Grasping Reality on TypePad, by Brad DeLong

Weekend Reading: Richard Thaler: Behavioral Economics/a>: "Exactly 100 years ago, the JPE was poised to be at the forefront of the field that would eventually come to be called behavioral economics...

Should-Read: Thomas Robert Malthus: PPrinciples of Political Economy Considered with a View to Their Practical Application: "We cannot too highly respect and venerate that admirable rule of Newton, not to admit more causes than are necessary... but the rule itself implies, that those which really are necessary must be admitted...

Should-Read: Free Exchange: A decade after it hit, what was learnt from the Great Recession?: "The success of those policies, and the relatively bearable recession that resulted, allowed governments to avoid more dramatic interventions...

Should-Read: Alan Cole: @AlanMCole on Twitter: "Don't think this one's gonna pay for itself, guys:"

Should-Read: Economist: Women and economics: Inefficient equilibrium: "Donna Ginther... has found telling evidence that women... in economics... face a thicker glass ceiling...

Should-Read: Tim Duy: Is The Fed Finishing 2017 On A Dovish Note?: "An important implication falls out of this analysis: Relative to the 2018 economic forecast changes, the projected path of policy is dovish...

Alan Cole: @AlanMCole on Twitter: "Don't think this one's gonna pay for itself, guys:"

Susan Collins on Meet the Press, December 4, 2017:

SUSAN COLLINS: Apply [that] to [the] four-tenths of one percent increase in the GDP generates revenues of a trillion dollars, a trillion dollars.... I’ve talked four economists, including the Dean of the Columbia School of Business and former chairs of the councils of economic advisors and they believe that it will have this impact. So I think if we can stimulate the economy, create more jobs, that does generate more revenue...

OK. It appears likely that you will “win” this round. It appears more likely than not that the tax “reform“ bill will pass, and thus that you will redistribute an extra 0.5 percent of national income from the bottom 90% to your 0.1%-0.01%—depending on how exclusively you define yourselves—selves. That will move your share of America’s resources devoted to satisfying your desires up to 5-10%, from a baseline of back in the 1970s of 1.5-3%.

Your Jewish, African-American, Hispanic-American, and Asian American brothers and sisters do not need to hear this, so I address myself to you.

You and your predecessors have been the backbone of America’s Republican Parry since the Great Depression. Your predecessors did not give up hope and faith in the America of individual opportunity and the market economy during the Great Depression. They were always suspicious of oversocialism, overtaxation, overredistribution, overunionization, and overbureaucratization as pursued by Democrats using the Great Depression as a club to beat up those saying “wait a minute“ in response to policy proposals that advanced the interests of Democratic Party clients.

Must-Read: This is the kind of thing that every Republican economist who ever wants to opine on economic policy and be received in polite society at any time in the future should be writing today, about their colleagues who are shilling, loudly or softly, directly or indirectly, for the tax "reform" bill: Brad DeLong: Notes on Gerald Friedman: Larry Summers's and my decision to set our hysteresis parameter η = 0.1 as the central case was merely a calculation followed by a belief and then extended by a guess. But the argument was strengthened by... American economic history....

J. Bradford Delong: Notes on Gerald Friedman: Since 2010 fiscal policy austerity has been a disaster for both Europe and the United States. But how much better could things be? How much good could be done by a restoration of a sensible fiscal policy?

I take a sensible fiscal policy to be one that, in the words of Abba Lerner, recognizes the first principle of functional finance...

Should-Read: Nicholas Crafts: The Postwar British Productivity Failure: "British productivity growth disappointed during the early postwar period...

Should-Read: Friedrich von Hayek was very clear that a market distribution of income has little to do with "deserve", even putting to one side the idea that perhaps we have not done anything to "deserve" our talents and our industriousness. IMHO, the conservative deference to wealth is rooted not in any moral claim to the justice of wealth distributions but rather to a very different claim—that churn is simply bad: Brink Lindsey and Steve Teles: The Conservative Inequality Paradox: "Conservatives have two intellectual commitments that are increasingly incompatible...

Should-Read: Danny Yagan: EMPLOYMENT HYSTERESIS FROM THE GREAT RECESSION: "This paper uses U.S. local areas as a laboratory to test whether the Great Recession depressed 2015 employment...

Should-Read: Barry Eichengreen: Two Myths About Automation: "Robots, machine learning, and artificial intelligence promise to change fundamentally the nature of work...

Should-Read: Nathan Jensen: Exit options in firm-government negotiations: An evaluation of the Texas chapter 313 program: "A unique economic development incentive program in the state of Texas that holds almost all elements of bargaining constant...

Should-Read: James Kwoka: U.S. antitrust and competition policy amid the new merger wave: "This dramatic and well-documented increase in concentration raises the question about its causes...

Should-Read: Ben Orlin: The Three Barriers to Deep Thinking in School: "Three crude reasons why deep thinking fails to bloom...

Should-Read: Jacob Levy: Black Liberty Matters: "'How is it that we hear the loudest yelps for liberty among the drivers of negroes?'...

Live from the American Libertarians' Self-Made Gehenna: When is the Volokh Conspiracy going to publish its piece on "Judge Alex 'But I Call My Male Clerks into Chambers and Pinch Their Nipples too!' Kozinski and the Background Villains in the Novels of Courtney Milan", with sympathetic commmentary by Susan Estrich?

Hoisted from 2013: The Great Depression from the Perspective of Today, and Today from the Perspective of the Great Depression:

J. Bradford DeLong
U.C. Berkeley and NBER

September 2013 :: University of Missouri—Columbia

Should-Read: Jerry Taylor (2016): Is There a Future for Libertarianism?: "The Rand Paul campaign and its (admittedly uneven) agenda of social tolerance, military restraint, and fiscal conservatism is little more than a very small pile of smoking embers...

Should-Read: Guido Menzio and Shouyong Shi: Efficient Search on the Job and the Business Cycle: "A model of directed search... in which transitions... between unemployment and employment and across employers are driven by heterogeneity in the quality of firm-worker matches...

Must-Read: Ahem! If Robert Barro seriously and carefully thought the long-run boost to national income from the tax "reform" bill was 7% rather than the 3% of the Nine Republican Economists Being Unprofessional, he should have said so then.

It is not good to say now: "our critics are right and we should have divided by 25 rather than 10 to get an 0.12% per year growth boost rather than an 'as much as 0.3%' growth boost, so let me multiply the 3% by 25 to get 7%". That is neither "serious" nor "careful". It is, instead, delivering a piece that nails the 0.3% per year growth boost that the Republican political spinmasters have settled on as the talking point.

Larry and Jason, please do not ascribe "seriousness" and "carefulness" to work unless it is both serous and careful. I do not believe either the work of the Nine Republican Economists Being Unprofessional or to the work of Robert Barro alone here qualifies: Jason Furman and Larry Summers: Robert Barro’s Tax-Reform Advocacy: A Response: "Now Barro has provided Project Syndicate with an analysis that uses his own estimates to conclude that the long-run level of output would increase by 7%...

Live from the Primate Research Lab: Truth!: A.Benítez-Burraco: @abenitezburraco on Twitter: "Chimps and bonobos help others achieve their goals by giving them needed objects, opening locked door and releasing rewards. Interestingly, while chimps help mainly in response to signals of need, bonobos also help proactively https://t.co/AoMFrFGYzl."

Marcy Wheeler: @emptywheel on Twitter: "Also, both chimps and bonobos have been known to shred copies of Ayn Rand to create bed litter for their friends..."

Live from the Self-Made Gehenna of the Grand Old Perverts: How Alex Kozinski's career survived the naked-women-painted-like-cows episode is beyond me: Joanna Grossman: @JoannaGrossman on Twitter: "When I clerked on the Ninth Circuit, Kozinski sent a memo to all the judges suggesting that a rule prohibiting female attorneys from wearing push-up bras would be more effective than the newly convened Gender Bias Task Force. His disrespect for women is legendary..." https://t.co/sp3dqCEuKS

Live from the Roasterie: Nothing has happened to Kansas since the start of 2011 like the tech boom of the late 1990s, which Kansas shared in and which pushed its share of national employment up (before returning to normal), or the housing boom of the mid 2000s, which Kansas did not share in and which pushed its share of national employment down (before returning to normal). The only important things to happen to Kansas since the start of 2011 has been Brownbackism and the conversion of Kansas into Brownbackistan. And now one out of seventeen jobs that one would expect to see in Kansas today is simply gone.

Live from the Hot and Dry Santa Barbara Area: I do wish that they would distinguish where it is a grass-and-brush fire from where it is a forest fire. Grass and brush fires do not have a great deal of oomph should they run up against settled areas. Forest fires do:

Must-Read: Looking back at my archives, it is clear to me that I have written too little about the good and too much about the bad Friedrich von Hayek. Not, mind you, that I wrote anything wrong: when he was bad, he was horrid. But when he was good he was very, very good. And if I want to argue for interpretive charity for James Buchanan and Nancy MacLean—and I think I do—I should be willing to apply it to Friedrich von Hayek: Samuel Bowles, Alan Kirman, and Rajiv Sethi: Reflections on Hayek: "Hayek pioneered the informational view of markets in which prices are messages...

Live from the Orange-Haired Baboon Cage: A tribe of incompetent grifters. But the Donald mistake is more serious: writing the wrong month for your birthdate is very hard to do without major cognitive decline: Leonard Greene: Why Melania, Ivanka & Jared's mayoral election votes didn't count: "resident Trump and his family of New Yorkers were not in the Big Apple Nov. 7 when voters went the polls, so they voted by absentee ballot...

Charlie Deist: Brad DeLong on Austrian Economics:

Charlie Deist: Good morning everyone, and welcome to the Bob Zadek Show.

Should-Read: The Republican Party somehow, over the last sixty years, lost its status as the party of people for whom the market economy and creative destruction were working and were going to work. It became the party of those who thought they had something to lose—plutocrats and their feckless heirs who fear being creatively destroyed, or fear they may be asked if they want jalapeños on their pizza, or fear they will be outcompeted in the market by hungry people from Chiapas who have already traveled hundreds and hundreds of miles to try to build a better life: Michael Tomasky: Republicans Have Lost Touch With Blue America: "Blue America... is the America that produces the vast majority of our innovators and thinkers and scientists and creative people...

Should-Read: The Aetna-CVS vertical combination is about sharing information, yes. But is it about sharing information to improve care? Or is it about sharing information to figure out ways to underwrite your coverage pool via plan design and advertising?: David Anderson: Aetna, CVS and data thoughts: "This is a risk adjustment data gold mine...

Should-Read: I really, really resent people calling this "populism". There were two populist moments—one in late nineteenth-century America, focused on policies to make the forgotten man of America better off via railroad regulation, unions, effective antitrust, and monetary expansion via the free coinage of silver at a ratio of 16-to-1. The second was post-World War II Latin America and its push for a rapid wage increase high-pressure economy stabilized via financial repression. You can argue as to whether the policies advocated would have made the economy better or worse off—I say "both" and "it depends". But the movement had nothing in common with the ethnic-animosity anti-rootless cosmopolite "Herrenvolk"-affirming plutocratic looting spree now going on in America, or, indeed, with analogous movements in Europe (where not even the plutocrats but rather a lumpenoverclass_ of politically well-connected grifters stand to benefit. Call it fascism. It was never populism. And Catherine Rampell has no excuse for supposing it ever was: Catherine Rampell: Populism died on Saturday: "In the end, only those on the populist right successfully took over a major political party, and later the country...

Should-Read: A veritable Samson armed with the jawbone of an ass—that is, the standard public finance model of capital-income taxation—Robert Waldmann wreaks havoc on the intellectual hosts of the Philistines by the mere expedient of taking the view that the most useful way to use the model is to ask what it tells us is optimal policy from a random initial starting position, rather than what optimal policy will be after a long period of optimal adjustment has passed. Very smart. But not of great interest because it brings with it unwelcome political conclusions to the overwhelming bulk of those who are etched up to follow the argument; Robert Waldmann (2008): Optimal Capital Income Taxation It Is: "The simplest... standard growth... aK model with optimizing consumers with logarithmic utility...

Should-Read: Back in 2015, I thought "cognitive dictatorship" was simply ludicrous. I should have been paying more attention to Breitbart, Drudge, and Fox News. I should have been paying more attention to the Brexiteers. I should have remembered more of the history of the Late Stuart dynasty—the Popish Plot, the warming-pan, and so forth: Charlie Stross (2015): The Present in Deep History: "I'm more worried about what I used as a throw-away in 'Glasshouse' as 'cognitive dictatorships'...

May I, for one, say that I am overwhelmingly embarrassed at the older white men from the South I have as fellow citizens in this country: Such easily-grifted morons!

Must-Read: John Maynard Keynes: The General Theory of Employment, Interest, and Money: "The austere view, which would employ a high rate of interest to check at once any tendency in the level of employment to rise appreciably above the average of; say, the previous decade...

Should-Read: I say it is time to promote this guy to Admiral: AdmiralPAYGO!: Ed Lorenzen: @CaptainPAYGO on Twitter: "The Treasury Department dynamic 'analysis' of tax reform makes a mockery of dynamic analysis and does a disservice to those who advocate for serious dynamic estimates https://t.co/PudiRrQzu1..."

Brad DeLong: @de1ong on Twitter: This is a surprise? Static analysis was always about making a bias-variance tradeoff: A static analysis would be biased, but have lower mean-squared error because the "dynamic" terms would inevitably be overwhelmingly large-magnitude political-partisan-lobbyist-ideologue noise:

Hoisted from the Archives from 2015: Night Thoughts on Dynamic Scoring: Live from DuPont Circle: Last Thursday two of the smartest participants at the Brookings Panel on Economic Activity conference—Martin Feldstein and Glenn Hubbard—claimed marvelous things from the enactment of JEB!'s proposed tax cuts and his regulatory reform program. They claimed:

Should-Read: I say it is time to promote this guy to Admiral: AdmiralPAYGO!: Ed Lorenzen: @CaptainPAYGO on Twitter: "The Treasury Department dynamic 'analysis' of tax reform makes a mockery...

Live from the Gehenna That is the Right-Wing Legal Community: Combine Alex Kozinski with Ed Crane and company, and one is reminded of John Stuart Mill's "not that conservatives are stupid, but the stupid tend to be conservative". Not that libertarians are predators and sociopathic bullies, but that predators and sociopathic bullies tend to be libertarians: Paul Campos: Judge Alex Kozinski: "All of this has been known, at least in its broad details, for a long time in the elite legal academic circles that send vulnerable young people off to clerk for sadistic bullies like Kozinski...

1. The U.S. Treasury's Office of Tax Policy (OTP) and Office of Tax Analysis (OTA) agree with the Congress's Joint Committee on Taxation (JCT) that the Republican Senate tax "reform" bill as written will raise the debt by 1.5 trillion dollars over the next decade, and boost growth by 0.08% per year

2. OTP does not believe that growth will be 2.9% per year over the next decade.

3. If growth were to be boosted from the baseline 2.2% per year over the next decade to 2.9% as a result of the tax "reform", it would pay for itself. But it won't.

4. No office in the Treasury Department is willing to go on record as having written this one-page document.

5. No official in the Treasury Department is willing to go on record as having written this one-page document.

6. Not even Steven Mnuchin has put his name on this one-page document.

Must-Read: Naomi Janowitz: Office Hour Podcast: "NAFTA with Special Guest Brad DeLong...

Should-Read: But is this—global—productivity slump really like any of the previous—much more local—productivity slumps? A very promising intellectual exercise to do in prospect, but I am going to find Barry and ask him what we really learn from it: Barry Eichengreen, Donghyun Park, and Kwanho Shin: The Global Productivity Slump:  Common and Country-Specific Factors: "Productivity growth is slowing around the world...

Must-Read: Few people—and next to zero of today's Republicans—seem to me to understand exactly how dangerous the current situation is—not just Trump's erratic moves, but the responses of all the people who somehow hope that riding his coattails will be to their long-term advantage. "But it could not happen here: this is the country of Goethe and Schiller!": Nouriel Roubini: Populist Plutocracy and the Future of America: "Donald Trump has consistently sold out the blue-collar, socially conservative whites who brought him to power...

Should-Read: So it turns out that "Brexit means Brexit" means: The United Kingdom loses its voice in Brussels, but for all other intents and purposes remains part of the EU. Who knew that this was the hill Boris Johnson and Teresa May wanted to die on? It may still be a political winner: May and Johnson and company will use "we are no longer part of the EU" to get their constituencies to look down on continental Europeans. But the U.S. southern Democratic Party got its constituency to look down on Negroes so that the constituency's pockets could be picked—it made cruel, sadistic, and pragmatic sense. There is no pragmatic sense here: Simon Wren-Lewis: First Stage Reality and Brexiters... see... the important facts... and... apply them relentlessly despite what politicians say...

Should-Read: Laura Tyson and Susan Lund: Rage Against the Machine?: "Almost every aspect of our economies will be transformed by automation in the coming years...

Should-Read: Gray Kimbrough: @graykimbrough on Twitter: "Chris Ruhm...has some really stark stats on drug, alcohol, and suicide deaths by race/ethnicity 1999-2015...