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Noted for Your Nighttime Procrastination for January 17, 2015

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

Plus:

Must- and Shall-Reads:

And Over Here:

  1. Nick Rowe: There Are No Friedmans Today, Except Maybe Friedman: "No economist on the right is asking 'Where are the Galbraiths of yesteryear?'? It's because Milton Friedman won the debate, and John Kenneth Galbraith lost.... By sheer chance, I found a Brad DeLong post.... In an alternate universe, Galbraith won and Friedman lost, and economics would be very different today. So I decided to post this.... We are all Friedman's children and grandchildren. The way that New Keynesians approach macroeconomics owes more to Friedman than to Keynes: the permanent income hypothesis; the expectations-augmented Phillips Curve; the idea that the central bank is responsible for inflation and should follow a transparent rule. The first two Friedman invented; the third pre-dates Friedman, but he persuaded us it was right.... Friedman had a mountain to move, and he moved it. And because he already moved it, we simply cannot have a Friedman today..."

  2. Matthew Yglesias: A 2017 Agenda : "A 160-page white paper from a think tank titled Report of the Commission on Inclusive Prosperity is not exactly designed to set the world ablaze. But the timing and circumstance of its authorship make it the best guide... endorsing fiscal stimulus and a strong pro-labor union agenda... downplaying the strong education-reform streak... liberal ambitions it pushes aside. There's no cap-and-trade or carbon tax in here, no public option for health care, and no effort to break up or shrink the largest banks. Nor is there an ambitious agenda to tackle poverty. Instead, you get a multi-pronged push to boost middle-class incomes. After an extended period in which Democratic Party politics has been dominated by health care for the poor, environmental regulation, and internecine fights about Wall Street... back-to-basics middle-class populism..."

  3. Sean McElwee and Marshall I. Steinbaum: Marriage Decline in U.S. Didn't Increase Inequality, the Economy Did: "David Leonhardt claimed that liberals overlook evidence that... the relative decline of... married couple [households] increases inequality... cited a paper by Professor Molly Martin of Penn State. But Martin... 'cannot determine the degree to which family structure changes caused the observed changes... family formation probably reacts to prevailing economic conditions and, in that response, sets the conditions for perpetuating broader inequality patterns'.... She notes that 'the relationship between family formation behavior and inequality appears to be declining over time' and even during the period where it was most influential, it accounted for very little of the change.... Bruce Western writes, 'Most of the increase in family income inequality was due to increasing within group inequality that was widely shared across family types and levels of schooling.... Though family structure, more than the educational inequality in earnings, is closely associated with the rise in inequality from 1975 to 1995, both effects were small after 1995'.... The evidence shows that family structure has changed because economic opportunities for most people have worsened..."

  4. Conor Sen: The Yellen Fed: Model-Based Policy: "The dots matter more than Eurodollars.... This is heresy to a generation of investors, who became accustomed to the “Greenspan put”--the view that the Fed would always be there to bail out the equity market--and trust that the prices in the bond market at any point in time reflected the likely forward path of policy changes.... We’ve heard for five years that all of the Fed’s actions have helped Wall Street but done nothing for Main Street. Easy money’s been available to corporations, who have done buybacks but not invested in their businesses.... The wealth effect from elevated asset prices has helped the 1%. But mortgage and household credit to non-pristine households and small firms has remained tight..."

Should Be Aware of:

 

  1. Tim Burke: Rebooting: "A growing sense of perplexity and unease about online discourse... academia... the political moment... as if I’m losing my voice... it’s not worth speaking up... sometimes, that the risks to speaking outweigh any benefits... my middle-aged anomie... a narcissism that encourages them to confuse a confessional for an analysis.... I started this blog uncertain about whether to trust my own readings and arguments, and have become less trusting with each passing year.... I want to start a new year of writing in public with a series of fragments that will repeat each other, as well as some old themes.... Call the whole thing Grasping the Nettle..."

  2. Caroline Daniel: Lunch with the FT: Marc Andreessen: "He asks what I have been struck by on this visit to Silicon Valley, and, when I cite its collaborative culture, he beams as if it is a personal compliment. 'I couldn’t believe that people were volunteering to help [me],” he recalls of his own arrival 20 years ago. “It didn’t match anything where I grew up'.... Waggling his iPhone affectionately, he says: 'This little guy right here is the equivalent power capability of the $20m supercomputer I was using. This thing is in two billion people’s hands'.... His interests on Twitter are promiscuous, ranging from multi-part tweet epics on economics to immigration. His tech-optimism attracts both admiration and mockery.... In person, it is not so much his voice as the speed at which he talks that makes lunch like navigating conversational rapids.... All will be well, he says, provided we allow more technology. 'If we don’t get it quite quickly, we will not be able to afford things like social security, Medicare. We need far higher productivity for the shrinking percentage of people who are going to be working'.... He leaves as I pay, but soon sends a text about an app that fights your parking ticket for you, confirming his faith: tech has an answer for everything."

  3. Matthew Yglesias: Why Republicans are starting to sound like Elizabeth Warren : "Lynn Vavreck's... The Message Matters is by far the best analysis of the interplay between campaign messages and economic fundamentals.... If the recovery really does continue strengthening... Republicans [must] pursue... an 'insurgent'... strategy.... Setting the agenda on something other than the economy. Persuading voters the insurgent has a novel position.... Clarifying and framing the insurgent stance in a popular way. The poverty and opportunity frames may work for Warren... but they essentially fail for Republicans... don't really change the conversation from the economy.. cuts against the existing Republican brand... doesn't tie in to any notably popular Republican policy positions.... Faced with the strong economic climate of the late 1990s, [George W.] Bush... distanced Al Gore from economic success, emphasizing divided government and... Alan Greenspan... changed the subject to... restoring 'honor and dignity to the White House', military preparedness, and management of K-12 schools. His agenda for steep tax cuts was framed as a common sense corrective to budget surpluses.... It was clever and it worked. Sort of. Bush, famously, received fewer votes than his opponent even though Gore simultaneously had to fend off a Ralph Nader campaign to his left.... There's plenty of time for things to take another turn for the worse. But if they don't, trying to sell themselves as the real progressives on economics isn't an especially promising means of coping..."

  4. Chuck Collins: Nit-Picking Piketty: "I attended a panel convened by right-wing Harvard economist Greg Mankiw that should have been entitled ‘Nit-Picking Piketty.’... At one point, Mankiw even put up a slide, ‘Is Wealth Inequality a Problem?’ Any economist who ventures across the disciplinary ramparts will, of course, find a veritable genre of research on the dangerous impacts of extreme inequality.... Mankiw, at another point in his presentation.... Piketty, he intoned, must ‘hate the rich.’ Piketty’s financial success with his best-selling book, Mankiw added, just might lead to self-loathing. These clearly well-rehearsed quips, aimed at knee-capping the humble French economist, fell flat. Mankiw’s presentation, entitled ‘R > G, so what?,’ came across as little more than an apologia for concentrated wealth.... Piketty observed that he has nothing against the rich and said he believes that capital has a useful role to play. He would like to see more of our wealth, he explained, reside with the middle class and the poor. Piketty’s one poke back at the nitpickers came in response to their unanimous support for a progressive consumption tax as an alternative to any other progressive income or wealth tax. ‘We know something about billionaire consumption,’ Piketty observed, ‘but it is hard to measure some of it. Some billionaires are consuming politicians, others consume reporters, and some consume academics.’ And therein lies the point: Too many in the economics profession are ideologues masquerading as mathematicians... hired guns for the privileged classes..."

Comments:

  • Robert Waldmann: The Banking Rules that Died by a Thousand Small Cuts: I've decided to give my argument that QE doesn't work a rest. Basically the results of Kurodnanomics are pretty convincing. The most embarrassing part is that one of my obsessions was complaining that advocates of non standard monetary policy argued that words speak louder than actions, yet the Japanese for 'whatever it takes' from Abe and Kuroda seem to have mattered. However, the Barry Ritholtz post pulls me back in. He goes back and forth on whether it may be a coincidence. Since he treats Europe as a whole, he really has 3 data points. He isn't using timing, because he just looks at the whole 2008-now interval.
    &nbsp
    In one case (near 'coincidence') he notes that both US monetary and fiscal policy have been less austere than European and Japanese austerity. Yet everywhere else, he asserts his 3 data points allow estimation of the effectiveness of monetary policy not the effectiveness of fiscal or monetary or both. He contradicts himself on who has had more QE the USA or Japan. More exactly, he argues the US has, because US GDP performance has been better, but then notes that the Q of Japans QE is three times the fraction of GDP. This is, I think, a question of space. I'm sure he thinks that QE works with a lag and then persistently so less sooner can have more effect on GDP than more but later. Another reason the comparison is not useful for determining effectiveness at the ZLB is that the ECB hasn't been at the ZLB all the time. They raised interest rates.
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    I'd say the case of the USA is consistent with fiscal policy matters as do interest rates and purchases of risky assets during a financial crisis. The case of Japan with the view that monetary policy at the ZLB can affect expected inflation and therefore economic activity, but that this effect is dwarfed by that of non gigantic shifts in fiscal policy. The case of Europe shows that austerity and misalligned price levels in regions with different languages and every mistake imaginable combined is not ideal. I think that Kuroda and Abe have shown that monetary policy at the ZLB (and not in a financial crisis) can matter. I think it took both -- the independent monetary authority and the guy with a majority in the Diet who could have unmade that authority. So I agree with Ritholtz's conclusion (and admit I was wrong about the key question) but don't find his argument or the evidence he presents convincing.

January 17, 2015 at 13:55 in #equitablegrowth, #shouldread, #weblogging | | Comments (3)

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