ZLB. So I am puzzled as to why Krugman put his energy into drumming up support for more fiscal policy rather than drumming up support for a change in monetary regimes...
...investing aphorisms.... Almost all... are good advice.... There was really only one I didn’t like: '67. Finance would be better if it was taught by the psychology and history departments...'. As someone who teaches finance, I might sound a little self-serving for saying that academic finance has valuable things.... But... [many of] Housel’s... aphorisms... come from... finance professors!... 10 of my favorites....
(6)... Erik Falkenstein says: 'In expert tennis, 80% of the points are won, while in amateur tennis, 80% are lost. The same is true for... investing'.... (14)... Nick Murray.... 'Timing the market is a fool's game, whereas time in the market is your greatest natural advantage.'... (24)... 40% of stocks have suffered 'catastrophic losses' since 1980.... If you understand the math of the random walk... this won’t be very surprising! (28.)... 72% of mutual funds benchmarked to the S&P 500 underperformed.... Finance profs have been yelling about this for decades.... (44). Our memories... extend... a decade back.... [Time] erases many important lessons.... (46)... The most boring companies... can make some of the best long-term investments.... Finance researchers have noticed the outperformance of value stocks over glamor stocks for decades! (50)... U.S. stocks increased 2,000-fold between 1928 and 2013, but lost at least 20% of its value 20 times.... (68)... Tim Duy, 'As long as people have babies, capital depreciates, technology evolves, and tastes and preferences change, there is a powerful underlying impetus for growth that is almost certain to reveal itself in any reasonably well-managed economy.' This is great advice. But it’s also a reason not to invest in stocks in Japan.... (90)... Those who trade the most earn the lowest returns.... (97)... The single best three-year period to own stocks was during the Great Depression. Not far behind was the three-year period starting in 2009.... Long-run predictability is one of the most interesting facts discovered by finance researchers... what earned Yale economist Bob Shiller his 2013 Nobel.... Housel’s compilation of aphorisms is a good list. Check it out. And remember, finance academics are hard at work discovering interesting and useful facts about investing, trading and asset markets."
During the American Revolution, Patriot General George Washington crosses the Delaware River with 5,400 troops, hoping to surprise a Hessian force celebrating Christmas at their winter quarters in Trenton, New Jersey. The unconventional attack came after several months of substantial defeats for Washington's army that had resulted in the loss of New York City and other strategic points in the region.
Morning Must-Read: Robert Rubin and Nicholas Turner: The Steep Cost of America’s High Incarceration Rate
...But appropriate punishment... shouldn’t obscure the vast deficiencies in the criminal-justice system.... The U.S. rate of incarceration, with nearly one of every 100 adults in prison or jail, is five to 10 times higher than the rates in Western Europe and other democracies.... Long sentences have had at best a marginal impact on crime reduction. This is not only a serious humanitarian and social issue, but one with profound economic and fiscal consequences.... For the more than 600,000 people who leave prison and re-enter society every year, finding employment can be a severe challenge.... Up to 60% of formerly incarcerated people are unemployed one year after release.... It’s no surprise that 43% of people released from prison end up back behind bars within three years, according to a recent Pew study on recidivism. The costs of incarceration extend across generations. Nearly three million American children have a parent in prison or jail.... There is widespread bipartisan agreement that we are using prison for too many crimes and for too long.... The time has come to make sensible reform in these four areas—sentencing, parole, rehabilitation and re-entry—a national priority...
...[which] reduced long-term interest rates and raised... equities and real estate... caused lenders and investors to reach for yield... taking greater risks through lower-quality loans... and accepting narrower spreads.... The risks... were unnecessary. Well-designed tax policies... an enlarged investment tax credit... converting the deduction for business interest to a credit... allowing deductions for dividends on common or preferred equity.... The resulting revenue loss could be balanced by a temporary rise in the corporate income-tax rate... taxing more highly the return on old capital while stimulating new investment.... A direct tax incentive to home builders.... The... deduction of mortgage interest... extended to non-itemizers... converted to an optional tax-credit.... Quantitative easing increase[s] the risk of financial instability.... Increased government spending and reduced tax revenue increase budget deficits and national debt.... Changes in the tax structure could stimulate spending... without raising... deficits.
Why It Is Likely to Be Really Bad for Bloomberg as a Journalistic Enterprise to Have John Micklethwait at Its Head: Hoisted from Other People's Archives
...a pair of 'Economist' writers. Perhaps you recall their June 21, 2005 WSJ op-ed, ‘Cheer Up Conservatives, You’re Still Winning,’ in which they declare ‘the right has walloped the left in the war of ideas.’ Ahem:
One of the reasons the GOP manages to contain Southern theocrats as well as Western libertarians is that it encourages arguments rather than suppressing them. Go to a meeting of young conservatives in Washington and the atmosphere crackles with ideas, much as it did in London in the heyday of the Thatcher revolution. The Democrats barely know what a debate is.
Well, the book is not such a polemical and high-handed affair as that portends. Mostly. It’s really--like a long 'Economist' article.
The Christmas truce (German: Weihnachtsfrieden; French: Trêve de Noël) was a series of widespread but unofficial ceasefires along the Western Front around Christmas 1914. In the week leading up to the holiday, German and British soldiers crossed trenches to exchange seasonal greetings and talk. In areas, men from both sides ventured into no man's land on Christmas Eve and Christmas Day to mingle and exchange food and souvenirs. There were joint burial ceremonies and prisoner swaps, while several meetings ended in carol-singing. Men played games of football with one another, giving one of the most enduring images of the truce. However, the peaceful behaviour was not ubiquitous; fighting continued in some sectors, while in others the sides settled on little more than arrangements to recover bodies. The following year, a few units arranged ceasefires, but the truces were not nearly as widespread as in 1914; this was, in part, due to strongly worded orders from the high commands of both sides prohibiting fraternisation. Soldiers were no longer amenable to truce by 1916. The war had become increasingly bitter after devastating human losses suffered during the battles of the Somme and Verdun, and the incorporation of poison gas.
- James Heckman (1995): Cracked Bell
- Paul Krugman: Recession, Recovery, and Gold
- Matt O'Brien: Now that the Dow Has Hit 18,000, Let Us Remember the Worst Op-Ed in History
- Is the Fed in a Trap?: I Really Cannot See It...s
- David Weigel: Republicans Block Reappointment of CBO Chief Doug Elmendorf
- Evaluating labor standards and employment outcomes :
- Creating a new understanding of economic growth and well-being :
- The Bank [of England] currently provides a drip-feed of releases... replacing a drip feed with a deluge will make the information provided harder to digest... leave most observers less well informed... indeed, the Bank itself will no longer be able to identify the separate impact of the policy decision.. :
- What Makes an Effective Executive (20040:
- Let us enjoy the greatest human escape of all :
- Righting Rogoff on Japan's Monetary Policy :
- A Critique of John Hussman’s Chart of Estimated Future Equity Returns :
- "John Cochrane... ‘An Autopsy for the Keynesians’... doesn’t ever define ‘Keynesian’, and because he doesn’t he’s able to engage in a series of dishonest generalizations.... I am mad at myself for even wasting the time to respond to such an obviously misleading article." :
- Cracked Bell ** (1995):
- Recession, Recovery, and Gold :
- Now that the Dow has hit 18,000, let us remember the worst op-ed in history :
- Republicans Block Reappointment of CBO Chief Doug Elmendorf :
- Minitrue Sullivan (2004):
And Over Here:
study of racial and ethnic differentials in socioeconomic outcomes.... Evidence that racial differentials weaken when ability is controlled for using regression methods does not rule out an important role for the environment.... In the presence of measurement error in the environment, the authors' analysis will overstate the 'true' effect of ability on those outcomes. There are methods for addressing these problems, but Murray and Herrnstein do not use them....
By its very construction... the 'two-standard deviation' range in measured IQ... [covers] 95 percent of the population. A 'two-standard deviation' range of their family background index does not include 95 percent of the population, because that measure does not come from a bell curve.... By restricting the range of the environmental variable they understate the role of the environment in affecting outcomes relative to the role allocated to IQ...
...the usual suspects told us to run for the hills, buying gold along the way. Zimbabwe! Or, actually, not.... Gold prices are down.... Why they were high in the first place[:] Gold is not, in fact, a hedge against inflation. It’s something people buy when real returns on alternative assets are low.... Gold went up as real interest rates turned negative, thanks to a depressed economy.... As recovery has gathered strength, real rates have gone up and gold has gone down...
On 23 December, the weather conditions started improving, allowing the Allied air forces to attack. They launched devastating bombing raids on the German supply points in their rear, and P-47 Thunderbolts started attacking the German troops on the roads. Allied air forces also helped the defenders of Bastogne, dropping much-needed supplies—medicine, food, blankets, and ammunition. A team of volunteer surgeons flew in by military glider and began operating in a tool room.
By 24 December, the German advance was effectively stalled short of the Meuse. Units of the British XXX Corps were holding the bridges at Dinant, Givet, and Namur and U.S. units were about to take over. The Germans had outrun their supply lines, and shortages of fuel and ammunition were becoming critical. Up to this point the German losses had been light, notably in armor, which was almost untouched with the exception of Peiper's losses. On the evening of 24 December, General Hasso von Manteuffel recommended to Hitler's Military Adjutant a halt to all offensive operations and a withdrawal back to the West Wall. Hitler rejected this.
The raw ingredients out of which The Lord of the Rings are equal parts Norse-Anglo-Saxon-Germanic myth, chivalric romance, and Christian apocalyptics (evil personified and mighty, but also powerful guardian spirits, and over all a God who arranges things so that the highest prizes fall to those who suffer). The mix is extraordinarily powerful.fashioned
Morning Must-Read: Matt O'Brien: Now that the Dow Has Hit 18,000, Let Us Remember the Worst Op-Ed in History
...And the Dow isn't even the best barometer of the stock market.... But if arbitrary round numbers are your thing, the Dow... above 18,000 for the first time. And that brings us to the worst op-ed in history. On March 6, 2009, former George W. Bush adviser Michael Boskin offered whatever the opposite of a prophecy is when he said that 'Obama's Radicalism Is Killing the Dow.'... Boskin... didn't think that this once-in-three-generations financial crisis was to blame for the market meltdown. Instead, he blamed it on Obama for... talking about raising taxes?
'It's hard not to see the continued sell-off on Wall Street and the growing fear on Main Street,' Boskin philosophized, 'as a product, at least in part, of the realization that our new president's policies are designed to radically re-engineer the market-based U.S. economy.' What followed was the usual conservative jeremiad against higher taxes on the rich, lower taxes on the poor, and deficit spending. Obama's trying to turn us into Europe, and that's why markets are pricing in the possibility of a Great Depression—not the dying economy he inherited. It was... extraordinarily ill-timed.... Obama's radicalism has killed the Dow to the tune of a 171 percent return since Boskin's op-ed.
Over at Equitable Growth: The very sharp and smart Stephen Roach is seriously alarmed--and I think he is wrong.
...and highly dangerous path... the same incremental approach that helped set the stage for... 2008-2009. The consequences could be similarly catastrophic... incremental approach... condoning mounting excesses in financial markets and the real economy.... [The] macro-prudential tools... approach... fails to address the egregious mispricing of risk brought about by an overly accommodative monetary policy.... READ MOAR
Live from La Farine: If You Had Told Me Twenty Years Ago That the People the Wall Street Journal Put on Its Op-Ed Page Would Only Get Less Hinged as Time Passed...
I would not have believed you. But is is true.
And so I gotta ask: Does John Cochrane have no friends? It is intervention time here: Cochrane is doing himself and his reputation no good by this.
He ought to simply say that he was clearly underbriefed back in 2007-9 and said some stupid things, that he recognizes that the world has evolved since 2007 in ways strikingly inconsistent with the beliefs he had then, apologize, and go back to doing what he does (or perhaps used to appear to do) well, asset pricing, and do that well--if he still can).
His friends need to tell him this.
Frances Coppola is not his friend:
The Gullible Economist: "I think John Cochrane has lost his marbles...:
I went out to Versailles and saw Ike today. He is a prisoner of our security police and is thoroughly but helplessly irritated by the restriction on his moves. There are all sorts of guards, some with machine guns, around the house, and he has to travel to and from the office led and at times followed by an armed guard in a jeep.
He got some satisfaction yesterday in slipping out for a walk around the yard in deep snow, in the eyes of the security officers quite the most dangerous thing for him to do, but he had the satisfaction of doing something he wanted to do. I told him he now knows how it must feel to be President and be guarded day and night by ever-watchful secret-service men.
...to another term as head of the Congressional Budget Office, according to a party aide.... Elmendorf, 52, an economist with experience at the Treasury Department and the Federal Reserve, was appointed to run the CBO in 2009 when then-director Peter Orszag was picked by President Barack Obama to run the White House Office of Management and Budget. In 2011, Elmendorf won a full four-year term, after Republicans took control of the House while Democrats retained the Senate. A CBO conclusion that Obama’s signature domestic achievement -- the 2010 Affordable Care Act -- was cutting costs pleased Democrats, while Republicans appreciated the office’s finding that the health-care law and a proposed minimum wage increase would cost jobs...
...went on sale a little over a century ago, our founding editor Herbert Croly outlined his vision to a reporter from The New York Times:
The magazine, which is to be a weekly review of current political and social events and a discussion of the theories they involve, is to represent progressive principles, but it is to be independent of any party, or individual in politics.
From that mild-seeming statement of purpose has emerged perhaps America’s most argumentative publication—a journal brimming with strong opinions beautifully elaborated (as well as a few duds). Croly’s vision is durable (perhaps because it's vague), giving his inheritors wide latitude to both adhere to his principles and fight over the specifics.
It was in Malmedy that Sergeant Francis Sherman ‘Frank’ Currey in the 3rd platoon of Company K, 120th Infantry Regiment, 30th Infantry Division found himself in charge in the early hours of the 21st December.
The attack towards K Company’s roadblock began as an infantry attack. There was no artillery preparation, in fact, no artillery support at all. When the advancing enemy infantry got within three or four hundred yards of the roadblock’s outpost, they were discovered and fired upon.