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October 2015

September 2015

Department of "Huh?!": Peter Gourevitch Edition

Can anybody explain to me what the usually-sharp Peter Gourevitch is doing here:

He seems to think--roughly 1000% wrongly--that Janet Yellen and Stan Fischer want spending cuts and balanced budgets.

He seems to think that interest groups seeking higher interest rates blocked Larry Summers's Fed Chair nomination in 2013.

He goes on about how political scientists "might disagree", "would extend the analysis", and "might highlight other mechanisms". And he does so without ever, you know, ever saying how they disagree, what the disagreement is, what the extended analysis actually says, or highlighting actual mechanisms...

Things to Read for Your Lunchtime Procrastination on September 30, 2015

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Must- and Should-Reads:

Over at Equitable Growth--The Equitablog


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Must-Read: Remember, relative to Fed beliefs less than four years ago, we have already seen 75 basis points of tightening relative to the benchmark of the estimated natural rate:


The more likely it is that we are in a régime of secular stagnation, the more important it is to take the 2%/year inflation target as an average rather than a ceiling, and the less-wise is the Federal Reserve's expressed commitment to start raining interest rates come hell or high water. The markets appear to think--quite reasonably--that the Federal Reserve is gradually moving month-by-month toward a more reality-based Larry Summers-like view of the macroeconomic situation, and that when December comes around the current FOMC consensus for raising interest rates then will have sublimed away.

And if the market is wrong, the most likely reason for it to be wrong is if the Federal Reserve decides to be contrary and to stop its ongoing rethinking process, just to show that it can and that it is boss...

Torsten Slok: DB: Expect More Hawkish Fedspeak: "Before Yellen’s speech last week, the probability of a rate hike by the end of 2015 was 42%...

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Must-Read: At this stage, Neumark, Salas, and Wascher's are only hurting themselves--and hurting confidence not just in their minimum-wage work but their non-minimum wage work as well--by their refusal to acknowledge that the overwhelming weight of the evidence is that Card and Krueger were right: that increases in the minimum wage from levels currently present in the United States have at most very small disemployment effects.

Sylvia Allegretto, Arindrajit Dube, Michael Reich and Ben Zipperer: Credible Research Designs for Minimum Wage Studies: A Response to Neumark, Salas and Wascher: "We assess the Neumark, Salas and Wascher (NSW) critique of our minimum wage findings...

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Must-Read: I had written, apropos of Medium: "I keep hoping that someone like Ben Thompson will write a dazzling piece on his daily newsletter to make everything clear to me."

Lo and behold! Ben Thompson delivers!

What a strange new world, that has such people the ability to order up on whim a 2000-word essay from one of keenest of analysts exactly prepared to write on exactly the topic I am curious about in it!

Ben Thompson: What is Medium Doing?: "There are a huge number of publishers on the Internet....

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Liveblogging World War II: September 29, 1945: The Relief of General Patton

Peter J. K. Hendrikx: The Relief of General Patton:

On September 29, 1945, General Eisenhower took away the army that General Patton lead so successfully from Normandy to Czechoslovakia. Eisenhower could no longer keep Patton in his position as military governor of Bavaria, not only because Patton didn’t believe in and didn’t carry out the orders of denazification, but he also openly said so in the press. Eisenhower was aware that he was just as much at fault, knowing Patton’s strengths and weaknesses as he did.

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Today's Economic History: Agricultural Development in Jiangnan, 1620-1850

The extremely-sharp Kenneth Pomeranz reviews Li Bozhang. It is another point for the coal-empire-metalworking view of the causes of the British Industrial Revolution, and against mentalité- or political institutions-based interpretations...

Ken Pomeranz:

Agricultural Development in Jiangnan, 1620-1850: "Chinese... economic history suffered badly during the 1960s and 1970s...

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Things to Read for Your Nighttime Procrastination on September 28, 2015

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Must- and Should-Reads:

Over at Equitable Growth--The Equitablog


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Must-Read: I have long thought that both Forbes and the Wall Street Journal have in mind as their target audiences that small segment of the human race that actually enjoys being free-riders, rather than that much larger segment of the human race that wants to engage in win-win reciprocal gift-exchange as a mode of social interaction...

Mark Kleiman: The Moral Universe of the Corporate Killers: "Daniel Fisher... writes for Forbes... hates plaintiffs’ lawyers...

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Monday DeLong Smackdown Watch: Robert Waldmann

Robert Waldmann: In Which Paul Krugman Notices How Very Few Students Milton Friedman Has...: "I think that 'German (and French) economists grew up and lived in a world where somebody else...

...the benevolent Kindlebergian hegemon of the United States--took on the task of maintaining a stable level of aggregate demand in the North Atlantic as a whole...

is both patronizing and too kind. First, most US economists have never worked at the Fed or the Treasury--they are spectators just like Germans and Frenchmen. But more importantly, there was a massive prolonged European demand shortfall from the late 70s through the early 90s. Enormous unemployment rates are not new.

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Must-Read: Let me underscore this: economists--especially economists who work for the Federal Reserve system--seem to strongly believe, unless they have themselves tried to estimate Phillips Curves, all three of:

  1. The slope of the Phillips Curve is a lot higher than actual statistical estimates suggest--unless you put your thumb on the scale and pick the single specification that generates the highest slope estimate.

  2. The gearing between recent past inflation and the expected-inflation measure that best forecasts is a lot higher than actual statistical estimates suggest--unless, once again, you put your thumb on the scale and pick the single specification that generates the highest slope estimate.

  3. The confidence intervals of parameters are a lot smaller than actual statistical estimates suggest.

Thus rising inflation in 2017 is a very real thing to the Federal Reserve system--but not to those outside the Federal Reserve who are working with the numbers without having as their goal finding a specification that generates such a forecast...

Paul Krugman: Economics: What Went Right: "One piece of the conventional story hasn’t worked that well...

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Must-Read: I sometimes wonder: would Matthew Yglesias be a better economist and moral philosopher now if he had been an Economics rather than a Philosophy major at Harvard College? If the answer is--as I think it is--"no", then some people have a lot of 'splainin to do...

Matthew Yglesias: Thoughtful opponents of the welfare state have generally avoided making the argument that capitalism is good because it promotes human well-being...

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Live from the Kansas City Library Cafe: A smart piece from McMegan. I do, however wish that she would follow the chain back closer to the egg: striking an appealing fundamental rhetorical pose at the price of substantive policy losses has always been attractive to a certain kind of political actor--think Ralph Nader 2000. But it was the too-successful Republican redistricting effort of 2010 that transferred effective control of much of the Republican Party to such people. For the Huelskamps of the world, a government shutdown that winds up sacrificing some Republican budgetary priorities enhances his career, after all. And the difference is that, after the 2010 redistricting, there are many Huelskamps...

Megan McArdle: Let's See What Republicans Learn From Losing Boehner: "Boehner has announced that he’ll be stepping down... come October...

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Monday Smackdown: Two Things from the Brookings Institution That Indicate a Grave Lack of Quality Control

Why am I not surprised to find the execrable Michael O'Hanlon calling for false balance on vaccination?

Michael O'Hanlon: Vaccines, autism and nervous patients: "Last week the issue of autism and vaccinations has come back into the public limelight...

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Must-Read: I think that Simon Wren-Lewis is not nearly hard enough on Britain's austerians here--if the Bank of England was indeed confident in the power of unconventional monetary policy, it was so without warrant. Elementary benefit-cost considerations strongly argued for waiting until a strong recovery was well-established before attempting to tackle not the desirable short-term deficit but the long-term funding challenges of the social insurance state:

Simon Wren-Lewis: The Path from Deficit Concern to Deficit Deceit: "I have always written that the arguments in 2010 for focusing fiscal policy on reducing debt were understandable...

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Pay Attention to Gabriel Zucman on Tax Havens

J. Bradford DeLong and Michael M. DeLong

Over at Project Syndicate: Pay attention to U.C. Berkeley's newly-hired Gabriel Zucman, author of the just-released The Hidden Wealth of Nations: The Scourge of Tax Havens (Chicago: University of Chicago Press)

His figures are the hardest figures about tax havens--Switzerland, Bermuda, the Cayman Islands, Singapore, Luxembourg, and so forth--and about the quantity of money stored in them that we are likely to get. His estimate? 8% of the world's financial wealth. $7.6 trillion. That is more wealth than is owned by the poorer half of the world. And this is money that is not in the tax base, but should be in the tax base--and would be if we had sufficient international tax harmonization to close off loopholes that allow for (legal) tax avoidance and sufficient cooperation and enforcement to make (illegal) tax evasion not worth the risk. READ MOAR

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Things to Read for Your Blood Supermoon Apocalypse Night Procrastination on September 27, 2015

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Must- and Should-Reads:

Over at Equitable Growth--The Equitablog


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Links for the Week of September 21, 2015

Sanzio 01 The School of Athens Wikipedia the free encyclopedia

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Why I Believe Paul Krugman Over Jim Hamilton: Why a Chinese Slowdown Is by itself Little Threat to the U.S. Economy

Over at Equitable Growth: The collapse of housing investment in the U.S. after the bubble pop began in late 2005 was absolutely huge:

FRED Graph FRED St Louis Fed


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Must-Read: I think Ta-Nehisi Coates has this right: As I read it, Moynihan tried to use, in the context of the rising crime wave, Richard Nixon's and others' racist fears of young Black men and even the Black middle class to mobilize support for massive federal support for poor Black communities in the ghetto and elsewhere. He most of all wanted America's poor children in the future to have mothers supported by society in a way that his mother had not been, and to have more of a chance of a father in their lives in a constructive way than he had had. But in his political-ideological-intellectual maneuvering to try to accomplish this good end, he gave hostages to very bad currents of thought:

Ta-Nehisi Coates: Daniel Patrick Moynihan's Responsibility for Mass Incarceration: "I almost had the sense that Moynihan was trying to trick Nixon into embracing liberal policy...

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Weekend Reading: Isaac Asimov: "Second Foundation", from Chapter 8

Agitation from the other side of the desk. “No--now you must take this phlegmatically. You had hoped you would qualify. You had feared you would not. Actually, both hope and fear are weaknesses. You knew you would qualify and you hesitate to admit the fact because such knowledge might stamp you as cocksure and therefore unfit. Nonsense! The most hopelessly stupid man is he who is not aware that he is wise. It is part of your qualification that you knew you would qualify.” Relaxation on the other side of the desk....

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Weekend Reading: Winston S. Churchill: 1934: When German "National Socialism" Lost More than 100% of Its "Socialism" Part

Winston Churchill: The Gathering Storm: The Second World War, Volume 1:

The acquisition of power had opened a deep divergence between the Fuehrer and many of those who had borne him forward. Under Roehm’s leadership the S.A. increasingly represented the more revolutionary elements of the party. There were senior members of the party, such as Gregor Strasser, ardent for social revolution, who feared that Hitler in arriving at the first place would simply be taken over by the existing hierarchy, the Reichswehr, the bankers, and the industrialists. He would not have been the first revolutionary leader to kick down the ladder by which he had risen to exalted heights. To the rank and file of the S.A. (“Brownshirts”) the triumph of January 1933 was meant to carry with it the freedom to pillage not only the Jews and profiteers, but also the well-to-do, established classes of society. Rumours of a great betrayal by their leader soon began to spread in certain circles of the party.

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Weekend Reading: Ta-Nehisi Coates: Shelby Foote and the Convenient Suspension of Disbelief

Ta-Nehisi Coates: The Convenient Suspension of Disbelief: "The always interesting J.L. Wall digs up this interview...

...with Shelby Foote:

INTERVIEWER: Had you been alive during the Civil War, would you have fought for the Confederates? 

FOOTE: No doubt about it. What's more, I would fight for the Confederacy today if the circumstances were similar. There's a great deal of misunderstanding about the Confederacy, the Confederate flag, slavery, the whole thing. The political correctness of today is no way to look at the middle of the nineteenth century. The Confederates fought for some substantially good things. States rights is not just a theoretical excuse for oppressing people. You have to understand that the raggedy Confederate soldier who owned no slaves and probably couldn't even read the Constitution, let alone understand it, when he was captured by Union soldiers and asked, What are you fighting for? replied, "I'm fighting because you're down here. So I certainly would have fought to keep people from invading my native state."

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Things to Read for Your Lunchtime Procrastination on September 25, 2015

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Must- and Should-Reads:

Over at Equitable Growth--The Equitablog


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What New Theories of Distribution and Growth Do We Need?

Over at Equitable Growth: The very sharp Ravi Kanbur and Joseph Stiglitz move the ball forward on sources of rising inequality:

Ravi Kanbur and Joseph Stiglitz: Wealth and Income Distribution: New Theories Needed for a New Era: "Six decades ago, Nicholas Kaldor (1957) put forward...

...the constancy of the share of capital relative to that of labor.... Simon Kuznets (1955) put forward... while the interpersonal inequality of income distribution might increase in the early stages of development, it declines as industrialised economies mature. These empirical formulations brought forth a generation of growth and development theories whose object was to explain the[se] stylised facts.... However, the Kaldor-Kuznets stylised facts no longer hold for advanced economies....

It stands to reason that theories developed to explain constancy of factor shares cannot explain a rising share of capital... [or] the new trends, or the turnaround....

Indeed. This seems to me exactly right. READ MOAR

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Must-Read: Yet another straw in the wind--that we really need to rebalance the Federal Reserve system to lessen the influence of commercial bankers within it. Carter Glass and company made a good try to set up a central bank that would administer finance in the general rather than in the bankers' interest, but the past decade would have certainly taught us that they did not do a good enough job--if we had not already known that:

Paul Krugman: More on the Political Economy of Permahawkery: "How to make sense of the ever-changing rationales for the ever-changing demand for higher interest rates[?]...

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Must-Read: As I say over and over again, conservatives could be taking a huge victory lap right now with the empirical policy success of the nationwide implementation of the health-care reform pioneered in Massachusetts by the 2012 right-wing standard-bearer Mitt Romney. It is an index of their extraordinary policy, rhetorical, and ideological dysfunction that they are not doing so.

Would somebody please point them a way back to fact-based reality?

Jared Bernstein**: The Affordable Care Act Is Providing Affordable Care. That’s a Big Problem for Its Opponents: "A gov’t program that, after a troubled start...

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Live from La Strada: There was a time when it seemed like Nick Gillespie was--unusually for those on the right--a relatively smart person, with respect for reality.

It looks as though those days are gone.

Jon Chait reports--and, as best as I can determine he reports the arguments of John Merline and Nick Gillespie fairly, and greatly to their discredit:

Jon Chait: Obamacare Haters Freaking Out Over New Report: "John Merline of Investor’s Business Daily and Nick Gillespie of Reason insist Obama’s promise to save money for people with employer insurance has failed...

...Why? Because the nominal cost of health insurance has gone up.... Merline and Gillespie... assume that Obama was using a baseline of existing nominal prices.... [In their view] the only way Obama’s reforms could succeed is not only if the decades of medical inflation slowed their rate, but if prices actually dropped in nominal terms. Of course, Obama never actually said anything like this. Merline does not even claim he did. Instead, he insists that it kinda ‘seems’ like Obama meant this.... Oh, it 'seems' that way, huh? That's your argument? The reason it makes sense to judge Obamacare against an alternative world in which decades of medical inflation drop to zero percent a year is that it 'seems' as if he made this insanely grandiose promise? So, yes, if you assume that Obama meant an implausibly unrealistic promise that he did not actually say, then his reforms have fallen short....

The determination of Obamacare haters to claim vindication is a testament to the power of the human spirit in the face of all factual evidence. Right-wingers have every right to ideologically oppose the concept of a government program that uses regulation, taxes, and spending to provide insurance to people who can't afford it. Their unwillingness to concede that this program is working on its own terms is delusional.

While everyone interested in reality-based health-care policy is marveling in astonishment at how much cheaper than expected ObamaCare has been to implement, Merline and Gillespie are off raving in the corner.

Plutocratic Self-Justification as a Dissipative Activity...

Over at Equitable Growth: A column from Daniel Ben-Ami really made me wince:

It is hard to imagine how the rapid development of many poorer economies in recent decades could have happened without the emergence of super-rich individuals. No doubt for most Financial Times readers the two go together.... Extreme wealth in emerging markets is largely self-made.... [Success] means, among other things, showing through the force of argument that everyone can benefit from a wealthier society.... [But] the fight cannot be won with evidence alone...

And this last brings me up short: what kinds of "non-evidence" is he thinking of?

What Ben-Ami--and, in my view, Freund also--really need is a much closer engagement with William Baumol (1990): Entrepreneurship: Productive, Unproductive, and Destructive: READ MOAR

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Must-Read: Larry Summers: The Importance of Global Health Investment: "I am proudest of... the idea... that the [World Bank should devote its... World Development Report to making the case for... global health investment. The 1993 report produced by a team led by Dean Jamison proved more influential than I could have hoped, not least because it drew Bill Gates into the global health arena... [and] made a strong case that the benefits of the right health investments far exceed the costs.... The dramatic declines in child mortality and increases in life expectancy demonstrate that policy can make an immense difference....

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Technological Progress Anxiety: Thinking About "Peak Horse" and the Possibility of "Peak Human"

[Over at Equitable Growth]]1: Another well-written piece by an authorial team led by the very sharp Joel Mokyr--The History of Technological Anxiety and the Future of Economic Growth: Is This Time Different?--that in my mind fails to wrestle with the major question, and so leaves me unsatisfied. [READ MOAR]]1

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