Grasping Reality on TypePad, by Brad DeLong

Latest Must-Reads:

• Andrew Gelman and Cosma Rohilla Shalizi (2011): Philosophy and the practice of Bayesian statistics
• Narayana Kocherlakota: Fragility of Purely Real Macroeconomic Models
• Ryan Avent: No Take-Backs: The Fed Makes the Best of the Bad Situation It Created

Latest Links:

• Paul Krugman: "The old Milton Friedman two-step.... That the Fed could have prevented a disaster... morphs into the claim that the Fed caused the disaster. See, government is the problem, not the solution! And the motivation for this bait-and-switch is, indeed, political..."
• : Why Are We Ruled by These Morons? (Under Secretary of State Bob Joseph Edition)
• David Atkins: Rubio’s Polling Gain Is The Final Capstone on the Utter Failure of Bush SuperPAC Right To Rise
• Brad DeLong (2003): Profits of Doom
• Nicolas Colin: 11 Notes on Amazon
• Noah Smith: "I guess there will always be a market for books claiming that progressives were The Real Nazis: https://t.co/Qw6dPC2ahr"

The pick of the litter:

• Barack Obama's 23 Hurricane Katrinas

Additional picks of the litter:

• Chicago Macro: Yet Another Soft Bigotry of Low Expectations Post
• The Cato Institute Tries to Make Kansas Poorer and Close Its Safety-Net Hospitals
• What Failed in 2008?
• On the Fed's Policy of Quantitative Easing Coupled with Promises Not to Let Prices Recover Any of the Ground Relative to Trend They Lost in the Recession
• Special David Gelernter and Michael Kinsley Feel-Bad Piece of the Month of July 2005
• The Rebalancing Challenge in Europe Today: The Honest Broker for the Week of February 8, 2015
• Intelligent Economic Design
• Reality-Based Economists' Letter on the Affordable Care Act

Not just not in the "trusted information intermediary" business, but somebody who has no conception of what the trusted information intermediary business is:

Hoisted from a Decade Ago: Some of the News That's Fit to Print (Why Oh Why Can't We Have a Better Press Corps?): "In Slate, Jack Shafer writes:

Not Just Another Column About Blogging - What newspaper history says about newspaper future. By Jack Shafer: John Q. Blogger can't fly to Baghdad or Bosnia and do the work of a John F. Burns. But what a lot of guild members miss is that not everybody wants to read John F. Burns, not everybody who wants to read about Baghdad is going to demand coverage of the quality he produces...

There's a question Shafer doesn't ask: what quality of coverage does John F. Burns, chief foreign correspondent of the New York Times produce?

It's an important question.

Tom Morgan: World War I: The Great Zeppelin Raid:

On January 31st, 1916, nine airships left their bases at Friedrichshaven and Lowenthal, an unusually large number. This time they would not creep across the North Sea under cover of darkness to haphazardly bomb the South coast of England and slink back home. This time their orders were to fly across the entire breadth of England and bomb Liverpool which, until then, had been considered well beyond the range of the raiders. The unprecedented scale and audacity of this raid would show the British a thing or two. It would make them realise that nowhere was safe from aerial attack. No longer could anyone say they were out of reach. Even distant Liverpool had become, to use a phrase which would become commonplace in later wars, a legitimate target.

I missed this six months ago:

Julie Verhage: The Two Big Economic Policy Failures That John Maynard Keynes Would Be Disappointed by Today: "The famous economist isn't around for us to ask him...

...but here is probably the next best thing. Robert Skidelsky... said... Keynes would have found two things upsetting. First, he would be frustrated with the lack of  precautions taken to prevent a huge financial crash like the one we saw in 2008. Secondly, Lord Skidelsky believes Keynes... would have wanted a more 'buoyant response,' he said.  Specifically, he doesn't think Keynes would have liked the Federal Reserve's quantitative easing....

Over at Equitable Growth--The Equitablog:

• Nick Bunker: Weekend reading: The “still shoveling out” edition
• Obsessing yet again about the Federal Reserve's unnecessary current dilemma* Andrew Gelman and Cosma Rohilla Shalizi (2011): Philosophy and the practice of Bayesian statistics
• Narayana Kocherlakota: Fragility of Purely Real Macroeconomic Models
• Ryan Avent: No Take-Backs: The Fed Makes the Best of the Bad Situation It Created

Paul Krugman (1999): Thinking about the liquidity trap:

We live in the Age of the Central Banker - an era in which Greenspan, Duisenberg, and Hayami are household words, in which monetary policy is generally believed to be so effective that it cannot safely be left in the hands of politicians who might use it to their advantage. Through much of the world, quasi-independent central banks are now entrusted with the job of steering economies between the rocks of inflation and the whirlpool of deflation. Their judgement is often questioned, but their power is not.

Josh Marshall: The Trumph of the Will: "This Donald Trump debate drama...

...When I heard... I was quite certain he had every intention of finally attending... [after] engineer[ing] 48 hours of cable news drama [and] begging by Fox News... [with] Trump... deigning to attend... after all the other players had been sufficiently humiliated. But... it... seems clear it was never the case.... Being a no-show was the plan.... Pundits and political obsessives tend to get distracted by process and policy literalism. But... especially intra-Republican political battles are really about... mark[ing] the dominating from the dominated....

Must-Read: Andrew Gelman and Cosma Rohilla Shalizi (2011): Philosophy and the practice of Bayesian statistics: "A substantial school in the philosophy of science...

Eleanor Roosevelt: My Day:

LONDON—I'm glad to have discovered that I made a mistake in saying, in a broadcast the other evening, that there were only two women who were full delegates to the UNO Assembly. Besides myself, there are four:—Mrs. Evdokia Uralova of White Russia, Miss Minerva Bernardino of the Dominican Republic, Miss J. R. McKenzie of New Zealand, and Miss Ellen Wilkinson, MP, of Britain.

George F. Kennan: To James Byrnes:

Atomic Bomb Physical Damage, Nagasaki, 01/23/1946 - 01/28/1946 (full):

Henry Laurens: To George Washington:

While I was sitting in Congress yesterday a Member came in & delivered me the inclosed paper just in its present State except the broken Seals, the Gentleman’s declaration as he was putting the thing into my hand, that he had picked it up on the Stairs, was a sufficient alarm--I passed my Eye cursorily over the pages, put them into my pocket & intimated to the House, that it was an anonymous production containing stuff which I must be content with, as perquisites of Office--that the hearth was the proper depository for such Records.

• Basecamp page: http://www.bradford-delong.com/introduction-to-economic-history-graduate-basecamp-policy.html
• Syllabus link: http://eml.berkeley.edu/~webfac/eichengreen//e210a_sp14/210a_syl_sp16_1-13-16_FINAL.pdf
• bCourses

For January 27, 2016: The January 20 class painted a picture of an economic world in which (a) total factor productivity growth was very slow, and (b) as a result the overwhelming effect of technological progress was to increase human numbers rather than raise standards of living above bare subsistence.

This week we read pieces all arguing that very important things were happening in northwestern Europe in 1500-1800 to raise the rate of total factor productivity growth. Pick one paper. Do you think it makes a convincing case? Taking as background January 20's class, how much of a difference in the global economic trend do you think that paper's factors by themselves could have made?

For February 3, 2016: Economics tends to view growth as a continuous and diffuse process: if one firm does not solve the problem of how to efficiently utilize resources, others will and drive the first out of business; if one technological vein plays itself out, energy will focus on others.

The papers this week argue different. They argue either that some unique and particular institutions and technologies matter a lot--or, implicitly that they do not, for it is other institutions or technologies or simply the aggregate state of the economy that matters the most. What kinds of evidence not presented in this week's reading might lead you to come down on one or the other of the many, many sides in this debate?

I really, truly am obsessing about this to excess, am I not?

But it's overwhelmingly weird: conclusions that seem to me obvious and inescapable, nailed-down and air-tight, ironclad and titanium do not seem to have any force with the deciding members of the FOMC:

Jo Walton (2015): The Just City (New York: Tor Books: 9780765332660) http://amzn.to/1WQi0cn

John Holbo: Walton’s Republic: What is Athene’s motive in dragging all those robots from the future to help build this thing?...

Brad DeLong: Re: ‘What is Athene’s motive in dragging all those robots from the future to help build this thing?’ Aristoteles son of Nikomakhos of Stagira:

Must-Read: Once again: if the economy comes in weak, then the FOMC will wish that it had not raised interest rates in December and will find it impossible to induce an offsetting deviation from the ex post interest rate path it will wish it had followed in order to balance things out. If the economy comes in strong, then the FOMC will wish that it had raised interest rates even earlier than December, but it will then find it easy to induce an offsetting deviation from the ex post interest rate path it will wish it had followed in order to balance things out. This ain't rocket science. This is the simple logic of optionality near the zero lower bound and the liquidity trap.

So why does this logic evade the FOMC? What are they thinking?

Tim Duy: FOMC Recap: "Now they have slow GDP growth and fast employment growth...

Must-Read: This strikes me as DeLong and Summers (1986) done right and done better with the zero lower bound included--i.e., how we would have done it had we been smarter (and had not the 1982 but today's math macro econ toolkit). The ability of the price level as a whole to jump discontinuously and instantaneously matters a lot in virtually any expectational model...

Narayana Kocherlakota: Fragility of Purely Real Macroeconomic Models: "Purely real models that abstract from the presence of nominal rigidities...

Must-Read: Back at the end of last October, when the Federal Reserve decided it was going to hike interest rates in December, there were three reasonably-likely outcomes for the US economy over what was then the next six months: the economy could roar ahead, and a 2015:IV rate hike followed by a 2016:I one would look prescient while a 2015:IV pause and a 2016:I double-hike would look a little behind the curve; the economy could plod along, in which one hike in either 2015:IV or 2016:I would look arguable; or the economy could dive, in which case a 2015:IV hike would look like a significant unforced error.

Now roaring ahead is off the table. The prospects now for October-April are for either a plod or a dive...

Ryan Avent: No Take-Backs: The Fed Makes the Best of the Bad Situation It Created: "SUPPOSE for a moment that you are sitting on the Federal Open Market Committee...

Myself, I would translate ‘Alles Ständische und Stehende verdampft’ as "All the established estates and orders of society are steamed away"...

Richard J. Evans (2013): Review of ‘Karl Marx’ by Jonathan Sperber: "Marx v. The Rest.... Previous accounts of Marx’s life have gone one of two ways...

...Either he is seen as a prophet... or... a misguided and misguiding ideologue.... This book aims to scrape away the patina of retrospective polemic to reveal Marx in the context of his own times.... Sperber provides a new translation of the much discussed sentence in the Manifesto, ‘Alles Ständische und Stehende verdampft’: ‘All that is solid melts into air’ in the standard English version but rendered by Sperber as ‘Everything that firmly exists and all the elements of the society of orders evaporate.’ What Marx had in mind was not some mystical process of transformation, but the dissolution of hierarchical Prussian society by the steam-power of industry. Political revolution leading to a communist regime... would be achieved on the lines of the French Revolution’s... Jacobin phase, from 1792 to 1794....

Over at Equitable Growth--The Equitablog:

• Nick Bunker: What’s happened to U.S. housing inequality?
• ObamaCare Increases the Salience of Antitrust in Health Insurance Markets from "Important" to "Essential"
• The Forthcoming-Behavioral-Economics of Abundance: Project Syndicate
• John Quiggin: Education: An Investment, Not a Filter
• Must-Read: Noah Smith: Book Review: "Economics Rules"
• Mark Thoma: Why GDP Fails as a Measure of Well-Being
• Richard Mayhew: School Lunches and Medicaid: a BFD

Must-Read: John Quiggin: Education: An Investment, Not a Filter: "Implicit in this statement is the ‘screening’ theory of education...

Must-Read: Noah Smith: Book Review: "Economics Rules": "I love a good book about econ philosophy-of-science...

Must-Read: Richard Mayhew: School Lunches and Medicaid: a BFD: "['Interested State agencies that administer the National School Lunch Program (NSLP)...

Must-Read: Mark Thoma: Why GDP Fails as a Measure of Well-Being: "Catherine Rampell provides a nice summary of the alternative measures that have been proposed...

As the extremely-sharp Aaron Edlin has taught me, apropos of the current wave of proposed health insurance mergers--Aetna-Humana, Anthem-Cigna, and Centene-HealthNet:

Over at Project Syndicate: Economics in the Age of Abundance: 250 years ago in the richest society that was then or ever had been--Imperial Augustan-Age Britain--the adolescents sent to sea by the Marine Society to be officers' servants were half a foot--15 cm--shorter than their counterpart gentry's sons whose heights were recorded as they entered the army as officers. 150 years ago the working class of the United States--the richest working class that was then or ever had been--was still spending roughly 2/5 of extra income at the margin simply on more calories. Pre-Industrial Agrarian-Age human populations, even Mid-Industrial populations, and a third of the world today were and are under what nutritionists and public-health experts see as severe and damaging nutritional biomedical stress. READ MOAR

Live from La Farine: One of the best reasons to think well of Hillary Rodham Clinton is the quality and character of her enemies, and their arguments:

Reading this famously snarky 1993 NYT profile and doesn't this sound like... exactly who you'd WANT as President? pic.twitter.com/iUxX8JtlyK

— Sady Doyle (@sadydoyle) January 28, 2016

Seriously. Hillary was mocked to death in '93. For hating racist & sexist jokes & thinking poor women deserved more: pic.twitter.com/cQBzxFUTAW

— Sady Doyle (@sadydoyle) January 28, 2016

@sadydoyle And -- in 2016 -- is being attacked in Salon for dressing differently than she did in 1979. https://t.co/sK7bZBP4VC

— Scott Lemieux (@LemieuxLGM) January 28, 2016

To be fair, I am ALSO angry that Hillary is not campaigning in clogs and giant striped bell bottoms. https://t.co/eZT4aRncPL

— Sady Doyle (@sadydoyle) January 28, 2016

You know, Michael Kelly was a cruel man who wrote lots of false things that misled his readers. Shame on the publishers and editors who employed and published him. And it still blows my mind that there is a Michael Kelly Journalism award--and that people accept it.

Live from Kennebunkport: The Bush family: bad for America, bad for the Republican Party, and good for Donald Trump:

Ryan Lizza: The Bush Family's Plot to Destroy Marco Rubio: "There’s an effort to... blam[e] Trump’s rise on someone else...

Over at Equitable Growth--The Equitablog:

• Nick Bunker: Context may be everything when it comes to the Phillips curve* Nathan Goldschlag and Alex Tabarrok: Is Regulation to Blame for the Decline in American Entrepreneurship?
• Tim Duy: On the Dispersion, or Lack Thereof, of Economic Weakness
• Paul Krugman: Review of ‘The Rise and Fall of American Growth’ by Robert J. Gordon
• Macro Advisers: Tracking the Not-Very-Covery

Must-Read: Nathan Goldschlag and Alex Tabarrok: Is Regulation to Blame for the Decline in American Entrepreneurship?: "Mounting evidence suggests that economic dynamism and entrepreneurial activity are declining in the United States...

Must-Read: Tim Duy: On The Dispersion, Or Lack Thereof, of Economic Weakness: "I direct you to my fellow Oregon economist Josh Lehner...

Live from Chappaqua: "I'm Hillary Clinton, and I Have Always Approved This Message":

Live Not from Evans Hall: Yet another picture of the UC Berkeley campus very carefully composed not to show any trace of Evans Hall (it is just off-frame to the left):

Must-Read: I need to read and then come up with my own informed view of the book that ruled the American Economic Association meeting earlier this month: Robert Gordon's Rise and Fall of American Growth. But until I do, I am going to steal Larry Summers's and Paul Krugman's reviews. Here's Paul's:

Paul Krugman: Review of ‘The Rise and Fall of American Growth’ by Robert J. Gordon: "Herman Kahn and Anthony J. Wiener’s ‘The Year 2000’ (1967)... offered...

Must-Read: Does anybody think that if the FOMC back last December had known how December and January would turn out that it would have raised interest rates then? Given that they would not have, why are they not intending to lower interest rates now at this meeting?

Macro Advisers: Tracking the Not-Very-Covery:

Over at Equitable Growth--The Equitablog:

• Heather Boushey: Feminist economics and policymaking
• Nick Bunker: The corporate savings glut and the economic possibilities of the future
• Jeff Weintraub on Adam Smith's Conceptual Sleight-of-Hand: Today's Economic History
• Martin Sandbu: Ask the big question on central banking
• David Glasner: The Sky Is Not Falling... Yet
• Lars E.O. Svensson: Two serious mistakes in the Goodfriend and King review of Riksbank monetary policy
• John Plender: Capitalists Excel at Giving Themselves a Bad Name

Jeff Weintraub (20130: Adam Smith's conceptual sleight-of-hand on exchange, cooperation, and the foundations of social order: "This was a response to one section of a post by Brad DeLong containing Snippets: Smith, Marx, Solow: Shoebox...

...The first snippet in this compilation.. posed the question 'Exchange and its vicissitudes as fundamental to human psychology and society?' and followed that with a justly famous quotation from Adam Smith's Wealth of Nations.... Brad's question zeroed in on some crucial issues. I was provoked to start writing a message... I thought would run a few lines... but it turned out to be a little longer, so I might as well share it.

Live from La Farine: Marco Rubio is trying to exercise his right to rise! And what are JEB!! and the Bushies doing to him?!

Sean McElwee: "The fact that the billionaire-funded Super PACworking to elect the son of a former President is called 'Right To Rise' is pretty telling":

The fact that the billionaire-funded Super PAC working to elect the son of a former Presidents is called Right To Rise is pretty telling.

— sean (@SeanMcElwee) January 24, 2016

I.V. Kurchatov: Handwritten Notes:

The conversation continued for approximately one hour, from 7:30 to 8:30 in the evening. Comrade Stalin, Comrade Molotov, and Comrade Beria attended.

Basic impressions of the conversation: The great love of Comrade Stalin for Russia and for V.I. Lenin, about whom he spoke in terms of his great hope for the development of science in our country.

Maurice Paleologue: An Ambassadors Memoirs:

I asked the Rumanian Minister, Diamandy, to lunch with me to-day, and once more laid before him the dangers of the equivocal attitude in which his friend Bratiano is taking refuge.

Live from La Farine: The problem with stories like this--and with reporters like Parker and Haberman--is that you never know (1) whether the reporters are spinning the situation in order to pay back their sources, (2) whether the (unnamed) sources are spinning the reporters, or (3) whether the story is accurate.

The lack of named sources takes us into a world where the only indication that the story is (3) rather than (2) comes from trust in the competence of the reporters, and the only indication that the story is (3) rather than (1) comes from the hope that the reporters are working for you rather than for their sources. And, as far as the New York Times political staff is concerned, nobody sane has either trust or hope.

Still: schadenfreude time:

Ashley Parker and Maggie Haberman: As Jeb Bush Struggles, Some Allies Blame His ‘Super PAC’: "When Jeb Bush and his allies began helping the ‘super PAC’ supporting him raise more than $100 million last year...

Must-Read: Martin Sandbu: Ask the big question on central banking: "Mervyn King and Goodfriend... the controversial decision by the Riksbank to raise interest rates...

Must-Read: If you think that there is one chance in ten that the sky is falling with respect to the development of deflationary expectations, then you conclude that Federal Reserve policy is not appropriate--that they ought to be straining nerves to make policy looser to diminish that chance.

If you also think that there is one chance in two that in two years an inflationary spiral will have clearly begun... then you also conclude that Federal Reserve policy is not appropriate--that they ought to be straining nerves to make policy looser to diminish the chance of deflation, for there is plenty of policy time and policy space, plenty of sea room, to curb aggregate demand in the future should it attempt to blow us out to sea.

But there is next to no sea room and next to no policy space to boost aggregate demand if needed, for we are on a lea shore right now.

I am kinda thinking these days that only yachtsmen and yachtswomen should be allowed to hold central-banking policy jobs...

David Glasner: The Sky Is Not Falling... Yet: "The 2008 crisis. was caused by an FOMC that was so focused on the threat of inflation...

Must-Read: Is it really the case that Goodfriend and King never asked Svensson whether his dissents and calls for lower rates were statements about the direction in which policy tools should move or statements about what the optimal value of policy tools should be? If they never asked him, that seems to me to be quite unprofessional. If they did ask him, then it seems there was, somewhere along the way, a major failure to communicate:

Lars E.O. Svensson: Two serious mistakes in the Goodfriend and King review of Riksbank monetary policy: "Marvin Goodfriend and Mervyn King presented their review of the Riksbank’s monetary policy 2010-2015 on January 19....

Must-Read: (1) Cecil Rhodes stole a lot of stuff. (2) Cecil Rhodes got a lot of people dead. (3) Cecil Rhodes built a lot of stuff. (4) Cecil Rhodes tried hard to spend his money to create a peaceful, united, trading world in which people of different countries understood each other--and (5) understood that people of British culture and British race were boss.

It's fine to celebrate (4). And it's good to actually spend the pile of money that derives from Cecil Rhodes on (4). But if you want to have a big statue of Rhodes hanging around, shouldn't it be part of an exhibit that also notes his role in (1), (2), (3), and (5), and puts it all in its proper place?

Monticello these days, I think, does that, and does that properly. Can Oriel College say that it does that? Does Plender have any constructive ideas as to how to do that? And is he willing to head up a fund-raising campaign?

John Plender: Capitalists Excel at Giving Themselves a Bad Name: "Oxford’s dilemma is indicative of how the system can create wealth but often in ways that offend...

Live from Evans Hall: Ah. I see that David Warsh has caught the "opinions of shape of earth differ!" disease in a big, big way. To say that JEB!'s current 6% and HRC's current 60% likely primary-voter share equally reflect the same thing--"Bush-Clinton fatigue"--and that Trump's current dominance in the Republican primary is "an expression of ephemeral contempt for dynastic politics" is simply being silly. And anyone who believes David Warsh is highly like to find him or herself... substantially misinformed.

Why do this, David? The brand of being professionally non-partisan is not worth much these days, is it?

Paul Krugman: Delusions of Moderation: "If David Warsh writes a piece titled ‘Against Krugman’...