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Noted for Your Nighttime Procrastination for February 12, 2015

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


Must- and Shall-Reads:

  1. Mark Thoma: Economist's View: Erskine Bowles is Back: "Erskine Bowles writes a letter to the NY Times.... 'Mr. Krugman’s assertion that America followed a course of austerity while the economy was still in a deep slump due to the influence of "Bowles-Simpsonism" ignores the fact that one of the key principles set out in the National Commission on Fiscal Responsibility and Reform report was that deficit reduction must not disrupt the fragile economic recovery. Indeed, it is largely due to the failure of our elected leaders to reach agreement on long-term deficit reduction along the lines of our recommendations that we ended up with the mindless austerity of sequestration....' Does anyone remember Bowles or his associates objecting strenuously to the sequester, getting out in public forums and arguing it was a big mistake? Writing letters and op-eds to the NY Times, that sort of thing? I don't.... I don't see them calling for delay until the economy recovers, only for a different type of austerity, e.g. 'simply waiving this sequester--or coming up with some agreement to spend partway between pre- and post-sequester levels--would represent a huge failure... send a message... that Washington is not serious....' Many projections suggest that our major social insurance programs will face financial difficulties in the future.... At some point we may need to cut benefits. But why, exactly, is it crucial that we deal with the threat of future benefits cuts by locking in plans to cut future benefits [now]?..."

  2. Olivier Blanchard (2008): The State of Macro: "The so-called new-Keynesian (or NK) model has emerged and become a workhorse.… The model starts from the RBC model without capital, and... introduces monopolistic competition in the goods market.... If the economy is going to have price setters, they better have some monopoly power. It then introduces discrete nominal price setting, using a formulation introduced by Calvo... which turns out to be the most analytically convenient.... [It] has largely replaced the IS-LM model as the basic model of fluctuations in graduate courses.... It reduces a complex reality to a few simple equations. Unlike the IS-LM model, it is formally rather than informally derived from optimization by firms and consumers.... The costs are that... the first two equations of the model are patently false.… The aggregate demand equation ignores the existence of investment, and relies on an intertemporal substitution effect... hard to detect in the data on consumers. The inflation equation implies a purely forward looking behavior of inflation, which again appears strongly at odds with the data.... One striking (and unpleasant) characteristic... is that there is no unemployment! Movements take place along a labor supply curve.... One has a sense... that this may give a misleading description of fluctuations, in positive terms, and, even more so, in normative terms..."

  3. Ross Douthat: The Case Against the Case Against the Crusades: "The Crusades as an epoch-spanning phenomenon aren’t in and of themselves a great stain on Christian history: They’re a phenomenon in Christian history that includes many stains and sins and great crimes, but also involves many admirable figures and heroic moments, many great tragedies, and many individuals and incidents that simply resist any kind of manichaean reading. Contemporary Christians should reject and disavow the great crimes that some Crusaders committed as they should reject and disavow the un-Christian hatreds that motivated them. But we are under no obligation to reject and disavow the entire multi-century struggle with an armed and equally-militant foe as merely the manifestation of some irrational religious ‘phobia,’ let alone accede to analogies that cast an entire civilization’s worth of kings and theologians and soldiers as the moral equivalent of Osama Bin Laden..."

  4. Raymond d'Aguilers: Historia Francorum qui Ceperunt Iherusalem: "Finally, our men took possession of the walls and towers and wonderful sights were to be seen. Some of our men (and this was more merciful) cut off the heads of their enemies; others shot them with arrows, so that they fell from the towers; others tortured them longer by casting them into the flames. Piles of heads, hands, and feet were to be seen in the streets of the city. It was necessary to pick one's way over the bodies of men and horses. In the Temple of Solomon, men rode in blood up to their knees and bridle reins. Indeed, it was a just and splendid judgment of God that this place should be filled with the blood of the unbelievers, since it had suffered so long from their blasphemies. Some of the enemy took refuge in the Tower of David, and, petitioning Count Raymond for protection surrendered the Tower into his hands. How the pilgrims rejoiced and exulted and sang a new song to the Lord! On this day, the children of the apostles regained the city and fatherland for God and the fathers...

  5. Paul Krugman: QE Truthers Paul Ryan and John Taylor: "Not many people seem to know about an opinion piece by John Taylor and Paul Ryan... even more revealing about the GOP’s monetary madness.... It attacks not just QE2, which was about to commence, but QE1--the Fed’s intervention during the chaotic post-Lehman period.... “QE1 failed to strengthen the economy, which has remained in a high-unemployment, low-growth slump.” Also, when I stepped outside this morning, it was cold, so I put on a coat — but it didn’t work, because it was still cold. But the truly amazing thing is the conspiracy theorizing. The article is titled “Refocus The Fed On Price Stability Instead Of Bailing Out Fiscal Policy”, and the text matches that theme: 'This looks an awful lot like an attempt to bail out fiscal policy, and such attempts call the Fed’s independence into question.' So Ryan and Taylor were accusing the Bernanke Fed of deliberately betraying its mandate in order to help out Obama by monetizing deficits.... That’s one heck of a conspiracy theory.... The Fed... insist[ed] it was... defend[ing] price stability against... below-target inflation--a defense of its actions completely borne out by events. Furthermore... suppose that you believe that the Fed’s actions were staving off what would otherwise have been a fiscal crisis. That’s supposed to be a bad thing? Were Ryan and Taylor casting envious glances at the euro area, where the ECB’s failure to do its job as lender of last resort provoked a series of near-catastrophic speculative attacks until Mario Draghi stepped up to the plate?... Rand Paul by no means has a monopoly on monetary crazy, conspiracy theories very much included..."

Should Be Aware of:


  1. Melissa S. Kearney and Lesley Turner (2013): Giving Secondary Earners a Tax Break: A Proposal to Help Low- and Middle-Income Families: "The tax and transfer system has an inherent secondary-earner penalty that discourages work efforts and reduces the return to work for a second earner within a married couple. When children are present, a spouse’s work efforts often brings associated child-care costs, making the return to work even lower.... A family headed by a primary earner making $25,000 a year will take home less than 30 percent of a spouse’s earnings. They propose a secondary-earner deduction for low- to moderate-income families..."

  2. Binyamin Appelbaum: How Mortgage Fraud Made the Financial Crisis Worse: ""New academic research... deserves attention for providing evidence that the lending industry’s conduct during the housing boom often broke the law.... Atif Mian... and Amir Sufi of the University of Chicago focuses on a particular kind of fraud... overstating a borrower’s income in order to obtain a larger loan.... Oncomes reported on mortgage applications in ZIP codes with high rates of subprime lending increased much more quickly than incomes reported on tax returns in those same ZIP codes between 2002 and 2005..."

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