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October 2017

Should-Read: Jared Bernstein also wishes that we had (1) Greg back. It is indeed the case that the old (1) Greg-teaching-students-about-public-finance-issues was much better than the current (2) Greg-going-as-far-as-he-believes-he-can-to-be-helpful-to-the-Republican-Party:

Jared Bernstein: When econ models potentially mislead, econ profs should say so: "Greg Mankiw points out the direction [but not the magnitude] of Hassett’s result is consistent with a particular economic model...

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Should-Read: I must say I never understand why people invite Charles Murray to speak.

If you cannot find a better advocate for a particular set of ideas than a one-time KKK-wannabe cross-burner, doesn't that tell you something about the quality of the ideas that will then be set forth? If somebody's response to his Bell Curve regressions' failure to produce a large enough Black-white differential to please him is to go p-hacking by suppressing education variables, does not that tell you about the degree of his open-minded commitment to academic values?

The purpose of a university is to set forth ideas that are potentially great and then to evaluate and assess them according to liberal Enlightenment norms of logic and evidence. Does this guy fit that?

And the purpose of a think-tank ought to be largely the same as a university...

Nathan Robinson: Current Affairs: "Charles Murray... in the 1950s... staged a cross burning on top of a hill...

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Must-Read: Above a Shiller CAPE of 25, we have essentially three observations as to what happens next. Hence "we have little idea what is likely, and past performance is not a reliable guide to future results" is the only sound thing to say. As Jim Powell says: with two data points you have an estimate of the mean and an estimate of the standard error, for you think your two data points are at μ ± σ/2. And then he laughs:

Chandrasekhar Ramakrishnan: The DeLong-Shiller Redux: "2014, Robert Shiller and Brad DeLong.... [Shiller] claims if the value of this [CAPE] ratio is above 25, a major market drop is probably brewing...

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Procrastination for October 23, 2017

We re All Public Intellectuals Now The National Interest

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

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Monday Smackdown: Larry Summers on Kevin Hassett and Company


I confess that I, at least, never heard Larry Summers say: "A-list people do not directly criticize A-list people: doing so is a way to become a B-list person". I doubt he has ever said it that way.

I have, however, heard Larry say—many times—that it is in general not wise to presume bad faith or incompetence on the part of, say, present or former fellows at places like, say, the American Enterprise Institute.

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37000 Feet Above the Utah-Nevada Border on EDI-SFO, Fueled by Two Moscow Mules...

Bosch Hell

@Noahpinion: On Twitter: Brad DeLong will find your algebra errors:

delong: Every day, a new fresh hell...

Today's new fresh hell is chasing links on the way back from Edinburgh to find Mulligan, Cochrane, Mankiw all marveling over how "gorgeous" and "striking" it is that the ratio of the wage gain to the "static" revenue loss is always 1/(1-t)—how it is a remarkable and important insight that the production function parameters drop it. With not a single one saying:

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Links and Such for the Week of October 22, 2017


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Ricardo's Big Idea, and Its Vicissitudes

Port of amsterdam Google Search

INET Edinburgh Comparative Advantage Panel

Panel: Gains from Trade: Is Comparative Advantage the Ideology of the Comparatively Advantaged?:

Ricardo's Big Idea, and Its Vicissitudes

Ricardo believes in labor value prices because capital flows to put people to work wherever those things can be made with the fewest workers. This poses a problem for Ricardo: The LTV tells him that capitalist production should take place according to absolute advantage, with those living in countries with no absolute advantage left in subsistence agriculture.

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Early (Monday) Circular DeLong Smackdown Squad...

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I have just spent four hours on a plane to Edinburgh—four hours when I should have been sleeping—chasing my own analytic tail in a counterproductive way.

It was me demonstrating that I am indeed a Bear of Very Little Brain in ways too numerous to enumerate...

It started when I ran across an excellent twitter thread from Jason Furman:

Some talk lately of Ramsey models and their implications for wage increases under the Unified Framework (warning: irrelevant nerdy thread)...

In the middle of saying a number of smart things, Jason said something that confused me—that a calculation comparing Ramsey model steady—states suggested that a 200b corp tax cut [would bring a] 300b wage increase", at least in "Greg Mankiw’s toy example", which Jason wanted to "stipulate... is right..."

I did not understand where such a conclusion could come from.

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Weekend Reading: Melissa Kearney: How Should Governments Address Inequality?

Quarto Stato The Fourth Estate painting Wikipedia

Melissa S. Kearney: How Should Governments Address Inequality?: "In 2014, an unusual book topped bestseller lists around the world: Capital in the Twenty-first Century... 816-page scholarly tome by the French economist Thomas Piketty that examined the massive increase in the proportion of income and wealth accruing to the world’s richest people. Drawing on an unprecedented amount of historical economic data from 20 countries, Piketty showed that wealth concentration had returned to a peak not seen since the early twentieth century. Today in the United States, the top one percent of households earn around 20 percent of the nation’s income, a dramatic change from the middle of the twentieth century, when income was spread more evenly and the top one percent’s share hovered at around ten percent. Piketty predicted that without corrective action, the trend toward ever more concentrated income and wealth would continue, and so he called for a global tax on wealth. 

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For the Weekend: Stephen Vincent Benet: The Devil and Daniel Webster VIII

Daniel Webster

For the Weekend: Stephen Vincent Benet: The Devil and Daniel Webster VIII "'Foreign?' said the stranger. 'And who calls me a foreigner?'...

..."Well, I never yet heard of the dev—of your claiming American citizenship," said Dan'l Webster with surprise.

"And who with better right?" said the stranger, with one of his terrible smiles. "When the first wrong was done to the first Indian, I was there. When the first slaver put out for the Congo, I stood on her deck. Am I not in your books and stories and beliefs, from the first settlements on? Am I not spoken of, still, in every church in New England? 'Tis true the North claims me for a Southerner, and the South for a Northerner, but I am neither. I am merely an honest American like yourself—and of the best descent—for, to tell the truth, Mr. Webster, though I don't like to boast of it, my name is older in this country than yours."

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Should-Read: Nick Bunker: Weekend reading: tax “reform” edition: "This week’s Working Paper series release features two papers...

...The first paper argues that the decline in the labor share of income can be traced back to the slowdown in productivity growth. The second uses online surveys to look at what Americans think about taxing capital. Nisha Chikhale writes about the second paper, focusing on its finding that Americans seem to favor a wealth tax, especially if the wealth is inherited.

In the latest issue of Democracy Journal, Heather Boushey reviews Richard V. Reeves’s book, Dream Hoarders, looking at the privileges of the United States’s “favored fifth.”

As part of the Equitable Growth in Conversation series, Heather Boushey talks to Reed College economist Kimberly A. Clausing about reforming the corporate income tax.

Reforming the tax code is supposed to lead to a simpler code with fewer loopholes. Greg Leiserson argues the “Unified Framework” for tax code changes from the Trump Administration and Congressional Republicans would create two new wasteful tax expenditures.

Bridget Ansel and Heather Boushey write in a new report for the Hamilton Project about the reforms needed to update labor standards for 21st century families.

Should-Read: I find Jason Furman totally convincing here. Which raises the question: what are those he is criticizing thinking?

More distressing, perhaps, is Jason's defensive "(warning: irrelevant nerdy thread)". If economists' models are worth anything at all, it is only because you take the time to understand them and do them right...

Jason Furman: Wage Increases Under the Unified Framework: Some talk lately of Ramsey models and their implications for wage increases under the Unified Framework (warning: irrelevant nerdy thread)...

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Must-Read: Endorse. The biggest reason not to name John Taylor to run the Fed is his persistent refusal to take any steps to mark his beliefs to market—to perform any kind of view-updating exercise in response to the extraordinary economic troubles of the past decade. That is just not right for anyone claiming to be an economist. And that is doubly not right for anyone being considered for any senior policymaking position. If Taylor is nominated, the Senate Banking Committee should not confirm him:

Noah Smith: Taylor and His Rule Are Not What the Fed Needsg: "How much should the Fed worry about inflation versus unemployment?...

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Should-Read: The Spectator Index on Twitter: "Total wealth of Forbes 400 list:

  • 1982: $93 billion
  • 2016: $2400 billion

Nominals, unfortunately: figure a tripling of the world price level and a doubling of global per capita income—to scale it is a factor of four, not 24...

Procrastination for October 18, 2017

We re All Public Intellectuals Now The National Interest

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

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Should-Read: All of Canada, all of Mexico, and the U.S. business community think that Lighthizer has his head completely up his --- on NAFTA renegotiation. Certainly U.S. consumers would not benefit. And the furniture workers harmed by NAFTA implementation in 1993-1995 have retied, or moved to other types of jobs. Only labor-side ideologues trapped in the early 1990s and those who—like Donald Trump—wrongly believe that every bilateral trade deficit is always a national loss are in Lighthizer's corner.

I have no idea how Lighthizer expects to get any implementation legislation for TRAFTA through the congress at all—xenophobia and associated opposition to "globalists" and "rootless cosmopolites" seem to be the only cards Lighthizer has to play here. If I were him, I would quit now:

Shawn Donnan: Bitter differences over Nafta break into the open: "US trade chief Lighthizer urges Canada and Mexico to ‘give up a little bit of candy’...

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David Ricardo's (1817) Comparative Advantage Argument Is a Price-Specie-Flow Argument

Loading wine in portugal sailing ship Google Search

David Ricardo's (1817) "comparative advantage" argument is actually remarkably complex. It is an argument with:

  • working-capital-in-advance production technologies
  • labor value prices (within a country)
  • country- and sector-specific labor productivities
  • specie flows to balance international payments
  • a nation-level quantity theory of money depending on specie stocks
  • no international capital mobility

David Ricardo (1817): Principles of Political Economy and Taxation: "Under a system of perfectly free commerce, each country naturally devotes its capital and labour to such employments as are most beneficial to each...

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Hoisted from Five Years Ago: Department of "Huh?": Estimating Long-Run Properties of Time Series

: Department of "Huh!?": This Is All Cosma Shalizi's Fault Department...: When something comes across my RSS feed stating that it is:

2500 words of statisticians quarreling with econometricians about arcane points of statistical theory...

how am I supposed to resist getting sucked in?

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Comment of the Day: Phil Koop: : "There are some not so surprising names on that list, but too many that are astonishing...

...How the hell can Dean Baker, Adam S. Posen, or Justin Wolfers be surprised that the author of Dow 36,000 is also the author of Wage Gain $9,000?..."

Should Not Read: THE WHITE HOUSE: Office of the Press Secretary: Embargoed For Release Until 5:00 a.m. EDT, October 16, 2017: ON-THE-RECORD PRESS CALL BY COUNCIL OF ECONOMIC ADVISERS CHAIRMAN KEVIN HASSETT ON UPCOMING CEA REPORT

MS. STROM: Hey, everybody. Thanks for taking time out of your Sunday to join us on this call, as Kevin said, to preview the President's Council of Economic Advisers' upcoming report, "Corporate Tax Reform and Wages: Theory and Evidence."

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