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December 2015

The Archives: December 16

Most worth noting are:

  1. From two years ago, Nick Rowe's smackdown of Steven Williamson. As I said, Williamson's problem is that he neither "read Frank Fisher's Disequilibrium Foundations of Equilibrium Economics [n]or watched the highly intelligent and thoughtful George Evans talk on the subject", and is--along with the rest of the oddly-named and more oddlier-thinking "Neo-Fisherians"--unarmed in their various battles of wits...

  2. From five years ago, the inability of the Obama White House not just to play but even to understand the fiscal-policy game...

Continue reading "The Archives: December 16" »


Hoisted from Others' Archives from Six Years Ago: Julian Sanchez: The Politics of Ressentiment

This looks... prescient, terrifyingly prescient, in retrospect. Memo to self: pay much more attention to the extremely-sharp Julian Sanchez...

Julian Sanchez: The Politics of Ressentiment: "Conor Friedersdorf pokes some holes in Matt Continetti’s desperate attempt to paint substantive criticism of Sarah Palin’s published arguments...

...as some kind of mob persecution.... [Conor] misses the mark when he dubs the modern right’s obsession with its own supposed victimization an instance of the ‘politics of schadenfreude.’... Schadenfreude is as ubiquitous in politics as in any other competitive game.... The word he wants is ressentiment:

Continue reading "Hoisted from Others' Archives from Six Years Ago: Julian Sanchez: The Politics of Ressentiment" »


Paul Krugman and Larry Summers Are Such Amazing F#@$*%$ Geniuses! Department

Over at Equitable Growth: So as I finish my Pre-Federal Reserve Interest-Rate Liftoff Lollapalooza, I am left with three conclusions:

  1. Paul Krugman and Larry Summers are such amazing f#@$*%$ geniuses...
  2. If I simply wiped my brain, and reprogrammed the left half with Paul and the right half with Larry, I would be so much smarter than I am...
  3. Their influence on low-theory, analysis, and policy is immense, yet somehow... not big enough...

I confess that back when I somehow found myself taking point on the internet for the Larry-Summers-for-Fed-Chair movement, I thought that the choice between Janet and Larry had the potential to be a big deal if we wound up in the tails--that Larry might break the committee so that it could not act when it needed to, and Janet might fail to act in the absence of consensus when it need to act. But I did not think it would be a big deal anywhere near the center of the distribution.

Yet here we are in the center of the distribution, and somehow the difference the choice has made feels... substantial. Larry the Dove...

Here's the whole lollapalooza: READ MOAR

Continue reading "Paul Krugman and Larry Summers Are Such Amazing F#@$*%$ Geniuses! Department" »


What Is the Eccles Building Thinking Today? III: The Mysterious Absence of Paul Krugman Thought

Over at Equitable Growth: I am, once again, struck by just how much smarter the economics profession as a whole would have been over the past sixteen years if only people had taken as their lodestone this paper: Paul Krugman (1999): Thinking about the liquidity trap

Wherever I look at the post-2007 discussion in macroeconomics, I see enormous literatures and subliteratures, all of them containing a great deal of verbose and confused argument, all of them eventually leading to conclusions that were... laid out with diamond-like clarity in single paragraphs in Krugman (1999): READ MOAR

Continue reading "What Is the Eccles Building Thinking Today? III: The Mysterious Absence of Paul Krugman Thought" »


What Is the Eccles Building Thinking Today? II: The Reasonable People Are Very Unreasonable Indeed

Over at Equitable Growth: Larry Summers: What Should the Fed Do and Have Done?: "The Federal Reserve... has strongly signaled that it will raise rates...

...Given the strength of the signals that have been sent it would be credibility-destroying not to carry through with the rate increase, so there is no interesting discussion to be had about what should be done on Wednesday...

This seems to me to be wrong: credibility that one will stubbornly pursue bad policies is not worth gaining, or preserving. READ MOAR

Continue reading "What Is the Eccles Building Thinking Today? II: The Reasonable People Are Very Unreasonable Indeed" »


What Is the Eccles Building Thinking Today? I: The Failure to Think Through the Consequences of "Secular Stagnation"

Over at Equitable Growth: Olivier Blanchard, at least, has said that the secular decline in global real interest rates and increased macro instability means that the 2%/year inflation target was greatly ill-advised and needs to be raised to 4%/year. But, among the great and good who staff the finance ministries, central banks, and international organizations these days, he is nearly alone. And the other pieces of the policy puzzle that might get us out of our zero-lower-bound-secular-stagnation pickle--aggressive redistribution via taxes and transfers, higher debt levels for reserve currency-issuing sovereigns with exorbitant privilege to boost the supply of safe assets, reducing risk premia by governments' assumption of the role of entrepreneurial risk-bearer of last resort, international organizations that emerging markets regard as friends rather than enemies--are nowheresville. READ MOAR

Continue reading "What Is the Eccles Building Thinking Today? I: The Failure to Think Through the Consequences of "Secular Stagnation"" »


Must-Read Pre-Liftoff Lollapalooza: As Larry Summers says, this fits neither Ben Bernanke's ascription of low real interest rates to a transitory global savings glut caused by the political-insurance preferences of non-return maximizing market actors, not Ken Rogoff's belief that it is overwhelmingly the result of overleverage and the need for the unwinding phase of a debt supercycle. The cures proposed are then (i) higher target inflation rates, (ii) higher public debt levels, (iii) more mobilization of risk-bearing capacity in private-sector financial markets, (iv) redistribution, and (v) an international lender of last resort that emerging markets trust.

Lukasz Rachel and Thomas D Smith: Secular Drivers of the Global Real Interest Rate: "Long-term real interest rates across the world have fallen by about 450 basis points over the past 30 years...

Continue reading "" »


Things to Read for Your Nighttime Pre-Federal Reserve Liftoff Lollapalooza Procrastination on December 15, 2015

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Over at Equitable Growth--The Equitablog:

  • Nick Bunker: The upside of expanding access to the Earned Income Tax Credit* Peter Newcomb (2013): Fed Hawks Worry about Threat of Inflation: "Two top Federal Reserve policymakers expressed discomfort on Thursday with the U.S. central bank's easy monetary policy..."
  • Jeff Spross: Don't do it, Fed! It's a trap!: "The first thing is for voters, activists, and politicians to treat monetary policy with the seriousness it deserves..." :: How much of the current diversion between the views of Yellen and Summers is due to the drip-drip-drip of banking-sector opinions?
  • Matthew Yglesias: This week, the US government will take action to slow the economy and prevent wage growth: "for an African-American population that will enjoy a double-scale version of any drop in the unemployment rate, the stakes remain quite high. The same is true of other kinds of vulnerable populations..."
  • Neil Irwin: Yellen Blinks on Interest Rates: "The cost of waiting... to ensure that the economy continues to perform the way... models predict... [is] low..." As Stanley Fischer did not say, if the Fed raises interest rates when the odds are still only 60-40 that it should, it is not probably but definitely raising them too early
  • Tim Duy: Makes You Wonder What The Fed Is Thinking: "And so into the darkness we go." :: The extremely-thoughtful Tim Duy is... genuinely frightened...
  • Jared Bernstein: Will Inflation Really Snap Back Once “Temporary Factors” Abate?: "I noted the Fed’s theory of the case as to why inflation isn’t accelerating..." :: With model uncertainty, a rational optimizing policymaker would keep interest rates at zero for considerably longer...
  • Jon Faust: Liftoff? And then…: "The Fed’s policy projections going into the December FOMC last year showed a year-end 2015 median federal funds rate of about 1.5%..." :: I find this from Jon Faust inadequate, mostly because if its failure to make even a bow in the direction of asymmetric risks...
  • Harriett Torry and Jon Hilsenrath: Lesson for Fed: Higher Interest Rates Haven’t Been Sticking: "The Bank of Israel, under Stanley Fischer, who is now the Fed’s vice chairman, was among the first to move..." :: Much better to wait until you are sure that you will not have to return to zero in short order...
  • Robin Wigglesworth: How the US Federal Reserve Intends to Raise Rates: "Buckle up. On Wednesday, the Federal Reserve is expected to raise interest rates for the first time since 2006..." :: how will it use its tools?... It has taken off the private market will be very interesting to watch.
  • Financial Times: The Federal Reserve May Be Jumping the Gun: "Just because it seems inevitable does not mean it is a good idea..." :: The only wrong thing I see is the statement that "it would probably be more disruptive if the Fed sat on its hands"...

Continue reading "Things to Read for Your Nighttime Pre-Federal Reserve Liftoff Lollapalooza Procrastination on December 15, 2015" »


Must-Read Pre-Liftoff Lollapalooza: How much of the current diversion between the views of Yellen and Summers is due to the drip-drip-drip of banking-sector opinions that have excessive voice in the Eccles Building?

Jeff Spross: Don't do it, Fed! It's a trap!: "The first thing is for voters, activists, and politicians to treat monetary policy with the seriousness it deserves...

Continue reading "" »


Must-Read Pre-Liftoff Lollapalooza: Even if there were no model uncertainty, the asymmetry of the situation would lead a rational optimizing policymaker to keep interest rates at zero until the need for liftoff was undeniable. With model uncertainty, a rational optimizing policymaker would keep interest rates at zero for considerably longer...

Jared Bernstein: Will Inflation Really Snap Back Once “Temporary Factors” Abate?: "I noted the Fed’s theory of the case as to why inflation isn’t accelerating...

Continue reading "" »


Must-Read Pre-Liftoff Lollapalooza: I find this from Jon Faust inadequate, mostly because if its failure to make even a bow in the direction of asymmetric risks. If the hawk scenario comes true, the Federal Reserve can then raise interest rates quickly to get to where it wants to be. If the dove scenario comes true, the Federal Reserve cannot lower interest rates far below zero and so cannot get to where it wants to be. Thus liftoff should wait until it is pretty damn clear that the hawk scenario is overwhelmingly more likely. And it is not overwhelmingly more likely now. The Fed is making a mistake. And Faust's on-the-one-hand-on-the-other-hand without acknowledging the asymmetry in the situation...

Jon Faust: Liftoff? And then…: "The Fed’s policy projections going into the December FOMC last year showed a year-end 2015 median federal funds rate...

Continue reading "" »


Must-Read Pre-Liftoff Lollapalooza: Why does the Fed think that it will be different, and not desperately want to lower interest rates in two years, but be scared to admit it made a mistake? Much better to wait until you are sure that you will not have to return to zero in short order. Yet, somehow, that asymmetric-risks argument does not have purchase within the Fed...

Harriett Torry and Jon Hilsenrath: Lesson for Fed: Higher Interest Rates Haven’t Been Sticking: "Central banks in the eurozone, Sweden, Israel, Canada, South Korea, Australia, Chile and beyond...

Continue reading "" »


Must-Read Pre-Liftoff Lollapalooza: Yes, the Federal Reserve has the tools it needs in order to liftoff interest rates. But how will it use its tools? How it is going to manipulate interest on reserves, the monetary base, reserve requirements, and the amount of duration risk it has taken off the private market will be very interesting to watch...

Robin Wigglesworth: How the US Federal Reserve Intends to Raise Rates: "Buckle up. On Wednesday, the Federal Reserve is expected to raise interest rates for the first time since 2006...

Continue reading "" »


Must-Read Pre-Liftoff Lollapalooza: The Financial Times editors argue that the Federal Reserve is making a mistake with tomorrow's liftoff of interest rates.

They are right.

The only wrong thing they say that I see is their statement that "it would probably be more disruptive if the Fed sat on its hands". The Fed is likely to have to break its policy commitments at some point because its policy commitments are dangerous and faulty. Given that, the least disruptive moment to break them is now. Breaking them later will only be more disruptive.

Financial Times: The Federal Reserve May Be Jumping the Gun: "Just because it seems inevitable does not mean it is a good idea...

Continue reading "" »


Liveblogging World War II: December 15, 1945: Harry S Truman

Harry S Truman: Speech Draft:

It was a decision to loose the most terrible of all destructive forces for the wholesale slaughter of human beings. The Secretary of War Mr. Stimson and I weighed that decision most prayerfully. The President had to decide. It occurred to me that a quarter of a million of the flower of our young manhood was worth a couple of Japanese cities and I still think they were and are.

But I couldn’t help but think of the necessity of blotting out women, children and more combatants. We picked a couple of cities where war work was the principle industry and dropped the bombs. Russia hurried in and that war ended...


Live from the Roasterie: Relying on the health-care market and fee-for-service Medicaid leaves enormous gaps in our ability to deliver the right kind of health services to the population. Why we have not adopted more of a public-health model--why we did not use the need for stimulus in 2008-11 to adequately provide health services on a public-health model--was and is beyond me...

Ann Marie Marciarille: Global Health Grand Challenge: Enable Self-Testing for Cervical Cancer: "Like others of you, I read about developments in global public health...

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Things to Read for Your Lunchtime Procrastination on December 15, 2015

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Over at Equitable Growth--The Equitablog:

  • Nick Bunker: The upside of expanding access to the Earned Income Tax Credit
  • Nick Bunker: Trying to get a grip on the gig economy
  • Paul Krugman: Obamacare and the Cockroaches: "Zombie ideas are claims that should have been killed by evidence..." :: Still looking, without success, for conservatives at think tanks willing to be reality-based on health care...
  • Ryan Cooper: How Climate Change Ate Conservatism's Smartest Thinkers: "Like Clive Crook, Will Wilkinson, and Walter Russell Mead, Douthat doesn't seriously engage with the evidence..." :: It is important to note that global warming is not unique here...
  • Kevin Hoover: The Methodology of Empirical Macroeconomics: "Representative-agent models [do not] provide microfundations... do not solve the problem of aggregation; rather they assume that it can be ignored..." :: The combination of representative-agent modeling and utility-based "microfoundations" was always a game of intellectual Three-Card Monte...
  • Dani Rodrik: When Economics Works and When it Doesn’t: "The efficient markets hypothesis... models... [of] sovereign debt crises.... I wish we’d put greater weight on stories of the second kind rather than the first. We’d have been better off..." :: There is an awful lot of bad right-wing economics. There is much less bad left-wing economics...
  • Zack Cooper et al.: The Price Ain’t Right? Hospital Prices and Health Spending on the Privately Insured: "Health care spending per privately insured beneficiary varies by a factor of three.... The correlation... [with] Medicare... is only 0.14..." :: Yes. Constraining hospital and doctor-group market power is very important to creating a more efficient health-care system. Why do you ask?
  • Nick Bunker: Trying to Get a Grip on the "Gig Economy": "The sharing economy... follows rather than causes the bulk of the increase in 'independent contracting'..." :: When put that way, what we need is not a halfway house between W-2 employees and 1099 independent contractors, but more expansionary monetary and fiscal policy

Continue reading "Things to Read for Your Lunchtime Procrastination on December 15, 2015" »


Must-Read: It is important to note that global warming is not unique here. There has been no sign of the reemergence of technocratic voices on the right in health care, macroeconomics, anti-poverty policy, inequality, or--increasingly--national security..

Ryan Cooper: How Climate Change Ate Conservatism's Smartest Thinkers: "Ross Douthat grappled yesterday with the issue, arguing that...

...he's basically okay with doing nothing....

Continue reading "" »


Must-Read: Yes. The combination of representative-agent modeling and utility-based "microfoundations" was always a game of intellectual Three-Card Monte. Why do you ask? Why don't we fund sociologists to investigate for what reasons--other than being almost guaranteed to produce conclusions ideologically-pleasing to some--it has flourished for a generation in spite of having no empirical support and no theoretical coherence?

Continue reading "" »


Must-Read: I wonder: There is an awful lot of bad right-wing economics. There is much less bad left-wing economics. But if the left wing were stronger as a political movement--as strong as the right wing--would there be as much bad left- as right-wing economics. I suspect not, but that is merely a guess. But if it is a correct guess, the next question is: "Why?"

Mark Thoma sends us to Dani Rodrik: When Economics Works and When it Doesn’t: "If we take as our central model one under which the efficient markets hypothesis is correct...

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Must-Read: Our smart young Equitable Growth whippersnapper Nick Bunker reads Dourado and Koopman and, correctly, sees the "gig economy" as a positive way of trying to turn our current sow's ear of a low-pressure labor market into some reasonable facsimile of a silk purse. When put that way, what we need is not a halfway house between W-2 employees and 1099 independent contractors, but more expansionary monetary and fiscal policy:

Nick Bunker: Trying to Get a Grip on the "Gig Economy": "The trend... starts around the year 2000...

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The Archives: December 15

The pick of the litter from the archives today is my introduction to a course I will never have time to teach: Treating Karl Marx Seriously, and with Respect.

But I still do hope, someday, to teach a different course: "Smith, Marx, Keynes, Polanyi, Piketty"...

Continue reading "The Archives: December 15" »


Hoisted from Others' Archives from 2013: Dan Davies on the Mental Atom Bomb That Is Eugene Fama Thought

Live from the Roasterie: Much worth reading: A correspondent reminds me of Dan Davies's contrarian-trolling attempt to "rehabilitate" Eugene Fama's reputation in the context of providing a superb summary of much of modern academic finance:

Daniel Davies (2013): Sveriges Riksbank prize actually, blah blah blah — Crooked Timber: "This is where Eugene Fama came in, round one...

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Live from the Roasterie: MOAR AEI-Quality Research!

Memo for W. Bradford Wilcox: if you are going to try to argue that religion is good, don't use "high priests" as an insult. More generally, how could any religion that preaches that while we are saved people who live differently than we do are damned not be a significant net negative--both for this world and for any future one? How would that work exactly?

W. Bradford Wilcox: The latest social science is wrong. Religion is good for families and kids: "It’s a message we hear more and more: Religion is bad...

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Must-Read: Giovanni Peri and Vasil Yasenov: The Labor Market Effects of a Refugee Wave: Applying the Synthetic Control Method to the Mariel Boatlift: "Workers with no high school degree... are the group competing most closely...

...in the labor market with the newly arrived. We compare Miami's labor market outcomes with those in a control group of cities chosen using the synthetic control method so as to match Miami's wages and other labor market features in the period 1972 to 1979. Using most samples and different outcomes we find no departure between Miami and its control between 1979 and 1983. Significant noise exists in many samples but we never find significant negative effects especially right after the Boatlift, when they should have been the strongest.... The very different conclusions... [of] George Borjas (2015) stem from the use of a small sub-sample of high school dropouts in the already very small March-CPS sample. That sample is subject to substantial measurement error and no other sample provides the same findings. Being imprecise about the timing of the data and the choice and validation of the control sample further contribute to the impression of an effect from the boatlift in Borjas (2015)...


Liveblogging History: December 14, 1945: Eleanor Roosevelt

Eleanor Roosevelt: My Day by:

NEW YORK, Thursday—Tuesday afternoon I talked at some length with a Dutch publisher and his wife, whose family are Texans, and also with a representative of the press from Norway. All of them have been travelling in the United States and are on their way back to their own countries. They will arrive there in mid-winter. The best they can hope for in heating their offices is to keep a temperature of 48 degrees Fahrenheit. In their homes they can have enough coal to cook one hot meal a day, and that will be all the heat there will be in the whole house!

Continue reading "Liveblogging History: December 14, 1945: Eleanor Roosevelt" »


Monday Smackdown: The "New York Times" from Eight Years Ago

Needless to say, no editor at the New York Times ever lost a job or a promotion for commissioning and publishing this or any other piece of misinformation perpetrated by Ben Stein. Ben Stein is, I think, exempt from the libel laws because he is not mentally competent to understand what "false" and "reckless disregard" mean. But at the very least there ought to have been a retraction, a personal apology from the editors of the New York Times business section and of the paper as a whole to Jan Hatzius, and steep financial penalties as well.

Th every last thing New York Times readers needed to hear in December 2007 was that worries about the macroeconomic consequences of subprime and the housing bubble were Goldman Sachs trying to create a panic so that it could profit. The indifference of the editorial staff of the New York Times with respect to how they are doing as trusted information intermediaries... spoke and speaks volumes:

Ben Stein (December 2007): The Long and Short of It at Goldman Sachs: "The world is far too complex a place to be run by any one group...

...But the closest I have recently seen to such a world-running body would have to be a certain large investment bank....

Continue reading "Monday Smackdown: The "New York Times" from Eight Years Ago" »


Things to Read for Your Morning Procrastination on December 14, 2015

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Over at Equitable Growth--The Equitablog:

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Links for the Week of December 7, 2015

Most-Recent Must-Reads:

  • Miriam Ronzoni: Where Are the Power Relations in Piketty’s Capital?: "There seems to be a friction between the diagnosis... of the power of capital... and the suggested cure... [of] well-minded citizens... recogniz[ing] the... problem" :: The extremely-sharp Miriam Ronzoni excellently puts her finger on a substantial hole in Thomas Piketty's Capital in the Twenty-First Century...
  • Ananya Roy: The Land Question: "The infrastructure problem, it turns out, is effectively a land problem..."
  • David Roberts: Why Conspiracy Theories Flourish on the Right: "The most engaged conservative voters... won't trust conservative elites any more than they trust liberals, scientists, or the media..."
  • Matt Bruenig: Why Education Does Not Fix Poverty: "To the extent that education does nothing to provide better income support for those who do find themselves in these vulnerable situations, its effect on overall poverty levels will always be weak, or, as with the US in the last 23 years, totally nonexistent..."

Most-Recent Links:

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Mea Culpa: Confidence Proceedings Edition: I Really Do Think Dynamic Scoring Is a Bad Idea

I have committed a grave sin for the first time.

In revising and extending for publication the remarks I made during the discussion of Doug Elmendorf's paper for the Fall 2015 issue of the Brookings Papers on Political Economy, I have not done so.

Instead, I have rewritten and compressed. The below bears little resemblance to what I did say. But it is what I should have said:

Continue reading "Mea Culpa: Confidence Proceedings Edition: I Really Do Think Dynamic Scoring Is a Bad Idea" »


The Archives: December 13

Wow! Has it really been ten years since John F. Harris launched his war to get Dan Froomkin's "White House Watch" column purged from the Washington Post?

In the end it succeeded--to, in my view, the great detriment of the Post as a trusted information intermediary.

And then John F. Harris went out on his own to do, at Politico, exactly what Froomkin had been doing with his "White House Watch". Only Harris without focus on policy substance, and without concern for the future of the country.

Continue reading "The Archives: December 13" »