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May 2017

(Early) Weekend Reading: The End of Francis Spufford's "Red Plenty"

"The retired monster" is Nikita Sergeyevitch Khrushchev. "Leonid Vitalevich" is Leonid Vitalevich Kantorovich. This is, I think, the heart of the ending:

When he awoke, beside the steady breathing of Nina Petrovna... out would come the other memories.... The groaning trees in the Western Ukraine in ‘45, when the NKVD hangmen had been at work, and the sight through an incautiously opened door in ‘37 where an interrogator had been demonstrating the possibilities of a simple steel ruler, and the starveling child vomiting grass during collectivisation. And more; and worse. So much blood, and only one justification for it... if it had been all prologue, all only the last spasms in the death of the old, cruel world, and the birth of the kind new one. But without the work it was so much harder to believe.... The garden came no closer, where the lion would lie down with the lamb and all could play at criticism after dinner, if they had a mind to.

He fumbled with the tape machine, and found the RECORD key his son had shown him. ‘Paradise’, he told the wheatfield in baffled fury, ‘is a place where people want to end up, not a place they run from. What kind of socialism is that? What kind of shit is that, when you have to keep people in chains? What kind of social order? What kind of paradise?’ He pressed STOP. Covered his mouth with his hand. And then, since he was tired of fear, of feeling it and of causing it, the retired monster sat very still on the bench by the field, and waited until Kava the rook hopped up onto his knee. A little wind came arrowing across the wheat and swayed the birches over his head. And the leaves of the trees said: can it be otherwise?

And here is the whole thing:

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Live from the Orange-Haired Baboon Cage: Donald Trump: On Twitter: "Despite the constant negative press covfefe" https://www.theglobeandmail.com/news/world/trump-what-does-covfefe-mean/article35160307/

MSNBC: "Spicer on 'covfefe' tweet: 'The president and a small group of people know exactly what he meant.'

David From:: "He’s right: the small group = the president and his pharmacists.

Amy: "Why can't they just acknowledge 'typo' and move on?"

David Frum: "Because typos are rapidly fixed. This looks as if the president spasmed, passed out-and nobody on staff noticed."

Jodi Beggs: "or cared =P"

Dr. Dena Grayson: "'Old age' doesn't explain #covfefe. Neurodegeneration does😳"

Pedro Marques: "Says a lot about the White House staff's waning dedication. Nobody bothered to correct the tweet while the World made fun of their boss. I once had a boss who nobody cared to point out when he was wrong. Even when he was embarrassing himself. No dedication. Just a pay check."


Perhaps Today We See Not a New Crisis of Liberal Democratic Capitalism, But an Old Condition Recurring—Like Herpes, If You Will...

Preview of Perhaps Today We See Not a New Crisis of Liberal Democratic Capitalism But an Old Condition

I do not believe that the very sharp Branko Milanovic ever studied George Kennan's "Long Telegram": his 8000-word message in 1946 back from Moscow, where he was then U.S. ambassador, to the State Department in Washington.

In Kennan's view, what was required was containment. And, indeed, containment was the keystone, indeed the whole arch, of U.S. policy from 1946 all the way up to 1989. Remember that really-existing socialism—Soviet communism—is attractive only to those who do not have to live under it. Remember to keep the competition on the economic, personal freedom, and ideological levels, using force only to preserve post-WWII boundaries and limits. Remember that we have the better system—in choosing leaders, in deciding on policies, in guiding economic growth. And if, when the competition is carried out on the economic, personal freedom, and ideological levels, it turns out that we do not have the better system? Then, as Kennan wrote:

The issue of Soviet-American relations is in essence a test of the overall worth of the United States... [which] need only measure up to its own best traditions.... Surely, there was never a fairer test of national quality than this.... The thoughtful observer... will find no cause for complaint in the Kremlin's challenge to American society...

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Must-Read: Once again:

Employment Rate Aged 25 54 All Persons for the United States© FRED St Louis Fed

Over the past 30 years we have had three business cycle peaks—1990, 2000, and 2007—and three business cycle troughs—1993, 2003, and 2009. The 2009 trough—what marked the nadir of what I now call the Longer Depression, at least as far as Europe is concerned—was an extraordinary and anomalous disaster. Taking the averages of the other peaks and troughs tells us that an economy with a prime-age employment-to-population ratio of 78.5% is still depressed relative to its normal sustainable configuration, while an economy with an employment-to-population ratio of 80.5% or above is in some kind of potential danger zone—although in all of 1990, 2000, and 2007 the danger has come from financial imbalances rather than accelerating wage-push inflationary pressures.

I remember back in mid-2014 when the prime-age employment-to-population ratio was 76.5%: I was then told that it was an unreliable indicator—that structural changes and hysteresis on the downside had made it next to impossible to get those missing prime-age workers back into employment. More than "I was told", in fact: I greatly feared it myself.

Well, that was wrong.

So why say "the prime-age employment-to-population ratio—remains more than 1 percentage point below pre-crisis levels" rather than "the prime-age employment-to-population ratio remains at levels that before 2010 we would have characterized as depressed and indicating substantial economic slack"?

Lael Brainard: Navigating the Different Signals from Inflation and Unemployment: "The labor market has continued to strengthen... https://www.federalreserve.gov/newsevents/speech/brainard20170530a.htm

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Should-Read: IMHO, Anatole Kaletsky is over credulous: He believes what the Republican establishment told him at the Milken Institute Conference—that everything is under control. It isn't. Or, if it is, it could blow in any moment in any of a number of different ways. That the Republican establishment in Los Angeles thought that its highest priority was to sooth the rich of America with the meme that everything was just fine is information. But it does not necessarily reflect reality:

Anatole Kaletsky: The Divergence of US and British Populism: "Trump’s key economic officials... plus a galaxy of Congressional officials and business leaders, made clear that Trump... is only a temporary aberration... https://www.project-syndicate.org/commentary/trump-resistance-brexit-acceptance-by-anatole-kaletsky-2017-05

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Procrastinating on May 30, 2017

We re All Public Intellectuals Now The National Interest

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

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Why Is the FOMC So Certain the U.S. Is "Essentially at Full Employment"?

Employment Rate Aged 25 54 All Persons for the United States© FRED St Louis Fed

Suppose you had, back in 1992 or 2004 or indeed any other time since 1990 and before 2013, asked a question of Charlie Evans—or, indeed, any of the other non-Neanderthal participants in the Federal Reserve's Federal Open Market Committee meetings. Suppose you had asked whether a 25-54 employment-to-population ratio in the United States of today's 78.5% was anywhere near "full employment". What would they have said?

They would have said "of course not!"

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Should-Read: A 25-54 employment-to-population ratio in the United States of today's 78.5% as "full employment", qualified only by an "essentially"? WTF?! Why isn't this qualified—why isn't this, instead: "today, we may have essentially returned to full employment"?

Charles Evans: Lessons Learned and Challenges Ahead: "These policies... produced results. Unemployment began to fall... https://www.chicagofed.org/publications/speeches/2017/05-25-lessons-learned-and-challenges-ahead-bank-of-japan

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(Late) Monday Smackdown: Observing Jared Kushner Beat Sweeteners Edition

Jared Kushner beat sweetener by Glenn Thrush, Maggie Haberman and Sharon LaFraniere—all the news that flatters our sources, because we think being a trustworthy information intermediary is for real losers:

Scott Lemieux: Hey, Harvard Doesn't Sell Its Degrees to Just Anyone!: "Truly, the reincarnation of Machiavelli walks among us... http://www.lawyersgunsmoneyblog.com/2017/05/hey-harvard-doesnt-just-sell-degrees-anyone

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Must-Read: November 8, 2016 was indeed the end of the long twentieth century:

Samuel Osborne: Angela Merkel says Germany can no longer rely on Donald Trump's America: "'We Europeans must really take our destiny into our own hands'... http://www.independent.co.uk/news/world/europe/angela-merkel-donald-trump-germany-us-no-longer-rely-european-union-climate-change-g7-a7760486.html

...She said that "the times in which we can fully count on others are somewhat over, as I have experienced in the past few days."... Trump, who has previously called global warming a hoax, came under concerted pressure from the other leaders to honour the 2015 Paris Agreement on curbing carbon emissions. Although he tweeted to say he would make a decision next week, his apparent reluctance to embrace the first legally binding global climate change deal, signed by 195 countries, clearly annoyed Ms Merkel.

"The entire discussion about climate was very difficult, if not to say very dissatisfying," she told reporters. "There are no indications whether the United States will stay in the Paris Agreement or not." G7 leaders went on to blame the US for the failure to reach an agreement on climate change, in an unusually frank statement which read:

The United States of America is in the process of reviewing its policies on climate change and on the Paris Agreement and thus is not in a position to join the consensus on these topics. Understanding this process, the heads of state and of government of Canada, France, Germany, Italy, Japan and the United Kingdom and the presidents of the European Council and of the European Commission reaffirm their strong commitment to swiftly implement the Paris Agreement...

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Must-Read: The Federal Funds rate is currently bouncing around between 0.82 and 0.91%. When the Federal Reserve embarked on its tightening cycle in December 2015, its median expectation was that by now it would have raised the Federal Funds rate to between 2.25 and 2.50%—that it would have undertaken 9 25 basis point interest rate hikes rather than three. Its expectation was that, even after those nine hikes, PCE core inflation would be running at 1.9% per year rather than the 1.5% per year that the smart money currently sees.

A policy significantly looser than they thought they were embarking on. And inflation outcomes noticeably worse, in the sense of falling below target, than they anticipated even with the tighter policies they thought they would adopt.

Yet I have very little sense of how the Federal Reserve is adjusting its thinking to its forecasting overoptimism for 2016 and now for 2017. Nor do I have any great sense of how the Federal Reserve is dealing with the fact that it has now been overoptimistic in forecasting 2017, 2016, 2015, 2014, 2013, 2012, 2011, 2010, 2009, and 2008:

Gavyn Davies: The Fed’s Lowflation Dilemma: "The [last] two months together have left core CPI inflation 0.4 percentage points lower than expected... https://www.ft.com/content/b165f756-e4bf-3a70-880f-74474f6538fa

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Links for the Week of May 28, 2017

Must-Reads:

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DeLong: The Future of Work: Automation and Labor: Inclusive AI: Technology and Policy for a Diverse Human Future

Il Quarto Stato

Thank you very much.

Let me follow the example of our Lord and Master Alpha-Go as it takes the high ground first.

Let me, therefore, take the hyper-Olympian and very long run historical point of view.

The human brain is a massively parallel supercomputer that fits inside half a shoebox.

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Weekend Reading: The Deleted Passage of the Declaration of Independence (1776)

The Black Past: Remembered and Reclaimed: _The Deleted Passage of the Declaration of Independence (1776) _: "When Thomas Jefferson included a passage attacking slavery in his draft of the Declaration of Independence it initiated the most intense debate... http://www.blackpast.org/primary/declaration-independence-and-debate-over-slavery

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Weekend Reading: RIch Landrieu: Address on Confederate Monuments

Mitch Landrieu: Transcript of Address on Confederate Monuments: "Thank you for coming... http://pulsegulfcoast.com/2017/05/transcript-of-new-orleans-mayor-landrieus-address-on-confederate-monuments

...The soul of our beloved City is deeply rooted in a history that has evolved over thousands of years; rooted in a diverse people who have been here together every step of the way–for both good and for ill.

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Should-Read: Chad Stone: Donald Trump's Indefensible Economic Growth Forecasts: "The 1.1 percentage point gap between the Trump annual growth forecast over the next decade and CBO's is the largest on record and much larger than any since the Reagan-Bush era... https://www.usnews.com/opinion/economic-intelligence/articles/2017-05-26/donald-trumps-indefensible-economic-growth-forecasts

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Where US Manufacturing Jobs Really Went: No Longer So Fresh at Project Syndicate

Il Quarto Stato

Project Syndicate: J. Bradford DeLong: Where US Manufacturing Jobs Really Went: In the two decades from 1979 to 1999, the number of manufacturing jobs in the United States drifted downward, from 19 million to 17 million. But over the next decade, between 1999 and 2009, the number plummeted to 12 million. That more dramatic decline has given rise to the idea that the US economy suddenly stopped working–at least for blue-collar males–at the turn of the century...

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Procrastinating on May 26, 2017

We re All Public Intellectuals Now The National Interest

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

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The Future of Education and Lifelong Learning: DeLong Opening DRAFT

Preview of The Future of Education and Lifelong Learning DeLong Opening DRAFT

Harvard Class of 1982 35th Reunion :: Science Center B :: Saturday, May 27, 2018, 10:45-12:00 noon

  • Seth Lloyd, MIT: Moderator
  • Brad DeLong, U.C. Berkeley
  • Ivonne Garcia, Kenyon
  • Noel Michele Holbrook, Harvard
  • William Sakas, CUNY
  • Carol Steiker, Harvard

In the spring of our freshman year, then-young economics professor Richard Freeman came to Ec 10 to tell us that going to Harvard would not make us rich.

He was wrong.

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The Benefits of Free Trade: Time to Fly My Neoliberal Freak Flag High!: Hoisted from the Archives

Preview of The Benefits of Free Trade Time to Fly My Neoliberal Freak Flag High Hoisted from the Archives

Hoisted from March 2016: The Benefits of Free Trade: Time to Fly My Neoliberal Freak Flag High! http://www.bradford-delong.com/2016/03/the-benefits-of-free-trade-time-to-fly-my-neoliberal-freak-flag-high.html: I think Paul Krugman is wrong today on international trade. For we find him in “plague on both your houses” mode. On the one hand:

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Should-Read: Kavya Vaghul: Trump administration 2018 budget swaps heavy cuts to education for focus on school choice: "The more fundamental problem is that there isn’t much evidence that school choice programs, specifically vouchers, have substantial positive effects... http://equitablegrowth.org/equitablog/trump-administration-2018-budget-swaps-heavy-cuts-to-education-for-focus-on-school-choice/

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Must-Read: Trump should simply not be allowed out of the country—and not be allowed to talk policy inside the country either. It really seems like none of Robert Lighthizer, Steve Mnuchin, or Gary Cohn are doing their jobs—but nobody else in the Trump administration is doing his or her job either:

Kevin Drum: Trump: I'll Put a Stop to Germany Selling Cars in the US: "This from Der Spiegel... http://www.motherjones.com/kevin-drum/2017/05/trump-ill-put-stop-germany-selling-cars-us

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Must-Read: This first part reads as though Ben Bernanke is not talking just about the Bank of Japan, but rather about the Federal Reserve as well—or perhaps more about the Federal Reserve. The argument against a 4%/year inflation target—or a price level-path target with catchup—is that there is value in keeping inflation too low to be salient in people's decisions. But that benefit is uncertain and speculative. The costs of being unable to use monetary policy to offset a negative demand shock are very concrete and real, and very dire indeed:

Ben Bernanke: Some reflections on Japanese monetary policy: "The BOJ shouldn’t stop its determined pursuit of its inflation target... https://www.brookings.edu/blog/ben-bernanke/2017/05/23/some-reflections-on-japanese-monetary-policy/

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Live from the Orange-Haired Baboon Cage: Ah. I see. Charles Murray, W. H. Brady Scholar at the American Enterprise Institute, is once again trying to rehabilitate his Racial Science. Burn one cross and spend your life arguing that people with dark skin are genetically inferior, and people call you a racist. Is that fair?

Eric Turkheimer, Kathryn Paige Harden, and Richard E. Nisbett: Charles Murray is once again peddling junk science about race and IQ - Vox: "Podcaster and author Sam Harris is the latest to fall for it... https://www.vox.com/the-big-idea/2017/5/18/15655638/charles-murray-race-iq-sam-harris-science-free-speech

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Must-Read: Crocodile tears from House Republican Tea Party Caucus Chair Mark Meadows:

Haley Byrd: CBO on Health Care Bill: Sick People Could Face Higher Premiums and Even Be Priced Out of the Market: "Freedom Caucus Chairman Mark Meadows (R-N.C.)... hadn't read the full report... said he saw it as “good news”... http://ijr.com/2017/05/881482-cbo-health-care-bill-sick-people-face-higher-premiums-even-priced-market/

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Procrastinating on May 25, 2017

We re All Public Intellectuals Now The National Interest

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

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Comment of the Day: Tracy Lightcap: A Note on Coursera CEO Rick Levin's Clark Kerr Lecture...: "I think Thoma's course is indicative of the kinds of courses that succeed on-line... http://www.bradford-delong.com/2017/05/highlighted-rick-levin-kerr-lecture.html?cid=6a00e551f08003883401b7c8fbb17e970b#comment-6a00e551f08003883401b7c8fbb17e970b

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Live from the Orange-Haired Baboon Cage: So did he write his book-signing message—and then did some aide hit the roof and beg him to add "and will never forget"?

Betty Cracker: Trump signs Yad Veshem’s yearbook…: "Trump visited Israel’s Holocaust memorial today. National embarrassment ensued: https://www.balloon-juice.com/2017/05/23/trump-signs-yad-veshems-yearbook-open-thread/

Trump signs Yad Veshem s yearbook Open Thread Balloon Juice

I apologize to everyone for the insane electoral college system that has a 10% error rate, and which meant that our getting 3 million extra votes was not enough to stop this atrocious CTF...


Welcome Back to History, America!

Preview of Welcome Back to History America

Matthew Yglesias tweeted:

Matthew Yglesias: On Twitter: "It seems profoundly dysfunctional that the whole imperial court has to travel, lest some particular faction bend the king's ear. https://t.co/wb1X9G63mC" https://twitter.com/mattyglesias/status/865635638363660288

All I can say is: Matthew, I welcome you and I welcome the United States back to history.

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A Few Notes on the CUNY "After Piketty" Panel...

After Piketty

After Piketty: The Agenda for Economics and Inequality http://amzn.to/2q0TevJ

Themes worth noting from the After Piketty CUNY launch event—that I missed, being on the wrong coast.

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Are Commenters on the Tulipmania Rational?: Extraordinary Popular Delusions and the Madness of Crowds Weblogging: Hoisted from the Archives

Preview of Are Commenters on the Tulipmania Rational Extraordinary Popular Delusions and the Madness of

Hoisted from the Archives: Are Commenters on the Tulipmania Rational?: Extraordinary Popular Delusions and the Madness of Crowds Weblogging http://www.bradford-delong.com/2013/10/are-commenters-on-the-tulipmania-rational-extraordinary-popular-delusions-and-the-madness-of-crowds-weblogging.html: Every once in a while someone is impelled to try to claim that one or the other of the more notorious bubbles in history was in fact not a bubble--that the market was in fact functioning efficiently, that asset prices were equal to fundamentals, that traders were behaving rationally given the information they had, and behaving rationally in their decisions to spend resources acquiring information, so that buyers and sellers were making investments that were good and appropriate from a rational ex ante perspective.

There is a big problem with this deluded enterprise.

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Must-Read: Actually, Kevin Hassett made the same large error (one of many, many very large errors) in his Dow 36000: counting both retained earnings as if they were profits distributed to shareholders and then also counting the extra future growth in dividends that not paying them to shareholders now—retaining and reinvesting these earnings—made possible. This does not come as a surprise to me:

Larry Summers: A warning on Trump’s budget: "You cannot use the growth benefits of tax cuts once to justify an optimistic baseline and then again to claim that the tax cuts do not cost revenue... https://www.ft.com/content/2ae4722a-f82f-3bbe-aba1-5b89dd8ac314

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Should-Read: Perhaps the most remarkable thing is that neither Robert Hodrick nor Ed Prescott ever came up with any arguments for why the filter was something you ought to use. Never. Not one:

James D. Hamilton: Why You Should Never Use the Hodrick-Prescott Filter: "Here's why. (1) The HP filter produces series with spurious dynamic relations that have no basis in the underlying data-generating process... http://www.nber.org/papers/w23429

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Should-Read: Yes. The invariable rule is that results George Borjas reports on immigration should be handled with tongs and asbestos mitts. Why do you ask?

Michael Clemens: What the Mariel Boatlift of Cuban Refugees Can Teach Us about the Economics of Immigration: An Explainer and a Revelation: "The Borjas study had a critical flaw that makes the finding spurious... https://www.cgdev.org/blog/what-mariel-boatlift-cuban-refugees-can-teach-us-about-economics-immigration

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