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February 2016

Must-Read: I have only one critique of Justin Wolfers's series of tweets here. He says that they are simple math errors. It is true that they are conceptually simple. But getting all this right is not easy--I have seen Alan Blinder get it wrong (in the context of a $12B surge in inventories in a single quarter, and its effect on real GDP growth rates) at a blackboard in his OEOB office during the Clinton administration[1].

This does explain a puzzle. As somebody-or-other said in the conversation, if you believe with Gerry Friedman that all of the shortfall in real spending growth since 2007 can be easily recaptured via demand channels alone, then Sanders's proposals are at most one-third the size that they should be--and that is the critique that Friedman should be making of Sanders given Friedman's beliefs about aggregate supply. (Since I do not share those beliefs, I think Sanders's fiscal stimulus proposals are about right-sized):

Justin Wolfers: On Twitter: "Romer and Romer find what look like...

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Procrastinating on February 25, 2016


Over at Equitable Growth--The Equitablog:

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Must-Read: The list of features of the current macroeconomic situation that the Federal Reserve's communications strategy suggests that it does not grasp keeps growing. In the past we had:

  • The asymmetry of the loss function for undershooting vis-a-vis overshooting nominal GDP growth.
  • The weakness of monetary policy tools as stimulus in and near the liquidity trap vis-a-vis the strength of monetary policy tools to cool off the economy always.
  • The extraordinarily low precision of estimates of the Phillips Curve.

And now we have also:

  • The degree to which the slope of the Phillips Curve now is smaller than it was in the 1970s.
  • The degree to which the gearing between increases in inflation now and increases in future expected inflation has decreased since the 1970s.
  • The fact that lack of strong association between financial jitters and subsequent reduced growth is a reduced form that factors in a stimulative monetary response in response to such jitters.
  • The strong links between credit-channel disruptions and reduced spending growth.

And, above all, the fact that in the Greenspan and Volcker eras a lack of concern for downside risks was excusable because demand could always be swiftly and substantially boosted in an afternoon via large interest-rate reductions. Not so in the Bernanke-Yellen era.

It thus seems more and more to me as though the Federal Reserve is making macroeconomic policy in a world that simply does not exist. Tim Duy has comments:

Tim Duy: Lacker, Kaplan, Fischer: "Today Richmond Federal Reserve President Jeffrey Lacker argued that the case for rate hikes remains intact...

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Live from the Supreme Court: Josh Marshall: A Lot Weaker Than They Look: "Let's not forget the massive stakes for Republicans in the next Supreme Court nominee...

...Republican control of the Court, a de facto reality for more than a generation with total control going back a decade, is that big a deal. Yet there's a lot more weakness to Senate Republicans' embrace of the 'three nos' yesterday than I think most observers, certainly most Beltway observers, realize. Not just no confirmation. But no vote, no hearings, not even courtesy meetings. They even took this bizarre step of having all the members of the Senate Judiciary sign a letter pledging absolutely not to hold any hearings of any Obama nominee. The signatures appear to be ink not blood. But who knows?...

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Comment of the Day: Charles Steindel: "That's Kocherlakota's point: through 2020. Here is Kocherlakota's language:

Overall: I see it as possible and beneficial to adopt policies that would lead to 5-6% growth per year over the next four years--which translates into a level of output in 2020 that is about 15% higher than is currently anticipated.

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Live from La Farine: A question about the estimable Gerry Friedman:

How can an increase in government spending of $1.4 trillion/year generate a $14 trillion increase in spending in the year 2026? But it really looks to me like he has both:

  • the very dubious assumption that all 10%-points of the shortfall from the trend as of 2007 can be made up relatively easily', and
  • a multiplier of not the 3-in-and-near-a-liquidity trap I carry around in the back of my head, but 10.

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Live from Νεφελοκοκκυγία: Ezra Klein: Why Bernie Sanders's campaign makes me worry about how he’ll manage the White House: "Steve Randy Waldman has penned...

...the best defense of Sanders[']... policy proposals [that] are sketchy and... economic projections... [that] are fantastical. But he argues that none of that really matters. The president's 'role is to define priorities that must later be translated into well-crafted policy details,' he says. 'In a democratic polity, wonks are the help.'... Waldman has a point....

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Live from Their Self-Made Gehenna: Poor baby: Georgetown Law Professor Randy Barnett does not understand that a university is first and above all a safe space for ideas, and he has no right to be protected from the idea that Nino Scalia was a lousy judge.

Randy Barnett: "I first met Justice Scalia when I left the Cook County States Attorney’s Office... become a research fellow at the University of Chicago Law School. There I was privileged to join the faculty ‘round table’ for lunches, where then-Professor Scalia was one of the most engaging of discussants. Because my research was on contract law theory and I aspired to be a contracts professor, he graciously allowed me to sit in on his class the day he taught the Peevyhouse case.

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Live from Moscow/Riyadh: Dan Drezner: The United States needs a new Long Telegram. But from where?: "Today marks the 70th anniversary of diplomat George F. Kennan’s Long Telegram...

...a missive he sent from his post in Moscow to explain Soviet intentions to a perplexed and confused State Department in the postwar era. That telegram — which eventually was converted into Kennan’s ‘Sources of Soviet Conduct’ essay in Foreign Affairs — had a dramatic effect on how U.S. policy principals thought about American foreign policy toward the Soviet Union. Which raises an interesting question: From where in the world right now could the United States use another Long Telegram?

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Across the Wide Missouri: For Lincoln's Birthday: Flap Over Confederates Seized in Tangier, 1862: DeLong Family History: MEI Editor: MEI Editor's Blog: For Lincoln's Birthday: Flap Over Confederates Seized in Tangier, 1862: "The US Civil War generally didn't involve the Middle East...

...(though as I've noted in "Stone Pasha and the Khedive Ismail's Yanks and Rebs," officers from both sides were actively recruited into the Egyptian Army after the war, and one became the Egyptian Chief of Staff under Khedives Ismail and Tawfiq.) But I thought today we'd focus on one diplomatic incident that did engage some of Lincoln's attention: the arrest by the US Consul in Tangier of two Confederates visiting that Moroccan city in February 1862, 151 years ago this month. It isn't well known but in addition to the Union, the Confederacy, and the Sultanate of Morocco, it also managed to draw in the British and French consuls and home governments.

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From the Archives: From a Decade Ago

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Procrastinating on February 22, 2016


Over at Equitable Growth--The Equitablog:

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Live from the Palmetto State: The sorcerers' apprentices in the Republican Establishment who misdrew their pentagram and so amplified the Curse of Goldwater now pin their hopes on Marco the Callow:

McKay Coppins: Republicans Rush to Crown Marco Rubio the Anti-Trump Standard Bearer: "Rubio’s path to the mantle of establishment savior is remarkable...

...for its lack of modern precedent. This is a candidate who placed third in Iowa and fifth in New Hampshire; who lags a mile behind the leading candidate, and has yet to win a single primary. In fact, the closest Rubio has come so far to winning a contest was here in South Carolina, where he beat out Ted Cruz for second place by a microscopic margin--and proceed to celebrate this triumph with perhaps the loftiest victory speech ever given by a non-victor. ‘If it is God’s will that we should win this election, then history will say that on this night in South Carolina, we took the first step forwards in the beginning of a new American century,’ Rubio told supporters on Saturday night.

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Weekend Reading: H.G. Wells: On Becoming a Socialist

H.G. Wells (1908): Becoming a Socialist: from "New Worlds for Old" (London: Macmillan), pp. 16-19: "A walk I had a little while ago with a friend along the Thames Embankment...

...from Blackfriars Bridge to Westminster. We had dined together and we went there because we thought that with a fitful moon and clouds adrift, on a night when the air was a crystal air that gladdened and brightened, that crescent of great buildings and steely, soft-hurrying water must needs be altogether beautiful.

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Ed Luce Says Some Very Nice Things About Steve Cohen's and My Forthcoming "Concrete Economics"

It is very nice to get a favorable view that indicates that the book we wrote is--at least in some respects--the book we thought we had written and tried to write. So Steve and I find ourselves especially grateful this weekend to the very-sharp Ed Luce:

Ed Luce: Is robust American Growth a Thing of the Past?: "My hunch is that [Robert] Gordon is a little too adamant...

...Perhaps we will come up with a cure to Alzheimer’s disease... androids will take... all the low-paying jobs. But even if he is right, there are things we can do.... The embittered US presidential primary battle offers a case study of what happens to politics when people’s economic hopes are dashed.... For an antidote to Gordon’s fatalism, turn to Concrete Economics.

This short book, by the economists Stephen Cohen and Bradford DeLong, is light on data and high on readability. What it shares with Gordon is the view that today’s economy is not serving most Americans well. Growth has slowed and inequality has risen.

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The Melting-Away of North Atlantic Social Democracy

This has been available in full exclusively at the magnificent and well worth subscribing-to Talking Points Memo.


But now let me let it out into the wild here--and promise to imminently (well, maybe in a month...) write about the whole symposium of which it is a part:

The Melting Away of North Atlantic Social Democracy: Hotshot French economist Thomas Piketty, of the Paris School of Economics, looked at the major democracies with North Atlantic coastlines over the past couple of centuries. He saw five striking facts:

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Monday Smackdown II: Sady Doyle Smacks Down Doug Henwood

Sady Doyle: On Twitter:

I must say, it is remarkable how much damage a surprisingly-small number of unhinged BernieBros are doing to his various causes...

Monday Smackdown I/Hoisted: Stanley Fish's Antimoral Philosophy

God! Stanley Fish is such an ass! And so are Gail Collins and company at the New York Times for wasting their opinion-hole on him. Have they no shame?

From a decade ago: Stanley Fish's Antimoral Philosophy: I think we have a new frontrunner in the Stupidest Man AliveTM contest: Stanley Fish with another case of this-is-so-funny-because-it's-so-sad.

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Must-Read: Cf. the debate about North Atlantic technological development in the nineteenth century started by the most amazingly-named Sir Hrothgar John Habakkuk, or, indeed Robert Allen's The British Industrial Revolution in Global Perspective. Most new technologies will not--at least not initially--involve movements of the PPF up and to the right, but rather the creation of new techniques that fall, relative to current ones, in quadrants II and IV. Whether those are profitable will turn very heavily on what current factor prices and factor availabilities are:

Nick Bunker: Abundance and the Direction of Technological Growth: "In a piece from two years ago, Ryan Avent of The Economist fleshes out a deeper argument...

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Links for the Week of February 21, 2016

Most-Recent Must-Reads:

Most-Recent Links:

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From the Archives: Five Years Ago

Picks of the Litter:

  1. Peters Agonistes (Peter Orszag and Peter Baker, That Is)
  2. America's Fiscal Problem Is Something We Can Fix Only at the Ballot Box
  3. In Which I Protest at a Little Monetarist Revisionism by Scott Sumner...
  4. Deficit Reduction Plans In which we learn, once again, not to trust Jonathan Weisman to get it right...
  5. The Theory of Relativity: Is It Time to "Teach the Controversy" in America's High Schools?
  6. Berkeley Friday Afternoon Political Economy Colloquium: Friday February 18, 2011: "Austerity" in the Context of the Global Economic Downturn
  7. : Why Oh Why Can't We Have a Better Press Corps? (Michael Fletcher of the Washington Post Edition)

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What to Teach the Undergraduates About Business Cycles?

Let me promote this to "highlighted" status, and flag it: it is time I once again tried to think hard about just what the "macro" weeks of introductory economics are for:

Time to Start Teaching the Undergraduates About Business Cycles: How to begin? What is the vision I went them to take away and remember?

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Weekend Reading: Irin Carmon: Reviewing ‘The Firebrand and the First Lady,’ by Patricia Bell-Scott

Irin Carmon: Reviewing ‘The Firebrand and the First Lady,’ by Patricia Bell-Scott:

The February 1953 issue of Ebony included an article entitled ‘Some of My Best Friends Are Negroes.’ The byline was Eleanor Roosevelt’s, though the headline, apparently, was not:

One of my finest young friends is a charming woman lawyer — Pauli Murray, who has been quite a firebrand at times but of whom I am very fond,

Roosevelt wrote:

She is a lovely person who has struggled and come through very well.

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No: We Can't Wave a Magic Demand Wand Now and Get the Recovery We Threw Away in 2009

The estimable Mike Konczal writes:

Mike Konczal: Dissecting the CEA Letter and Sanders's Other Proposals: "I would have done Gerald Friedman’s paper backwards...

...He gives a giant headline number and then you have to work into the text and the footnotes to gather all the details. But a core assumption within the paper is that we are capable of getting back to the 2007 trend GDP through demand. We can get the recovery we should have gotten in 2009...

He is wrong.

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Weekend Reading: Jeff Toobin: Nino Scalia: Looking Back

Jeff Toobin: Looking Back: "Antonin Scalia, who died this month...

...after nearly three decades on the Supreme Court, devoted his professional life to making the United States a less fair, less tolerant, and less admirable democracy. Fortunately, he mostly failed. Belligerent with his colleagues, dismissive of his critics, nostalgic for a world where outsiders knew their place and stayed there, Scalia represents a perfect model for everything that President Obama should avoid in a successor.

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Procrastinating on February 21, 2016


Over at Equitable Growth--The Equitablog:

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Must-Read: Very nice. But why "Galilean", Gavyn? I do note that in the end Gavyn's "insider" argument boils down to "we must keep the hawks on the FOMC on board with policy", which is a declaration that:

  1. The Obama administration has made truly serious mistakes in speed of action and in personnel in its Fed governor nominations;
  2. The Bernanke-Yellen Board of Governors has made truly serious mistakes in Fed Bank President selection; and
  3. The high priority given to keeping (nearly) the entire FOMC on board with the policy path should, perhaps, be revisited.

Also, "we have already allowed for these asymmetrical risks by holding interest rates below those suggested by the Taylor Rule for a long time" is simply incoherent: sunk costs do not matter for future actions.

The dialogue:

Gavyn Davies: Splits in the Keynesian camp: a Galilean Dialogue: "As Paul Krugman pointed out a year ago...

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Liveblogging the Cold War: February 22, 1946: George Kennan's "Long Telegram"

George Kennan: Long Telegram:

The Charge in the Soviet Union (Kennan) to the Secretary of State


Moscow, February 22, 1946--9 p.m. [Received February 22--3: 52 p.m.]

511) Answer to Dept's 284, Feb 3 involves questions so intricate, so delicate, so strange to our form of thought, and so important to analysis of our international environment that I cannot compress answers into single brief message without yielding to what I feel would be dangerous degree of over-simplification. I hope, therefore, Dept will bear with me if I submit in answer to this question five parts, subjects of which will be roughly as follows:

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Liveblogging World War I: February 21, 1916: Battle of Verdun Battle of Verdun begins:

At 7:12 a.m. on the morning of February 21, 1916, a shot from a German Krupp 38-centimeter long-barreled gun—one of over 1,200 such weapons set to bombard French forces along a 20-kilometer front stretching across the Meuse River—strikes a cathedral in Verdun, France, beginning the Battle of Verdun, which would stretch on for 10 months and become the longest conflict of World War I.

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Liveblogging World War II: February 20, 1946: Eleanor Roosevelt

Eleanor Roosevelt: My Day:

NEW YORK, Tuesday—By asking innumerable questions while I was in Germany, I think I gained some insight into the problems confronting our Army in their administration of the American zone. In the future, I shall be slower to criticize because I understand the difficulties. By and large, I think we are doing a job we need not be ashamed of.

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Liveblogging History: February 19, 1946: Eleanor Roosevelt

Eleanor Roosevelt: My Day:

DUBLIN, Ireland En Route to New York—While I was in London, I happened to hear some one say, 'Given a certain situation, the United Nations Organization might possibly succeed.' Curiously, from the very beginning, I felt that, unless we approached our work in a spirit of defeatism, we would succeed, so I never for a minute thought of the possibility of failure.

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Liveblogging the American Revolution: February 17, 1778: The Marquis de Lafayette

U.S. The Marquis de Lafayette:

General Gates who was only lukewarm in his support of Washington had succeeded in convincing several members of Congress to appoint a Board of War in which Gates would have complete control. He suggested that plans should be developed to invade Canada. Gates knew how loyal Lafayette was to Washington and he urged that Lafayette should command the expedition, and Congress agreed to the campaign and gave Gates authority to work out the details....

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Liveblogging the American Revolution: February 18, 1776: John Adams prepares to sail for Franc John Adams prepares to sail for France:

Two future presidents of the United States, John Adams and his son, 10-year-old John Quincy Adams, sit in Marblehead Harbor, off the coast of Massachusetts, on board the frigate, Boston, which is to take them to France, where John Adams will replace Silas Deane in Congress’ commission to negotiate a treaty of alliance.

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Live from the Gehenna the Republicans have made for themselves: Sam Wang (February 11, 2016): The GOP’s Deadline Problem: "Given the results in Iowa and New Hampshire...

as well as national polls, if the Republican front-runner were a more conventional candidate we would be writing about near-inevitability. Donald Trump is in a very similar position to Mitt Romney’s at this point in 2012--if anything, a somewhat stronger position. In 2012 Romney lagged at various points to other candidates. For Trump, this has not happened since he entered the race.

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Live from Cloud-Cuckoo Land: At least Mashable has owned up to the fact that it's original story was full of s---:

Yohana Desta: Meryl Streep: 'We're All Africans, Really': "CORRECTION: Meryl Streep’s ‘We’re all Africans, really’ comment was a direct response to a question about Arab and African films...

...not a response to questions about the Berlinale Film Festival’s all white jury, as the article and headline originally suggested..... Streep’s original comments were misrepresented in subsequent reports.

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