Grasping Reality on TypePad, by Brad DeLong

Must-Read: Non-residential investment is not that low given the low-pressure economy. In fact, on some measures, business equipment and structures investment is relatively high.

It's residential investment and productivity growth that appear to me to be disappointingly low. The first is due, in some part at least, to administrative malpractice on the part of the Obama Treasury. The second is a puzzle, for it is a lot lower than could be plausibly accounted for by lower business investment...

Nick Bunker: How concerned should we be about business investment and productivity growth? - Equitable Growth: "The changes in business behavior in recent decades...

Must-Read: William Cavanaugh and Jack Figura: Merrick Garland on Efficiencies: "A Garland appointment would likely be bad news for those who seek to justify mergers based on the efficiencies...

Must-Read: Larry Summers: Corporate Profits Near Record Highs Is a Problem: "The rate of profitability in the US is at a near-record-high level...

Over at Equitable Growth: Must-Reads:

• We Are so S-ed. Econ 1-Level Edition - Equitable Growth
• Nick Bunker: You filed your taxes. Congrats, you’re administrative data! - Equitable Growth
• Olivier Blanchard: The US Phillips Curve: Back to the 60s?
• Guenther Roth: The Near-Death of Liberal Capitalism: Perceptions from the Weber to the Polanyi Brothers
• Kate Davidson and Anupreeta Das: Fed’s New Bank Critic Keeps Heat On
• Duncan Black: Time To Increase Interest Rates!

Eleanor Roosevelt: My Day:

HYDE PARK, Sunday—John W. Snyder's recent report on reconversion to the President, Senate and House of Representatives is interesting reading. The papers have been so full of stories about strikes that it is very difficult for us to realize the simple facts which Mr. Snyder sets forth—namely, that more Americans are now working and producing more goods than ever before in peacetime history.

Must-Read: Olivier Blanchard says that he and Paul Krugman differ not at all on the analytics but, rather, substantially on "tone"...

It looks as though the center of the Federal Reserve is working today as if the slope of the Phillips-Curve relationship is still what it was in the years around 1980, and that the gearing of expected inflation to recent-past inflation is still what it was in the years around 1980.

Why this is so is a mystery.

Olivier Blanchard: The US Phillips Curve: Back to the 60s?: "The US Phillips curve is alive...

Over at Equitable Growth: As I told my undergraduates yesterday:

Y = μ[c_o + I_o + NX] + μG - μI_rr

where:

• Y is real GDP
• μ = 1/(1-c_y) is the Keynesian multiplier
• c_o is consumer confidence
• c_y is the marginal propensity to consume
• C = c_o + c_yY is the consumption function--how households' spending on consumption goods and services varies with consumer confidence, with their income which is equal to real GDP Y, and with the marginal propensity to consume
• I_o is businesses' and banks' "animal spirits"--their confidence in enterprise
• r is "the" long-term risky real interest rate r
• I_r is the sensitivity of business investment to r
• NX is foreigners' net demand for our exports
• And G is government purchases. Read MOAR

Must-Read: Guenther Roth: The Near-Death of Liberal Capitalism: Perceptions from the Weber to the Polanyi Brothers: "Karl Polanyi and Max Weber held radically different views of liberal capitalism...

Must-Read: It's strange and new for me to find myself to the right of the past president of the FRBMinnie (Narayana Kocherlakota) on monetary policy and to the right of the current president (Neel Kashkari) on regulatory policy:

Kate Davidson and Anupreeta Das: Fed’s New Bank Critic Keeps Heat On: "Neel Kashkari, the new president of the Federal Reserve Bank of Minneapolis...

Must-Read: And Duncan Black comes up with a very good phrase to describe what we think the Federal Reserve is doing based on what we think is its misspecified and erroneous view of the inflation process: "taking away the punchbowl before the DJ even shows up to the party":

Duncan Black: Time To Increase Interest Rates!: "As I've said, I don't think small upticks in interest rates by the Fed...

Over at Equitable Growth: Must-Reads:

• More Musings on the Fall of the House of Uncle Milton... - Equitable Growth
• Nick Bunker: Unemployment insurance might increase unemployment, but only slightly - Equitable Growth
• Nick Bunker: You filed your taxes. Congrats, you’re administrative data!
• Dina D. Pomeranz: Benefits of Welfare Payments
• Eduardo Porter: Nafta May Have Saved Many Autoworkers’ Jobs
• Megan McArdle: Listen to the Victims of the Free Market
• Peter Ganong and Daniel Shoag: Why Has Regional Income Convergence in the U.S. Declined?
• Nick Autiello: "#ConcreteEconomics: The Hamilton Approach to Economic Growth and Policy is one of the best and most useful books of the year."
• Heather Boushey: The Political Economy of Time and ‘Work-Life Conflict’

History.com: Battle of Lake Naroch Ends:

The Battle of Lake Naroch, an offensive on the Eastern Front by the Russian army during World War I, ends on this day in 1916 after achieving little success against German positions near Lake Naroch and the Russian town of Vilna (in modern-day Lithuania).

Must-Read: Dina D. Pomeranz: Benefits of Welfare Payments:

More evidence on benefits of welfare payments. Recipients' sons die later, study longer & earn more. Via @ThewissenS pic.twitter.com/AjCNeZAiZF

— Dina D. Pomeranz (@dinapomeranz) March 29, 2016

Must-Read: Why do Bernie Sanders and Michigan fear NAFTA? I never understood the focus. I think, in retrospect, that there were better roads for Mexican development than the integration with the rest of North America that brought about Mexico's 1995 financial crisis and recession. But the argument that NAFTA was a big deal for U.S. income inequality never made sense to me. As far as inequality was concerned, NAFTA back in the early 1990s had at most 1% of the salience of health-care reform--yet American labor seemed to be spending 80% of its energy fighting NAFTA and only 20% on all other issues combined, and that pattern continues.

Here the very sharp Eduardo Porter points out that trade is, well, positive-sum:

Eduardo Porter: Nafta May Have Saved Many Autoworkers’ Jobs: "Nafta might have saved hundreds of thousands of jobs...

Live from Pebble Beach: Unvirtuous Abbey: On Twitter:

This person just gave an epic answer to our question of the day: pic.twitter.com/WJSHu3Rkra

— Unvirtuous Abbey (@UnvirtuousAbbey) April 7, 2016

Over at Equitable Growth: This, from Paul Krugman, strikes me as... inadequate:

Paul Krugman: Why Monetarism Failed: "Right-wingers insisted--Friedman taught them to insist--that government intervention was always bad, always made things worse...

...Monetarism added the clause, ‘except for monetary expansion to fight recessions.’ Sooner or later gold bugs and Austrians, with their pure message, were going to write that escape clause out of the acceptable doctrine. So we have the most likely non-Trump GOP nominee calling for a gold standard, and the chairman of Ways and Means demanding that the Fed abandon its concerns about unemployment and focus only on controlling the never-materializing threat of inflation. READ MOAR

Must-Read: For the most part, an excellent piece by Megan McArdle. But...

McMegan: There is a lot of good reason to think that the elasticity of labor demand at the low end is about -0.2! That higher minimum wages of the magnitude we are talking about throw not a lot but a few people out of work--that the actual low-wage household societal welfare gain is roughly 80% of the naive estimate.

And maternity leave makes even not-good jobs much better...

And the point is not to send everyone to a four-year college, but to send enough people to a four-year college to reduce the four-year college wage premium from its current 90% back to the 30% or so it was in the 1970s...

Otherwise: perfect:

Megan McArdle: Listen to the Victims of the Free Market: "The arguments for market liberalism are bound to sound a lot less convincing...

Hoisted from a Year Ago: "We don't do links.... If you want to get links... go on Twitter.... We've clicked on the links already and we've decided what's interesting, and we've put it in Espresso.... We don’t want to undermine the reassuring impression that if you want to understand Subject X, here’s an Economist article on it--read it and that’s what you need to know..."

No. When I read it, I did not believe it either.

It would seem to me that the last thing the world needs is more cocksure underbriefed morons suffering from the Dunning-Krueger effect who believe that they are up-to-speed on issues about which they in fact know very little.

And the last thing the world needs is news organizations with business models that involve creating more of such morons--via knowingly and deliberately providing its readers with the false 'reassuring impression' that a 600-word Economist article is all someone needs to know.

Must-Read: Peter Ganong and Daniel Shoag: Why Has Regional Income Convergence in the U.S. Declined?: "The past thirty years have seen a dramatic decline in the rate of income convergence...

*Dan Tompkins writes: *Joseph Schumpeter and Max Weber, Cafe Landtmann, Vienna, 1918: "'The conversation turned to the Russian revolution...

Over at Equitable Growth: Must-Reads:

• The disappearance of monetarism - Equitable Growth
• Nick Bunker: The importance of income and place in U.S. life expectancy - Equitable Growth
• Derek Thompson: How American Cities Can Make America Great Again
• Jérémie Cohen-Setton, Joshua K. Hausman, and Johannes F. Wieland: Supply-Side Policies in the Depression: Evidence from France
• Andrew Gelman: Middle-Aged White Death Trends: All About Women in the South
• Joe Gagnon et al.: Event: Macroeconomic Policy Options for the World Today
• Simon Wren-Lewis: Can Central Banks Make Three Major Mistakes in a Row and Stay Independent?

Major General Alexander McDougall: To George Washington: "Major General Alexander McDougall Fish Kill [N.Y.] 13th April 1778:

Sir:

I am honored with the Receipt of your Favors of the 31st Ultimo & 6th Instant. The inclosures in the last have been forwarded agreeable to your Orders. No Service would be more agreeable to me than an Attack upon New-York, could I recommend it consistent with any probable Prospect of Success. But the Condition & Strength of these posts, utterly forbid it. Especially when the consequence of a misfortune in the Attempt, is duly considered as it may affect the Supplies to your Army, and the general influence such an Event may have on the Operations of the Campaign.

Must-Read: Derek Thompson: How American Cities Can Make America Great Again: "Even if the federal government were a monarchy...

Must-Read: Jérémie Cohen-Setton, Joshua K. Hausman, and Johannes F. Wieland: Supply-Side Policies in the Depression: Evidence from France: "The effects of supply-side policies in depressed economies are controversial...

Must-Read: Andrew Gelman: Middle-Aged White Death Trends: All About Women in the South: "Remember that increasing death rate among middle-aged non-Hispanic whites?...

...It’s all about women in the south (and, to a lesser extent, women in the midwest)....

http://andrewgelman.com/2016/01/19/death-trends-update-its-all-about-women-in-the-south/

Live from SF: In fact, San Francisco Federal Reserve Bank President John Williams simply stands mute at the podium for thirty minutes...

Livesquawk: Fed's Williams does not comment...:

Fed's Williams does not comment on economy or monetary policy outlook in his remarks

— Livesquawk (@livesquawk) April 12, 2016

Over at Equitable Growth: I just hoisted [a piece I wrote fifteen years ago1—a follow-up to my “Triumph of Monetarism” that I published in the Journal of Economic Perspectives. I think of it as my equivalent of Olivier Blanchard's “The state of macro is good" piece… Read MOAR

However, it is, I now recognize, clearly inadequate. It is quite good on how's today's New Keynesians are really Monetarists and how today's Monetarists are really Keynesians. But it misses completely:

The Monetarist Counterrevolution: April 2001:

Introduction

Last year I published an essay (DeLong, 2000) arguing that modern Keynesians are really monetarists. Even if they--we--do not really like to admit it, most of the key elements in how modern "new Keynesian" economists view the world are derived from or heavily influenced by the work of Milton Friedman.

But that essay left me unsatisfied, for it was only half of the story.

The excellent Ryan Avent, from four years ago:

Monetary policy: Try overshooting for once!: "DAVID BECKWORTH points us to Janet Yellen...

...vice chairman of the Federal Reserve, who points, in turn, to the obvious:

[R]esource utilization rates have been so low since late 2008 that a variety of simple rules have been calling for a federal funds rate substantially below zero, which of course is not possible. Consequently, the actual setting of the target funds rate has been persistently tighter than such rules would have recommended. The FOMC's unconventional policy actions--including our large-scale asset purchase programs--have surely helped fill this "policy gap" but, in my judgment, have not entirely compensated for the zero-bound constraint on conventional policy. In effect, there has been a significant shortfall in the overall amount of monetary policy stimulus since early 2009 relative to the prescriptions of the simple rules that I've described.

Hoisted from Other People's Archives: Ezra Klein: End of the Powerline: "With the Schiavo memos proven to be from a Republican source and Powerline not apologizing for their truthless innuendo and slander...

...it's time to break out the popcorn and see if Big Trunk and Hindrocket can clear the shark. Odds are on massive carnage.... It's not just that they have no shame, it's that they once met shame on a street, beat the shit out of him, rolled him up in a carpet, and threw him off a bridge. And don't even ask me about the nightmare they put truth through. To paraphrase Marv in Sin City, after what they did to poor honesty, hell must have seemed like heaven.

Must-Watch: Joe Gagnon et al.: Event: Macroeconomic Policy Options for the World Today: "Joseph E. Gagnon... Jay Shambaugh... Patrick Honohan... Carlo Cottarelli...

...The Peterson Institute will hold an event on April 12, 2016, to discuss the capacity and prospects for macroeconomic stimulus ahead of the spring meetings of the International Monetary Fund (IMF) and World Bank... possible monetary policy options for major central banks... the Obama administration's perspective on the fiscal space globally and potential stimulus policies...

http://piie.com/events/event_detail.cfm?EventID=436#.VwlMW8NrfKY.twitter

Beached, Sunk & Damaged Japanese Shippinge:

"

Must-Read: Simon Wren-Lewis: Can Central Banks Make Three Major Mistakes in a Row and Stay Independent?: "Mistake 1: If you are going to blame anyone for not seeing the financial crisis coming...

...it would have to be central banks. They had the data that showed a massive increase in financial sector leverage. That should have rung alarm bells, but instead it produced at most muted notes of concern about attitudes to risk. It may have been an honest mistake, but a mistake it clearly was.

Continental Currency: April 11, 1778:

Emissions totaling $25,000,000 payable in Spanish milled dollars, or the equivalent in gold or silver, was authorized by Continental Congress resolutions passed at Yorktown on April 11, May 22 and June 20, 1778 and resolutions passed at Philadelphia on July 30 and September 5, 1778. This issue is known as the Yorktown issue.

Over at Equitable Growth: Must-Reads:

• Yes, in some (many) ways, our macro debate has lost intellectual ground since the 1930s. Why do you ask? - Equitable Growth
• John Schmitt: Investing in social infrastructure as an anti-recession tool - Equitable Growth
• Charles Moore: The Middle-Class Squeeze
• David Dayen: The Most Important 2016 Issue You Don’t Know About
• Jim Zarroli: Raj Chetty et al.'s Life Expectancy Study: It's Not Just What You Make, It's Where You Live
• Noah Smith: 101ism in Action: Minimum Wage Edition

Live from La Farine: Scott Lemieux sends us to Jonathan Chait on the unprofessional hagiography the New York Times and Jennifer Steinhauer are committing for Paul Ryan:

Scott Lemieux: "Yah, okay, I'll have my girl send you over a copy, then": "Chait highlights perhaps the most ridiculous part of the NYT’s embarrassing Paul Ryan hagiography Erik highlighted earlier...

Comment of the Day: Howard: 101ism in Action: "[The American Enterprise Institute's] Mark Perry has been producing months of lies...

...on the Seattle minimum wage increase: I don't know how to copy and paste a link on my phone, but search 'busted: the sad data manipulation of professor mark Perry' on the Big Picture blog.

Live from La Farine: This by Jennifer Steinhauer strikes me as unprofessional. This New York Times reporter does include a "Republicans have failed... since it passed in 2010" to provide an ObamaCare alternative caveat, but I do not think that is sufficient:

Jennifer Steinhauer: Paul Ryan, a Mirage Candidate, Wages a Parallel Campaign: "if the Republican nominee does not provide an alternative to the Affordable Care Act...

Over at Equitable Growth: Last September, the illustrious Simon Wren-Lewis wrote a nice piece about the Bank of England's thinking about Quantitative Easing: Haldane on Alternatives to QE, and What He Missed Out.

Simon's bottom line was that Haldane was not just thinking inside the box, but restricting his thinking to a very small corner of the box:

[neither] discussion of the possibility that targeting something other than inflation might help... [nor] any discussion of helicopter money...

And this disturbs him because:

We rule out helicopter money because its undemocratic, but we rule out a discussion of helicopter money because ordinary people might like the idea.... Governments around the world have gone for fiscal contraction because of worries about the immediate prospects for debt. It is not as if the possibility of helicopter money restricts the abilities of governments in any way.... [While] it is good that some people at the Bank are thinking about alternatives to QE, which is a lousy instrument.... It is a shame that the Bank is not even acknowledging that there is a straightforward and cost-free solution... Read MOAR

Must-Read: Miles Kimball sends us to a convinced British Tory:

Charles Moore: The Middle-Class Squeeze: "If Western countries want to disprove the dire forecasts of Karl Marx...

Must-Read: David Dayen: The Most Important 2016 Issue You Don’t Know About: "We’ve seen plenty of economic issues discussed...

Comment of the Day: Bloix: Sokrates as Mary Sue: "I don’t think every wish-fulfillment character is a Mary Sue...

Live from La Farine: What would a HRC administration do for the health-care sector, anyway? My view is that--with the exception of implementing a public option on the exchanges, and aggressively enforcing our antitrust laws--it is not worth expending political capital here until we can see how ObamaCare turns out: we have placed a lot of bets, so let them ride until the ball settles in its slot, and then re-optimize.

But they think differently. And Larry Levitt points me to interesting and reasonable things...

Larry Levitt: "New Clinton Health ideas: Tax credits for OOP costs/premiums...

Must-Read: Jim Zarroli: Raj Chetty et al.'s Life Expectancy Study: It's Not Just What You Make, It's Where You Live : "Poor people who reside in expensive, well-educated cities such as San Francisco...

Most-Recent Must-Reads:

• Matthew Klein: Private Equity’s Mark-to-Make-Believe Problem
• Susan Dynarski: Why Talented Black and Hispanic Students Can Go Undiscovered
• Robert B. Reich: Saving Capitalism: For the Many, Not the Few

Most-Recent Links:

• Libby Nelson: A top expert on tax havens, Gabriel Zucman, explains why the Panama Papers barely scratch the surface
• Matt McIrvin (1994): Some Frequently Asked Questions About Virtual Particles
• Anne Laurie: Excellent Read: Ta-Nehisi Coates on His Marvel Black Panther
• Women in Refrigerators

Must-Read: Noah Smith waxes wroth about really lousy economics perpetrated by Alex Tabarrok, Mark Perry of the invariably-execrable American Enterprise Institute (sorry Norm Ornstein: you inhabit a really bad neighborhood), and a guy who puts things on the internet while remaining anonymous. It need not to be said that randomly tweeting art put on the internet by guys who do not have real names rarely ends well...

But it does need to be said that, for Noah, "Econ 101ism" involves pretending that Econ 101 says things that it does not--that it involves getting the elementary economics 180 degrees wrong, all the while claiming that you are merely parroting elementary economics.

I suggest renaming it: "False-Flag Econ 101ism". But Noah is right on the big point. This one is a beauty, for Econ 101--the real Econ 101--tells us that the first-order effect of a minimum wage is to transfer wealth from consumers and business owners to low-wage workers...

Noah Smith: 101ism in Action: Minimum Wage Edition: "American Enterprise Institute scholar Mark J. Perry tweeted the following...

Ever since I was six years old or so, my overriding goal has been to become as smart as possible--not to become the smartest person around (as it was all was clear that that was simply not possible), but as smart as I could be. That seemed to be a very fun way to live one's life. And it is.

I now find myself, I think, passing or past the intellectual peak of my internal brain pack, understood as some combination of occupied flash storage capacity and computational processing power.

That means that from now on “becoming smarter” means:

• building a better external brain pack,
• building a better API to hook my internal brain pack into my external brain pack, and
• building better APIs to hook into other sources of information and judgment.

Then are, of course, other goals besides “being smart”—and of them one important one is “being useful“.

Brad DeLong : No, Silicon Valley Did Not and Does Not Partake of the Anarchist Utopian Nature. Why Did You Imagine It Did?: I would be smarter if I read more Unfogged comment threads...

Courtesy of an unknown lurker informing the Mineshaft that "Graeber, on Twitter, sourced [his] Apple claim to his memory of a lecture by Richard Wolff", and of bjk commenting on More on Graeber, I am led to the… unusual opinions… of neo-Althusserian structuralist wingnut--and guy who made it pleasant to be at U.Mass--Richard D. Wolff:

Economic Crisis from a Socialist Perspective: Beginnings for the "reform plus" strategy: The contradictions of capitalism offer us partial yet useful examples of the democratization of enterprise advocated by this “reform plus” agenda. One of these, recurring in California for decades, can illustrate our argument.

Over at Equitable Growth: Must-Reads:

• Notes on the Global Economy as of Early April 2016 - Equitable Growth
• Nick Bunker: Weekend reading: “Rewiring the labor market” edition - Equitable Growth* Matthew Klein: Private Equity’s Mark-to-Make-Believe Problem
• Susan Dynarski: Why Talented Black and Hispanic Students Can Go Undiscovered
• Robert B. Reich: Saving Capitalism: For the Many, Not the Few
• Barry Eichengreen: The Case for a Grand Bargain

Record of Conversation between I. V. Stalin and the Hungarian Governmental Delegation: :

PRESENT: V. M. Molotov, G. M. Pushkin, B. Va. Grigoriev (USSR Ministry of Foreign Affairs), Prime Minister Nagy Ferents, Deputy Prime Minister Sakasbich Arpad, Minister of Foreign Affairs Diendesbi Janos, Minister of Transportation Gero Emo, and Hungarian Envoy Sekfu Dula

Nagy says that on April 4 they celebrated the first anniversary of Hungary's liberation from Nazi rule. Hungary was liberated thanks to the heroic Red Army and Generalissimus Stalin. The Hungarian government understood that one year after the liberation they had to visit Generalissimus Stalin in order to express their gratitude for the liberation of Hungary, for the freedom of Hungarian political life, and for the independence of the Hungarian motherland. According to Nagy, the Hungarian government must not only express its gratitude, but also report on how the Hungarians use the freedom granted to them thanks to Generalissimus Stalin's good will.