Looking Backwards from This Week at 16, 8, 4, 2, 1, 1/2, and 1/4 Years Ago

stacks and stacks of books

Three Months Ago:

  • Cosma Shalizi (2011): Dives, Lazarus, and Alice: Weekend Reading: "The market clears, Alice is 11 cents better off, Dives enjoys a consumer surplus of $4999.89, and Lazarus starves to death in the street, clutching his dime.Nothing can be changed without making someone worse off, so this is Pareto optimal. And so, in yet another triumph, the market mechanism has allocated a scarce resource, viz., the turkey, to its most efficient use.... What makes this the most efficient use of the scarce resource? Why, simply that it goes to the user who will pay the highest price for it. This is all that economic efficiency amounts to. It is not about meeting demand, but meeting effective demand, demand backed by purchasing power...

  • Writing Bulls--- for the WSJ Op-Ed Page as a Career Strategy: The Nine Unprofessional Republican Economists: The extra quarter's worth of data from the new BEA NIPA release raises this, once again, to the top of the pile: Note the contrast between the path of investment, on the one hand, implicit in the growth forecast of the effects of the Trump-Ryan-McConnell tax cut that Robert J. Barro, Michael J. Boskin, John Cogan, Douglas Holtz-Eakin, Glenn Hubbard, Lawrence B. Lindsey, Harvey S. Rosen, George P. Shultz and John. B. Taylor, and, on the other hand, reality. If you are even 10% in the explain-the-world business—if you are even 1% in the explain-the-world business—such a sharp disjunction between what you had predicted and the outcome calls forth curiosity, interest, and explanations of why you think you went wrong and what your future research projects will be to figure it out.... Yet as I listen to each and very one of the Nine Unprofessional Republican Economists, all that I hear is: < crickets > ...

 

Six Months Ago:

  • U.S. Recession No Longer Improbable_: The next recession is unlikely to come as a response to an uptick in inflation that triggers a Federal Reserve shift from trend-growth-nurturing to inflation-fighting policy....The next recession is likely to come as a result of the revelation of an unexpected weakness and an unexpected shock to financial markets that causes a sudden, sharp "flight to safety".... The financial shock will be unanticipated. Investors, speculators, and institutions are generally hedged against possible shocks that are seen by the conventional wisdom as live possibilities.... The near-inverted yield curve, the low absolute value of nominal and real bond yields, and equity values that are now plausibly fairly-valued for the long-term tell us that financial markets in the U.S. are now pricing a recession as likely.... If that recession begins, the U.S. government will not have the tools to fight it.... For the first time in nine years, Americans and investors in America need to be prepared for not a probable but rather a not improbable economic downturn...

  • By Popular Demand: What Is “Modern Monetary Theory”?: Settled doctrine in the nations of the North Atlantic that the government has a responsibility to keep the macroeconomy in balance... [to] use fiscal policy—the purchase of goods and services, the imposition of taxes, and the provision of transfer payments—and monetary policy—the provision by the central bank to the system of those liquid assets called “money” and its consequent nudging up and down of interest rates and asset prices—to attempt to keep the circular flow of spending, etc., in balance with the economy‘s sustainable productive potential at the expected rate of inflation. Modern Monetary Theory says (1) that that is all there is to worry about, and (2) that fiscal policy should play the principal role in this balancing process...

  • Yes, There Are Individual Economists Worth Paying Respect to. But Is Economics Worth Paying Respect to?: Blush. To be one of fifteen good economists name-checked by Larry Summers genuinely makes my day—nay, makes my week. But this gets into a topic I have been worrying at for a long time now. And so let me try once again to say what needs to be said, for I do have to admit that, contrary to what Larry maintains, Fareed Zakaria does have a point when he says that "events have hammered... nails into the coffin of traditional economics" and that, while the question mark at the end is important, it is time to speak of "the end of economics?". Yes, there are very many good economists worth listening to. But does economics as a whole have any claim to authority, or is it better for outsiders' first reaction to be to dismiss its claims as some combination of ideology on the one hand and obsequious toadying to political masters on the other?...

  • Charlie Warzel: "A Honeypot For Assholes": Inside Twitter’s 10-Year Failure To Stop Harassment: "For nearly its entire existence, Twitter has not just tolerated abuse and hate speech—it’s virtually been optimized to accommodate it. With public backlash at an all-time high and growth stagnating, what is the platform that declared itself 'the free speech wing of the free speech party' to do? BuzzFeed News talks to the people who’ve been trying to figure this out for a decade...

  • Commonwealth Club: Annual Economic Forecast Event (January 25, 2019): Relevant Files: The right, rational response to this situation is for Pelosi, McCarthy, Schumer, and McConnell to strike deals and then pass them with veto-proof majorities. But McCarthy and McConnell are too scared of Trump and not concerned enough about the well-being of the country to do that...

 

One Year Ago:

  • The 1870 Inflection Point in Transport and Trade: An In-Take from "Slouching Towards Utopia": An Economic History of the Long 20th Century: Everyplace in the world was, as long as there were docks and railroads, cheek-by-jowl to every other place. Everyone’s opportunities and constraints, not, as before, just the consumption patterns of the elite, depended on what was going on in every other piece of the world economy.... And once a comparative advantage was established it tended to stick for a long time. There was nothing about British-invented automated textile machinery that made it work better in Britain than elsewhere. Yet Britain’ cotton textile exports rose decade after decade from 1800 to 1910, peaking at 1.1 billion pounds a year in the years before World War I.... If you could move goods you could also move and supply armies. Thus conquest, or at least invasion and devastation, became things that any European great power could undertake in nearly any corner of the world...

  • Why Was the 20th Century Not a Chinese Century?: An Outtake from "Slouching Towards Utopia?: An Economic History of the Long 20th Century": As Albert Feuerworker summed up the story of Kaiping in the 1959 Journal of Asian Studies: "Despite its pioneering achievements, Kaiping faltered... [like] other kuan-tu shang-pan enterprises in the late nineteenth century. The first was the lack of sufficient capital and the inability to raise more from domestic sources. The second was the unpropitious political environment into which it was born. Little aid could be expected from the tottering Manchu regime either in the form of financial assistance to compensate for the reluctance of private investors, or protection from foreign encroachment such as eventuated in British domination of this enterprise.... The contrast with the history of early industrial efforts in Meiji Japan is a striking one...

  • Teddy Roosevelt: "We Have Traveled Far...": How to Look on Our Predecessors with Charity and Justice_: "Men must be judged with reference to the age in which they dwell, and the work they have to do.... We have traveled far since [the Puritan's] day. That liberty of conscience which he demanded for himself, we now realize must be as freely accorded to others as it is resolutely insisted upon for ourselves. The splendid qualities which he left to his children, we other Americans who are not of Puritan blood also claim as our heritage.... We have gained some things that the Puritan had not—we of this generation, we of the twentieth century, here in this great Republic; but we are also in danger of losing certain things which the Puritan had and which we can by no manner of means afford to lose...

  • Jefferson’s Conversation with Washington, 10 July 1792, and What Came Before: Weekend Reading: Washington thought it was fine that Jefferson argued with Hamilton inside the continent, but that funding and stoking opposition to policies once Washington had decided was not kosher. Did Jefferson get that Washington was on to him?...

  • George Washington's Conviction That Thomas Jefferson Was a French Puppet..._: I have been looking for this for a while: Washington's judgment that Jefferson was, at best, not an American patriot but rather an agent of influence for the corrupt French Republic. It is thought that "John Langhorne" was not Thomas Jefferson, but rather Jefferson's favored nephew Peter Carr. The extent to which Carr was acting on his own rather than for Jefferson is not clear to me. Carr was certainly a "Jeffersonian"—and thus distance between him and Jefferson (like distance between Freneau and Jefferson) seems to me much more like plausible deniability than true divergence...

  • The Meiji Restoration: A Probable In-Take for "Slouching Towards Utopia?: An Economic History of the Long 20th Century": Meiji Japan did not have banks. It did have a government willing to fulfill a Gerschenkronian role as capital-mobilizer. And it also had some very wealthy and open merchant clans willing to move into industry: Mitsui, Mitsubishi, Sumitomo, Yasuda. In both of these efforts to substitute for the missing investment banking and tariff wall prerequisites for Allen's "Standard Model" of early industrialization, the "strong army" part of the slogan was more important than the "rich country" part. It is unlikely that the Meiji Restoration's military politicians imagined how useful for the civilian economy the communities of engineering practice they were trying to midwife into being would be. Their focus was on preparing the logistical tail to defend Japan and conquer an empire in the age of steel and steam.... The establishment, using imported machinery, of state-owned mines and factories could have been a disaster, as it had and has been in so many other times and places. But the Japanese government quickly swerved away, privatizing industrial establishments to businesses that had demonstrated managerial competence in the 1880s.... Structural change was low. Manufacturing was still only one-fifth of GDP in 1910. The leading industries were textiles, plus tea growing and manufacture. Japan in the decade of the 1900s was only a semi-industrial civilization. It had, however, accomplished something unique: transferring enough industrial technology outside of the charmed circles of the North Atlantic and the temperate-climate European settler economies...

  • Hoisted from the 2007 Archives: Dilemmas of Economists in Government: MaxSpeak, You Listen!: "J'ACCUSE: Professor N. Gregory Mankiw takes umbrage at the implication from some "bigshot at the left-wing thinktank Economic Policy Institute" (that would be labor market genius Jared Bernstein) that he is 'a hypocrite'. But Jared did not use that word, and his remark was not personal..." Here's Jared Bernstein: "Predicting with a Handicap: Why are Economists’ Predictions So Often Wrong?: Economists sometimes serve vested interests, and will change their views accordingly. The best example is also one of the best economists, Greg Mankiw. This textbook-writing Harvard prof was Bush’s chief economist for awhile, and during his confirmation hearing and subsequent tenure at the White House, he constantly defended Bushonomics, including supply-side beliefs that he once argued were the musings of 'cranks and charlatans'. Now, Mankiw may well have felt he could do the nation more good if he were working from the inside, trying to nudge the administration’s economic policy in a better direction (if so, he failed)..." Let me call this one for Jared: Mankiw was indeed correct in thinking that he personally could do more good for the country and the world working inside than if he were to march up to Dick Cheney, tell him "you have to stop saying that tax cuts raise revenues," and so get fired. But the Bush administration did frequently argue that tax cuts raised revenue. And there is the much harder question: is it worth the sacrifice of the economics profession's outside credibility and the further confusion of the public that is entailed when good economists defend bad policies on the outside that they are working to change on the inside?I don't know the answer to that...

 

Two Years Ago:

  • Reading Notes for Robert Skidelsky: "Keynes: A Very Short Introduction"...: John Maynard Keynes was brought up a classical liberal and a classical economist... believed in free trade, economic progress, cultural uplift, and political reason... found himself watching as the classical economic mechanisms he had been taught to admire all fell apart.He then picked himself up. After World War I Keynes used what power he had to—don't laugh—try to restore civilization... spent the rest of his life arguing that, if only statesmen would be farsighted and clever enough, they could put Humpty-Dumpty back together again: the world could get back to a good world of free trade, economic progress, cultural uplift, and political reason. He undertook a brave if losing struggle against the approaching Great Depression, against political insanity, and against the Nazi Party's attempted revenge for the German defeat in World War I. And when he lost in the 1920s and the 1930s he picked himself up yet again, and tried yet again in the mid-1930s and thereafter to lay the groundwork for future victories for prosperity, rationality, and technocracy. And, in the end, he succeeded...

  • A Teaching Note on Barro's (2005) "Rare Events and the Equity Premium" and Rietz's (1988) "The Equity Premium: A Solution": Barro's paper follows Rietz (1988) and uses the possibility of future disastrous falls in economy-wide consumption and in payouts on equities to explain the high premium equity return relative to bonds, and the low real return on bonds as well....Fear of future catastrophe raises desired savings to carry purchasing power forward in time in case of need. But, since assets are in fixed supply... for risk-aversion parameters greater than one... a greater fear of future catastrophe is a source of high, not low, price-dividend and price-earnings ratios. THIS CAN ONLY WORK BECAUSE THERE ARE NO BONDS IN THE MODEL: SAFE ASSETS ARE IN ZERO SUPPLY: THE ONLY WAY TO INSURE AGAINST A BAD FUTURE IS TO BUY RISKY EQUITIES NOW IN AN ATTEMPT TO MOVE PURCHASING POWER FORWARD IN TIME!!!!.... The implicit story is that stock market multiples were much higher in 1999 and 1929 than they were in 1982 and 1922 because the likelihood of a macroeconomic catastrophe greater than the Great Depression was much higher in 1999 and 1929 than it was in 1982 and 1922. Hence people were desperate to save for the future to insure against the greater likelihood of macroeconomic catastrophe. And that was the force underpinning the 1990s stock market boom...

  • World War II at the Operational Level: The Fall of France 1940 (Prompted by the Forthcoming Release of "Dunkirk")_: Three days into the battle it was clear that a major Nazi attack was coming through the Ardennes, and the French began to respond.... The French failed in tactics—the comparative battlefield casualties make that clear. The French failed in strategy—opposing the main Nazi attack with the weak Ninth Army while leaving the stronger formations to the north vulnerable to encirclement. Yet the French threw 800 tanks in four armored divisions plus between six and ten infantry divisions in front of the Nazi breakthrough in plenty of time to make a difference—yet (de Gaulle's division aside) they were completely ineffective in a running fight against seven Nazi panzer divisions, which had no more tanks and somewhat fewer soldiers than the French reserves committed to oppose them. Winston Churchill had kissed hands and taken over as First Lord of the Treasury on May 10, 1940.... On the sixteenth Churchill crossed the English Channel.... "I then asked: 'Where is the strategic reserve?' and, breaking into French, which I used indifferently (in every sense): 'Ou est las masse de manoeuvre?' General Gamelin turned to me and, with a shake of the head and a shrug, said: 'Aucune'.... Two new factors that I had never expected... an irresistible incursion of armoured vehicles and secondly NO STRATEGIC RESERVE.... [O]ne can have, one must always have, a mass of divisions which marhes up in vehement counter-attack..." What Churchill did not realize at the time—and either did not learn later or wanted to gloss over when he wrote his memoirs—is that the French had possessed a mobile strategic reserve with more tanks, guns, trucks, and troops (and planes) than the Nazi breakthrough force. That strategic reserve had been committed to contain the breakthrough. That strategic reserve had been, operationally, wholly ineffective—except for Charles de Gaull's Fourth Armored Division. But before we scorn the French army of 1940 as cheese-eating surrender monkeys, remember what happened to the U.S. 106th Infantry Division when Hitler’s Third Reich was on its very last legs, and what happened to Major General Lloyd Fredendall’s U.S. II Corps at Kasserine Pass. Everybody who faced the Nazis did more-or-less equally badly, in their initial encounters at least...

  • What Should We Be Ready to Do After the Next Nuclear Fire?...: "We are highly likely to lose a city to nuclear fire over the next half-century. Some not-too-smart major will see what he expects to see, or some god-maddened colonel will think he has received a holy command, or some ignorant general will believe that the logic of deterrence is failing but that the situation can be rescued if he strikes first.... Let's look on the bright side: the aftermath of the first post-Nagasaki use of nuclear weapons to kill humans will be a moment of maximum political plasticity: a moment when swift global action in the heat of the moment can create institutions to govern the world. What then should be done? If we argue and debate in the aftermath of nuclear fire, we will lose a unique opportunity to shape events so that there will be no second post-Nagasaki use of nuclear weapons. We should have our arguments and debates now, so that we will know what to do when the moment strikes...

  • Monday Smackdown: Republican Economists Burn Yet More of Their Reputations Department...: All I can say is: unprofessional.... John F. Cogan, Glenn Hubbard, John B. Taylor, and Kevin Warsh: ON THE PROSPECTS FOR HIGHER ECONOMIC GROWTH http://www.hoover.org/sites/default/files/research/docs/on_the_prospects_for_higher_economic_growth_0.pdf: "The data are not supportive of the popular contention that the United States is in the midst of a long-term decline in productivity growth..." I... want to draw a simple line: economists who grossly misrepresent what the basic data say are not economists of reputation. How do Cogan, Hubbard, Taylor, and Warsh make their case? They don't do any form of estimation: they simply draw arrows—arrows that do not match any trends that could be estimated—to make you think the data trends are other than they are...

  • Ten Years and Four Days Ago at Grasping Reality: July 27, 2007: Negative: Michael Kinsley's admission that he is a no-trick pony: Michael Kinsley: REVIEW OF CHRISTOPHER HITCHENS http://www.nytimes.com/2007/05/13/books/review/Kinsley-t.html: "A statement that contradicts everything you have ever said before is considered for that reason to be especially sincere, courageous and dependable. At the _New Republic in the 1980s, when I was the editor, we used to joke about changing our name to 'Even the Liberal New Republic', because that was how we were referred to whenever we took a conservative position on something, which was often. Then came the day when we took a liberal position on something and we were referred to as 'Even the Conservative New Republic'. As this example illustrates, among writers about politics, the surprise technique usually means starting left and turning right. Trouble is, you do this once and what’s your next party trick?...

  • Monday Smackdown: Every Time I Try to Get Out, They Pull Me Back In... Clive Crook Edition_: So after a pep talk from Noah Smith Saturday night about how it is time to become kinder and gentler—to look for opportunities to praise for being smart people who in the past I have criticized for being really really really dumb—I wake up Monday morning, and I wince because Duncan Black has been reading the once-thoughtful Clive Crook again. "People is weird... 'let's shoot ourselves in the face just to prove our gun works'..." is really four standard deviations kinder and gentler than this deserves...

 

Four Years Ago:

  • Depression's Advocates: One major reason for the enormous failure of Brussels and Frankfurt to handle the Greek crisis has been their attachment to the wrong model of how the economy works. Thus they have constantly and severely underestimated the gravity of the situation. And they have constantly recommended policies that have made matters much worse.... The key reason for the failure of forecasts is, of course, Brussels's and Frankfurt's—and Washington's, both at the IMF and in the Obama administration—underestimate of the simple Keynesian multiplier at the zero lower bound on interest rates. Yet the failure of ever-greater austerity to summon the Confidence Fairy either for Greece or the eurozone as a whole has not provoked any rethinking of what proper technocratic policy would be in Brussels or Frankfurt...

 

Eight Years Ago:

  • Is There Serious Money to Be Made by Shorting Long Treasuries? Probably Not...: The upshot? This: Shorting long Treasuries is a bet that (a) short-term rates will exceed 5% on average by a healthy margin once they normalize, or a bet that (b) they will start normalizing very soon now, or a bet that they will overshoots on the way down...

  • Dean Acheson, FDR's Wishes, and the Origins of World War ii: I am always intrigued by Dean Acheson's account in Present at the Creation of how the U.S. escalated the Pacific crisis in 1941.... Roosevelt, it appears, had decided against embargoing oil exports as too provocative. Roosevelt, however, was willing to freeze Japanese assets... [so] oil was embargoed unless Japan wished to pay for oil with non-frozen resources, which it did not.... Did Roosevelt know about this state of affairs? That has never been clear to me...

  • Contractionary Fiscal Policy Is Contractionary Watch: Great Britain Edition: Remember those claims that Britain was being hammered by winter, and that the British economy would super-snap-back once the snow melted? I do...

  • Sixty-Odd Slides

  • Department of "Huh?!": Libertarians Forecast Inflation Department: Timothy B. Lee: "Two years ago, my friend Matt Yglesias ... irritated [me]... and [I] made a note to myself to check back in a few years and see how things turned out.... I don’t think we have enough data yet to reach a decisive verdict. It’s possible that that the most recent measurement of 3.6 percent inflation portends a major price rise over the next few months—though the 'core' inflation rate of just 1.6 percent suggests otherwise..." Not just the core inflation rate: the wage inflation rate, the level of the unemployment rate, financial market forecasts of inflation, forecasts of inflation by private-industry agents who make their money off of clients who pay for their forecasts rather than politicians who pay for air cover, et cetera, et cetera, et cetera. Many things are "possible" in this wide green world. But I am having a hard time right now thinking of a bet that has a lower expected payout than the bet that the most recent price-inflation number portends a rise in inflation over the next few months back to, say, Reagan-Bush administration levels...

  • Dr. Pangloss and Serial Correlation in Asset Values: Suppose the smart-money traders are risk-averse and credit-constrained. And suppose that there are some dumb-money traders who think the future will be like the past... other traders who believe that they are gambling with the government's money... other traders who used to be the smart nimble money and who think that they are still... other traders who really are the smart nimble money. Then the law of iterated expectations is unlikely to hold. Instead, you are more likely to get a price pattern that looks more like Paul Krugman's Pangloss value—what is the best that things might possibly be—or a weighted average of iterated rational expectations and Pangloss value...

  • Economists' Views of Fiscal Policy: RetCon Department_: The argument that Sumner attributes to Cochrane and Fama (and, wrongly, to Barro) is not a coherent argument: if you say "if I assume that fiscal policy does not affect nominal spending then fiscal policy does not affect nominal spending, and so I have proved my case" you haven't made an argument at all.... A coherent argument would have to succeed in arguing both.... Even though the government is a very large organization that does not need to back each dollar of its spending by the same amount of transactions cash money as private households, when the government ramps up its spending the extra transactions cash balances it needs to hold will lead to an equal reduction in the transactions cash balances in the hands of households.... Even though right now short-term safe nominal interest rates are zero and a great many households and businesses are holding cash as a safe savings vehicle rather than treating it as part of their transactions cash balances... bond sales by the Federal Reserve will not lead households and businesses to swap out that cash in their portfolio for Treasury bonds and so raise the transactions money stock. Cochrane and Fama, of course, do not make either of those arguments convincingly. They do not make either of those arguments at all...

  • Obama Has Always Been for Premature Fiscal Austerity: January 7 [2009]: TAPPER: "Your team has talked about the stimulus package being 675 to 775 billion. But at the same time... you're going to distribute a memo in which economists say it should be between 800 billion and 1.3 trillion. How do you reconcile that difference...?" OBAMA: "Well, we are still in consultation with members of Congress about the final size of the package. We expect that it will be on the high end of our estimates, but [it] will not be as high as some economists have recommended because of the constraints and concerns we have about the existing deficit..."

  • Fiscal Policy During the Great Depression: If Congress in 1931 passes a large benefit program for war veterans, and if Hoover vetoes it, and if Congress overrides the veto, and if the money is spent, does Hoover increase spending?...


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