Fairly Recently: Must- and Should-Reads, and Writings (December 27, 2019)...

6a00e551f080038834022ad3b05124200d

MUST OF THE MUSTS:

  1. Looking forward to the next recession, and to the unwillingness of politicians to reserve fiscal space for fighting it, makes Keynes message more urgent than ever: Paul Krugman: Introduction to Keynes's General Theory https://delong.typepad.com/sdj/2006/03/krugmans_intro_.html: 'In the spring of 2005 a panel of “conservative scholars and policy leaders” was asked to identify the most dangerous books of the 19th and 20th centuries.... Charles Darwin and Betty Friedan ranked high on the list. But The General Theory of Employment, Interest, and Money did very well, too. In fact, John Maynard Keynes beat out V.I. Lenin and Frantz Fanon. Keynes, who declared in the book’s oft-quoted conclusion that “soon or late, it is ideas, not vested interests, which are dangerous for good or evil,” would probably have been pleased.... It’s probably safe to assume that the “conservative scholars and policy leaders” who pronounced The General Theory one of the most dangerous books of the past two centuries haven’t read it. But they’re sure it’s a leftist tract, a call for big government and high taxes.... The arrival of Keynesian economics in American classrooms was delayed by a nasty case of academic McCarthyism. The first introductory textbook to present Keynesian thinking, written by the Canadian economist Lorie Tarshis, was targeted by a right-wing pressure campaign aimed at university trustees. As a result of this campaign, many universities that had planned to adopt the book for their courses cancelled their orders, and sales of the book, which was initially very successful, collapsed. Professors at Yale University, to their credit, continued to assign the book; their reward was to be attacked by the young William F. Buckley for propounding “evil ideas.” But Keynes was no socialist—he came to save capitalism, not to bury it. And there’s a sense in which The General Theory was... a conservative book.... Keynes wrote during a time of mass unemployment, of waste and suffering on an incredible scale. A reasonable man might well have concluded that capitalism had failed, and that only... nationalization... could restore economic sanity.... Keynes argued that these failures had surprisingly narrow, technical causes... because Keynes saw the causes of mass unemployment as narrow and technical, he argued that the problem’s solution could also be narrow and technical: the system needed a new alternator, but there was no need to replace the whole car...

  2. Josiah Ober: Agamemnon's Cluelessness https://delong.typepad.com/files/ober-agamemnon-selections.pdf: 'For Aristotle, ethics and politics must take into account “merely living” (zên) as the foundation for the end of living well (eu zên)... in a way... cognizant of the kinds of expertise necessary for living, without losing sight of the ultimate goal of living well. The domain of expertise... concerned with natural material conditions and forms of authority (especially master-slave) required by the end of self-sufficiency is designated oikonomia. But the definition of oikonomia and especially its relationship to money-making (chrêmatistikê) is, Aristotle says, contested.... Among the many goals of Politics book 1 is to put chrêmatistikê–as expert knowledge of a particular relationship among production (poiêsis), exchange (allangê/metablêtikê), and consumption/possession (ktêsis), all characteristically involving coined money—into the normatively correct place in his naturalized hierarchy of value. The critical conclusion is that chrêmatistikê (or one specific type of chrêmatistikê) is a subordinate part of oikonomia. It is not “according to nature” (kata phusin) but rather a technê arising from practical experience (empeiria). It aims the possession and increase of wealth, at accumulation of money, as an end. That accumulation is by its internal logic unbounded and unconstrained, insofar as wealth denominated in monetary terms has no natural limit. Chrêmatistikê thus is a matter of maximizing a single resource (one thought to give access to all other resources), rather than optimizing or satisficing in respect to other values. It is at once contrary to the true end of human existence, a prevalent approach to the management of material goods, and (at least potentially) an essential instrument for both the oikonomos and the politikos. Among the delicate tasks of book 1 of the Politics is, then, to demonstrate that Aristotle knows enough about this dangerous and vulgar (phortikon) instrument to specify its proper uses, while avoiding appearing to honor it as a science worthy of a detailed treatment. Much of Politics book 1.8-11 is devoted to sorting out the contested relationship between chrêmatistikê and oikonomia...

  3. I object to Doug Jones's characterization of the past 100,000 years. It is true that wild mammal biomass is only 1/6 of what it was before the Anthropocene. But total mammal biomass is four times what it was. As far as TEAM MAMMAL biomass is concerned, we have been excellent player-coaches. Doug Jones: 7 Billion | Logarithmic History https://logarithmichistory.wordpress.com/2019/12/26/7-billion-2/: 'The biomass of wild mammals (terrestrial and marine) is only about 1/6 of what it was before humans came on the scene, and total plant biomass is about ½ of what it was before humans, largely as a result of deforestation...

  4. It is well known that systems in which there is too much feedback and too little reliance on fundamentals become unstable: I believe that this is how nicotine and caffeine and chocolate work in their evolved function as nerve poisons for bugs: excite the neurons to fire more often, and rational coordination breaks down, and the bugs that ate the tobacco leaves die. Here we are the bugs, and social media is our tobacco leaf: Charles Stross: Artificial Intelligence: Threat or Menace? http://www.antipope.org/charlie/blog-static/2019/12/artificial-intelligence-threat.html: 'Today's internet ads are qualitatively different from the direct mail campaigns of yore. In the age of paper, direct mail came with a steep price of entry, which effectively limited it in scope—also, the print distribution chain was it relatively easy to police. The efflorescence of spam from 1992 onwards should have warned us that junk information drives out good, but the spam kings of the 1990s were just the harbinger of today's information apocalypse. The cost of pumping out misinformation is frighteningly close to zero, and bad information drives out good: if the propaganda is outrageous and exciting it goes viral and spreads itself for free. The recommendation algorithms used by YouTube, Facebook, and Twitter exploit this effect to maximize audience participation in pursuit of maximize advertising click-throughs. They promote popular related content, thereby prioritizing controversial and superficially plausible narratives. Viewer engagement is used to iteratively fine-tune the selection of content so that it is more appealing, but it tends to trap us in filter bubbles of material that reinforces our own existing beliefs. And bad actors have learned to game these systems to promote dubious content. It's not just Cambridge Analytica I'm talking about here, or allegations of Russian state meddling in the 2016 US presidential election. Consider the spread of anti-vaccination talking points and wild conspiracy theories, which are no longer fringe phenomena but mass movements with enough media traction to generate public health emergencies in Samoa and drive-by shootings in Washington DC. Or the spread of algorithmically generated knock-offs of children's TV shows proliferating on YouTube that caught the public eye last year...

  5. Rana Foroohar: America’s Competitiveness Problem https://www.ft.com/content/419b6a42-2254-11ea-92da-f0c92e957a96?segmentid=acee4131-99c2-09d3-a635-873e61754ec6: 'A dysfunctional dance between business and politics is at the root of the country’s woes: Carly Fiorina, the former Republican presidential candidate and Hewlett-Packard boss, made news last week when she gave voice to a hypocrisy common in the American business community. She insisted that it was “vital” that President Donald Trump be impeached. Yet she wouldn’t rule out the possibility of voting for him, depending on “who the Democrats put up”. She’s presumably referring to the possibility of an Elizabeth Warren candidacy. I understand why people like Ms Fiorina are allergic to any wealth-distributing progressive. But business people who’ve supported Mr Trump because of cuts to corporate taxes or promises of deregulation are playing a sucker’s game. They are also part of a bigger dysfunctional dance between business and politics that is explored in a new Harvard Business School report on US competitiveness. More accurately, the report focuses on an increasing lack of competitiveness, evidenced by everything from pessimism about America’s medium- to long-term growth prospects, the divide between the fortunes of business and workers, to the country’s declining fiscal position and skills gap.... Business itself is another big reason for government gridlock, since it has “funded, perpetuated, and profited” from political dysfunction. Business was part of the diabolical process of gerrymandering that has led to the partisan redrawing of voting districts.... Yet business stubbornly refuses to accept that it is part of the problem. Survey results show that most business leaders believe that corporations influence politics in ways that erode not only democracy but the competitiveness of the economy as a whole. But most deny that their own companies are at fault.... In 2016, too many people in important leadership positions paid to elect Mr Trump. Many more (though not all) have stayed quiet as he has taken a wrecking ball to the postwar order because they knew that, in the short term, they’d get tax changes they wanted, not to mention a highly profitable, though unproductive, asset bubble. In exchange for that, we also got a trade war, an immigration debacle, and a crisis of the rules-based order that underpins corporate America’s own license to operate. Not a great return on investment. The complicity of business in the US in the current system of money politics is reaching a crisis point. My plea to the C-suite? Don’t follow Ms Fiorina and try to have it both ways in 2020...

  6. Hank Reichman: On Blacklists, Harassment, and Outside Funders: A Response to Phil Magness https://academeblog.org/2017/04/11/on-blacklists-harassment-and-outside-funders-a-response-to-phil-magness/: 'In a recent series of tweets Magness repeatedly accused UnKoch of being Soros-funded (they are not, although I’ll bet they’d like to be) and, more ominously, of being “Soviets” or even “Stalinists.” Here’s one such tweet: “Things that strongly correlate: 1. support for UnKoch My Campus. 2. posting sentimentalism for the Soviet Union on social media.” (March 10) Here’s another: “A good expose of the type of ‘journalism’ produced by the Soviets in the UnKoch crowd:” (March 21) And then there’s the series of tweets beginning, so far as I can tell, with a Magness message to UnKoch charging that “there’s plenty of overt Soviet sympathizing in your organization to historically contextualize you with them.” (March 24)  This was followed by a tweet later that day claiming that “Your own co-founder is quite the fanboy of genocidal Soviet types” offering as proof a tweet that reveals how UnKoch co-founder Ralph Wilson participated in the carving of a Halloween pumpkin with the faces of Marx, Engels, and Lenin!  How damning! There’s more like that. Of course, to call any of the five young UnKoch staffers “Soviet” is totally ludicrous, since looking at their photographs online I’m pretty sure they were no more than children, and perhaps not yet born, when the Soviet Union collapsed in 1991.  As a scholar of Soviet history myself, I can assure Magness that the Soviet Union is no more and that Communism (in any meaningful sense) is dead.  But it’s not funny, since this sort of red-baiting recapitulates the kind of activity that made blacklisting so dangerous in the 1950s.  Although I don’t seem to agree with Magness about much, having read many of his comments I had hoped he would be above such base crudity...

  7. Wolfgang Münchau: Austerity, Not the Populists, Destroyed Europe’s Centre Ground https://www.ft.com/content/be3ca48a-2344-11ea-b8a1-584213ee7b2b: 'From Brexit to fiscal policy, the EU’s largest member states have seen the mainstream wrongfooted: There were tell-tale signs early on. In 2009, Peer Steinbrück, a former German finance minister and later the Social Democrats’ candidate for chancellor, introduced the constitutional balanced budget rule. This later gave rise to Germany’s permanent fiscal surpluses and under-investment in critical infrastructure. In a joint study, Germany’s employers and trade unions recently put the investment shortfall at a staggering €450bn. So it is unsurprising that the SPD has lost political support during the years of its grand coalition with Angela Merkel’s Christian Democrats. In 2012, Italy’s government of technocrats, led by Mario Monti, imposed procyclical austerity in the middle of a recession. The goal was to prove that Italy was a good follower of the eurozone’s fiscal rules. The country has still not fully recovered from that shock. In 2014, François Hollande, the former French president, outed himself as a rightwing supply-sider when he cited Say’s law—that supply creates its own demand. Since then his Socialist party has in effect disappeared as a political force, along with its old rivals on the centre right. In late 2015 in the UK, I overheard a group of pro-Remain politicians, academics and commentators persuading themselves that the easiest way to win the forthcoming Brexit referendum would be to scare the hell out of the electorate. We all know how that went. What these disparate stories have in common is that they paint a picture of the decline of the political centre in Europe. I consider this, not the rise in populism, to be the main development in the EU’s largest member states. If there was one common policy that accelerated that trend, it was austerity. We have come to judge austerity mainly in terms of its economic impact. But it is the political fallout from public spending cuts that is most likely to persist. Austerity as a policy is the consequence of a poor understanding of economics coupled with a self-righteous mind and a tendency to spend too much time with your chums at places like Davos...

  8. Blogging: What to Expect Here... https://www.bradford-delong.com/2019/12/blogging-what-to-expect-here.html: The purpose of this weblog is to be the best possible portal into what I am thinking, what I am reading, what I think about what I am reading, and what other smart people think about what I am reading: "Bring expertise, bring a willingness to learn, bring good humor, bring a desire to improve the world—and also bring a low tolerance for lies and bullshit..." — Brad DeLong...

  9. What Is the Political-Economic Agenda After Piketty? https://www.bradford-delong.com/2019/12/what-is-the-political-economic-agenda-after-piketty.html: Introduction: Let me write, overwhelmingly, about inequality understood as inequality between people who regard themselves as members of a common culture, economy, nation. There is the separate issue of inequality between the different cultures, economies, nations that make up the world, but let me leave that for the very end, and then deal with it only briefly...


  1. Christopher Pissarides: Why Worry About Automation? https://www.project-syndicate.org/commentary/digital-automation-impact-on-jobs-poverty-inequality-by-christopher-pissarides-2019-11: 'The impact of today’s digital technologies on the labor market raises three questions. Will there be enough jobs for workers to do? Where will these jobs be? And will the compensation be high enough to avoid an increase in poverty and inequality?... Fear of technological unemployment persists because it is rooted in uncertainty about new job creation. New machines’ capabilities enable us to identify the jobs at risk, but not the jobs yet to emerge.... The challenge that all new technologies pose is not that they create too few jobs, but rather that too few workers have the skills to fill them.... The jobs threatened in the early stages of robotics and artificial intelligence were routine or relied on processing data. Moving big boxes in warehouses, or loading agricultural produce onto trucks, was easily mechanized. Data-processing jobs could be carried out by AI software; a search engine and a few key words could easily replace a paralegal who searches court records for relevant precedents. These properties led to the polarization of employment, challenging workers to shift to jobs that were either complementary to the new technologies, such as computer programming or robotics, or to jobs that could not be programmed, such as management consultancy or nursing care.... The sectoral employment transition is easier where the educational system teaches a broad range of skills, rather than encouraging specialization from an early age, and where flexible labor markets have good retraining facilities. Access to finance also is essential in facilitating the transition.... The third question, about inequality, is more difficult to address. Economics is good at providing unambiguous answers to questions about the efficiency of labor markets. The question of inequality, by contrast, is partly about political choices.... The key question, however, should not be whether some people become very rich, but whether the wages of lower-skill people are sufficiently high to avoid poverty.... Companies in the digital era have a choice: They can use technology to substitute capital for labor and keep wages low, or use technology for the good of their workers with a view to longer-term profits...

  2. Adolf Hitler: To Hermann Rauschning http://aynrandlexicon.com/lexicon/fascism_and_communism-socialism.html: 'Each activity and each need of the individual will thereby be regulated by the party as the representative of the general good. There will be no license, no free space, in which the individual belongs to himself. This is Socialism—not such trifles as the private possession of the means of production. Of what importance is that if I range men firmly within a discipline they cannot escape? Let them then own land or factories as much as they please. The decisive factor is that the State, through the party, is supreme over them, regardless whether they are owners or workers. All that, you see, is unessential. Our Socialism goes far deeper...

  3. Adolf Hitler: To Hermann Rauschning http://aynrandlexicon.com/lexicon/fascism_and_communism-socialism.html: 'The people about us are unaware of what is really happening to them. They gaze fascinated at one or two familiar superficialities, such as possessions and income and rank and other outworn conceptions. As long as these are kept intact, they are quite satisfied. But in the meantime they have entered a new relation; a powerful social force has caught them up. They themselves are changed. What are ownership and income to that? Why need we trouble to socialize banks and factories? We socialize human beings!...

  4. Amanda Borschel-Dan: Factory for Romans' Favorite Funky Fish Sauce Discovered Near Ashkelonl https://www.timesofisrael.com/factory-for-romans-favorite-funky-fish-sauce-discovered-near-ashkelon/: 'Northwest of... Ashkelon, Erickson-Gini’s team uncovered... a rare Holy Land garum production center, or cetaria.... In addition to evidence of fish pools, the team uncovered giant plastered vats, jars used for storing liquid, and what appears to be a large receptacle to hold the strained goopy substance.... The paucity of production sites had always surprised and puzzled the archaeologist, she said. Throughout the Empire, the sauce graced the tables of the Roman world’s rich and famous, as well as the troughs of commoners.... Pliny the Elder mentions the sauce throughout his “Natural History,” both as a foodstuff and as medicine.... Even in the storerooms of 1st century BCE King Herod’s isolated Masada palace, a rare labeled amphorae of garum was found that was possibly imported from Andalusia.... To accomplish its pungent putrefaction, the craftsman would place whole small fish such as sardines or anchovies, or chopped up larger fish such as tuna or mackerel, at the base of a jar and pour on top of it spices and salt, followed by another fish layer, etc. According to Erickson-Gini, the recipe’s ratio called for five parts fish to one part salt. A lively video, “Garum, Rome’s Favorite Condiment (Ancient Cooking),” on the Invicta History YouTube channel, said the concoction inside a closed jar would bake in the hot Mediterranean sun for a week as the fish deteriorated, but was saved from rot by the salt. It was then opened and stirred for another 20 days or more (Erickson-Gini suggested up to three months). The resultant “puree of fish goop” was strained through a basket, and the strained liquid is the garum. Other, more solid leftovers could be made into a different sauce or lesser-regarded fish paste called allec.... The height of the garum fad was circa the 2nd century CE, but its use is recorded even much later...

  5. Michael Kades: 'It is a great time https://twitter.com/Michael_Kades/status/1194690760794353666: to look at @EquitableGrowth's "The State of U.S. Federal Antitrust Enforcement" https://equitablegrowth.org/wp-content/uploads/2019/09/091719-antitrust-enforcement-report-1.pdf… Lots of graphs...

  6. Looking forward to the next recession, and to the unwillingness of politicians to reserve fiscal space for fighting it, makes Keynes message more urgent than ever: Paul Krugman: Introduction to Keynes's General Theory https://delong.typepad.com/sdj/2006/03/krugmans_intro_.html: 'In the spring of 2005 a panel of “conservative scholars and policy leaders” was asked to identify the most dangerous books of the 19th and 20th centuries.... Charles Darwin and Betty Friedan ranked high on the list. But The General Theory of Employment, Interest, and Money did very well, too. In fact, John Maynard Keynes beat out V.I. Lenin and Frantz Fanon. Keynes, who declared in the book’s oft-quoted conclusion that “soon or late, it is ideas, not vested interests, which are dangerous for good or evil,” would probably have been pleased.... It’s probably safe to assume that the “conservative scholars and policy leaders” who pronounced The General Theory one of the most dangerous books of the past two centuries haven’t read it. But they’re sure it’s a leftist tract, a call for big government and high taxes.... The arrival of Keynesian economics in American classrooms was delayed by a nasty case of academic McCarthyism. The first introductory textbook to present Keynesian thinking, written by the Canadian economist Lorie Tarshis, was targeted by a right-wing pressure campaign aimed at university trustees. As a result of this campaign, many universities that had planned to adopt the book for their courses cancelled their orders, and sales of the book, which was initially very successful, collapsed. Professors at Yale University, to their credit, continued to assign the book; their reward was to be attacked by the young William F. Buckley for propounding “evil ideas.” But Keynes was no socialist—he came to save capitalism, not to bury it. And there’s a sense in which The General Theory was... a conservative book.... Keynes wrote during a time of mass unemployment, of waste and suffering on an incredible scale. A reasonable man might well have concluded that capitalism had failed, and that only... nationalization... could restore economic sanity.... Keynes argued that these failures had surprisingly narrow, technical causes... because Keynes saw the causes of mass unemployment as narrow and technical, he argued that the problem’s solution could also be narrow and technical: the system needed a new alternator, but there was no need to replace the whole car...

  7. I have not yet seen a good estimate of the impact of Trump's trade war on supply-side growth. Half a percentage point per year is what my own back-of-the-envelope guesses are suggesting to me now, but I have no confidence in them. I would really love to see a comprehensive assessment that I could trust: Jayant Menon: The Knock-On Consequences Of The Us-China Trade Tariffs on Global Value Chains https://voxeu.org/article/knock-consequences-us-china-trade-tariffs-global-value-chains: "The impact of a simple 25% trade tariff can go far beyond the costs of directly impacted goods. This column shows that seemingly small tariffs can substantially disrupt global value chains, both through the difference between nominal and effective tariff rates and the relative costs of relocation and transhipment, and also because of how the trade dispute is being perceived. If it is seen as a symptom of an enduring geopolitical struggle for global economic dominance, then it could recur.... Effective rather than the nominal tariff rate, and the perception that the dispute will not end with the trade war... explain how a relatively small tariff has permanently fractured GVCs. The recent escalation in the trade war, both in terms of increases in tariffs and its greater coverage of products, suggests that the disruption will be even higher.... A similar dispute took place just over 30 years ago, also triggered by a large bilateral trade imbalance, but between the US and Japan.... Japan responded by moving labour-intensive segments of manufacturing production to lower wage destinations in Southeast Asia, giving birth to ‘Factory Asia’ (Baldwin 2006). In the process, Japan was able to retain its export competitiveness... shift a part of its export surplus to the balance of payments accounts of the countries it had invested in, thereby appearing to shrink its bilateral surplus.... The creation of Factory Asia benefitted consumers around the world and raised world incomes. This trade war is having the opposite effect. And the fallout could continue for a long time yet...

8.Katherine Policelli and Alix Gould-Werth: California Paid Family Leave Reduces Poverty: "Between 2004 and 2013, the California paid leave program increased household income levels and lowered poverty rates for mothers of 1-year-olds... an average 3,407 increase in income.... Also... good news specific to the bottom end of the income distribution: The introduction of paid leave in California is tied to a 10.2 percent decrease in risk of new mothers dropping below the poverty threshold and disproportionately helps women with lower levels of education and who are unmarried: Alexandra Boyle Stanczyk: Does Paid Family Leave Improve Household Economic Security Following a Birth? Evidence from California...

  1. Josiah Ober: Agamemnon's Cluelessness https://delong.typepad.com/files/ober-agamemnon-selections.pdf: 'For Aristotle, ethics and politics must take into account “merely living” (zên) as the foundation for the end of living well (eu zên)... in a way... cognizant of the kinds of expertise necessary for living, without losing sight of the ultimate goal of living well. The domain of expertise... concerned with natural material conditions and forms of authority (especially master-slave) required by the end of self-sufficiency is designated oikonomia. But the definition of oikonomia and especially its relationship to money-making (chrêmatistikê) is, Aristotle says, contested.... Among the many goals of Politics book 1 is to put chrêmatistikê–as expert knowledge of a particular relationship among production (poiêsis), exchange (allangê/metablêtikê), and consumption/possession (ktêsis), all characteristically involving coined money—into the normatively correct place in his naturalized hierarchy of value. The critical conclusion is that chrêmatistikê (or one specific type of chrêmatistikê) is a subordinate part of oikonomia. It is not “according to nature” (kata phusin) but rather a technê arising from practical experience (empeiria). It aims the possession and increase of wealth, at accumulation of money, as an end. That accumulation is by its internal logic unbounded and unconstrained, insofar as wealth denominated in monetary terms has no natural limit. Chrêmatistikê thus is a matter of maximizing a single resource (one thought to give access to all other resources), rather than optimizing or satisficing in respect to other values. It is at once contrary to the true end of human existence, a prevalent approach to the management of material goods, and (at least potentially) an essential instrument for both the oikonomos and the politikos. Among the delicate tasks of book 1 of the Politics is, then, to demonstrate that Aristotle knows enough about this dangerous and vulgar (phortikon) instrument to specify its proper uses, while avoiding appearing to honor it as a science worthy of a detailed treatment. Much of Politics book 1.8-11 is devoted to sorting out the contested relationship between chrêmatistikê and oikonomia...

  2. I object to Doug Jones's characterization of the past 100,000 years. It is true that wild mammal biomass is only 1/6 of what it was before the Anthropocene. But total mammal biomass is four times what it was. As far as TEAM MAMMAL biomass is concerned, we have been excellent player-coaches. Doug Jones: 7 Billion | Logarithmic History https://logarithmichistory.wordpress.com/2019/12/26/7-billion-2/: 'The biomass of wild mammals (terrestrial and marine) is only about 1/6 of what it was before humans came on the scene, and total plant biomass is about ½ of what it was before humans, largely as a result of deforestation...

  3. Ben Casselman: "The prime-age (25-54) employment and participation rates both held at their post-recession highs https://twitter.com/bencasselman/status/1202958816163303425. Adjusting for demographic shifts, the participation rate is now back to its prerecession level. And the employment rate is getting close to its 2000-era peak, which is something many of us doubted we'd ever see. The gender split in participation is really striking, though. Participation among prime-age women is well above its prerecession level. For men, the rate has barely rebounded...

  4. Great conversation between Heather Boushey and Emmanuel Saez. My favorite highlight: Heather Boushey: In Conversation with Emmanuel Saez: "Kansas... illustrates beautifully from a research perspective even though it’s a disaster in terms of public policy... tax avoidance... pass-through businesses... huge incentives for high-income earners to reclassify... a big erosion of the wage income tax base in the state... a much bigger negative impact on tax revenue than would have been predicted mechanically.... When governments have actually to balance their budgets, they realize that taxes are useful, and that brings the two pieces of the debate together.... Certainly Kansas didn’t experience an economic boom...

  5. Arindrajit Dube on our going long-time mentor and friend Marty Weitzman, who committed suicide last summer. His "price and quantities" article is at https://scholar.harvard.edu/weitzman/files/prices_vs_quantities.pdf. His memory is a blessing: Arindrajit Dube: Mary Weitzman: "Marty's book on share economy was something I read, thought, and argued a lot about in my undergrad and grad years. Ultimately, I don't think I agree with the argument, but I am so thankful to him for helping me think about the relevant issues https://hup.harvard.edu/catalog.php?isbn=9780674805835#.XXBiuT0dujQ.twitter.... Needless to say, Marty's work on catastrophic climate change was monumental. This is what he is best known for today, and rightfully so https://scholar.harvard.edu/files/weitzman/files/review_of_stern_review_jel.45.3.pdf... He has a QJE 1976 paper that has become THE basis for an enormous literature on “green accounting”, which only got picked up after Solow referred to it a decade later, prompting a boom in work in that area, which is still ongoing.... Weitzman's paper on the 'ratchet principle' https://scholar.harvard.edu/files/weitzman/files/rachetprincipleperformanceincentives.pdf—so simple, and by modern standards no doubt only a toy model, but for me a lasting insight into allocation under a hierarchy. Two... Weitzman also contributed on production-function accounting for Soviet growth https://scholar.harvard.edu/weitzman/files/sovietpostwareconomicgrowth.pdf.... I have to add his work on prices versus quantities, which was so insightful...

  6. Martin Wolf: How to Reform Today’s Rigged Capitalism https://www.ft.com/content/4cf2d6ee-14f5-11ea-8d73-6303645ac406: 'We must address weakened competition, feeble productivity growth, high inequality and degraded democracy: “It is clear then that . . . those states in which the middle element is large, and stronger if possible than the other two [wealthy and poor] together, or at any rate stronger than either of them alone, have every chance of having a well-run constitution.” Thus did Aristotle summarise his analysis of the Greek city states. The stability of what we would now call “constitutional democracy” depended on the size of its middle class. It is no accident that the US and UK, long-stable democracies today succumbing to demagogy, are the most unequal of the western high-income countries. Aristotle, we are learning, was right. My September analysis of “rigged capitalism” concluded that “we need a dynamic capitalist economy that gives everybody a justified belief that they can share in the benefits. What we increasingly seem to have instead is an unstable rentier capitalism, weakened competition, feeble productivity growth, high inequality and, not coincidentally, an increasingly degraded democracy.” So what is to be done? The answer is not to overthrow the market economy, undo globalisation or halt technological change. It is to do what has been done many times in the past: reform capitalism. That is the argument I made in a recent debate with former Greek finance minister Yanis Varoufakis on whether liberal capitalism should be saved. I argued, in effect, that “if we want everything to stay the same, everything must change”, as the Italian author Giuseppe Tomasi di Lampedusa wrote. If we want to preserve our freedom and democracy we need to embrace change. Here are five policy areas that need to be addressed. First, competition.... Second, finance.... Third, the corporation. The limited liability joint stock corporation was a great invention, but it is also a highly privileged entity. The narrow focus on maximising shareholder value has exacerbated the bad side-effects.... Fourth, inequality. As Aristotle warned, beyond a certain point, inequality is corrosive.... Finally, our democracies need refurbishing. Probably, the most important concerns are over the role of money in politics and the way the media works. Money buys politicians. This is plutocracy, not democracy. The malign impact of fake news (which is the opposite of what the US president means by the term) is also clear. We need public funding of parties, complete transparency of private funding and also far greater use of consultative forums...

  7. It is well known that systems in which there is too much feedback and too little reliance on fundamentals become unstable: I believe that this is how nicotine and caffeine and chocolate work in their evolved function as nerve poisons for bugs: excite the neurons to fire more often, and rational coordination breaks down, and the bugs that ate the tobacco leaves die. Here we are the bugs, and social media is our tobacco leaf: Charles Stross: Artificial Intelligence: Threat or Menace? http://www.antipope.org/charlie/blog-static/2019/12/artificial-intelligence-threat.html: 'Today's internet ads are qualitatively different from the direct mail campaigns of yore. In the age of paper, direct mail came with a steep price of entry, which effectively limited it in scope—also, the print distribution chain was it relatively easy to police. The efflorescence of spam from 1992 onwards should have warned us that junk information drives out good, but the spam kings of the 1990s were just the harbinger of today's information apocalypse. The cost of pumping out misinformation is frighteningly close to zero, and bad information drives out good: if the propaganda is outrageous and exciting it goes viral and spreads itself for free. The recommendation algorithms used by YouTube, Facebook, and Twitter exploit this effect to maximize audience participation in pursuit of maximize advertising click-throughs. They promote popular related content, thereby prioritizing controversial and superficially plausible narratives. Viewer engagement is used to iteratively fine-tune the selection of content so that it is more appealing, but it tends to trap us in filter bubbles of material that reinforces our own existing beliefs. And bad actors have learned to game these systems to promote dubious content. It's not just Cambridge Analytica I'm talking about here, or allegations of Russian state meddling in the 2016 US presidential election. Consider the spread of anti-vaccination talking points and wild conspiracy theories, which are no longer fringe phenomena but mass movements with enough media traction to generate public health emergencies in Samoa and drive-by shootings in Washington DC. Or the spread of algorithmically generated knock-offs of children's TV shows proliferating on YouTube that caught the public eye last year...

  8. Noah Smith: Economics Will Never Be the Same https://www.bloomberg.com/opinion/articles/2019-12-09/economics-will-never-be-the-same: 'The Shift to the Left: In the 1970s and 1980s, libertarian economists such as Milton Friedman commanded the limelight and dominated the policy conversation, while conservative supply-siders filled  Washington's think tanks. But in the 2010s... left-leaning economists became the public face of the discipline... Paul Krugman... Thomas Piketty... Emmanuel Saez and Gabriel Zucman... Economists for Inclusive Prosperity.... The Fight Against Sexism: The pervasive sexism in the economics profession has long been an open secret. But in the 2010s the problem began to get the attention it deserved.... Warming to Minimum Wage.... Research is also suggesting that concentrated corporate market power is a reason the real world doesn’t work like the simple theories in introductory textbooks.... Warning About Monopolies: As megamergers become more common, gigantic companies are taking over industry after industry. Economists are warning that this could be leading to low productivity growth, higher consumer prices and greater inequality.... Heresy on Trade.... A growing literature suggests that China’s entry into the World Trade Organization had dire consequences for a large swath of the American workforce.... The Diminished Clout of Economics: It’s a sad coincidence that just as economics is improving in so many ways, its public influence is on the wane. But the financial crisis and the devastating recession that followed discredited the discipline in the eyes of much of the public. Meanwhile, decades of rising inequality and stagnating mobility has made economists the targets of leftist ire and scorn just as the field has become substantially more progressive...

  9. Urban Dictionary: Tankie: 'A hardline Stalinist. A tankie is a member of a communist group or a "fellow traveller" (sympathiser) who believes fully in the political system of the Soviet Union and defends/defended the actions of the Soviet Union and other accredited states (China, Serbia, etc.) to the hilt, even in cases where other communists criticise their policies or actions. For instance, such a person favours overseas interventions by Soviet-style states, defends these regimes when they engage in human rights violations, and wishes to establish a similar system in other countries such as Britain and America. The term is used to distinguish the rare individuals with these kinds of beliefs from communists more broadly (including Communist Party members), whose adherence to Soviet doctrine and attachment to existing "socialist" states is somewhat weaker. It is always more-or-less abusive in the sense that those termed tankies do not use the term themselves, but it doesn't have any particular bite (unlike, say, Trot). The term derives from the fact that the divisions within the communist movement first arose when the Soviet Union sent tanks into communist Hungary in 1956, to crush an attempt to establish an alternative version of communism which was not embraced by the Russians. Most communists outside the eastern bloc opposed this action and criticised the Soviet Union. The "tankies" were those who said "send the tanks in". The epithet has stuck because tankies also supported "sending the tanks in" in cases such as Czechoslovakia 1968, Afghanistan 1979, Bosnia and Kosovo/a (in the case of the Serbian state), and so on (whereas the rest of the communist movement has gravitated towards anti-militarism)...

  10. It is very hard, given China's growth over the past two generations plus its outstripping those economies that were its peers in the 1980s, to criticize Chinese macroeconomic and industrial policy. Nevertheless, we economists keep trying—and thus, implicitly at least, reinforcing our reputation for arrogance by hinting that we could have done it better: Panle Jia Barwick, Myrto Kalouptsidi, and Nahim Bin Zahur: China's Industrial Policy: an Empirical Evaluation https://www.nber.org/papers/w26075: 'Despite the historic prevalence of industrial policy and its current popularity, few empirical studies directly evaluate its welfare consequences. This paper examines an important industrial policy in China in the 2000s, aiming to propel the country's shipbuilding industry to the largest globally. Using comprehensive data on shipyards worldwide and a dynamic model of firm entry, exit, investment, and production, we find that the scale of the policy was massive and boosted China's domestic investment, entry, and world market share dramatically. On the other hand, it created sizable distortions and led to increased industry fragmentation and idleness. The effectiveness of different policy instruments is mixed: production and investment subsidies can be justified by market share considerations, but entry subsidies are wasteful. Finally, the distortions could have been significantly reduced by implementing counter-cyclical policies and by targeting subsidies towards more productive firms...

  11. Heather Boushey: In Conversation with Leemore Dafny https://equitablegrowth.org/in-conversation-with-leemore-dafny/: 'Leemore Dafny: 'How can it possibly be a bad thing for consumers if insurers use some of their bargaining power to bring down the prices of the inputs into the health insurance product? The answer to that question is that it depends on how they are bringing down those prices.... From an antitrust enforcement perspective, savings passed through would be considered a benefit to consumers... a change in the division of existing surplus. But now, suppose something different—suppose that the only way the insurers get lower prices is not by taking away the margin, holding quantity constant, but by exercising their market power vis-à-vis these healthcare providers such as purchasing less, as well as paying less.... Lower prices in this setting can have an impact on the quantity and/or the quality of services, and that’s called monopsony, and it’s the flipside of monopoly. And just as monopoly benefits the seller of a good, monopsony benefits the buyer, in this case, the insurer, but at the expense not only of the healthcare providers but also of consumers in general...

  12. Ernest Gellner: The Price of Velvet: Thomas Masaryk and Vaclav Havel https://www.ssoar.info/ssoar/bitstream/handle/document/5373/ssoar-1995-1-gellner-the_price_of_velvet_thomas.pdf: 'Masaryk’s 1925 book was in due course translated into English as The Making of a State, whereas the Czech title means World Revolution. The English version can be justified on the grounds that it gives the reader a far more accurate account of the actual contents of the book, which is a fascinating description of Masaryk’s activities and thoughts during the First World War period, and which eventually led to the establishment of the Republic. A subsidiary reason for the English title is that the Western publishers did not like the Bolshevik-sounding stress on revolution in the title. But in a deeper sense, the English title is an appalling mistranslation: the Czechs weren’t creating their own state out of some capricious wilfulness or opportunism; they were, on Masaryk’s account, doing it because this was part of an overall trend which was both global and deeply moral. Masaryk wanted it clearly understood that he would not be seen indulging in state-creation, unless it was manifest that it was morally right to do so and history had decreed that it should be done–and these two conditions were linked to each other, for history did not do things lightly or without good cause. Like the men who drafted the American Declaration of Independence, he was not going to indulge in state-creation lightly, without due cause and deep philosophic reflection. No State Formation without Philosophic Justification! The victory of their nationalism was the victory of democracy, reason, sobriety, scepticism, individualism. It was not something to be undertaken lightly. But, and this is the second theme in Masaryk’s interpretation of the great transformation, the Czechs weren’t merely jumping onto a bandwagon, belatedly and without having made much of a contribution to it. They had once, in the late Middle Ages and early modern times, been at the very heart and forefront of that movement which they were now re-joining: that was the deep meaning of Czech history...

21.Alice Dreger: Napoleon Chagnon Is Dead https://www.chronicle.com/interactives/20191023-dreger-chagnon: "Consider the recent blog post published by science journalist John Horgan at Scientific American’s website, in which, in light of Nap’s death, he revisits his review of Darkness in El Dorado for the New York Times Book Review. Horgan now confesses that, warned by Chagnon’s most prominent allies not to support Tierney’s falsehoods, he doubled down in his influential review: 'I ended up making my review of Darkness more positive. I wanted Darkness to get a hearing'. He apologizes now not for amplifying a work full of lies, but only for understating the subtleties in Chagnon’s work. In his 2000 review of Darkness for the Washington Post, the anthropologist Marshall Sahlins also endorsed Tierney’s bullshit. In that review, speaking of things he knew nothing about, Sahlins seconded Tierney’s sharp criticism of Chagnon for pressing the Yanomamö for information about their dead: 'As for the dead', Sahlins wrote, 'they are completely excluded from Yanomami society, ritually as well as verbally, as a necessary condition of the continued existence of the living'. 'It’s a goddamned lie', Hames told me when we talked soon after Nap died. 'You walk into any Yanomamö village on any evening, and you will hear people mourning their beloved deceased family members. You will hear the sobbing. They never forget.' The Yanomamö dead, Ray told me, 'are not forgotten and obliterated from memory. They’re kept alive by the people who love them'. After we hung up, I thought about why Ray was harping on this particular factual error. Then it came to me. The people who became like kin to Chagnon never expected the people who considered themselves journalists and scholars to love Nap. They did, however, expect that journalists and scholars would feel as Nap did—that we ought to always be aiming for the earthly truth. Because that is how we can begin to take care of each other...

  1. I was convinced by Burfisher &al. back in 2001 http://www2.hawaii.edu/~noy/362texts/NAFTA-US.pdf that old NAFTA had been a net plus for United States autoworkers—and a huge plus for North American autoworkers. The downside industries seemed to be furniture, timber, and possibly apparel. But I do agree with Sandy and Harley that worker-rights violations ought to be as subject to trade sanctions as other violations of the rules of the international trading game. Sherrod Brown and company did not get that from Trump's underbriefed negotiators, but they did get a lot: Sander M. Levin and Harley Shaiken: _How Can Americans Compete With Mexicans Making a Tenth of What They Do? https://www.nytimes.com/2019/11/19/opinion/UAW-GM-Mexico-Nafta.html: 'Despite financial gains won recently by the United Auto Workers in a new contract that ended a nearly six-week-long strike against General Motors, the longest in a half-century, the deal will not rectify the major problem that has hurt American autoworkers and will continue to do so. The problem has been the longstanding lack of workers’ rights in Mexico. Wages there are roughly one-tenth of what American workers earn and the unions are often tools of the employer. This has warped the playing field and resulted in the transfer of American manufacturing jobs to south of the border. American autoworkers have been hit particularly hard. This situation can be blamed in part on a flawed 1993 North American Free Trade Agreement and addendum that, though it included provisions to protect workers, failed to ensure adequate monitoring and enforcement. Transgressions of workers’ rights were not subject to trade sanctions.... Congress must insist that Mexico first demonstrate that workers there can form independent unions and bargain collectively before agreeing to any new trade deal.... Mexico should focus on worker rights in the auto industry, which accounts for 37 percent of the country’s exports to the United States...

  2. On the one hand, this type of paper feels to me like engineered wheel-reinvention. It is microfoundations tuned to give a desired macroeconomic result, but its microfoundations are not real: we have no statistical mechanics in economics to get us from the real microfoundations to emergent macro properties like pressure and temperature. All we have are just-so stories: "if these were the microfoundations, then..." Nevertheless, this is a very, very nice example of the genre. And lots of people find this kind of thing very useful, or at least comforting. So I am probably wrong in my lack of enthusiasm here: Daniel Murphy: Excess Capacity in a Fixed Cost Economy https://economics.virginia.edu/sites/economics.virginia.edu/files/macro/murphy.pdf: '[When] firms... face only fixed costs over a range of output... equilibrium output and income depend on consumer demand rather than available supply, even when prices are flexible and there are no other frictions. The theory matches the procyclicality of capacity utilization, firm entry, and markups. A heterogeneous household version of the model demonstrates how an economy can enter a capacity trap in response to a temporary negative demand shock: When demand by some consumers falls temporarily, other consumers’ permanent income (and hence their desired consumption) falls. Since output is demand-determined, the permanent fall in desired consumption causes a permanent state of excess capacity...

  3. WTF, Sean Wilentz, Victoria Bynum, James M. McPherson, James Oakes, and Gordon S. Wood?!?!?!: Sean Wilentz, Victoria Bynum, James M. McPherson, James Oakes, and Gordon S. Wood: Letter to the Editor: Historians Critique The 1619 Project https://www.nytimes.com/2019/12/20/magazine/letter-to-the-editor-historians-critique-the-1619-project-and-we-respond.html: 'On the American Revolution, pivotal to any account of our history, the project asserts that the founders declared the colonies’ independence of Britain “in order to ensure slavery would continue.” This is not true. If supportable, the allegation would be astounding—yet every statement offered by the project to validate it is false...

  4. Jill Lepore: These Truths: A History of the United States https://books.google.com/books?id=v2ZSDwAAQBAJ: '“It is imagined our Governor has been tampering with the Slaves & that he has it in contemplation to make great Use of them in case of a civil war,” young James Madison reported from Virginia to his friend William Bradford in Philadelphia. Lord Dunmore, the royal governor of Virginia, intended to offer freedom to slaves who would join the British army. “To say the truth, that is the only part in which this colony is vulnerable,” Madison admitted, “and if we should be subdued, we shall fall like Achilles by the hand of one that knows that secret.”64 But the colonists’ vulnerability to slave rebellion, that Achilles’ heel, was hardly a secret: it defined them. Madison’s own grandfather, Ambrose Madison, who’d first settled Montpelier, had been murdered by slaves in 1732, apparently poisoned to death, when he was thirty-six...

  5. John Holbo: 'This seems true and important https://twitter.com/jholbo1/status/1210400656139243522: Kevin Drum: "White evangelicals are terrified that liberals want to extinguish their rights" https://motherjones.com/kevin-drum/2019/12/white-evangelicals-are-terrified-that-liberals-want-to-extinguish-their-rights/. I would add one thing. One thing that makes it hard to meet these terrified Christian cons halfway is that one thing that has freaked them out is the degree to which the public culture has converged on the position that tolerating gay people is morally absolutely good. So being on the other side of the tolerance question is just to be a morally bad person. Intolerable! Some conservative Christians (e.g. Dreher) find this sort of heaped opprobrium oppressive. I'm sure it's uncomfortable. But you can't demand those who believe it's just bad to be intolerant of gays not to believe that. They have arguments! So the 'religious liberty' ask is incredibly high-bar. 'I can believe what I like and no one is allowed to believe that whatever I believe is a bad belief. But, if I believe you or your belief is bad I get to be half-believed about it, because religion.' This sort of high epistemological privilege simply can't be accommodated. It's too aggressive. But, not realising how much they are asking for, the cons feel aggressed against...

  6. Rana Foroohar: America’s Competitiveness Problem https://www.ft.com/content/419b6a42-2254-11ea-92da-f0c92e957a96?segmentid=acee4131-99c2-09d3-a635-873e61754ec6: 'A dysfunctional dance between business and politics is at the root of the country’s woes: Carly Fiorina, the former Republican presidential candidate and Hewlett-Packard boss, made news last week when she gave voice to a hypocrisy common in the American business community. She insisted that it was “vital” that President Donald Trump be impeached. Yet she wouldn’t rule out the possibility of voting for him, depending on “who the Democrats put up”. She’s presumably referring to the possibility of an Elizabeth Warren candidacy. I understand why people like Ms Fiorina are allergic to any wealth-distributing progressive. But business people who’ve supported Mr Trump because of cuts to corporate taxes or promises of deregulation are playing a sucker’s game. They are also part of a bigger dysfunctional dance between business and politics that is explored in a new Harvard Business School report on US competitiveness. More accurately, the report focuses on an increasing lack of competitiveness, evidenced by everything from pessimism about America’s medium- to long-term growth prospects, the divide between the fortunes of business and workers, to the country’s declining fiscal position and skills gap.... Business itself is another big reason for government gridlock, since it has “funded, perpetuated, and profited” from political dysfunction. Business was part of the diabolical process of gerrymandering that has led to the partisan redrawing of voting districts.... Yet business stubbornly refuses to accept that it is part of the problem. Survey results show that most business leaders believe that corporations influence politics in ways that erode not only democracy but the competitiveness of the economy as a whole. But most deny that their own companies are at fault.... In 2016, too many people in important leadership positions paid to elect Mr Trump. Many more (though not all) have stayed quiet as he has taken a wrecking ball to the postwar order because they knew that, in the short term, they’d get tax changes they wanted, not to mention a highly profitable, though unproductive, asset bubble. In exchange for that, we also got a trade war, an immigration debacle, and a crisis of the rules-based order that underpins corporate America’s own license to operate. Not a great return on investment. The complicity of business in the US in the current system of money politics is reaching a crisis point. My plea to the C-suite? Don’t follow Ms Fiorina and try to have it both ways in 2020...

  7. Hank Reichman: On Blacklists, Harassment, and Outside Funders: A Response to Phil Magness https://academeblog.org/2017/04/11/on-blacklists-harassment-and-outside-funders-a-response-to-phil-magness/: 'In a recent series of tweets Magness repeatedly accused UnKoch of being Soros-funded (they are not, although I’ll bet they’d like to be) and, more ominously, of being “Soviets” or even “Stalinists.” Here’s one such tweet: “Things that strongly correlate: 1. support for UnKoch My Campus. 2. posting sentimentalism for the Soviet Union on social media.” (March 10) Here’s another: “A good expose of the type of ‘journalism’ produced by the Soviets in the UnKoch crowd:” (March 21) And then there’s the series of tweets beginning, so far as I can tell, with a Magness message to UnKoch charging that “there’s plenty of overt Soviet sympathizing in your organization to historically contextualize you with them.” (March 24)  This was followed by a tweet later that day claiming that “Your own co-founder is quite the fanboy of genocidal Soviet types” offering as proof a tweet that reveals how UnKoch co-founder Ralph Wilson participated in the carving of a Halloween pumpkin with the faces of Marx, Engels, and Lenin!  How damning! There’s more like that. Of course, to call any of the five young UnKoch staffers “Soviet” is totally ludicrous, since looking at their photographs online I’m pretty sure they were no more than children, and perhaps not yet born, when the Soviet Union collapsed in 1991.  As a scholar of Soviet history myself, I can assure Magness that the Soviet Union is no more and that Communism (in any meaningful sense) is dead.  But it’s not funny, since this sort of red-baiting recapitulates the kind of activity that made blacklisting so dangerous in the 1950s.  Although I don’t seem to agree with Magness about much, having read many of his comments I had hoped he would be above such base crudity...

  8. Barry Eichengreen, Donghyun Park, Kwanho Shin: When Fast Growing Economies Slow Down: International Evidence and Implications for China https://www.nber.org/papers/w16919: 'Using international data starting in 1957, we construct a sample of cases where fast-growing economies slow down. The evidence suggests that rapidly growing economies slow down significantly, in the sense that the growth rate downshifts by at least 2 percentage points, when their per capita incomes reach around $17,000 US in year-2005 constant international prices, a level that China should achieve by or soon after 2015. Among our more provocative findings is that growth slowdowns are more likely in countries that maintain undervalued real exchange rates....

...We continue to find dispersion in the per capita income at which slowdowns occur. But in contrast to our earlier analysis which pointed to the existence of a single mode at which slowdowns occur in the neighborhood of $15,000-$16,000 2005 purchasing power parity dollars, new data point to two modes, one in the $10,000-$11,000 range and another at $15,000-$16,0000. A number of countries appear to have experienced two slowdowns, consistent with the existence of multiple modes. We conclude that high growth in middle-income countries may decelerate in steps rather than at a single point in time. This implies that a larger group of countries is at risk of a growth slowdown and that middle-income countries may find themselves slowing down at lower income levels than implied by our earlier estimates. We also find that slowdowns are less likely in countries where the population has a relatively high level of secondary and tertiary education and where high-technology products account for a relatively large share of exports, consistent with our earlier emphasis of the importance of moving up the technology ladder in order to avoid the middle-income trap...

  1. Barry Eichengreen, Donghyun Park, Kwanho Shin: When Fast Growing Economies Slow Down: International Evidence and Implications for China https://www.nber.org/papers/w16919: 'Using international data starting in 1957, we construct a sample of cases where fast-growing economies slow down. The evidence suggests that rapidly growing economies slow down significantly, in the sense that the growth rate downshifts by at least 2 percentage points, when their per capita incomes reach around $17,000 US in year-2005 constant international prices, a level that China should achieve by or soon after 2015. Among our more provocative findings is that growth slowdowns are more likely in countries that maintain undervalued real exchange rates....

...We continue to find dispersion in the per capita income at which slowdowns occur. But in contrast to our earlier analysis which pointed to the existence of a single mode at which slowdowns occur in the neighborhood of $15,000-$16,000 2005 purchasing power parity dollars, new data point to two modes, one in the $10,000-$11,000 range and another at $15,000-$16,0000. A number of countries appear to have experienced two slowdowns, consistent with the existence of multiple modes. We conclude that high growth in middle-income countries may decelerate in steps rather than at a single point in time. This implies that a larger group of countries is at risk of a growth slowdown and that middle-income countries may find themselves slowing down at lower income levels than implied by our earlier estimates. We also find that slowdowns are less likely in countries where the population has a relatively high level of secondary and tertiary education and where high-technology products account for a relatively large share of exports, consistent with our earlier emphasis of the importance of moving up the technology ladder in order to avoid the middle-income trap...

  1. Wolfgang Münchau: Austerity, Not the Populists, Destroyed Europe’s Centre Ground https://www.ft.com/content/be3ca48a-2344-11ea-b8a1-584213ee7b2b: 'From Brexit to fiscal policy, the EU’s largest member states have seen the mainstream wrongfooted: There were tell-tale signs early on. In 2009, Peer Steinbrück, a former German finance minister and later the Social Democrats’ candidate for chancellor, introduced the constitutional balanced budget rule. This later gave rise to Germany’s permanent fiscal surpluses and under-investment in critical infrastructure. In a joint study, Germany’s employers and trade unions recently put the investment shortfall at a staggering €450bn. So it is unsurprising that the SPD has lost political support during the years of its grand coalition with Angela Merkel’s Christian Democrats. In 2012, Italy’s government of technocrats, led by Mario Monti, imposed procyclical austerity in the middle of a recession. The goal was to prove that Italy was a good follower of the eurozone’s fiscal rules. The country has still not fully recovered from that shock. In 2014, François Hollande, the former French president, outed himself as a rightwing supply-sider when he cited Say’s law—that supply creates its own demand. Since then his Socialist party has in effect disappeared as a political force, along with its old rivals on the centre right. In late 2015 in the UK, I overheard a group of pro-Remain politicians, academics and commentators persuading themselves that the easiest way to win the forthcoming Brexit referendum would be to scare the hell out of the electorate. We all know how that went. What these disparate stories have in common is that they paint a picture of the decline of the political centre in Europe. I consider this, not the rise in populism, to be the main development in the EU’s largest member states. If there was one common policy that accelerated that trend, it was austerity. We have come to judge austerity mainly in terms of its economic impact. But it is the political fallout from public spending cuts that is most likely to persist. Austerity as a policy is the consequence of a poor understanding of economics coupled with a self-righteous mind and a tendency to spend too much time with your chums at places like Davos...

  2. Gabriel Chodorow-Reich, Plamen Nenov, and Alp Simsek: Stock Market Wealth and the Real Economy: A Local Labor Market Approach https://scholar.harvard.edu/chodorow-reich/publications/stock-market-wealth-and-real-economy-local-labor-market-approach: "We provide evidence on the stock market consumption wealth effect by using a local labor market analysis and regional heterogeneity in stock market wealth. An increase in stock wealth increases local employment and payroll in nontradable industries and in total, while having no effect on employment in tradable industries. In a model with consumption wealth effects and geographic heterogeneity, these responses imply a marginal propensity to consume out of a dollar of stock wealth of 2.8 cents per year. We also use the model to quantify the aggregate effects of a stock market wealth shock when monetary policy is passive. A 20% increase in stock valuations, unless countered by monetary policy, increases the aggregate labor bill by at least 0.85% and aggregate hours by at least 0.28% two years after the shock...

  3. A. Pluchino, A. E. Biondo, A. Rapisarda: _ Talent vs Luck: The Role of Randomness in Success and Failure_ https://arxiv.org/abs/1802.07068: 'The largely dominant meritocratic paradigm of highly competitive Western cultures is rooted on the belief that success is due mainly, if not exclusively, to personal qualities such as talent, intelligence, skills, efforts or risk taking. Sometimes, we are willing to admit that a certain degree of luck could also play a role in achieving significant material success. But, as a matter of fact, it is rather common to underestimate the importance of external forces in individual successful stories. It is very well known that intelligence or talent exhibit a Gaussian distribution among the population, whereas the distribution of wealth - considered a proxy of success - follows typically a power law (Pareto law). Such a discrepancy between a Normal distribution of inputs, with a typical scale, and the scale invariant distribution of outputs, suggests that some hidden ingredient is at work behind the scenes. In this paper, with the help of a very simple agent-based model, we suggest that such an ingredient is just randomness. In particular, we show that, if it is true that some degree of talent is necessary to be successful in life, almost never the most talented people reach the highest peaks of success, being overtaken by mediocre but sensibly luckier individuals. As to our knowledge, this counterintuitive result - although implicitly suggested between the lines in a vast literature - is quantified here for the first time. It sheds new light on the effectiveness of assessing merit on the basis of the reached level of success and underlines the risks of distributing excessive honors or resources to people who, at the end of the day, could have been simply luckier than others. With the help of this model, several policy hypotheses are also addressed and compared to show the most efficient strategies for public funding of research in order to improve meritocracy, diversity and innovation...

  4. Megan N. Fontenot: Exploring the People of Middle-earth: Sauron—Craftsman, Ring-giver, and Dark Lord https://www.tor.com/2019/05/30/exploring-the-people-of-middle-earth-sauron-craftsman-ring-giver-and-dark-lord/: 'Early drafts depicting Sauron’s coming are intense and leave no room for confusion. As the ship approaches the island a great wave, high as a mountain, lifts it up and casts it upon a high hill. Sauron disembarks and from there preaches, an image that recalls Christ’s sermon on the mount and establishes Sauron’s dominance. He offers a message of “deliverance from death,” and he “beguile[s] them with signs and wonders. And little by little they turned their hearts toward Morgoth, his master; and he prophesied that ere long he would come again into the world” (The Lost Road and Other Writings, hereafter LR, 29). He also preaches imperialism, telling the Númenoreans that the earth is theirs for the taking, goading them to conquer the leaderless rabble of Middle-earth (LR 74). He attempts to teach them a new language, which he claims is the true tongue they spoke before it was corrupted by the Elves (LR 75). His teaching ushers in an age of modern warfare in Númenor, leading “to the invention of ships of metal that traverse the seas without sails […]; to the building of grim fortresses and unlovely towers; and to missiles that pass with a noise like thunder to strike their targets many miles away”...

  5. We will not be ready to fight the next recession. Gavyn Davies tries a Hail Mary: Gavyn Davies: Can Automatic Fiscal Stabilisers Replace Monetary Policy? https://www.ft.com/content/7c3498c0-0523-11ea-a984-fbbacad9e7dd?segmentid=acee4131-99c2-09d3-a635-873e61754ec6: 'Monetary policy, whether conventional or unconventional, will be found wanting in the face of the next global recession.... Central bankers now admit that they will need help from fiscal policy in such circumstances. However, in the past, discretionary budgetary injections have usually been implemented with long delays, and political wrangling has resulted in tax and spending measures that have failed to stabilise demand in the economy. An example of these problems came after the financial crash in 2008.... The eventual ARRA stimulus was not large enough to stabilise the US economy and was reversed too quickly during the recovery. It prevented a financial collapse, but it did not avoid high and persistent unemployment. Even having Democratic control of the White House and Congress did not stop political roadblocks hindering the fiscal stimulus from shortening the recession. Meanwhile, in the eurozone, meaningful fiscal response was prevented by the absence of a mechanism that allowed significant risk-sharing among member states.... The proven disadvantages of discretionary budgetary changes to cushion a recession explain why there is growing interest in enhancing the so-called automatic fiscal stabilisers. Macroeconomists have argued for decades that the scale and effectiveness of built-in methods to raise spending or cut tax revenue should be increased to make fiscal policy more successful...

  6. Doug Jones: Enjoy It While It Lasts https://logarithmichistory.wordpress.com/2019/10/09/enjoy-it-while-it-lasts-5/: '"If a man were called to fix the period in the history of the world, during which the condition of the human race was most happy and prosperous, he would, without hesitation, name that which elapsed from the death of Domitian [96 CE] to the accession of Commodus [180 CE]. The vast extent of the Roman empire was governed by absolute power, under the guidance of virtue and wisdom. The armies were restrained by the firm but gentle hand of four successive emperors, whose characters and authority commanded involuntary respect."... Gibbon doesn’t include China in this assessment of the state of the world, but for that country too, under the Eastern Han dynasty, there was a period of stability and prosperity, lasting from the death of the usurper Wang Mang in 24 CE to the outbreak of the Yellow Turban peasant uprising in 184 CE. During this time, the Roman and Han empires so completely dominated their respective portions of Eurasia that they enjoyed relative peace. Toward the end of the second century CE, both empires had populations around 50-60 million; world population was perhaps 190 million. In the succeeding centuries both empires would experience major population declines and political collapse. As a result, the world’s total population may have declined as well. Of course Gibbon’s view is a retrospective one, and didn’t anticipate the vast rise in standards of living that eventually followed the industrial revolution....

  7. David Baqaee and Emmanuel Farhi: Networks, Barriers, and Trade https://www.nber.org/papers/w26108: 'We study a non-parametric class of neoclassical trade models with global production networks. We characterize their properties in terms of sufficient statistics useful for growth and welfare accounting as well as for counterfactuals. We establish a formal duality between open and closed economies and use it to analytically quantify the gains from trade. Accounting for nonlinear (non-Cobb- Douglas) production networks with realistic complementarities in production significantly raises the gains from trade relative to estimates in the literature. We use our general comparative statics results to show how models that abstract away from intermediates, no matter how well calibrated, are incapable of simultaneously predicting the costs of tariff and non-tariff barriers to trade. Given trade volumes and elasticities, accounting for intermediates doubles the losses from tariffs. Better quantitative accuracy demands the use of more complicated, oftentimes computational, models. This paper seeks to help bridge the gap between computation and theory...

  8. This policy makes absolutely no sense whatsoever—neither social sense, economic sense, or political sense. Yet it rolls forward, with no resistance from legislators of the president's party: American Progress: Cruelty for Cruelty's Sake: 'This week, President Donald Trump issued a new, cruel rule that will strip nearly 700,000 struggling people of Supplemental Nutrition Assistance (SNAP) benefits. In its announcement of the rule, the U.S. Department of Agriculture cited a strong economy and protection of U.S. taxpayer money as reasons for the changes to SNAP benefits. But a new CAP survey on voter opinions on the economy, government, and poverty finds that despite headlines touting a booming economy, a majority of voters are still struggling economically, with more than half reporting that they or their family faced a serious personal economic hardship over the past year. Furthermore, a broad majority of voters across party lines not only oppose cuts to SNAP but want to see the program expanded to ensure families can afford nutritious food throughout the month. If the current economy isn't working for everyday Americans and voters oppose cuts to the program, what excuse is left for the passing of this new rule other than cruelty for cruelty's sake?...

  9. Narrator:"The Chilean Economy had not done very well when Pinochet, to his own surprise, lost his plebiscite to remain": PBS: Commanding Heights https://www.pbs.org/wgbh/commandingheights/shared/minitext/int_miltonfriedman.html#10: INTERVIEWER: "You don't see Chile as a small turning point, then?" MILTON FRIEDMAN: "It may have been a turning point, but not because it was the first place to put the Chicago theory in practice. It was important on the political side, not so much on the economic side. Here was the first case in which you had a movement toward communism that was replaced by a movement toward free markets. See, the really extraordinary thing about the Chilean case was that... the military adopted the free-market arrangements instead of the military arrangements...." INTERVIEWER: "In the end, the Chilean [economy] did quite well, didn't it?" MILTON FRIEDMAN: "Oh, very well. Extremely well. The Chilean economy did very well, but more important, in the end the central government, the military junta, was replaced by a democratic society. So the really important thing about the Chilean business is that free markets did work their way in bringing about a free society..."

  10. Ben Thompson: The Value Chain Constraint https://stratechery.com/2019/the-value-chain-constraint/: 'What matters is not “technological innovation”; what matters is value chains and the point of integration on which a company’s sustainable differentiation is built; stray too far and even the most fearsome companies become also-rans.... Google... has been predicated on “technological innovation”. This was possible because the company’s core product—Internet search—entered a value chain with no integrations whatsoever. On the supply side there were countless websites and even more individual web pages, increasing exponentially, and on the demand side were a similarly increasing number of Internet users looking for specific content. Crucially, all of the supply was easily accessible... and all of the demand was capturable.... This meant that the best search engine... could win, and so it did. Google was leaps and bounds better than the competition, thanks to its focus on understanding links—the fabric of the web—instead of simply pages, and consumers flocked to it. This set off the positive cycle I have described in Aggregation Theory: owning demand gave Google increasing power over supply, which came onto Google’s platform on the search engine’s terms, first by optimizing their web pages and later by delivery content directly to Google’s answer boxes, AMP program, etc., all of which increased demand, resulting in a virtuous cycle.... Things have not gone so well for Google Cloud.... The problem... is that the company’s value chain is completely wrong. The world of enterprise software is not a self-serve world (and to the extent it is, AWS dominates the space); what is necessary is an intermediary layer to interact with relatively centralized buyers with completely different expectations from consumers when it comes to product roadmap visibility, customer support, and pricing. It has taken Google many years to learn this lesson: Google Cloud remains a distant third to AWS and Microsoft with a strategy that simply wasn’t working.... The technical attributes of a product are only one piece of what matters to success in the enterprise. Just as important are customization, support, and the ability to sell. Google is widely regarded as being the worst in all three areas. In short, what Google Cloud needs is not a CEO that fits the culture, because the culture of Google is about making the best product technologically and waiting for customers to line-up. That may have worked for Search and for VMWare, but it’s not going to work for Google Cloud. Instead the company needs to actually get out there and actually sell, develop the capability and willingness to tailor their offering to customers’ needs, be willing to build features simply because they move the needle with CIOs, and actually offer real support.... Google Cloud is competing in a different value chain than is Google search, and it needs to build new integrations accordingly...



#noted #weblogs #2019-12-27

Comments