Litman: Cautious Congratulations—Noted
Edlagan & Monroe: Equitable Growth Expert Focus—Noted

Worthy Reads for June 27, 2019

Worthy Reads from Equitable Growth:

  1. If you did not read this when it came out five years ago—or if it is not fresh in your brain—you need to read or reread it today: Emmanuel Saez and Gabriel Zucman (2014): Exploding Wealth Inequality in the United States: "Income inequality has been on the rise... [with a] large portion of this increase is due to an upsurge in the labor incomes earned by senior company executives and successful entrepreneurs. But is the rise in U.S. economic inequality purely a matter of rising labor compensation at the top, or did wealth inequality rise as well?... (Hint: the answer is a definitive yes, as we will demonstrate below).... Currently available measures of wealth inequality rely either on surveys (the Survey of Consumer Finances of the Federal Reserve Board), on estate tax return data, or on lists of wealthy individuals, such as the Forbes 400 list of wealthiest Americans...

  2. One would imagine that market logic would lead inescapably to a consensus for expansionary fiscal policy when safe interest rates on government debt are very low and unemployment is high. When safe interest rates on government debt are very low, government debt is a very valuable asset to hold—hence any government that regards the creation of private wealth as a plus should be eager to create more government debt. And when safe interest rates on government debt are lower than the economy's growth rate, there is no sense in which long-term debt must be financed via taxes—hence those who want to reserve fiscal space either for other forms of future spending or for future tax cuts should have no objection. Yet even the most Keynesian audience in mainstream economics was extremely resistant to this message when Larry Summers and I tried to propagate it most of a decade ago. And I do not see how to break through—how to add expansionary fiscal policy in a recession to our panoply of recession-fighting tools in light of our failure to succeed in breaking through most of a decade ago: Various: Discussion of J. Bradford DeLong and Lawrence H. Summers: "Fiscal Policy in a Depressed Economy...

  3. And if you did not read Austin Clemens and Heather Boushey a year ago last spring on the need to track growth not just for the economy as a whole but for Americans at every point along the income curve, you should go do so: Austin Clemens and Heather Boushey: Disaggregating Growth: "Measuring who prospers when the economy grows.... The National Income and Product Accounts, or NIPA (also referred to as System of National Accounts, or SNA, outside of the United States), were a radical advance in economic measurement when they were instituted in the early 20th century. These accounts track aggregate output and income for the national economy. Most notably, they measure Gross Domestic Product and the quarterly fluctuations in GDP that tell us if the economy is growing or contracting. Before their advent, ascertaining the health of the economy was an inexact and patchwork procedure...

  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...

 

Worthy Reads Elsewhere:

  1. All signs are that when the next recession comes the deficit hawks will reappear in full force. But the bust is not the time for austerity: Alan Taylor (2013): When Is the Time for Austerity?: "Recent austerity policies have been guided by ideology rather than research.... Matching methods based on propensity scores show how contractionary austerity really is, especially in economies operating below potential.... Austerity has a... larger and more statistically significant negative effects in the slump. In booms, which one could view as the 'full employment' case, we find smaller (and mostly statistically insignificant) impacts of fiscal consolidation on output...

  2. There are still no signs of any acceleration in measured productivity growth from the low "new normal" that emerged with the financial crisis of 2007-9. Least of all are there signs of an acceleration in investment and productivity growth produced by the late-2017 McConnell-Ryan-Trump tax cut. Moreover, the growth rate of the labor force now falls off of a demographic cliff. If there were a moment over the past two and a half centuries when we would like for the economy's sake for immigration to be higher than usual, it is now: John Fernald and Huiyu Li: Is Slow Still the New Normal for GDP Growth?: "The new normal pace for U.S. GDP growth remains between 1½% and 1¾%, noticeably slower than the typical pace.... The slowdown stems mainly from demographic trends that have slowed labor force growth.... A larger challenge is productivity. Achieving GDP growth consistently above 1¾% will require much faster productivity growth...

  3. I am hearing from a number of people that columns like this one and its ilk by Paul Krugman and our other compadres are bloodless, and ineffective. They do not convey any sense of what is happening. So let me make it more concrete: The top 0.01% of American workers—now some 15000—this year have incomes, including capital gains, of about 500 times the average. Typical incomes in America today, including capital gains and benefits, are perhaps 300 a working day. The gulf between them and average income is large: average income is about 800. Thus 15000 workers in the top 0.01% of income this year receive an average of 400,000 dollars a day. How could one go about spending that? Suppose you decided this morning that you wanted to rent the 2000 square-foot Ritz-Carlton suite at the Ritz-Carlton San Francisco hotel for the week of next Memorial Day, and did so. That would set you back 6000 for seven nights. You would still have to spend 394,000 more today to avoid getting richer: to avoid getting richer you would have to spend 16,667 an hour, awake and asleep, day in and day out. One way to think about the spending of these 15000 superrich is that they are, collectively, through their spending employing 7,500,000 who are dedicated to making them happier and advancing their purposes, whatever they may be. And a large proportion of them are bosses, partially constrained by their obligation to advance the purposes of the organizations they work for, but free to shape and interpret those purposes as they wish. Guess average is effectively the unconstrained boss of only 3 more: that makes 20,000,000 of us who are paid to directly and indirectly and who are thus are focused on advancing the top 0.01%'s particular and idiosyncratic purposes. Is that likely to be a healthy society? And then there are the rest of the top 0.1%—not 15,000 but 135,000 each on average one-ninth as well-off—who must spend and reinvest not 400,000 but 45,000 a day, but who are collectively of the same economic weight as the top 0.01%, and thus have another 20,000,000 of us working for them: paid to directly and indirectly and thus focused on advancing the top 0.1%'s particular and idiosyncratic purposes as well: Paul Krugman: Notes on Excessive Wealth Disorder: "How not to repeat the mistakes of 2011.... What’s really at issue here is the role of the 0.1 percent, or maybe the 0.01 percent—the truly wealthy, not the '400,000 a year working Wall Street stiff' memorably ridiculed in the movie Wall Street. This is a really tiny group of people, but one that exerts huge influence over policy.... Raw corruption.... Soft corruption.... Campaign contributions.... Defining the agenda.... For me and others... a kind of radicalizing moment, a demonstration that extreme wealth really has degraded the ability of our political system to deal with real problems... [was] the extraordinary shift in conventional wisdom and policy priorities that took place in 2010-2011, away from placing priority on reducing the huge suffering still taking place in the aftermath of the 2008 financial crisis, and toward action to avert the supposed risk of a debt crisis...

  4. Information is valuable. But are our information overlords creating value for them out of the information they collect about us by figuring out what goods and services they can offer to sell us that will make us happy and advance our purposes? Or are they creating value for them out of the information they collect about us by figuring out how to manipulate and deceive us into giving them money and taking actions that benefit them but that do not make us happy or advance our purposes? In the case of Fox News, it is clear that the well-being and informed orientation to the world of its viewership is the last thing it cares about. In the case of Facebook, its eagerness to cheaply sell indicators of which of its customers are easily grifted is sobering, and contemptible. But are the others much better—the New York Times and Washington Post reporters and editors who work for their insider sources rather than their readers, the financial pundits seeking to tell viewers about the latest unicorn pump-and-dump scheme? These are the questions about the interaction of the public sphere with the market that we should be talking about: Idle Words: The New Wilderness: "To what extent is living in a surveillance-saturated world compatible with pluralism and democracy? What are the consequences of raising a generation of children whose every action feeds into a corporate database? What does it mean to be manipulated from an early age by machine learning algorithms that adaptively learn to shape our behavior? That is not the conversation Facebook or Google want us to have. Their totalizing vision is of a world with no ambient privacy and strong data protections, dominated by the few companies that can manage to hoard information at a planetary scale...

  5. I recommend reading Kurt Vonnegut, as perhaps more relevant and informative for our times than he was for the post-WWII era in which he wrote. I found Mother Night striking me harder than Slaughterhouse 5, but mileage will vary: Daniel Kennelly: A Triumphant Failure: "There’s nothing intelligent to say about a massacre, wrote Kurt Vonnegut of his book about the firebombing of Dresden. So why are we still reading it a half-century later?.... Dresden haunted Vonnegut’s life, and Slaughterhouse haunted his career.... We are the Tralfamadorians, collectively, creating nuclear weapons because 'if we don’t, someone else will'.... And we are Billy, each of us as individuals. We could stand up and yell, 'Don’t get on that plane! It’s going to crash!' But Billy 'didn’t want to make a fool of himself by saying so', and we don’t want to sound like fools either...

  6. Ever since I stopped being a wee'un, I have heard that one should not use expansionary fiscal policy to rebalance the economy because of the dangers of public debt accumulation. Somehow, there was never an analogous focus on how rebalancing the economy through monetary policy might produce greater dangers of private debt accumulation. Until now: Martin Wolf: How Our Low Inflation World Was Made: "If we are to make sense of where the world economy is today and might be tomorrow, we need a story about how we got here. By 'here', I mean today’s world of ultra-low real and nominal interest rates, populist politics and hostility to the global market economy. The best story is one about the interaction between real demand and the ups and then downs of global credit. Crucially, this story is not over...

  7. The echoes of the 1930s appear to me to be getting stronger and stronger. Hannah Arendt—who did not show up in the United States until 1941—always thought we were better than we were, and are: more insulated from European nihilism: Charles Sykes: Some Thoughts on David French’s Thoughts: "Go get a copy of Hannah Arendt’s Origins of Totalitarianism... the rise of fashionable cruelty... [in] the 1930s. Arendt writes about how 'it seems revolutionary to admit cruelty... because this at least destroyed the duplicity upon which the existing society seemed to rest. What a temptation to... wear publicly the mask of cruelty if everybody was patently inconsiderate and pretended to be gentle'...

  8. I agree with Larry Glickman here: Talking your book is never good, Tyler. And monopsony is not freedom—not even if the monopsonist works for you: Lawrence Glickman: "I have questions about this piece by @tylercowen: https://t.co/UllO6J28my: Why must very wealthy universities 'choose between boosting their academic quality through better training, or paying them higher stipends and teaching wages to ease their immediate financial concerns'? Why is it an inherently zero sum?... You write, 'I would merely note that many of my graduate students come from relatively well-to-do backgrounds and face favorable prospects after they graduate'.... Anecdotes about your grad students is not the best basis for policy making.... Do... [you] want to live in a world in which grad school is only feasible for the 'well-to-do'[?]... Grad students may not be 'employees in the traditional sense', but... there are many more Whole Foods employees than coal miners. Unions work just as well for the former as the latter...


.#noted #weblogs #2019-06-27

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