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Economics, Identity, and the Democratic Recession: Talking Points

Event: Tu 2019-04-09 10-11am CFR: 58 E. 68th St., New York, NY:

Untitled 7 pages

The Data

  • 1970s a bad decade for real incomes—oil shocks, environmental cleanup, baby boom entry into the labor market
  • End of 1970s sees shift to "neoliberalism" to fix the "excesses of social democracy"
  • Since 1980: males and those with low education have seen their expectations of what their lives would be like bitterly disappointed
    • Male high school graduates down by 17%
    • Males with advanced degrees up by 25%
    • Whites have not been disappointed more economically—what William Juilius Wilson called the "declining significance of race"
      • Save, perhaps, for Black women with BAs...
    • Sociological disappointment in addition?
    • Within-household economic disappointment?
    • Other aspects of the economic besides income?
      • Occupation and occupational stability
      • Employment stability

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Greenspan and Wooldridge Argue the American Love and Embrace of Capitalism Is the Key...

Il Quarto Stato

The world as a whole is much richer than it was three centuries ago. Back then, at the end of the long era since the invention of agriculture, the typical human lived on two dollars a day, had a life expectancy at birth of 25, and was protein deprived in utero. Mothers worldwide no longer run a one-in-six chance of dying in childbed. Literacy in no longer a rare accomplishment. Less than one in six humans worldwide live like all of our pre-industrial ancestors—and even those less-than-one-in-six likely have some access to the village smartphone.

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The Lighting Budget of Thomas Jefferson: DeLong's Morning Coffee


Morning Coffee Podcast: The Lighting Budget of Thomas Jefferson: Should the U.S. fall into recession soon, the Federal Reserve will have very little room to loosen policy to cushion the downturn. This is a large asymmetric risk. The right way to manage an asymmetric risk is to buy insurance: the Federal Reserve should be buying recession insurance. It is not. This is a substantial problem...

8:02: https://delong.micro.blog/2019/03/17/the-lighting-budget.html | https://delong.micro.blog/uploads/2019/708e9b89bf.mp3

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The Lighting Budget of Thomas Jefferson

Thomas jefferson jpg 307×200 pixels

On December 21, the sun sets at Monticello at 4:57 pm. Civil twilight—when there is still enough light to conduct normal activities—ends at 5:27 pm. By March 21, the sun sets at 6:26 eastern standard time—Monticello is west of the center of America's eastern time zone—and civil twilights ends at 7:52. And on June 21 the sun sets at Monticello at 7:39 pm. Civil twilight ends at 8:11 pm (standard time). Even in the summer, moreover, Thomas Jefferson was unlikely to want to go to sleep when it got dark, with the chickens.

Hence his concern with candles:

1791 September 15: I will now ask the favor of you to procure for me, in the proper seasons 250 lb. of myrtle wax candles, moulded, and of the largest size you can find...

1792 January 24: Myrtle candles of last year out...

1792 November 4: I must now repeat to you my annual sollicitation to procure and send me 200 ℔ myrtle wax candles. I do not know whether the mixing tallow with the wax be absolutely necessary. If not, I would wish them of the pure wax; but if some mixture be necessary, then as little as will do...

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Still Haunted by the Shadow of the Greater Recession...

key: https://www.icloud.com/keynote/0UtILjGfChXSFFUBSCJ3PTf1g
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#highlighted #presentations #greatrecession #macro #economicgrowth #economichistory #economics #finance #monetaryeconomicss

Real Gross Domestic Product FRED St Louis Fed

Note to Self: Current forecast for 2018QIV GDP growth: 2.0%. Current forecast for 2019Q1 GDP growth: 1.5%. All of these people are now very, very quiet:

  • Robert J. Barro, Michael J. Boskin, John Cogan, Douglas Holtz-Eakin, Glenn Hubbard, Lawrence B. Lindsey, Harvey S. Rosen, George P. Shultz and John. B. Taylor: How Tax Reform Will Lift the Economy: "A conventional approach to economic modeling suggests that such an increase in the capital stock would **raise the level of GDP in the long run by just over 4%. If achieved over a decade, the associated increase in the annual rate of GDP growth would be about 0.4% per year...

  • Robert Barro (endorsed by Mike Boskin): How US Corporate-Tax Reform Will Boost Growth: "Gauging the effects of the tax-law changes on the costs (referred to as user costs) that businesses attach to investment in equipment and structures. Then I estimate long-run responses of the capital-labor ratio to the changes in user costs.... If we thought of C-corporations as corresponding to the whole economy, the changes in capital-labor ratios would imply a rise in long-run real per capita GDP by about 8.4%.... I made a rough downward adjustment of the long-run level effect from 8.4% to 7%...

  • James C. Miller III, Douglas Holtz-Eakin... Barry W. Poulson... Charles W. Calomiris... Donald Luskin... 95 others: Pass tax reform and watch the economy roar: "A twenty percent statutory rate on a permanent basis would, per the Council of Economic Advisers, help produce a GDP boost 'by between 3 and 5 percent'.... It is critical to consider that $1 trillion in new revenue for the federal government can be generated by four-tenths of a percentage in GDP growth. Sophisticated economic models show the macroeconomic feedback generated by the TCJA will exceed that amount—more than enough to compensate for the static revenue loss...

  • Susan Collins: Twitter: "On @MeetThePress today said that she had talked to [Holtz-]Eakin, Lindsay and Hubbard and they believed that the supply side stimulus would produce an increase on government revenue. This is problem when other side alleged serious people are really hacks.

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"Gunpowder Empire": Should We Generalize Mark Elvin's High-Level Equilibrium Trap?: Hoisted from the Archives

Natalie Pierson A Comparative Look at the Gunpowder Empires

Hoisted from the Archives: "Gunpowder Empire": Should We Generalize Mark Elvin's High-Level Equilibrium Trap?: OK. Popping the distraction stack again. A chance remark by the extremely sharp Cosma Shalizi when he came through Berkeley has caused me to spend a lot of time meditating upon a passage written by Bob Allen:

Robert Allen (2006): The British Industrial Revolution in Global Perspective: "The different trajectories of the wage-rental ratio created different incentives to mechanize production.... It was not Newtonian science that inclined British inventors and entrepreneurs to seek machines that raised labour productivity but the rising cost of labour... due to... Britain’s success in the global economy... in part the result of state policy... Britain['s] vast and readily worked coal deposits...

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Commonwealth Club Talking Points (January 25, 2019): Forecasting and Steve Moore Edition

The Embarcadero Google Maps

The Shutdown: Let's review the bidding: Pelosi, Ryan, McCarthy, Schumer, McConnell, Trump reached a deal. Deal passes Senate unanimously. Trump watches "Fox and Friends". Trump announces he won't sign the deal. Paul Ryan—desperate not to embarrass Trump more—won't let the House vote on the deal. Ryan goes out and Pelosi gets in on January 4, and Pelosi passes the deal through the House. But because it is a new congressional session, the Senate's approval has expired. And McConnell—desperate not to embarrass Trump more—is now holding things up in the Senate.

From Pelosi and Schumer's standpoint, the big problem is this: they reach a new deal with Trump, Fox and Friends finds some reason to slag it, Trump backs out again.

The right, rational response to this situation is for Pelosi, McCarthy, Schumer, and McConnell to strike deals and then pass them with veto-proof majorities. But McCarthy and McConnell are too scared of Trump and not concerned enough about the well-being of the country to do that.

2.5 million people aren't getting their paychecks and 800,000 are getting very little work done. That's about a 0.5%—10 billion over the past month—hit to the economy. We won't see that because of oddities in the how the public sector is folded into official statistics, but it is there. Will there be a multiplier applied to it? In a year I will have the data so that then I will be able to look back and tell you. I cannot tell you now...

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David Rezza Baqaee and Emmanuel Farhi: The Microeconomic Foundations of Aggregate Production Functions: "We provide a general methodology for analyzing...aggregate production functions by deriving their first- and second-order properties... provide non-parametric characterizations of the macro elasticities of substitution between factors and of the macro bias of technical change in terms of micro sufficient statistics. They allow us to generalize existing aggregation theorems and to derive new ones. We relate our results to the famous Cambridge-Cambridge controversy...

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M.G. Siegler: Apple’s Precarious and Pivotal 2019: The battery replacement issue suggests that many people are no longer upgrading iPhones because they’re now 'good enough' and everyone is more than happy to just pay a bit more for a better battery.... The part about 'US dollar strength-related price increases'—yes, this is Apple... acknowledging there may be a price ceiling for the iPhone.... The '$1,500 iPhone' (the most expensive variety of the iPhone XS Max) [was] to test such upper boundaries, like velociraptors testing electric fences. Consider it tested! And they’ll remember!...

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Richa Gupta and Umang Aggarwal: Is there a “Late Converger Stall” in Economic Development? Can India Escape it?: "A major driver of these good times is 'economic convergence', whereby poorer countries have grown faster than richer countries and closed the gap in standards of living. The convergence process has been broadening and accelerating for the last 20-30 years.... [But] the possibility of... a 'Late Converger Stall'...

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Noah Smith: China's Economic Growth at Risk From Reversing Reforms - Bloomberg: "There already are some signs that the country is making mistakes that will hobble economic growth.... By many measures, China is the world’s largest economy. This means a number of benefits will now flow—and indeed are already flowing—to China that used to go to the U.S. and Europe. Chief among these is agglomeration.... But... it might easily make mistakes that would prevent the country from leveraging that size for maximum economic benefit. Chief among these self-inflicted wounds would be closing the country to foreign investment, extending state control of the economy and adopting an adversarial relationship with neighboring nations. Ominously, the country seems to doing all of these now, to one extent on another...

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Stagnant Real Wages and Secular Stagnation Are Not Closely Related: DeLong FAQ

EconSpark: Derrick Miedaner asks: What role, if any, does secular stagnation play in the flat growth of wages since the recovery?": I reply: I think Ed Lambert is correct. "Secular stagnation" is probably not the best label for the worry. The worry is that financial markets have gotten themselves wedged into a situation in which frequently and for sustained periods of time it is the case that the full-employment real safe short-term Wicksellian neutral rate of interest turns out to be less than the negative of the central bank's inflation target. In a flexible-price full-employment economy, the economy deals with this and maintains full employment by having the price level drop instantaneously and discretely whenever this occurs in order to generate the extra inflation needed to get the market rate at the zero lower bound to its value needed for full employment, the real safe short-term Wicksellian neutral rate of interest. This was one of the major (but I think often overlooked) points of Krugman (1998) https://www.brookings.edu/wp-content/uploads/1998/06/1998b_bpea_krugman_dominquez_rogoff.pdf.

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The Appalachian and Other Trails


Let's consider the United States in the time of major westward expansion and "Amerindian removal": the century 1760 to 1860 before the Civil War. We have U.S. output-per-worker growth then at about 1.0% per year, in contrast to British output-per-worker growth at about 0.5% per year. We have the U.S. population and labor force growing at 2.5% per year, from 2.5 to 30 million. Our conclusion:

An America penned behind the Appalachians would probably have seen its living standards and productivity levels not growing at 1% per year from 1760 to 1860 but shrinking. For the $ \gamma = 3.0 $ benchmark case, living standards and productivity levels would have shrunk at a pace of -0.325% per year had population growth been the historical 3% per year.

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Perhaps the biggest hole in growth economics is its inability to properly wrestle with the problem of how to build and entertain the communities of engineering practice that have the externalities that fuel so much of economic growth. The 2% per year rate of growth of labor efficiency seen over the past century comes from somewhere, after all. If it comes from activities like R&D and science that together consume 2% of national income, that is a 60%/year net rate of return on such activities. We badly need to understand more about them: Pierre Azoulay, Erica Fuchs, Anna Goldstein, Michael Kearney: Funding Breakthrough Research: Promises and Challenges of the "ARPA Model": "The Advanced Research Projects Agency (ARPA) model for research funding has... spread...

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As Michael Kades writes, “the stakes are much higher than an ideological battle or technical adjustments to a legal regime” here. We need to understand how anti-trust practice affects the degree of monopoly in the United States and Hal monopoly effects equitable growth and societal well being. We do not. I think that attempting to understand these two issues is the most important analytic issue for policy relevant economic research in the United States today: Michael Kades: Why market competition matters to equitable growth: "At first glance, competition in the U.S. economy may seem far afield of the topic of equitable growth.... What could antitrust enforcement have to do with maintaining a healthy economy?...

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Big Questions for Left Opposition Social Scientists: Cedarbrook Notes


Cedarbrook Notes: Occupy had zero impact on austerity budgets. Mont Pelerin was not important because they gathered by a lake, sang “kumbaya”, and felt a sense of solidarity. We should not pretend defeats were victories.

What can we do? I think there are three levels that we ought to be operating on—all, right now, understanding the world rather than trying to change it: understanding policies, understanding mobilizations, and understanding utopia:

  • The first is understanding the effects of policies: the policies adopted between 1980 and 2007 did not have the results that their advocates expected nor the results that their critics expected. We really do need to figure out how to understand what the social world is rather than what the models—both pro and con—in use during the neoliberal era said the social world was.

  • The second is understanding the vicissitude of mobilization. The standard political center-left plans to promote full employment, progressive taxation and social insurance, upward mobility, and infrastructure and public services—equitable growth—all these are things that should meet with near-universal applause. By contrast, con-game kleptocracy in the interest of plutocracy should not get 60 million votes. Fascism—the belief that you need a strong leader who is a bully, because he is your bully, and he will bully your enemies, who may be corporations, foreigners, people who look or think differently, and who are always the rootless cosmopolites—should not be attractive to a 21st-century electorate on any level. Yet, somehow, it, terrifyingly, is. The same social-science models that failed to adequately track the effects of neoliberal policies failed to predict the seductive attractiveness of 21st century neo-fascism. Thus we have two different levels at which we need to understand the societal world: the effects of neoliberal policies, and the possibilities for mobilization.

  • The third is the question of what our Utopia is. How will our different view of the social world change our goals for a good society? Our utopia will almost surely still include full employment, progressive taxation and social insurance, upward mobility, and lots of infrastructure. But it will also include other and deeper objectives—objectives that have not been on the New Deal and social democratic bucket lists.

These three tracks all need to be pushed forward. But they also very much need to be three tracks. And they need to be three different tracks.

Nils Gilman: The Toba Eruption, by Spawning the #Transformationofthehuman Known as Behavioral Modernity...: "'Never before have I encountered someone so gleeful about catastrophe. When we discussed the risk that the Yellowstone supervolcano might blow at any time, Keller’s eyes twinkled. "It’s a fun idea", she said' https://www.theatlantic.com/magazine/archive/2018/09/dinosaur-extinction-debate/565769/...

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Steering by the Socialist Idols in the Heavens Leads Us to Sail Not Towards but Away from the Shores of Utopia: (Early) Monday Corey Robin Smackdown

Preview of Steering Toward Socialist Idols Leads Us to Sail Not Towards but Away from the Shores of Utopia

I find Corey Robin smart most of the time. I find him annoyingly and profoundly stupid some of the time. Why? Because of occasional but stubborn blindnesses to very important parts of recent history and, indeed, very important parts of the world in which he lives—what seems to me a willful, trollish blindnesses.

For example, his piece in the New York Times last week. It really could have used some proper editorial attention it did not get: The examples presented of what is wrong with "the market" are simply... not examples...

Robin writes of "the anxious parent, desperate not to offend the insurance representative on the phone, lest he decree that the policy she paid for doesn’t cover her child’s appendectomy". But that is not a problem with "the market": that is a problem with bureaucracy. National health systems face the same problems and make the same kinds of decisions with respect to "medical appropriateness" as do private insurers.

Robin writes of freedom from "the need to smile for the sake of a sale". But that is not a problem with "the market": that is a problem with the need we have for a complex division of labor in order to be a rich society, in the context of the very human fact that people will not be eager to deal with you as a cooperative partner if you are a misanthropic grouch.

The market provides a partial way around the unfreedoms generated by institutions of bureaucratic organization and social cooperation. The market—if and only if you have wealth—allows you to be a misanthropic grouch and still get people to cooperate with you. The market—if and only if you have wealth—allows you to avoid having to work to make the gear-wheels of bureaucracy turn and yet still gain access to resources. It is certainly the case that if people are poor then the market does them no good at all. It cannot, then, be a way around bureaucracy or norms of social agreeableness. The market pays attention to the wealthy and only the wealthy. But the problem then is one of poverty—that we have managed to arrange a very wealthy society in such a way that it has a lot of not-wealthy people in it.

Contrary to what Robin claims, utopia is indeed the liberal dream of freedom plus groceries—with "groceries" standing in for enough wealth to route yourself around the unfreedoms created by bureaucracy and by your own misanthropic nature when they bind too tightly. The problem is not "the market" or "capitalism": Corey Robin: The New Socialists: "Under capitalism, we’re forced to enter the market just to live...

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Assessing the "China Shock"

The School of Athens by Raffaello Sanzio da Urbino The School of Athens Wikipedia

Assessing the China Shock: I enter into a conversation between Noah nd Larry to give my views:

Noah Smith: An easy way to reconcile @de1ong and @joshbivens_DC on trade is to see the China Shock (and thus China's entry into the WTO) as sui generis http://www.bradford-delong.com/2018/08/eg-it-has-always-seemed-to-me-that-the-sharp-josh-bivens-is-engaging-in-some-motivated-reasoning-here-1-_putting-pen-to-.html

Larry Mishel: What I don't like about the 'shock' terminology is that the damage to jobs and wages are permanent, not a temporary phenomenon. One can argue...

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Robert C. Allen, Jean-Pascal Bassino, Debin Ma, Christine Moll-Murata, and Jan Luiten van Zanden (2005): Wages, Prices, and Living Standards in China, Japan, and Europe, 1738-1925: "'The difference between the money price of labour in China and Europe is still greater than that between the money price of subsistence; because the real recompence of labour is higher in Europe than in China.' –Adam Smith, Wealth of Nations, 1776, p. 189...

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In retrospect, this from the usually-reliable Karl Smith and Brandon Arnold looks really, really, really awful, no?

But they really should have known better: Anyone who goes the extra mile to give the version of Kevin Hassett on display these days the benefit of the doubt is likely to wind up naked on the Moon. That, I think, is the real lesson here—shading your thoughts to think more highly of Kevin these days either out of comity or because you think he is broadly on your policy side will put you in the same position as those who surrender their dignity to Donald Trump: Karl Smith and Brandon Arnold: Kevin Hassett’s Defense of Tax Reform is Right on Point: "The Tax Policy Center... had recently issued a report suggesting that the “Big Six” tax-reform proposal would add nearly $2.4 trillion to the budget deficit over the next ten years, raise taxes on many upper-middle class households, and slash taxes for the top 1 percent. Mr. Hassett was invited to respond to the report. His remarks were, unsurprisingly, unsparing. After all, the government’s top economist shouldn’t sit quietly while premature invectives are launched at the administration’s signature fiscal proposal...

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Should Kansas's (and Missouri's) Future Be "a Lot More Like Texas"?: Hoisted from the Archives

Clowns (ICP)

Hoisted from them Archives: Should Kansas's (and Missouri's) Future Be "a Lot More Like Texas"?: That is one of Kansas Governor Sam Brownback's constant applause lines—that he wants Kansas to be a lot less like California and a lot more like Texas.And so I was reading Bryan Burrough on Erica Grieder: ‘Big, Hot, Cheap and Right’: What America Can Learn from the Strange Genius of Texas.... Burrough applaud's Erica Grieder's "counter[ing] much of this silliness" that "Texas is corrupt, callous, racist, theocratic, stupid, belligerent, and most of all, dangerous.” The problem is that three paragraphs later Burrough is writing of how:

Texas’s laissez-faire mix of weak government, low taxes and scant regulations is deeply rooted in its 1876 Constitution, which was an attempt to vehemently dismantle an oppressive post-Civil War government of Radical Reconstructionists…

What was most "oppressive" about the Radical Reconstructionists? It was, of course, that they thought African-Americans should vote, and enabled them to do so.

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The empirical studies are finding more and more hysteresis—more hysteresis in the sense of a persistent downward shadow cast by a recession than I would have believed likely. I keep hunting for something wrong with these studies. But there are too many of them. And they all—at least all those published that cross my desk—point in the same direction: Karl Walentin and Andreas Westermark: Stabilising the real economy increases average output: "DeLong and Summers (1989)... argue that (demand) stabilisation policies can affect the mean level of output and unemployment...

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2018 Fall DEVENG 215 Pre-Class Introduction and Notes

School of Athens

DEVENG 215: Global Poverty Challenges and Hopes: A Perspective for Development Engineers:

Discussion: J. Bradford DeLong: TU 4:00 pm - 5:00 pm Mulford 230
Lecture: Fatmir Haskaj: TU, TH 2:00 pm - 3:29 pm Valley Life Sciences 2050

This graduate Development Engineering class has the following goals:

  1. Assist students in orienting themselves to the current global debates about poverty and inequality by exposing them to alternative paradigms of development and welfare situated in their historical context.

  2. Assist students in familiarizing themselves with the institutions and actors—from the World Bank to global social movements, from national and local governments to nonprofits and NGOs, from multinational corporations to philanthropic foundations—attempting to act to diminish global poverty.

  3. Assist students in critically reflecting upon philosophies of global justice, the ethics of global citizenship, their own engagements with poverty action, and their own aspirations for social change.

  4. Prevent students from maintaining or accepting the the comfortable perception that poverty exists elsewhere, can be contained at a distance, does not affect them and their communities every day.

The hope is to accomplish all these tasks at the graduate student level, with a focus on how the social-political-economic context constrains and opens opportunities for successful Development Engineering. The hope is to do this on the cheap, without committing lots of additional resources.

My idea is to do this by building on the lectures and readings of Fatmir Haskaj's undergraduate course GPP 115: Global Poverty: Challenges and Hopes in the New Millennium. We will add additional readings and a graduate-level discussion seminar to attempt to supercharge what Fatmir does. Hence this syllabus incorporates-by-reference the GPP 115 syllabus…

Fatmir's course describes itself as:

seek[ing] to provide a rigorous understanding of 20th century development and thus 21st century poverty alleviation. Students will take a look at popular ideas of poverty alleviation, the institutional framework of poverty ideas and practices, and the social and political mobilizations that seek to transform the structures of poverty...

From the graduate Development Engineering Program perspective, this course—while completely fine for what it is—is not quite what we want. It is too "idealist"—incorporates too much of an implicit belief that once one understands the world, it will immediately become obvious how to change it, which belief is a common disease thought by academics like me. And it is too "macro"—individual development engineers are not going to lead social and political mobilizations and transform structures, but rather work in the context created by existing structures and mobilizations, in the hope of taking small steps in a good direction. Therefore post-lecture discussions will focus on: "OK. Very good. Now how does this affect how we will act when the rubber meets the road?"

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The very sharp Doug Rushkoff tries to recall tech to its utopian aspirations, rather than its current money-making reality. The fascinating thing is that tech is not very good in reality at money-making for anyone who is not the luckiest of lucky people—yet tech is very good at getting consumer surplus to users, who then use it to build utopia... or dystopia... depending: Doug Rushkoff: Survival of the Richest: "There was a brief moment, in the early 1990s, when the digital future felt open-ended and up for our invention...

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I am provoked by this. The benchmark of constant research productivity" defined as the same real dollar expenditure on research produces the same proportional increase in output? I have heard people say that the benchmark should be that the same share of national product spent on R&D should produce the same proportional increase in output. I have heard people say that the benchmark should be that the natural growth in the share of national product spent on R&D should be such as to produce the same proportional increase in output. I have never heard anybody say that the benchmark is that the same real dollar expenditure on research produces the same proportional increase in output: Nicholas Bloom, John Van Reenen, Charles I. Jones, and Michael Webb: Are Ideas Getting Harder to Find?: "One of the key drivers of economic growth during the last half century is Moore’s Law: the empirical regularity that the number of transistors packed onto an integrated circuit serving as the central processing unit for a computer doubles approximately every two years...

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Aspen: Security: Reactions to the Four Ex-National Security Advisors Panel

Aspen—Maroon Bells

Aspen: Security: Nine Reactions to the Four Ex-National Security Advisors Panel: Most important:

  • Joe Nye—and the others—should not have pretended that that the Trump Administration has a strategy, and is some sort of unitary actor. It doesn't. It isn't. For the right analogies, we need to reach back to the Tudor or Stuart dynasties—a King Charles II Stuart without the work ethic, mostly concerned with his mistresses, his parties, and deference to himself; easily bribed by the King of France, &c.; plutocrats maneuvering and using access to advance their interests; other kleptocrats manuevering and using access to advance their interests; and a few technocrats—a Pepys, a Godolphin—trying to hold things together. Graham Allison's three analytical perspectives—rational actor-organizational process-bureaucratic politics—are not sufficient to understand this thing. We need a fourth perspective: weak chaos monkey king, perhaps?...

And here are eight more:

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My More Polite Thoughts from Aspen...

Farmer and the Cowman

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Aspen—Maroon Bells

Aspen: Development Finance: A common thread in a bunch of the initial comments here was: valuation and assessment. This is a piece of a much broader problem. We have absolutely powerful measures for assessment as far as things that go through the market. We see them every hour on practically every news channel: GDP, employment, wages, equity values, interest rates. We have no similar set of indicators that are brought in front of our eyes and injected into our consciousnesses with respect to any of the broader societal welfare measures that we really want to advance—and the things that we really want Mars to advance. I do not know what the solution to this is. Clearly it is not another report with another set of indicators to add to the cacophony. But I do think we need to settle on a single set of global societal indicators that will have the mindshare that the market financial and other indicators have. I have no answers. I only have a plea for coordination...

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Aspen—Maroon Bells

Aspen: Development Finance Introducing considerations of strategy into development is a very sharp two-edged sword. On the one hand, the Cold War focused the attention of the entire American government on making the redevelopment of northwest and the development of southwestern Europe and of East Asia—Korea and Taiwan and Japan—a success. That was of enormous value in making the US development efforts the greatest successes we have ever had.

In addition, as Barney Frank once said when my colleague Barry Eichengreen was testifying in front of him, the Cold War was worth 60 votes in the House of Representatives. Now we have a much harder row to hoe.

On the other hand, there have been many times over the past 70 years in which strategic logic has overcome development logic. And there are dangers in poisoning the entire effort to the extent that strategic logic takes on too large a place. Walt Whitman Rostow had John F Kennedy primed up talk to Sukarno about all the wonderful things the US was going to do for Indonesian development. But Suharto—sorry, Sukarno, Sukarno, Sukarno—was interested in two and only two things: Irian Jaya, and free cash flow that he could use to reward elements of his political coalition...

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Aspen—Maroon Bells

Aspen: Approaches to Fragility: One of the great mysteries puzzling me in my Visualization of the Cosmic All is the extraordinary disjunction between the two acts of Chiang Kai-Shek's career. The first act—Chiang Kai-Shek and his Guomindang as rulers of China between the Northern Expedition and the Japanese invasion—produced a highly-corrupt government that did not seem to be nurturing economic convergence and rapid industrialization. The second act—Chiang Kai-Shek and his Guomindang as rulers of Taiwan after 1949—is one of the most glorious episodes of economic development produced by any democracy-minded or not-so-democracy-minded strongman.

What should I read to understand this?...

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The Rise of the Robots: Some Fairly-Recent Must- and Should-Reads

  • Very wise words from close to where the rubber meets the road about how the Rise of the Robots is likely to work out for the labor market over the next generation or so: Shane Greenstein: Adjusting to Autonomous Trucking: "Let’s come into contact with a grounded sense of the future.... Humans have invented tools for repetitive tasks, and some of those tools are becoming less expensive and more reliable...

  • The answer is: probably in the late 1960s: Joe McMahon: When was the last time all the computing power in the world equaled one iPhone?: "When was the last time all the computing power in the world equaled one iPhone?...

  • IMHO, the "long run" problems Martin discusses need to be postponed: we don't know enough about the future to even begin to think intelligently about them. The "medium run" problems, by contrast, deserve a lot of attention right now: Martin Wolf: Work in the age of intelligent machines: "How do you organise a society in which few people do anything economically productive?...

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Hoisted from the Archives: James Scott and Friedrich Hayek

Il Quarto Stato

James Scott and Friedrich Hayek: My review of James Scott (1998), Seeing Like a State: How Certain Schemes to Improve the Human Condition Have Failed (New Haven: Yale University Press: 0300070160):


I. Introduction

There is a lot that is excellent in James Scott's Seeing Like a State.

On one level, it is an extraordinary well-written and well-argued tour through the various forms of damage that have been done in the twentieth century by centrally-planned social-engineering projects—by what James Scott calls 'high modernism' and the attempt to use high modernist principles and practices to build utopia. As such, every economist who reads it will see it as marking the final stage in the intellectual struggle that the Austrian tradition has long waged against apostles of central planning. Heaven knows that I am no Austrian—I am a liberal Keynesian and a social democrat—but within economics even liberal Keynesian social democrats acknowledge that the Austrians won victory in their intellectual debate with the central planners long ago.

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If you take the appropriate measure of labor market tightness to be the prime-age employment rate, there is no wage growth puzzle. So why does the Federal Reserve take the unemployment rate as the relevant labor market tightness variable and wring its hands about the wage-growth puzzle, rather than taking the prime-age employment rate as its relevant labor market tightness variable? It is a mystery: Adam Ozimek: Wage growth is right on target folks!:

Adam Ozimek on Twitter Wage growth is right on target folks

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I Owe an Apology to Stefanie Stantcheva

I messed this up the first time. And I apologize to Stefania. Let me see if I can fix it: The very sharp Stefanie Stantcheva gets trapped into linguistic quicksand, and disappears into the mire. Her Let me disagree with the very sharp Stefanie Stantcheva's statement that "it’s good to be clear... whether you are making an efficiency argument about the reaction to taxes or expressing a social value judgment..." is totally incoherent: so-called "efficiency" arguments rest on a social value judgment—that the existing distribution of wealth corresponds to utility and deservingness, so that reducing the areas of the economy's Harberger triangles would raise societal wellbeing, holding the distribution of wealth constant, while increasing the areas of the economy's Harberger triangles would raise societal wellbeing, holding the distribution of wealth constant. I think that is wrong: the Harberger triangles' changes go to and come from people with different marginal utilities of wealth. Thus whether the total of behavioral responses to balance-preserving fiscal interventions raise or reduce societal wealth, holding the distribution of wealth constant, hinges on who the Harberger triangles go to or come from. If the people they go to and come from do not have the same marginal utility of wealth, then:** "efficiency" can be inefficient.

And to claim the the current distribution of wealth corresponds to utility and deservingness ought to be a lie too big for anyone to swallow. **It's not anything Stefanie Stantcheva would ever say—rather the reverse—but it does implicitly underpin the belief that the sum-of-the-areas-of-the-economy's-Harberger-triangles is meaningful.

I think all these messes are potentially avoided by working in utility space rather than wealth space from teh get-go. But what do I know?

And, otherwise, her twitter thread is totally great: Stefanie Stantcheva: "Optimal Capital Taxation in 7 Tweets: "Simplifying a lot, but here is the core logic...

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The argument against Nouriel is that asset markets are still placing high valuations on everything. The argument against taking that as a sign of optimism is that true apocalypse scenarios are not priced: there is no place to hide, so fear of them produces no pressure to sell anything: Nouriel Roubini: Trump May Kill the Global Recovery: "How does the current global economic outlook compare to that of a year ago?...

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Early industrial Japan did marvelous things. It accomplished something unique: transferring enough industrial technology outside of the charmed circles of the North Atlantic and the temperate-climate European settler economies. Ever since, politicians, economists, and pretty much everybody else have been trying to determine just what it was Japan was ale to do, and why. But it was a low-wage semi-industrial civilization, economizing on land, materials, and capital and sweating labor: Pietra Rivoli (2005): The Travels of a T-Shirt in the Global Economy: An Economist Examines the Markets, Power, and Politics of World Trade (New York: John Riley: 0470456426) https://books.google.com/books?isbn=0470456426: "Female cotton workers in prewar Japan were referred to as 'birds in a cage'...

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The Meiji Restoration: A Probable In-Take for "Slouching Towards Utopia?: An Economic History of the Long 20th Century"

Tokaido road Google Search

The problem with this is that I do not think that I have the story of Japan's successfully pre-WWI development path nailed, the way I have the Chinese story of failure nailed. Oh well:

The opposite of China in the pre-World War I years was Japan.

In the early seventeenth century the Tokugawa clan of samurai decisively defeated its opponents at the battle of Sekigahara, and won effective control. Tokugawa Ieyasu petitioned the—secluded Priest-Emperor to grant him the title of Shogun, the Priest-Emperor's viceroy in all civil and military matters. His son Hidetaka and grandson Iemitsu consolidated the new régime. From its capital, Edo—renamed and now Tokyo—the Tokugawa Shogunate ruled Japan for two and a half centuries.

At its very start, early in the seventeenth century, the Tokugawa Shogunate took a look to the south, at the Philippines. Only a century before, the Philippines had been independent kingdoms. Then the Europeans landed. Merchants had been followed by missionaries. Converts had proved an effective base of popular support for European influence. Missionaries had been followed by soldiers. And by 1600 Spain ruled the Philippines.

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