Grasping Reality on TypePad, by Brad DeLong

Most-Recent Must-Reads:

• Paul Krugman (2013): Helicopters Don't Help:
• Willem Buiter: EU and China Ought to Use Helicopter Money
• Joel Mokyr (2015): Culture of Growth: Origins of the Modern Economy

Most-Recent Links:

• Louis Johnston: The Growth of the Service Sector in Historical Perspective: Explaining Trends in U.S. Sectoral Output and Employment, 1840-1990:
• Rowan Jacobsen: Israel Proves the Desalination Era is Here
• Nicholas Lardy: China’s SOE Reform—The Wrong Path
• James Pethokoukis: Pulling up the drawbridge: America and 'authoritarian populism'
• Olivier J. Blanchard and Lawrence H. Summers (1986): Hysteresis and the European Unemployment Problem
• Michael Kalecki (1943): Political Aspects of Full Employment

Most-Recent Storified:

• Storify: "Economic Anxiety" and Trumpism Once Again
• Storify: Josh Marshall Tries to Think About Trump
• Storify: Origins of Trumpism: James Surowiecki and Friends...

Must-Read: Eric Lonergan: A Brief Reply to Paul Krugman on Policy Equivalence:

Helicopter money is partly useful precisely because it addresses the institutional failure of fiscal policy...

Must-Read: Eric Lonergan: Helicopter Money Is Different:

There are some genuine policy innovations and some old policies in new clothes...

Must-Read: Nick Bunker's Weekend Reading: “How Many Big Macs will That Minimum Wage Buy?”

• Weak U.S. productivity growth http://equitablegrowth.org/equitablog/did-the-great-recession-reduce-u-s-productivity-growth/
• Ryan Avent writes on economic sclerosis, inequality, and insufficient demand.

What a maroon this guy DeLong (2000) was!:

"The increased risk of deflation and depression in a low-inflation environment can be oversold..."

"Low inflation raises the chance that at some point the turning of the wheel of the business cycle will generate deflation. How great is this danger? How is it to be guarded against? The answer is: not very great. Low trend inflation does raise the chance that a contractionary shock might push goods-and-services price indexes down. But what we fear about deflation can be generated by asset price 'deflations' and foreign-currency debt 'deflations' as easily as by goods-and-services price index "deflations." A period of price stability certainly does not increase the chances of either of these alternative sources of contractionary shocks..."

J. Bradford DeLong (2000): America's Historical Experience with Low Inflation, Journal of Money, Credit and Banking 32:4, Part 2: (November), pp. 979-993 http://www.jstor.org/stable/2601154

Abstract: The inflation of the 1970's was a marked deviation from America's typical peacetime historical pattern as a hard-money country. We should expect America to continue to be a hard-money--low inflation--country in the future, at least in peacetime.

Live from the Republicans' Self-Made Gehenna: Storify: "Economic Anxiety" and Trumpism Once Again: Chris Arnade, James Surowiecki, and Friends Once Again...

Must-Read: A piece from Paul Krugman three years ago that I put aside to think about because I didn't really understand what argument he was trying to make. I am pulling it out again because I was reading Adair Turner.

Adair, seeking supporters for his advocacy of helicopter money, recruits as authority number one Ben Bernanke. That's great!

He then recruits as authority number two... me. That's not so great. There ought to be somebody of more weight and reputation--and intelligence--on the pro-helicopter money side. I wish I could do something to boost my reputation overnight (my weight is already more than high enough, thank you very much). But I can't. So all I can do is to try to become more intelligent, and think smarter thoughts about helicopter money. So the first question is: what argument am I (and Ben, and Adair) making?

Paul Krugman (2013): Helicopters Don't Help:

David Beckworth has a good piece on... the irrelevance of the decision to finance budget deficits by printing money as opposed to selling bonds...

Live from the Republicans Self-Made Gehenna: Dr.Cleveland: Decompensation:

One of the most useful psychiatric terms I've picked up in my travels is the word "decompensation"...

Live from the Republican Self-Made Gehenna: Ilya Somins makes some typos. Shame on the Washington Post for not correcting them! I have cleaned his piece up:

Ilya Somin: How Trump Strengthens the Forces of Political Correctness:

Political correctness feeds on the perception reality that many right of center political views are really just a cover for racism, ethnic bias, religious bigotry, and sexism...

Live from the Republicans' Self-Made Gehenna: Trump's Republican Party as an anti-American nationalist party:

Storify: Origins of Trumpism: James Surowiecki and Friends...

Live from America's Better Self: Harold Pollack: Khizr Khan: “You Have Sacrificed Nothing”:

Khan’s genuine anger.... In every way, the Khan family is the antithesis of Trump’s snarling rhetoric....

Over at Equitable Growth: Must-Reads:

• What More Has to Happen Before the Fed Concludes That This Looks Like Yet Another Failed Interest-Rate Liftoff? - Equitable Growth
• The Federal Reserve: I Repeat Myself - Equitable Growth
• Nick Bunker: Weekend reading: “How many Big Macs will that minimum wage buy?” edition - Equitable Growth:
• Joel Mokyr (2015): Culture of Growth: Origins of the Modern Economy
• Olivier J. Blanchard and Lawrence H. Summers (1986): Hysteresis and the European Unemployment Problem
• Michael Kalecki (1943): Political Aspects of Full Employment
• Jim Nunns et al. (2015): An Analysis of Donald Trump's Tax Plan
• Ananya Roy: In Defense of "Poverty"

My colleague and neighbor Michael O'Hare is fed up with and denounces Berkeley NIMBYist privilege. I have two reactions:

Barack Obama: Dem Convention Speech:

Hello, America. Twelve years ago tonight, I addressed this convention for the very first time.

Live from the Republicans' Self-Made Gehenna: The Houston Chronicle: These Unsettling Times Require a Steady Hand: That's Not Donald Trump:

Houston Chronicle Editorial Board endorses Hillary Clinton: On Nov. 8, 2016, the American people will... choose between one candidate with vast experience and a lifelong dedication to public service and another totally lacking in qualifications to be president...

Wye Oak covers Kate Bush: "Running Up That Hill":

Live from the Republicans' Self-Made Gehenna: Josh Barro: Khizr Khan's Speech Was Telling about the US:

I am angry at Donald Trump, and I am angry at the people who voted for him. But most of all...

Must Watch: Joel Mokyr (2015): Culture of Growth: Origins of the Modern Economy:

I repeat myself: to begin a tightening cycle and a process of interest-rate increases in December 2016--in fact, to announce in mid 2014 the end of further moves toward monetary expansion and a bias toward tightening as soon as it is not grossly imprudent--requires that one place only an infinitesimal weight on:

1. Bond market very pessimistic long-run expectations.
2. The asymmetry in policy responses and thus in risks created by the zero lower bound on short-term safe nominal interest rates.

I have been asking for quite a while now why any FOMC would choose to place such an infinitesimal weight not on just one but on both of these considerations. I have not gotten an answer from anywhere. I would like one. Very much...

If you had told the Federal Reserve at the start of last December that 2015Q4, 2016Q1, and 2016Q2 were going to come in at 0.9%, 0.8%, and 1.2%, respectively, a rational Fed would not only have not raised interest rates in December, they would have announced that they would not even think of raising interest rates until well into 2017, and they would have started looking for more things they could do that would safely boost demand.

So why is the FOMC now not cutting interest rates back to zero? I mean, what more has to happen before the balance of probabilities says that this is likely to be yet another failed liftoff of interest rates?

Comment of the Day: Sanjait: Let's dispel once and for all:

Roy tries to play the victim, but he gives away the act in talking about his fervent support for Rubio.

Must-Read: Ananya Roy: In Defense of "Poverty":

A glimpse of the public assistance bureaucracy that the poor must navigate....

Must-Read: Olivier J. Blanchard and Lawrence H. Summers (1986): Hysteresis and the European Unemployment Problem:

European unemployment has been steadily increasing for the last 15 years and is expected to remain very high for many years to come....

Must-Read: Jim Nunns et al. (2015): An Analysis of Donald Trump's Tax Plan:

Must-Read: Michael Kalecki (1943): Political Aspects of Full Employment:

Most economists are now agreed that full employment may be achieved by government spending.... There is a political background in the opposition to the full employment doctrine, even though the arguments advanced are economic....

Comment of the Day: Jorgenson: Not a Legacy:

It is not a legacy he inherited. It is a reality built by all those Republicans who thought they could "ride the tiger" of white resentment.

Over at Equitable Growth: Must-Reads:

• John Maynard Keynes (1936): The General Theory of Employment, Interest and Money by John Maynard Keynes
• Jacob Vigdor et al.: Report on the Impact of Seattle's Minimum Wage Ordinance
• Cosma Shalizi (2014): Review of Oliver Morton (2008): "Eating the Sun: How Plants Power the Planet"
• Thinking About "Premature Deindustrialization": An Intellectual Toolkit I - Equitable Growth
• Can This Capitalism Be Saved? - Equitable Growth
• Bridget Ansel: Does a higher U.S. minimum wage hurt employment? A look abroad for answers - Equitable Growth

Adrienne Wilmots Lerner: Black Tom Explosion:

The Black Tom explosion was the peak act of German sabotage on American soil during the First World War. On July 29, 1916, German agents set fire to a complex of warehouses and ships in the New York harbor that held munitions, fuel, and explosives bound to aid the Allies in their fight. Though America was technically a neutral nation at the time of the attack, general policies greatly favored the Allies. The attack persuaded many that the United States should join the Allies and intervene in the war in Europe.

Live from the Republicans' Self-Made Gehenna: Yes, if Trump wins the election the Republicans are planning to invoke Amendment 25 on Inauguration Day. Why do you ask?

Trump, talking about his time in Iowa, just said he won first place in the caucuses.

— Sopan Deb (@SopanDeb) July 28, 2016

Must-Read: John Maynard Keynes (1936): The General Theory of Employment, Interest and Money by John Maynard Keynes:

Whilst, therefore, the enlargement of the functions of government, involved in the task of adjusting to one another the propensity to consume and the inducement to invest, would seem to a nineteenth-century publicist or to a contemporary American financier to be a terrific encroachment on individualism, I defend it, on the contrary, both as the only practicable means of avoiding the destruction of existing economic forms in their entirety and as the condition of the successful functioning of individual initiative.

Must-Read: Cosma Shalizi (2014): Review of Oliver Morton (2008): "Eating the Sun: How Plants Power the Planet":

Of Heliophagy: I cannot remember the last time I read a popular science book with such enjoyment, or learned so much from it....

Can This Capitalism Be Saved?

Here is piece of mine left on the cutting room floor elsewhere. So I might as well throw it up here.

Reviewing: Robert Reich: Saving Capitalism: For the Many, Not the Few http://amzn.to/29Viz6w

Robert Reich’s Saving Capitalism: For the Many, Not the Few http://amzn.to/29Viz6w is an excellent book. It powerfully argues that America needs once again—as it truthfully reminds us that we did four times in the past—restructure its institutions to build both private and public countervailing power against the monopolists and their political servants in order to right the distribution of income and boost the pace of economic growth.

W. Arthur Lewis (1977): The Evolution of the International Economic Order

We must therefore turn to economic explanations. The most important... is the dependence of an industrial revolution on a prior or simultaneous agricultural revolution... already familiar to eighteenth-century economists, including Sir James Steuart and Adam Smith. In a closed economy, the size of the industrial sector is a function of agricultural productivity. Agriculture has to be capable of producing the surplus food and raw materials consumed in the industrial sector, and it is the affluent state of the farmers that enables them to be a market for industrial products.

Live from Northern California: "Code monkeys"--an insult to simians of all species: That's what I'm saying...

I am still marveling at the fact that last spring it took Berkeley’s bCourses system six hours to read a table of 10,000 numbers off of the iClicker.com and put it into its own database. And, of course, any network timeout anywhere in those six hours would cause the process to barf completely, saving none of its intermediate state.

All this for programs running on chips that work so fast that light travels less than a foot in each clock cycle...

Poached:

Eric Lemieux: This Day in Labor History: July 28, 1932:

On July 28, 1932, the U.S. Army 12th Infantry regiment commanded by Douglas MacArthur and the 3rd Calvary Regiment, supported by six battle tanks commanded by Major George Patton violently evicted the Bonus Army from their Washington, D.C. encampment. This violent action and horrible treatment of impoverished veterans shocked the American public and demonstrated the utter indifference of Herbert Hoover to the desperate poverty the nation faced, helping to seal his overwhelming defeat that fall that ushered in the widespread change of the New Deal that would follow.

Must-Read: Jacob Vigdor et al.: Report on the Impact of Seattle's Minimum Wage Ordinance:

The typical worker earning under $11/hour in Seattle... earned $11.14 per hour by the end of 2015, an increase from $9.96/hour at the time of passage....

Over at Equitable Growth: Must-Reads:

• A Brief History of (In)equality: Now Live at Project Syndicate - Equitable Growth
• John Fernald (2014): Productivity and Potential Output Before, During, and After the Great Recession
• Alisdair McKay and Ricardo Reis: Optimal Automatic Stabilizers
• Giles Wilkes: How I learnt to love the economic blogosphere
• Jeffrey Frankel: Trump Jr.’s Pants-on-Fire Allegation of Manipulated Jobs Numbers
• Bridget Ansel: Does a higher U.S. minimum wage hurt employment? A look abroad for answers - Equitable Growth
• Nick Bunker: The permanent income hypothesis, wealth inequality, and anti-recessionary stimulus - Equitable Growth
• David Howell: The employment effects of a much higher U.S. federal minimum wage: Lessons from other rich countries - Equitable Growth

Must-Read: John Fernald (2014): Productivity and Potential Output Before, During, and After the Great Recession:

U.S. labor and total-factor productivity growth slowed prior to the Great Recession.

Must-Read: Alisdair McKay and Ricardo Reis: Optimal Automatic Stabilizers:

Should the generosity of unemployment benefits and the progressivity of income taxes depend on the presence of business cycles?...

Must-Read: Leah Schnelbach: Thinking Through Violence in The Just City and The Philosopher Kings:

In a different book, the narrative would become either ‘Maia’s recovery’ or ‘Ikaros’ redemption’, and Walton would track their lives and relationships with this night as a fulcrum point. Instead, it’s one night in their lives...

Must-Read: Jeffrey Frankel: Trump Jr.’s Pants-on-Fire Allegation of Manipulated Jobs Numbers:

When interviewed about the unemployment numbers, which have fallen steadily since 2010, Donald Trump Jr., replied:

Must-Read: Giles Wilkes: How I learnt to love the economic blogosphere:

Riffing off of yesterday's: : "'Gunpowder Empire': Should We Generalize Mark Elvin's High-Level Equilibrium Trap?"...

A generation ago Michael Kremer wrote a superb paper: Michael Kremer (1993): "Population Growth and Technological Change: One Million B.C. to 1990", Quarterly Journal of Economics 108:3 (August), pp. 681-716 http://tinyurl.com/dl20160727a.

Kremer saw human populations as growing at an increasing rate over time. Population reached approximately 4 million by 10000 BC, 50 million by 1000 BC, and 170 million by the year 1. Population then reached 265 million by the year 1000, 425 million by 1500, and 720 million by 1750 before the subsequent explosion of the British Industrial Revolution and the subsequent spread of Modern Economic Growth.

Comment of the Day: Yes, Donald Trump is suffering from not mild but moderate dementia:

Sans Souci: Dementia:

Tom Kean?....Tim Kaine?...Dementia, I tells ya....This is dementia....

Comment of the Day: Phil Koop: Avik Roy's Damascene Conversion:

I agree that Roy's Damascene conversion is more than a little precious. But...

Over at Project Syndicate: A Brief History of (In)equality: BERKELEY – The Berkeley economist Barry Eichengreen recently gave a talk in Lisbon about inequality that demonstrated one of the virtues of being a scholar of economic history. Eichengreen, like me, glories in the complexities of every situation, avoiding oversimplification in the pursuit of conceptual clarity. This disposition stays the impulse to try to explain more about the world than we can possibly know with one simple model. For his part, with respect to inequality, Eichengreen has identified six first-order processes at work over the past 250 years.

READ MOAR of A Brief History of (In)equality at Project Syndicate

Harry Truman: Transcript of Executive Order 9981:

WHEREAS it is essential that there be maintained in the armed services of the United States the highest standards of democracy, with equality of treatment and opportunity for all those who serve in our country's defense:

NOW THEREFORE, by virtue of the authority vested in me as President of the United States, by the Constitution and the statutes of the United States, and as Commander in Chief of the armed services, it is hereby ordered as follows:

Over at Equitable Growth: Must-Reads:

• Stephen J. Terry: The Macro Impact of Short-Termism
• Danny Yagan: Is the Great Recession Really Over?
• Josh Hausman: What Was Bad for General Motors Was Bad for America: The Automobile Industry and the 1937/38 Recession:
• Diego Anzoategui et al.: Endogenous Technology Adoption and R&D:
• Nick Bunker: Protecting against risk can help boost U.S. entrepreneurship - Equitable Growth:

Must-Read: Diego Anzoategui et al.: Endogenous Technology Adoption and R&D as Sources of Business Cycle Persistence: