Grasping Reality on TypePad, by Brad DeLong

Over at Equitable Growth: The very sharp and energetic Peter Passell, who runs the Milken Institute Review these days, commissioned me to write a reader's guide to the secular stagnation debate. I set it up as a four-corner cage match--Bernanke, Rogoff, Krugman, and Summers--and I am proud of it. (But I have to offer apologies to those--Koo, Blanchard, Feldstein come most immediately to mind, but there are others--who have their own serious positions that are not completely and satisfactorily understood as linear combinations of the four I chose to be my basis vectors.) It is out:

J. Bradford DeLong (2015): The Scary Debate Over Secular Stagnation, Milken Institute Review 2015:IV (October) pp. 34-51:

Bernanke... says we have entered an age of a “global savings glut.”... Rogoff... points to the emergence of global “debt supercycles.”... Krugman warns of the return of “Depression economics.” And... Summers calls for broad structural shifts in government policy to deal with “secular stagnation.” READ MOAR

Must-Read: Mark Thoma sends us to Rajiv Sethi, who makes a convincing case that the very sharp Sendhil Mullainathan has gotten one wrong here:

Rajiv Sethi: Threats Perceived When There Are None: "He argues that 'eliminating the biases of all police officers would do little...

Live from Evans Hall: Ezra Klein: What Makes Me so Confident in Marco Rubio?: "I gave a speech last night where I repeated my prediction...

...that Hillary Clinton and Marco Rubio would win their respective primaries. But I’m increasingly unsure where my confidence in Rubio comes from. Look at this chart. Can you easily pick out Rubio’s line? And even once you spy his violet thread, is there anything in that line to justify much optimism?...

Must-Read: Jason Furman and Peter Orszag: A Firm-Level Perspective on the Role of Rents in the Rise in Inequality: "In Joe [Stiglitz]’s honor, we thought it appropriate to collaborate on a paper...

Live from Silicon Valley: Heidi Roizen: How to Build a Unicorn From Scratch--and Walk Away with Nothing: "Liquidation preferences, participation, ratchets...

...even the very term preferred shares (they are called ‘preferred’ for a reason) are things every entrepreneur needs to understand. Most terms are there because venture capitalists have created them, and they have created them because over time they have learned that terms are valuable ways to recover capital in downside outcomes and improve their share of the returns in moderate outcomes--which more than half the deals they do in normal markets will turn out to be. There is nothing inherently evil... standard procedure for high risk investing.  But for you the entrepreneur to be surprised after the fact about what the terms entitle the venture firm to is just bad business--on your part. For any private company with different classes of stock, the capitalization table is not-at-all the full picture of who gets what in an outcome...

Comment of the Day: Phil Koop: The Dreamwork of Humanity: "'The Minds have run a billion simulations of...

...every course of action (and are the programs inside their simulations self-aware? Horrible thought!)"

Must-Read: Stephen Breyer (2014): NLRB v. Canning: "Ordinarily the President must obtain “the Advice and Consent of the Senate”...

...before appointing an “Office[r] of the United States.” U. S. Const., Art. II, §2, cl. 2. But the Recess Appointments Clause creates an exception. It gives the President alone the power “to fill up all Vacan cies that may happen during the Recess of the Senate, by granting Commissions which shall expire at the End of their next Session.” Art. II, §2, cl. 3. We here consider three questions about the application of this Clause.

Must-Read: Michael DeLong: Pay Attention to Gabriel Zucman on Tax Havens: "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, www.press.uchicago.edu/ucp/books/book/chicago/H/bo20159822.html).

Must-Read: Martin Sandbu: Free Lunch: Mutiny at the Fed: "Two governors, Lael Brainard and Daniel Tarullo...

Must- and Should-Reads:

• Jim Tankersley: The Great Recession and the Middle Class (with image, tweets)
• David Cay Johnston: A Rising Tide Does Not Lift All Boats
• Kevin O'Rourke: Secular Stagnation: Economic Impossibilities for Our Grandchildren?
• Ben Thompson: Venture Capital and the Internet's Impact
• Larry Summers: Another Argument for Infrastructure Repair
• Greg Sargent: Freedom Frauds
• Paul Romer: Looking Back on Romer (1990): Nonrival Goods After 25 Years | Human Capital and Knowledge | Clear Writing Produces Clearer Thoughts | Economic Growth
• Mancur Olson (2000): Power And Prosperity, Outgrowing Communist And Capitalist Dictatorships
• John Quiggin: "For-profit education has been a disastrous failure wherever it has been tried, and particularly where for-profit firms can gain access to public funds through policies designed to enhance ‘consumer choice’..."

Over at Equitable Growth--The Equitablog

• Nick Bunker: The importance of low U.S. interest rates in the long run

Plus:

Must-Read: Jim Tankersley: The Great Recession and the Middle Class (with image, tweets):

Must-Read: Ben Thompson: Venture Capital and the Internet's Impact: "Because a company pays for AWS resources as they use them...

Dominic Selwood : The true story of the Battle of Hastings:

On the 13th of October... [Harold the Usurper's] army of around 7,000 pitched camp on the ridge of Senlac Hill, south of Wealden Forest, around 10 miles north-west of Hastings. The stage was set. As the sun rose on the 14th of October, William moved out to meet Harold. He had his archers in front, his infantry behind, and three divisions of cavalry bringing up the rear.  The men were a mix of Norman, Breton, Flemish, and French, with a significant number of mercenaries and adventurers.

Live from Portland Art Museum: Josh Marshall: Keeping His Distance from the RINOizer: "This is Young Guns: A New Generation of Conservative Leaders...

...a rather self-congratulatory book by Ryan, Cantor and McCarthy heralding a new generation of more ideological and more aggressive Republican congressional leaders who were going to take the fight to President Obama... published just before the 2010 mid-term election.... The three... played a key role in bringing about the new GOP majority that took over in 2011 and building the spirit of confrontation that characterized it. And yet, look at the picture. Eric Cantor is now working as an investment banker after undergoing the abject humiliation of being tossed from office... by a right wing primary challenger... an uber-RINO who paid the price.

Eleanor Roosevelt: My Day:

HYDE PARK, Friday—Today I want to talk to you about something which came to me the other day from a member of a USO entertainment group that had been in both Italy and Germany very recently.

Arnold Blumberg: Too tired to fight? Harold Godwinson’s Saxon army on the march in 1066:

Sometime between 29 September and 1 October Harold was notified that the long awaited invasion of Saxon England by William of Normandy had taken place. He now had no choice but to return to the south to deal with this new threat. From York the King raced southwards toward London.... Most likely, he only led the core of [his] force... his housecarls... as well as his brother Gyrth’s contingent....

John Burgoyne (1780): The State of the Expedition from Canada: October 11, 1777:

: Battle of Saratoga, Oct. 10, 1777:

History.com: Belgrade falls to Austria-Hungary:

On October 9, 1915, Austro-Hungarian forces capture the Serbian capital of Belgrade, assisted in their defeat of Serbian forces by German troops under the command of General August von Mackensen.

Eleanor Roosevelt: My Day:

NEW YORK, Sunday—On Thursday evening I attended a solemn and beautiful ceremony which the Netherlands-Jewish Society held to commemorate the deaths that had occurred throughout Europe, but especially among the Dutch Jews. A message from Queen Wilhelmina spoke of her deep sorrow in the death of so many of her loyal subjects and of the pride she felt in the way in which all of them had banded together to defy the Germans, so that many Gentiles risked death to protect Jews.

Live from La Farine: Jeb Bush, trying to capitalize on the fact that the one thing that Presidents named Bush definitely know how to do is to create recessions:

.@JebBush: Let’s create a small recession inside D.C...:

.@JebBush: Let’s disrupt Washington & create a small recession inside D.C. so we can have economic prosperity outside of Washington.

— Fox News (@FoxNews) October 15, 2015

Positive proof that Neil Bush is the smarter brother...

Must- and Should-Reads:

• Daniel Davies: "To solve Britain's housing crisis we don't need to build more houses, we need to fix our rental laws..."
• Jared Bernstein: Fed Fight!
• Vasco Cúrdia: Why So Slow? A Gradual Return for Interest Rates
• Ben Thompson: "Venture capitalists are arbitrageurs... [with] more information than those with the capital... more capital than those with information... exploiting the mismatch.... This is not a bad thing! Our entire economy is predicated on middlemen... an entire supply chain of middlemen that results in $4 toast from wheat that costs $4/bushel..."
• Noah Smith: It Isn't Just Asian Immigrants Who Thrive in the U.S.
• Douglas Staiger, James H. Stock, and Mark W. Watson (1997): How Precise Are Estimates of the Natural Rate of Unemployment?

Over at Equitable Growth--The Equitablog

• Michael Ettlinger: Conventional, one-dimensional policies will not reverse U.S. income inequality growth
• Nick Bunker: The measured Angus Deaton wins the Nobel Prize
• The Extremely-Sharp Tim Duy Sees the Fed Moving Away from Contractionary Policy
• Nick Bunker: Minimum wage workers and the collapse of the job ladder

Plus:

Live from Over the Great Basin: James Fallows: Why They're Running: Lessons From the Democratic Debate: "A reader (who also happens to run a tech company)...

...has an assessment of the debate that I find more useful than a lot of what’s coming from the political pros....

Comment of the Day: Matt: The Dreamwork of Humanity: "Re: 'The Minds have run a billion simulations...

...of every course of action (and are the programs inside their simulations self-aware? Horrible thought!)"

Live from the Roasterie: It is very interesting: now that Nate Silver is no longer writing for the New York Times, the incompetents within the DC media bubble no longer feel that they have to respond to his calm, reasoned pointing-out that they have no clothes at all. The Halperins, the Milbanks, the Montgomerys, etc. are back in their groove, spouting their rapidly-changing-horse-race bullshit, unashamed and unmoved:

: The Media Underestimated Hillary Clinton, But Overestimated Her Debate: "I suggested the media was likely to emerge with one of two narratives about...Hillary Clinton...

...mounting a comeback, or she was in a downward spiral. ‘It may not take all that much,’ I wrote, ‘for the media to choose one narrative over another and then find all sorts of ‘evidence’ to reinforce it.’...

It is a truth universally acknowledged that any trip that involves five talks in five cities in five days will, if it also requires two intercontinental redeyes, acquire a certain dreamlike quality--a certain fuzziness and confusion of memory.

For example:

• Those flashes in my brain relatively-slight short-haired person wearing glasses, a pinstriped shirt, and a rather loud tie: was she an investment-banking forecasting minion, the editor-in-chief of http://gizmodo.com, or Breq Mianaai--off for what she thought would be her fatal confrontation with one of the instantiated avatars of her adoptive mother, Anaander Mianaai, Lord of the Radch?

Must-Read: Noah Smith: It Isn't Just Asian Immigrants Who Thrive in the U.S.: "Nicholas Kristof... ask[s] the ‘awkward question’ of why Asian-Americans have been so economically successful...

Over at Equitable Growth: The extremely-sharp Tim Duy sees a much bigger potential impact than I do from Fed Governor Lael Brainard's recent speech telegraphing future dissents on her part if the Federal Reserve raises interest rates in the current situation. Briefly, this: The failure to raise interest rates over the next nine months will call forth dissents from those whose analytical perspectives have been wrong pretty much all the time since 2007. Raising interest rates will call forth dissents from those whose analytical perspectives have been pretty much right all the time since 2007. Moreover, it is straightforward to undo the damage from being behind the curve in raising interest rates. It is impossible to undo the damage from being ahead of the curve in raising interest rates.

It would be one thing to raise interest rates if it were the unanimous consensus of the committee that it was time to do so. It is quite another, in a world of uncertainty and the need for prudent risk management. It's quite another to risk making unrecoverable errors by endorsing those whose positions have been wrong in the past over the objections of those whose positions have been right.

Tim Duy: Brainard Drops A Policy Bomb: "Lael Brainard dropped a policy bomb... READ MOAR

Live from the Roasterie: David Brooks says: "I've been helping the Republicans run a con game on America and on conservatives for my entire career, and now that it looks like the game has run out, I'm going to say I'm sorry and change sides":

David Brooks: The Republicans’ Incompetence Caucus: "The House Republican caucus is close to ungovernable...

...[It's] not just the... Freedom Caucus or Ted Cruz or one month.... Capacity for effective self-governance degraded slowly, over the course of a long chain of rhetorical excesses, mental corruptions and philosophical betrayals... [as they] abandoned traditional conservatism for right-wing radicalism.... Over the past 30 years, or at least since Rush Limbaugh came on the scene, the Republican rhetorical tone has grown ever more bombastic, hyperbolic and imbalanced. Public figures are prisoners of their own prose styles, and Republicans from Newt Gingrich through Ben Carson have become addicted to a crisis mentality. Civilization was always on the brink of collapse. Every setback, like the passage of Obamacare, became the ruination of the republic. Comparisons to Nazi Germany became a staple.

October 12, 2015

We, the undersigned UC Berkeley Astronomy faculty, write to make clear that sexual harassment has no place in our Department, and that we fully support the survivors of harassment. We regret the harm caused by our faculty, and reject any suggestion that our sympathies should be with the perpetrators of sexual harassment. We are committed to developing and maintaining a supportive, open climate in which all members of the Department can thrive, regardless of gender, ethnicity, sexual orientation, disability, or religious faith.

Berkeley Astro Department Statements--PostDocs

12 October 2015

Dear Interim Department Chair Gibor Basri and Astronomy Faculty:

Many of us in the department were shocked and appalled to read the BuzzFeed articleabout Prof. Geoff Marcy's record of harassment. We are likewise dismayed by the response of our University and department to his behavior and the results of the Title IX investigation. As postdoctoral scholars and staff researchers associated with the UC Berkeley Astronomy Department, we wish to express our dissatisfaction with both the communication and the outcome of this investigation via the following statements:

The following statement represents the consensus reached by the UC Berkeley Astronomy Department graduate student community as of October 12th, 2015:

The determination by UC Berkeley’s Title IX Office that Astronomy Professor Geoff Marcy violated the University’s sexual harassment policies is deeply troubling. We are appalled by Geoff Marcy’s actions, and by the extended length of time his behavior continued without repercussions. Our concern is compounded by the University’s decision to forego immediate disciplinary action, and by the secrecy surrounding the findings: most members of the Department learned about the report—months after it was issued—from an article on BuzzFeed.

Enrico Ramirez-Ruiz, Chair; and Claire Max, Director, UC Observatories: [Letter to UCSC Astronomy Community](http://www.astro.ucsc.edu/news-events/by-year/2015/Astro UCO Statement.pdf):

To Members of the UCSC Astronomy Community:

Friday October 9th, Buzzfeed broke the news that prominent astronomer and UC Santa Cruz alumnus Geoffrey Marcy was found by UC Berkeley to have violated campus sexual harassment policies between 2001 and 2010.

Must- and Should-Reads:

• Chris Blattman: Why Angus Deaton Deserved the Nobel Prize in Economics
• Mark Thoma sends us to Simon Wren-Lewis: mainly macro: One reason why monetary policy is preferred by New Keynesians
• John Voorheis, Nolan McCarty, and Boris Shor: Unequal Incomes, Ideology and Gridlock: How Rising Inequality Increases Political Polarization
• Yi Wen: The Making of an Economic Superpower--Unlocking China’s Secret of Rapid Industrialization
• Paul Krugman: Angus Deaton and the Dodd-Frank Election
• Matt Phillips: Bernanke: I’m not really a Republican anymore
• Oregon Economic Forum to examine the post-recovery economy
• Matt Bruenig: The Egalitarian Program in Broad Strokes
• Vasco Curdia: Why So Slow? A Gradual Return for Interest Rates

Over at Equitable Growth--The Equitablog

• Watching Star Trek Is Doing the Dreamwork of Planning for Our Own Future, and Izabella Kaminska Is ON IT!!!!
• An Excellent Nobel Prize for Angus Deaton-But Was Eugene Fama Always Such a Total [Redacted]?
• Monday DeLong Smackdown: Kevin Drum Asks a Question About the Attainability of a 4%/Year Inflation Target
• "Your Mom Isn't Here" Jobs... - Equitable Growth

Plus:

Comment of the Day: Kansas Jack: Links: "...and why won't more newspapers and TV stations...

...simply ignore banana republicans?

What? Sorry can't hear the question over the din of the $11 million dollars of change pouring into Des Moines' area media coffers: http://dmreg.co/1WVvAva

Let me, for one, beg for daily insider reports from Kansas Jack in the belly of the plutocratic media storm beast...

Comment of the Day: Roger Farmer: Fed?!?!: "There is a third possibility...

...The only way to get out of the trap is to raise rates now and offset the contraction through simultaneous fiscal expansion: either through:

1. traditional infrastructure (I'm not a fan),
2. Helicopter drops (I'm more of a fan), or
3. Fed purchases of stocks.

I think that Miles Kimball's negative interest rates would also work--which would be not a fiscal but a monetary expansion in Roger's taxonomy...

Live from the Enterprise Captain's Stateroom: Tea: Stash Earl Grey Double Bergamot, 16 oz.; steeped for three minutes; one-sixth half-and-half by volume, three teaspoons of sucralose, and two sprinkles of cinnamon added; reheated to just short of boiling.

Over at Equitable Growth: In the utopian post-scarcity future, the extremely-sharp Izabella Kaminska will transcribe and curate my random blatherings into sharp, concisive, and useful diamond-like weblog posts--and will do so for free!

That future is here, albeit unevenly distributed--and a lot of it is distributed to me:

Felix Salmon: What is post scarcity?

Me: Well 400 years ago, in almost all human societies, being rich relative to your neighbours mattered a lot. If you were poor, especially poor and female, chances were you weren’t getting the calories you needed to reliably ovulate, and chances were your children weren’t getting the nutrients that they needed for their immune systems to be protected against the common cold. 400 years ago the great bulk of humanity lived lives that were nasty, brutish, short and they were hungry pretty much all the time. And when they weren’t hungry they were wet, because the roof leaked, and when they weren’t wet they were probably cold, because damp-proofing hadn’t been invented. READ MOAR

Live from the O'Hare Tarmac: Now I remember why friends don't let friends connect through O'Hare...

They do! I now have for email messages in my inbox, two from Berkeley faculty, all saying roughly:

This business about a "women's network to warn" is so familiar...

Must-Read: Yi Wen: The Making of an Economic Superpower--Unlocking China’s Secret of Rapid Industrialization: "Poverty or backwardness or the lack of industrialization is always and everywhere a social coordination-failure problem...

Live from La Farine: My colleague Michael O'Hare has had it with the U.C. Berkeley administration.

It seems to me that Gibor Basri, Claude Steel, Nick Dirks, Janet Napolitano, Monica Lozano, and Jerry Brown have some explaining to do, and should do it very quickly:

Michael O'Hare: Serial Sexual Harasser Geoffrey Marcy: Irony Bonfire at Cal: "Astronomer Geoffrey Marcy is a big deal in big science, apparently on the Nobel Prize short list...

...A Sirius-level magnitude star in Berkeley’s constellation.  For  a decade, at least, he’s also been a serial harasser of women and on notice about it, in a field that has a big problem treating women as colleagues. Not a careless act or slipup: a long-time hobby.

Must-Read: John Voorheis, Nolan McCarty, and Boris Shor: Unequal Incomes, Ideology and Gridlock: How Rising Inequality Increases Political Polarization: "Income inequality has a large, positive and statistically significant effect on political polarization...

Over at Equitable Growth: A truly excellent economics Nobel Prize--I have learned a lot from Angus Deaton.

And I look at my desk and see my copy of Akerlof and Shiller's Phishing for Phools that I am halfway through on my desk. And I think about the panel I was on with Paul Krugman at New York Comic Con yesterday. There is a subset of economics Nobel Prize winners who are true geniuses, from whom I have learned and continue to learn an immense amount.

But then I turn to my computer to sort through my unread browser tabs.

And the first thing that comes up is: Eugene Fama: http://www.chicagobooth.edu/capideas/magazine/fall-2015/whos-really-in-charge.

And all I can think is: "What a maroon!" READ MOAR

Must-Read: Paul Krugman: Angus Deaton and the Dodd-Frank Election: "Angus Deaton has won the Nobel, which is wonderful...

British Museum: The Kurush Cylinder: "I am Kurush, king of the universe, the great king, the powerful king...

...king of Babylon, king of Sumer and Akkad, king of the four quarters of the world; son of Kambojie, the great king, king of the city of Anshan; grandson of Kurush, the great king, king of the city of Anshan; descendant of Tishpish, the great king, king of the city of Anshan, the perpetual seed of kingship; whose reign Bel (Marduk) and Nabu love, and with whose kingship, to their joy, they concern themselves.

Must-Read: Oregon Economic Forum to examine the post-recovery economy: "The 2015 Oregon Economic Forum... will be held Thursday, Oct. 15, at the Portland Art Museum, 1219 S.W. Park Ave...

Over at Equitable Growth: A very effective smackdown, I must say:

Kevin Drum: 4%/Year Inflation: "Generally speaking, I'm in DeLong's camp...

...But here's my question: what makes him think that the Fed can engineer 4 percent inflation right now? And what would it take? I ask this because it's conventional wisdom that a central bank can engineer any level of inflation it wants if it's sufficiently committed and credible about it. And that's true. But my sense recently has been that, in practice, it's harder to increase inflation than it sounds. The Bank of Japan has been trying to hit the very modest goal of 2 percent inflation for a while now and has had no success. Lately it's all but given up. 'It's true that the timing for achieving 2 percent inflation has been delayed somewhat,' the BOJ chief admitted a few months ago, in a statement that bears an uncomfortable similarity to the emperor's declaration in 1945 that 'the war situation has developed not necessarily to Japan's advantage.'

So I'm curious. Given the current state of the economy, what open market operations would be required to hit a 4 percent inflation goal? How big would they have to be? How long would they have to last? What other extraordinary measures might be necessary? I've never seen a concrete technical analysis of just how much it would take to get to 4 percent. Does anybody have one? READ MOAR

Live from the Outer Banks: A very well deserved Nobel Prize to the great Angus Deaton...

• Matthew Yglesias: "Conor Friedersdorf... from some alternate universe in which the House Republican caucus hasn't just thrown itself into a tailspin over a few dozen nutters' insistence that the entire fabric of the American economy must collapse unless Barack Obama agrees to implement the entire Republican Party platform.... The idea that Democrats should play a game of 'heads the GOP wins, tails the Democrats lose' may make for a fun holier than thou hot take, but it's also ridiculous..."
• Martin Wolf: Alphachatterbox
• Michael DeLong: The Attack on Voting Rights
• Jeffrey Frankel: Why Support the TPP?
• Thomas E. Mann and Norman J. Ornstein (2012): Just Say It: The Republicans Are the Problem
• Bruce Bartlett: The Fed: Being Goaded into Raising too Soon?
• Aaron Bleyaert: How to Lose Weight in 4 Easy Steps
• Anita Anand: Sophia Dulup Singh: Princess, Suffragette, Revolutionary