Afternoon Must-Read: Nick Bunker: Did Credit Replace Wage Growth in the Mid-2000s?
Barack Obama's 23 Hurricane Katrinas: Live from teh Roasterie

Noted for Your Afternoon Procrastination for January 26, 2015

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


Must- and Shall-Reads:

And Over Here:

Nick Bunker: Did Credit Replace Wage Growth in the Mid-2000s?: "So were the middle class and the rich were taking out much larger loans than before or more mortgages? According to Adelino, Severino, and Schoar... more so the latter... new borrowers entering the market.... Adelino, Severino and Schoar’s paper would seem to indicate that what caused the run up in mortgage debt wasn’t due to a change in ‘lending technology’ such as securitization or looser government policies. Rather, the debt was built by the same kind of bubble dynamics that leads to investors betting that an asset will never lose value. Which story is true is still up for debate, but it could just be that this time wasn’t no different after all..."

  1. Brian Buetler: Repealing Obamacare Would Be Immoral: "As a political matter Obamacare probably can’t be repealed outright.... Strain also notes that conservatives might ‘have their way with Obamacare’ if ‘the Supreme Court deals it a death blow.’... [Strain's] wishing for this outcome is morally dubious, and Strain’s counterclaim is unusually weak. 'In a world of scarce resources, a slightly higher mortality rate is an acceptable price to pay for certain goals--including more cash for other programs, such as those that help the poor; less government coercion and more individual liberty; more health-care choice for consumers.... Such choices are inevitable. They are made all the time.' This argument about ends is concise, unobjectionable, and completely unresponsive to the situation at hand. If the Supreme Court eliminates ACA subsidies... the federal government will indeed spend less.... But none of the other tradeoffs Strain lists will happen... [no] programs that help the poor... individual liberty will not increase... a wider array of health plans will not materialize. Millions will lose their coverage, insurance markets will collapse.... The moral implications of this outcome are hideous..."

  2. Ann Friedman: Can We Solve Our Child-Care Problem?: "I called economist Heather Boushey to find out. ‘What’s interesting about the cost question is that it presumes that no one is paying the costs right now.... We are paying for it, we’re just paying for it in this inefficient way that doesn’t work for families and isn’t good for kids.’ Families that can scrape together the money for safe, inspected day-care facilities are forgoing other priorities like saving for retirement or buying new shoes. Families who can’t afford day care are relying on a relative or a neighbor to provide informal care, which may or may not be paid.... Obama’s suggested tax credit is a first step. But he was not proposing a network of state-run, quality day-care facilities--which actually did exist, during World War II, when men were at war and women flooded the workplace.... Nixon vetoed a bill that would have established a network of federally subsidized child-care centers, open to all parents on a sliding scale. He cited the bill’s ‘family-weakening implications’.... The notion that affordable day care is harmful to families sounds downright crazy today.... Sure, personal politics play a role in how each family makes child-care decisions. But in the vast majority of cases, the economics matter far more..."

  3. Kenneth Thomas: What Is Noah [Smith] Thinking?: "Noah Smith put up a post Sunday purporting to show that things aren’t so bad for the middle class... immediately shows us a chart of median household income. Stop right there..... We need to look at individual data, aggregated weekly... to know what’s going on.... The individual real weekly wage is still below 1972 levels, [so] households... have traded time and debt for current consumption. This is not an improvement in the middle class lifestyle.... Richard Serlin points out that we also need to consider risk.... The middle class is less secure than it was in 1972. Noah has lots of interesting things to say, and you should check out his blog if you haven’t already. But this is an error on his part, and I don’t understand what he’s thinking."

  4. Arun Garg: Value Investing as Software Eats the World: "Venture capitalist Marc Andreessen’s trenchant phrase--‘Software is Eating the World’--evokes the reach and power of this pervasive and powerful phenomenon.... There are serious investing implications.... The following is just a small sample of companies that once used to dominate their niche are now are either gone, or fundamentally transformed, by the encroachment of software: The bookstore chain Borders got ‘eaten’ by software-based Amazon. The music store chain Tower Records got ‘eaten’ by iTunes software. Apple’s iTunes itself is getting ‘eaten’ by Pandora and Spotify streaming software. The video chain Blockbusters got ‘eaten’ by Netflix software. Newspapers and magazines got ‘eaten’ by the websites and blogs and online ads. Yellow Pages got ‘eaten’ by Google software. Kodak got ‘eaten’ by digital photos and smartphone cameras. AT&T and Vodaphone are under attack from Skype, Whatsapp, Facetime, and Facebook. Retailing giants like Sears, Target, Walmart, and Tesco are being ‘eaten’ by Amazon. Bank clerks got ‘eaten’ by ATM machines. Human brokers were ‘eaten’ by online brokerage sites. Travel agencies are being ‘eaten’ by Expedia and Travelocity, etc. Recruiters are being ‘eaten’ by LinkedIn and other social networks. Insurance underwriters and actuaries are being ‘eaten’  by ‘big data’ analytic software.... the list grows every day. This should be of critical interest to all value investors since companies in the process of being eaten alive can often seem attractive to investors--inexpensive on the basis of the usual valuation ratios--right until their very end.... It seems clear, at least to me, that the old value investing strategy of avoiding technology stocks is no longer tenable as software keeps eating more and more of the world..."

Should Be Aware of:


  1. Andrew Kaczynski: Ben Carson Advocated Partial Government Health Care Takeover In His 2012 Book: "Dr. Ben Carson advocated for government-run catastrophic health care as late as 2012. Responding to a report from BuzzFeed News during a press conference at the Iowa Freedom Summit on Saturday, Carson said that a 1996 essay that ran in the Harvard Journal of Minority Public Health in which he proposed government-run nationalized catastrophic care and end-of-life national guidelines for who should and should not receive care, ‘bears about as much resemblance to my current views as our views on Afghanistan did 20 years ago.’ Carson, however, advocated a nearly-identical proposal to reform health care in his 2012 book, 'America the Beautiful'..."

  2. Simon Wren-Lewis: Alternative Eurozone Histories: "It would be very nice if this was all about history. Unfortunately exactly the same mistakes are continuing, with equally damaging effects. Fiscal policy continues to be pro-cyclical, meaning that we had a second Eurozone recession and no real recovery from that. Monetary policy is either perverse (2011), or 6 years too late (!) and continues to openly encourage fiscal austerity. That most policy makers in the Eurozone have still not understood past errors remains scandalous..."

  3. Andrea Matranga: Climate-driven technical change: seasonality and the invention of agriculture: "During the Neolithic Revolution, seven populations independently invented agriculture. In this paper, I argue that this innovation was a response to a large increase in climatic seasonality. Hunter-gatherers in the most affected regions became sedentary in order to store food and smooth their consumption. I present a model capturing the key incentives for adopting agriculture, and I test the resulting predictions against a global panel dataset of climate conditions and Neolithic adoption dates. I find that invention and adoption were both systematically more likely in places with higher seasonality. The findings of this paper imply that seasonality patterns 10,000 years ago were amongst the major determinants of the present day global distribution of crop productivities, ethnic groups, cultural traditions, and political institutions."