Grasping Reality on TypePad, by Brad DeLong

Worthy Reads Elsewhere:

1. Adam Kotsko's mode of discourse is well outside our wheelhouse here at Equitable Growth, but I do think that this is important. It is generally a mistake in America to think that religious arguments will persuade anyone of anything political or moral. In America, at least, religion tends to act as a righteousness multiplier rather than a set of principles and ideas that can be used for persuasion and to get peoplle to think reflectively: Adam Kotsko: The Political Theology of Trump: "This brings us to a scriptural parallel that evangelicals themselves have drawn with Trump: Cyrus the Great, the Persian Emperor who allowed Israelite priestly elites to settle back in the Promised Land.... The Prophet Isaiah sings this pagan ruler’s praises, even calling him God’s 'anointed'... 'Messiah' in Hebrew or 'Christ' in Greek—and promising divine assistance in his ongoing conquest.... IT’S THE BIBLICAL VERSION of 'only Nixon can go to China'. Only a pagan ruler who knows nothing of the God of Israel... can restore the righteous remnant to the Promised Land...

2. And, speaking of totalizing revealed ideologies, the Chinese Communist Party is finding little difficulty in proof-texting its current doctrines out of the scripture that is the collected writings of Marx and Engels. Their point that Donald Trump and Brexit suggest that unequal slow-growth political democracies do not have it right is powerful. And it is hopeful that Xi Jinping and company view gross inequality as a problem to be solved—"the result of an 'early stage of development'"—rather than a reality to be suffered: Tom Hancock: China’s Selective Version of Marxist Theory Is a Puzzle: "A TV show, Marx Got it Right, and an illustrated edition of his masterpiece Das Kapital aimed at 8- to 14-year-olds.... The Communist party is stepping-up promotion of Marxist thought.... Beijing pushes a selective version of Marxism... likes the theory of historical change that helps portray Communist party rule as inevitable.... Marxism means one-party rule... means fixing inequality, the result of an 'early stage of development'... gives US president Donald Trump and Brexit as examples of 'serious problems of capitalist development'...

3. The question of whether it is just income or wealth that is the source of political-economic maldistribution is an interesting and complex one. But I think Auerbach and Hassett are wrong here in neglecting r > g and pure luck as powerful sources generating inequality that work in addition to inequality of labor income, and that need to be controlled just as inequality in labor income needs to be congtrolled in order to attain a good society: Alan J. Auerbach and Kevin Hassett (2015): Capital Taxation in the Twenty-First Century: "To the extent that labor income inequality is the underlying source of overall inequality, it is hard to see why the appropriate policy response is a wealth tax, rather than, for example, an increase in the progressivity of labor income taxes, as indeed Piketty and his collaborators have proposed (Piketty, Saez, and Stantcheva 2014). It may well be true that the growing inequality of labor income is leading to a growing concentration of capital ownership. Even so, the underlying factor driving inequality would be the dispersion of labor income...

4. Moreover, who says that workers are paid anything like their marginal products? Luck and market power seem to me to be much more important than anything that could be called net social value of the work. As I often say, a skilled worker is an unskilled worker with a good union: Paul Campos: Talent Is Not Scarce: "Existing social hierarchies, and especially the compensation structures that undergird them, require the constant denial of the fact that almost everyone is easily replaceable at any time.  After all, if there are 500 people standing at the ready who could do just as good or better a job than Chairman Smith or President Jones or Senior Executive Vice President for West Coast Promotion Johnson or Distinguished Professor of the Newly Endowed Chair for the Worship of Capitalism Cowan, then why do these people get treated and most of all paid as if they were as unique as unicorns, as precious as Vermeer portraits, as irreplaceable as Billy Shakespeare or Willie Mays? Because if we didn’t treat them (us) in that way, that would mean the entire structure of our society is radically unjust, root and branch.  And that can’t be true, obviously...

5. Rather than saying, with Stigler, that industrial policy is too dangerous because it is too vulnerable to rent-seeking, more economists should be writing papers like this: Reda Cherif and Fuad Hasanov: The Return of the Policy That Shall Not Be Named: Principles of Industrial Policy: "Industrial policy is tainted with bad reputation among policymakers and academics and is often viewed as the road to perdition.... Yet the success of the Asian Miracles... stands as an uncomfortable story.... We argue that one can learn more from miracles than failures. We suggest three key principles... (i) the support of domestic producers in sophisticated industries, beyond the initial comparative advantage; (ii) export orientation; and (iii) the pursuit of fierce competition with strict accountability...

6. And Noah Smith believes that if we found enough research universities in small cities, we will have a booming economy elsewhere than the coasts for both indust8rrial-policy and private-entrepreneurship reasons: Noah Smith: Universities and Colleges Can Revive Declining Rural America: "Big cities aren’t the only places to benefit from knowledge industries—college towns also thrive in the new economy.... College Station, Texas.... Even small towns like Pikeville, Kentucky, home to the modest University of Pikeville, are doing well.... Government money that gets routed to college towns via state subsidies and federal research grants, then spent locally... tuition fees... university research... attracting smart people to the region and drawing in private investment, research universities harness the forces of knowledge-industry clustering to increase the wealth of an entire region. There’s a good chance that these forces can be harnessed to revive parts of the rural U.S.... It’s worth a shot...

7. If you believe—as so many do—that one important source of the disaster of 2008-10 was that economies had too much potentailly-insecure debt, you should be petrified today: John Authers and Lauren Leatherby: Financial Crisis: Decade of Deleveraging Debt Didn’t Quite Work Out: "This was the decade of de-leveraging that wasn’t. A decade ago... there was agreement... too much debt had caused the crisis, and so there must be a huge de-leveraging. It has not worked out like that.... Companies, particularly in the U.S., took advantage of the rock-bottom interest rates meant to bail out banks to go on their own borrowing spree. And the world found a new borrower of last resort. Ten years ago, China had been enjoying phenomenal economic growth for two decades, and largely avoided debt to fund it. No more. China’s debt has ballooned, transforming the geography of global debt in the process. It’s now bipolar, revolving around the U.S. and China...

8. ALAS! Parents appear to value not schools that teach their children but rather schools in which their children can rub elbows with the right kind of people. This could help make school choice into a recipe for disaster: Atila Abdulkadiroglu, Parag A. Pathak, Jonathan Schellenberg, and Christopher R. Walters: Do Parents Value School Effectiveness?: "School choice may lead to improvements in school productivity if parents' choices reward effective schools and punish ineffective ones. This mechanism requires parents to choose schools based on causal effectiveness rather than peer characteristics.... [But] arents prefer schools that enroll high-achieving peers.... We find no relationship between preferences and school effectiveness after controlling for peer quality...

9. U.C. Davis economic historian Eric Rauchway continues his long twilight struggle against the Obama administration's claims that it did better with its crises than FDR did with his in the Great Depression-ridden 1930s. I'm with Eric here: Roosevelt knew less about how the economy worked and what to do, yet in retrospect did much better given the state of things when he took office: Eric Rauchway: The New Deal Was on the Ballot in 1932: "During the 1932 campaign, Franklin Roosevelt explicitly committed himself to nearly all of what would become the important programs of the New Deal. In the months before his March 4, 1933, inauguration, he made his proposed policies even clearer. Yet many Americans have forgotten this clarity of purpose.... One historian [Roger Daniels] recently declared, 'The notion that when Franklin Roosevelt became president he had a plan in his head called the New Deal is a myth that no serious scholar has ever believed'. Outgoing president Herbert Hoover (and voters and politicians and diplomats at the time) knew better...

10. The China shock was not the only shock American manufacturing has experienced. Yet New England politics did not turn nativist in the 1960s. What was the difference? No Fox News?: John F. Kennedy: New England Industry and the South: "The southward migration of industry from New England has too frequently taken place for causes other than normal competition and natural advantages...

#noted #weblogs #2019-04-11