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April 2019

Marshall Burke, Lauren Falcao Bergquist, and Edward Miguel: Sell Low and Buy High: Arbitrage and Local Price Effects in Kenyan Markets: "Small-scale farmers are commonly observed to “sell low and buy high,” rather than the reverse. In a field experiment in Kenya... credit market imperfections.... Timely access to credit... increasing farm revenues and generating a return on investment of 29%.... In contrast to existing experimental work, the results indicate a setting in which microcredit can improve firm profitability, and suggest that GE effects can substantially shape microcredit’s effectiveness. In particular, failure to consider these GE effects could lead to underestimates of the social welfare benefits of microcredit interventions...

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CFR Future of Democracy Symposium: Session Two: Economics, Identity, and the Democratic Recession: Transcript and Link to Video

Council on Foreign Relations: The Future of Democracy Symposium: Session Two: Economics, Identity, and the Democratic Recession


Transcript

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BREXIT!!: Ian Dunt: Week in Review: The Frazzlfication Ends Now. For a Little Bit.: "On January 15th, Theresa May's Brexit deal was defeated by a historic margin. Immediately afterwards, Jeremy Corbyn called a no-confidence vote, which he lost. Then the Malthouse Compromise was born, as a kind of release valve for MPs' desperate stupidity. The government responded by whipping in support of its evil twin, the Brady amendment, and won, thereby sabotaging its own negotiating strategy. Labour published a new Brexit strategy, which looked suspiciously like Norway Plus but was different to it in ways they were unable or unwilling to describe. The government then proceeded to lose a vote on the policy which MPs had forced on it the week before, driving British politics into a kind of post-modern chasm in which David Lynch became the creative director of parliament. Then a group of Labour and Tory MPs split from the party to form the Independent Group. May announced she would request a dual extension of Article 50-short in the case of a deal and long if not. She later went back on this and requested only the short extension. She also secured an update to her deal with the Europeans which didn't really change anything. MPs promptly and unsurprisingly rejected it again. In response, the government put forward a convoluted motion on no-deal, whipped MPs to oppose an amendment which simplified it, lost, and had to therefore whip against its own motion even though it amounted to the exact policy it said it was pursuing anyway. Then anyone who still believed in parliamentary democracy decided maybe it wasn't such a great idea after all. Soon enough John Bercow popped up and refused to allow May to bring her deal back to the Commons a third time unless it was changed. May secured her first extension of Article 50, but then MPs passed an amendment taking control of the Brexit process, triggering a new bout of constitutional chaos. The Brexit process became a kind of executive dual carriageway, with the government pursing one strategy and parliament another. In a bid to get MPs to back her deal, May offered her own resignation as an incentive, seemingly oblivious to how logically and morally broken that was as a strategy. MPs, for their part, held a series of indicative votes and found no majority. May stripped her deal in two to get it past Bercow, put it before the Commons again, and lost again. MPs held more indicative votes and still could not find a majority. Pitiful broken toys scattered everywhere. May announced she would seek another Article 50 extension. Parliament passed a bill, independently of government, forcing her to do the thing she said she would do, given that her reputation for reliability at this stage was frankly not what it was. And then, finally, the EU offered an extension to October 31st. And now here we are. Three months later and about twelve hundred years older...

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Ellora Derenoncourt: Atlantic Slavery’s Impact on European and British Economic Development: "The economics literature on Atlantic slavery attests to its negative long-run impact on development outcomes in Africa and the Americas. What was slavery’s impact on Europe? In this paper, I test the hypothesis that slavery contributed to modern economic growth in Europe using data on European participation in the Atlantic slave trade. I estimate a panel fixed effects model and show that the number of slaving voyages is positively associated with European city growth from 1600-1850. A 10% increase in slaving voyages is associated with a 1.2% increase in port city population. Using a newly created dataset on British port-level trade, I show that for the UK, this effect is distinct from that of general overseas trade, which also increased during this period...

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This Identity Politics Stuff is Killing America...

Herman cain and steve moore Google Search

There is an argument that somebody who has built a food-processing and consumer-service business and met its payroll—like Herman Cain—should be on the Board of Governors of the Federal Reserve, in order to keep the staff and the other Governors reality-based in the sense that it would force them to explain themselves to somebody whose experience is in the real and not the financial economy. There is no argument that Herman Cain is the best businessman for the slot.

There is no argument at all that Stephen Moore—whose qualification is having played an economist on TV, and being willing to dump whatever of his previous policy positions (free trade? TPP? gold standard? anything else?) over the side whenever his political masters demand—belongs on the Fed.

The pro-Moore pro-Cain pieces that are currently being planted are reduced to closing with "Moore and Cain would only be two of 12 FOMC votes". But Republicans—save Greg Mankiw and Ross Douthat—are in lockstep behind them. Well—almost in lockstep. Herman Cain is the stronger (not strong) candidate. Republican Senators Kevin Cramer (ND), Lisa Murkowski (AK), Cory Gardner (CO), and Mitt Romney (UT) are for Moore and against Cain.

This identity politics stuff is killing America:

Jim Bianco: The Fed Would Benefit from Stephen Moore, Herman Cain: "Policymaking positions should help determine policy, not act as a rubber stamp for the staff or Chairman. They should hold divergent views, come from different backgrounds and be ready to explain themselves. Policy makers should be given the resources to flesh out their ideas. If confirmed, Moore and Cain would only be two of 12 FOMC votes. Their unique perspectives could make the Fed a stronger institution...

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HA HA HA HA HA HA!!!!! If you have no rules-of-origin checks, no tariffs, and no quotas vis-a-vis the EU, then your trade policy is not independent from the EU's, but is the EU's. It does not work any other way: Theresa May: All My Base Is Dumber than Donald Trump: "We want to obtain the benefits of a customs union—no tariffs, no rules of origin checks and no quotas -- while being able to operate our own independent trade policy...

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Barry Eichengreen, Arnaud Mehl, and Livia Chițu: Mars or Mercury Redux: The Geopolitics of Bilateral Trade: "The pre-World War I period... whether trade agreements are governed by pecuniary factors... or by geopolitical factors.... We find that defense pacts boost the probability of trade agreements by as much as 20 percentage points. Our estimates imply that were the U.S. to alienate its geopolitical allies, the likelihood and benefits of successful bilateral agreements would fall significantly. Trade creation from an agreement between the U.S. and E.U. countries would decline by about 0.6 percent of total U.S. exports...

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I would put this more strongly. Trump and the Trumpists have absolutely no idea what they should be doing or are doing with respect to U.S.-China economic relations. And it shows: Tom Mitchell: Trump Had a Chance to Gain Greater Leverage Over China But Blew It: "Last spring a senior US executive complained to a government official about President Donald Trump’s... tariffs on imports from China.... The official had a pointed response: what leverage would the executive use to change Chinese approaches that have frustrated US businesses for decades, from forced technology transfers to state-directed industrial policies?... The executive had a three-letter answer: TPP, referring to the Trans-Pacific Partnership trade pact from which the US withdrew on Mr Trump’s first day in office...

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Marcella Alsan (2015): The Effect of the TseTse Fly on African Development: "The TseTse fly is unique to Africa and transmits a parasite harmful to humans and lethal to livestock. This paper tests the hypothesis that the TseTse reduced the ability of Africans to generate an agricultural surplus historically. Ethnic groups inhabiting TseTse-suitable areas were less likely to use domesticated animals and the plow, less likely to be politically centralized, and had a lower population density. These correlations are not found in the tropics outside of Africa, where the fly does not exist. The evidence suggests current economic performance is affected by the TseTse through the channel of precolonial political centralization...

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Comment of the Day: "It is not only crows and chimpanzees that have a 'theory of mind'-people do too!": Phil Koop: "Well thank goodness I am not the only one who feels this way! Far too much is made, in my opinion, of the [Scott Sumner's] banal observation that we can never know what someone else is thinking. This is speciously true - we can never be certain of the entirety of another's thoughts. But it is substantively false, once you allow as you ought for probable inference; we can often make a pretty good guess on salient points of interest. It is not only crows and chimpanzees that have a 'theory of mind'-people do too! And some of us are pretty good at it; we can be quite sure of this because they tend to do things like consistently win a lot of money at poker. Certainly we do not need to be telepaths to judge Moore's or Cain's motives...

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Robert Waldmann: Robert Waldmann: "The wedge comes from 2 types of irrationality. Poor portfolio diversification means the portfolio held by actual investors has high risk per return compared to the market portfolio. And also irrational loss aversion...

...But I also don't think the source of the wedge matters much.

The crude Mehra-Prescott calculation is interesting. It could be that the equity premium is high because of irrationality, and it could be that it is high because of liquidity constraints and other frictions. But in either case, considering the return a rational representative agent would accept is interesting. The premium minus what it would be if there were a rational representative agent describes the welfare effect of a sovereign wealth fund on welfare. This is John Quiggin's point and it is very important. That is the 64 trillion dollar question.

Why the policy would cause a huge increase in welfare is less important than the fact that such a policy exists, is simple, and can be implemented.

So next step is we look at a state which issued debt and buys the risky asset. The math is fairly simple and works for an OLG model with rational agents in the same way it works for a model of a representative but very stupid agent.

Notice that the leveraged state doesn't have to worry about interest rate spikes. If its debt is short term, it can respond to a loss of public confidence by liquidating its portfolio. In simple models, there aren't multiple equilibria.

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NIMPS! Clark Kerr is supposed to have said that the life of a Berkeley Chancellor is easy as long as: (1) the students are having enough sex, (2) the alumni are watching enough football, and (3) the faculty have enough parking.

Now Carol Christ is discovering the consequences of what happens when (3) is not satisfied. And it is dire: the prospective tear-down of the 350-space Upper Hearst Parking Structure looms...

And why don't people like the "Foothill" parking lot? Sather Gate is about 300 feet above sea level, Upper Hearst about 400 feet, and Foothill about 600 feet: Carol Christ: An Update on the Upper Hearst Project: "The campus’ plan to develop faculty housing and academic space on the site of the Upper Hearst parking lot is generating legitimate concerns and questions.... We continue to engage with our colleagues at the College of Engineering and the Goldman School of Public Policy.... We need to do a better job disseminating information about the project and its impacts.... We are sharing with all members of the Academic Senate the note below that was recently sent to the College of Engineering faculty by the Provost.... We will publish and distribute a comprehensive FAQ... provide ample opportunity for comment and feedback...

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Dotting i's and Crossing t's with Respect to Olivier Blanchard's "Secular Stagnation" Fiscal-Policy-in-an-Era-of-Low-Interest-Rates AEA Presidential Address

Il Quarto Stato

Consider the semi-canonical Diamond (1965) overlapping-generations model, with a wedge between the safe government-bond interest and the risky profit rate driven by risk aversion. Blanchard (2018) shows that the effects of increased debt have two effects that:

  • raise (lower) reprentative-agent utility,
    • evaluated after the resolution of uncertainties when the agent is young:
  • a direct-transfer effect that holds when the safe government-bond rate is lower (higher) than the economy's growth rate, and
  • a factor-price effect that holds when the risky average profit rate is lower (higher) than the economy's growth rate.

Robert Waldmann has convinced me that this second factor-price effect can be neutralized by a balanced-budget profit tax-funded wage subsidy.

Hence in the semi-canonical Diamond (1965) overlapping-generations model the economy is dynamically-inefficient—can be made better off by reducing its productive capital stock and introducing sustainable pay-as-you-go transfer schemes—whenever the safe government-bond rate is less than the economy's growth rate, no matter what the level of the expected profit rate:

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I have been dinking around thinking about minor points in Olivier Blanchard's excellent AEA presidential address, which focused on whether and when it is the relationship of the economy's growth rate to the safe government-bond interest or to the risky average profit rate that defines whether more government debt is good or bad. Blanchard's is an important and valid question. But that discussion is predicated on the assumption that the spread between the safe government-bond interest and the risky average profit rate makes sense as a risk premium. And whether or not it does—and if it does, how it works—are the big and important questions in this literature.

Study and learn from Blanchard, by all means—you can learn a lot. But keep in mind that you are ignoring the elephant in the room Olivier Blanchard: Public Debt and Low Interest Rates: "The lecture focuses on the costs of public debt when safe interest rates are low.... The current U.S. situation in which safe interest rates are expected to remain below growth rates for a long time, is more the historical norm than the exception.... Put bluntly, public debt may have no fiscal cost.... Even in the absence of fiscal costs, public debt reduces capital accumulation... [but] welfare costs may be smaller than typically assumed... [because] the safe rate is the risk-adjusted rate of return on capital. If it is lower than the growth rate, it indicates that the risk-adjusted rate of return to capital is in fact low...

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Fairly Recently: Must- and Should-Reads, and Writings... (April 10, 2019)

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  1. Does Inbox Zero count if one has snozzed 245 emails? Asking for a friend...

  2. No, I do not understand Netflix's valuation. And I do not understand what it was doing in "FAANG" in the first place. I suspect it was just Jim Cramer looking for a cute acronym, which is a hell of a way to run an porftfolio-assessment business: Tara Lachapelle: Netflix Valuation Tested by Disney, AT&T, Apple Apps: "Disney, AT&T and Apple are coming, and this time they are really bringing the heat...

  3. Sarah Halzack: Amazon Risks Missing Out on $35 Billion Click-and-Collect Market: "Big-box retailers are leading in click-and-collect services such as grocery pickup, and the gap may only widen...

  4. Command-Tab Plus: Application and Window Switching Done Right: "Hold Command and press Tab to display the active applications and then use the Tab key to cycle through your open apps...

  5. Olivier Blanchard: Public Debt and Low Interest Rates: "Seminar 237/281: 291 Departmental Seminar.... April 10 | 4-6 p.m. | 648 Evans Hall...

  6. Jeff Weintraub: Afterthoughts on the Communist Manifesto

  7. Max Nisen: Walgreens Earnings: Retail Apocalypse Now Threatens Drug Stores: "Prescription medications aren't as profitable as they used to be, leaving chains like Walgreens more exposed to industry headwinds...

  8. Ceteris Numquam Paribus: "This blog is for young economists, who want advice on how to proceed on their chosen path. Every week or so I'll bring you a short interview with an economist, giving suggestions on what to read, what to learn, and how to become an economist...

  9. Scott Lemieux: Our Green Lantern: "It’s getting hard to avoid the conclusion that Bernie is actually high on his own “our revolution will force Republican senators to vote for my agenda” supply...

  10. Joshua M. Brown: Is Economic Inequality a “National Emergency”?

  11. Robert Waldmann (2016): Dynamic Inefficiency

  12. CPPC: Senate Finance Committee Examines How PBMs Cause Higher Drug Prices: "Senator Wyden told the CEOs that 'you see there are not a lot of Democrats or Republicans holding rallies for spread pricing. Spread pricing is a rip off, plain and simple.' He asked them: if Congress proposes to ban spread pricing, will they support it? Three of the CEOs said yes they would, and the other two said they would remain neutral. For the first time, the Senate Finance Committee investigated PBMs and how they promote higher drug costs...

  13. Gramercy Park Hotel

  14. L'Express

  15. Sheisha Kulkarni

  16. John Le Carre: Tinker Tailor Soldier Spy (Novel) | Tinker Tailor Soldier Spy (Miniseries) | Tinker Tailor Soldier Spy (Film)

  17. Wikipedia: Ian Richardson

  18. Wikipedia: Colin Firth

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This annoys me. Moore and Cain have given no explanation of their switch because there is no explanation fo their switch other than that they are kowtowing to their political masters. I find David Beckworth's Scott Sumner's claim that he is "in no position to judge motives" is itself disingenuous: he is in a position to judge their motives. And that he claims not to be... erodes his credibility on all issues: Scott Sumner: Who Should Serve on the Federal Reserve Board?: "Moore and Cain were both quite hawkish when a more dovish policy was needed, and have recently become more dovish when there is far less need for monetary stimulus. Why?... President Trump is the only other person I can recall whose views on monetary policy switched from hawkish when President Obama was presiding over a weak economy, to dovish when Trump is presiding over a stronger economy.... I’m in no position to judge motives.... If their change of heart was motivated by political considerations, that would be inconsistent with the Fed’s traditional independence from the rest of the government. When politics influences Fed decisions, it can destabilize the economy...

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Martin Wolf: Xi Jinping’s China Seeks to be Rich and Communist: "President’s ambitions rely on avoiding ‘middle-income trap’ and placating a more demanding populace.... If... China... succeed[ed] in becoming rich, while its political system stayed much the same....Sustained growth of real GDP per head at 4 per cent a year over another generation.... Its economy would then be far bigger than those of the US and EU combined. This would be a new world. Yet is it a plausible one?...

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Do We Have Any Republican Remedies for the Diseases of Republican Government?

Signing of the Constitution by Louis S Glanzman Teaching American History

Note to Self: It was 80 blocks south of here that Alexander Hamilton wrote to the middle class of New York that:

The history of the petty republics of Greece and Italy... feeling sensations of horror and disgust... intervals of felicity... overwhelmed by the tempestuous waves of sedition and party rage...

That is how the rest of the world views Britain and the United States in this age, the age of Brexit and Trump. And I haven’t even raised the strange spectacle of our modern-day Earl of Warwick, Rupert the Kingmaker. Few among middle classes abroad today think that the Anglo-Saxon democracies have it right, deliver the goods.

Hamilton and Madison had plans for republican remedies to the diseases of republican government. What would your remedies be?

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Ha Ha Ha Ha Ha!

We in the Clinton administration established the norm that Governors of the Federal Reserve should be people capable of going toe-to-toe in argument with the Fed Chair, on the grounds that the Fed Chair needed competent intellectual sparring partners if he or she, and the staff that did his or her bidding, was not to fall victim to groupthink. One of those who personally benefitted most from this norm was Larry Lindsey, who was chosen as and was quite an effective Fed Governor under George W. Bush.

But now, for some short-term advantage or other, Larry is trying to blow up this norm and outdo others in obsequious toadying to Trump.

Neither Steve Moore nor Herman Cain can make a coherent forecast. Both are for lower interest rates when Republicans and higher interest rates when Democrats are President. Neither will have the slightest impact on the thinking of the Chair or of the staff—instead, the staff will start playing the pre-Clinton administration game of, as one friend of mine who worked for the Fed called it, "Look! Here's a Governor! Let's see if we can make him say something really stupid!"

I wonder what Larry Lindsey says to himself in the morning when he looks in the mirror, and the mirror looks back and says: "You benefitted from this norm of professionalism required for Fed Governors. Now you are trying to break it. What kind of a person are you?":

Larry Lindsey: Defending Trump's Likely Fed Nominees: "Steve Moore has a master's in economics from George Mason..... Herman Cain was chairman of the board of the Kansas City Federal Reserve. He is obviously aware of how the Federal Reserve operates and how monetary policy is made.... I am a firm believer in having a variety of views, including those I do not necessarily agree with, expressed. Diversity of thought, not credentialism, is what the board needs...

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Alexander Hamilton (1787): The Federalist #9: The Union as a Safeguard Against Domestic Faction and Insurrection: "It is impossible to read the history of the petty republics of Greece and Italy without feeling sensations of horror and disgust at the distractions with which they were continually agitated, and at the rapid succession of revolutions by which they were kept in a state of perpetual vibration between the extremes of tyranny and anarchy. If they exhibit occasional calms, these only serve as short-lived contrast to the furious storms that are to succeed. If now and then intervals of felicity open to view, we behold them with a mixture of regret, arising from the reflection that the pleasing scenes before us are soon to be overwhelmed by the tempestuous waves of sedition and party rage...

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Economics, Identity, and the Democratic Recession: Talking Points

Event: Tu 2019-04-09 10-11am CFR: 58 E. 68th St., New York, NY:

Untitled 7 pages

The Data

  • 1970s a bad decade for real incomes—oil shocks, environmental cleanup, baby boom entry into the labor market
  • End of 1970s sees shift to "neoliberalism" to fix the "excesses of social democracy"
  • Since 1980: males and those with low education have seen their expectations of what their lives would be like bitterly disappointed
    • Male high school graduates down by 17%
    • Males with advanced degrees up by 25%
    • Whites have not been disappointed more economically—what William Juilius Wilson called the "declining significance of race"
      • Save, perhaps, for Black women with BAs...
    • Sociological disappointment in addition?
    • Within-household economic disappointment?
    • Other aspects of the economic besides income?
      • Occupation and occupational stability
      • Employment stability

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Dylan Matthews: Child Poverty Report: Food, Housing, and Money, Not Work Requirements, Work Best: "The most important report on child poverty in years is finally out.... The result of pressure from California Democratic Representatives Barbara Lee and Lucille Roybal-Allard, the provision called for the National Academy of Sciences to convene a group of experts to produce 'a nonpartisan, evidence-based report that would provide its assessment of the most effective means for reducing child poverty by half in the next 10 years'.... A 'work-based package'.... A 'work-based and universal support package'.... A 'means-tested supports and work package'...

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Steven Levitsky and Daniel Ziblatt: How Democracies Die https://books.google.com/books?isbn=1524762938: "Since the end of the Cold War, most democratic breakdowns have been caused not by generals and soldiers but by elected governments themselves.... Chávez in Venezuela... Georgia, Hungary, Nicaragua, Peru, the Philippines, Poland, Russia, Sri Lanka, Turkey, and Ukraine. Democratic backsliding today begins at the ballot box...

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Gavin Wright: Slavery and Anglo-American Capitalism Revisited: "Eric Williams... links the slave trade and slave-based commerce with early British industrial development. Long-distance markets were crucial supports for technological progress and for the infrastructure of financial markets and the shipping sector.... The eighteenth century Atlantic economy was dominated by sugar, and sugar was dominated by slavery. The role of the slave trade was central.... Adherents of an insurgency known as the New History of Capitalism have extended this line of analysis to nineteenth century America.... Such analyses overlook the second part of the Williams thesis, which held that industrial capitalism abandoned slavery because it was no longer needed for continued economic expansion...

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John Hatcher: Unreal Wages: Long-Run Living Standards and the ‘Golden Age’ of the Fifteenth Century: "The renowned ‘Golden Age’ of the fifteenth century has been exaggerated. The surge in the prosperity of the lower orders resulting from high wages, low food prices and easier access to cheap land was undoubtedly extraordinary. But not as prodigious as has customarily been assumed. Furthermore, contrary to the common belief that the economic fortunes of the labouring classes can be taken as a proxy for the living standards of the population as a whole, the scale of improvement in their good fortune was not widely shared by the rest of society who did not derive their incomes solely from wages or their subsistence solely from the market. Argument and evidence are also provided that the criticisms made in this chapter of the compilation, interpretation and application of real wage indices have implications that stretch far beyond the fifteenth century...

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Fairly Recently: Must- and Should-Reads, and Writings... (April 6, 2019)

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  • Comment of the Day: John Howard Brown: "Property rights are always conditional on the allocation of social power! When the power of the Laird of a Scots clan depended on the number of clansmen who could wield pike and claymore...

  1. Wikipedia: Late Antique Little Ice Age

  2. Mark Bergen: YouTube Executives Ignored Warnings, Let Toxic Videos Run Rampant

  3. R. Leeson et al.: [, Hayek: A Collaborative Biography]: Influences from Mises to Bartley | The Hayekian Religion | The Chicago School of Economics

  4. C. E. Cubitt: A Life of Friedrich August von Hayek https://books.google.com/books?isbn=0755202430

  5. Wikipedia: Richard Neville, 16th Earl of Warwick

  6. Wikipedia: Tywin Lannister

  7. Wikipedia: John Mair

  8. Steve Knott: Battle of Gettysburg: Why J.E.B. Stuart Ends Up in Carlisle

  9. Wikipedia: Wilhelm Voigt: "The Captain of Köpenick, which shifts the focus from the event at Köpenick itself to the prelude.... The pitiful catch-22 situation of Voigt trying to earn his living honourably in Berlin: 'No residence address-no job. No job-no residence (rented room). No residence-no passport. No passport-getting ousted...

  10. Wikipedia: Walter Nicolai

  11. Adam Gopnik: How the South Won the Civil War | The New Yorker: "Now we think that the aftermath—the confrontation not of blue and gray but of white and black, and the reimposition of apartheid through terror—is what has left the deepest mark on American history. Instead of arguing about whether the war could have turned out any other way, we argue about whether the postwar could have turned out any other way...

  12. John Van Reenen: "Why @michaelgove is unfit to hold any public office:: When Justice minister he accused me and fellow academics (including some whose relations were in the Holocaust) of being "Nazi Scientists" for saying #Brexit would be costly...

  13. Matthew Townsend and Eric Martin: Who Is Winning Trump's Trade War with China? So Far, It's Mexico: "America’s imports from Mexico surge the most in seven years as Trump’s policies shift supply chains...

  14. Potch: There should be a hotline you can call where you can safely pronounce words you've only ever read out loud for the first time, and they say 'oh sweetie' and kindly explain how it's pronounced..." vagrantcow: "Google pronunciation is a thing. 2019 is on the phone, for you...

  15. Tom Joseph: The question why Mueller didn't recommend whether Trump should face Obstruction charges is baffling people. Punting the decision to HJC doesn't make sense either. The answer may be simple—Mueller knows Trump has dementia, which makes T's intent, responsibity & charges an unknown...

  16. Brian Krassenstein: "BREAKING: "Motel 6 will pay $12 million to settle a lawsuit by the Washington state attorney general over the lodging chain's practice of handing over guest lists to U.S. Immigration and Customs Enforcement agents...

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Umair Haque: Why the Anglo World is Collapsing: "How the Dunces of Modern History Ended Up Being Us: You and me. The Anglos. I think that we have to confront a difficult truth. One that’s especially difficult for me, as an Anglo, an English-speaker, and maybe for you, too. Our societies are not looking like they are going to make it. Take a hard look at America and Britain. Do these seem like sane, enlightened, thinking societies to you anymore? Or just places where the most aggressively ignorant, cruel, and abusive rise to the top—cheered on by people who wish they were the most aggressively ignorant, cruel, and abusive?...

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The thing to note about both Cain and Moore is that they are for: (i) the gold standard, (ii) sound money, (iii) market rather than artificially-low interest rates, (iv) quantitative easing, and (v) low interest rate Federal Reserve policy. There is no there there:

Sam Fleming: Donald Trump Calls for U-turn by Federal Reserve to Stimulate Economy: "US president says rate cuts and quantitative easing would allow ‘rocket ship’ growth.... Mr Trump’s decision to propose Herman Cain... to be a governor of the Fed’s powerful board... also... nominate Stephen Moore.... It remains to be seen how the two prospective nominees will fare if they face Senate confirmation.... Mr Gapen said: 'In our view, the experience of each candidate does not seem to be the main reason the Trump administration is considering their nominations. The administration has been openly critical of recent Fed interest rate increases and would prefer lower interest rates and a more accommodative monetary policy stance. Both Cain and Moore have altered their views on appropriate policy in this direction'...

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Regular Gem: @Choplogik: "We write 'Millenials Are Killing The [X] Industry' because when you write 'Unsustainable Profit-Driven Systems Are Crumbling Around A Wage-Suppressed Global Populace Serving Roughly 2000 Aging Billionaires' people get too depressed to click through & watch our hair cream ads...

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Homer: What We Owe Exiles: "We live at a great distance from others amid the much-sounding sea,/Far way, and no other mortals visit us./But this man who has wandered here, who is so ill-starred,/It is right to care for him now. For all are from Zeus,/The strangers and the beggars, and our gift is small but dear to them./Come, handmaidens, give the stranger food and drink;/Bathe him in the river, where there is shelter from the wind...


#noted

Nick Bunker: Puzzling Over U.S. Wage Growth: "The unemployment rate is below its Great Recession levels, but wage growth hasn’t picked up in recent years. The prime employment rate may be a better predictor of wage growth than unemployment rates. The state of U.S. wage growth these days is puzzling. The unemployment rate is below where it was before the Great Recession back in 2007, but nominal wage growth is below its level that year and hasn’t picked up in recent years (according to some data series). For economists and analysts who believe that a tighter labor market should lead to higher wages, this disconnect is confusing...

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Comment of the Day: John Howard Brown: "Property rights are always conditional on the allocation of social power! When the power of the Laird of a Scots clan depended on the number of clansmen who could wield pike and claymore, they were happy to grant all able adult men usufruct in his clan. When raising sheep became more profitable than raising warriors, they were willing to forget their fellow clansmen's rights. That's why I'm an American!...

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Brilliant from my freshman roommate Robert Waldmann: Robert Waldmann: The Transformation of Left Neoliberalism: "The correct assertion that bureaucrats are too dumb to centrally plan also implies that they are too dumb to design efficient and incentive compatible mechanisms. The correct (and more important) argument that public servants can’t be trusted to be purely public spirited... applies in order of increasing force...

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Nobody ever showed me credible numbers stating that New York's proposed subsidies to Amazon were a good deal for the people of New York, let alone for the country as a whole. That makes me strongly suspect that credible numbers cannot be calculated. Unless a recession hits at the right (or rather wrong) moment, the people who would have worked in New York at Amazon HQ2 will work elsewhere, and the state economy as a whole is likely to be healthier:

Nathan Jensen: Economic Development Public Policy Lessons Abound in New York’s Amazon HQ2 Debacle: "Most of these incentives are bad public policy. Virginia’s HQ2 bid was more public focused. It includes future payments based on a formula involving new, high-paying jobs as well as and other public subsidies, but it also includes a promise of infrastructure and education investments that would serve not only Amazon but also the entire community. The subsidies continue to face opposition. New York’s bid, in contrast, was designed primarily to put more money into the pockets of Amazon...

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David Leonhardt: Trump’s Trade Grade: "It’s a neat microcosm of President Trump’s economic policy: He picks a yardstick to measure the American economy—the trade deficit—that’s mostly meaningless. He spends years criticizing it as too high and promising to reduce it. And under his administration, it surges.... 'He set out to fix a non-problem (a trade deficit) and created real ones including international conflict, higher consumer prices and gross inefficiency in our economy', the Washington Post’s Jennifer Rubin writes...

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John Harwood: @JohnJHarwood: "Trump/GOP promised lasting 3+% growth from self-financing tax-cuts. Mainstream economists predicted brief deficit-fueled growth burst. The record so far: 2018 Q2 4.2%, 2018 Q3 3.4%, 2018 Q4 2.6%, deficit way up. Fed forecasts: 2019 2.3%, 2020 2.0%, 2021 1.8%...

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Guy bar-Oz et al.: Ancient Trash Mounds Unravel Urban Collapse a Century Before he End of Byzantine Hegemony in the Southern Levant | PNAS: "The Late Antique Little Ice Age (LALIA) was recently identified... proposed as a major cause for pandemic and extensive societal upheavals in the sixth–seventh centuries.... Archaeological evidence for the magnitude of societal response to this event is sparse.... This study uses ancient trash mounds... to establish the terminal date of organized trash collection and high-level municipal functioning on a city-wide scale...

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Fairly Recently: Must- and Should-Reads, and Writings... (April 5, 2019)

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  1. Charlotte Edwardes: Sam Gyimah: I’m Still a Tory—It’s the Party I Joined That’s Changed: "He’s faced repeated deselections and a no-confidence vote—but Sam Gyimah won’t give up. Here, the MP talks about being ‘thrown to the wolves’ and how toxic Brexiteer infighting is threatening to tear the Conservatives apart...

  2. Brooke Masters: Want to Write a Piece for the Financial Times Opinion Page?: "Think about our readers.... Write what you know.... Write clearly and accessibly.... Use specific examples.... Be pithy and sharp...

  3. Paige Harden: "Pietro is being generous, when in fact I’m just trying to articulate something that’s been percolating for awhile... Let’s take genetics AND egalitarianism seriously. Begin there, and see where it takes us...

  4. Bart Demandt: China Car Sales Analysis January & February 2019: "The market for domestic passenger car sales in China continues its decline in 2019 with 8 consecutive months of declines from July 2018 to February 2019. With two months of double digit declines in January (-16,7%) and February (-17,6%), the market doesn’t seem able to recover soon...

  5. FOLD: What is FOLD?

  6. Read Irin Carmon at New York Magazine on how Baron, Wallsten, and Barr handled the pieces of her story about CBS honcho Jeff Fager's internal defense of Charlie Rose http://nymag.com/intelligencer/2019/04/what-was-the-washington-post-afraid-of.html. After reading it, if you read it as I read it, you will conclude that newspaper managers as easily bullied as Baron, Wallsten, and Barr are not useful in their current. I wrote so to Jeff Bezos. If you wind up agreeing with me, I urge you to write Bezos as well...

  7. Steve Moore: “I’m kind of new to this game, frankly, so I’m going to be on a steep learning curve myself about how the Fed operates...

  8. James LaPorta: Top Marine General Let Emails Leak Amid Border Funding Fight so Service Families Would Not Be Forgotten: Sources: "When asked why Neller would allow internal memorandums to leak to press outlets, one Defense Department source expressed bluntly, 'Because he didn’t want the Marines and families at Camp Lejeune [in North Carolina] to get f---ed.' Six months after Hurricane Florence first made landfall at Wrightsville Beach in North Carolina, roughly an hour southwest of Camp Lejeune, the base is still waiting on funding for repairs...

  9. Friedrich A. von Hayek: Hayek the Ethnic Bigot and the Perils of the Ad Hominem Fallacy: "I have no racial prejudices in general—but there were certain types, and conspicuous among them the Near Eastern populations, which I still dislike because they are fundamentally dishonest... a type which, in my childhood in Austria, was described as Levantine, typical of the people of the eastern Mediterranean.... I have a profound dislike for the typical Indian students at the London School of Economics, which I admit are all one type—Bengali moneylender sons. They are to me a detestable type, I admit, but not with any racial feeling. I have found a little of the same amongst the Egyptians—basically a lack of honesty in them...

  10. Matthew Buckley: "Back when America wasn’t a fascist ethnostate, this statement alone would have been grounds for impeachment. But that was when we were a nation of laws: Aaron Rupar: TRUMP threatens to close border with Mexico as soon as this weekend, then rants about immigration during Oval Office meeting with NATO secretary general: "What we have to do is Congress has to meet quickly & make a deal... to be honest with you, we have to get rid of judges...

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Pharmaceutical pricing appears to be one of the very few areas in which an equitable growth agenda can be advanced at the federal level over the next two years: CPPC: How Rebate Walls Block Access to Affordable Drugs: "The company that manufacturers the older drug can "bundle" its rebates for all those prescriptions and use it as a weapon. Some drug companies are using the large group of rebates, also known as a 'rebate wall', as a negotiating tactic-they demand that health plans not favor or exclude newer medicines from their formularies, even if the newer medicines lead to better outcomes. One example of this problem are when Johnson & Johnson used rebate walls to protect its drug Remicade and stifle competition from Pfizer's Inflectra, a lower cost biosimilar drug.... How can this be fixed? One possible solution: the Trump administration has announced a proposed rebate rule that eliminate the anti-kickback safe harbor that is currently applied to rebates. Another idea would be indication-based pricing, which is requiring prices and rebates to be negotiated for each drug and not bundled together. And as we mentioned earlier, the Federal Trade Commission could and should forbid drug manufacturers from erecting rebate walls...

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This Federal Reserve interest-raising cycle: not just an ex-post but an ex-ante mistake: Adam Ozimek and Michael Ferlez: The Fed’s Mistake: "WWhen the Fed faces similar uncertainty in the future, looks back at the deci- sion to start raising rates in 2015, and judges that the path of monetary policy turned out to be optimal, such an assessment will offer support for raising rates. If instead the Fed looks back and sees that the path was sub-optimal, such an assessment will offer a cautionary tale.... The current Fed estimate of the long-run unemployment rate implies that in December 2015 the gap was 0.55 percentage point instead of 0.1.... The assumption that the LRU will continue to be revised downward is consistent with the pattern over the past few years, and is further supported by recent statements from Powell that indicate a strong possibility that LRU will continue to fall. As the best estimates of the long-run unemployment rate fall, the magnitude of the Fed’s ex ante error will continue to grow.... the Fed made a numerically significant error in underestimating the amount of labor market slack...

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George Magnus: China Leadership Monitor: "China’s TFP surged in the 1980s following the agricultural and ownership reforms, in the 1990s following the state enterprise reforms and the creation of a modern housing market, and in the 2000s as China prepared for and was then able to exploit WTO membership.... China’s one-party system deservedly has won plaudits when it has been most ambitious with regard to economic reforms and experimentation with market mechanisms. But this is not the case, for example, before the 1980s and again since 2012, when reforms were suppressed or stifled and inputs were boosted, but without any improvements...

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Migration—temporary and permanent—is turning out to be one of the magic bullets for global economic growth: Ricardo Hausmann (2013): The Tacit-Knowledge Economy: "Know how resides in brains, and emerging and developing countries should focus on attracting them, instead of erecting barriers to skilled immigration. Because knowledge moves when people do, they should tap into their diasporas, attract foreign direct investment in new areas, and acquire foreign firms if possible.... Recent research at Harvard University’s Center for International Development (CID) suggests that tacit knowledge flows through amazingly slow and narrow channels. The productivity of Nuevo León, Mexico, is higher than in South Korea, but that of Guerrero, another Mexican state, resembles levels in Honduras. Moving knowledge across Mexican states has been difficult and slow. It is easier to move brains than it is to move tacit knowledge into brains, and not only in Mexico. For example, as the CID’s Frank Neffke has shown, when new industries are launched in German and Swedish cities, it is mostly because entrepreneurs and firms from other cities move in, bringing with them skilled workers with relevant industry experience.... Knowledge moves when people do...

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Ken Rogoff has picked up the goal posts and moved them five miles down the field! Recall his (and Carmen Reinhart's) austerity line from 2011:

Too Much Debt Means the Economy Can’t Grow: "Current debt trajectories are a risk to long-term growth and stability.... [Debt] burdens above 90 percent are associated with 1 percent lower median growth..."

But it turns out "austerity" does not mean "move heaven and earth to keep debt-to-annual GDP less than 90%, no matter how high current unemployment". Instead, all "austerity" means is:

Kenneth Rogoff: The Austerity Chronicles: "Alesina, Favero, and Giavazzi find that their main conclusions are valid even at the zero bound.... Expenditure-based austerity programs tend to impose lower costs on output than do programs based on tax hikes... [A] politician who tries to adopt an austerity program will [not necessarily] be kicked out of office.... The nature of any pathbreaking scholarship is that it sets the agenda for further research. Alesina, Favero, and Giavazzi have written a fundamentally non-ideological book that raises the bar for future studies of fiscal retrenchment policies. No doubt it will continue to set the standard for such research for many years to come, however much left-leaning polemicists try to dismiss it as blasphemy...

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Louis Brandeis believed that bigness is bad per se—thus failing to see that since, well, at least 1870 value chains and the division of the labor had become sufficiently complicated that efficient production required a great deal of central planning on the level of the large firm. Toyota sells 250 billion dollars worth of cars each year—that is 0.2 percent of global GDP—and roughly 2/3 of that value flow is under the centrally-planned direction of the Toyota design and production management teams, not the result of arms-length market-price deals between truly independent producers. Bork believed that any bigness was good if could be colorably or uncolorably claimed to be the result of some clever economy of scale that a lawyer who was part of the judge's social circle could think up was never credible as anything other than an excuse for rent-seeking corruption. To find the true path, look, and Jonathan Baker says, to FDR antitrust guru Thurman Arnold:

Jonathan Baker: Revitalizing U.S. Antitrust Enforcement Is Not Simply a Contest Between Brandeis and Bork—Look First to Thurman Arnold: "Growing market power in the United States today puts a spotlight on our nation’s antitrust laws—the critical policy tool for restoring competition where it is lacking—from airlines and brewing to hospitals and dominant online platforms. But how can these laws be made more effective in this environment? The best guide from the past is Thurman Arnold...

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Matt Bruenig: Various Job Guarantee Quotes: "Despite the long-standing JG promise of a program featuring shit jobs at s--- wages with the intent of undermining the regular welfare state and private sector workers, people have recently become very confused into thinking it is something else. Some of that confusion is just the result of clever messaging...

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Equitable Growth's Kate Bahn sends us to what she rightly describes as "a really heartbreaking and inspiring and important thread" treating to the death of Alan Krueger:

Kate Bahn: @LipstickEcon:

Liz Ananat: @LizAnanat: "I have some things to say about the death from depression of Alan Krueger.... Alan was unfailingly and unnecessarily kind to me. He also made many of the things I love about economics possible. But others e.g. @dynarski @arindube can speak better to these aspects of his life. What I can speak to is living with depression as an economist...

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Paul Krugman (2013): Milton Friedman, Unperson: "[It] is really interesting is the way Friedman has virtually vanished from policy discourse. Keynes is very much back.... Hayek is back in some sense.... But Friedman is pretty much absent. This is hardly what you would have expected not that long ago, when Friedman’s reputation bestrode the economic world like a colossus, when Greg Mankiw declared Friedman, not Keynes, the greatest economist of the 20th century...

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