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August 2018

It is necessary to remember, every day, what Dan Froomkin reminds us of: THIS IS NOT NORMAL. This was a private cabinet meeting. Yes, there are always lots of leaks and lots of complaisant reporters who work for sources generating a cloud of misinformation in an attempt to seek personal advantage in the court that is the White House. But "our principal is an idiot" is a message that people in the White House rarely wish to send. But that is, as Dan Froomkin points out here, the message that the Whire House insiders are saying: Dan Froomkin: THIS IS NOT NORMAL: "In private FEMA remarks, Trump’s focus strays from hurricanes..."

Opposition to Medicaid expansion was one of the cruelest deeds of reactionaries in the 2000s: Ralph Northam: "As a doctor, I believe ensuring all Virginians have access to the care they need is a moral and economic imperative. This budget expands Medicaid and will empower nearly 400,000 Virginians with access to health insurance, without crowding out other spending priorities..."

The extremely wise Randall Munroe on the proper visual display of geographic quantitative information: Randall Munroe: xkcd: 2016 Election Map: "I like the idea of cartograms (distorted population maps), but I feel like in practice they often end up being the worst of both worlds—not great for showing geography OR counting people. And on top of that, they have all the problems of a chloro... chorophl... chloropet... map with areas colored in...

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The Ahistorical Federal Reserve: Live at Project Syndicate

The Ahistorical Federal Reserve by J Bradford DeLong Project Syndicate

The Ahistorical Federal Reserve: The most effective–and thus the most credible–monetary policy is one that reflects not only the lessons of history, but also a willingness to reconsider long-held assumptions. Unfortunately, neither attribute is much in evidence at today's Federal Reserve: BERKELEY–Economic developments over the past 20 years have taught–or ought to have taught–the US Federal Reserve four lessons. Yet the Fed’s current policy posture raises the question of whether it has internalized any of them... READ MOAR at Project Syndicate

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The desperate attempt to justify World War I reached into even Sherlock Holmes: Arthur Conan Doyle (1917): His Last Bow: "There's an east wind coming all the same, such a wind as never blew on England yet. It will be cold and bitter, Watson, and a good many of us may wither before its blast. But it's God's own wind none the less, and a cleaner, better, stronger land will lie in the sunshine when the storm has cleared..."


The very sharp Doug Rushkoff tries to recall tech to its utopian aspirations, rather than its current money-making reality. The fascinating thing is that tech is not very good in reality at money-making for anyone who is not the luckiest of lucky people—yet tech is very good at getting consumer surplus to users, who then use it to build utopia... or dystopia... depending: Doug Rushkoff: Survival of the Richest: "There was a brief moment, in the early 1990s, when the digital future felt open-ended and up for our invention...

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I am provoked by this. The benchmark of constant research productivity" defined as the same real dollar expenditure on research produces the same proportional increase in output? I have heard people say that the benchmark should be that the same share of national product spent on R&D should produce the same proportional increase in output. I have heard people say that the benchmark should be that the natural growth in the share of national product spent on R&D should be such as to produce the same proportional increase in output. I have never heard anybody say that the benchmark is that the same real dollar expenditure on research produces the same proportional increase in output: Nicholas Bloom, John Van Reenen, Charles I. Jones, and Michael Webb: Are Ideas Getting Harder to Find?: "One of the key drivers of economic growth during the last half century is Moore’s Law: the empirical regularity that the number of transistors packed onto an integrated circuit serving as the central processing unit for a computer doubles approximately every two years...

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Event studies are very dangerous tools if you truly seek robust identification for policies that operate through expectational channels: Joseph Gagnon: QE Skeptics Overstate Their Case: "David Greenlaw, James Hamilton, Ethan Harris, and Kenneth West... argued that the consensus of previous studies overstates the effects of quantitative easing (QE) on long-term interest rates...

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Three cheers for the Verge, willing to tell it like it is and try to be a trustworthy information intermediary: T.C. Sottek et al.: Newsrooms must stand up to targeted campaigns of harassment: "A widespread campaign of harassment has targeted Verge reporter Sarah Jeong for a number of tweets she wrote years ago. Many of those now reacting to these tweets have intentionally taken them out of context...

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Nikita Sergeyevitch Khrushchev to John Fitzgerald Kennedy (1963): "We and you ought not now to pull on the ends of the rope in which you have tied the knot of war, because the more the two of us pull, the tighter that knot will be tied. And a moment may come when that knot will be tied so tight that even he who tied it will not have the strength to untie it, and then it will be necessary to cut that knot, and what that would mean is not for me to explain to you, because you yourself understand perfectly of what terrible forces our countries dispose..."

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We really do not know what effect a trade war would have on the global economy. All of our baselines are based off of what has happened in the past, long before the age of highly integrated global value chains. It could be small. It could be big. The real forecast is: we just do not yet know: Dan McCrum: Trade tension and China : "The war on trade started by the Trump administration is percolating through the world's analytical apparatus.... Tariffs could be bad for the global pace of economic activity, but only if the economic warfare escalates...

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It has always seemed to me that the sharp Josh Bivens is engaging in some motivated reasoning here: "[1] Putting pen-to-paper on trade agreements contributed nothing to aggregate job loss in American manufacturing. This is almost certainly true.... [2] The trade agreements we have signed are mostly good policy and have had only very modest regressive downsides for American workers. This is false." How am I supposed to reconcile [1] and [2] here?: Josh Bivens (2017): Brad DeLong is far too lenient on trade policy’s role in generating economic distress for American workers on Brad DeLong (2017): NAFTA and other trade deals have not gutted American manufacturing—period: "I could rant with the best of them about our failure to be a capital-exporting nation financing the industrialization of the world...

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Sunday Morning Twitter: Functional Finance/A Better World Is Possible Tweeting...

Preview of Sunday Morning Twitter Functional Finance A Better World Is Possible Tweeting

A better world—a better twitter—is indeed possible...

Suresh Naidu: I will stake my fancy economics job on this: Nothing in @Ocasio2018's policy program is inconsistent with a 2018 understanding of economics.

Wojtek Kopczuk: I missed it before, by my favorite colleague to disagree with. Congratulations on tenure @snaidunl!

Suresh Naidu: Sigh you drew me out. Tell me which policy is infeasible and not addressing some market failure?

Wojtek Kopczuk: They are inconsistent with the government budget constraint. And her MMT support is definitely inconsistent with mainstream economics.

Suresh Naidu: MMT is totally consistent with lots of mainstream macro when the economy is demand constrained (and fiscal theory of the price level when its not). it is unfortunate its adherents dont see that. And budget constraints are endogenous.

Ivan Werning: What do you have in mind?

Suresh Naidu: Oh crap a real macroeconomist. I think stripped of mysticism, MMT is really boils down to "fiscal mutipliers greater than 1", which could be true in demand constrained economy.

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(Early) Monday Smackdown: Bard College Has a Quality Control Problem Here: Roger Berkowitz Needs to Learn to Quote Fairly and Accurately

I think that almost every discussion about "cultural appropriation" should be, instead, a discussion about: "don't be a d-ck". Clarifies matters immeasurably.

The brilliant national treasure Roxane Gay is, in my opinion, 100% correct when she writes: "stay in your lane.... The great thing about writing is that you can develop new lanes through research, immersion and effort..." That is not "being a d-ck". But When I read these exchanges (and Jennifer Schuessler's piece), I think Jennifer, Nina, and Burleigh are all being d-cks—especially Roger Berkowitz, who I think is being a major a--hole here, and doing so while claiming to be the heir and channeler of Hannah Arendt:

Jennifer Schuessler: "I wrote about the controversy over @thenation ’s publication of a poem by a white poet using black vernacular, with a little bit on the long debate over what counts as literary 'blackface' (looking at you, Vachel Lindsay & John Berryman)..."

Nina Burleigh: "Probably shouldn't wade into this but, by @rgay 'stay in your lane' logic, every entitled male screenwriter-white or black-should be banned from writing female characters of any race. I'm actually all for that, but piling on to crush the career of a young poet? geez..."

Roxane Gay: "Well, Nina, this is the problem with journalists taking tweets out of context and using them in their articles, instead of asking people for a more fully fleshed out statement. My tweets are my opinions...

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Weekend Reading: Geopolitics, World Trade and Globalization: Learning from the Wise Kevin O'Rourke and Ron Findlay

Hoisted from the Archives: Ron Findlay and Kevin O'Rourke Power and Plenty: Trade, War, and the World Economy in the Second Millennium (Princeton: Princeton University Press): "A feature of the book that may strike some economists as odd or surprising, but will seem entirely commonplace to historians, is its sustained emphasis on conflict, violence, and geopolitics...

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(Early) Monday Smackdown: New York Magazine Has a Huge Quality Control Problem with Andrew Sullivan. It Needs to Fix It...

Clowns (ICP)

Quo usque tandem abutere, Newyorkmagina, patientia nostra? Quam diu etiam furor iste tuus nos1 eludet? Quem ad finem sese effrenata iactabit audacia?Andrew Sullivan (2014-12-22): Excuse Me, Mr Coates: "Dish readers know how comfortable I found myself in that liberal tradition...

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Some of My Less Polite Thoughts from Aspen

Farmer and the Cowman

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Aspen: Security: Reactions to the Four Ex-National Security Advisors Panel

Aspen—Maroon Bells

Aspen: Security: Nine Reactions to the Four Ex-National Security Advisors Panel: Most important:

  • Joe Nye—and the others—should not have pretended that that the Trump Administration has a strategy, and is some sort of unitary actor. It doesn't. It isn't. For the right analogies, we need to reach back to the Tudor or Stuart dynasties—a King Charles II Stuart without the work ethic, mostly concerned with his mistresses, his parties, and deference to himself; easily bribed by the King of France, &c.; plutocrats maneuvering and using access to advance their interests; other kleptocrats manuevering and using access to advance their interests; and a few technocrats—a Pepys, a Godolphin—trying to hold things together. Graham Allison's three analytical perspectives—rational actor-organizational process-bureaucratic politics—are not sufficient to understand this thing. We need a fourth perspective: weak chaos monkey king, perhaps?...

And here are eight more:

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Aspen—Maroon Bells

Aspen: Security: A Question I Did Not Ask Condoleeza Rice: Secretary Rice, in her opening statement, focused on historical roots of our current mishegas, and how the foreign view of the U.S. as a country that is not well-governed, that cannot handle its trade and immigration issues, has been long building.

That reminded me of something that has long puzzled me: Dual containment of Iran and Iraq—that always seemed to me like a very good idea, a very good policy, a profoundly imperfect policy, yes, but the best we could do given that we live, as Cicero said, not in the Republic of Plato but in the Sewer of Romulus.

Back in 2002 we already had a serious global terrorism network problem. "One enemy at a time" is elementary strategy. Yet in 2003 we broke dual containment by invading Iraq. We broke dual containment:

  • without a plan for getting the 300K Arabic-speaking military police optimal for stabilization,
  • without a plan for a post-invasion Iraq not theologically and ideologically in sync with Iran, and
  • without a spur to action in the form of an advanced Iraqi nuclear weapons program.

Why we decided to launch such a war of choice in 2003 has always been opaque to me. Can you make your thinking less opaque to me, as to why this was thought to be a good idea? And what does this say about how good an idea disruption for disruption’s sake is in general?

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Mr. Justice McReynolds: NLRB v. Jones & Laughlin Steel: "The Court... Departs From Well-Established Principles Followed in Schechter... and Carter v. Carter Coal...": Weekend Reading

Mr. Justice McREYNOLDS: NLRB v. Jones & Laughlin Steel: Dissenting Opinion: "Mr. Justice VAN DEVANTER, Mr. Justice SUTHERLAND, Mr. Justice BUTLER and I are unable to agree with the decisions just announced....

...Considering the far-reaching import of these decisions, the departure from what we understand has been consistently ruled here, and the extraordinary power confirmed to a Board of three, the obligation to present our views becomes plain. The Court as we think departs from well-established principles followed in Schechter Poultry Corporation v. United States, 295 U.S. 495 (May, 1935), and Carter v. Carter Coal Co., 298 U.S. 238 (May, 1936). Every consideration brought forward to uphold the act before us was applicable to support the acts held unconstitutional in causes decided within two years. And the lower courts rightly deemed them controlling.

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My More Polite Thoughts from Aspen...

Farmer and the Cowman

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Aspen—Maroon Bells

Aspen: Development Finance: A common thread in a bunch of the initial comments here was: valuation and assessment. This is a piece of a much broader problem. We have absolutely powerful measures for assessment as far as things that go through the market. We see them every hour on practically every news channel: GDP, employment, wages, equity values, interest rates. We have no similar set of indicators that are brought in front of our eyes and injected into our consciousnesses with respect to any of the broader societal welfare measures that we really want to advance—and the things that we really want Mars to advance. I do not know what the solution to this is. Clearly it is not another report with another set of indicators to add to the cacophony. But I do think we need to settle on a single set of global societal indicators that will have the mindshare that the market financial and other indicators have. I have no answers. I only have a plea for coordination...

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Aspen—Maroon Bells

Aspen: Development Finance Introducing considerations of strategy into development is a very sharp two-edged sword. On the one hand, the Cold War focused the attention of the entire American government on making the redevelopment of northwest and the development of southwestern Europe and of East Asia—Korea and Taiwan and Japan—a success. That was of enormous value in making the US development efforts the greatest successes we have ever had.

In addition, as Barney Frank once said when my colleague Barry Eichengreen was testifying in front of him, the Cold War was worth 60 votes in the House of Representatives. Now we have a much harder row to hoe.

On the other hand, there have been many times over the past 70 years in which strategic logic has overcome development logic. And there are dangers in poisoning the entire effort to the extent that strategic logic takes on too large a place. Walt Whitman Rostow had John F Kennedy primed up talk to Sukarno about all the wonderful things the US was going to do for Indonesian development. But Suharto—sorry, Sukarno, Sukarno, Sukarno—was interested in two and only two things: Irian Jaya, and free cash flow that he could use to reward elements of his political coalition...

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Jane Austen and Walter Scott: Not Quite Love and Friendship: Weekend Reading

Catherine Hokin: The History Girls: Jane Austen and Walter Scott: Not Quite Love and Friendship by : “'Walter Scott has no business writing novels, especially good ones – it is not fair. He has fame and profit enough as a poet, and should not be taking the bread out of other people’s mouths'”...

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What I call Bob Rubin's Questions. They really work!: Annie Duke: Thinking in Bets: Making Smarter Decisions When You Don't Have All the Facts: "In fact, questioning what you see or hear can get you eaten. For survival-essential skills, type I errors (false positives) were less costly than type II errors (false negatives). In other words, better to be safe than sorry, especially when considering whether to believe that the rustling in the grass is a lion. We didn’t develop a high degree of skepticism when our beliefs were about things we directly experienced, especially when our lives were at stake...

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The "optimal tax" literature in economics has always been greatly distorted by the fact that models simple enough to solve bring with them lots of baggage that leads to misleading—and usually anti-egalitarian and anti-equitable growth—conclusions that would not follow if we had better control over our theories. Here Saez and Stantcheva make significant progress in resolving this problem: Emmanuel Saez and Stefanie Stantcheva: A simpler theory of optimal capital taxation: "We first consider a simple model with utility functions linear in consumption and featuring heterogeneous utility for wealth...

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Aspen—Maroon Bells

Aspen: Multilateral Institutions and International Collaboration: Back when I was in the Clinton administration, I remember pressing the Treasury International people on how better funding and more substantive independence for multilateral institutions ought to be a much higher priority—and their response was: "We want to keep them on their leashes so we can run the show. We are the US. We are the boss".

And then, lo and behold, Bob Dole unleashes Al D'Amato to make trouble about the Mexican financial crisis and the fallout from that leaves the US hobbled when 1997-8 comes around, and there was a general current of: "yeah, it would have been better if a much more well-funded and truly independent IMF had been able to handle both on its own."

US politics now are obviously so fraught and dysfunctional that it seems to me we should be ceding power over multilateral institutions as fast as possible, while also beefing up their financial resources. What roads are available to accomplish that?...

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Aspen—Maroon Bells

Aspen: Approaches to Fragility: One of the great mysteries puzzling me in my Visualization of the Cosmic All is the extraordinary disjunction between the two acts of Chiang Kai-Shek's career. The first act—Chiang Kai-Shek and his Guomindang as rulers of China between the Northern Expedition and the Japanese invasion—produced a highly-corrupt government that did not seem to be nurturing economic convergence and rapid industrialization. The second act—Chiang Kai-Shek and his Guomindang as rulers of Taiwan after 1949—is one of the most glorious episodes of economic development produced by any democracy-minded or not-so-democracy-minded strongman.

What should I read to understand this?...

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