Grasping Reality on TypePad, by Brad DeLong

Live from the Roasterie: Prairie Weather: Seen This?:

: Brain Surgeon: That Mitchell & Webb Look, Series 3:

https://readfold.com/read/delong/notes-for-econ-1-spring-2016-uc-berkeley-unfinished-ypriov7m

Still thinking about auxiliary readings for next semester...

Can I afford to assign a third auxiliary reading book?

And, if I can, which of these should it be?:

• Partha Dasgupta (2007): Economics: A Very Short Introduction http://amzn.to/1iojyew
• Robert Heilbroner (1953, et seq.*): The Worldly Philosophers http://amzn.to/1LnpikC
• Something else: but what?
• Or should I simply ask them to mainline something. Karl Polanyi never wrote anything both short and accessible to Berkeley freshmen and sophomores. But there are: John Maynard Keynes (1926): "The End of Laissez-Faire" http://www.panarchy.org/keynes/laissezfaire.1926.html, and "Concluding Notes on the Social Philosophy towards which the General Theory Might Lead' http://tinyurl.com/nv35dkt

This file: http://www.bradford-delong.com/2015/09/auxiliary-readings-historical-psychological-and-moral-philosophical-context-econ-1-spring-2016-uc-berkeley.html

And to counterbalance Friedman and Director Friedman--what? Last time I used Tom Slee (2006): No One Makes You Shop at Wal-Mart http://amzn.to/1Lnok7L. It seemed not quite up to the task of countering Friedman and Director Friedman, but still better than anything else I could find. Is it still the best thing around?

I should go off and read John Kenneth Galbraith (1977): The Age of Uncertainty http://amzn.to/1LnoKeB...

Something by Dani Rodrik, perhaps?...

This file: [http://www.bradford-delong.com/2015/09/auxiliary-readings-from-the-left-no-one-makes-you-shop-at-wal-mart-econ-1-spring-2016-uc-berkeley.html]

To help the students in Econ 1 next semester put the course, and the discipline of Economics, into its proper moral-philosophical context...

Is there anything better from the right to assign than Milton and Rose Director Friedman (1980): Free to Choose http://amzn.to/1OklF0r? Can I ask the students--Berkeley freshmen and sophomores for the most part--to read anything more sophisticated? And is there anything more recent or more sophisticated and of equivalent length that is better?

And to counterbalance Friedman and Director Friedman--what? Last time I used Tom Slee (2006): No One Makes You Shop at Wal-Mart http://amzn.to/1Lnok7L. It seemed not quite up to the task, but still better than anything else I could find...

This file: http://www.bradford-delong.com/2015/09/auxiliary-readings-from-the-right-free-to-choose-econ-1-spring-2016-uc-berkeley.html

As near as I can see, no.

She placed a huge bet on the merger with COMPAQ--over very strong objections from her Board and her shareholders--based on a belief about economies-of-scale in the PC industry. That belief was wrong. The merger was not a financial success:

Must-Read: IMHO, Tim B. Lee gets this one very wrong indeed:

Tim B. Lee: Carly Fiorina's Controversial Record as CEO, Explained: "Fiorina's biggest and most controversial move--acquiring computing rival Compaq...

Must-Read: Catherine Rampell: The economy was a no-show at GOP debate: "There’s actually a good reason why Republican candidates might want to avoid...

Must-Read: Josh Barro: Carly Fiorina Increased Hewlett-Packard’s Sales, but Not Its Profits: "Carly Fiorina... said... ‘despite those difficult times...

Live from the Roasterie: Marco Arment: Introducing Peace, My Privacy-Focused iOS 9 Ad Blocker: "Running the Ghostery browser add-on in my Mac browsers has been illuminating...

Live from the Roasterie: National Medicarism!

I am sorry. Perhaps Mussolini in his day looked like this big a jackass to sane Italians, but I suspect not:

Tim F.**: Say anything » Balloon Juice: "When I said Trump will self-destruct and soon...

...this is exactly what I meant.

UNIDENTIFIED JACKASS: (Unintelligible) We have a problem in this country. It’s called Muslims. We know our current president is one.

TRUMP: Right.

Live from the Roasterie: There is something very wrong with anybody who donates to or votes for today's Republican Party--or who advocates for it in public for any reason other than to become an internal mole pursuing the overriding aim of tearing it down and rebuilding it on less-insane foundations:

Jon Chait: GOP Candidates to Keep Us As Safe As Bush Did: "Wednesday night's... implicit... question...

Live from the Eccles Building: Federal Reserve leaves rates unchanged...

Live from the World Trade Center: I must say, the amount of evil bullshit spouted by members of the Bush clan is rapidly approaching a singularity:

Matthew Yglesias: Jeb Bush is forgetting something important when he says his brother "kept us safe": "What does he think that's a photo of?

Comment of the Day: Ajay: "A colleague asked for advice on how to open a conversation with a chap she'd met through Tinder...

...(not actually Tinder but some similar thing). For some reason she took my advice and gave the guy the Voigt-Kampff test (you know, the 'you see a tortoise on its back in the desert, what do you do' thing) from 'Blade Runner', a film that she has not in fact seen. She is now committed to going on a date with him based on a shared love of cyber-noir films of the 1980s which is, in her case, completely fake. I mention this to show that that sort of thing does happen in real life as well as in bad sitcoms.

Live from the Roasterie: Barry Goldwater was the crusader: roll back the New Deal as an un-American mistake that keeps people from learning how to stand on their own two feet and thus be strong. Richard Nixon was the divider: break America into two opposing nations, forcing people to choose sides in the belief that he would pick up the larger half. Ronald Reagan was the optimist: that it is morning and America is great now that we are here to help you by keeping the government from trying to help you.

But now we have a very different Republican Party on display:

Michael Grunwald: The 'Everything Is Bad' Party: "America’s potential, said Carly Fiorina, is being ‘crushed’...

Must-Read: It is just very unevenly distributed, and is here only in part:

Felix Salmon: Star Trek's Utopia is already here: "The Replicator obviates the need for humans to work...

Must- and Should-Reads:

• Elizabeth Stoker Bruenig: Lost Opportunity
• Must-Read: John Cassidy: Jeb Bush and the Return of Voodoo Economics
• Must-Read: Robert F. Stambaugh and Yu Yuan: Mispricing Factors
• Must-Read: Elise Gould and Tanyell Cooke: By the Numbers: Income and Poverty, 2014
• Lawrence Mishel and Alyssa Davis: Income Stagnation in 2014 Shows the Economy Is Not Working for Most Families
• Bruce Bartlett: Half Measures: David Madland... at... CAP.... The scale of the problems confronting the middle class is so great that such small-bore initiatives are unlikely to accomplish much.... Higher revenues are... necessary... to redress rising income inequality and... provide the resources for a meaningful package...
• Ta-Nehisi Coates: 50 Years After the Moynihan Report: Examining the Black Family in the Age of Mass Incarceration
• Jon Chait: How Jeb Bush’s Tax Cuts Suckered the Media
• Jonathan Portes: The UK's Digital Economy
• Steve Randy Waldman: Perspectives on a Universal Basic Income

Over at Equitable Growth--The Equitablog

• Nick Bunker: What would a rate hike by the Federal Reserve mean?
• Elisabeth Jacobs: Putting the new U.S. Census data on income and poverty in context
• Nick Bunker: Why U.S. tax credits and tax deductions for higher education don’t work
• Ben Zipperer: Keep an eye on changes to U.S. corporate income tax proposals
• The Economist Gets It Wrong on Disability Insurance: Hoisted from the Archives from Two Years Ago

Plus:

• Daniel Davies: "It's not so much "marking your views to market". It's "closing all your positions because they're so far out that you're being ripped apart by margin calls"...
• Nathan Pippenger: America’s Gun Problem and the Reassertion of Christian Leftism: Dan Hodges: "In retrospect Sandy Hook marked the end of the US gun control debate. Once America decided killing children was bearable, it was over..."
• Ian Millhiser: Keep Fearing the Supreme Court: The real story of the Court’s recent term is... conservative overreach.... It’s unlikely that liberals will celebrate the 2015-16 term... poised to... kill affirmative action and throw public-sector unions into financial turmoil...

Bradford DeLong was struck by a finding in Reinhart and Trebesch’s paper showing that, historically, real ex-post returns on defaulted bonds were in the range of one to five percent, despite the losses due to haircuts and arrears.

Must-Read: I am with ESB here as a matter of moral philosophy: divorced from the decrease in inequality or a rise in total production produced by a better use of our collective talents, more opportunity is not a good--unless you place a high weight on the continuation of the current social order, that is, and see avenues for upward mobility within the system as an important safety valve keeping those who would otherwise make serious trouble from doing so:

Elizabeth Stoker Bruenig: Lost Opportunity: "None of this is to assert that what Putnam observes about the inequality of opportunity...

Must-Read: Once again, if these GDP elasticities claimed by Cogan, Feldstein, Hubbard, and Warsh had much purchase in reality, we would have seen it in the macro performance: we would have seen a growth acceleration relative to the trend in the Reaganite 1980s, a growth deceleration relative to the trend in the Clintonite 1990s, another growth acceleration in the Bushit 2000s, and another growth decelleration now. That pattern is not what we have seen. And it would take an incredibly perverse act of Providence to produce additional masking fluctuations that give rise to the pattern we have seen:

John Cassidy: Jeb Bush and the Return of Voodoo Economics: "[Would] the [Republican] Party... endorse... narrowly targeted... [tax cuts for] middle-income families...

Over at Equitable Growth: Kathy Ruffing: The Economist Gets It Wrong on Disability Insurance: "A recent article in the Economist took an uninformed--and unjustified--swipe at Disability Insurance…

...The Economist notes that the average disabled-worker benefit is about $1,130 a month, and its accompanying graph suggests that this figure has almost doubled since 1990.  That’s seriously misleading. When adjusted for inflation, the average benefit has barely grown…. The Economist also remarks that the number of DI recipients has roughly doubled since the mid-1990s.  But that’s largely due to the aging of the population (the baby boomers have aged squarely into their high-disability years), the growth of women’s labor-force participation (which means that more of them qualify for DI if they become disabled), and the rise in Social Security’s full retirement age from 65 to 66 (which delays beneficiaries’ switch from disability to retirement benefits). As we’ve explained, adjusting for these factors reveals that the disability rolls have grown only modestly.

My view is that Kathy Ruffing is correct, for my spirit guide on these issues is Michigan's John Bound: READ MOAR

John Bound et al.: The Welfare Implications of Increasing DI Benefit Generosity: "The empirical literature on DI has primarily focused on the impact of program parameters on caseload growth...

Must-Read: it is, I think, worth stepping back to recognize how very little is left of the original efficient market hypothesis project, and how far the finance community has drifted--nay, galloped--away from it, all the while claiming that it has not done so.

The original EMH claim was this: You--if your von Neumann-Morgenstern psychological rate of time preference and your von Neumann-Morgenstern psychological rate of declining marginal utility of wealth are close to that of the average--cannot expect to beat the market. The best you can do is diversify, hold the market portfolio, and hunker down. You can expect to earn higher average returns, but only by taking on unwarranted systematic risks that place you at a lower expected utility.

But finance today has given up any pretense of a claim that the--widely fluctuating over time--risk-free rate at any horizon has anything to do with von-Neumann Morgenstern patience-or-impatience psychology. It is very possible for the average person to beat the market in a utility sense by trading on the difference between the average rate of time preference and that priced in by the market. Finance today has given up any preference that the--widely fluctuating over time--expected systematic risk premium has anything to do with von Neumann-Morgenstern declining marginal utility of wealth. It is very, very possible for the average person to beat the market in a utility sense and quite probably in a money sense by trading in systematic risk on the difference between their risk tolerance and the (usually abnormally low) risk tolerance priced in by the market. And now, in addition to the--mispriced from a von Neumann-Morgenstern psychological perspective--wrong risk-free rates and wrong systematic risk premium are joined by two additional "misplacing" factors that the market has not managed to arbitrage away.

So what is left? All that is left of the EMH project is the American question: If this deal is good for you, why is it good for me? All that is left is the insight that if you there is neither a difference-in-patience, a difference-in-risk-tolerance, a diversification, mor an alignment-of-incentives-for-agents reason for a trade to be win-win, at least one of the parties in it is making a mistake. That is a powerful insight--but a very limited one. And it is not what the EMH is--or, rather, it is not what the EMH was back before it was redefined to "save the hypothesis":

Robert F. Stambaugh and Yu Yuan: Mispricing Factors: "A four-factor model with two 'mispricing' factors...

Best-selling author Rick Perlstein will talk American politics in Hall Center lecture

A question for Rick Perlstein, should we make our way out to Lawrence, KS tonight:

Sixty years ago Democratic Party grandee Dean Acheson said: Republicans are an essential part of America. They are the party that understands economic growth, and represent those for whom America is working, and for whom economic growth is sufficient.

Today, however, when I look at the Republican Party, that is not the party I see.

I see a party that caters to plutocrats--but increasingly to heirs and successful rent-seekers, not to real entrepreneurs. I see a party that caters to a bunch of white identity-politics practicing Fox News-watchers whom it scares by saying bad guys are coming to get them--for Pat Buchanan, Jews; for Ron Paul, Blacks; for Donald Trump and Kris Kobach, Mexicans; for Sam Brownback, Californians; and for the mayor of Irving Texas, Muslim immigrant anchor-baby teenage-engineers.

You have written three big books of the history of this transformation. But you are only halfway through. Can you give us now the one-paragraph synopsis of what the bottom line will be when you will have finished writing all eight volumes of your history?

Live from Irving, Texas: Xeni Jardin: Arab-looking man of Syrian descent found in garage building what looks like a bomb:

Live from the Roasterie: which of the Republican presidential candidates will take the "Ahmed Mohamed is no angel" line tonight, and defend the powers that be of Irving. Texas?

Comment of the Day: Charlie Steindel: No, The Federal Reserve Should Not Be Tightening Right Now. Why Do You Ask?: "This morning's CPI report should be the nail in the tightening coffin...

...Where does it suggest that inflation is moving up toward the target, much less above it?... This is the CPI: 2% for the PCE equates to something more than 2% for the CPI (I would say 2.5%)...

BLS: Consumer Price Index Summary: "The Consumer Price Index for All Urban Consumers (CPI-U) decreased 0.1 percent in August...

...on a seasonally adjusted basis.... Over the last 12 months, the all-items index rose 0.2 percent.... The index for all items less food and energy increased 0.1 percent in August, the same increase as in July.... The 12-month change in the index for all items less food and energy also remained the same, at 1.8 percent for the 12 months ending August...

The highly-estimable Tim Duy is doing what he does best once again: worrying about the Federal Reserve's conduct of monetary policy:

Tim Duy: Some Thoughts On Productivity And The Fed: "Yellen is leaning in the direction of taking the productivity numbers at face value...

...and seeing low wage growth as consistent with the view that the productivity slowdown is real.... The unobserved component approach suggests that productivity growth decelerated to an annualized pace of just 0.82 percent by the second quarter of this year... [in line with] Fed staff estimates of potential GDP growth range from roughly 1.6 to 1.8 percent through 2020.... Yellen might think back to the 1990’s, when a surprise rise in productivity growth temporarily lowered the natural rate of unemployment... [and] reverse that logic now and think that the arguments for tighter policy are stronger....

Four times in the past 40 years, the Federal Reserve has begun what it expected at the start to be a substantial tightening of monetary policy: one that would leave interest rates markedly higher and asset prices significantly lower than when it started.

All four of these times--every single one--the tightening has triggered processes that reduced employment and production, and impoverished nations, by amounts significant larger than the Federal Reserve had anticipated when it began the tightening cycle.

Live from the Roasterie: The Hall Center for the Humanities**: Humanities Lecture Series: Rick Perlstein: New York Times bestselling author and historian of conservatism: "The Invisible Bridge: From Nixon to Reagan to Palin and Beyond...

Live from Strada: Michael Woodford: Risk Attitude as a Perceptual Bias:

Wednesday September 16: the Departmental Seminar jointly organized with Macroeconomics...

Must-Read: Rick Perlstein: Solidarity Squandered: "But the squandering had already begun...

Dean Baker: The Elite's Childlike Commitment to Austerity: "Just last week, E.J. Dionne, an unusually thoughtful Washington Post columnist...

President Obama on Twitter: "Cool clock, Ahmed. Want to bring it to the White House? We should inspire more kids like you to like science. It's what makes America great.":

Cool clock, Ahmed. Want to bring it to the White House? We should inspire more kids like you to like science. It's what makes America great.

— President Obama (@POTUS) September 16, 2015

Live from the Reagan Library: Remembering the last Republican debate...

Francis Wilkinson: Donald Trump Isn't a GOP Lone Wolf: "In one of the network’s jabs at Trump...

Must-Read: I must say, I am struck anew by how great a disaster the 5-4 2000 election and what followed was, in terms of changing the socio-economic trajectory of America from the generally-hopeful and positive 1990s:

Elise Gould and Tanyell Cooke: By the Numbers: Income and Poverty, 2014: "Median [real] earnings for men working full time fell 0.7 percent from 2000 to 2013...

Live from the Roasterie: SUPERPOPCORN!! The curse of Goldwater, Nixon, Gingrich, and Murdoch: spend fifty years pandering to the racist, the resentful, and the unhinged, and then twenty-five years feeding their paranoia--and then expect them to be happy with yet another establishment Republican as a standard-bearer? It doesn't work like that, does it?

Brian Buetler: [What's at Stake in the Second Republican Debate: Full Panic in the GOP](http://www.newrepublic.com/article/122826/whats-stake-second-republican-debate-full-panic-gop?utm_source=Sailthru&utm_medium=email&utm_campaign=New Campaign&utm_term=TNR Daily Newsletter): "The four... establishment-friendly... campaigns...

Live from Irving, TX: #IStandwithAhmed

Periodically, Jon Chait and Kevin Drum worry about "the hack gap"--the willingness of conservative intellectuals to sacrifice their credibility by making transparently-false arguments to advance the interests of their political masters, and the lack of willingness of liberal intellectuals to do the same.

Today we have "good" news of a sort about the hack gap!

But, first, Jon and Kevin:

Must-Read: Jon Chait gets one wrong. Scott Horsley, Alan Rappaport, Matt Flegenheimer, Patrick O'Connor, John D. MacKinnon, Tal Kopan, and Ashley Killough were not "suckered" by the JEB! campaign. Rather, they are in the business not of informing their readers but of pleasing their sources, and this leads to a situation in which--as one newspaper honcho once told me about his paper and its competitors--"on an average day, you learn more from reading Ezra Klein than from reading the entire output of the national news staff of the New York Times. Put aside Josh Barro at The Upshot (and Matt O'Brien at Wonkblog), and it is still true:

Jon Chait: How Jeb Bush’s Tax Cuts Suckered the Media: "If you have heard about Jeb Bush’s new tax plan by reading political reporters...

Seth Dickinson: The Traitor Baru Cormorant http://amzn.to/1gplgew

Must- and Should-Reads:

• Must-Read: Mike Konczal: Student Loan Distress Goes Beyond Defaults
• Jared Bernstein: The Lessons of Lehman, Learned and Unlearned
• Frances Coppola: Rethinking Government Debt
• Must-Read: Ray Fair (2010): Convergence in Macroeconomics: Hoisted from Ray Fair's Archives
• Joseph E. Gagnon: It is highly unlikely that China would need to spend all of its reserves to defend the renminbi.... Moreover, the reserves are not useful for anything [else]... so China may as well use them.... Indeed... China is better off selling reserves while it can still get a good price for them...
• Matthew Yglesias: Why is the media more interested in Hillary's email than in Jeb's profoundly dishonest tax pitch?
• Must-Read: Paul Krugman: Poland Versus Greece
• Michael Woodford: [Prospect Theory as Efficient Perceptual Distortion](http://www.columbia.edu/~mw2230/Inattention AEAPP.pdf)
• Ryan Sweet: Full Employment Hasn't Always Translated Into Higher Inflation: We believe this time will be different
• Must-Read: Paul Krugman: Labour’s Dead Center
• Must-Read: Martin Sandbu**: The Importance of Corbynomics
• Ta-Nehisi Coates Interviewed by Ezra Klein: Ta-Nehisi Coates: “For African Americans, Unfreedom Is the Historical Norm”
• Must-Read: Tim Duy: Why the Fed Is Likely to Stand Pat This Week

Over at Equitable Growth--The Equitablog

• Nick Bunker: Keep an eye on changes to U.S. corporate income tax proposals
• Ben Zipperer: Comments on proposed U.S. overtime regulation
• The Arguments Being Put Forward for Raising Interest Rates Now Are Very Weak Indeed
• Why Don't Commercial Bankers Understand the Interests of Their Class Fraction?

Plus:

Must-Read: Tim Duy: Why the Fed Is Likely to Stand Pat This Week: "The Federal Reserve is looking for a time with minimal downside risks...

Live from 1333 H St., N.W.: I am very sorry that I will have to miss this...

Casey Schoeneberger: Gabriel Zucman presents “Hidden Wealth of Nations: The Scourge of Tax Havens”: "Please join the Washington Center for Equitable Growth for a presentation by Gabriel Zucman...

Over at Equitable Growth: The arguments for raising interest rates right now are of appallingly low-quality.

Consider, for example, Bloomberg View:

Brad Brooks: Why the Fed Should Raise Rates Now: "Although the Fed hasn't raised interest rates in almost 10 years...

...sympathetic pundits say it's still too soon to raise them.... How did our financial system weaken to the point where a quarter of a percent increase in rates is more than it can handle?

Stop right there: it is not that "our financial system [is] weaken[ed] to the point where a quarter of a percent increase in rates is more than it can handle". No interest-rate dove says it is. The reason interest-rate doves oppose rate increases right now is not that the financial system cannot handle them, but that they come with a cost--lower employment and slower growth--and no compensating gain in the form of an appropriate curbing of excess inflationary pressures, since there are no excess inflationary pressures visible either her and now or as far out as the horizon we can see. READ MOAR

Live from the Banks of the Miskatonic: LibraryThing: Miskatonic University Library in Arkham, Massachusetts: "Description: The building was full of a frightful stench...

...which Dr Armitage knew too well, and the three men rushed across the hall to the small genealogical reading-room whence the low whining came. For a second nobody dared to turn on the light, then Armitage summoned up his courage and snapped the switch. One of the three--it is not certain which--shrieked aloud at what sprawled before them among disordered tables and overturned chairs...

Live from Strada Barry Eichengreen: Chinese Renminbi: Regional or Global Currency?:

Colloquium: Center for Chinese Studies: Institute of East Asian Studies | September 16 | 12-1 p.m. | 180 Doe Library

Speaker: Barry Eichengreen, Economics, UC Berkeley
Moderator: Lowell Dittmer, Political Science, UC Berkeley
Sponsors: Institute of East Asian Studies (IEAS), Center for Chinese Studies (CCS)

This talk will contrast two views of the process and ultimate result of renminbi internationalization, one in which the renminbi becomes a consequential international currency used throughout the world, and a second in which the renminbi is used for cross-border transactions mainly in Asia.

**Must-Read: I do not think it is an accident that "student debt activists... put forward people defrauded by the for-profit industry, the media prefers to talk about poetry majors with outrageous debt balances..." The Graham family conglomerate, remember, included both The Washington Post and Stanley Kaplan University--the second-worst for-profit student-loan grifter--before its break-up. I think that mattered...

Mike Konczal: Student Loan Distress Goes Beyond Defaults: "Adam Looney and... Constantine Yannelis... [say] that there is no...

Must-Read: Martin Sandbu**: The Importance of Corbynomics: "A good place to start is by the two competing letters from economists...