Worthy Reads Elsewhere:

1. This paper seems to rest on a distinction between "removing inefficiencies" and "transformational growth" that they do not theorize, yet should. That very few of those countries that have grown faster than the North Atlantic economies over the past two decades are on anything like Korea's trajectory is surely true. But why not? Why doesn't the removal of one inefficiency lead to a chain-reaction removal of others?: Paul Johnson and Chris Papageorgiou: It’s too Soon for Optimism about Convergence: "Many analysts... claim[ing] that poorer countries are catching up with advanced economies.... [But] most of the economic achievements in developing economies have been the result of removing inefficiencies which are merely one-off level effects. While these effects are not unimportant and are necessary in the process of development, they do not imply ongoing economic growth...

2. Picking winners—seeing which are the industries in which subsidizing efficient producers will produce large externalities via the creation of communities of engineering practice—has never been that difficult. It has been actually winning that is difficult: creating the institutional and political-economic discipline so that the subsidies flow where they should, rather than where the politically powerful wish them to flow. What is nice about Cherif and Hasanov is that they show where and have some good suggestions as to how to make this more general than it has been: Andrew Batson: Rediscovering the Importance of Export Discipline: "The new IMF working paper on industrial policy, by Reda Cherif and Fuad Hasanov, has gotten a lot of notice.... But for anyone who has already done some reading on the history of successful Asian economies, particularly Taiwan and South Korea, it is not exactly surprising.... Brad DeLong’s 2010 book with Stephen Cohen, The End of Influence: 'Americans like to say scornfully that industrial policy is about “governments picking winners.” Picking winner industries is not that hard—even for governments...

3. It is interesting to note that Adam Smith's one explicit use of the phrase "Invisible Hand" in his Wealth of Nations is not a situation in which the competitive market equilibrium is Pareto-optimal. It is of a situation with two market failures—a home bias psychological failure among the merchants of Amsterdam, and agglomeration economies for mercantile activity in Amsterdam. And the two offset each other: if merchants were rational, the free-market equilibrium would ternate an inefficient sacrifice the agglomeration economies. If the agglomeration economies were absent, psychological home bias would lead to an inefficient concentration of activity: Glory Liu: How the Chicago School Changed the Meaning of Adam Smith’s ‘Invisible Hand’: "For Friedman and Stigler, economics’ scientific power came from its ability to predict outcomes based on two central insights... self-interest... [and,] of course, the invisible hand.... What makes the Smith of Milton Friedman and George Stigler so... problematic... is that they 'economized' Smith in a way that obscured if not precluded the relevance of his moral philosophy and political theory...

4. The public sphere of discussion and debate definitely feels a lot more broken than it gelt back in the 1980s. But I have not yet seen anybody put forward a plausible explanation for why. A number of people say: increased wealth inequality raises the stakes at risk. But weren't the stakes at risk already high?: Paul Krugman: The Zombie Style in American Politics: "Russia didn’t help Donald Trump’s presidential campaign. O.K., it did help him, but the campaign itself wasn’t involved. O.K., the campaign had a lot of Russian contacts and knowingly received information from the Russians, but that was perfectly fine.... We’re not even talking about an ever-shifting party line; new excuses keep emerging, but old excuses are never abandoned.... I first encountered this... over the issue of rising inequality.... The answer was multilayered denial. Inequality wasn’t rising. O.K., it was rising, but that wasn’t a problem. O.K., rising inequality was unfortunate, but there was nothing that could be done about it without crippling economic growth. You might think that... at least that once you’d managed to refute one layer of the argument... you could... move on to the next one. But no: Old arguments, like the wights in Game of Thrones, would just keep rising up after you thought you had killed them. And this is still going on...

5. A book about equitable growth I have jut added to my must-read list. No, I have not read it yet: Jonathan Gruber and Simon Johnson: Jump-Starting America

6. Smart, interesting people for WCEG leader heather Boushey to interact with. She now has an new, extra position: The New School SCEPA: SCEPA's Faculty & Senior Fellows: "Heather Boushey is the Executive Director and Chief Economist at the Washington Center for Equitable Growth and co-editor of a volume of 22 essays about how to integrate inequality into economic thinking, After Piketty: The Agenda for Economics and Inequality.... She received her doctorate in economics from The New School for Social Research and her bachelor’s from Hampshire College...

7. It's not a disconnect between utility and happiness, its a disconnect between revealed preference and happiness. And a disconnect between revealed preference and happiness is properly solved via educating people to become their best selves—I do not think it poses grave philosophical conundrums: Noah Smith: What We Want Doesn’t Always Make Us Happy: "Facebook users in order to get them to deactivate the Facebook app for one or two months. They found that the median amount was $100, and the average was $180 (the latter being larger because a few users really loved Facebook). This suggests that Facebook, which is free to use, generates a huge amount of utility—more than $370 billion a year in consumer surplus in the U.S. alone. This bolsters the argument of those who believe that free digital services have added a lot of unmeasured output to the global economy. But Allcott et al. also found that the people who deactivated Facebook as part of the experiment were happier afterward...

8. In the absence of global warming such a 95%-ile cyclone would have a maximum windspeed at landfall of 220 km/hr rather than 240: Hilzoy: "'With winds expected to be 240 kilometers per hour (150 mph) at landfall,: Tropical Cyclone Fani would be the strongest storm to hit the region since a similar system struck Odisha in 1999, resulting in at least 10,000 deaths.... A storm surge in excess of 6.5 feet is likely to occur in some locations, with the surge affecting millions in low-lying areas. The Bay of Bengal is notorious for allowing storms like this one to pile huge amounts of water into highly populated areas'...

9. Sam Bell recalls this from two years ago. The Bernanke and the Yellen Feds are, I think, going to be judged as harshly as the Burns Fed of the 1970s for assuming that they knew the state and structure of the economy. The more tentative, more willing to gather information Greenspan Fed of the 1990s looks much much better in retrospect: Sam Fleming: Is It Finally Time For a Pay Rise for American Workers?: "John Williams... San Francisco Fed president, says that while inflation may have been weak recently, this should not detract from the bigger picture. “It’s not like inflation is moving in the wrong direction or is out of sync with what you’d expect for where the economy is,” he said last month. 'We have gotten rid of all the slack'...

10. I confess that the normal thing to do would be to give the 737MAX a de novo safety review, which it would flunk, and then shut down the value chain. Let Airbus have the business. But there is a large margin of safety in commercial aviation. And with the value chain setup, more pans can now be made cheap. Plus there are those planes already made now on the ground. I do not know what I would do if I were king of the world: David Fickling: Boeing's 737 Max Defense Is Poor Crisis Management: "We can expect Boeing Co.’s treatment of its two 737 Max crashes to join the syllabus–as an example of what not to do. Engineers at the planemaker discovered problems with the aircraft’s angle-of-attack sensors within months of the model’s first delivery, but didn’t share its findings with airlines, regulators or even senior management until much later, the company said Sunday. That we’re still getting incomplete details of the situation–almost two years after the problems were first found, and six months after the Lion Air crash last October that brought it to wider attention–is an almost perfect inversion of the Tylenol lesson...

    equitablegrowth #noted #weblogs #2019-05-09