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December 2016

Should-Read: The swipe at Tony Blair is, I think, undeserved. If the Athenian demos can vote to reverse its previous-day's massacre decree before upon being convinced by Diodotos son of Eukrates that that vote was a mistake, the sovereign Queen-in-Parliament of the United Kingdom can--and I believe should--reject the narrow majority for BREXIT produced by the advisory vote. And the swipe at the OBR for simply doing its job is definitely undeserved, and unfair. The possibility that BREXIT will in the end be seen as having accelerated British economic growth is definitely a possibility out in the tail of the probability distribution.

If I were Wolfgang, I would tear up this current column of his and write another one, starting from the end of the current column. Start by saying that the first and most important economic-policy job of the elected leaders of a democracy is to maintain a high-pressure low-unemployment economy. Continue by saying that the second but subsidiary task is then to manage finances so that that high-pressure low-unemployment economy does not produced either undue inflation or unmanageable structural imbalances. Then note that economists' first job is to remind the elected leaders of what their tasks are. Then note that economists' second job is to give the elected leaders policy options that will (a) maintain a high-pressure low-unemployment economy economy, and (b) manage finances to prevent either undue inflation or unmanageable structural imbalances.

Conclude by saying that the economics profession has failed to do its job--but be sure to include a coda listing honorable exceptions.

Wolfgang Munchau: The Elite’s Marie Antoinette Moment: "The Bourbons were hard to beat as the quintessential out-of-touch establishment. They have competition now...

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Must-Read: Whether Britain's BREXIT vote would bring on a more-or-less immediate recession depended on whether markets and the Bank of England could and would drop the value of the pound far enough to boost exports enough to offset the shock to investment in Britain. There was a risk that they would or could not--enough of a risk that I thought that avoiding a post-vote recession was a tail possibility. But a more than 20% fall in the value of the pound turns out to have been enough to do the job:

U S U K Foreign Exchange Rate FRED St Louis Fed

However, is there any other high card in the hole that can make use forecast that British economic growth in the five years post-vote will be as fast as or faster than in the counterfactual in which the BREXIT vote went the other way? Yes--if Britain reverses itself and abandons the BREXIT project. Otherwise? I cannot see any. Untangling value chains is expensive. And the untangling will end with less productive value chains than Britain has now. You can argue--and I do--for a less financialized Britain in which government does much more to nurture and support communities of engineering practice and excellence. But BREXIT looks to me like a uniquely stupid and destructive way to set about such a policy shift. And I cannot imagine the clowns who run Britain's Conservative and Unionist Party today having any clue as to how to accomplish such.

So put me on record as strongly supporting Britain's Office of Budgetary Responsibility against all of its enemies and critics--including the extremely sharp [William Munchau[]:

Simon Wren-Lewis: Hitting Back: "A reaction to reading this [by Wolfgang Munchau][]...

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Procrastinating on December 6, 2016

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Over at Equitable Growth: Must- and Should-Reads:

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Should-Read: To paraphrase Rawls: Nobody deserves the benefits that flow because their native endowments and luck have given them talents and resources are hard to duplicate and help produce things that rich people have a strong jones for. According to Rawls, the most that is true is that it is useful to us all to pretend that the rich and talented deserve the benefits that flow because, etc. If you want to contest Rawls here, IMHO, you need to specify why people actually deserve to profit from having chosen the right parents and the right environment which formed them when young and from luck.

Now you can do so. You can say:

  1. Those with the right parents and the right environment when young and with luck do things that are pleasing to the gods, and since we are in gift-exchange relationships with the gods, they respond by providing us benefits. But then you immediately fall into the pit of Euthyphro.
  2. Those with the right parents and the right environment when young and with luck are advancing humanity's telos to become as clever and strong as possible--are evolutionarily superior. But this is worse off than (1): we are not even in a gift-exchange relationship with humanity's telos.
  3. Those with the right parents and the right environment when young and with luck "deserve" benefits because they are strong and clever, and justice is nothing but a word that the strong and clever use to disorient and disorganize the weak so that the strong can do what they will while the weak suffer what they must.

You see the trouble we are in? "Desert" is not a concept that can be deployed to clarify thought.

But on what principles should we act? My view is that the height of moral philosophy is attained by Bill and Ted, with their injunction: "Be excellent to each other!"

T.M. Scanlon: Giving Desert Its Due: "Here the relevant critical point was made by Rawls...

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Must-Read: As I wrote in reply to Neville Morley, in the twentieth century the pace of explosion in humanity's technological capabilities and material wealth has been so great that the economic-technological strand of history is profoundly and substantially determinative of all other aspects of human history. Before 1700, however, the economic is the largely-static background against which history takes place: only in the [longue duree][] does economic history become a character in any narrative. And from 1700 to 1870? Let me turn the mic over to John Stuart Mill (1871):

Hitherto it is questionable if all the mechanical inventions yet made have lightened the day's toil of any human being. They have enabled a greater population to live the same life of drudgery and imprisonment, and an increased number of manufacturers and others to make fortunes. [And] they have increased the comforts of the middle classes. But...

Then Mill goes off into the necessity for conscious and artificial--and mandatory--fertility control to dismiss the Malthusian Devil. But the point--that up until 1870 the world was still profoundly pre-industrial in its bulk--is inescapable.

Neville Morley: When It Changed: "Eric Hobsbawm['s]... short twentieth century... [an] idea... found in Stefan Zweig’s Die Welt von Gestern...

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Should-Read: The Republicans think they can take a vote to dismantle ObamaCare in January without passing a replacement--and then postpone the dismantling until after the 2018 midterm. But in most states insurers are only participating in the exchanges--and incurring current losses from adverse selection--in order to build market position for a future in which the system is stabilized. The most likely outcome is exchange collapse unless states commit to stabilizing their own exchanges. That will happen on the west coast. That will happen in most of New England and New York. Elsewhere? We are in all likelihood facing yet another Trump-Republican policy disaster come next January:

Nicholas Bagley: Health Insurance Market Implosion: "The big risk of [ObamaCare] repeal-and-delay (well, one big risk) is that the individual insurance market will unravel before repeal takes effect. As Robert Laszewski tartly noted...

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Should-Read: One should seek truths from facts rather than from theories. Karl Marx, Friedrich Engels, and the Marxists, for example, decided for theoretical reasons that countries would follow, in their economic development, the track of England and, in their political development, the track of France. Not only is such a trajectory not typical: such a trajectory has never been seen anywhere, anywhen...

Friedrich Engels (1888): Notes to the "Communist Manifesto": "(4).... Generally speaking, for the economical development...

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Links for the Week of December 4, 2016

Most-Recent Must-Reads:


Most-Recent Should-Reads:

  • Walter Jon Williams: Index of Russian Lies: "Via Bruce Sterling, an annotated index of Russian disinformation... (F)
  • Izabella Kaminska: The Taxi Unicorn’s New Clothes: "[Hubert Horan:] 'For the year ending September 2015, Uber had GAAP losses of $2 billion... (M)

Most-Recent Links:

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The One Best Way We Does the Tell of the History of the Twentieth Century...

Preview of Untitled 2

I must take exception to something said earlier today by the very sharp Neville Morley:

Neville Morley: When It Changed: "Unless you do assume that one strand of historical development...

...changes in productivity, or technology, or ideology--is determinative of all the others, then there’s no particular reason to assume that everything will change according to the same chronological pattern...

I think he has gone wrong here. In the past--even in the first half of the nineteenth century--the assumption that there was one principal engine driving the belts and powering the orreries of history was just that: an assumption, and a simplifying and probably badly chosen assumption.

But for the past hundred and fifty years things have been different.

In the "long" twentieth century the pace of economic transformation has been so great as to force nearly every other aspect of history to respond according to the same chronological pattern.

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Weekend Reading: Debating What's Wrong With Macroeconomics

Sanzio 01 The School of Athens Wikipedia the free encyclopedia

Mark Buchanan and Noah Smith: Debating What's Wrong With Macroeconomics: "*It wasn't very long ago that macroeconomics was being hailed for answering some of the big, perplexing questions about the workings of the economy...

..."The state of macro is good," one highly respected economist wrote in August 2008, just before much of the developed world came close to economic disaster. The failure to foresee the financial crisis now is considered one glaring sign of the field's limitations. Bloomberg View columnists Mark Buchanan and Noah Smith met online to debate how macroeconomics needs to change.* 

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Weekend Reading: Abraham Lincoln: State of the Union Address (December 3, 1861)

Abraham lincoln addressing congress Google Search

Abraham Lincoln: State of the Union Address: "Fellow-Citizens of the Senate and House of Representatives...

In the midst of unprecedented political troubles we have cause of great gratitude to God for unusual good health and most abundant harvests.

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Must-Read: Edward Hastings Chamberlain wrote his Theory of Monopolistic Competition and Joan Robinson wrote her Economics of Imperfect Competition back in 1933. The enterprise of building the tools to help us understand such markets is now 84 years old. And yet...

Noah Smith: An Econ Theory, Falsified: "Almost every theory is falsifiable to some degree... since almost every theory is just an approximation...

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Weekend Reading: Betty Cracker: Update on Faces vs. Leopards

Betty Cracker: Update on Faces vs. Leopards: "This is one of my favorite tweets from the post-election period:

Update on Faces vs Leopards Balloon Juice

...Via TPM, we now have a (metaphorically eaten) face and name to attach to that sentiment:

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Weekend Reading: Jonathan Chait: David Brooks and the Intellectual Collapse of the Center

Preview of strike No strike Few Enemies on the Left

The unwillingness of David Brooks of the New York Times) and his ilk to tell their readers that Barack Obama was the centrist president they were looking for is one of the reasons we are in this mess--and one reason why, I think, David Brooks's career is now over:

Jonathan Chait: David Brooks and the Intellectual Collapse of the Center: "Of all the failures that have led to the historical disaster of the Trump presidency, perhaps the least-remarked-upon is the abdication of responsibility of the American center.

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Parrots, Laissez Faire, Supply and Demand, and Political Economy

Preview of Parrots Laissez Faire Supply and Demand and Political Economy

Thomas Allen Horne: Property Rights and Poverty: Political Argument in Britain, 1605-1834: "To appeal to laissez-faire on all occasions, [J.R. McCulloch wrote]...

savors more of the policy of a parrot than of a statesman or philosopher...

Quote Investigator: Teach a Parrot to Say ‘Supply and Demand’ and You Have an Economist: "Dear Quote Investigator: There is a humorous saying about parrots and economists that is often attributed to the philosopher and satirist Thomas Carlyle...

...Sometimes the joke is simply ascribed to Anonymous. Here are three versions:

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No. The New York Times Does Not Know How to Do Its Job. Why Do You Ask?

Live from Riga: Why not just say that the candidate is ignorant and underbriefed, rather than pretending that he is informed and briefed so you can try to play "gotcha"? You have a candidate who is trying to say that "the U.S. will not be a sap" and only that "the U.S. will not be a sap". But you push him into saying things that others will interpret very differently:

NYT: "[The Baltic Republics] are NATO members, and we are treaty-obligated..."

Donald Trump: "We have many NATO members that aren’t paying their bills."

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Procrastinating on December 2, 2016

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Over at Equitable Growth: Must- and Should-Reads:

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Must-Read: Back when Card and Krueger first suggested that there was substantial effective monopsony power in the low-wage labor market and thus that there would be no disemployment effect from (modest) increases in the minimum wage to make it binding, I said: "Clever, but nahhh." The reason for their findings, I thought, was that labor demand is just inelastic in the short and perhaps the medium run--but maybe not in the long run.

I confess that I think I have to change my mind. Economists do not fail to find disemployment effects from (modest) increases in the minimum wage that make it binding because labor demand is inelastic and statistical power is insufficient. Employers actually do have substantial monopsony power in the low-wage labor market--even though they shouldn't. And the minimum wage is best thought of as an anti-monopsony rate-regulation policy that raises low-wage employment, raises average low-wage earnings, and brings the market closer to its competitive equilibrium:

Sandra Black, Jason Furman, Laura Giuliano and Wilson Powell: Minimum Wage Increases and Earnings in Low-Wage Jobs: "18 states plus the District of Columbia have implemented minimum wage increases...

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Hoisted from the Archives from 2012: Eric Hobsbawm, RIP: Let me correct the late Tony Judt, who said: "If he had not been a lifelong Communist, [Eric Hobsbawm] would be remembered simply as one of the great historians of the 20th century."

It should read: "Even though he was a lifetime Communist, Eric Hobsbawm was one of the greatest historians of the 20th century."

A thousand years from now people are likely to still read The Age of Revolution and The Age of Capital. I have tried to write reviews of those two books, and so far I have failed--I have been unable to write anything that conveys just how good they are.

Kindred Winecoff also has some thoughts:

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Hoisted from the Archives from 1984: Faith: Pascal's Wager, When the Odds Are a Thousand to One Against: Eric Hobsbawm says that he would have still been a communist in 1934 even if he had known about Stalin's slaughter and starvation in the Ukraine because Stalin might have been building a utopia.

May I guess that Eric Hobsbawm never read Rosa Luxemburg?

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The "Short" vs. the "Long" Twentieth Century...

Preview of Fiscal Policy in the New Normal IMF Panel

Ah. I see that you have found the first draft of my opening lecture for Econ 115 next semester... https://twitter.com/BrankoMilan/status/804205835543019520 https://t.co/lK82RVQudb

I think whether it is more useful to do the tell of 20th century economic history as the "short" 1914-1989 (as Hobsbswm does) or the "long" 1870-2012 (as I want to) rests on two analytical judgments:

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Procrastinating on December 1, 2016

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Over at Equitable Growth: Must- and Should-Reads:

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