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January 2019

U.S. Recession No Longer Improbable: No Longer Fresh at Project Syndicate

The World Economy Goes Hollywood by Anatole Kaletsky Project Syndicate

Project Syndicate: U.S. Recession No Longer Improbable: Over the past 40 years, the U.S. economy has spent six years in four recessions: in a downturn 15% of the time, with the odds that a current expansion will turn into a downturn within a year being one-in-eight. Of these four downturns, one—the extended downturn of 1979-82—had a conventional cause: the Federal Reserve thought inflation was too high, and so hit the economy on the head with the high interest-rate brick to stun it and induce workers to moderate their demands for wage increases and firms to cut back planned price increases. The other three have been caused by derangements in financial markets: the collapse of sunbelt Savings-and-Loans for 1991-92, the collapse of dot-com valuations in 2000-2, and the collapse of mortgage-backed securities in 2008-9.

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Zack Beauchamp: Brexit Vote: Theresa May’s Defeat Reveals the Lies Behind Brexit: "UK Prime Minister Theresa May spent months negotiating a deal with the European Union on the terms of Brexit.... The UK Parliament voted to reject the deal by a resounding 432-202 margin.... May’s tenure in office... was premised on the lie that she could work out a Brexit deal palatable to all sides. Now, in the clarifying light of this vote’s failure, it’s time to be honest.... Either the UK exits the EU without a deal by the March 29 deadline, which virtually every expert agrees would result in economic catastrophe, or else the country pulls back from the brink and decides to remain in the EU. These options aren’t what the Brexiteers promise, but it’s difficult to envision any other ones after the failure of May’s deal...

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It was back in 1924 that it was first generally recognized that diversification was the equity investor's biggest friend. A properly-diversified portfolio of equities would outperform bonds by huge amounts with very high provability over long-enough horizons. The problem is that while "diversification" might have been reasonably accomplished with ten well-chosen stocks back in the mid-twentieth century, in the past generation it has required more like fifty. And if we truly are moving into more of a winner-take all economy, in the future it may take 100: Terry Smith: Busting the myths of investment: Do equities outperform bonds?: "The degree of concentration of returns is still startling. Just five companies out of the universe of 25,967 in the study account for 10 per cent of the total wealth creation over the 90 years, and just over 4 per cent of the companies account for all of the wealth created.... The study also looks at returns decade by decade and reaches more or less the same conclusion: that the decade returns for most equities are lower than those earned by investment in Treasury bills...

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Fairly Recently: Must- and Should-Reads, and Writings... (January 22, 2019)

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  1. Be the Podcast You Want to See in the World!: Arindrajit Dube: "God damn it Brad now Matt Y is on board and I am seriously screwed..." So it looks like we may be doing this for real—once a week, half-hour chunks, starting out as amateur hour only. First topic: thinking about what marginal tax rates on the rich should be. What say you all?...

  2. Three Papers and Four Graphs and Tables: The Top Marginal Tax Rate: If Arindrajit Dube and I do start our Economic Home podcast, I think that each 30 minute segment should concentrate on two or three (or four) papers and two or three (or four) graphs and tables. Our first proposed topic is the top marginal tax rate. Are these the right papers? Are these the right graphs and tables?...

  3. By Popular Deman: What Is “Modern Monetary Theory”?: Nevertheless, if one must choose between MMT on the one hand and the yahoos of either monetary stringency or fiscal austerity on the other, choose MMT. It is closer to being an accurate view. We do seek a circular flow of spending, production, and incomes both high enough to keep us from unnecessary unemployment and also from surprisingly and distressingly high prices and inflation. This is a modest goal. It is not something pushed out of reach by some malign and austere economic or budgetary accounting logic...

  4. On Robert Barro's (2005) "Rare Events and the Equity Premium" and T.A. Rietz's (1988) "The Equity Risk Premium: A Solution": Our habit of using the Lucas-tree model of Lucas (1978), "Asset Prices in an Exchange Economy" as a workhorse has turned out to be a trap...

  5. A Toast: "The Queen Over the water!"…: "The rightful president of the United States warned us before anybody else did...

  6. Dealing with Global Warming Needs a Carbon Tax Starting Now: It would have been smart to do it 26 years ago, when Al Gore was first pushing it—and we got it through the House and fell short by two votes in the Senate: George Akerlof et al.: Economists’ Statement on Carbon Dividends: Bipartisan agreement on how to combat climate change: Global climate change is a serious problem calling for immediate national action. Guided by sound economic principles, we are united in the following policy recommendations...

  7. Comment of the Day: Ronald Brakels: "In Australia we'd just say Lewis CK is an arsehole...

  8. Note to Self: Enjoyed Cherryh and Fancher's Alliance Rising very much, but... I wish I had read something else this past week and had saved this for five years from now, when The Hinder Stars II, III, and... IV? would be out.... If only Jen-and-Ross-Together had been given twice the screen time, 40% rather than 20% of the book, it would have been a wonderful Happy-for-Now romance...

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Ian Dunt: Historic Defeat: May Faces Her Day of Judgement: "At the moment there is no majority for no-deal or a People's Vote. Many MPs have ruled out both. But soon they are going to have to decide which of the two they find least objectionable. No-deal comes closer and closer.... Options are likely to whittle down until only a People's Vote is left. The question is whether enough MPs have the bravery and responsibility to prevent no-deal. We're about to find out...

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Increasing attention to leverage cycles and collateral valuations as sources of macroeconomic risk seems to be very welcome. Leverage and trend-chasing are the two major sources of demand-for-assets curves that slope the wrong way: when prices drop demand falls, either because you need to liquidate in order to repay now-undercollateralized loans or because you do not want to be long in a bear market. And there is every reason to think the government need to take very strong steps to make effective demand curves slope the proper way: Felix Martin: Will there be another crash in 2019?: "One important detail is that this effect is achieved not only directly, by adjusting the cost of borrowing, but also indirectly by making assets cheaper or more expensive...

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The curious thing is that Rod Dreher has never had any problems despising and demonizing those who embrace what he sees as bad men and bad causes. But somehow the Trumpists—the Trumpists alone—get a get-out-of-jail-free card from him: Rod Dreher: A Yankee Franco and The Long Defeat: "Conservative Christians will embrace politically a bad man... because unlike left-wing leaders, he doesn’t despise them, and seek to demonize them.... If progressives in America push too hard, and economic conditions are just right, the years ahead may bring about an American Franco—that is to say, a right-wing authoritarian leader who demolishes democracy, and rules by decree... [and] will be popular with half the country.... I deeply wish that the mainstream left... would get a freaking grip on itself, and understand exactly what kind of demons it is calling forth...

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Robert Waldmann (2016): Dynamic Inefficiency: "Is public debt a burden?... It is possible in theory that the answer is no and that higher [initial] public debt causes permanently higher [balanced-growth path] consumption and welfare.... This is called dynamic inefficiency. The standard result from simple models is that an economy is dynamically inefficient if r is less than g where r is the real interest rate and g is the rate of GDP growth...

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Three Papers and Four Graphs and Tables: The Top Marginal Tax Rate

If Arindrajit Dube and I do start our Economic Home podcast, I think that each 30 minute segment should concentrate on two or three (or four) papers and two or three (or four) graphs and tables. Our first proposed topic is the top marginal tax rate. Are these the right papers? Are these the right graphs and tables?

Www ucl ac uk uctp39a PikettySaezStantcheva pdf

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Be the Podcast You Want to See in the World!

We are going to need more monkeys Google Search

The very sharp Arindrajit Dube was, as one does, procrastinating on twitter:

Arindrajit Dube: Somehow I find the econ podcast space is mostly occupied by ideological right wingers, as opposed to people interested in an open minded, evidence informed economics. Who am I missing?

And my instantaneous reaction was: BE THE PODCAST YOU WANT TO SEE IN THE WORLD!

Brad DeLong: Let's start a podcast!

Arindrajit Dube: Wait Brad, is this a serious offer? :-)...

And the public chimed in:

Suresh Naidu: Do it!
Matthew Yglesias: You guys should do this for real
Robert Waldmann: You really do have to do the podcast (or block me). I will tweet complaints until you do it.
Aaron Sojourner: It would be incredibly valuable service.
Erik: Do it!
Dr. A. Duus Pape: I'd subscribe in a heartbeat.

Arindrajit Dube: God damn it Brad now Matt Y is on board and I am seriously screwed...

So it looks like we may be doing this for real—once a week, half-hour chunks, starting out as amateur hour only. First topic: thinking about what marginal tax rates on the rich should be.

What say you all?

Continue reading "Be the Podcast You Want to See in the World!" »


Stefan Rahmstorf on Twitter Earth is anomalously warm today but North America is cold A huge blob of icy Arctic air usually corralled up north by the polar vortex has escaped and moved south You can check the data here https t co

Stefan Rahmstorf: "Earth is anomalously warm, but North America is cold. A huge blob of icy Arctic air, usually corralled up north by the polar vortex, has escaped and moved south. You can check the data here: http://cci-reanalyzer.org/wx/DailySummary/#t2anom Is this becoming more common, and why?... Marlene Kretschmer... has just finished her PhD thesis... has found that over the last decades, the stratospheric polar vortex has become weaker and less stable, so Arctic air masses can escape more easily towards the North American and Eurasian continents...

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By Popular Demand: What Is “Modern Monetary Theory”?

Brad DeLong s Grasping Reality

What Is “Modern Monetary Theory”?

Ever since the Great Depression it has been settled doctrine in the nations of the North Atlantic that the government has a responsibility to keep the macroeconomy in balance: The circular flow of spending, production, and incomes should be high enough to keep there from being unnecessary unemployment while also being low enough so that prices and inflation are not surprisingly and distressingly high.

To accomplish this, governments use fiscal policy—the purchase of goods and services, the imposition of taxes, and the provision of transfer payments—and monetary policy—the provision by the central bank to the system of those liquid assets called “money” and its consequent nudging up and down of interest rates and asset prices—to attempt to keep the circular flow of spending, etc., in balance with the economy‘s sustainable productive potential at the expected rate of inflation .

Modern Monetary Theory says (1) that that is all there is to worry about, and (2) that fiscal policy should play the principal role in this balancing process.

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Brad DeLong (2007): On Robert Barro's (2005) "Rare Events and the Equity Premium" and T.A. Rietz's (1988) "The Equity Risk Premium: A Solution": Our habit of using the Lucas-tree model of Lucas (1978), "Asset Prices in an Exchange Economy" as a workhorse has turned out to be a trap. The Lucas-tree model has neither production nor accumulation. This makes it easy to solve. But this makes its responses perverse. There are no scarce resources to be allocated among alternative uses. There are only asset prices which must move so as to make agents unwilling to try to reallocate resources. It is, I think, not surprising that an economic model in which resource allocation plays no role is a dangerous tool to use in trying to understand the world...

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Dealing with Global Warming Needs a Carbon Tax Starting Now

Global warming Google Search

It would have been smart to do it 26 years ago, when Al Gore was first pushing it—and we got it through the House and fell short by two votes in the Senate: George Akerlof et al.: Economists’ Statement on Carbon Dividends: Bipartisan agreement on how to combat climate change: Global climate change is a serious problem calling for immediate national action. Guided by sound economic principles, we are united in the following policy recommendations...

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Harry Brighouses: Marina Hyde Competition: "Yesterday’s Marina Hyde... contains... 'voluminously overcoated Jacob Rees-Mogg, who still resembles an 11-year-old Jacob Rees-Mogg sitting on Nanny’s shoulders for a nursery game called Disaster Capitalist’s Bluff'... affectedly shambling figure of Boris Johnson–not so much a statesman as an Oxfam donation bag torn open by a fox'... One sentence descriptions, please, of politicians who are unsuited to office, in the style of Marina Hyde...

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Comment of the Day: Ronald Brakels: In Australia we'd just say Lewis CK is an arsehole: "We don't have school shootings in Australia for 2 reasons: (1) It is much harder to obtain firearms. But this is only part of it. (2) The second reason is when people say shit about children who saw their friends die like Louis CK did, people say, 'You're a fuckwit, mate'. And then those people don't get gigs and they don't get paid. If you're a 'ha ha' fuckwit maybe you can find work, but not if you're a fuckwit fuckwit. Less access to firearms definitely helps, but so does a culture that encourages people to ask themselves, 'Am I a fuckwit?' before a mass shooting gets past its initial planning stage...

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If you have not already read all of the WCEG's top 12 of 2018, go read them now: Equitable Growth: Top 12 of 2018: "The effects of wealth taxation on wealth accumulation and wealth inequality.... Why macroeconomics should further embrace distributional economics.... The links between stagnating wages and buyer power in U.S. supply chains.... U.S. income growth has been stagnant. To what degree depends on how you measure it.... Income inequality and aggregate demand in the United States.... Presentation: U.S. Inequality and Recent Tax Changes.... The latest research on the efficacy of raising the minimum wage above $10 in six U.S. cities.... Competitive Edge: There is a lot to fix in U.S. antitrust enforcement today.... Labor Day is a time to reflect on reviving workers’ power in the U.S. economy.... Kaldor and Piketty’s facts: The rise of monopoly power in the United States.... How the rise of market power in the United States may explain some macroeconomic puzzles.... Puzzling over U.S. wage growth...

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14th Amendment: "All persons born or naturalized in the United States, and subject to the jurisdiction thereof, are citizens of the United States and of the state wherein they reside. No state shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any state deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws...

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Robert Bork and his followers' belief that the test for anticompetitive behavior was whether it could be proved anticompetitive in theory beyond a reasonable doubt was poisonous. And here we see people having to argue against it again in a new context: Jonathan B. Baker and Fiona Scott Morton: Antitrust Enforcement Against Platform MFNs: "Antitrust enforcement against anticompetitive... pricing parity provisions... can help protect competition in online markets.... These contractual provisions may be employed by a variety of online platforms offering, for example, hotel and transportation bookings, consumer goods, digital goods, or handmade craft products. They have been the subject of antitrust enforcement in Europe but have drawn only limited antitrust scrutiny in the United States...

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This book is fun!: Jeff Erickson: Algorithms: "'Algorithm' does not derive... from the Greek roots arithmos (αριθοσ), meaning “number”, and algos (αλγοσ), meaning 'pain'. Rather, it is a corruption of the name of the 9th century Persianm athematician Muhammad ibn Musa al-Khwarizmi. Al-Khwarizmi is perhaps best known as the writer of the treatise Al-Kitab al-mukhtasar fihisab al-gabr wal-muqabala, from which the modern word algebra derives. In a different treatise, al-Khwarizmi described the modern decimal system for writing and manipulating numbers—in particular, the use of a small circle or sifr to represent a missing quantity—which had been developed in India several centuries earlier. The methods described in Al-Kitab, using either written figures or counting stones, became known in English as algorism or augrym, and its figures became known in English as ciphers...

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Marina Hyde: Welcome to the Westminster apocalypse. Have you thought about theocracy instead?: "Here comes the affectedly shambling figure of Boris Johnson—not so much a statesman as an Oxfam donation bag torn open by a fox–who could conceivably still end up prime minister of no-deal Britain. May needed to go again to the EU 'with a high heart, fortified by the massive rejection of the House of Commons', judged Johnson, speaking as always like a Taiwanese news animation of Winston Churchill. In the meantime, 'we should be actively preparing for no deal with ever more enthusiasm'...

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Daniel Larison: Threat Inflation and "The Jungle Grows Back": "Damir Marusic has written an incisive review of Robert Kagan’s The Jungle Grows Back.... 'Kagan... rues the fact that... no bogeyman big enough to keep Americans focused on maintaining their preeminent position in the world exists.... Kagan therefore makes an attempt to cast first Vladimir Putin’s Russia, and then Xi Jinping’s China, as authoritarian challengers and potential threats to the American way of life...' The end of the Cold War was a calamity for many hawks because it deprived them of a sufficiently powerful and menacing adversary, and the history of U.S. foreign policy over the last three decades has been the desperate search for a suitable replacement...

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Note to Self: Enjoyed Cherryh and Fancher's Alliance Rising very much, but... I wish I had read something else this past week and had saved this for five years from now, when The Hinder Stars II, III, and... IV? would be out...

For reasons I do not fully understand, these days publishers seem to want to greenlight books where the authors say: “and we have already written to sequels!” This then creates the problem of how to end the first book with a satisfactory plot resolution while still leaving a bigger story open for the sequels. It is a hard problem. And, much as I enjoyed reading Alliance Rising, Cherryh and Fancher did not quite manage to make it work.

Mind you, it is close—If only Jen-and-Ross-Together had been given twice the screen time, 40% rather than 20% of the book, it would have been a wonderful Happy-for-Now romance In addition to all of its other excellences. And overshadowing it all is that it is all going to end very badly for a great many of the major characters: Because I do not remember hearing about them in any previous Cherryh book, I fear for the ships Rights of Man and Galway and for the entire Monahan family. And I know that Alpha Station becomes a Mazianni military base. I have a bad feeling about Hinder Stars II, III, and... IV?: C. J. Cherryh and Jane S. Fancher: Alliance Rising: The Hinder Stars I https://books.google.com/books?isbn=0756412730...

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Fairly Recently: Must- and Should-Reads, and Writings... (January 15, 2019)

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  1. Global North research university problem: Speaker: "My major concern is: How can I be interested in fewer things?...

  2. Welcome to the 21st-century, in which my coffee machine says that it is “booting”...

  3. For the Weekend: 2018 In Weather

  4. Costs and Benefits of International Capital Mobility: Reply to Bhagwati: Hoisted from 20 Years Ago: Needless to say, time has left me a lot wiser: We need to design economies so that they can operate without disaster even when deregulatory clowns like those of the George W. Bush or the Donald J. Trump administrations are in control of the levers of policy at key moments...

  5. Comment of the Day: Charles Steindel: "British produce comes in before the Swiss spaghetti harvest?...

  6. Supply and Demand Shocks, and Seasonal Adjustment: Think that there are no such things as aggregate fluctuations generated by shifts in tastes and technologies? Think again. Look at the pattern of monthly payroll employment changes...


  1. A million dollars? As a tort settlement? What was going on?: Michelle Boorstein: C. John McCloskey: Opus Dei paid $977,000 to settle sexual misconduct claim against prominent Catholic pries

  2. That conservative parties' policies redistribute wealth and power upward while distracting their mass base by focusing them on internal or external enemies has long been the point of Toryism—since before try Gordon Riots, in fact. And now Tucker Carlson is surprised that there is gambling going on, and is just asking questions? Does he want us to take him seriously?: Eric Levitz: Why Tucker Carlson Plays a Critic of Capitalism On TV: "Melinda Cooper... explains: 'Writing at the end of the 1970s, the Chicago school neoliberal Gary Becker remarked that the “family in the Western world has been radically altered—some claim almost destroyed—by events of the last three decades.”… Becker believed that such dramatic changes in the structure of the family had more to do with the expansion of the welfare state in the post-war era than with feminism per se... a consequence rather than an instigator of these dynamics.... Becker’s abiding concern with the destructive effects of public spending on the family represents a key element of his microeconomics... that is consistently overlooked'...

  3. Farmers, miners, merchants, assembly-line workers—four key categories of workers that at various times in the past had to be supported and nurtured in order to create the wealth of a nation. Now none of those categories seem likely to embrace any substantial proportion of any future workforce. So how, then, we inquire, are we to understand the nature and causes of the wealth of nations in our future?: David desJardins: "It's too Late for Industrialization and Manufacturing to be a Path to Increasing Returns for Developing Countries.: "he information economy... is where the real increasing returns are today.... The key question for developing economies today is whether they can take advantage of the information economy.... China has moved pretty darn quickly up the ladder. Basically created a significant number of rather productive information workers in a single generation... #globalization #economicgrowth #riseodftherobots

  4. David Cho: The Labor Market Effects of Demand Shocks: Firm-Level Evidence from the Recovery Act: "How do firms respond to demand shocks?... Leveraging two firm-level datasets... linked employer-employee administrative records for a subset of U.S. firms from ADP, LLC with a comprehensive database of transactions from the American Recovery and Reinvestment Act (ARRA)... I compare firms that received ARRA funds to a counterfactual sample of employers that were not directly connected to the Recovery Act.... The magnitudes of these changes suggest that the labor supply to an individual firm is relatively inelastic, even in a deep recession, and provide evidence of monopsonistic wage-setting in U.S. labor markets... #fiscalpolicy

  5. Noah Smith: Unions Did Great Things for the American Working Class: "Politically and economically, unions are sort of an odd duck. They aren’t part of the apparatus of the state, yet they depend crucially on state protections in order to wield their power. They’re stakeholders in corporations, but often have adversarial relationships with management. Historically, unions are a big reason that the working class won many of the protections and rights it now enjoys... #equitablegrowth #labormarket #politicaleconomy

  6. Paul Krugman (1998): America the Boastful

  7. Jagdish Bhagwati (1998): The Capital Myth

  8. Sendhil Mullainathan: Using Machine Learning to Understand Health Care Systems: "Machine learning... can also be used to improve our understanding of the health system itself... contribute to empirical science and better grounded policy. I describe results from two projects where the predictive approach proves particularly illuminating, both on 'wasted' spending: one on over-testing and the other on the high concentration of spending at the end of life. I will also describe methodological issues that arise that are relatively neglected in the machine learning literature, such as measurement error and the impact of unobserved variables...

  9. Lyz Lenz: You Should Care That Richard Spencer's Wife Says He Abused Her: "Despite the so-called alt-right’s attempt to be respectable, violence seems to follow it everywhere—even, allegedly, into Spencer’s own home...

  10. Seems to me @biscuit_ersed and everybody else needs their first game-theory lecture to be (1) defect-defect as dominant-strategy Nash equilibrium in prisoner's dilemma, (2) the unraveling equilibrium in finite related prisoner's dilemma, and (3) this first prisoner's dilemma ever played: http://www.j-bradford-delong.net/economists/prisoners_dilemma.html https://twitter.com/biscuit_ersed/status/1084812993509105671... #economics

  11. UCLA Gymnastics: "A 🔟 isn't enough for this floor routine by @katelyn_ohashi...

  12. Marie Le Conte: "One of my favourite things about being alive in 2019 is vaguely remembering that someone once sent you something you now need and having to look through the conversation archives of four different social media platforms to find it...

  13. Flood and Dresher devised a simple game where Nash equilibrium wasn't such a good outcome......

  14. Welcome to the 21st-century, in which my coffee machine says that it is “booting”...

  15. The very sharp Jeet Heer traces David Brooks's intgellecutal panic back to the John Birch Society; Jeet Heer: A Few Thoughts on "Cultural Marxism," Marcuse, John Wayne, the John Birch Society, and Anti-Semitism: "Goobers in the Trump administration are worried about 'Cultural Marxism' in the 'Deep State' opposing Trump.... 'Cultural Marxism' is a big boogeyman on the alt-right: it's the people who are supposedly responsible for creating PC, feminism, etc. The actual historical 'cultural Marxists' (or 'Western Marxists') were the Frankfurt School: Adorno, Benjamin, Marcuse etc... sought to supplant and update Marx's economic system with recognition of cultural forces...

  16. Todd C. Neumann, Price V. Fishback, and Shawn Kantor: The Dynamics of Relief Spending and the Private Urban Labor Market During the New Deal: "Positive shocks to relief during the First New Deal were followed by increased private employment and earnings, consistent with demand stimulus in that period...

  17. Delany Crampton: Veterans in the U.S. Labor Market Face Barriers to Success That Can and Should Be Addressed - Equitable Growth: "Anna Zogas of the University of Washington observes in her 2017 research that the U.S. military does an extremely effective job of training veterans to operate within the military and an extremely poor job of preparing them, especially young servicemembers, for post-military job...

  18. According to my Grandmother Florence Richardson Usher Lord, my Great-Great Uncle Abbott Payson Usher back in The Day used to teach—very boringly, she said—(1) Middle Ages, (2) Commercial Revolution, (3) Industrial Revolution, (4) Age of Modern Science, with growth accelerations in each of the four: Dietz Vollrath: Sustained growth and the increase in work hours: "Jane Humphries and Jacob Weisdorf... labor contract terms in England over several centuries... annual labor contracts starting seeing sustained growth in their value around 1650 or so, far sooner than the day wages indicated...

  19. Xavir Jaravel (2017): Product innovations and inflation in the U.S. retail sector have magnified inequality: "shifts in income distribution in the United States lead to product innovations that target high-income households, which increases purchasing-power inequality...

  20. Stephanie Victoria: "I'm a say this lil story then I'm gon' let'chall get back to tweeting...: Recently, I discovered a grocery story even bougie-er than Whole Foods in my new 'hood. My addition to the list of 'approved negroes after 6PM' recently went through so my neighbors have stopped staring at me & the resident coons only give disapproving looks on trash day instead of their usual 'don't start no trouble' slave talks in the hallway...

  21. David Rezza Baqaee and Emmanuel Farhi: The Microeconomic Foundations of Aggregate Production Functions: "We provide a general methodology for analyzing...aggregate production functions by deriving their first- and second-order properties... provide non-parametric characterizations of the macro elasticities of substitution between factors and of the macro bias of technical change in terms of micro sufficient statistics. They allow us to generalize existing aggregation theorems and to derive new ones. We relate our results to the famous Cambridge- Cambridge controversy...

  22. Equitable Growth Steering Committee member Karen Dynan and company point out a big problem. Should we be trying to pay down our debt now in order to create "fiscal space"? Our should we take secular stagnation seriously, and not fear the possibilty of a sudden downward valuation of government debt that would take fiscal space away?: Karen Dynan, Jay Shambaugh, and Eduardo Porter: What Tools Does the U.S. Have to Combat the Next Recession?: "Today's lower equilibrium interest rates make it more likely that monetary policy would need to make use of unconventional tools to spur the economy. On the fiscal front, we have a much larger level of government debt relative to GDP than we did prior to the financial crisis. However, viewing this level of debt to GDP as a reason to restrain stimulus spending in case of a crisis could make the problem worse. Whether the government uses fiscal policy to stimulate the economy will depend more on political willingness, than on the actual limits on fiscal policy...

  23. This book is fun!: Jeff Erickson: Algorithms: "'Algorithm' does not derive... from the Greek roots arithmos (αριθοσ), meaning “number”, and algos (αλγοσ), meaning 'pain'. Rather, it is a corruption of the name of the 9th century Persianm athematician Muhammad ibn Musa al-Khwarizmi. Al-Khwarizmi is perhaps best known as the writer of the treatise Al-Kitab al-mukhtasar fihisab al-gabr wal-muqabala, from which the modern word algebra derives. In a different treatise, al-Khwarizmi described the modern decimal system for writing and manipulating numbers—in particular, the use of a small circle or sifr to represent a missing quantity—which had been developed in India several centuries earlier. The methods described in Al-Kitab, using either written figures or counting stones, became known in English as algorism or augrym, and its figures became known in English as ciphers...

  24. Abbott Payson Usher (1921): European Economic History: European Industry and Commerce in the Nineteenth Century. Half-course (second half-year). Tu., Th., Sat., at 9. Dr. Usher

  25. Irwin Collier presents my Great-Great-Uncle Abbott's 1922 exam: Abbott Payson Usher: Final Exam Questions for: European Industry and Commerce in the Nineteenth Century, 1922

  26. Nicholas Lardy: Xi Jinping’s Turn Away from the Market Puts Chinese Growth at Risk: "Credit is flowing to state-owned companies, not more productive private ones...


Equitable Growth Steering Committee member Karen Dynan and company point out a big problem. Should we be trying to pay down our debt now in order to create "fiscal space"? Our should we take secular stagnation seriously, and not fear the possibilty of a sudden downward valuation of government debt that would take fiscal space away?: Karen Dynan, Jay Shambaugh, and Eduardo Porter: What Tools Does the U.S. Have to Combat the Next Recession?: "Today's lower equilibrium interest rates make it more likely that monetary policy would need to make use of unconventional tools to spur the economy. On the fiscal front, we have a much larger level of government debt relative to GDP than we did prior to the financial crisis. However, viewing this level of debt to GDP as a reason to restrain stimulus spending in case of a crisis could make the problem worse. Whether the government uses fiscal policy to stimulate the economy will depend more on political willingness, than on the actual limits on fiscal policy...

Continue reading "" »


David Rezza Baqaee and Emmanuel Farhi: The Microeconomic Foundations of Aggregate Production Functions: "We provide a general methodology for analyzing...aggregate production functions by deriving their first- and second-order properties... provide non-parametric characterizations of the macro elasticities of substitution between factors and of the macro bias of technical change in terms of micro sufficient statistics. They allow us to generalize existing aggregation theorems and to derive new ones. We relate our results to the famous Cambridge-Cambridge controversy...

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Stephanie Victoria: "I'm a say this lil story then I'm gon' let'chall get back to tweeting...: Recently, I discovered a grocery story even bougie-er than Whole Foods in my new 'hood. My addition to the list of 'approved negroes after 6PM' recently went through so my neighbors have stopped staring at me & the resident coons only give disapproving looks on trash day instead of their usual 'don't start no trouble' slave talks in the hallway...

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According to my Grandmother Florence Richardson Usher Lord, my Great-Great Uncle Abbott Payson Usher back in The Day used to teach—very boringly, she said—(1) Middle Ages, (2) Commercial Revolution, (3) Industrial Revolution, (4) Age of Modern Science, with growth accelerations in each of the four: Dietz Vollrath: Sustained growth and the increase in work hours: "Jane Humphries and Jacob Weisdorf... labor contract terms in England over several centuries... annual labor contracts starting seeing sustained growth in their value around 1650 or so, far sooner than the day wages indicated...

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Davie: "0, 179, 465, 654—what is the next number in this series? Stephen Moore claims it is obvious, and gestures at it with an 'and so on'": "Davie's master is also blocked by paywall, but given the quote about 'compounding', Davie would diffidently suggest that the mathematical error is more basic: The sequence should read 179, 365, 554. That is, from the second number in the sequence on, Mr. Moore accidentally added 100 to the total. Davie has seen his master make similar errors while not recognizing them, under the influence of Alzheimer's-type dementia. Davie would therefore gently suggest that Mr. Moore be checked for dementia...

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Yet another Polanyiesque critique of the modern neoliberal order: Wolfgang Münchau: The Crisis of Modern Liberalism Is Down to Market Forces: "Kartte was an old-fashioned German ordoliberal.... The macroeconomics of German ordoliberalism is somewhat dodgy. But they excelled at one particular thing. Their intellectual leaders explained better than anyone else how the German liberal order of the 1920s collapsed and how it drove a majority of the population away from supporting it. The short, flippant answer is that the Weimar Republic favoured the big guy...

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The very sharp Jeet Heer traces David Brooks's intellectual panic back to the John Birch Society: Jeet Heer: A Few Thoughts on "Cultural Marxism," Marcuse, John Wayne, the John Birch Society, and Anti-Semitism: "Goobers in the Trump administration are worried about 'Cultural Marxism' in the 'Deep State' opposing Trump.... 'Cultural Marxism' is a big boogeyman on the alt-right: it's the people who are supposedly responsible for creating PC, feminism, etc. The actual historical 'cultural Marxists' (or 'Western Marxists') were the Frankfurt School: Adorno, Benjamin, Marcuse etc... sought to supplant and update Marx's economic system with recognition of cultural forces...

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Seems to me @biscuit_ersed and everybody else needs their first game-theory lecture to be (1) defect-defect as dominant-strategy Nash equilibrium in prisoner's dilemma, (2) the unraveling equilibrium in finite related prisoner's dilemma, and (3) this first prisoner's dilemma ever played: http://www.j-bradford-delong.net/economists/prisoners_dilemma.html https://twitter.com/biscuit_ersed/status/1084812993509105671...

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Costs and Benefits of International Capital Mobility: Reply to Bhagwati: Hoisted from 20 Years Ago

Needless to say, time has left me a lot wiser: We need to design economies so that they can operate without disaster even when deregulatory clowns like those of the George W. Bush or the Donald J. Trump administrations are in control of the levers of policy at key moments. How to do that is not so clear. What is clear is that only a fool today would think that our political economy would support a clever technocracy so that we might have our cake and eat it too. Indeed, the most likely scenario seems to be that we will be unable to eat our cake, and then the kleptocrats will steal it out from under our noses so that we will not have it either. In short: I should have listened harder to Jagdish 20 years ago...

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Hoisted from the Archives: Reply to Bhagwati: "I open my May/June [1998] issue of Foreign Affairs to discover myself pilloried in an article by Jagdish Bhagwati between Paul Krugman and Roger C. Altman (excellent company to be in, by the way: much better than I am used to) as a banner-waving proponent of international capital mobility, guilty of "assum[ing] that free capital mobility is enormously beneficial while simultaneously failing to evaluate its crisis-prone downside."

I rub my eyes in surprise. I had not thought of myself as a banner-waving proponent of international capital mobility.

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Noah Smith: Unions Did Great Things for the American Working Class: "Politically and economically, unions are sort of an odd duck. They aren’t part of the apparatus of the state, yet they depend crucially on state protections in order to wield their power. They’re stakeholders in corporations, but often have adversarial relationships with management. Historically, unions are a big reason that the working class won many of the protections and rights it now enjoys...

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David Cho: The Labor Market Effects of Demand Shocks: Firm-Level Evidence from the Recovery Act: "How do firms respond to demand shocks?... Leveraging two firm-level datasets... linked employer-employee administrative records for a subset of U.S. firms from ADP, LLC with a comprehensive database of transactions from the American Recovery and Reinvestment Act (ARRA)... I compare firms that received ARRA funds to a counterfactual sample of employers that were not directly connected to the Recovery Act.... The magnitudes of these changes suggest that the labor supply to an individual firm is relatively inelastic, even in a deep recession, and provide evidence of monopsonistic wage-setting in U.S. labor markets...

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Farmers, miners, merchants, assembly-line workers—four key categories of workers that at various times in the past had to be supported and nurtured in order to create the wealth of a nation. Now none of those categories seem likely to embrace any substantial proportion of any future workforce. So how, then, we inquire, are we to understand the nature and causes of the wealth of nations in our future?: David desJardins: "It's too Late for Industrialization and Manufacturing to be a Path to Increasing Returns for Developing Countries.: "he information economy... is where the real increasing returns are today.... The key question for developing economies today is whether they can take advantage of the information economy.... China has moved pretty darn quickly up the ladder. Basically created a significant number of rather productive information workers in a single generation...

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