Morning Must-Read: Lant Pritchett and Lawrence Summers: Growth Slowdowns: Middle-Income Trap vs. Regression to the Mean
For the Weekend: Anaconda

Noted for Your Morning Procrastination for December 12, 2014

Screenshot 10 3 14 6 17 PMOver at Equitable Growth--The Equitablog


Must- and Shall-Reads:

And Over Here:

  1. Jack Lew: Fires Back at Elizabeth Warren: 'You need multiple perspectives' | "You need multiple perspectives represented in a department like the Treasury. I think you’re hearing more from the few than from the many.... It is a natural thing for there to be some lingering concerns about whether or not the institutions... that caused the last crisis are truly changed. It’s a lot to expect for the American people who are struggling with wages that are not rising as fast as they should to say everything’s fine."

  2. Jared Bernstein: My version of the progressive agenda fits on a little bag. Take that, complexity!: "I was having a coffee with someone at the Corner Bakery who argued that the problem with the policy agendas of people like me is that they’re way too complex. ‘You couldn’t write it down on this little bag, for example,’ he said, a bit haughtily for my taste, as he threw down the gauntlet and handed me the bag.... The topic is: ‘Ways to reduce inequality and generate broadly shared prosperity.’ I’ll write it all down here .... Full employment! Low-income Households: education opportunity, expand EITC, higher min wage, subsidized jobs (direct job creation). Middle class: affordable higher education, boost manufacturing through lower trade deficit! **High end:&& close wasteful tax loopholes, financial market oversight (fewer bubbles), ‘financial transaction tax.’ I suppose you could argue there’s more... politicians committed to reconnecting growth and prosperity... willing to write the budgets... reducing the influence of money in politics... financial transaction tax... a tiny tax on security trades, like 0.03 percent... that would raise significant revenue while dampening unproductive volatile and high-speed trades.).... Protecting what we’ve got, from social insurance to labor laws to Obamacare. But... there’s no great mystery to pushing back on the great economic disconnect. In fact, it’s in on the bag."

  3. Martin Wolf: Europe’s Lonely and Reluctant Hegemon: "Some are born great, some achieve greatness, and some have greatness thrust upon ’em. Germany is now experiencing the last in full measure. So how is it faring with this eminence? Quite well, but not well enough.... Remarkably, of Europe’s large countries Germany has arguably the most stable and adult democracy. It is free of the xenophobic populism that mars the others. In Angela Merkel, it possesses an exceptionally mature and responsible leader. Despite these triumphs, all is not well. The eurozone economy is mired in stagnation and ultra-low inflation. Yet many German policy makers resist efforts to change this for the better.... Meanwhile, to the east a revanchist Russia has destabilised a hapless Ukraine and threatens to destabilise even more of its former empire. Again, just as is the case for the economy, this challenges postwar Germany’s reflexes. It wishes to avoid a more assertive posture but can no longer do so. The difficulty Germany finds in playing its new roles is understandable. Germany did not seek the euro. On the contrary, it was a price others foolishly asked Germans to pay for unification..."

  4. Paul Krugman: Profiles in Coreage: "Tim Duy... reminds us of the spring of 2011, when headline inflation had risen a lot mainly due to oil prices. He portrays Ben Bernanke as being all alone in insisting that the inflation bump was a blip.... As I recall, most saltwater economists agreed.... What Duy doesn’t say is that the inflation fight of 2011 was... another aspect of the fight over how the economy works--and another big victory for the Keynesian view. The concept of core inflation arises out of the notion that most prices are ‘sticky’, revised only on occasion, and that when they are revised they are set taking into account expected inflation over some length of time looking forward.... And yes, this means that you should discount the effects of falling oil prices in the same way you discount the effects of rising oil prices. I would nonetheless urge the Fed to hold off on rate hikes, but for different reasons--the asymmetry in risks between raising rates early and raising them late. And I worry that the Fed may be losing the thread here (hi Stan!). But that’s another topic."

  5. Ian Buruma: Immigration and the New Class Divide: "What can American Tea Party enthusiasts, Russian chauvinists, fearful Dutch and Danes, and Singaporean leftists possibly have in common that is driving this anti-immigrant sentiment?... The livelihoods of most of the middle-aged rural white Americans who support the Tea Party are hardly threatened by poor Mexican migrants... [but they do] share... anxiety about being left behind in a world of easy mobility, supranational organizations, and global networking.... It would be a mistake to dismiss anxiety about immigration as mere bigotry or apprehension about the globalized economy as simply reactionary. National, religious, and cultural identities (for lack of a better word) are being transformed, though less by immigration than by the development of globalized capitalism.... The new class divisions run less between the rich and the poor than between educated metropolitan elites and less sophisticated, less flexible, and, in every sense, less connected provincials. It is irrelevant that the provincials’ political leaders (and their backers) are sometimes wealthier than the resented metropolitan elites. They still feel looked down upon.... Populist rabble-rousers like to stir up such resentments by ranting about foreigners who work for a pittance or not at all. But it is the relative success of ethnic minorities and immigrants that is more upsetting to indigenous populations. This explains the popular hostility toward Obama..."

Should Be Aware of:

  • Annie Lowrey: The Rise of the Economic-Policy Truthers
  • Nick Szabo: Unenumerated: The dawn of trustworthy computing
  • Bill Montague: Herrenvolk Democracy and the American Right's Peculiar Definition of Tyranny
  • Vasiliki Fouka
  • Walt Mossberg: On the market share war between Apple and Android: "In my conversations with Apple executives, they vehemently insist that market share isn’t--and won’t be--their goal, and even go so far as to say that most public market-share numbers are somehow off the mark, though they decline to explain how.'"

    1. Lant Pritchett and Lawrence Summers: Growth Slowdowns: Middle-Income Trap vs. Regression to the Mean: "No question is more important for the living standards of billions of people or for the evolution of the global system than the question of how rapidly differently economies will grow over the next generation. We believe that conventional wisdom makes two important errors.... First, it succumbs to the extrapolative temptation and supposes that, absent major new developments, countries that have been growing rapidly will continue to grow rapidly, and countries that have been stagnating will continue to stagnate. In fact... past is much less the prologue than is commonly supposed. Second, conventional wisdom subscribes to the notion of a ‘middle-income trap’.... Any tendency of this type is very weak, and that what is often ascribed to the middle-income trap is better thought of as growth rates reverting to their means...

    2. Lawrence Summers: Crumbling Infrastructure Sign of Lost Collective Faith: "Take a walk from the US Air Shuttle in New York’s LaGuardia airport to ground transportation. For months you will have encountered a sign saying ‘New escalator coming in Spring 2015’. Or take the Charles River at a key point separating Boston and Cambridge which is little more than 100 yards wide. Traffic has been diverted to support the repair of a major bridge crossing the river for more than two years, and yet work is expected to continue into 2016.... It will take almost half as long to fix the escalator in LaGuardia as it took to build the Empire State building 85 years ago. Is it any wonder that the American people have lost faith in the future and in institutions of all kinds? If rudimentary tasks such as keeping escalators going and bridges repaired are too much to handle, it is little surprise that disillusionment and cynicism flourish.... The escalator that will take five months to repair is privately owned. Although it is in an airport, failure cannot be blamed on public authorities. Necessary maintenance had been delayed for years--with the escalator in question even being stripped for spare parts to support other escalators. Now the new owner has many priorities; the replacement of the escalator system is only one.... The focus of infrastructure discussions in both the public and the private sector needs to shift from major new projects whose initiation and completion can be the occasion for grand celebration to more prosaic issues of upkeep, maintenance, and project implementation.... The public and the media on their behalf need to be much less accepting of institutional failure. It has been said that we do not want to know all to which we can become accustomed. A vicious cycle in which governments perform poorly and so are starved of resources and so perform worse is serious threat to healthy democracy. Something similar can happen to business.... Fixing escalators and building bridges may seem like small stuff at a time of economic crisis and geopolitical instability. But it is time we recognise the importance of what may seem small to what is ultimately important--the faith of citizens in their collective future."

    3. Gavin Davies: The Fed’s plan to “normalise” interest rates | Gavyn Davies: "One of the most successful rules for investors in the past few years has been never to underestimate the innate dovishness of the Federal Reserve. Whenever there has been a scare that the Fed might move in a hawkish direction, this has quickly proven to be a mistake.... In recent months, however, the markets may have become over confident about the Fed’s dovishness in the face of a large and persistent decline in the US unemployment rate.... ‘Normalisation’ is the new buzzword. Fed Vice Chairman Stanley Fischer made it clear in an interview with Jon Hilsenrath of the Wall Street Journal last week that he believes that interest rates are far below normal, even if inflation stays low. A further upward adjustment in market rates may become necessary soon, unless inflation greatly surprises the Fed on the downside..."