Grasping Reality on TypePad, by Brad DeLong

Chris Lee: Photons Dance Along A Line Of Superconducting Qubits: "Computation relies on more than just having and preserving qubits; you also need to control their interactions.... Nature beat us to it Perhaps the most interesting part of random walk quantum computers is that they already exist, and we would not exist if it didn't work.... Photosynthesis works because light creates a quantum particle called an exciton that has to travel to a reaction center before it decays away to nothing. The only way that it can do this is by traveling all possible paths simultaneously. Through the power of constructive interference (or, if you prefer, quantum computing), the exciton survives about a 1,000 times longer than it would otherwise be expected to, allowing it to reach the reaction center. Since photosynthesis takes place at room temperature, it gives me hope that, eventually, the quantum computer will move out of the helium dilution fridge...

John Authers: Federal Reserve Interest-Rate Cut Odds Drop: "Male employment is clearly lower.... The recovery... has still left male unemployment worse than at any point post-war before the Great Recession. So yes, the macro-data do indeed suggest that there are many men who are less productive than their fathers, and have reason to feel angry. That said, women have reason for unhappiness as well.... Women are still putting up with [non-]employment rates 10 points higher than for men. And so it does indeed seem possible, from my extremely swift look at the top-down data, that gender dynamics help explain why improving employment is not making many Americans happier...

Trump's policies are not boosting economic growth. So the Trumpists—paid, and those who hope to cash in—are preparing the battlespace by arguing that economic growth isn't a good thing anyway—just as we have shifted from "no collusion!" to "collusion isn't illegal!" To his honor, Michael Strain pushes back:

Michael Strain: Right-Wing Populists Are Wrong About Economic Growth - Bloomberg: "Oren Cass... the Manhattan Institute... argues that the results from decades of policies designed to encourage GDP growth are 'embarrassing' and have 'steered the nation off course'. Michael Anton... Claremont... questioning the presumption that technological and economic progress is desirable and that innovation is 'per se good.... [But] growth doesn’t just help low-income and working-class households in the short term. Over longer periods, seemingly small changes in the growth rate have large consequences.... A rising tide does not lift all boats equally, and it doesn’t lift them instantaneously. But over time, all boats do rise considerably...

On the one hand, apparently permanent low interest rates do produce a lot of reaching for yield–which means a lot of people taking risks they do not understand for low expected returns, and a lot of people figuring out how to take advantage of the cognitive biases of those who take risks they do not understand. On the other hand, as long as the bills are paid and as long as the investors are risking money they can stand to lose, the Fyre Festival Economy does push us closer to full employment. Thus I find myself genuinely perplexed here:

Izabella Kaminska: GMO's Montier on the Rise of the Dual Economy: "This week's installment of The entire economy is Fyre Festival (TEEIFF).... To recap... we made the argument that the rise of mystic job titles like 'chief vision officer'... was indicative of corporates having lost their purpose... to make or provide stuff people wanted so much they were prepared to pay for it.... In the modern corporate sphere the desire to make profits, however, has been replaced with the desire to achieve growth at any cost... [because] products and services are so visionary and forward thinking that we the customers can't yet understand... [yet[ one day in the future... we will eventually be prepared to pay top dollar for them. The second justification is that if you hook enough customers to your brand you will eventually be able to sell them something they will be prepared to pay for. What that thing is doesn't necessarily have to be determined yet, and may or may not be determined in countless corporate pivots that follow onwards. This is why the mystic vision officer is so important. Establishing a vision of what tomorrow's needs may be, rather than what today's needs actually are, is essential to keeping the investment case alive.... And it's all very believable because this is exactly how a selection of today's most profitable technology stocks have made it...

A panel led by Jason Furman. Predictable rules, platform regulation—a "code of conduct for the most significant digital platforms", treating them as essential services—plus ensuring data mobility and open standards are essential for the creation of a digital economy in which competition and innovation can produce large benefits. Unfortunately, none of those are in the financial interest of current tech shareholders or their lobbyists: HM Treasury: Unlocking Digital Competition, Report of the Digital Competition Expert Panel: "An independent report on the state of competition in digital markets, with proposals to boost competition and innovation for the benefit of consumers and businesses.... Chaired by former Chief Economist to President Obama, Professor Jason Furman, the Panel makes recommendations for changes to the UK’s competition framework that are needed to face the economic challenges posed by digital markets...

Nice to finally see the red-meat throwing Republican senators admit that those of their Democratic colleagues who voted for ObamaCare created something that has, on balance, been a good thing for America. May their consciences weigh on them every morning when they ask themselves why they didn't do this ten year ago: Tony Leys: "Grassley, who opposed Obamacare, isn’t now pressing to replace it. 'Quite obviously, more people have health insurance than would otherwise have it, so you got to look at it as positive', he says. via @pw_cunningham...

Put me down as someone who thinks that the Federal Reserve and the European Central Bank have not tried and are not trying hard enough to learn from the bank of Japan. They still do not seem to be at the point of understanding the relevance of Japan for themselves as well as Paul Krugman did two decades ago, when he wrote his Return of Depression Economics https://books.google.com/books?isbn=0393320367, "Japan's Trap", and "It's Baaaack: Japan's Slump and the Return of the Liquidity Trap". This is not a good situation to be in: Enda Curran and Toru Fujioka: BOJ's Never Ending Crisis Has Lessons for World's Central Banks: "The underlying problems confronting the BOJ—slowing growth, tepid wage increases, lackluster productivity gains and aging populations—are becoming more pronounced in other developed economies. This increases the likelihood of more drawn out stimulus, pushing others down the same road as Japan. 'When Japan first confronted the problem of very low inflation, monetary economists pooh-poohed the problem, saying there was an easy fix', said Raghuram Rajan, former governor of the Reserve Bank of India and now a professor at the University of Chicago. 'After confronting the same issue in their own countries and showing an inability to deal with it, there seems to be a general consensus that the problem is harder'. Its latest experiment in yield-curve control... has drawn the attention of Federal Reserve Deputy Chair Richard Clarida amid an examination of strategy at the U.S. central bank...

I am with David Autor here: individual tasks that are components of jobs will be automated, but human thought and judgment will continue to be able to add value throughout the economy. There is, however, nothing to require that a world of abundant capital and sophisticated computers will be a world in which the income distribution will be relatively equal: David Autor: Polanyi’s Paradox: Will It Be Overcome?: "Jobs are made up of many tasks.... While automation and computerization can substitute for some of them, understanding the interaction between technology and employment requires thinking about more than just substitution. It requires thinking about... how human labor can often complement new technology... price and income elasticities for different kinds of output.... The tasks that have proved most vexing to automate are those demanding flexibility, judgment, and common sense—skills that we understand only tacitly. I referred to this constraint above as Polanyi’s paradox. In the past decade, computerization and robotics have progressed into spheres of human activity that were considered off limits only a few years earlier—driving vehicles, parsing legal documents... agricultural field labor. Is Polanyi’s Paradox soon to be at least mostly overcome, in the sense that the vast majority of tasks will soon be automated? My reading of the evidence suggests otherwise...

At least half of our wealth comes from the ideas and investments of those who are now dead. And as we grow richer, that proportion grows as well. None of the living have any just exclusive claim on any portion of this cornucopian storehouse of technologies. The dead have no just claim on it either: respect for their legacy does not entail honoring their wishes as to its use, if that honoring upsets the principle of equal opportunity. Thus the most bedrock moral-philosophical principal is that more than half of our wealth is held in common for the human community to distribute as it decides is good.

Comment of the Day: Robert Waldmann: "Also I don't like 'publicly commit'. This is based on the faith that such declarations are credited, and the prior assumption that if they are firmly and sincerely meant and therefore credible they shall be credited. The idea that agent's belief in a declaration is an aspect of the policy is the rational expectations hypothesis sneaking in the back door after having been tossed out the front door (effort to translate returning by the window after being tossed out the door for residents of a country where most windows aren't French windows). Why promise inflation after the recession rather than produce inflation now when monetary policy isn't at the zero lower bound. Is it really likely that people could be convinced that the Fed will accept inflation over 2% some years after then next time we are in the liquidity trap when it demonstrates that it won't accept it right now? They should walk the walk, not just pre-commit to possibly talking the talk at some time in the indefinite future. Still progress...

This is, I think, 100% correct. And this is important enough that I think it now puts Larry on the short list for the Nobel Prize. IMHO, his career up until now has been worth at least 2 Nobel Prizes, but the problem is that his contributions have been spread out over eight different subfields of economics. But this is, I think, more than a home run—this is a grand slam: Lawrence H. Summers: Responding to Critiques: "No one from whom I have heard doubts the key conclusion that a combination of meaningfully positive real interest rates & balanced budgets would likely be a prescription for sustained recession if not depression in the industrial world...

Potemkin factories in Wisconsin: Josh Dzieza: Foxconn Is Confusing Tthehe Hell Out of Wisconsin: "Last summer, Foxconn announced a barrage of new projects in Wisconsin — so we went looking for them: It was summer in Wisconsin, and Foxconn seemed to be everywhere. But also: nowhere at all.... The trade war with China still looms, and Trump has personally called Foxconn CEO Terry Gou when the company wavers. This time, Foxconn can’t simply vanish without risking a backlash, but it also makes no sense for it to build what it initially promised. Shih thinks Foxconn is still figuring out what it’s going to do and that the infrastructure development, political attention, and insistence on a factory is painting the company into a corner...

Twitter Thread: "He has waged cruel War against human Nature itself...: Annette Gordon-Reed @agordonreed: "So many of the grievances in the Declaration could be challenged. Heck, the whole enterprise of presenting themselves as having been oppressed/enslaved by the British was wifty...

...To have a foundational document describe the evil of what had happened to Africans could have been quite meaningful. Think of the use that has been made of “all men are created equal” as an affirmation. In the understandable zeal to catch TJ out on hypocrisy, historians have missed the recognition of the violation of the human rights of Africans. We can go on and on about whether TJ sincerely believed these things, as if American history were some gigantic revival meeting. But words matter, and sincerity is overrated...

Joseph Schumpeter (1927): The Explanation of the Business Cycle: "§1. The childhood of every science is characterised by the prevalence of "schools," of bodies of men, that is, who swear by bodies of doctrine, which differ toto caelo from each other as to philosophic background and fundamentals of methods, and aim at preaching different "systems" and, if possible, different results in every particular—each claiming to be in exclusive possession of Truth and to fight for absolute light against absolute darkness. But when a science has "gained man's estate," these things, whilst never ceasing to exist, tend to lose importance: the common ground expands, merits and ranges of "standpoints" and "methods " become matter of communis opinio doctorum, fundamental differences shade off into each other; and what differences remain are confined within clear-cut questions of fact and of analytic machinery, and capable of being settled by exact proof...

Twitter Thread: @RBrookhiser "When Mao's economic policies associated with the Great Leap Forward caused a nationwide famine, Peng became critical of Mao's leadership. The rivalry between Peng and Mao culminated in an open confrontation between the two at the 1959 Lushan Conference. Mao won this confrontation, labeled Peng as a leader of an 'anti-Party clique', and purged Peng...

...Following the advent of the Cultural Revolution, Peng was arrested by Red Guards. From 1966–1970, radical factions within the Communist Party, led by Lin Biao and Mao's wife, Jiang Qing, singled out Peng for national persecution, and Peng was publicly humiliated in numerous large-scale struggle sessions and subjected to physical and psychological torture in organized efforts to force Peng to confess his "crimes" against Mao Zedong and the Communist Party. In 1970 Peng was formally tried and sentenced to life imprisonment, and he died in prison in 1974. After Mao died in 1976, Peng's old ally, Deng Xiaoping, emerged as China's paramount leader. Deng led an effort to formally rehabilitate people who had been unjustly persecuted during the Cultural Revolution, and Peng was one of the first leaders to be posthumously rehabilitated https://en.wikipedia.org/wiki/Peng_Dehuai...

Twitter Thread: "If you are hanging with Mt. Pelerin...: Daniel Kuehn: "@delong asks why I don’t put stock in 4-6, which I’ll try to answer here. It’s not that glamorous because it’s basically that there’s no evidence (though I’ll try to say more). It’s important to realize Brad agrees these are not major drivers...

An excellent catch by Bonnie Kavoussi. Bonnie Kavoussi: "A one-third reduction in the rate of new business formation, together with a steady exit rate, means that, on average, firms are larger and older today while also representing an increased share of employment." @jasonfurman and @porszag: https://piie.com/system/files/documents/wp18-4.pdf...

After hearing Ellora Derenoncourt rave about being a TA for Melissa Dell and her Econ 142: The History of Economic Growth, I have decided to go full parasite and stand up my own version of the course for the spring of 2020 here at U.C. Berkeley. Tell me what you think! Here are my notes so far:

Course to be at: Teaching Economics: https://delong.typepad.com/teaching_economics/econ-135.html

Econ 135: Economic Growth in Historical Perspective

This course examines the idea and reality of economic growth in historical perspective, beginning with the divergence between human ancestors and other primates and continuing through with forecasts for the 21st century and beyond. Topics covered include human speciation, language, and sociability; the discovery of agriculture and the domestication of animals; the origins and maintenance of gross inequality; Malthusian economies; the commercial and industrial revolutions; modern economic growth; international prosperity differentials; OECD convergence and East Asian miracles; the political economy of growth and stagnation; and the stubborn persistence of poverty.

Note to Self: Are all the cool kids still writing weekly email newsletters? If not, why no longer? If so, why?

Note to Self: F--- you, @jack. Twitter keeps—somehow—reversing my view from "Latest Tweets" to your algorithmic "Home", showing me first tweets I am likely to engage in. But tweets I am likely to engage in are not the tweets I want to see. You are hacking my brain, @jack—and not in a good way.

Thus you have made yourself my enemy: Things that advertise on Twitter I will not buy. Opportunities for me to cheaply degrade your reputation and reduce your wealth I will gladly take advantage of.

Quite stunning that you have developed such potentially useful tool, @jack, and yet have managed to make yourself so thoroughly my enemy, isn't it? One might say it requires a close-to-unique talent...

Did they actually achieve de-entanglement and re-coherence here? It looks like it to me. But whaddooeyeno? G. B. Lesovik, I. A. Sadovskyy, M. V. Suslov, A. V. Lebedev, and V. M. Vinokur: Arrow of Time and Its Reversal on IBM Quantum Computer: "The arrow of time... within the framework of statistical physics... [is] the second law of thermodynamics... entropy growth proceeds from the system's entanglement with the environment.... Whether the irreversibility of time... might be circumvented.... While in nature the complex conjugation needed for time reversal is exponentially improbable, one can design a quantum algorithm that includes complex conjugation and thus reverses a given quantum state... on an IBM quantum computer... backward time dynamics for an electron scattered on a two-level impurity...

This is the best expression of the end-of-ideology "managerialism" theses of the Great Post-WWII Keynesian Boom—Les Trente Glorieuses. It is remarkably early: 1955. And it is 100% correct that those who tried to apply a pre-WWI socialist or a Leninist frame to the state of the world after World War II were hopelessly wrong, and would up naked on the moon. And that is if they were lucky. Aron, of course, took the defeat of fascism as the Red Army turned Hitler's Berlin into rubble in 1945 as permanent. And Aron mistook the Eisenhower wing of the Republican Party for the beast. And maybe he would have been right if not for Goldwater:

Raymond Aron (1955): Nations and Ideologies: "WE are becoming ever more aware that the political categories of the last century—Left and Right, liberal and socialist, traditionalist and revolutionary-have lost their relevance. They imply the existence of conflicts which experience has since reconciled, and they lump together ideas and men whom the course of history has drawn into opposing camps. How can one describe as "extreme Left" the Soviet regime which identifies society with the state? Is it possible to see it as a continuation of the struggle against arbitrary rule, or as favouring individual freedom and the control of government by the governed? Or again, when a parliament of "Pashas" is dissolved by a group of army officers sincerely concerned for national independence and economic progress, who then establish a military dictatorship, what is the correct word to describe their regime?...

This—written forty years ago—is still the best short summary of left-neoliberalism I have every seen. Indeed, I think meditating on it, while walking up Drury Lane between the LSE and Bloomsbury in the summer of 1982, was how I became a card-carrying left-neoliberal in the first place:

Samuel Brittan (1980): Hayek, the New Right, and the Crisis of Social Democracy: "SINCE THE PUBLICATION of his Road to Serfdom in 1944, Friedrich Hayek has been cursed by sneerers, who dismiss everything he has to say without giving it a hearing, and even more by admirers, who agree with it before they have studied it, and regard it mainly as a highbrow stick with which to beat the Left. Yet there are many reasons for trying to come to terms with what he has been saying. The completion of The Political Order of a Free People, the third and last volume of his Law, Legislation and Liberty, provides a suitable opportunity for an interim assessment...

• Note to Self: Comment on Richard Baldwin: The Globotics Upheaval: Globalization, Robotics, and the Future of Work: We can worry along either of two dimensions... another wave of globalization—... will hit a world of absolutely enormous and extraordinary income and wealth inequality.... [Or Peak Horse, for] until the 1920s, if there was a horse in America, there was a use for the horse...

• Note to Self: Richard M. Johnson (1780-1850), Vice President and Senator, and Julia A. Chinn (1790-1833), slave and châtelaine...

• Note to Self: If, after the EMP data wipeout and the collapse, future raccoon historians of fascism dig up this statue, they are going to be very confused...

• Where Frank Fukuyama Went Wrong; or, Zombie Fascism!!

• It Was Political Decisions, Not Trade or even Technology, That Done It...

• If You Were Right, John, Then Massachusetts Politics Would Have Turned This Strange Weird Trumpist Flavor Back in the 1950S

1. Robert Kuttner: Karl Polanyi Explains It All

2. Wikipedia: Friedrich von Hayek: "In August 1926, Hayek married Helen Berta Maria von Fritsch (1901–1960), a secretary at the civil service office where Hayek worked, on the rebound upon hearing of his cousin's marriage. They had two children together. Upon the close of World War II, Hayek restarted a relationship with his cousin, who had married since they first met, but kept it secret until 1948. Hayek and Fritsch divorced in July 1950 and he married his cousin Helene Bitterlich (1900–1996) just a few weeks later after moving to Arkansas to take advantage of permissive divorce laws. His wife and children were offered settlement and compensation for accepting a divorce. The divorce caused some scandal at LSE where certain academics refused to have anything to do with Hayek.] In a 1978 interview to explain his actions, Hayek stated that he was unhappy in his first marriage and as his wife would not grant him a divorce he had to enforce it. He rarely visited his children after the divorce...

3. Peter Kafka: Disney says its over $400 million Vice investment is now worthless - Vox: "A now-familiar story: Investors say they overvalued a high-flying digital publisher...

4. Amrita Chakrabarti Myers: The Erasure and Resurrection of Julia Chinn: "The main house at Johnson’s Blue Spring Farm is gone.... On the right-hand side... stands an antebellum-era building... so overgrown with weeds, grasses, and brush that it is barely visible... but it looks sturdier than the Choctaw Academy school building. It is believed to have been one of the slave cottages or a kitchen building at Blue Spring.... On the other hand, just a few miles away, thousands of visitors annually stream through the impeccably maintained gardens and halls of Ashland, the home of Henry Clay.... The contrast between the two sites couldn’t be any starker. And the difference has everything to do with race. Make no mistake: Richard’s decision to live publicly with Julia and their children, Imogene and Adaline, and Henry’s decision to hide his black 'mistresses' in the slave quarters and sell their offspring downriver to New Orleans, played enormous roles in how the two men are remembered today...

5. Michael Staub: The Mismeasure of Minds: "Seeking to wipe away forever the fake science of The Bell Curve.... The book’s analysis refuses to die, animated by already existing racial resentment in U.S. politics and culture and helping to fuel more in its turn...

6. Samuel Brittan (1980): Hayek, the New Right, and the Crisis of Social Democracy

7. Robert Waldmann Has an Interpretation of Karl Marx that Is New to Me...: I tend to read Marx as a Christian heretic--as writing in an eschatological mode in which the time when "labor has become not only a means of life but life's prime want; after the productive forces have also increased with the all-around development of the individual, and all the springs of co-operative wealth flow more abundantly" is exactly as real and near to him as the expectation of Paul of Tarsus that someday soon: "we which are alive and remain shall be caught up together with them in the clouds, to meet the Lord in the air: and so shall we ever be with the Lord..." (1 Thess. 4:17). Robert disagrees, and hears a sneer whenever Marx says "come the Millennium" that I cannot...

8. Hayek and the "Shut Up and Be Grateful You Were Even Born!" Argument: I ran into a passage that makes me wonder whether Hayek in his inner core believed that democracy had any value—even any institutional value—at all.... "Egalitarianism is of course not a majority view but a product of the necessity under unlimited democracy to solicit the support even of the worst.… It is by the slogan that 'it is not your fault' that the demagoguery of unlimited democracy, assisted by a scientistic psychology, has come to the support of those who claim a share in the wealth of our society without submitting to the discipline to which it is due. It is not by conceding 'a right to equal concern and respect’ to those who break the code that civilization is maintained…" Now it is certainly true that of the trio "Prosperity, Liberty, Democracy," Hayek puts prosperity first and liberty second—or, rather, that freedom of contract needs to be more closely safeguarded than freedom of speech, for if there is freedom of contract then freedom of speech will quickly reappear, but if there is no freedom of contract than freedom of speech will not long survive. But the passage above makes me wonder whether democracy has any place in Hayek's hierarchy of good things at all...

9. Hansard: Army Council and General Dyer(8 July 1920)

10. H. Clay and Richard L. Troutman: The Emancipation of Slaves by Henry Clay

11. Mark Thoma: Economist's View: Links (5/8/19): "Competitive Edge: Principles and presumptions for U.S. vertical merger enforcement policy: Antitrust and competition issues are receiving renewed interest, and for good reason. So far, the discussion has occurred at a high level of generality. To address important specific antitrust enforcement and competition issues, the Washington Center for Equitable Growth has launched this blog, which we call “Competitive Edge”...

12. Joakim Book: Mr. Darcy’s Ten Thousand a Year

13. Susie Madrak: Rep. Escobar: 'We Have A President Who Has Created An Addiction To Hate': "I'll tell you, that clip, when I saw it last night, it made me very, very sad, very sad for our country, that we are at such a moral rock bottom," Rep. Escobar said...

14. Nancy LeTourneau: Why Is Trump So Afraid of Mueller?: "The fact that the Commander in Chief is describing an investigation conducted by his own administration as “treasonous” ranks right up there with some of the worst. Why would Trump be so afraid of what Mueller has to say, especially when he claims that the special counsel’s report totally vindicated him? It could be because Mueller has earned a tremendous amount of political capital by conducting himself as the consummate professional surrounded by a sea of angry lunatics otherwise known as the Trump administration...

15. Paul Mason: Reading Arendt Is Not Enough: "Arendt’s descriptions of the dynamics of totalitarian movements hold good—... [but] her explanations for them do not.... If Trump has triggered a crisis of progressive thought, it is in particular a crisis for the cult of Hannah Arendt. The United States of America was her last and enduring hope: the only political institution on earth that was supposed to be immune to totalitarianism, nationalism, and imperialism...

The creator of the World Wide Web tries to provide some guidelines for getting it back onto a useful course: Tim Berners-Lee: The World Wide Web Turns 30. Where Does It Go From Here?: "The web has become a public square, a library, a doctor’s office, a shop, a school, a design studio, an office, a cinema, a bank, and so much more. Of course with every new feature, every new website, the divide between those who are online and those who are not increases, making it all the more imperative to make the web available for everyone.And while the web has created opportunity, given marginalized groups a voice, and made our daily lives easier, it has also created opportunity for scammers, given a voice to those who spread hatred, and made all kinds of crime easier to commit...

Over the past generation, tax avoidance and evasion have gone from an annoyance to a major societal catastrophe: Annette Alstadsæter, Niels Johannesen, and Gabriel Zucman: Tax Evasion and Inequality: "Why do the rich evade so much? The straightforward answer is because they can. There is a whole industry – in Switzerland, Panama and other tax havens around the globe – that provides wealth concealment services to the world’s wealthiest individuals. This industry typically only targets the very wealthy (people with more than $20 million or sometimes $50 million to invest), since serving too many would-be evaders would increase the risk of these banks and law firms being found in violation of the law. Moderately wealthy individuals (those below the top 0.1%) do not have access to the services they sell and therefore don’t evade much tax. Further down the ladder, the majority of the population only earns wages and pension income, which cannot be hidden from the tax authority...

Our massive economic overreliance on formal education, coupled with a high school system that appears half a century out-of-date and no alternative to standard or semi-standard college is not serving us well: Kyle Herkenhoff: The Case for More Internships and Apprenticeships in the United States: "Learning from co-workers accounts for 24 percent of the aggregate U.S. human capital stock. Roughly 40 percent of a typical worker’s human capital is accumulated on the job, and of that human capital accumulation, 60 percent comes from learning the skills of co-workers. These benefits of learning from co-workers could be increased markedly, however, if U.S. policymakers encouraged more firms to offer internships, apprenticeships, and other types of mentoring such as vocational training. But this is easier said than done. In the U.S. labor market,... not enough mentorship relationships are formed between high- and low-skill workers. If low-skill workers are able to leave immediately after learning new skills, then their employers have little incentive to train and educate those workers. But, from society’s standpoint, we want those low-skill workers to be taught so that they produce more and eventually go on to train the next generation of workers.... A simple 3.6 percent tax break on the wages of interns, or a 3 percent tax break on the wages of mentors (defined to be those whose primary capacity is to work with interns), would generate welfare gains of roughly 2 percent per annum in the long-run...

Note to Self: Comment on Richard Baldwin: The Globotics Upheaval: Globalization, Robotics, and the Future of Work: Start from the observation the the human brain is a massively-parallel supercomputer that fits inside a breadbox and draws 50 watts of power.

For 6,000 years, since the domestication of the horse, human backs, human thighs, and human fingers have becoming less powerful as sources of economic value, as animals and machines have increasingly competed with and substituted for them. Up until recently, however, every domesticated animal every machine had required a microprocessor. And the highly-productive decentralized societal division of labor of enormous extent created huge and increasing amounts of need for white-collar information processing: the accounting, control, transmission of information, and purveyance of misinformation jobs that are most of what people like us here do. Thus while human backs and thighs and fingers became less powerful as sources of economic value as time passed, human brains become more valuable. But now we have robots which contain their own microprocessors, and software 'bots that handle huge amounts of the white-collar information processing. So the job-creating aspects of technological creative destruction are now open to question

From this standpoint, we can worry along either of two dimensions:

David Blanchflower: Not Working: Where Have All the Good Jobs Gone?: "Don't trust low unemployment numbers as proof that the labor market is doing fine—it isn't. Not Working is about those who can’t find full-time work at a decent wage—the underemployed—and how their plight is contributing to widespread despair, a worsening drug epidemic, and the unchecked rise of right-wing populism.... Blanchflower draws on his acclaimed work in the economics of labor and well-being to explain why today's postrecession economy is vastly different from what came before. He calls out our leaders and policymakers for failing to see the Great Recession coming, and for their continued failure to address one of the most unacknowledged social catastrophes of our time. Blanchflower shows how many workers are underemployed or have simply given up trying to find a well-paying job, how wage growth has not returned to prerecession levels despite rosy employment indicators, and how general prosperity has not returned since the crash of 2008.... Blanchflower practices the 'economics of walking about'—seeing for himself how ordinary people are faring under the recovery, and taking seriously what they say and do. Not Working is his candid report on how the young and the less skilled are among the worst casualties of underemployment, how immigrants are taking the blame, and how the epidemic of unhappiness and self-destruction will continue to spread unless we deal with it...

It is power and surveillance rather than worker displacement that is the principal issue on the table with respect to automation for the next decade, and probably for the next two decades: Brishen Rogers: Beyond Automation: The Law & Political Economy of Workplace Technological Change: "This article unpacks the relationship among advanced information technologies, employment law rules, and labor standards. Based on a detailed review of the capacities of existing technologies, it argues that automation is not a major threat to workers today, and that it will not likely be a major threat anytime soon. Companies are, however, using new information technologies to exercise power over workers in other ways, all of which are enabled by existing employment laws. For example, they are increasingly using algorithms to monitor, direct, or schedule workers, in the process reducing workers’ wages or autonomy. Companies are also using new technologies to “fissure” employment: outsourcing work tasks or processes and then disclaiming legal duties toward workers, all while closely monitoring workers’ performance. These findings have policy implications. If the major threat facing workers is employer domination rather than job loss, then exotic reforms such as a universal basic income are less urgent. Rather, policymakers could expand the scope and stringency of companies’ duties toward their workers, and/or enable workers to contest the introduction of new workplace technologies...

Brad DeLong: Council on Foreign Relations: The Future of Democracy Symposium: Session Two: Economics, Identity, and the Democratic Recession: this political moment—Louis Napoleon mobilized these kinds of sentiments to overthrow the French Second Republic and establish himself as emperor. Francis Fukuyama wrote an excellent article about how really-existing-socialism—public ownership of the means of production, hopefully leading someday to the free society of associated producers—had crashed and burned, and that the only big idea left about how to organize society was that of liberal market democracy. But Fukuyama made a key mistake: there had been a third challenge. That is the basally-Roman idea thateach of us is individually a stick, very weak, but if we can unite ourselves in a big bundle of sticks and if we can tie ourselves together in leather thongs, we then become a powerful force that, in the hands of our strong leaders, could bruise our enemies.

Federal Reserve Bank of New York: Nowcasting Report: "The New York Fed Staff Nowcast stands at 2.2% for 2019:Q2. News from the JOLTS, CPI, PPI, and international trade releases left the nowcast for 2019:Q2 broadly unchanged...

Key Points:

The right response to almost all economic data releases is: Nothing has changed—your view of the economic forecast today is different from what it was last week, last month, or three months ago in only minor ways.

What has changed in the past week is: The falling-apart of Trump's trade negotiating strategy with China will harm Americans and may disrupt value chains, but the effects are unlikely to be clearly visible in the data flow.

It is still the case that U.S. potential economic growth continues to be around 2%/year, that inflation is unthreatening, and tha trhe donomy is closing in but not yet at full employment.

Note to Self: If, after the EMP data wipeout and the collapse, future raccoon historians of fascism dig up this statue, they are going to be very confused:

Worthy Reads at Equitable Growth:

1. A nice instantiation of our monthly summary of JOLTS. I would, however, quibble with the authors' claim that workers are now "confident". Yes, they are quitting at a much higher rate than they dared to do in the early years of this decade. But I remember 1998-2000: That was a confident labor market! How old were these authors in 1999, anyway? :-): Kate Bahn and Will McGrew: JOLTS Day Graphs: March 2019 Report Edition - Equitable Growth: "The quits rate held steady at 2.3% for the 10th month in a row, reflecting a steady labor market where workers are confident leaving their jobs to find new opportunities...

2. This surprises me: "motherhood" is not what I would have expected to see as one of the most durable and stubborn forms of either statistical or prejudicial discrimination. Yet here it is, constant sincerity 68 or so: Eunjung Jee, Joya Misra, and Marta Murray-Close: Motherhood Penalties in the U.S., 1986-2014: "The motherhood penalty remains quite stable over time.... The gross gap in pay between childless women and mothers of two or more... has narrowed... because mothers’ have increased... education and workforce experience...

3. If you are in DC, sign up for our event on Thursday the 16th. You will not be sorry: Equitable Growth: Preparing for the Next Recession: Policies to Reduce the Impact on the U.S. Economy: "When: May 16, 2019 1:00PM - 4:30PM. Where: The Rockefeller-Peterson Room, 1777 F St NW, Washington, D.C. 20006, USA...

4. It is certainly true that you have to look at both demand and supply to figure out what happens in equilibrium. But Milton Friedman's first rule is that supply curves do slope upward. Things have to be very weird indeed for equilibrium effects to do more than modestly attenuate impact effects. Sometimes things are really weird But that is not the way to bet: Raj Chetty: In Conversation: "We talked about moving-to-opportunity.... You might worry that if we help one low-income family move out of a low-opportunity area, do they simply get replaced by another low-income family who moves into that area, so we have essentially a musical chairs phenomenon?... Empirical research has recently mainly been focused on identifying individual-level effects. But trying to figure out how things play out in equilibrium is a very challenging problem, which, I think, is something we should have on our agenda to focus on going forward...

5. The late and persistent apparent rise in margins pretty much everywhere in the U.S. economy is one of the most surprising things to happen in the past generation. I do not know anyone very confident they know why this has taken place, or what all of its implications are. But it does seem highly likely that it calls for tougher antitrust policy. Here we have some very smart words from a murderers' row of thoughtful experts: Jonathan B. Baker, Nancy L. Rose, Steven C. Salop, and Fiona Scott Morton: Five Principles to Guide Vertical Merger Enforcement: "Agencies should consider and investigate the full range of potential anti-competitive harms.... Agencies should decline to presume that vertical mergers benefit competition on balance in... oligopoly markets.... Agencies should evaluate claimed efficiencies resulting from vertical mergers as carefully and critically as they evaluate claimed efficiencies resulting from horizontal mergers.... Agencies should decline to adopt a safe harbor for vertical mergers, even if rebuttable.... Agencies also should consider adopting presumptions (rebuttable) that a vertical merger harms competition when certain factual predicates are satisfied...

Note to Self: Richard M. Johnson (1780-1850), Vice President and Senator, and Julia A. Chinn (1790-1833), slave and châtelaine:

• Wikipedia: Richadf Mentor Johnson

• BlackPast: Julia Ann Chinn

• Keven McQueen (2001): Offbeat Kentuckians: Richard M. Johnson

• Leland Winfield Meyers (1932): The Life and Times of Colonel Richard M. Johnson of Kentucky

• David Petriello: The Days of Heroes Are Over: A Brief Biography of Vice President Richard Mentor Johnson

• James A. Padgett (1940): The Letters of Colonel Richard M. Johnson of Kentucky

• Abraham Lincoln (September 18, 1858): Fourth Debate with Stephen A. Douglas at Charrleston, Illinois: "I have never seen to my knowledge a man, woman or child who was in favor of producing a perfect equality.... I recollect of but one distinguished instance... the case of Judge Douglas' old friend Col. Richard M. Johnson [Laughter]...

Plutarch: Life of Tiberius Gracchus: "This is said to have been the first sedition at Rome, since the abolition of royal power, to end in bloodshed and the death of citizens; the rest though neither trifling nor raised for trifling objects, were settled by mutual concessions, the nobles yielding from fear of the multitude, and the people out of respect for the senate. And it was thought that even  p193 on this occasion Tiberius would have given way without difficulty had persuasion been brought to bear upon him, and would have yielded still more easily if his assailants had not resorted to wounds and bloodshed; 2 for his adherents numbered not more than three thousand. But the combination against him would seem to have arisen from the hatred and anger of the rich rather than from the pretexts which they alleged; and there is strong proof of this in their lawless and savage treatment of his dead body...

Note to Self: From Council on Foreign Relations: The Future of Democracy Symposium: Session Two: Economics, Identity, and the Democratic Recession: Over 2001—2008 the furniture workers who had lost their jobs because of NAFTA and the China shock were getting new and better jobs in construction, building up Raleigh and Durham. Few unhappy about the economic transformation of the Carolinas until late 2008. Then, all of a sudden, it turned out that a great many securities rated AAA by Moody’s and Standard & Poor’s in fact had no business being sold to anyone at any price at all; the Democrats did not prioritize a return to full employment; and the Republicans prioritized a non-return to full employment in the hope of weakening a Democratic president. Economic anxiety producing racial cleavage, yes. But it was political decisions, not trade or even technology that done it.

Note to Self: From Council on Foreign Relations: The Future of Democracy Symposium: Session Two: Economics, Identity, and the Democratic Recession: Look at me: Harvard Ph.D., Harvard B.A., Harvard B.A ancestors back to 1686 or whenever, Sidwell Friends School, and before that Cal Tech nursery school. But my wife grew up—first generation in her family to go to college—in a Portuguese neighborhood of Fall River, where everyone’s parents and grandparents worked in the textile mills. The textile mills of Fall River were stripped by Greensboro, North Carolina. They took the jobs away from the Portuguese millworker immigrants of Fall River. They stole that identity.

Martin Wolf: How Our Low Inflation World Was Made: "Where has this left us today? Not where we would like to be, is the answer, in three respects. First, while financial and household debt have fallen relative to incomes in mature economies, that is not true for debts of governments or non-financial corporates. Second, the transatlantic crisis triggered offsetting debt explosions elsewhere, notably in China. Third, crisis-hit economies are still far below pre-crisis trend output levels, while productivity growth is also generally low. Finally, the populist politics of left and right remain in full force. All this is in keeping with past experiences with big debt crises, which have always thrown long shadows into the future...

1. Ed Luce: Donald Trump’s Latest China Tariff Threat Is Just Bluster: "Trump has staked his reputation on eliminating the trade deficit with China. Most economists consider that goal to be unattainable—and undesirable.... Trump has boxed himself into a corner. He has promised something he cannot force China to deliver.... China has had two-and-a-half years of watching Mr Trump make extravagant threats that he fails to follow through.... Recent history suggests that all Mr Xi needs to do is make a few grand promises but keep the details hazy... to mollify Mr Trump...

2. Tim Duy: Labor Market, Wage Growth, Kaplan Capitulates on Inflation: "The unemployment rate has been at or below Fed estimates of the natural rate of unemployment for, well, literally years without any disconcerting inflationary pressures.... In real terms, wage growth has rebounded to its pre-recession pace, an under-appreciated event in my opinion...

3. Mark Thoma: Economist's View: Links (5/6/19)

4. (2013): The Great Depression from the Perspective of Today, and Today from the Perspective of the Great Depression

5. Tim Taylor: Did Disability Insurance Just Fix Itself?

6. Sean Owen: Common Probability Distributions: The Data Scientist's Crib Sheet

7. George Windholz (2001): Karl Marx's Paranoid Ideation in the Communist Manifesto: "Marx maintained that... European Powers... as represented by the Pope, the Tsar, Austria's statesman Metternich, and France's Guizot, haunted as they were by the spectre of communism, had allied themselves in order to exorcise that spectre. I propose that the view of communism as propounded by Marx during his Brussels exile discloses his paranoid ideation of grandiosity and suspiciousness as conceptualized by W. W. Meissner...

8. Paul Guzzo: They Were Standing at a Publix Register When Her Purse Fell. Her Derringer Fired and Hit Him: "Vernon Messier, 69, flinched and dropped, a video from the Land O’ Lakes supermarket shows. A bullet from his wife’s pistol struck him in the shin...

9. Francesco Giavazzi and Richard Portes: Alberto Giovannini 1955-2019

10. Kevin Lansing: Improving the Phillips Curve with an Interaction Variable: "The multiplicative combination of lagged inflation and the lagged output gap... appears better able to capture the true underlying inflationary pressure.... Including the interaction variable helps improve the accuracy of Phillips curve inflation forecasts over various sample periods...

11. Eric Ravenscraft: Utilize the "Steel Man" Tactic to Argue More Effectively: "The steel man requires a debater to find the best form of her opponent's argument and then argue with this.... It allows for fewer shady arguments, but the result is a stance that holds up to scrutiny.... Finding common ground first and offering counter information second may be more helpful in persuading your audience, if not your opponent directly...

12. Soonergrunt: "The way this story reads to me—Falwell didn't know Cohen. Didn't know who he was. So Cohen was sent to him to "fix the problem". I'm guessing National Enquirer had them, told Trump, who sent Cohen to deliver the blackmail message...

13. Robert Waldmann: The Critique of the Golgotha Program: "I don’t believe Marx’s promises about the withering away of the state and the joy of work (comparing our work efforts one can at least understand how Karl and I have very different views about work). I therefore interpret the Critique of the Gotha Program as implying, in practice, 'from each according to his ability, to each according to his needs, starting on the first of never'...

Wikipedia: Augustus: "In the beginning of his Annals, the Roman historian Tacitus (c. 56–c.117) wrote that Augustus had cunningly subverted Republican Rome into a position of slavery. He continued to say that, with Augustus' death and swearing of loyalty to Tiberius, the people of Rome simply traded one slaveholder for another. Tacitus, however, records two contradictory but common views of Augustus...

Hold it? It was the fault of the Gracchi that they were killed? That is really bizarre: Robert Merry: Like Rome, America Could be Ripe for Tyranny: "'Again and again', writes Callahan, 'following the precedent of the Gracchi, some ambitious politician, finding his agenda blocked along all constitutional routes, flouted tradition and used popular sentiment along with the threat or actual employment of mob violence to achieve his ends'...

J. Bradford DeLong (2000): America's Historical Experience with Low Inflation: Hoisted from 1999: "The inflation of the 1970's was a marked deviation from America's typical peacetime historical pattern as a hard-money country. We should expect America to continue to be a hard-money--low inflation--country in the future, at least in peacetime. The low rate of future inflation that we thus forecast changes the balance of macroeconomic risks and opportunities. The risk of debt-deflation-mediated recessions is somewhat higher because a low trend rate of goods-and-services price index inflation somewhat increases the chances of deflation. But it does not raise such risks as much as one might think...

The evidence for the position that minimum wage increase can often be an effective policy for equitable growth continues to pile up: Péter Harasztosi and Attila Lindner: Who Pays for the Minimum Wage?: "This paper provides a comprehensive assessment of the margins along which firms responded to a large and persistent minimum wage increase in Hungary. We show that employment elasticities are negative but small even four years after the reform; that around 75 percent of the minimum wage increase was paid by consumers and 25 percent by firm owners; that firms responded to the minimum wage by substituting labor with capital; and that dis-employment effects were greater in industries where passing the wage costs to consumers is more difficult. We estimate a model with monopolistic competition to explain these findings...

Eric Rauchway: The New Deal Was on the Ballot in 1932: "On February 22, 1933, just over a week before Roosevelt’s inauguration, Hoover wrote to Senator David Reed (R-PA) that '90% of the so-called new deal' consisted of inflationary measures, massive borrowing to build public works, and indefinite delay in balancing the budget...

For quite a long time now a conservative mode of American politics has been to find a despised other who can be despised to draw attention away from issues of economic well-being. Yet there is a peculiar resistance to naming this. John Holbo deals here with one particular dodge:

John Holbo: The Steelwool Scrub–A Fallacy: "It IS unfair to strawman a position by conflating it with its least thoughtful, most irrational, animus-afflicted exponents. Yet descriptively–sociologically–it’s absurd to steelman a socio-cultural order-or-group by conflating its practices and norms with unrepresentative, intellectual outliers. If you think the reason trans people struggle for respect, recognition, rights is that they are surrounded by well-meaning, rationally-convicted neo-Thomists, you’re nuts.... Spinning actually-existing bigotry as, ideally, the better angel of some natural law argument, is just a weird way to excuse what’s right there in front of you...

Harold James stabs his discipline in the back—fairly, I think. There should are a rule that any historian who opines needs to present a menu of five different historical analogies and parallels for their piece to be taken as a treasure for all time: Harold James: Stories That Can’t End Well: "The sheer depth of political and economic uncertainty turned historians into pundits whose critiques of conventional social science are overly biased toward random pet narratives. Worse, many historians have begun to lend their academic authority to policy prescriptions that are even more problematic than anything pre- or post-crisis economists ever proposed.... Peddling fallacious assertions about the centrality of sovereignty... historians have played a devastating role in precipitating the Brexit crisis. They would have British voters believe that leaving the European Union is no different than Henry VIII’s declaration of sovereignty in opposition to the Roman pontiff.... Historians... when they advance simple narratives that imply specific policy prescriptions, they are even more dangerous than social scientists...

Ah. Remembering trying to make American economic policy more sane back in the early 2010s frown those who weren't thinking clearly, or were thinking that it was time to make their political bones. I don't understand why we haven't gotten any mea culpas. But we have not. And at this stage I do not think that we will:

Paul Krugman: The Sabotage Years: "Republicans were up in arms, warning that the Fed’s policies would lead to runaway inflation. A Congressman named Mike Pence introduced a bill that would prohibit the Fed from even considering the state of the labor market in its actions. A who’s who of Republicans signed an open letter to Ben Bernanke demanding that he stop his monetary efforts, which they claimed would 'risk currency debasement and inflation'. And supposedly respectable Republicans engaged in conspiracy theorizing, suggesting that the Fed was secretly in league with the Obama administration. Paul Ryan and the economist John Taylor declared that the Fed’s policy 'looks an awful lot like an attempt to bail out fiscal policy, and such attempts call the Fed’s independence into question'. Of course, all these warnings were totally wrong...

I disagree here: our soft power has been blown up by George W. Bush's and Donald Trump's liking to come off as cartoon villains on the international stage. A large stock of social capital built up by Roosevelt, Truman, Eisenhower, Kennedy, Johnson, Ford, Carter, Reagan, GHWB, Clinton, and Obama has been trashed. Now we are just another normal nation. We need to figure out how to deal with this. Nye hopes that our attractive civil society will win through. But in the age of Trump our civil society is no longer attractive: Joseph Nye: American Soft Power in the Age of Trump: "Skeptics argue that such cycles show that soft power does not matter much; countries cooperate out of self-interest. But this argument misses a crucial point: cooperation is a matter of degree, and the degree is affected by attraction or repulsion. Fortunately, a country’s soft power depends not only on its official policies, but also on the attractiveness of its civil society. When protesters overseas were marching against the Vietnam War, they often sang 'We Shall Overcome', an anthem of the US civil rights movement. Given past experience, there is every reason to hope that the US will recover its soft power after Trump, though a greater investment in public diplomacy would certainly help...

Smart from Carmen Reinhart on inflation: Carmen M. Reinhart: Explaining Inflation Inertia: "Price-stability targets have proved elusive in countries like Argentina, where inflation is soaring, and Japan, which can't shake the specter of deflation.... The BOJ now holds about 50% of the outstanding stock of government bonds. This is no small achievement, as Japan’s government debt ratio, at 238% of GDP, is the highest in the world. And yet, despite these policies, inflation expectations five years out are still anchored close to 1%.... Argentina... inflation... has accelerate... to about 55%.... Pass-through from the exchange rate to the price level is only part of the story. And an overheated economy has played no role at all.... What can governments do to induce turning points in stubborn inflation expectations when central banks’ policies prove insufficient to the task?... Japan, convincing the private sector that higher inflation is the path of the future requires a break from the current practice of indexing public-sector wages to the previous year’s inflation. Bold increases in public-sector wages may provide the official signal.... As for Argentina... de-indexation requires significant reductions in real wages, starting with the public sector. The political difficulty of doing this (especially when the public sector is large, as it is in Argentina) is daunting...