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Is Plutocracy Really the Problem?: Fresh at Project Syndicate

Is Plutocracy Really the Problem by J Bradford DeLong Project Syndicate

Fresh at Project Syndicate: Is Plutocracy Really the Problem?: After the 2008 financial crisis, economic policymakers in the United States did enough to avert another Great Depression, but fell far short of what was needed to ensure a strong recovery. Attributing that failure to the malign influence of the plutocracy is tempting, but it misses the root of the problem.... In fact, big money does not always find a way, nor does its influence necessarily increase as the top 0.01% captures a larger share of total income.... The larger issue...is an absence of alternative voices. If the 2010s had been anything like the 1930s, the National Association of Manufacturers and the Conference Board would have been aggressively calling for more investment in America, and these arguments would have commanded the attention of the press. Labor unions would have had a prominent voice as advocates for a high-pressure economy. Both would have had very powerful voices inside the political process through their support of candidates. Did the top 0.01% put something in the water to make the media freeze out such voices after 2008?... Read MOAR at Project Syndicate

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Risks of Debt: The Real Flaw in Reinhart-Rogoff: Hoisted from the Archives

There never was a 90% cliff. And most of the downward slope in teh scatter came not from debt accumulation but from growth that had been slow for other reasons. See Owen Zidar (2013): Debt to GDP & Future Economic Growth:

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Hoisted from the Archives: Risks of Debt: The Real Flaw in Reinhart-Rogoff: 2013: A country that spends and spends and spends and spends and does not tax sufficiently will eventually run into debt-generated trouble. Its nominal interest rates will rise as bondholders fear inflation. Its business leaders will hunker down and try to move their wealth out of the corporations they run for fear of high future taxes on business. Real interest rates will rise because of policy uncertainty, and make many investments that are truly socially productive unprofitable. When inflation takes hold, the web of the division of labor will shrink from a global web he'd together by thin monetary ties to a very small web solidified by social bonds of trust and obligation—and a small division of labor means low productivity. All of this is bound to happen. Eventually. If a government spends and spends and spends but does not tax sufficiently.

But can this happen as long as interest rates remain low? As long as stock prices remain buoyant? As long as inflation remains subdued. My faction of economists—including Larry Summers, Laura Tyson, Paul Krugman, and many many others—believe that it will not...

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Smackdown: Failing to Do Robustness Checks Is Not a Virtue

Smackdown

This, from this past April of all times, greatly puzzles me: WHAT IN THE HOLY NAME OF THE ONE WHO IS IS GOING ON HERE?!

Let us remember what really happened back in 2011 when the unemployment rate was 9%:

"Reinhart... explained that countries rarely pass the 90 percent debt-to-GDP tipping point precisely because it is dangerous.... Reinhart and Rogoff... 'current debt trajectories are a risk to long-term growth and stability, with many advanced economies already reaching or exceeding the important marker of 90 percent of GDP'..."

Yet there never was any "90 percent debt-to-GDP tipping point".

Reinhart and Rogoff thought there was because they did not do any robustness checks of their data-analysis binning procedures.

Perhaps an apology to the misled world should be a high priority? Perhaps it should be a higher priority than rants claiming that their critics like me—who were right—engaged in "years of mounting polemics against austerity policies, Keynesian dogma has become something close to a secular religion"?

Marking your beliefs to market makes your thoughts stronger and raises your credibility. Not doing so does the reverse:

Ken Rogoff: The Austerity Chronicles: "After years of mounting polemics against austerity policies, Keynesian dogma has become something close to a secular religion in popular economic-policy debates. But a new study of 16 advanced economies shows that, as with all dogmas, righteousness is no substitute for empirical facts...

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Henry Farrell: The American Right's Torquemada Option: Weekend Reading

Handmaid s tale Google Search

Henry Farrell: The American Right's Torquemada Option: "On the Ahmari/Kimball/Peterson/Deneen thing. When anti-modern conservatives decide that the liberal world is depraved they can either withdraw from it-the Benedict Option, or cleanse it of the corruption of tolerance. Call it the Torquemada Option https://en.wikipedia.org/wiki/Nemesis_the_Warlock. And the moderate success that some modern figures-such as Orban-have enjoyed in taking over the university system and forcibly purging it of those who would pollute our youth with gender studies and the like give old time reactionaries like Kimball some hope it can be done...

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Belle Waring: Uses and Abuses of Tarps: Weekend Reading

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Belle Waring: Uses and Abuses of Tarps: "It took me so long to find this quote. I remembered that it was Solovki, yes! And that Maxim Gorky was the visitor! And the tortures with the logs, and being staked out for the mosquitoes, and rolling the prisoners down the stairs, and the brave boy who told all, all! to Gorky and was left behind to be shot the moment Gorky’s ship left the horizon empty and barren! And the tarps. But could I find the quote? I damn sure could not. I was in the position of Edward Gorey’s Mr. Earbrass who starts up in the night having thought of the perfect lines for an epigraph: 'His mind’s eye sees them quoted on the bottom third of a right-hand page in a (possibly) olive-bound book he read at least five years ago. When he does find them, it will be a great nuisance if no clue is given to their authorship'...

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Note to Self: F--- you, @jack. Twitter keeps—somehow—reversing my view from "Latest Tweets" to your algorithmic "Home", showing me first tweets I am likely to engage in. But tweets I am likely to engage in are not the tweets I want to see. You are hacking my brain, @jack—and not in a good way.

Thus you have made yourself my enemy: Things that advertise on Twitter I will not buy. Opportunities for me to cheaply degrade your reputation and reduce your wealth I will gladly take advantage of.

Quite stunning that you have developed such potentially useful tool, @jack, and yet have managed to make yourself so thoroughly my enemy, isn't it? One might say it requires a close-to-unique talent...

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Weekend Reading: John Maynard Keynes: from The End of Laissez-Faire (1926)

School of Athens

John Maynard Keynes (1926): The End of Laissez-Faire (1926): "Suppose that by the working of natural laws individuals pursuing their own interests with enlightenment in condition of freedom always tend to promote the general interest at the same time! Our philosophical difficulties are resolved-at least for the practical man, who can then concentrate his efforts on securing the necessary conditions of freedom. To the philosophical doctrine that the government has no right to interfere, and the divine that it has no need to interfere, there is added a scientific proof that its interference is inexpedient. This is the third current of thought, just discoverable in Adam Smith, who was ready in the main to allow the public good to rest on 'the natural effort of every individual to better his own condition', but not fully and self-consciously developed until the nineteenth century begins. The principle of laissez-faire had arrived to harmonise individualism and socialism, and to make at one Hume's egoism with the greatest good of the greatest number. The political philosopher could retire in favour of the business man—for the latter could attain the philosopher's summum bonum by just pursuing his own private profit...

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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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Modern Dan Drezner Is Much Better...

Consumer Price Index for All Urban Consumers All Items Less Food and Energy FRED St Louis Fed

Dan Drezner: The Worst Piece Of Conventional Wisdom You Will Read This Year: "OK, so, a few things.... Stagflation in the 1970s was caused primarily by an inward shift of the aggregate supply curve due to a surge in commodity prices, particularly energy. Some central banks responded with accommodating monetary policies that accelerated inflation even further. Fiscal policy was an innocent bystander to this whole shebang. So I honestly don’t know what the hell Kinsley is talking about...

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So, Professor Drezner, We Meet Again. And THIS TIME THE ADVANTAGE IS MINE!

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Dan Drezner appears to mourn for the days when I was his nemesis: Dan Drezner (2005): So How Do Mexicans View African-Americans?: "While Latino critics in the United States have their hands full combating discrimination in the Star Wars movies (link via Glenn Reynolds), Latinos south of the border have a slightly bigger problem.... dealing with their own racial prejudices. Traci Carl explains for the Associated Press: 'President Vicente Fox reversed course Monday and apologized for saying that Mexicans in the United States do the work that blacks won't....' An intriguing angle about this story is the ability of Jackson and Sharpton to go global with... that thing they do (though in this case they have a pretty valid point). Readers are heartily encouraged to predict the next world leader who will be required to mau-mau kowtow to Jackson and Sharpton for something they say. I think it's a toss-up between Silvio Berlusconi and Vladimir Putin.... UPDATE: Brad DeLong objects to this post without saying why he objects. From his comments section, I gather it was my use of the phrase 'mau-mau', which some argue is a racially offensive term. Wikipedia backs them up (though they treat it as a noun and I used it as a verb)—so let me take the opportunity to apologize for using the term...

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I Said "Pass the Baton" to Those Further Left than I, Not "Bend the Knee"

Pass the baton olympics Google Search

Last night at dinner at Iyesare, Noah Smith admonished me for not making it clear that I said "pass the baton" to those further left, not "bend the knee". So here I make that clear, and repost:

Carville-Hunt "Two Old White Guys" Podcast:

Al Hunt: Brad, your critique is brilliant.... Your solution that worries me. Turn it over to the left, and then try to make their proposals slightly more palatable. I don't see how that becomes in any fashion a winning coalition, legislatively or politically.

Brad DeLong: I said: pass the baton, right? I said: pass the baton.

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Carville-Hunt "Two Old White Guys" Podcast

Carville-Hunt "Two Old White Guys" Podcast:

Albert Hunt

Edited for Coherence and Clarity

https://www.pscp.tv/w/1OwxWOzBQgkxQ?q=alhuntdc

Al Hunt: Brad Delong, a Rubin Democrat, a mainstream, a Clinton-Obama Democrat, if you will, has said in the [intra-]democratic wars: My side has lost. We can't form any coalitions with [even] a handful of moderate Republicans. Cap-and-trade was a Republican idea. Every single Republican basically turned their back.

Uh, Brad, are you there?...

As soon as you're with us, let us know.

Brad, you hit the smiley face.

We are going to ask Brad what this means for the Democratic Party’s [position] on major economic issues.

I think we have Brad, right?

Brad DeLong: [The Machine] says I am here.

Al Hunt: Terrific. I'm talking about your vox[.com] interview. I also note that you are one of the 750 most influential economists. James and I hope to be one of the 70,000 most influential podcasters at some point. We once again have been elevated by our guests.

James [Carville], let me turn it over to you to ask the first couple of questions to Brad about his new thesis.

Brad DeLong: May I first compliment the two of you?

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The State of America's Political-Public Sphere

Il Quarto Stato

One of my twitter threads from yesterday: I think it is fair to say that the already-broken American political public sphere has become significantly more broken since November 8, 2018.

On the center and to the left, those like me in what used to proudly call itself the Rubin Wing of the Democratic Party—so-called after former Treasury Secretary Bob Rubin, and consisting of those of us hoping to use market means to social democratic ends in bipartisan coalition with Republicans seeking technocratic win-wins—have passed the baton to our left. Over the past 25 years, we failed to attract Republican coalition partners, we failed to energize our own base, and we failed to produce enough large-scale obvious policy wins to cement the center into a durable governing coalition.

We blame cynical Republican politicians. We blame corrupt and craven media bosses and princelings. We are right to blame them, but shared responsibility is not diminished responsibility. And so the baton rightly passes to our colleagues on our left. We are still here, but it is not our time to lead.

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A Rant on Trump, Trade, and China...

Clowns (ICP)

I'm still trying to come to terms with my Commonwealth Club event with Steve Moore last month. As therapy, I took some of my less-than-coherent ravings and tried to turn then into proper rant:


Steve, what you are saying is simply delusional.

You keep saying that Xi needs to deal. Why? Because, you say, Trump is deadly serious on China an sod will not back down.

Do remember that Trump declared victory on reforming NAFTA, "the worst trade deal in the history of the world", with small adjustments on autoparts rules-of-origin. Small adjustment on auto parts were enough to transform NAFTA, in Trump's mind, from the worst trade deal in the history of the world into something he is now very proud of. Xi has to be thinking that he should deal with Trump the same way that Mexico did—hang tough, provide a few symbolic concessions only, and Trump will cave. then things will go go back to business-as-usual.

What is there in the situation that would keep that from being the obvious strategy for Xi to follow?

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Blogging: What to Expect Here...

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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

"I have never subscribed to the notion that someone can unilaterally impose an obligation of confidentiality onto me simply by sending me an unsolicited letter—or an email..." — Patrick Nielsen Hayden

"I can safely say that I have learned more than I ever would have imagined doing this.... I also have a much better sense of how the public views what we do. Every economist should have to sell ideas to the public once in awhile and listen to what they say. There's a lot to learn..." — Mark Thoma

"Tone, engagement, cooperation, taking an interest in what others are saying, how the other commenters are reacting, the overall health of the conversation, and whether you're being a bore..." — Teresa Nielsen Hayden

"With the arrival of Web logging... my invisible college is paradise squared, for an academic at least. Plus, web logging is an excellent procrastination tool.... Plus, every legitimate economist who has worked in government has left swearing to do everything possible to raise the level of debate and to communicate with a mass audience.... Web logging is a promising way to do that..." — Brad DeLong

"Blogs are an outlet for unexpurgated, unreviewed, and occasionally unprofessional musings.... At Chicago, I found that some of my colleagues overestimated the time and effort I put into my blog—which led them to overestimate lost opportunities for scholarship. Other colleagues maintained that they never read blogs—and yet, without fail, they come into my office once every two weeks to talk about a post of mine..." — Daniel Drezner

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Commonwealth Club: Annual Economic Forecast Event (January 25, 2019): Relevant Files

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Commonwealth Club: Annual Economic Forecast

Short-Run Economic Forecast: The Economic Forecast: Commonwealth Club Non-Public Event Opening Statement

Talking Points and Snippets from Commonwealth Club January 25, 2019 Forecast Event

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

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Yes, There Are Individual Economists Worth Paying Respect to. But Is Economics Worth Paying Respect to?

Lorenzetti ambrogio bad govern det The Allegory of Good and Bad Government Wikipedia

Blush. To be one of fifteen good economists name-checked by Larry Summers genuinely makes my day—nay, makes my week.

But this gets into a topic I have been worrying at for a long time now. And so let me try once again to say what needs to be said, for I do have to admit that, contrary to what Larry maintains, Fareed Zakaria does have a point when he says that "events have hammered... nails into the coffin of traditional economics" and that, while the question mark at the end is important, it is time to speak of "the end of economics?". Yes, there are very many good economists worth listening to. But does economics as a whole have any claim to authority, or is it better for outsiders' first reaction to be to dismiss its claims as some combination of ideology on the one hand and obsequious toadying to political masters on the other?

Open right now on my virtual desktop, as has been true about 5% of the time over the past fourteen months, is an article forecasting the economic effects of the 2017 Trump-McConnell-Ryan tax cut by nine academic economists: 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: We believe the Republican bills could boost GDP 3% to 4% long term by reducing the cost of capital. It is, bluntly, unprofessional.

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Larry Summers: Has economics failed us? Hardly: "My friend Fareed Zakaria... writing... “The End of Economics?,” doubting the relevance and utility of economics and economists. Because Fareed is so thoughtful and echoes arguments that are frequently made, he deserves a considered response. Fareed ignores large bodies of economic thought, fails to recognize that economists have been the sources of most critiques of previous economic thinking, tilts at straw men and offers little alternative to economic approaches to public policy...

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Bad actors acting badly. A century ago the authors and distributors of the Protocols of the Elders of Zion has theological and political motives—they saw their lies as buttressing what they saw as the essential institutions of orthodoxy and autocracy—rather than just seeking to make a buck. Which is worse?: Hannes Grassegger: The Plot Against George Soros: "The Unbelievable Story Of The Plot Against George Soros: How [the] two Jewish American political consultants [Arthur Finkelstein and George Eli Birnbaum] helped create the world’s largest anti-Semitic conspiracy theory...

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Talking Points and Snippets from Commonwealth Club January 25, 2019 Forecast Event

3 Month Treasury Bill Secondary Market Rate FRED St Louis Fed

Forecasting: Because of the shutdown, we are flying much more blind than we would like to be. We are not getting the normal data flow. Thus there is more than the usual level of uncertainty. Given that:

  • I believe there is something like an 80 percent probability that Europe is now in a small recession.
  • The Chinese government continues to say that all is well.
  • But somehow six percent fewer cars were bought in China in late 2018 than in late 2017.
  • Over the past half century the reliable recession signal has been yield-curve inversion—since 1965 eight inversion signals: one false (1998), one near-recession (1966), and six recessions.
  • There have been no recessions not signaled by a yield-curve inversion.
  • The Federal Reserve currently plans are to invert the yield curve in June.
  • Neither Steve Moore nor I understand why the Fed thinks that this is a good thing to do.

In the last yield-curve inversion, in 2006, they were worried about an inflationary spiral breaking out because of rising oil prices—they should not have been worrying about it, but they were. In the yield-curve inversion before that, in 2000, they were worried about the dot-com bubble. There is nothing like either of those going on now.

Some people think the Federal Reserve is about to back off. Some people think that this time really is different—that the bond market is spooking at shadows this time. Give each of these a 25% chance of being right, and you have to say that there is a 50% chance the U.S. will be in recession in a year and a half. We hope the recession, if it comes, will be a small one. We hope we will, somehow, dodge the bullet and not have a recession.

But, at least as I see it, that is the forecast: a 50% chance of 1.5%-2.5% growth over the next year and a half, and a 50% chance of negative growth.

If you want a more precise forecast, my advice is to consult your Magic-8 Ball.

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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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Hoisted from the Archives from 2005: Kevin Drum: The Wall Street Journal Editorial Page Is More of a Joke than Ever: "Stephen Moore's maiden outing as a member of the WSJ editorial board.... Moore's sermon today is about the wonders of supply side economics.... 'President Ronald Reagan chopped the highest personal income tax rate from the confiscatory 70% rate that he inherited when he entered office to 28% when he left office and the resulting economic burst caused federal tax receipts to almost precisely double.'... Tax revenue doubled!... First, we should adjust for inflation.... Population increased... tax revenue was $2,283 per person in 1980 and $2,694 per person in 1990. That's not double. It's an increase of 18%... a lot of that is due to consistent tax increases throughout the 1980s.... We can play this game with any decade.... Adjusting for inflation and population growth... 70s produced an increase... of 25%. The Clinton 90s produced... 40%.... Reagan produced the slowest growth in... any decade since World War II. That's a real supply side triumph. Welcome to the Journal, Steve. You guys deserve each other...

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Greg Mankiw: The Bad Economics Behind Trump's Policies: "Moore and Laffer... learned the importance of flattering the boss... Trump is a 'gifted orator' who is always 'dressed immaculately'. He is 'shrewd',” 'open-minded', 'no-nonsense', and 'bigger than life'.... The book quotes Trump as claiming... his tax plan... would not increase the budget deficit because it would raise growth rates to 'three, or four, five, or even six percent'. The authors offer no credible evidence that the tax changes passed will lead to such high growth.... The Congressional Budget Office estimates that the Trump tax cuts will increase growth rates by 0.2 percentage points per year over the first five years [and then give all of that back in the next five years]... a long way from the one- to four-percentage-point boost that the president and his associates have bragged of, and that Moore and Laffer quote without explanation, caveat, or apology...

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Why do people do this? Because it gets you invited back on to CNN. Why does it get you invited back on to CNN? That remains a mystery to me, and to others: Brad Reed: Trump-Loving Economist Caught Red-Handed 'Making Up Numbers' by Ann Guest: "Washington Post columnist Catherine Rampell busted Trump-loving economist Stephen Moore on Friday when he falsely claimed that we are seeing vast 'deflation' in the United States economy thanks to interest rate hikes by the Federal Reserve.... 'Wait, wait, wait!' interjected Rampell. 'There is no deflation!' 'Yeah there is', Moore replied. 'No there is not', she shot back. 'Look at the Consumer Price Index!'... Rampell then nailed Moore for his false warnings during the Obama presidency that it was unwise for the Fed to keep interest rates low because it would lead to hyperinflation—despite the fact that the economy at the time was deeply depressed and much more in need of easy money...

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Trying to blame poor nonwhite people and social democratic governance for the faults of Wall Street seemed to me several bridges too far back a decade ago. Yet Steve Moore and Larry Kudlow seem to have gained rather than lost influence on the right from their eagerness to do so. They very sharp Barry Ritholtz takes exception: Barry Ritholtz (2016): No, the CRA Did Not Cause the Financial Crisis: "Two of Donald Trump’s economic advisers, Lawrence Kudlow and Stephen Moore... lay the blame for the credit crisis and Great Recession on the Community Reinvestment Act, a 1977 law designed in part to prevent banks from engaging in a racially discriminatory lending practice known as redlining. The reality is, of course, that the CRA wasn’t a factor.... Showing that the CRA wasn’t the cause of the financial crisis is rather easy. As Warren Buffett pal Charlie Munger says, 'Invert, always invert'...

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Are our models filing systems to remind us in shorthand form of what we think we know—in which case "we" should distrust models that say debt is good—or are they intuition pumps? As I see it, Paul Krugman strongly argues for the first; Olivier Blanchard takes some steps toward the second—which is why there is some dissonance between the tone of and the models in his presidential ddress: Paul Krugman: "A mostly good summary of interesting papers presented at the ASSA https://www.bloomberg.com/news/articles/2019-01-07/a-new-urban-divide-and-other-gems-from-the-big-economics-shindig but tellingly misrepresents what the paper by @ojblanchard1 actually said.... It doesn't say anything like 'debt is bad but not catastrophic'. It notes that in simple models a situation like the one we're in, in which interest rates are below growth rates, is one in which debt is actually good https://www.aeaweb.org/aea/2019conference/program/pdf/14020_paper_etZgfbDr.pdf.... Olivier then asks whether realistic complications reverse that result, and finds it unclear—more debt may well actually be good, and in any case probably doesn't do much harm. It's really a radical repudiation of what the Serious People have been saying. So it's misreporting to imply that it's just about downplaying the catastrophic risk aspect; the chairman of the AEA is basically saying that the whole deficit scold enterprise that dominated so much political discourse was bad economics...

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Commonwealth Club: Annual Economic Forecast

The Embarcadero Google Maps

Streaming: https://www.facebook.com/thecommonwealthclub/videos/2219824924924010/ https://www.youtube.com/watch?v=Gj398AqszD0

Commonwealth Club: Brad DeLong and Stephen Moore: Bank of America/Merrill Lynch Walter E. Hoadley Annual Economic Forecast | Commonwealth Club: "FRI, JAN 25 / 12:00 PM :: The Commonwealth Club :: 110 The Embarcadero :: Taube Family Auditorium :: San Francisco, 94105: With changes to taxes, trade wars with China and other countries, health care in flux, housing prices continuing to rise, continued governmental gridlock as well as international challenges to the United States, what does all of this mean for your business, your investments and the overall economy for 2019?...

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Be the Podcast You Want to See in the World!

We are going to need more monkeys Google Search

The very sharp Arindrajit Dube was, as one does, procrastinating on twitter:

Arindrajit Dube: Somehow I find the econ podcast space is mostly occupied by ideological right wingers, as opposed to people interested in an open minded, evidence informed economics. Who am I missing?

And my instantaneous reaction was: BE THE PODCAST YOU WANT TO SEE IN THE WORLD!

Brad DeLong: Let's start a podcast!

Arindrajit Dube: Wait Brad, is this a serious offer? :-)...

And the public chimed in:

Suresh Naidu: Do it!
Matthew Yglesias: You guys should do this for real
Robert Waldmann: You really do have to do the podcast (or block me). I will tweet complaints until you do it.
Aaron Sojourner: It would be incredibly valuable service.
Erik: Do it!
Dr. A. Duus Pape: I'd subscribe in a heartbeat.

Arindrajit Dube: God damn it Brad now Matt Y is on board and I am seriously screwed...

So it looks like we may be doing this for real—once a week, half-hour chunks, starting out as amateur hour only. First topic: thinking about what marginal tax rates on the rich should be.

What say you all?

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The very sharp Jeet Heer traces David Brooks's intellectual panic back to the John Birch Society: Jeet Heer: A Few Thoughts on "Cultural Marxism," Marcuse, John Wayne, the John Birch Society, and Anti-Semitism: "Goobers in the Trump administration are worried about 'Cultural Marxism' in the 'Deep State' opposing Trump.... 'Cultural Marxism' is a big boogeyman on the alt-right: it's the people who are supposedly responsible for creating PC, feminism, etc. The actual historical 'cultural Marxists' (or 'Western Marxists') were the Frankfurt School: Adorno, Benjamin, Marcuse etc... sought to supplant and update Marx's economic system with recognition of cultural forces...

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Jeet Heer: Let's Talk about Anti-Semitic Ideology: "The idea that George Soros (symbol for many on right of Jewish conspiracy) is behind Caravan isn't confined to Nazis. Here's Congressman Matt Gaetz. Here is popular Trumpist cartoonist Ben Garrison—again, someone with an audience outside the Nazi right but circulating idea that Soros is working to destroy America. House GOP Leader Kevin McCarthy:

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@attackerman and @chick_in_kiev have both written about how all these Soros theories replicate classic anti-Semitic tropes:

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Betting That Nobody Will Check the References as an Intellectual Style: Monday Smackdown

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Monday Smackdown: Apropos of David Brooks's ill-sourced imaginings that "cultural Marxism... is now the lingua franca in the elite academy..." and his use of Alexander Zubatov and Russell Blackford to back him up...

I am not sure whether Brooks is simply confident that people will not check Zubatov's references or did not check them himself—he does have to write a full 1200 words a week in his job. But I have long thought that betting nobody will check the references is an intellectual style much more common on the right than on the center or the left. For example:

On Niall Ferguson: Why Did Keynes Write "In the Long Run We Are All Dead"?: In [Keynes's] extended discussion of how to use the quantity theory of money, the sentence 'In the long run we are all dead' performs an important rhetorical role. It wakes up the reader. It gets him or her to reset an attention that may well be flagging.

But it has nothing to do with attitudes toward the future, or with rates of time discount, or with a heedless pursuit of present pleasure.

So why do people think it does? Note that we are speaking not just of Ferguson here, but of Mankiw and Hayek and Schumpeter and Himmelfarb and Peter Drucker and McCraw and even Heilbroner—along with many others.

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The most remarkable thing about this piece from 2011 is that Robert Barro does not seem to feel under any pressure at all to provide an account of why it was that real GDP per capita was 52,049 dollars in the fourth quarter of 2007 and yet only 49,318 dollars in the second quarter of 2009—and did not surpass its 2007Q4 level again until 2013Q3.

Other adherents than Barro to what Barro calls "normal economics" have put forward three theories:

  • that there was a huge sudden change in American workers' utility functions that made them much less eager to work,
  • that there was a huge sudden forgetting of a great deal of knowledge about how to manipulate nature and organize production, and
  • that there was a great and well-founded fear that Obama was about to impose taxes to turn America into a Venezuela or that Bernanke was about to follow a monetary policy that would turn the U.S. into a Zimbabwe.

They were laughed at.

So Barro prefers to have no explanation at all for why production per capita was lower than it had been in 2007Q4, and yet maintains unshaken confidence that he has a deep and correct understanding of what determines the level of production. You can't do that—hold that you have the correct theory, and yet not explain how it applies to the world in which you live: Robert Barro (2011): Keynesian Economics vs. Regular Economics: "The overall prediction from regular economics is that an expansion of transfers, such as food stamps, decreases employment and, hence, gross domestic product (GDP). In regular economics, the central ideas involve incentives as the drivers of economic activity. Additional transfers to people with earnings below designated levels motivate less work effort by reducing the reward from working. In addition, the financing of a transfer program requires more taxes—today or in the future in the case of deficit financing. These added levies likely further reduce work effort—in this instance by taxpayers expected to finance the transfer—and also lower investment because the return after taxes is diminished...

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0, 179, 465, 654—what's the next number in this series? Stephen Moore claims it is obvious, and gestures at it with an "and so on". Two numbers give you a line, three (that don't fall on a line) give you a parabola, and four (that don't fall along a line or a parabola) give you a cubic. We have four: What are the next numbers iin the cubic? 542, and -75, and -1401. Add up the first ten terms of this "and so on" series and we get not +6000 billion but rather -39820 billion. Economists know how to do and use math. Stephen Moore just doesn't: Stephen Moore: The Corporate Tax Cut Is Paying for Itself: "Kevin Hassett... caused a brouhaha by claiming... that the corporate tax cut... has 'about paid for itself.'... He is almost entirely right.... Even if we assume a reversion to the pre-Trump 1.9% growth path, the ratchet up in GDP this year translates into 179 billion in unexpected output this year, 465 billion next year, 654 billion in 2020, and so on. This magic of compounding yields more than $6 trillion additional GDP over the decade thanks to the faster growth already achieved...

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As I have said: It is a long time since NEC Chair Larry Kudlow was an economist—now he is just a guy who plays an economist on TV: Fred Imbert: White House Advisor Kudlow Says Apple Technology May Have Been 'Picked Off' by China: "'Apple technology may have been picked off by China and now China is becoming very competitive with Apple',” says Kudlow. 'There are some indications from China that they’re looking at that, but we don’t know that yet. There’s no enforcement; there’s nothing concrete', Kudlow adds... John Gruber: "What he’s saying here is that the Chinese stole Apple technology, copied it, and are now flooding the Chinese market with phones based on that stolen tech. I’m 99.8 percent certain that hasn’t happened—if there were Chinese phones built with stolen Apple technology we’d know it because we’d see it. I was going to say 'You can’t just make shit like this up', but as with most of the Trump Kakistocracy, things that you think are can’t’s are really just shouldn’t’s...

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Where did David Brooks learn to use the term "cultural Marxism"? From Alexander Zubatov and his attempt to rehabilitate it from its anti-Semitic not just connotation but denotation. How does Zubatov do this? By taking Russell Blackford out of context: Zubatov claims that Blackford's bottom line is "in other words, [cultural Marxism] has perfectly respectable uses outside the dark, dank silos of the far right". Blackford's actual bottom line is that the modern

conception of cultural Marxism is too blunt an intellectual instrument to be useful for analysing current trends. At its worst, it mixes wild conspiracy theorizing with self-righteous moralism.... Right-wing culture warriors will go on employing the expression 'cultural Marxism'... attaching it to dubious, sometimes paranoid, theories of cultural history.... Outside of historical scholarship, and discussions of the history and current state of Western Marxism, we need to be careful.... Those of us who do not accept the narrative of a grand, semi-conspiratorial movement aimed at producing moral degeneracy should probably avoid using the term 'cultural Marxism'...

Why does Zubatov misuse Blackford? In the hope that he will pick up readers like Brooks, who will take his representations of what Blackford says to be accurate. Why does Brooks take Zubatov's representations of what Blackford says as accurate? Because Brooks is too lazy to do his homework: Ben Alpers: A Far-Right Anti-Semitic Conspiracy Theory Becomes a Mainstream Irritable Gesture: "At the heart of this largely rote piece of Brooksian pablum is a claim that deserves a closer look.  'The younger militants', writes Brooks, 'tend to have been influenced by the cultural Marxism that is now the lingua franca in the elite academy'. This is interesting both for what Brooks appears to be trying to say and, more immediately, how he has decided to say it.... Norwegian far-right terrorist Anders Behring Breivik... murdered sixty-nine people... William Lind... associated with both the Free Congress Foundation and Lyndon LaRouche... Lind’s conception of Cultural Marxism was explicitly anti-Semitic.... Over the course of these years, the idea of Cultural Marxism spread across the American far right... [with] a big boost from Andrew Breitbart.... Why would a columnist like David Brooks, who is himself Jewish in background (if, perhaps, no longer in faith) and who has tried to build his brand identity by peddling in respectability and civility, adopt the term?...

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Debating Societies, Talking Points, and Choosing Our Governors

Daniel Webster In The Webster Hayne Debate Photograph by Cora Wandel

Debating Societies, Talking Points, and Choosing Our Governors This is a piece that never came together—on Ted Cruz, Bernie Sanders's henchman Warren Gunnels, JEB!! henchman Franklin Foer, and other people who have paved our way to our current Trumpist detachment of media and political discourse from, you know actual governance.

But here it is, for what it is worth:


With Bill Clinton, or Bill Bradley, or Al Gore, or Barack Obama, or Lloyd Bentsen, or Hillary Rodham Clinton—you listen to them, or you talk to them, and you know there is a mind back there deeply knowledgeable about and wrestling with substantive issues of societal welfare and technocratic policy.

With other high politicians, not so much. I gather that New Jersey Governor Chris Christie boldly stated that Marco Rubio failed his Turing test—and large numbers of observers agreed. Or take Ted Cruz, who starts out with a quite reasonable discourse on the fundamental aims of monetary policy:

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A Lazy New Year's Eve Morn on Twitter...

School of Athens

Brad DeLong: Gee, I Have Argued Myself From Half-Agreeing With @EconMarshall To 90% Agreeing With Him, Haven’t I?_:

Suresh Naidu: Sorry that came out wrong, deleted. Straightforward: a substantial amount of economic power and inefficiency is not eliminated by deconcentration/free entry. Not clear, lots of problems are made worse by free entry/competition. Low margins mean harder to unionize. Innovation is done by big firms. On simple efficiency grounds things can get worse in market with advantageous selection (eg loans) or with any negative ext. It depends!

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Mike Konczal: If we are worried about margins being too low, boy do I have exciting news for you:

Sure, but between that, Tobin's Q, "profit share", consistent rate of return under declining real rates, and the break of investment and profitability, something is broken. One can contest any of the individual methods, but together they paint a clear picture.

Suresh Naidu: The " always more competition" fix implies we want to expand output but it is not clear we do in every market (eg airline monopoly might be 10th best emissions regulation).

(((E. Glen Weyl))): 10th best reasoning is fine for policy technocrats, but I think a pretty poor basis for thinking about imaginaries for broad social change and democratic movement building. Imaginaries that move us beyond monopolistic corporate forms, but using market mechanisms, seem promising. I am talking about building coalitions and democratic discourse rather than just being technocratic experts.

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Note to Self: WTF?!?! At a ten-percent pre-tax social return to investment, that would require a 1 trillion—a 5%-point of national income—permanent upward jump in the annual flow of investment into America. Given that it looks like Trump is raising the annual deficit by 400 billion, that would require a 1.4 trillion—a 75-point of national income—permanent upward jump in the sum of annual private savings plus the annual trade deficit. On what planet and on what definition of "reasonable" is it "reasonable" to argue that Trump's tax cuts are going produce such a thing? Greg Mankiw: The Bad Economics Behind Trump's Policies: "One might reasonably argue that Trump’s tax cuts will increase growth over the next decade by as much as half a percentage point per year...

Gross Private Domestic Investment Nominal Potential Gross Domestic Product FRED St Louis Fed

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Not Only No Wage But Minimal Investment Boosts from Trump-McConnell-Ryan...

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The so brilliant as to be goddess-like Chye-Ching Huang gets this one, I think, wrong: In response to: Jared Bernstein: "For the [Trump-McConnell-Ryan tax] cuts to have more than near-term growth impacts, they’d have to boost biz investment a lot more than we’ve seen so far, though these are early days. Both WSJ and Slate show “muted” investment results..." She writes: Chye-Ching Huang: "My concern is the frame that "growth' is what we should be focused on. If what we care about is how workers are doing—and GOP lawmakers claimed the 2017 tax law would help workers—we should focus on the metric that directly shows how they're doing! If the claimed point of tax cuts for corporations was to raise wages, we should first and foremost look at real wage rates to assess the results...

But those economists shilling for Trump-McConnell-Ryan committed not just to wage increases, but to a particular mechanism for wage increases: (1) U.S. a small open economy -> (2) tax cuts produce a huge jump in investment -> (3) faster growth -> (4) factor shares revert -> (5) higher wages.

To see whether this argument makes sense we can—and should—look at this causal mechanism at every one of its five steps.

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Would Small Minimum Wage Increases Raise or Have No Effect on Employment?

Il Quarto Stato

That is the current question—would (small) minimum wage increases have no effect on employment because labor-supply curves are steep, or would they boost employment by curbing employers with monopsony power from pushing both wages and employment below their competitive equilibirum values? Yet you would not know it from the very sharp and good-hearted ex-New York Times labor beat reporter Steven Greenhouse. What is he doing? He is, I think, reflexively saying "both sides!": Steven Greenhouse: "Some argue that it's foolish to support a higher minimum because it could reduce employment. But there's a huge debate among economists on this. One school—see David Neumark—finds that a higher minimum reduces employment. The other—see Arin Dube—finds little effect on employment...

Now this is simply wrong. The majority of economists believe that raising the minimum wage from its current level would significantly boost the incomes of the working poor and have little adverse effect on employment. A large minority of economists believe that raising the minimum wage would actually increase employment—that employers currently use their monopsony power to push wages and employment below their competitive equilibrium values, and that a higher minimum wage would reduce their ability to do this and so boost both. The majority and the large minority all, however, agree that there is uncertainty here. It is only a small minority of economists who follow David Neumark on this—who are confident that a higher minimum wage now would have a noticeable negative effect on employment. Thus Steve gets it wrong.

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Is There Any Reason to Fear Low Interest Rates?

Il Quarto Stato

Paul Krugman tells us: Paul Krugman: @paulkrugman: "The American Economic Association has a new discussion forum set up by Olivier Blanchard. First up is the question of whether low interest rates are leading to excessive risk-taking https://www.aeaweb.org/forum/311/have-low-interest-rates-led-to-excessive-risk-taking..." So I mossed on over and left three comments: one on the forum, one on secular stagnation, and one on whether there is any reason to fear low interest rates:

Is There Any Reason to Fear Low Interest Rates?: Have low interest rates led to excessive risk taking?: I suspect that the right way to make the accurate point that this line of discussion is hunting for is to focus not on the amount of risk but on, rather, who is bearing the risk...

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