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May 2016

Live from the Gamma Quadrant: Matthew Yglesias: Star Trek Rannkings: "The 10 Best Star Trek Episodes...

...‘The Best of Both Worlds,’ The Next Generation. ‘In the Pale Moonlight,’ Deep Space Nine. ‘Equinox,’ Voyager. ‘The City on the Edge of Forever,’ The Original Series. ‘Chain of Command,’ The Next Generation. ‘Cogenitor,’ Enterprise. ‘What You Leave Behind,’ Deep Space Nine. ‘The Trouble With Tribbles,’ The Original Series. ‘Time’s Arrow,’ The Next Generation. ‘The Void,’ Voyager

The 10 Best Star Trek Villains: Q, Gul Dukat, Khan Noonien Singh, The Borg, Weyoun, Captain Ransom, Kruge, Lore, Lursa and B’Etor, Kai Winn

Manu Saadia's Trekonomics Is Out!


"Live Long and Prosper" Blogging...: Manu Saadia: Trekonomics (San Francisco: Piper Text: 941758754): Forward by J. Bradford DeLong:

'Live long and prosper.'

'The needs of the many outweigh the needs of the few, or the one.'


'Make it so.'

‘Logic is the beginning of wisdom, not the end.’

'I'm a doctor, not a bricklayer.'

‘Highly illogical.’

'You can stop it!' 'Stop it? I'm counting on it!'

Over the past century Star Trek has woven itself into our socio-cultural DNA. It provides a set of cultural reference points to powerful ideas, striking ideas, beneficial ideas that help us here in our civilization think better--even those of us who are economists.

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Live from the Republicans' Self-Made Gehenna: Michael Gerson is such a good writer that he makes me feel sorry for him. But then I remember that he has knowingly spent his career, so far, insisting that sow's ears are silk purses. And then I remember that his "best of the GOP... intellectually serious reform icons"--Marco Rubio and Paul Ryan--are an empty suit and a con artist, respectively:

Michael Gerson**: The Most Depressing Moment of the 2016 Race: "For those of us with a certain political bent and background, this is the most depressing moment of all...

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Must-Read: The extremely sharp Michael Woodford makes the obvious point about quantitative easing and financial stability: by increasing the supply and thus reducing the premium on safe liquid assets, it should--if demand and supply curves slope the normal way--not increase but reduce the risks of the banking sector.

It is very, very nice indeed to see Mike doing the work to demonstrate that I was not stupid when I made this argument in partial equilibrium:

J. Bradford DeLong (January 17, 2014): "Beer Goggles", Forward Guidance, Quantitative Easing, and the Risks from Expansionary Monetary Policy: When the Federal Reserve undertakes quantitative easing, it enters the market and takes some risk off the table, buying up some of the risky assets issued by the U.S. government and its tame mortgage GSEs and selling safe assets in exchange. The demand curve for risk-bearing capacity seen by the private market thus shifts inward, to the left: a bunch of risky Treasuries and GSEs are no longer out there, as the government is no longer in the business of soaking-up as much of the private-sector's risk-bearing capacity:


And this leftward shift in the net demand to the rest of the market for risk-bearing capacity causes the price of risk to fall, and the quantity of risk-bearing capacity supplied to fall as well. Yes, financial intermediaries that had held Treasuries and thus carried duration risk take some of the cash they received by selling their risky long-term Treasuries to the Fed and go out and buy other risky stuff. But the net effect of quantitative easing is to leave investors and financial intermediaries holding less risky portfolios because they are supplying less risk-bearing capacity...

It is reassuring that I was not stupid--that there is nothing important in general equilibrium that I had missed:

Michael Woodford: Quantitative Easing and Financial Stability: "Conventional interest-rate policy, increases in the central bank's supply of safe (monetary) liabilities, and macroprudential policy...

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Hoisted from the Archives from Two Years Ago: The Poverty of Right-Wing Piketty Criticism

Piketty capital Google Search

Over at Project Syndicate: The Poverty of Right-Wing Piketty Criticism: In The Baffler, Kathleen Geier recently attempted a roundup of conservative criticism of Thomas Piketty’s new book Capital in the Twenty-First Century. The astonishing thing to me is how weak the right’s appraisal of Piketty’s arguments has turned out to be.

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Liveblogging World War I: May 31, 2016: Jutland

Andrew Gordon (2013): The Rules of the Game: Jutland and British Naval Command::

Before proceeding, it should be mentioned that in HM ships afternoon tea was, and is, normally available from 3.30 p.m. (‘seven-bells tea’, it used to be called, from the bells rung half-hourly throughout a watch). It was timed to straddle the change of watch at 4.0, to benefit both those going on watch and those whom they would relieve; but on an uneventful afternoon at sea it would be a welcome event for everyone. This was the first time they had gone to sea after the confusing clock-change, and although by now (the afternoon of the 31st of May) all the battlecruisers which were to survive the day, except for Lion, and all the battleships except for Malaya, had switched their bridge logs back to GMT, as will become evident in the next chapter, most of them (including Barham) were running their internal routines on the new BST. It is therefore likely that members of the ‘flag’ teams left their respective bridges after witnessing the 2.15 (3.15 BST) ‘waypoint’ turn to the north, intending to get tea comfortably out of the way before the junction with the Battle Fleet and the various demands which that event would place upon them.

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Monday Smackdown: Nick Kristof and the New York Times: Shakezulu Does the Intellectual Garbage Collection

MOAR bilgewater!

Live from the Journamalists' Self-Made Gehenna: Shakezulu: "Kristof isn’t arguing for or against more conservative voices around the university table...

...This is yet another round of You call yourself progressive? Then kiss this rabid skunk. Normal people know that kissing a rabid skunk, eating a peanut butter & crap sandwich or whatever the litmus test de l’heure happens to be, has zero to do with anything. But the Kristofs of the world like to devise these tests and shout J’accuse! when the subjects refuse to participate....

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Digby Was Right!

Live from the Republicans' Self-Made Gehenna: Digby (June 18, 2015): Yes, he's a right-wing blowhard. But he's rich & famous, and his kooky ideas fit snugly in the Tea Party mainstream: "The GOP race for the presidency has been upgraded from a clown car to a three-ring circus...

...with the official entry of Donald Trump into the race. After daughter Ivanka delivered a stirring introduction... the audience waited expectantly for the great man to appear. And it waited. And waited. Finally after several long moments, the great man finally emerged above the crowd on the mezzanine level of the glittering Trump Tower building waving as if he were Juan Peron (or the Queen of England). As Neil Young’s ‘Keep on Rockin’ in the Free World’ continued to play over and over again, he then descended to the stage on an excruciatingly slow-motion escalator and began his speech by insulting his fellow Republican candidates for failing to know how to put on a competent political event.

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Procrastinating on May 30, 2016


Over at Equitable Growth: Must-Reads:

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Must-Read: The very sharp indeed Steve Cecchetti and Kermit Schoenholtz on how, contrary to the models of the early 1980s--and, I fear, the view of the world still held by the FOMC--U.S. monetary tightening is not expansionary for the rest of the world:

Stephen G. Cecchetti Kermit L. Schoenholtz: Spillovers, Spillbacks and Policy Coordination: "Reserve Bank of India Governor Raghuram Rajan’s recent plea for increased coordination is merely the latest protest by emerging-market economy (EME) policymakers about the spillovers from advanced-economy (AE) monetary policy...

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Must-Read: The very sharp Ricardo Hausmann on the catastrophe of Venezuelan Peronismo. Peronismo is, in a nutshell, manipulating market prices to affect the distribution of wealth and attempting to use government controls and commands to guide the pattern of economic activity. This commits both market prices and the government commands to focus on their competitive disadvantages, and ends badly.

I have scattered thoughts on why Peronismo is popular--why the descamisados--whether voting for Peron, for Chavez, or for Trump--would much rather have the government take steps to boost the incomes they receive via labor and capital than rely on the stinking charity of a sensible social-insurance system. But I think I should leave them for another day...

Ricardo Hausmann: Overdosing on Heterodoxy Can Kill You: "Venezuela’s current catastrophe.... A country that should be rich is suffering the world’s deepest recession, highest inflation...

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Hoisted from Two Years Ago: Jack Goldsmith Tries Patience with Michael Kinsley and the New York Times

Jack Goldsmith: Tries Patience with Michael Kinsley: "Why Kinsley is Wrong About the Connection Between Democracy and the Publication of National Security Secrets:...

...Michael Kinsley, in his review of Glenn Greenwald’s book made the following claims about leaks of national security secrets:

The question is who decides.  It seems clear, at least to me, that the private companies that own newspapers, and their employees, should not have the final say over the release of government secrets, and a free pass to make them public with no legal consequences. In a democracy (which, pace Greenwald, we still are), that decision must ultimately be made by the government. No doubt the government will usually be overprotective of its secrets, and so the process of decision-making--whatever it turns out to be--should openly tilt in favor of publication with minimal delay. But ultimately you can’t square this circle. Someone gets to decide, and that someone cannot be Glenn Greenwald...

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Current Links

Most-Recent Must-Reads:

Most-Recent Links:

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Liveblogging World War I: May 30, 1916: Jutland

Andrew Gordon (2013): The Rules of the Game: Jutland and British Naval Command:

Tuesday the 30th of May started as a routine day in the life of a fleet in harbour. Queen Elizabeth’s men returned from leave, and were set to cleaning their ship and preparing her for undocking. Nine boys in Barham were vaccinated. One of their shipmates, an able-seaman, was sent to the RN Hospital in Queensferry with syphilis. He was accompanied by a boy from Warspite with gonorrhoea, and a midshipman from Princess Royal with German measles. The last-mentioned (later, Admiral Sir Conolly Abel Smith) was to curse his luck for the rest of his life. In the afternoon the usual recreational and marching parties were landed, while off-duty officers were free to please themselves. Few will have bothered to go up to Edinburgh on this early-closing day, but it was a glorious afternoon and other attractions pulled....

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Sunday Theology Weblogging...

The Parable of the Dives Rich Man and Lazarus

So there I was, sitting here trying to think about how I am going to teach "wealth maldistribution as a market failure"--that is, how when the distribution of wealth does not accord with utility and desert, the market economy's price-rationing of goods and services--and its assignment of jobs--can and does go really badly awry. This is a bad thing. But it is not quite right to call it a market failure: it is, the market thinks, a market success...

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Does One Improve Intellectual Diversity by Hiring or Reading "Conservative" Idiots?

Monstrous regiment of women Google Search

As the very sharp Jacob Levy wrote back in 2008:

There's no modern work to teach alongside Theory of Justice and Anarchy, State, and Utopia that really gets at what's interesting about Burkean or social conservatism.... Any book plucked from the past that was concerned with yelling "stop!" tends to date badly to any modern reader who does not think he's already living in hell-in-a-handbasket... talks about how everything will go to hell if the [Jim Crow] South isn't allowed to remain the South.... Oakeshott['s]... "Rationalism in Politics" end[s] up feeling faintly ridiculous by the time he's talking about women's suffrage.... I might say Schumpeter, Capitalism, Socialism, and Democracy, and Kristol, Two Cheers for Capitalism, but the former isn't really distinctively conservative enough and I'm not sure the latter is a classic.

In my view, you go with Polanyi's The Great Transformation--which gets the rational kernel inside the mystical conservative shell--or you go home.

And this is apropos today because Nick Kristof is writing more bilgewater for the New York Times:

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(Early) Monday Smackdown: Anne Laurie and Company on Bernie Sanders

I confess that I thought much better of both major Democratic candidates after the 2008 primary. That is not the case this time:

Anne Laurie: Beyond Exasperated Open Thread: Bernie Sanders's Strategery — How Does It Work?:

@DannyEFreeman: .@BernieSanders tells @TheYoungTurks the "Clinton strategy" is to announce the race is "over" after New Jersey votes on June 7.

@mattyglesias: Pretty good strategy

@NateSilver538: Clinton "strategy" is to persuade more "people" to "vote" for her, hence producing "majority" of "delegates".

Continue reading "(Early) Monday Smackdown: Anne Laurie and Company on Bernie Sanders" »

Populist Backlash and Political Economy

Nuremburg rally Google Search

Live from High Above the Former Iron Curtain: The very sharp Dani Rodrik:

Dani Rodrik: The Politics of Anger: "Perhaps the only surprising thing about the populist backlash that has overwhelmed the politics of many advanced democracies... that it has taken so long.... Politicians’ unwillingness to offer remedies for the insecurities and inequalities of our hyper-globalized age... create[s] political space for demagogues with easy solutions... Ross Perot... Patrick Buchanan... Donald Trump, Marine Le Pen, and sundry others.... [In] the first era of globalization... mainstream political actors had to downplay social reform and national identity because they gave priority to international economic ties. The response... [was] fatal.... Socialists and communists chose social reform, while fascists chose national assertion. Both paths led away from globalization to economic closure (and far worse). Today’s backlash most likely will not go quite so far....

Still, the conflicts between a hyper-globalized economy and social cohesion are real, and mainstream political elites ignore them at their peril.... The internationalization of markets for goods, services, and capital drives a wedge between the cosmopolitan, professional, skilled groups that are able to take advantage of it and the rest of society... an identity cleavage, revolving around nationhood, ethnicity, or religion, and an income cleavage, revolving around social class. Populists derive their appeal from one or the other.... You can barely make ends meet? It is the Chinese who have been stealing your jobs. Upset by crime? It is the Mexicans.... Terrorism? Why, Muslims.... Political corruption? What do you expect... [from] big banks?... Establishment politicians are compromised... by their central narrative... [of] helplessness... [which] puts the blame... on technological forces... and globalization... as inexorable.... Mainstream politicians... [must] offer serious solutions.... The New Deal, the welfare state, and controlled globalization (under the Bretton Woods regime)... gave market-oriented societies a new lease on life... not tinkering and minor modification of existing policies that produced these achievements, but radical institutional engineering...

I find it alarming that here we are, more than one a half decades into the twenty-first century, and the wisdom and true knowledge that is state-of-the-art as far as political economy is concerned is still to be found in the writings of John Maynard Keynes and Karl Polanyi...

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Live from the Log Cabin: Via [Sidney Blumenthal], Honest Abe had some choice words for today's Republicans who claim that "religious liberty" means "the right of bosses to make their customers and their employees follow their religion":

Sidney Blumenthal: "Throughout the war, Copperheads, the Northern Peace Democrats, and Confederates...

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Weekend Reading: Prakash Loungani on the Extremely Wise Dani Rodrik: Rebel with a Cause

Prakash Loungani: Rebel with a Cause:

The triumph of markets over the state appeared almost complete in the early 1990s. The collapse of the Soviet Union and the fall of the Berlin Wall had discredited the role of the state in commanding the economic and political life of citizens. The political scientist Frank Fukuyama proclaimed in 1992 that the spread of democracy and capitalism around the globe would henceforth make history somewhat ‘boring.’ Among economists, markets—already held in fairly high regard—gained further esteem. Prominent left-leaning economists like Larry Summers admitted to a ‘grudging admiration’ for such champions of the global spread of free markets as Milton Friedman.

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Why No Byzantine Road to Modernity?

Fall of constantinople 22 jpg 400×311 pixels

The extremely-sharp Branko Milanovic asks a very good question that I had never considered before:

Branko Minanovic: Economic Reflections on the Fall of Constantinople: This Sunday, May 29 marks the anniversary of the Fall of Constantinople in 1453...

...Thinking of... what is called (somewhat inaccurately) the Eastern Roman Empire, led me to two, I hope interesting, observations. First, why did the Industrial Revolution not happen in the Eastern Roman Empire?... There are many answers... from... ‘barbarians at the gate’... inability to incorporate lower classes... ‘dead hand’ of a rising military bureaucracy... slavery: cheap labor that provided no incentive for the use of labor-saving machines... [to] those who... thought, like Moses Finley and Karl Polanyi, that Roman institutions did not contain at all the seeds that could have led to capitalist development.... Constantinople become the capital in 330 AD... and that lasted for another 800 to 900 years with no interruption. (That is, if we want to date the end of the Roman Empire in 1204 when Byzantium was conquered by the Crusaders). Wasn’t there enough time to find out if ancient institutions could become capitalistic? Eight or nine centuries seems plenty.

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Procrastinating on May 28, 2016


Over at Equitable Growth: Must-Reads:

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Liveblogging World War I: May 29, 1916: Jutland

Sir John Jellicoe (1936): Errors Made in the Jutland Battle:


Beatty. At 2.20 p.m. the Galatea reported by wireless the presence of two cruisers, probably hostile, bearing ESE., course unknown. Beatty's dispatch states incorrectly that the report gave their course as being to the Northward. It also states incorrectly that he immediately altered course to SSE. He did not do this until 2.32 p.m. (See signals.)

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Liveblogging World War I: May 28, 2016: Jutland

Andrew Gordon: The Rules of the Game: Jutland and British Naval Command:

There is said to have been an increase in tension in naval circles in the early months of 1916: a sense of calm before the storm. The German Commander-in-Chief, Admiral Hugo von Pohl (an advocate of U-boat warfare against commerce), was known to have been superseded, for reasons of illness, by Vice-Admiral Reinhard Scheer, who was thought likely to use the High Seas Fleet more offensively than his predecessor; and with the Army deadlocked on the Western Front, it was possible that the German high command might cast about for other ways to take the initiative and vary the daily diet of depressing news from the trenches.

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Must-Read: Suppose you put someone in cryogenic sleep a decade ago, woke them up today, showed them this graph:

Graph Employment Cost Index Total compensation All Civilian FRED St Louis Fed

and said: "The U.S. Federal Reserve still has the same 2%/year inflation target it had in the early 2000s. Do you think it should raise or lower interest rates in June?"

I cannot think of a single reason why such a person would say "raise interest rates" (unless, of course, their compensation was an increasing function of the interest rate).

Nick Bunker: What’s the deal with U.S. wage growth?: "The U.S. unemployment rate has been at or under 5 percent for more than six months...

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Helicopter Money!: No Longer So Live at Project Syndicate

Finally we re doing the helicopter drop of printed money for ordinary Britons This is Money

For economies at the the zero lower bound on safe nominal short-term interest rates, in the presence of a Keynesian fiscal multiplier of magnitude μ--now thought, for large industrial economies or for coordinated expansions to be roughly 2 and certainly greater than one--an extra dollar or pound or euro of fiscal expansion will boost real GDP by μ dollars or pounds or euros. And as long as the interest rates at which the governments borrow are less than the sum of the inflation plus the labor-force growth plus the labor-productivity growth rate--which they are--the properly-measured amortization cost of the extra government liabilities is negative: because of the creation of the extra debt, long-term budget balance allows more rather than less spending on government programs, even with constant tax revenue.

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Weekend Reading: Cardiff Garcia: Our Long Chat with Paul Volcker

Cardiff Garcia: : Podcast: our long chat with Paul Volcker (plus transcript and highlights):

Paul Volcker: I would never interpret it as you have to have [inflation] exactly zero. Prices tend to go up or down a little bit depending upon whether the economy’s booming or not booming. And I can’t understand making a fetish of a particular number, frankly. What you do want to create is a situation where people don’t worry about prices going up and they don’t make judgments based upon fears of inflation instead of straightforward analysis of what the real economy is doing. And I must confess, I think it’s something of a moral issue.... You shouldn’t be kind of fooling people all the time by having inflation they didn’t expect. Now, they answer, well, if they expect it, it’s okay. But if they expect it, it’s not doing you any good anyway. Those arguments you set forward don’t hold water if you’re expecting it...

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Live from the Self-Made Gehenna That Is Twitter: Terry Teachout: Twitter, in Four Sentences:

  1. How dare you talk about A when B is infinitely more important!

  2. If I disagree with you, you’re almost certainly arguing in bad faith and probably evil as well.

  3. You are personally responsible, in toto and in perpetuity, for everything that your friends, colleagues, and/or ancestors have ever said, done, or thought.

  4. Sentences #2 and #3 do not apply to me.