Fairly Recently: Must- and Should-Reads, and Writings... (November 20, 2018)

6a00e551f080038834022ad39f5903200b 1. Review of "Capitalism in America: A History" by Alan Greenspan and Adrian Wooldridge: Alan Greenspan and Adrian Wooldridge’s “Capitalism in America: A History” argues that it is the American love and embrace of capitalism, the resulting entrepreneurial business culture, and the creative destruction inherent in the capitalist-market system that have given America its special, unique edge in economic wealth...

Across the Wide Missouri: FiveThirtyEight's ultimate Thanksgiving dinner menu is: "Tofurky... Frog eye salad... Jell-O salad... Yorkshire pudding... Snickers salad...

175 years ago Friedrich Engels put his finger on the major flaw in economics that Paul Romer has tried to repair over his career: Friedrich Engels (1843): Outlines of a Critique of Political Economy: "According to the economists, the production costs of a commodity consist of three elements: the rent for the piece of land required to produce the raw material; the capital with its profit, and the wages for the labour required for production and manufacture.... A third factor which the economist does not think about–I mean the mental element of invention, of thought...
I would find the wise and public-spirited Ricardo Haussmann more convincing here if he'd had an explanation for why mandated wage compression by John Dunlop in the U.S. during World War II was not a huge success: Ricardo Hausmann: How Not to Fight Income Inequality: "Trying to combat income inequality through mandated wage compression is not just an odd preference. It is a mistake, as Mexico's president-elect, Andrés Manuel López Obrador, will find out in a few years, after much damage has been done...
I highlighted this two years ago. I am highlighting it again, as I think it has not received the attention it deserves. Ernest Liu: Industrial Policies in Production Networks: "Many developing countries adopt industrial policies favoring selected sectors. Is there an economic logic to this type of interventions?..
Seth Godin: Throat-Clearing: "Begin in the middle. The first paragraph, where you lay out what's about to happen. The half-apology you use to preface your comments at the meeting. The email that takes a paragraph or two to get to the point…. You can skip those. Throat clearing is a good way to make sure that people are looking at you. And an even better way to give yourself time to collect your thoughts, to indulge your fears or to get yourself warmed up. But we're already looking at you. We've clicked through to your link, given you the microphone, read your note…. Say all that stuff in your head, but, we'd really like to hear the best part first. Begin in the middle...
Another very good "Equitable Growth in Conversation" piece: Ioana Marinescu, Herbert Hovenkamp, Kate Bahn, and Michael Kades. In modern antitrust policy, the monopoly and the monopsony analyses need to proceed on two separate tracks: Equitable Growth: In conversation with Herbert Hovenkamp and Ioana Marinescu: "You can’t just do a workup on the product side and then assume you’ve gotten all the work done. If you’ve got a special class of employees, like computer engineers, those engineers might work for firms that don’t compete with each other at all on the product side, and that means that that market will end up having different boundaries than the product market has for those same firms...
Equitable Growth's Will McGrew makes a good catch here, and direct us to Brendan Greely: Will McGrew: Weekend Reading: “Monopsony and Mobility” Edition: "Brendan Greely of the Financial Times dives into another aspect of the mobility divide: social capital. Using frequent Equitable Growth guest authors and economists Raj Chetty, Nathaniel Hendren, and John Friedman’s recently published Opportunity Atlas as a starting point, Greely explains why relationships and communities are more important than the mere availability of jobs in determining economic mobility. Beyond enhancing a neighborhood’s services and amenities such as public schools, growing up in proximity to people with a diversity of highly paid jobs provides children with role models and connections to higher quality jobs and more numerous economic opportunities... #equitablegrowth
It may finally be the time that we get some traction on better measures of economic growth and prosperity than GDP. So go back and reread this from 290016: homas Piketty, Emmanuel Saez, and Gabriel Zucman: Distributional national accounts: Methods and estimates for the United States: "This paper combines tax, survey, and national accounts data to estimate the distribution of national income in the United States since 1913. Our distributional national accounts capture 100% of national income, allowing us to compute growth rates for each quantile of the income distribution consistent with macroeconomic growth... #economicgrowth
This from eight years ago is still the best thing I have seen about "sustainability" and its proper role in economic analysis: Kenneth J. Arrow, Partha Dasgupta, Lawrence H. Goulder, Kevin J. Mumford, and Kirsten Oleson (2010): Sustainability and the Measurement of Wealth: "We develop a consistent and comprehensive theoretical framework for assessing whether economic growth is compatible with sustaining well-being over time. The framework focuses on whether a comprehensive measure of wealth–one that accounts for natural capital and human capital as well as reproducible capital–is maintained through time... #sustainability #equitablegrowth
Getting deeply into the weeds on whether much observed social mobility is actually error in measuring "true status". The answer ape to be "no": Martin Nybom and Kelly Vosters: Intergenerational Transmission of Socioeconomic Status: "There is no simple law of mobility: In 2014, Gregory Clark proposed a ‘simple law of mobility’ suggesting that intergenerational mobility is much lower than previously believed, and relatively uniform across countries.... This column tests this... using US and Swedish data... no evidence of a rise in intergenerational persistence and no evidence of uniformity across countries...
One might, naively, think that the economies of scale that companies like Wal-Mart possess should redound to the benefit of workers as well as consumers. More efficiencies from economies of scale should leave a bigger pie for everyone else, which would be shared, right? Apparently not. When a business earns more by selling to large buyers, its workers wages appear not to go up but to go down. Something to watch very closely. Sharon Nunn sends us to Nathan Wilmers: Sharon Nunn: Big Businesses Push Down Prices, and Perhaps Wages: "As large firms... command increasing market share in the retail industry, they narrow the field of buyers for companies that make and move consumer products.... [Nathan] Wilmers found that since the late 1970s... a 10% increase in [corporate] earnings that depend on larger buyers is associated with a 1.2% decline in wage growth... #equitablegrowth #inequality
Dan Davies on financial fraud is certainly the most entertaining book on Economics I have read this year. Highly recommend itcold Chris Dillow: Review of Dan Davies: Lying for Money: "Squalid crude affairs committed mostly by inadequates. This is a message of Dan Davies’ history of fraud, Lying For Money.... Most frauds fall into a few simple types.... Setting up a fake company... pyramid schemes... control frauds, whereby someone abuses a position of trust... plain counterfeiters. My favourite was Alves dos Reis, who persuaded the printers of legitimate Portuguese banknotes to print even more of them.... All this is done with the wit and clarity of exposition for which we have long admired Dan. His footnotes are an especial delight, reminding me of William Donaldson. Dan has also a theory of fraud. 'The optimal level of fraud is unlikely to be zero' he says. If we were to take so many precautions to stop it, we would also strangle legitimate economic activity...

books #finance

Brilliant, as usual from Costa Shalizi: Cosma Shalizi: Alien Failure Modes of Machine Learning: "They have such alien failure-modes, and... don't have the sort of flexibility we're used to from humans or other animals. They generalize to more data from their training environment, but not to new environments.... If you take a person who's learned to play chess and give them a 9-by-9 board with an extra rook on each side, they'll struggle but they won't go back to square one; AlphaZero will need to relearn the game from scratch... #riseoftherobots #cognition
I really do not know who the audience for this is supposed to be. Addressing the Trump Administration is a pointless waste of time. And this is not written to give Nancy Pelosi, Mitch McConnell, Kevin McCarthy, and Chuck Schumer ideas as to how they can constrain Trumpets idiocy: Robert Z. Lawrence: How the United States Should Confront China Without Threatening the Global Trading System: "The Trump administration’s willingness to violate trade rules to maximize its negotiating leverage is undermining its most important and most legitimate objective... #globalization #orangehairedbaboons

November 24, 2018 at 06:37 in #noted, #teachingmacro | Permalink | Comments (0)

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Across the Wide Missouri: FiveThirtyEight's ultimate Thanksgiving dinner menu is: "Tofurky... Frog eye salad... Jell-O salad... Yorkshire pudding... Snickers salad...

175 years ago Friedrich Engels put his finger on the major flaw in economics that Paul Romer has tried to repair over his career: Friedrich Engels (1843): Outlines of a Critique of Political Economy: "According to the economists, the production costs of a commodity consist of three elements: the rent for the piece of land required to produce the raw material; the capital with its profit, and the wages for the labour required for production and manufacture.... A third factor which the economist does not think about–I mean the mental element of invention, of thought...
I would find the wise and public-spirited Ricardo Haussmann more convincing here if he'd had an explanation for why mandated wage compression by John Dunlop in the U.S. during World War II was not a huge success: Ricardo Hausmann: How Not to Fight Income Inequality: "Trying to combat income inequality through mandated wage compression is not just an odd preference. It is a mistake, as Mexico's president-elect, Andrés Manuel López Obrador, will find out in a few years, after much damage has been done...
I highlighted this two years ago. I am highlighting it again, as I think it has not received the attention it deserves. Ernest Liu: Industrial Policies in Production Networks: "Many developing countries adopt industrial policies favoring selected sectors. Is there an economic logic to this type of interventions?..
Seth Godin: Throat-Clearing: "Begin in the middle. The first paragraph, where you lay out what's about to happen. The half-apology you use to preface your comments at the meeting. The email that takes a paragraph or two to get to the point…. You can skip those. Throat clearing is a good way to make sure that people are looking at you. And an even better way to give yourself time to collect your thoughts, to indulge your fears or to get yourself warmed up. But we're already looking at you. We've clicked through to your link, given you the microphone, read your note…. Say all that stuff in your head, but, we'd really like to hear the best part first. Begin in the middle...
Another very good "Equitable Growth in Conversation" piece: Ioana Marinescu, Herbert Hovenkamp, Kate Bahn, and Michael Kades. In modern antitrust policy, the monopoly and the monopsony analyses need to proceed on two separate tracks: Equitable Growth: In conversation with Herbert Hovenkamp and Ioana Marinescu: "You can’t just do a workup on the product side and then assume you’ve gotten all the work done. If you’ve got a special class of employees, like computer engineers, those engineers might work for firms that don’t compete with each other at all on the product side, and that means that that market will end up having different boundaries than the product market has for those same firms...
Equitable Growth's Will McGrew makes a good catch here, and direct us to Brendan Greely: Will McGrew: Weekend Reading: “Monopsony and Mobility” Edition: "Brendan Greely of the Financial Times dives into another aspect of the mobility divide: social capital. Using frequent Equitable Growth guest authors and economists Raj Chetty, Nathaniel Hendren, and John Friedman’s recently published Opportunity Atlas as a starting point, Greely explains why relationships and communities are more important than the mere availability of jobs in determining economic mobility. Beyond enhancing a neighborhood’s services and amenities such as public schools, growing up in proximity to people with a diversity of highly paid jobs provides children with role models and connections to higher quality jobs and more numerous economic opportunities... #equitablegrowth
It may finally be the time that we get some traction on better measures of economic growth and prosperity than GDP. So go back and reread this from 290016: homas Piketty, Emmanuel Saez, and Gabriel Zucman: Distributional national accounts: Methods and estimates for the United States: "This paper combines tax, survey, and national accounts data to estimate the distribution of national income in the United States since 1913. Our distributional national accounts capture 100% of national income, allowing us to compute growth rates for each quantile of the income distribution consistent with macroeconomic growth... #economicgrowth
This from eight years ago is still the best thing I have seen about "sustainability" and its proper role in economic analysis: Kenneth J. Arrow, Partha Dasgupta, Lawrence H. Goulder, Kevin J. Mumford, and Kirsten Oleson (2010): Sustainability and the Measurement of Wealth: "We develop a consistent and comprehensive theoretical framework for assessing whether economic growth is compatible with sustaining well-being over time. The framework focuses on whether a comprehensive measure of wealth–one that accounts for natural capital and human capital as well as reproducible capital–is maintained through time... #sustainability #equitablegrowth
Getting deeply into the weeds on whether much observed social mobility is actually error in measuring "true status". The answer ape to be "no": Martin Nybom and Kelly Vosters: Intergenerational Transmission of Socioeconomic Status: "There is no simple law of mobility: In 2014, Gregory Clark proposed a ‘simple law of mobility’ suggesting that intergenerational mobility is much lower than previously believed, and relatively uniform across countries.... This column tests this... using US and Swedish data... no evidence of a rise in intergenerational persistence and no evidence of uniformity across countries...
One might, naively, think that the economies of scale that companies like Wal-Mart possess should redound to the benefit of workers as well as consumers. More efficiencies from economies of scale should leave a bigger pie for everyone else, which would be shared, right? Apparently not. When a business earns more by selling to large buyers, its workers wages appear not to go up but to go down. Something to watch very closely. Sharon Nunn sends us to Nathan Wilmers: Sharon Nunn: Big Businesses Push Down Prices, and Perhaps Wages: "As large firms... command increasing market share in the retail industry, they narrow the field of buyers for companies that make and move consumer products.... [Nathan] Wilmers found that since the late 1970s... a 10% increase in [corporate] earnings that depend on larger buyers is associated with a 1.2% decline in wage growth... #equitablegrowth #inequality
Dan Davies on financial fraud is certainly the most entertaining book on Economics I have read this year. Highly recommend itcold Chris Dillow: Review of Dan Davies: Lying for Money: "Squalid crude affairs committed mostly by inadequates. This is a message of Dan Davies’ history of fraud, Lying For Money.... Most frauds fall into a few simple types.... Setting up a fake company... pyramid schemes... control frauds, whereby someone abuses a position of trust... plain counterfeiters. My favourite was Alves dos Reis, who persuaded the printers of legitimate Portuguese banknotes to print even more of them.... All this is done with the wit and clarity of exposition for which we have long admired Dan. His footnotes are an especial delight, reminding me of William Donaldson. Dan has also a theory of fraud. 'The optimal level of fraud is unlikely to be zero' he says. If we were to take so many precautions to stop it, we would also strangle legitimate economic activity...