David Glasner: Wherein Hayek Agrees with DeLong that Just Because You’re Rich, It Doesn’t Mean You Deserve to Be | Uneasy Money: "Recently Brad DeLong expounded on the extent to which the earnings that accrue to individuals do not correspond to the contributions total output that can be ascribed to the personal efforts of those individuals or the contributions made by resources owned by thoe people. Here’s DeLong: 'Pascal Lamy: “When the wise man points at the moon, the fool looks at the finger…”
...Perhaps in the end the problem is that people want to pretend that they are filling a valuable role in the societal division of labor, and are receiving no more than they earn–than they contribute. But that is not the case. The value–the societal dividend–is in the accumulated knowledge of humanity and in the painfully constructed networks that make up our value chains. A “contribution” theory of what a proper distribution of income might be can only be made coherent if there are constant returns to scale in the scarce, priced, owned factors of production. Only then can you divide the pile of resources by giving to each the marginal societal product of their work and of the resources that they own. That, however, is not the world we live in.
Continue reading "Hoisted from the Archives: David Glasner Says That I Am More of a Hayekian than I Think I Am..." »
Hoisted from the Archives: In the interest of keeping our eye on the ball in FinReg, let me present Alan Blinder stating that incentives in banks that are too big to fail simply must be totally and completely broken and misaligned:
Alan Blinder (2005): On Raghuram Rajan: "I’d like to defend Raghu a little bit against the unremitting attack he is getting here for not being a sufficiently good Chicago economist.... The way a lot of these funds operate, you can become richer than Croesus on the upside, and on the downside you just get your salary. These are extremely convex returns. I’ve wondered for years why this is so. You don’t need to have public regulatory concerns to worry about it.... I remember a discussion I had with... one of the principals of the LTCM, while it was riding high. He agreed with me that the skewed incentives are a problem. But they weren’t solving it.... What can make it a systemic problem is herding, which Raghu mentioned, or bigness, which is related to the discussion that Fraga raised, and so on. If you are very close to the capital—for example, if the trader is the capitalist—then you have internalized the problem. So, it may be that bigness has a lot to do with whatever systemic concerns we have. Thus, I’d draw a distinction between the giant organizations and the smaller hedge funds. Whether that thinking leads to a regulatory cure, I don’t know. In other domains, we know, bigness has been dealt with in a regulatory way...
Continue reading "" »
Worthy Reads at Equitable Growth:
IMHO, this is closely akin to William Julius Wilson's "the declining significance of race"—i.e., the rising significance of class: Robert Manduca: How rising U.S. income inequality exacerbates racial economic disparities: "In 1968... median African American family income was 57 percent of the median white American family income. In 2016, the ratio was 56 percent. The utter lack of progress is striking...
How much of this correlation is causal? And how much is associational? I do not think we really know, in spite of studies of the build-out of broadband in France. The U.S. is a very different country. Nevertheless, I for one think that it is long past time to put universal broadband in the same bucket as basic sanitation and rural electrification—as something that is part of the citizens' share of being an American: Delaney Crampton: Why accessibility to broadband matters in reducing economic inequality in the United States: "A strong correlation between household income and in-home connectivity—a pattern that persists across both rural and economically depressed urban communities...
Austin Clemens: Schumer and Heinrich Introduced a Bill to Create New Measures of Economic Growth: "Very excited.... @HBoushey and I have written extensively about the need to track growth not just for the economy as a whole but for Americans at every point along the income curve...
Kate Bahn sends us to NPR's Planet Money: Kate Bahn: My Girl Joan Robinson: "My girl Joan Robinson is discussed in this episode of @planetmoney on underrated economists https://www.npr.org/sections/money/2018/08/22/641002632/the-underrated-economists...
Newly-arrived at Equitable Growth, Will McGrew retweets Matthew Yglesias quoting Ryan Cooper: Will McGrew: Matthew Yglesias: "Ryan Cooper: 'There was no skills gap, nor an innovation shortage, nor an explosion of stay-at-home dads. There was a collapse in aggregate demand that was left to rot, while a lot of people who should have known better made things worse...'
Equitable Growth alumnus Nick Bunker reminds us of this WCEG working paper from a year and a half ago: Emmanuel Saez, Thomas Piketty, and Gabriel Zucman: Economic growth in the United States: A tale of two countries: "We combine tax, survey, and national accounts data to build a new series on the distribution of national income...
Continue reading "Sixteen Worthy Reads for August 30, 2018" »
Noah Smith: John Cochrane Smackdown: "John writes: 'My surprise in reading Noah is that he provided no alternative numbers. If you don't think Free Market Nirvana will have 4% growth, at least for a decade as we remove all the level inefficiencies, how much do you think it will produce, and how solid is that evidence?...' I don't really feel I need to produce an alternative to a number that was made up as a political talking point. Why 4 percent? Why not 5? Why not 8? Why not 782 percent? Where do we get the number for how good we can expect Free Market Nirvana to be? Is it from the sum of point estimates from a bunch of different meta-analyses of research on various free-market policies? No. It was something Jeb Bush tossed out in a conference call because it was 'a nice round number', after James Glassman had suggested '3 or 3.5'. You want me to give you an alternative number, using the same rigorous methodology? Sure, how about 3.1. Wait, no. 3.3. There we go. 3.3 sounds good. Rolls off the tongue..."
I must say, Cochrane here reminds me of one of my most favorite quotes from tank economist Paul M. Sweezy:
Continue reading "John Cochrane Prostitutes Himself to Republican Politicians Department: Monday Smackdown/Hoisted from 2015" »
Worthy Reads at Equitable Growth:
Antitrust law and policy is probably the most "relatively autonomous" piece of our whole legal system. The laws as enacted by Congress and signed by the President change rarely and slowly. How those laws are enforced—and how business is then conducted in the shadow of the possibility of resort to the courts for antitrust cases—changes much more radically and substantially. It is a dance of intellectual fashion, some serious benefit-cost analysis, and a great deal of lobbying and lobbying-funded motivated reasoning. My view is that the answers to the three questions Michael Kades suggests the FTC examine are: yes, no, and no, respectively. But it is very good that the FTC is thinking about this: Michael Kades: In re: Competition and Consumer Protection in the 21st Century: "Equitable Growth suggests that the hearings include the following three topics: 1. Is monopoly power prevalent in the U.S. economy?...
Paul Krugman writes: "As Greg Leiserson of the Washington Center for Equitable Growth points out, 'every month in which wage rates are not sharply higher than they would have been absent the legislation, and investment returns are not sharply lower, is a month in which the benefits of those corporate tax cuts accrue primarily to shareholders'. A tax cut that might significantly raise wages during, say, Cynthia Nixon’s second term in the White House, but yields big windfalls for stock owners with only trivial wage gains for the next five or 10 years, is not what we were promised..." See Greg Leiserson: Assessing the economic effects of the Tax Cuts and Jobs Act: "Key takeaways: An assessment... should focus on the impact... on wage rates... [on] the return on business investment, and... [on] future federal budget deficits, as these will determine the impact... and the fiscal sustainability of the law....
Very much worth listening to: Heather Boushey, Helaine Olen, and Katie Denis: Americans vs. vacation: "Half of American workers didn’t take all the paid vacation days they were entitled to in 2017. Why are so many of us unwilling or unable to take the vacation days that we’ve earned?...
This was the first working paper the WCEG published. It did not get the attention it deserved then. So why not hoist it?: Arindrajit Dube and Ben Zipperer: Pooling multiple case studies using synthetic controls: An application to minimum wage policiesh: "We assess the employment and wage effects minimum wage increases between 1979 and 2013 by pooling 29 synthetic control case studies...
Darrick Hamilton is asking the right questions. And he might have the right answers. But I suspect not. Yes, there is something very deep in America's culture that discourages public responsibility for the conditions of poor and especially poor black Americans, to the country's shame. Adam Smith wrote in 1776 that: "no society can surely be flourishing and happy, of which the far greater part of the members are poor and miserable. It is but equity... that they who feed, clothe, and lodge... the people, should... be themselves tolerably well fed, clothed, and lodged..." We today can replace his "greater part" with "substantial part", and it is still true. But I suspect that the health gaps between high-status, high-income, and high-wealth African Americans and their white peers have other origins—not that I know what those other origins are, mind you: Darrick Hamilton: Post-racial rhetoric, racial health disparities, and health disparity consequences of stigma, stress, and racism: "High achieving black Americans, as measured by education, still exhibit large health disparities...
Elsewhere than Equitable Growth:
Encyclopedia of Chicago (1899): Mr. Dooley Explains Our "Common Hurtage": "In the late 1890s, Finley Peter Dunne's newspaper columns in Irish dialect brought to life a fictional Bridgeport bartender, Mr. Dooley...
Economist: Why is macroeconomics so hard to teach?: "Mr Rowe remained... 'fairly low down the totem pole' as a researcher. But he became a thunderbird at conveying macroeconomic intuition...
Noah Smith wonders if he can make a supply-and-demand argument to people who are allergic to "supply and demand" with a spoonful of sugar. He has three types of housing: newly-built yuppie fishtanks, old housing that can switch between working-class and yuppie, and newly-built "affordable housing" unattractive to yuppies: Noah Smith: YIMBYism explained without "supply and demand": "YIMBYism is the idea that cities need to build more housing in order to relieve upward pressure on rents...
Dick Schmalensee: Handicapping the Highstakes Race to Net-Zero: "Economists argue that a broadly applicable incentive-based system... could reduce emissions at a much lower total cost than any alternative regime. Incentives to reduce emissions could be produced directly by a tax on emissions or through... cap-and-trade system. But the argument for relying primarily on financial incentives has historically not been very persuasive.... Even in California and the European Union, where cap-and-trade systems for CO₂ have been established, so-called “ancillary” or “belt-and-suspenders” policies that target particular sectors or sources have also been deployed...
EG: Yuriy Gorodnichenko, Debora Revoltella, Jan Svejnar, Christoph Weiss: Dispersion in productivity among European firms: "This column uses firm-level data from all EU countries to explore how the dispersion of resources affects macroeconomic performance...
Scott Jaschik: Author discusses his new book on anti-intellectualism and fascism: "A country that is not fascist may still experience fascist politics... efforts to divide society and demonize groups.... How Fascism Works by Jason Stanley...
This is the most hopeful take on American productivity growth relative stagnation I have seen. I thought it was coherent and might well be right 20 years ago. I think it is coherent and might possibly be right today. But is that just a vain hope?: Michael van Biema and Bruce Greenwald (1997): Managing Our Way to Higher Service-Sector Productivity: "What electricity, railroads, and gasoline power did for the U.S. economy between roughly 1850 and 1970, computer power is widely expected to do for today’s information-based service economy...
Potsdam this year is 7F warmer than it averaged in the century before 1980. Berkeley is now Santa Barbara: Stefan Rahmstorf: Europe’s freak weather, explained: "Naive.... The smoothed curve shows... global warming... the scattering of the grey bars... random variations of the weather.... Slightly more than half of the 4.3 degrees would be due to global warming, the rest to weather. That... likely underestimates the contribution of climate change...
Thiemo Fetzer: Did Austerity Cause Brexit?: "The rise of popular support for... UKIP... strongly
and causally associated with an individual’s or an area’s exposure to austerity since 2010...
Interesting. The question is always: do you make money by devoting effort to selling them things they will be happy they bought, or do you make money by devoting effort to selling them things they will be unhappy they bought—by grifting them? And what determines the balance of providing value vs. deception in selling commodities aimed at different income classes? I am not sure they have it right here. I am sure that this is very important: James T. Hamilton and Fiona Morgan: Poor Information: How Economics Affects the Information Lives of Low-Income Individuals: "How information is produced for, acquired by, and utilized by low-income individuals...
I concur with Noah Smith here that the biggest dangers of machine learning, etc., are not on the labor but on the consumer side. They won't make us obsolete as producers. They could make us easier to grift as customers: Noah Smith: Artificial Intelligence Still Isn’t All That Smart: "Machine learning will revolutionize white-collar jobs in much the same way that engines, electricity and machine tools revolutionized blue-collar jobs...
We keep looking for thoughtful intellectual voices on political economy and equitable growth to the right of the intellectual center of gravity of our organization. But they turn out to be remarkably hard to find, as we are learning again this week. Suggestions for interlocutors are very welcome: John Holbo: Do The Nordic Codetermination Moonwalk: "Amused: 'Matthew Yglesias: 'Every conservative institution in America appears to be simultaneously maintaining that @SenWarren’s codetermination proposal is economically ruinous but that Nordic countries, which have codetermination, are free market success stories'...
Claudia Sahm: Alice in Wonderland: "One year ago today, Alice Wu’s research about sexism at an online economics forum made the news...
Kimberly Adams: The disturbing parallels between modern accounting and the business of slavery: "The common narrative is that today's modern management techniques were developed in the factories in England and the industrialized North.... According to... Caitlin Rosenthal, that narrative is wrong...
Really surprised that there is no evidence of boom-bust asymmetry here. I am going to have to dig into what reasonable alternatives are and how much power they have here: Adam M. Guren, Alisdair McKay, Emi Nakamura, and Jon Steinsson: Housing Wealth Effects: The long View: "We exploit systematic differences in city-level exposure to regional house price cycles...
Hoisted from the Archives: _What Is This "White" You Speak of, Kemosabe?: One way to look at Nixon's 'Silent Majority' strategy was that it involved the redefinition of lots of people as 'white'—people who wouldn't have been 'white' even thirty years before, back when they were seen as not-quite-real-American ethnic immigrants living in ghettos and serving the corrupt Democratic political machines against which the Republicans fought—probably entangled in organized crime, too.
Continue reading "What Is This "White" You Speak of, Kemosabe?: Hoisted from the Archives" »
Worthy Reads at Equitable Growth...
An excellent piece from Marinescu, Dinan, and Hovenkamp: one of our working papers laying out how the analysis of how antitrust policy should be done given that compensated firms face their counter parties not just in the product but in labor markets. I think this is the most important thing I have seen out of our shop here at Equitable Growth this week*Ioana Marinescu, James G. Dinan, and Herbert Hovenkamp*: Anticompetitive mergers in labor markets: "Increased market concentration in labor markets threatens to facilitate coordinated interaction among employers that could lead to lower output and wage suppression in employment markets...
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?...
The analysis of rising inequality and its effects in the United States and elsewhere over the past generation has suffered from a relative downplaying of the role of the family and how income gets earned and then transformed Into well-being. Central to this is the rapidly changing economic role of women in the workforce, but that is not all of it. We need more and better analyses of her public policy needs to shift in the context of changing family structure and rising inequality. Elizabeth Jacobs presents some of our thinking about how Equitable Growth is and will be trying to support this effort: Elizabeth Jacobs: Rethinking 20th century policies to support 21st century families: "...As a raft of research illustrates, economic growth is increasingly concentrating at the top...
Our Kate Bahn Reminds us: Kate Bahn: "This needs to be screamed from the rooftops.... We cannot have a substantive conversation about how tight the labor market is without examining demographic disparities..." ands sends us to Equitable Growth alumnus John Schmitt quoting Janelle Jones at: Laura Maggi: Despite Drop in Black Unemployment, Significant Disparities Remain: "The African-American unemployment rate... low—compared to historic numbers. In July, it was 6.6 percent...
Not to put the pressure on or anything, but I expect very good things from our Equitable Growth grant to: Matthew Staiger: Parental Resources And The Career Choices of Young Workers: "With a specific focus on the impact of parental resources on entrepreneurship and job mobility...
Continue reading "Worthy Reads at Equitable Growth and Elsewhere... August 16, 2018" »
MUST OF THE MUSTS: J. Bradford De Long and Lawrence H. Summers: Equipment Investment and Economic Growth: "We use disaggregated data from the United Nations International Comparison Project and the Penn World Table to examine the association between different components of investment and economic growth over 1960–85. We find that producers’ machinery and equipment has a very strong association with growth: in our cross section of nations each percent of GDP invested in equipment raises GDP growth rate by 1/3 of a percentage point per year. This is a much stronger association than can be found between any of the other components. We interpret this association as revealing that the marginal product of equipment is about 30 percent per year. The cross nation pattern of equipment prices, quantities, and growth is consistent with the belief that countries with rapid growth have favorable supply conditions for machinery and equipment. The pattern is not consistent with the belief that some third factor both pushes up the rate of growth and increases the demand for machinery and equipment...
Continue reading "Looking Backwards from This Week at 24, 16, 8, 4, 2, 1, 1/2, and 1/4 Years Ago (August 7-August 13, 2019)" »
Worthy Reads from Equitable Growth and Friends:
J. Bradford DeLong: The Ahistorical Federal Reserve: "Economic developments over the past 20 years have taught–or ought to have taught–the US Federal Reserve four lessons. Yet the Fed’s current policy posture raises the question of whether it has internalized any of them.... The proper inflation target... should be 4% per year.... The two slope[s of] the Phillips Curve... are smaller.... Yield-curve inversion... monetary policy is too tight.... Principal shocks have not been inflationary...
Mark Paul, Khaing Zaw, Darrick Hamilton, and William Darity Jr.: Returns in the labor market: A nuanced view of penalties at the intersection of race and gender - Equitable Growth: "Multiple identities cannot readily be disaggregated in an additive fashion. Instead, the penalties associated with the combination of two or more socially marginalized identities interact in multiplicative or quantitatively nuanced ways...
Raymond Fisman, Keith Gladstone, Ilyana Kuziemko, and Suresh Naidu: Do Americans want to tax capital? Evidence from online surveys: "Our regression results yield roughly linear desired tax rates on income of about 14 percent... positive desired wealth taxation... three percent when the source of wealth is inheritance, far higher than the 0.8 percent rate when wealth is from savings.... These tax rates are consistent with reasonable parameterizations of recent theoretical optimal wealth tax formulae...
Equitable Growth: #JOLTS: "The quit rate... historically high level.... The ratio of unemployment-to-job openings trended upward slightly in June to just under 1.0.... The Beveridge Curve continues to be at levels similar to those in the expansion of the early 2000s...
Bridget Ansel and Heather Boushey (2017): Modernizing U.S. Labor Standards for 21st-Century Families: "Boosting women’s economic outcomes [via] paid family leave, fair scheduling, and combatting wage discrimination...
Continue reading "A Year Ago on Equitable Growth: Fifteen Worthy Reads On and Off Equitable Growth for August 9, 2018" »
Smackdown/Hoisted: Why I Was Wrong...: Calculated Risk issued an invitation:
Calculated Risk: Hoocoodanode?: Earlier today, I saw Greg "Bush economist" Mankiw was a little touchy about a Krugman blog comment. My reaction was that Mankiw has some explaining to do. A key embarrassment for the economics profession in general, and Bush economists Greg Mankiw and Eddie Lazear in particular, is how they missed the biggest economic story of our times.... This was a typical response from the right (this is from a post by Professor Arnold Kling) in August 2006:
Apparently, the echo chamber of left-wing macro pundits has pronounced a recession to be imminent. For example, Nouriel Roubini writes, "Given the recent flow of dismal economic indicators, I now believe that the odds of a U.S. recession by year end have increased from 50% to 70%." For these pundits, the most dismal indicator is that we have a Republican Administration. They have been gloomy for six years now...
Sure Roubini was early (I thought so at the time), but show me someone who has been more right! And this brings me to Krugman's column:
... Why did so many observers dismiss the obvious signs of a housing bubble, even though the 1990s dot-com bubble was fresh in our memories? Why did so many people insist that our financial system was “resilient,” as Alan Greenspan put it, when in 1998 the collapse of a single hedge fund, Long-Term Capital Management, temporarily paralyzed credit markets around the world? Why did almost everyone believe in the omnipotence of the Federal Reserve when its counterpart, the Bank of Japan, spent a decade trying and failing to jump-start a stalled economy?
Continue reading "DeLong Smackdown: Why I Was Wrong Over 2006-2010..." »
MUST OF THE MUSTS: James M. Buchanan: The "Social" Efficiency of Education: You have to be able to hold in your mind two things at once in order to understand economist James M. Buchanan: (1) He was a total loon: a strong believer in the de Maistrean trinity of Patriarchy, Orthodoxy, Autocracy as necessary for society—essential Noble Lies; a man who in 1970 wanted to shut down America's universities as teachers of evil, and regretted the failure of nerve that made that impossible; a man who saw Martin Luther King Jr. as a teacher of evil—whose response to the Civil Rights movement and its peaceful civil disobedience campaign was not Edmund Burke's "to make us love our country, our country must be lovely", but rather: how dare MLK claim that an African American should be "openly encouraged to use his own conscience"—rather than shutting up and accepting his subservient Jim Crow position in society! (2) A man who saw things that other economists did not and would not have without him...
Continue reading "Looking Backwards from This Week at 24, 20, 16, 12, 8, 4, 2, 1, 1/2, and 1/4 Years Ago (July 31-August 6, 2019)" »
Hoisted from the Archives: A Now-Extended Non-Sokratic Dialogue on Website Design: What I, at least, regard as an interesting discussion in the comments to my A Very Brief Sokratic Dialogue on Website Redesign: From that post:
Platon: Five requirements?
Sokrates: Yes.... The stream... so... who want to either read what is new or to treat the site as a weblog--that is, have a sustained engagement and conversation with the website considered as a Turing-class hivemind--can do so.... The front-end... to give each piece of content a visually-engaging and subhead-teaser informative welcome mat.... The syndication... to propagate the front-end cards out to Twitter and Facebook.... The stock... a pathway... by which people can pull things written in the past... relevant... to their concerns today.... The grammar: The visually-interesting and subhead-teaser front-end... needs to lead the people who would want to and enjoy engaging with the content to actually do so.... [But,] as William Goldman says, nobody knows anything.
Platon: Is there anybody whose degree of not-knowingness is even slightly less than the degree of not-knowingness of the rest of us?...
Sokrates: My guess... http://www.vox.com--Ezra Klein and Melissa Bell and company--are most likely to be slightly less not-knowing than the rest of us....
Continue reading "A Now-Extended Non-Sokratic Dialogue on Website Design: Hoisted from the Archives" »
Monday Smackdown/Hoisted from the Archives: We Miss Fafblog: Condi Rice Complains to Customer Service!: Not even Fafblog can deal with the Bush administration at the appropriate level. However, it is trying. Here Fafnir interviews Condi Rice:
RICE: First of all, we don't send prisoners off to be tortured, Fafnir. We just transport prisoners to countries where torture happens to be legal and where they happen to end up getting tortured.
FB: Well that explains everything then! It's all just a wacky misunderstanding, like that episode a Three's Company where Jack sends Janet off to Uzbekistan to get boiled alive by the secret police.
RICE: I'd also like to point out that whenever we send a prisoner to a country that routinely tortures prisoners, that country promises us NOT to torture them.
FB: And then they get tortured anyway!
RICE: Yes, they do! It's very strange.
Continue reading "Monday Smackdown: Fafblog: Condi Rice Complains to Customer Service!" »
Worthy Reads from Equitable Growth and Its Network:
Anybody looking back at economic history cannot help but note that female physical autonomy and its absence has played an absolutely huge role. Kate Bahn and company are pulling together the evidence that this is not just history—that it still matters a lot in America today: Kate Bahn: Understanding the link between bodily autonomy and economic opportunity across the United States: "All of these connective threads are examined in a forthcoming paper of mine...
Seattle is pursuing (a version of) social democracy in one metropolitan area. In the 2010s we learned from some of our laboratories of democracy (cough, Kansas, Wisconsin) what really not to do. Will Seattle provide a model for what we should do?: Hilary Wething: Seattle: Paid Sick Leave And Workers’ Earnings Dynamics: "Utilize administrative data from Washington state to study the impact of Seattle’s paid sick time ordinance on:...
Let me welcome Will McGrew, who sends us to a very insightful study of government failure and bureaucratic blockage in the New Orleans school system. Since we economists do not have an effective grammar of government failure, there is a tendency (on my part at least) to somewhat overlook it: Will McGrew: "A timely and necessary piece from Haley Correll: quality public schools should be available to all kids in New Orleans, not just those whose parents have the time, information, and resources to navigate the complex application system..."
In my opinion, Arindrajit Dube is one of the best economists around in figuring out what we should control for and why in order to achieve real econometric identification. The contrasting pole is simply to throw in a bunch of controls until you have produced the numbers you want. In my view, we do not teach what should be controlled for and how enough, so people pick it up on the fly. Arindrajit has picked it up, and is a master: Arindrajit Dube: Minimum wages and the distribution of family incomes in the United States: "I find that a 10 percent increase in the minimum wage reduces poverty among the nonelderly population by 2.1 percent and 5.3 percent across the range of specifications in the long run...
Lyndon Johnson said: "You do not take a person who, for years, has been hobbled by chains and liberate him, bring him up to the starting line of a race and then say, 'You are free to compete with all the others,' and still justly believe that you have been completely fair. Thus it is not enough just to open the gates of opportunity. All our citizens must have the ability to walk through those gates.... It is not enough just to open the gates of opportunity. All our citizens must have the ability to walk through those gates.... Equal opportunity is essential, but not enough." However, one of our problems is that that does not seem to be working for even those African-Americans who can and do walk through all of our society's formal and status gates to opportunity: Khaing Zaw, Jhumpa Bhattacharya, Anne Price, Darrick Hamilton, and William Darity, Jr.: A College Degree and Marriage Fail to Yield Significant Wealth Gains for Black Women: "[In] the story of the American Dream... a college education is viewed as a key driver of upward mobility and the primary vehicle to eradicate racial differences...
Continue reading "A Year Ago on Equitable Growth: Twenty Worthy Reads On and Off Equitable Growth for August 2, 2018" »
Hoisted from the Archives: Four huge mistakes in this here by John Taylor:
That the low-interest rate economy of 2004-2007 was in an inflationary boom, rather than an economy that barely managed to reach any definition of "full employment" even though supercharged boy three things—low interest rates, expansionary fiscal policy, plus a huge irrationally-exuberant asset-price bubble.
That low interest rates since 2007 represent a discretionary choice by central banks, rather than reflecting the fact that any central bank wanting to avoid permanent depression must accommodate itself to the low level fo the Wicksellian neutral interest rate.
That as of 2017 interest rates were about to normalize.
$. That the Republican policy package of regulatory rollback and tax cuts for the rich would provide a large boost to investment spending and, through that channel, productivity growth.
None of those have panned out as intellectual bets.
Yet John Taylor today exhibits no visible curiosity as to why they did not.
This strongly suggests to me that none of them were meant seriously in the first place—that it was always disinformation, and never an analytical judgment, and thus subject to revision as knowledge advanced:
John Taylor (March 2017): Sluggish Future: Policy Is The Problem: "Secular stagnation... raises inconsistencies and doubts. Low policy interest rates set by monetary authorities... before the financial crisis were associated with a boom characterized by rising inflation and declining unemployment—not by the slack economic conditions and high unemployment of secular stagnation. The evidence runs contrary to the view that the equilibrium real interest rate—that is, the real rate of return required to keep the economy’s output equal to potential output—was low prior to the crisis. And the fact that central banks have chosen low policy rates since the crisis casts doubt on the notion that the equilibrium real interest rate just happened to be low. Indeed, in recent months, long-term interest rates have increased with expectations of normalization of monetary policy.... The United States needs another dose of structural reform—including regulatory, tax, budget, and monetary—to provide incentives to increase capital investment and bring new ideas into practice.... There is hope for yet another convincing swing in the policy-performance cycle to add to the empirical database...
Continue reading "Monday Smackdown/Hoisted from the Archives: Four Huge Mistakes in One Short Piece by John Taylor" »
Hoisted from the Archives: The John Bell Hood-Max von Gallwitz Society!: Dedicated to celebrating the memory of two field commanders who may well have been the worst in history. Drink a toast to John Bell Hood on the 7/28 anniversary of his defeat at Ezra Church:
Hood... moved his troops out to oppose the Union army... planned to intercept them and catch them completely by surprise.... Unfortunately for Hood... Howard had predicted such a maneuver based on his knowledge of Hood from their time together.... His troops were already waiting in their trenches when Hood reached them. The Confederate army also had not done enough reconnaisance... and made an uncoordinated attack.... In all, about 3,642 men were casualties; 3,000 on the Confederate side and 642 on the Union side...
And drink a toast as well to Max von Gallwitz—perhaps the only Imperial German commander who could have turned the Somme into a draw!...
Continue reading "Annual Celebration of the John Bell Hood-Max von Gallwitz Society!" »
TOP MUST REMEMBER: What I call 'Bob Rubin's End-of-Meeting Questions'. Ask them! They really work!: Annie Duke: Thinking in Bets: Making Smarter Decisions When You Don't Have All the Facts: "In fact, questioning what you see or hear can get you eaten. For survival-essential skills, type I errors (false positives) were less costly than type II errors (false negatives). In other words, better to be safe than sorry, especially when considering whether to believe that the rustling in the grass is a lion. We didn’t develop a high degree of skepticism when our beliefs were about things we directly experienced, especially when our lives were at stake...
Continue reading "A Year Ago on Equitable Growth: Fifteen Worthy Reads On and Off Equitable Growth for July 26, 2018" »
Hoisted from the Archives: Nine years ago: Karl Marx, First Real Business Cycle Theorist: We see the affinity between Karl Marx and the Pain Caucus in his notes on crises in Theories of Surplus Value. Negative supply shocks and missed collective guesses on what the extent of the market will be in the future create overaccumulation and overproduction. Marx is very clear that the monetary crisis theorists--like John Stuart Mill--must be wrong, and that the system cannot run itself without crises.
In Marx this is one of the reasons why the system is abominable and must be overthrown. For the Pain Caucus the conclusion is opposite: because the system is good crises must be suffered.
Theories of Surplus-Value, Chapter 17: "When speaking of the destruction of capital through crises, one must distinguish between two factors...
Continue reading "Karl Marx, First Real Business Cycle Theorist: Hoisted from the Archives" »
Hoisted from 2011: Sumner really knew better than to do this, and really ought to have restrained himself:
Scott Sumner: A Slightly Off-Center Perspective on Monetary Problems: "They are both basically saying: 'if we hold nominal spending constant, fiscal policy can’t fix it.'... [I]t’s really rather sad when people like Krugman and Brad DeLong keep insisting that these guys don’t understand basic macro principles.... I don’t know for sure that Fama was using the same implicit assumption... [but] I think it quite likely that Fama was also cutting corners.... Lots of brilliant people talking past each other.... Welcome to elite macroeconomics, circa 2011.... If I was going to assign blame I’d single out Krugman/DeLong for rudeness and Fama/Cochrane for poor communication skills...
Continue reading "Monday Smackdown/Hoisted from the Archives: Scott Sumner Knew Better than to Do This!" »
TOP MUST REMEMBER: Here is the website for Zucman, Wier, and Torslavon's work on missing profits from tax avoidance and tax evasion (yes, I have decided I should spend some time occasionally listing paper authors in reverse alphabetical order): Gabriel Zucman et al.: The Missing Profits of Nations: [Working paper], June 2018. [Online appendix], June 2018. [Presentation slides], June 2018...
Worthy Reads on and from Equitable Growth:
Here is the website for Zucman, Wier, and Torslavon's work on missing profits from tax avoidance and tax evasion (yes, I have decided I should spend some time occasionally listing paper authors in reverse alphabetical order): Gabriel Zucman et al.: The Missing Profits of Nations: [Working paper], June 2018. [Online appendix], June 2018. [Presentation slides], June 2018...
I have not yet welcomed the extremely sharp Kate Bahn to Equitable Growth: Equitable Growth: Kate Bahn: "Her areas of research include gender, race, and ethnicity in the labor market, care work, and monopsonistic labor markets.... She was an economist at the Center for American Progress. Bahn also serves as the executive vice president and secretary for the International Association for Feminist Economics.... She received her doctorate in economics from the New School... and her Bachelor of Arts... from Hampshire...
Wealth inequality measures have been grossly understating concentration because of tax evasion and tax avoidance in tax havens: Annette Alstadsæter, Niels Johannesen, and GabrielZucman: Who owns the wealth in tax havens? Macro evidence and implications for global inequality: "This paper estimates the amount of household wealth owned by each country in offshore tax havens...
The "optimal tax" literature in economics has always been greatly distorted by the fact that models simple enough to solve bring with them lots of baggage that leads to misleading—and usually anti-egalitarian and anti-equitable growth—conclusions that would not follow if we had better control over our theories. Here Saez and Stantcheva make significant progress in resolving this problem: Emmanuel Saez and Stefanie Stantcheva: A simpler theory of optimal capital taxation: "We first consider a simple model with utility functions linear in consumption and featuring heterogeneous utility for wealth..
Very much worth reading from Equitable Growth alum Nick Bunker: Nick Bunker: Puzzling over U.S. wage growth: "Hiring has not been particularly strong during this recovery...
Continue reading "A Year Ago on Equitable Growth: Twenty Worthy Reads from the Past Week or so: July 19, 2018" »
Hoisted from July 3, 2008 Optimal Control: Was the Federal Reserve too volatile and hair-trigger? Or was the ECB too sluggish?:
Continue reading "Hoisted from July 3, 2008: Optimal Control" »
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:
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...
Continue reading "Risks of Debt: The Real Flaw in Reinhart-Rogoff: Hoisted from the Archives" »
The Fed now seems to be saying: "We misjudged the situation late last year. We are going to reverse our policy. But not quite yet." And I do not understand the frame of mind in which that is a coherent system of thought. I wish they would explain: Tim Duy: Rate Cut On The Way: "The Fed turned... dovish... basically announcing a July rate cut as clearly as they could without taking out an ad in the Wall Street Journal... increased 'uncertainties'... 'muted inflation pressures'.... The proximity to the lower bound coupled with low inflation was always going to lead the Fed to err on the side of a rate cut. It just took them some time to find their way there.... The dot plot was far more dovish than I anticipated.... Eight participants expecting lower rates.... Forecasts were dovish as well.... Market participants have priced in a 100% change of a rate hike in July. The 2 year treasury yield is also begging the Fed to cut rates.... It would take some spectacular data to call the July cut into question.... It would be exceedingly difficult to pull back on a rate cut now. Nor is there any reason to...
Continue reading "" »
Hoisted from the Archives: Stupidity Is a Willed Choice Files: John Cochrane: Reading Paul Krugman calls to mind that I never reacted to John Cochrane's July 2012 failure to mark his beliefs to market and, instead, doubling down on his claim that the biggest risk the U.S. economy faces is that of becoming "Argentina" "quickly".
I must say that if I had been opining stridently about issues of public policy without doing my homework five years ago, and if between then and now events had developed in directions strongly contrary to my expectations, I would not double down on what I had thought then--I would rather try hard to do my homework and to mark my beliefs to market.
And if I were going to criticize people for not citing my work, I would not claim that a sentence they wrote which comes immediately after a four-paragraph quote from me as an example, and I would have read their explanation of why they think expansionary fiscal policy right now does not raise the risks of "fiscal dominance" rather than remain in ignorance of it.
But to each his own!
Continue reading "Hoisted from Six Years Ago: To Steal a Line from Leon Trotsky: "Every Man Has a Right to Be Stupid, but John Cochrane Abuses the Privilege..."" »
Hoisted from the Archives: The fact is that by the end of 2007 the construction sector had rebalanced: there was no excess of people pounding nails in Nevada—even if you did believe the false theory that recessions have recessions do the "necessary work of rebalancing", there was no rebalancing work to be done after 2007. Even a quarter-competent Schumpeterian who kept even half an eye on the data should have been able to recognize that...
To: @johnmlippert: If I may beg a small slice of your attention...
I am tracking down John Cochrane's claims that (i) in your December 23, 2008 article you were "only... on a hunt for embarrassing quotes", (ii) he had "spent about 10 hours patiently trying to explain some basics" to you, and (iii) you took him out of proper context when you wrote: "'We should have a recession', Cochrane said in November, speaking to students and said in November, speaking to students and investors in a conference room.... 'People who spend their lives pounding nails in Nevada need something else to do'."
Do you by chance remember the larger context of Cochrane's "pounding nails" comment, and do you have any idea why he now claims that you took him out of context? Or what he thinks the proper context would have been?
I would be grateful for any light you can shed on this.
Brad DeLong email@example.com
John M. Lippert: "Hi Professor DeLong.
Thanks for your note. Professor Cochrane’s complaint is something of which I became aware several months after we published our story in 2008.... The bottom line is that Bloomberg did not respond to Cochrane’s comments. He never sent them to us, despite my request that he do so.
When we became aware of his complaint, we saw no reason to make a correction. Cochrane made the ‘pounding nails’ comment at a Chicago Booth forum at the Gleacher Center in downtown Chicago in November 2008. It was part of an ongoing lecture series, as I recall. It was kind of a big event, with a couple hundred people. So they may have a recording that you can access.
Good luck with your inquiries.
Continue reading "Hoisted from the Archives: John Cochrane's Claim in Late 2008 That a Recession Would Be a Good Thing Deserves Some Kind of Award..." »
Until secular stagnation ends—until the yield on U.S. government debt exceeds the growth rate of the economy—worry about reducing of even stabilizing the debt-to-GDP ratio of a country like the U.S. that has assume running room via financial repression to stabilize demand for its debt is premature. Thus the takeaway is this: It would be much more productive right now to worry about how do we maintain normal levels of net investment in a high government debt post-interest rate normalization environment than to propose sending the economy back into recession in order to reduce government debt accumulation. Recession and high unemployment in the short- and medium-run are problems. Low investment in the medium- and long-run are problems. Government debt is a tool to avoid the first and a source of risk of the second. But it is better to keep your mind focused on the things that are real problems:
Hoisted from the Archives: The Intergenerational Burden of the Debt: Nick Rowe Tempts Fate Weblogging...: Nick Rowe:
Continue reading "The Intergenerational Burden of the Debt: Nick Rowe Tempts Fate Weblogging: Hoisted from the Archives" »
Hoisted from the Archives: Economists Think of Most Lawyers the Way Cats Think of Small Birds: June 13, 2002: I find that right-wingers Glenn Reynolds, Tom Maguire, and company have elevated me to the high and mighty rank of Democratic Party Hack. Alas! The real ideological partisans scorn me: I have too great a tendency to think about what I should say and then say what I think, rather than to simply jerk my knee and line up in my assigned place on some ideology- or patronage-based team.... Reynolds and company want very badly to say something critical about... Paul Krugman. Unfortunately for them, Krugman's recent column has nothing to take exception to.... So since they can't argue substance, they decide to try to argue procedure.
I can imagine what they thought: "Paul Krugman quotes Brad DeLong! And he doesn't say that DeLong was Deputy Assistant Secretary of the Treasury in the Clinton administration!! That's 'material nondisclosure'!!! Krugman has done a bad thing!!!!" Never you mind that this isn't an issue on which there is any partisan dispute, and thus that 'disclosure' of the partisan allegiance of one's sources is not relevant. To an economist like me this style of—let's be polite, and call it "lawyerlike"—discourse is sad.... Try your best to make the listener forget what the big issue is (in this case, is Krugman right?)--and, instead, argue that there is something wrong with your adversary's procedure. This is, I think, the reason that we economists regard most lawyers like cats regard small birds: Flighty things. Unable to keep their minds focused on what matters. And our lawful prey.
Continue reading "Economists Think of Most Lawyers Like Cats Think of Small Birds: Hoisted from the Archives" »
Hoisted from Eleven Years Ago: Poverty Traps: The High Price of Investment Goods in Poor Countries http://www.bradford-delong.com/2007/06/poverty-traps-t.html:Here is how Larry Summers and I formulated it back in the early 1990s, and I believe that we were correct:
Continue reading "Hoisted from Eleven Years Ago: Poverty Traps: The High Price of Investment Goods in Poor Countries" »
Ooh boy. Was I wrong in 2006. I am not betting against the yield curve again:
From 2006: DeLong Smackdown Watch: Yield Curve: Worthwhile Canadian Initiative thinks I'm wrong when I write: Yes, we should be worrying about the US yield curve: This inversion of the yield curve, however, is generated not by domestic investors' thinking that a recession is on the way, but by foreign central banks' desires to keep buying lots of dollar-denominated bonds in order to keep their currencies from appreciating. Thus while an inverted yield curve is usually a sign that a bunch of people are trading bonds on their belief that a recession is likely, that is not what is going on in this case...
Continue reading "DeLong Smackdown Watch: Yield Curve: Hoisted from the Archives from 2006" »
Worthy Readings at Equitable Growth:
That monetary policy is best which avoids creating needless unemployment while still maintaining confidence in the value of the unit of account. Yet surprisingly little thought has been devoted to figuring out which monetary policy jumps the highest with respect to this objective: Nick Bunker: Getting on the level with the Fed’s targeting of prices: "John Williams’s move to New York is a sign that the Federal Reserve may soon reconsider its target for monetary policy. It’s not clear whether a new target would emerge from such a process or how radical a change current members of the FOMC would consider. The current inflation targeting structure may have gotten the U.S. economy to where it is, but it took some time. A quicker recovery from the next recession would be to the benefit of everyone in the U.S. economy. So, a rethink is needed. Hopefully it’s coming soon..."
I think "top 20%" is wrong. The fact that most of percentiles 80%-97% perceive themselves as having catastrophically lost the game of relative status vis-a-vis percentiles 98% and 99%—and that most of percentiles 98% and 99% perceive themselves as having catastrophically lost the game of relative status vis-a-vis the 99.9%, and most of the 99.9% perceive themselves as having catastrophically lost the game of relative status vis-a-vis 99.99% makes arguing that they have in some sense succeeded in realizing a dream that they now hoard a hard argument to make: Richard Reeves: Equitable Growth in Conversation_: "Dream hoarders... are the people at the top... the winners of the inequality divide... the top 20 percent roughly of the income distribution. That means they earn healthy six-figure household incomes, with average incomes of about $200,000 a year..."
There was a lot of noise about how giving repatriated profits a tax break would boost investment in America. As near as I can see it, none of it was well-founded at all: Kimberly Clausing: Equitable Growth in Conversation: "We are distorting repatriation decisions by having this repatriation tax. But I don’t think we’re dramatically changing the investments found in the United States. The companies that have profits abroad can borrow against them to finance any desired investment. And some of the money isn’t really truly abroad—it’s invested in U.S. assets..."
This web page at Slate has the wrong headline. It should be: "Education Won’t Solve Inequality: Not without workers’ power too". Sigh. On the substance, blaming increasing inequality on "Skill Biased Technical Change" was always a non-sequitur. Given the way the models were set up, SBTC was a residual: anything that diminished worker bargaining power was going to be labeled "SBTC" regardless of what it really was: Kate Bahn: Study: Unions increasingly represent educated workers: "Herbst, Kuziemko, and Naidu throws a wrench in the SBTC [Skill-Biased Technical Change] explanation of rising inequality. They find that the education level of union members also followed a U-shape curve from 1936–2016..."
Looking forward to what we can learn from this BLS initiative: Kate Bahn: New data on contingent workers in the United States: "On Thursday, June 7, the U.S. Bureau of Labor Statistics will release data from its freshly collected Contingent Worker Supplement. It’s important for policymakers and economists alike to know what to look for ahead of Thursday’s data release..."
Continue reading "A Year Ago on Equitable Growth: Twenty Worthy Must- and Should-Reads from the Past Week or so: June 7, 2018" »
Hoisted from the Archives: Joseph Schumpeter on "Liquidationism": Hoisted from the Archives: "The problems presented by periods of depression may be grouped as follows: First, removal of extra economic injuries to the economic mechanism: Mostly impossible on political grounds. Second, relief: Not only imperative on moral and social grounds, but also an important means to keep up the current of economic life and to steady demand, although no cure for fundamental cases. Third, remedies: The chief difficulty of which lies in the fact that depressions are not simply evils, which we might attempt to suppress, but—perhaps undesirable—forms of something which has to be done, namely, adjustment to previous economic change. Most of what would be effective in remedying a depression would be equally effective in preventing this adjustment. This is especially true of inflation, which would, if pushed far enough, undoubtedly turn depression in to the sham prosperity so familiar from European postwar [i.e., World War I] experience, but which, if it be carried to that point, would, in the end, lead to a collapse worse than the one it was called in to remedy...
Continue reading "Joseph Schumpeter on "Liquidationism": Hoisted from the Archives" »
Five Worthy on Equitable Growth:
From two years ago: a minimum wage meta-analysis: Arindrajit Dube and Ben Zipperer: Pooling multiple case studies using synthetic controls: An application to minimum wage policies | Equitable Growth
Worth reading from last October: Darrick Hamilton: Post-racial rhetoric, racial health disparities, and health disparity consequences of stigma, stress, and racism | Equitable Growth
Also worth reading from last October: Papers from our co-hosted antitrust symposium: Michael Kades: Unlocking Antitrust Enforcement: New Yale symposium examines proposals to make antitrust enforcement more effective | Equitable Growth
Nick Bunker gathers scattered threads and sets out the issues: Nick Bunnker: Puzzling over U.S. wage growth
As I say, this is exactly the kind of debate we should be hosting and encouraging: Jesse Rothstein: Inequality of Educational Opportunity? Schools as Mediators of the Intergenerational Transmission of Income: "Chetty et al. (2014b) show that children from low-income families achieve higher adult incomes... in some commuting zones (CZs) than in others...
Continue reading "A Year Ago on Equitable Growth: Twenty Must- and Should-Reads from the Week of May 31, 2018 for si..." »
Joseph Ford Cotto: J. Bradford DeLong says "NAFTA is just not a big deal for the U.S.", explains why: "Support for Bernie Sanders and the Donald did not rise out of nowhere, after all.
In such turbulent waters as these, it is important to seek the guidance of a wise, seasoned captain. Insofar as the sea of dollars and cents is concerned, J. Bradford DeLong is just that fellow.
He is "a professor of economics at UC Berkeley, a weblogger for the Washington Center for Equitable Growth http://equitablegrowth.org/blog, a research associate of the National Bureau of Economic Research, and former deputy assistant secretary of the U.S. Treasury in the Clinton administration .... He also writes the weblog Grasping Reality: http://bradford-delong.com," as DeLong's U.C.B. biography explains. Dr. DeLong recently spoke with me about many topics relative to our nation's economy. Some of our conversation is included below....
Continue reading " Interview: "NAFTA Is Just Not a Big Deal for the U.S.": Hoisted from the Archives from 2017" »
Hoisted from the Archives: This serves as a good index of how much Milton Friedman's redefinition of "neutral monetary policy" to mean "whatever monetary policy keeps nominal GDP on its trend growth path" led people prone to motivated reasoning in a laissez-faire direction completely and horribly astray. It also serves as an example of an astonishing failure to mark one's beliefs to market. Never mind that the rough constant of M2 velocity before 1980 had been an obvious example of Goodhart's Law, and never mind that even before 1980 forecasts of the state of the economy one and two years out based on M2 were inferior to other forecasts, by 1997 James Buchanan had just seen a remarkable five-year 30% runup in M2 velocity. and the complete ditching of monetary aggregates not just as targets but even as indicators by Alan Greenspan in favor of a neo-Wicksellian "neutral interest rate" approach that had nothing whatsoever to do with an "effective monetary constitution" of any type:
Continue reading "James Buchanan (1997): Has Economics Lost Its Way?: Hoisted from the Archives" »
Hoisted From the Archives**: Worth Reading from A Year Ago
Five Things Worthy at Equitable Growth:
Austin Clemens and Heather Boushey: Disaggregating growth: "NIPA... were a radical advance in economic measurement when they were instituted.... The lack of data on how income is distributed is especially glaring now in the face of rapidly increasing economic inequality.... Instead of revolutionizing GDP, U.S. policymakers should evolutionize it... add an explicitly distributional component to GDP..."
Hold it! Why does the spread of Microsoft Office shift workers away from "non routine analytic" and toward "routine cognitive and routine manual" tasks?: Enghin Atalay et al.: New technologies and the labor market: "Most new technologies are associated with an increase in nonroutine analytic tasks, and a decrease in nonroutine interactive, routine cognitive, and routine manual tasks.... Through the lens of the model, the arrival of ICTs broadly shifts workers away from routine tasks, which increases the college premium. A notable exception is the Microsoft Office suite, which has the opposite set of effects..."
And I do think that grappling with the work and legacy of John Kenneth Galbraith is a very important but rarely operated railway line within economics. So I put a signpost to it here: Brad DeLong: Galbraithian economics: Countervailing power edition | Equitable Growth
Is this a worthwhile and successful way of doing something roughly aligned with but substantially different from not only Mark Thoma but also Liz Hipple: Weekend Reading: a weekly post... with links to articles that touch on economic inequality and growth...? Brad DeLong: Worthy reads on equitable growth, May 10-17, 2018
Jacob Robbins: How the rise of market power in the United States may explain some macroeconomic puzzles: "Surprising... facts about... growth and rising... inequality.... 1. Financial wealth has increased... despite no real increase in... investment.... 2. The financial value of many firms now is permanently higher than the cost of their assets.... 3. These more valuable firms haven’t invested more.... 4. The average rate of return on capital has stayed steady while interest rates have dropped. 5. The share of income going to labor... has declined.... The driving force behind them is an increase in monopoly power together with a decline in interest rates...
Continue reading "A Year Ago on Equitable Growth: Twenty Worthy Reads from the Week Before May 24, 2018" »
Hoisted from the Archives: From 2015: _"Neoliberalisms", Left and Right: Today's best piece I have read on the internet is by the extremely sharp John Quiggin: The Last Gasp of (US) [Left-]Neoliberalism: "US neoliberalism is... closer to Blair’s Third Way than to Thatcher....
...[US] neoliberalism maintained and even extended ‘social liberalism’, in the US sense of support for equal marriage, reproductive choice and so on. In economic terms, its central claim was that the goals of the New Deal... could best be pursued through market-friendly policies that would earn the support of the financial sector.... [The] signature issues for US neoliberals were free trade, cuts in ‘entitlement’ spending, and school reform... a ‘grand bargain’, in which Republicans would accept minimal increases in taxation in return for the abandonment of most of the Democratic program. The Clinton administration was explicitly neoliberal.... And, while Obama’s 2008 election campaign was masterfully ambiguous, his first Administration neoliberal through and through.... But developments since then, including the global financial crisis, the failure of school reform and increasing awareness of entrenched inequality have destroyed the appeal of neoliberalism...
I think that John Quiggin is largely correct—if you correct "abandonment" to "reconfiguration".
Continue reading ""Neoliberalisms", Left and Right: Hoisted from the Archives" »
rootless_e is correct: Ludwig von Miese is not: Hoisted from the Archives: Quote of the Day: November 12, 2011: "Attempts to carry out economic reforms from the monetary side can never amount to anything but an artificial stimulation of economic activity by an expansion of the circulation, and this, as must constantly be emphasized, must necessarily lead to crisis and depression. Recurring economic crises are nothing but the consequence of attempts, despite all the teachings of experience and all the warnings of the economists, to stimulate economic activity by means of additional credit"—Ludwig von Mises, The Theory of Money and Credit...
"Attempts to make sense out of right wing Austrian economics can never amount to anything."—rootless_e...
"Fictitious" Wealth and Ludwig von Mises: Nevertheless, like a moth to a flame—or like a dog to vomit, or like a dog to something worse—I find myself under a mysterious but inexorable and irresistible compulsion to waste what would otherwise be productive work time trying to make some kind of sense of it—to at least understand wherein lies the error, and how somebody trying very hard to understand the economy (never mind that he is a big fan of the political leadership of Benito Mussolini) can go so pathetically wrong. It is, of course, not the case that every expansion of the circulation is an "artificial" (and unnatural) "stimulation of economic activity" that must "necessarily lead to crisis and depression". So why does Ludwig von Mises think that it must? Here is my current guess as to where von Mises is coming from:
Continue reading ""Attempts to Make Sense Out of Right Wing Austrian Economics Can Never Amount to Anything"—rootless_e: Hoisted From the Archives" »
What a difference six months makes! And now the Fed really wishes it had not raised interest rates in the second half of 2018 and yet is unwilling to move them now back to the summer-of-2018 level. Why they are unwilling I do not know:
Hoisted from the Archives: Next week the Federal Open Market Committee—the principal policymaking body of the United States's Federal Reserve system—is overwhelmingly likely to raise the benchmark interest rate it controls, the Federal Funds rate that governs short-term safe nominal bonds, by one quarter of a percentage point from the range of 1.75-2% per year to the range of 2-2.25% per year. That would make it a little more expensive to borrow and spend and a little more attractive to cut spending and save. Thus there would be a little less spending in the economy, and so a few fewer jobs. Economic growth would be a little slower. The economy would be a little less resilient in the face of adverse shocks to resources or confidence that might generate a recession. These are all minuses—small minuses from a 25 basis point increase in the Federal Funds rate, but minuses.
Continue reading "Hoisted from the Archives: What I Wrote in Advance of the FOMC's September 2018 Meeting" »
Continue reading "Thoughts on David Frum's Excellent Review of Adam Tooze: Hoisted from the Archives" »
Every time I try to get out, they drag me back in...
Now I am being told that nobody with any audience ever thought 15/hour in California was a really bad idea. So time to recall this:
Monday Smackdown/Hoisted from Others' Archives: A correspondent asks me for help: Chuck Lane is being used as an authority on the California's 15/hr by 2023 minimum wage proposal. And Chuck Lane says:
A hot concept in wonkdom these days is “evidence-based policymaking.”… Gov. Jerry Brown and the state’s labor leaders have announced legislation to raise the state’s minimum wage… to $15 per hour…. Whatever else might be said about this plan, it does not represent an exercise in evidence-based policymaking. To the contrary: There’s a total lack of evidence that the potential benefits would outweigh potential costs—and ample reason to worry they would not…
: Why I Don’t Need to Take Charles Lane Seriously: "The Washington Post’s Chuck Lane wrote an op-ed arguing in favor of Jeff Flake’s amendment...
...to cut National Science Foundation funding for political science. In fact, Lane raised the ante, arguing that NSF should stop funding all of the social sciences, full stop. Now, I can respect someone who tries to make the argument that the opportunity costs of funding the social sciences are big enough that this is where a budget cut should take place. It’s harder, however, to respect someone who:
Continue reading "Monday Smackdown/Hoisted from Others' Archives from Six -and-a-HalfYears Ago: Dan Drezner on Chuck Lane" »
David Drake, a good chunk of whose work is best classified as horror and is really about his experiences as an interrogator in the 11th Armored Cavalry Regiment, the "Blackhorse", when it went through the Cambodian market town of Snuol:
I [now] had much more vivid horrors than Lovecraft's nameless ickinesses to write about.... I wrote about troopers doing their jobs the best they could with tanks that broke down, guns that jammed—and no clue about the Big Picture.... I kept the tone unemotional: I didn't tell the reader that something was horrible, because nobody told me.... Those stories... were different. They didn't fit either of the available molds: "Soldiers are spotless heroes," or... "Soldiers are evil monsters"... [...] The... stories were written with a flat affect, describing cruelty and horror with the detachment of a soldier who's shut down his emotional responses completely in a war zone... as soldiers always do, because otherwise they wouldn't be able to survive. Showing soldiers behaving and thinking as they really do in war was... extremely disquieting to the civilians who were editing magazines...
Continue reading "Hoisted from the Archiyes: Why We Hate Chickenhawks: Selections from SFF Author David Drake" »
Continue reading "Hoisted from the Archives: Why We Have Good Reason to Hate Chickenhawks" »
Hoisted from the Archives: Note: The Ten Americans Who Did the Most to Win the Cold War:
Harry Dexter White: Treasury Assistant Secretary* who was the major force behind the Bretton Woods Conference and the institutional reconstruction of the post-World War II world economy. He accepted enough of John Maynard Keynes's proposals to lay the groundwork for the greatest generation of economic growth the world has ever seen. It was the extraordinary prosperity set in motion by the Bretton Woods' System and institutions--the "Thirty Glorious Years"--that demonstrated that political democracy and the mixed economy could deliver and distribute economic prosperity.
George Kennan: Author of the "containment" strategy that won the Cold War. Argued--correctly--that World War III could be avoided if the Western Alliance made clear its determination to "contain" the Soviet Union and World Communism, and that the internal contradictions of the Soviet Union would lead it to evolve into something much less dangerous than Stalin's tyranny.
George Marshall: Architect of victory in World War II. Post-World War II Secretary of State who proposed the Marshall Plan, another key step in the economic and institutional reconstruction of Western Europe after World War II.
Arthur Vandenberg: Leading Republican Senator from Michigan who made foreign policy truly bipartisan for a few years. Without Vandenberg, it is doubtful that Truman, Marshall, Acheson, and company would have been able to muster enough Congressional support to do their work.
Paul Hoffman: Chief Marshall Plan administrator. The man who did the most to turn the Marshall Plan from a good idea to an effective aid program.
Dean Acheson: Principal architect of the post-World War II Western Alliance. That Britain, France, West Germany, Italy, and the United States reached broad consensus on how to wage Cold War is more due to Dean Acheson's diplomatic skill than to any single other person.
Harry S Truman: The President who decided that the U.S. had to remain engaged overseas--had to fight the Cold War--and that the proper way to fight the Cold War was to adopt Kennan's proposed policy of containment. His strategic choices were, by and large, very good ones.
Dwight D. Eisenhower: As first commander-in-chief of NATO, played an indispensable role in turning the alliance into a reality. His performance as President was less satisfactory: too many empty words about "rolling back" the Iron Curtain, too much of a willingness to try to skimp on the defense budget by adopting "massive retaliation" as a policy, too much trust in the erratic John Foster Dulles.
Gerald Ford: In the end, the thing that played the biggest role in the rise of the dissident movement behind the Iron Curtain was Gerald Ford's convincing the Soviet Union to sign the Helsinki Accords. The Soviet Union thought that it had gained worldwide recognition of Stalin's land grabs. But what it had actually done was to commit itself and its allies to at least pretending to observe norms of civil and political liberties. And as the Communist Parties of the East Bloc forgot that in the last analysis they were tyrants seated on thrones of skulls, this Helsinki commitment emboldened their opponents and their governments' failures to observe it undermined their own morale.
George Shultz: Convinced Ronald Reagan--correctly--that Mikhail Gorbachev's "perestroika" and "glasnost" were serious attempts at reform and liberalization, and needed to be taken seriously. Without Shultz, it is unlikely that Gorbachev would have met with any sort of encouragement from the United States--and unlikely that Gorbachev would have been able to remain in power long enough to make his attempts at reform irreversible.
*Also, almost surely an "Agent of Influence" and perhaps an out-and-out spy for Stalin's Russia. If so, never did any intelligence service receive worse service from an agent than Stalin's Russia did from Harry Dexter White....
#hoistedfromthearchives #politics #security #history #highlighted
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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Hoisted from the Archives: Adrian Wooldridge Is... the Vicar of Bray!:
"The Illustrious House of Hannover,
And Protestant succession,
To these I lustily will swear,
Whilst they can keep possession:
For in my Faith, and Loyalty,
I never once will faulter,
But George, my lawful king shall be,
Except the Times shou'd alter."
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Note to Self: The Heritage Foundation, the Club for Growth, and Stephen Moore Have No Principles Whatsoever. Why Do You Ask?: Now that Stephen Moore has signed up with Donald Trump, he is opposed to the Trans Pacific Partnership.... On Trish Regan's show with him, he made four points about TPP: 1. The agreement is long, and has lots of pages in it. 2. The agreement does not commit the Asians to stop copying our intellectual property. 3. The agreement does allow the U.S. to impose retaliatory penalties on other signatories if they do copy our intellectual property, but they will copy anyway. 4. The agreement is unlike NAFTA, which is a good thing. But... short months ago...
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Hoisted from the Archives: The Kansas Republican Governance Experiment. Or Is That "Governance 'Experiment'"? Or Is That "'Governance' Experiment"?: Nothing like this was seen before.... It is only under Brownback that it has been down, down, down, down. You can argue how much of it is hostility to immigrants and strangers. How much of it is the profoundly un-Christian cast of a "Christian" government, and how much of it is the collapse of public services. But it has been effective. My friend Dan Davies says that the best proof that there is a skill and art of management comes from the fact that nobody doubts that there is such a thing as gross mismanagement. Similarly, the best proof that there is such a thing as good technocratic government leading to shared prosperity and equitable growth is... Brownback, and his acolytes and supporters, in Kansas:
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Hoisted from the Archives from 2016: Ben White: "Ben White: Morning Money: "Larry Kudlow and Steve Moore... [were] confident he and Kudlow could help nudge Trump away from his protectionist trade policies.... Moore noted that Trump has largely stopped talking about big tariffs on Chinese goods. Kudlow added: 'I think Mr. Trump does not want to see a wall of tariffs. He's actually pushed that rhetoric aside in recent months'...
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Hoisted from the Archives from 2010: If You Did Not Think UCLA Law Professor Steve Bainbridge Had Lost His Mind—or Perhaps Had No Mind to Lose—You Do Now...: I genuinely thought this was a joke when I first saw it. But, no, people who deal with him every week have persuaded me UCLA law professor Steve Bainbridge really does think Paris Hilton is the tenth worst American of all time. The misogyny is strong in this one: "20 Worst American... Aldrich Ames... John Wilkes Booth... James Buchanan... Aaron Burr... Robert Byrd... Jefferson Davis... Louis Farrakhan... Nathan Bedford Forrest... Rutherford B. Hayes... Paris Hilton...
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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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