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November 2017

Should-Read: This is a serious problem: success at exporting told developing countries that their efforts to build engineering communities of practice were working; the fact that a lot of global value was created in labor intensive manufacturing industries meant that industrialize-via-export policies had large potential reach and oomph. Those days may be over: Tom Simonite: Robots Threaten Bigger Slice of Jobs in US, Other Rich Nations: "Although the short-term disruption from automation may be smaller in developing countries than in richer countries...

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Should-Read: Larry Summers and Jason Furman are back, with their response to the non-response from the Nine Unprofessional Republican Economists. What did I do in a previous life to deserve this fresh hell? What did any of us do?: Larry Summers and Jason Furman: A modest proposal part II: the debate over US tax reform: "We appreciate... you are backing off from the statement... that 'the gain in the long-run level of GDP would be just over 3 per cent, or 0.3 per cent per year for a decade'... [and] 'not offer[ing] claims about the speed of adjustment'...

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Should-Read: A price-earnings ratio of 25 corresponds to an expected long-run real equity return of about 4%/year. Why is this seen as dangerously high? Especially given low real rates of return on other assets, why isn't this just what is appropriate?: Martin Feldstein: New Priorities for a New Fed Regime: "The Fed has kept the short-term federal-funds interest rate at less than the rate of inflation for nearly a decade...

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Should-Read: I disagree with the very sharp Gavyn Davies about the potential confirmation of the honorable and professional Marvin Goodfriend to the Board of Governors of the Federal Reserve. I think he would be a bad choice. Gavyn does not: Gavyn Davies: Marvin Goodfriend would be good for the Fed: "Prof Goodfriend has recently argued that the FOMC should explicitly compare its policy actions with the recommendations from... a rule...

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Economics as a Professional Vocation

Real GDP Growth Rate

Should-Read: The very sharp Binyamin Applebaum had an interesting rant yesterday: Binyamin Applebaum: @BCAppelbaum on Twitter: "I am not sure there is a defensible case for the discipline of macroeconomics if they can’t at least agree on the ground rules for evaluating tax policy...

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In Which I Try and Fail to Understand the Current State of Right-Wing Monetary Economics: Hoisted from 2014

Hearing entitled Federal Reserve Oversight Examining the Central Bank s Role in Credit Allocation House Committee on Financial Services

Hoisted from the Archives: Marvin Goodfriend Blogging: In Which I Try and Fail to Understand the Current State of Right-Wing Monetary Economics: Wednesday Focus: March 19, 2014: Josh Bivens sends us a link to a House of Representatives hearing he participated in, with a striking discussion that takes place at the 45:00 mark… On the panel, in addition to Josh, were Larry White,[1] Marvin Goodfriend, and Paul Kupiec. Congressman Bill Foster asked why predictions five years ago that the Federal Reserve’s expansion of its balance sheet would produce runaway inflation had been wrong...

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On the Negative Information Revealed by Marvin Goodfriend's "I Don't Teach IS-LM": Hoisted from the Archives

3 Month Treasury Bill Secondary Market Rate FRED St Louis Fed

The smart and snarky Sam Bell wants to taunt me into rising to his bait by twittering a quote from likely Fed nominee Marvin Goodfriend: "I don't teach IS-LM". He succeeds. Here is the quote:

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Must-Read: The Nine Unprofessional Republican Economists have become even more unprofessional. I would also note that such transparent self-contradiction is incompetent. Do they even read what they wrote four days before?: Robert J. Barro, Michael J. Boskin, John Cogan, Douglas Holtz-Eakin, Glenn Hubbard, Lawrence B. Lindsey, Harvey S. Rosen, George P. Shultz and John. B. Taylor (Wednesday, November 29, 2017): Economists respond to Summers, Furman over Mnuchin letter: "First Point You Raised: Our letter addresses the impact of corporate tax reform on GDP; we did not offer claims about the speed of adjustment to a long-run result (though official revenue estimators will obviously need to do so for short-run analysis)..."

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Should-Read: Well, we have 100 more unprofessional Republican economists today... We saw 4.5% real GDP growth in the second half of the 1990s and 5% in the half-decades before and after the 1979-1982 Volcker Disinflation Recession. "Levels of growth not seen in generations" is a high bar indeed. Appealing to Kevin "Dow 36000" Hassett rather than doing any modeling is perhaps the most unprofessional thing I have ever seen, save for insisting that sophisticated economic models show... macroeconomic feedback... more than enough to compensate for the static revenue loss" without, somehow, naming the models, plural—let alone grappling with the fact that of us who have tried hard to look for an elastic supply response of domestic savings to the after-tax rate of return have failed to find anything. I am, I have to admit it, greatly embarrassed by the fact that (some of these) clowns have Ph.D.s in economics...

Most of them know they are lying. And it is not as though many of them think that a devil's bargain is worth making they will thereby gain high federal office and be able to rein in crazy nut jobs. A little affinity fraud. A lot of partisanship. Zero commitment to telling it like it is:

One Hundred Unprofessional Republican Economists: Trump tax reform opinion: Why Congress should pass: "The enactment of a comprehensive overhaul—complete with a lower corporate tax rate—will ignite our economy with levels of growth not seen in generations...

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Should-Read: Since Sam Brownback planted his behind behind the Kansas governor's desk at the end of 2012, Kansas has lost 6%-points of employment relative to the U.S. average. And there is nothing special about Kansas that would make such a huge swing happen in such a short period—nothing but the presence of a tax-cuts-for-the-rich nut in the governor's chair and a complaisant legislature implementing his policies. I would not in a hundred years have dared speculate that Brownbackism in Brownbackistan could be so destructive. And yet I cannot think of any alternative explanation for what has gone on:

Republican Governance in Kansas

Kansas City Star: Jerry Moran: Don't take failed Kansas tax plan nationwide: "Moran... could be the deciding vote.... He has already seen, first-hand, during a very painful five years, what will happen...

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Must-Read: Jason and Larry bring plenty of refreshments to the debate over tax "reform". They are really unhappy with the Nine Unprofessional Republican Economists. Shrill, even. And so they provide great detail on how these nine economists are being unprofessional. This is good to see: Jason Furman and Larry Summers: A modest proposal: time to rethink the impact of US tax reform: "You recently wrote an open letter to Treasury Secretary Mnuchin quantifying the economic impact of tax reform...

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Technocracy at Bay: No Longer Fresh at Project Syndicate

Alice Rivlin

Project Syndicate: Keeping US Policymaking Honest: Last month here at Berkeley I heard great optimism from the illustrious Alice Rivlin. What “technocracy” in the good sense the United States has—what respect is paid to sound analysis and empirical evidence in the making of policy—is due more to Alice Rivlin than to any other living human.

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Should-Read: Yes, Topher Spiro has gone over the edge into shrillness. He is, however, right: The Tax Foundation is not doing "dynamic scores" of anything. They may build a model of the interaction of taxes, government financial flows, international considerations, and economic growth to do them in the future. They do not have one now. John Harwood and company should not be citing them in the same breath as TPC, PWM, CBO, and JCT: Topher Spiro: @topherspiro on Twitter: "John Harwood...

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Madmen in the Attic: Hoisted from the Archives from 2006


No, this is not about Martin Peretz...

2006: Madmen in the Attic...: Here Mark Thoma watches Tony Giddens in the Guardian discourse on conditions for a 'revival of sociology.' I listen for a while, and then I want to sidle quietly away before I am noticed:

Economist's View: Did Economics Crowd Out Sociology?: A call to arms, by Anthony Giddens, Commentary, The Guardian:

All you sociologists out there! All you ex-students of sociology! All of you (if there are such people) who are simply interested in sociology and its future! I'd like to hear from you. We live in a world of extraordinary change, in everyday life, family relationships, politics, communications and in global society. We are witnessing, among other things, a return of the gods, as religion re-emerges as a major force in our societies, locally and on a worldwide level.... [W]hy isn't sociology again right at the forefront of intellectual life and public debate?...

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Monday Smackdown: Nine Republican Economists Being Unprofessional on Tax Reform Edition

JCT Tax Changes 2027

First of all, note that nine and only nine would sign on to this letter.

That is not a large number.

Second, note that they do not analyze the deficit-increasing tax bill on display, but rather something else:

Robert J. Barro, Michael J. Boskin, John Cogan, Douglas Holtz-Eakin, Glenn Hubbard, Lawrence B. Lindsey, Harvey S. Rosen, George P. Shultz, and John. B. Taylor: How Tax Reform Will Lift the Economy: "In the foregoing analysis, we assumed a revenue-neutral corporate tax change...

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Yes. The New York Times is in hell, nor are we out of it. What else do you want to know?: Steve M.: ALL THE WAYS THE NEW YORK TIMES IS DEFENDING THAT NAZI NORMALIZATION STORY: "I don't think it's 'indisputable' that we 'need to shed more light...

...on the most extreme corners of American life and the people who inhabit them...

if what that means is that we see extremists going to the grocery store and cooking pasta. If all you have to say as a reporter is that the Nazis next door are not cartoon villains, that's not "shedding light," because they are engaged in monstrous activity when they're not shopping for food and cooking and you're ignoring that. That's what we need to know about. Or we need to know what happens to people on the receiving end of what these Nazis do. Banality of evil? Stipulated. Don't waste our time on what we already know.

Note to Self: Getting in Touch with My Inner Austrian: Toy Stochastic Processes Edition

Austrian Business Cycles

Note to Self: Getting in Touch with My Inner Austrian: Memo to Self: A Start of a Model...: How can you be an Austrian, and yet have big swings in the desired capital stock—and thus bigger swings in the desired rate of investment—without having to have massive shocks to the current level of technology? How can you get a big downward shock to desired investment without committing yourself to massive technological amnesia?

This is how:

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Monday DeLong Smackdown: Trying and Failing to Get in Touch with My Inner Austrian Back in 2004...


That I never figured out how to write this paper is deserving of a smackdown. Why did I never figure out how to write it? Because I never figured out what to say, or what the answer was:

Hoisted from 2004: Getting in Touch with My Inner Austrian: A Still-Unwritten Paper: Fragment of an Unfinished Ms.: Part II of an unfinished paper, "After the Bubble." The paper currently lacks Parts I, III, IV, V, and VI:

II. Aggressively Expansionary Monetary Policy and Macroeconomic Vulnerabilities:

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Must-Read: As I repeatedly say, people are spending a lot of time on their cellphones and such doing things that would have been very expensive or impossible back in 1980. That doesn't speak to the distributional point at all—the rich (at least the young rich) benefit more from cheap electronic devices not just by being able to afford more of them but because they are information-age force multipliers for how to better spend your money. But it does speak to the average growth point: Dylan Matthews: You're not imagining it: the rich really are hoarding economic growth: "With... 'distributional national accounts'... exactly where economic growth is going...

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Should-Read: I would conceptualize this differently. It is not a "breakdown" of democratic governance that has allowed "wealthy special interests to capture the policymaking process". Interests have always captured the policymaking process. (i) Sometimes these interests are broad coalitions interested in (progressive) redistribution. (ii) Sometimes these interests are (narrower) interests interested in promoting entrepreneurship, enterprise, and wealth. And (iii) sometimes these interests are (narrow) interests interested in negative sum policies that drive their own enrichment. Interests of type (i) promote the general welfare according to standard utilitarian theory. Interest of type (ii) promote the general welfare by enriching the economy. It is interests of type (iii) that are the problem. And the question is: why does it appear that interests of type (iii) are more powerful now than they used to be?: Brink Lindsey and Steven Teles: The Captured Economy: How the Powerful Enrich Themselves, Slow Down Growth, and Increase Inequality: "For years, America has been plagued by slow economic growth and increasing inequality...

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Links and Such/Procrastination for November 25, 2017


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Must-Read: 1. Paul Krugman is right... 2. If you think Paul Krugman is wrong, see #1...: Paul Krugman (2009): The Obama Gaps: "The bottom line is that the Obama plan is unlikely to close more than half of the looming output gap, and could easily end up doing less than a third of the job...

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Comment of the Day: Charles Steindel: This Is Your Reminder...: "James Madison was appalled that the Constitutional Convention agreed to equal state representation in the Senate. He was dragged kicking and screaming into accepting that compromise (it's a bit odd to think nowadays that New Jersey—perhaps no longer a "large" state, but certainly, in population, considerably above the median—was then the leader of the small state bloc)."