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Fairly Recently: Must- and Should-Reads, and Writings… (September 28, 2019)

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Five Super-Musts:

  1. Remember: the Trump-McConnell-Ryan tax cut did absolutely nothing to boost investment in America, and thus has no supply-side positive effects on economic growth. And it is another upward jump in inequality: Greg Leiserson: U.S. Inequality and Recent Tax Changes: "Slides from a presentation by Greg Leiserson for a panel 'U.S. Inequality and Recent Tax Changes' hosted by the Society of Government Economists on Tuesday, February 20, 2018. In the presentation, Leiserson argues that the recently enacted Tax Cuts and Jobs Act will likely increase disparities in economic well-being, after-tax income, and pre-tax income…

  2. Very wise start-of-the-semester advice: Harry Brighouse: Advice for New College Students: "Bear in mind that while there’s such a thing as getting into too much debt, there’s also such a thing as working too many hours. Seek balance (Finding it is easier said than done). Choose classes on the following bases: does the subject interest you?; how big is the class? (seek out small classes even if you are shy; especially if you are shy, because that’s how you’ll learn not to be); how good is the professor? How do you know who’s a good professor?… Do they engage?… Are they open to a full range?… Do they make you write a lot? (if so, that’s a positive, not a negative) Do they seem to enjoy teaching?… Find out from your friends. Or from your enemies if that’s the best you can do!…

  3. I would say that Martin Wolf grossly understates his point here. It is not just that the case for a sane globalism remains strong. Rather, the case for a sane globalism has never been stronger and grows stronger every day. With each passing day, the world needs more and more powerful international public goods in order to remain healthy and sane, and only globalists have a chance of providing them: Martin Wolf: The Case for Sane Globalism Remains Strong: "We are now close to eliminating extreme human destitution…. The decline in the proportion of humanity living in absolute poverty, to less than 10 per cent, is a huge achievement. I make no excuses for continuing to support policies and programmes, including trade-oriented development, that helped accomplish this. The notion that it may be necessary to thwart the economic rise of non-western countries, in order to cement western domination, is, in my view, an abomination…. The range of public goods we now need has vastly increased, with the complexity of our economies and societies. For the same reason, ever more of those public goods are global…. That is why the victors of the second world war decided to create effective international institutions. They had experienced unbridled national sovereignty. The outcome had been catastrophic. Nothing since then has rendered global co-operation less essential…. [On] the interface between the global and the national… we have gone too far in some areas and done too little in others…. The globalisation of finance has arguably gone too far…. [But] liberal trade has not been a dominant source of rising inequality within countries. Meanwhile, areas where global co-operation has not gone far enough include business taxation and the environment. The final and perhaps most important of all challenges is containing the natural human tendency to scapegoat foreigners for failures of domestic policy and cleavages among domestic interests…. Blaming ills on foreigners may be a successful diversionary tactic. It is also highly destructive. We must think and act globally. We have no alternative…

  4. John Scalzi: 21 Years of Whatever: "Whatever exists today for the same reason it began existing 21 years ago, which is, I wanted a place to write about things. The formula hasn’t really wavered in all that time; I write about the things I want to write about, when I want to write about them, for whatever length I feel like writing about them for. Sometimes I’m ambitious and post several times a day; other times I’ll post once a day and sometimes skip a day or two (or more). When I’m writing a book, I tend to post less. When I’m not, I’ll post more. I don’t take requests, unless I do. And so on. Also, you know: I write here because I just plain like this site. This is, in more ways than one, my house and a reflection of me. I like how I’ve built it over the years and I like what it does. I like I have a place to say what I want to say. I like that I have a place where others occasionally come by to visit. I like that those people seem to like it too. So, I’ll keep at it some more. Let’s see what happens from here…

  5. Quantum supremacy! We were all but certain that it would come. I mean, after all, leaves. A leaf is a solar panel attached to quantum computers attached to energy-storage mechanisms that does things no "classical" solar-panel-plus battery could do. But that it is coming so soon is interesting: John Timmer: Paper Leaks Showing a Quantum Computer Doing Something a Supercomputer Can’t https://arstechnica.com/science/2019/09/paper-leaks-showing-a-quantum-computer-doing-something-a-supercomputer-cant/: "This hardware is not the makings of a general-purpose quantum computer… you can trust. We needed error-corrected qubits before these results; we still need them after. And it's possible to argue that this was less 'performing a computation' than simply 'repeatedly measuring a quantum system to get a probability distribution'. But that seriously understates what's going on here…. There is simply no way to get that probability distribution using a classical computer. With this system, we can get it in under 10 minutes…. There's no obvious barrier to scaling up quantum computations. The hard part is the work needed to set a certain number of qubits in a specific state and then entangle them…. Recognizing the error rate, however, the researchers suggest that we're not seeing the dawn of quantum computing, but rather what they call 'Noisy Intermediate Scale Quantum technologies'…. This particular system's only obvious use is to produce a validated random number generator…


101 Must- and Shoulds-:

  1. We do not really know how we would collect and enforce a net-worth tax—but we did not really know how we would collect and enforce a broad income tax either until Milton Friedman came up with payroll withholding. In some ways the administrative burdens of a net-worth tax will be a lot easier since it is designed to catch only the upper tail: Greg Leiserson, Will McGrew, and Raksha Kopparam: Net worth taxes: What they are and how they work – Equitable Growth: "The wealthiest 1 percent of households owns about 40 percent of all wealth…. Taxes on wealth are a natural policy instrument to address wealth inequality and could raise substantial revenue, while shoring up structural weaknesses in the current income tax system…

  2. I confess I do not see how Tesla is going to survive. BYD or some others are going to dominate battery-making. And there will not be that much both valuable and scarce to an automobile besides an efficient battery in the future we are heading for: *Matthew Campbell and Ying Tian: *: BYD, World’s Biggest Electric Car Maker, Looks Nothing Like Tesla: "BYD, which built the battery in your ’90s cellphone, now produces more EVs than anyone—and it wants to sell them to you, soon: On the floor of a cavernous factory in southern China… a sledlike robot scooted into position…. The robot carried a crucial payload: a battery about the size and shape of a double mattress, wrapped in a gray plastic casing. Suddenly, an accordion lift extended upward from the sled and inserted the battery into the car’s undercarriage. Workers in blue jumpsuits and white cotton gloves moved swiftly to the battery’s edges, carrying rivet guns connected by curling red cables to a supply of compressed air. Once the battery was rattled into place, the accordion retracted, sending its robot host scurrying off in search of fresh cargo…

  3. The labor requirements for this kind of farming were already absurdly low. And one swallow does not make a spring. Nevertheless, the age of intelligent tools draws closer: Ashley Robinson, Lydia Mulvany, and David Stringer: Robots Take the Wheel as Autonomous Farm Machines Hit Fields: "The first fully autonomous farm equipment is becoming commercially available…. Tractors will drive with no farmer in the cab, and specialized equipment will be able to spray, plant, plow and weed cropland. And it’s all happening well before many analysts had predicted thanks to small startups in Canada and Australia…. Saskatchewan’s Dot Technology Corp. has already sold some so-called power platforms for fully mechanized spring planting. In Australia, SwarmFarm Robotics is leasing weed-killing robots that can also do tasks like mow and spread. The companies say their machines are smaller and smarter than the gigantic machinery they aim to replace. Sam Bradford, a farm manager at Arcturus Downs in Australia’s Queensland…. 'The savings on chemicals is huge, but there’s also savings for the environment from using less chemicals and you’re also getting a better result in the end'…

  4. An absolute must-read, from Leiserson, McGrew, and Kopparam. It is excellent. I would note that it does not get much into the political economy of wealth taxes—that one goal of them is to persuade the wealthy to distribute their wealth, and thus reduce the amount of control over society that they exercise: Greg Leiserson, Will McGrew, and Raksha Kopparam: Net Worth Taxes: What They Are and How They Work: "New from @equitablegrowth: “Notably, a business does not pay tax on its assets. Instead, shareholders pay tax on the value of the business…. The revenue potential of a net worth tax in the United States is large, even if applied only to the very wealthiest families. The wealthiest 1 percent of families holds $33 trillion in wealth, and the wealthiest 5 percent holds $57 trillion. The burden of a net worth tax would be highly progressive. The wealthiest 1 percent of families holds about 40 percent of all wealth…. Taxes on wealth—including property taxes, net worth taxes, estate taxes, and capital gains taxes, among others—are ubiquitous in the developed countries that make up the… OECD…. Assets have value because of the income (implicit or explicit) they are expected to generate. As such, taxing wealth through a net worth tax and taxing income from wealth through a tax on investment income can achieve similar ends…

  5. Paul Krugman (2015): Artificial Unintelligence: "In the early stages of the Lesser Depression, those of us who knew a bit about the macroeconomic debates of the 1930s… felt a sense of despair. Everywhere you looked, people who imagined themselves sophisticated and possessed of deep understanding were resurrecting 75-year-old fallacies and presenting them as deep insights. A lot of water has passed under the bridge since then…. I feel an even deeper sense of despair…. People are still rolling out those same fallacies, even though in the interim those of us who remembered and understood Keynes/Hicks have been right about most things, and those lecturing us have been wrong about everything. So here’s William Cohan in the Times, declaring that the Fed should “show some spine” and raise rates even though there is no sign of accelerating inflation. His reasoning: 'The case for raising rates is straightforward: Like any commodity, the price of borrowing money—interest rates—should be determined by supply and demand, not by manipulation by a market behemoth. Essentially, the clever Q.E. program caused a widespread mispricing of risk, deluding investors into underestimating the risk of various financial assets they were buying'…

  6. Oded Galor, Omer Moav, and Dietrich Vollrath (2009): Inequality in Landownership, the Emergence of Human-Capital Promoting Institutions, and the Great Divergence https://delong.typepad.com/land-inequality.pdf: "Inequality in the distribution of landownership adversely affected the emergence of human-capital promoting institutions (e.g. public schooling), and thus the pace and the nature of the transition from an agricultural to an industrial economy, contributing to the emergence of the great divergence in income per capita across countries. The prediction of the theory regarding the adverse effect of the concentration of landownership on education expenditure is established empirically based on evidence from the beginning of the 20th century in the U.S…

  7. Felix Salmon: 1 Big Thing: The Cost of Unstable Norms: "Adam Neumann, Kevin Burns, Boris Johnson and Donald Trump were historically rewarded for breaking the rules. Now, suddenly, the rules seem as though they might matter. Neumann… WeWork, broke more rules even than Travis Kalanick… of Uber… became billionaires by losing billions of dollars, and they both awarded themselves voting control of their boards despite holding only a minority economic position…. Burns… Juul Labs, allowed his company to market its products to children and to claim without FDA permission that they were significantly safer than cigarettes…. Johnson, the U.K. prime minister, made his name and reputation by making up lies about the European Union and getting them printed in a respectable newspaper…. Trump—well, if you don't know how Trump built his career by violating political rules and norms, Axios Edge is not the place for you to find out…. Neumann and Burns were both fired…. Johnson's activity was found to be illegal in a unanimous ruling by the U.K. Supreme Court. Impeachment proceedings are beginning against Trump… Their punishment does not restore trust to the system. Instead, it reveals the degree to which trust is now absent. A world where rule-breaking and 'disruption' continue to be celebrated in both the economic and political spheres is a world where a lot of energy ends up being wasted on trying to discern the status of formerly clear boundaries. Capitalism works best when everybody is playing by the same rules. Right now we seem to be moving away from that ideal…

  8. That's a 2.5% reduction in suicides for a 10% rise in two dimensions of the safety net. That seems to me to be large effect: William H. Dow, Anna Godøy, Christopher A. Lowenstein, and Michael Reic: Can Economic Policies Reduce Deaths of Despair?: "Midlife mortality has risen… largely reflect [ing]increased mortality from alcohol poisoning, drug overdose and suicide…. We leverage state variation in policies over time to estimate difference-in-differences models of drug overdose deaths and suicides, using data on cause-specific mortality rates from 1999-2015…. Higher minimum wages and EITCs significantly reduce non-drug suicides…. Increasing both the minimum wage and the EITC by 10 percent would likely prevent a combined total of around 1230 suicides each year…

  9. Federal Reserve Bank of New York: Nowcasting Report: Aug 16, 2019: : "The New York Fed Staff Nowcast stands at 1.8% for 2019:Q3. News from this week's data releases increased the nowcast for 2019:Q3 by 0.2 percentage point. Positive surprises from building permits and retail sales were only partially offset by negative surprises from industrial production and capacity utilization…

  10. Tim Duy: Paving The Way To Rate Cuts: "The Fed will cut interest rates at least 25bp in September…. The manufacturing sector is weak…. Still… the slowdown in the sector has yet to match that of 2015-16 nor does it even approach something consistent with a recession. I have said this before, but it should be said again: As manufacturing becomes a smaller portion of the economy, we should expect more instances of manufacturing downturns or even manufacturing recessions being separate from the overall business cycle. In contrast, the much larger consumer sector of the economy continues to power forward. Retail sales sustained the rebound from turn-of-the-year weakness and core sales are again growing at a roughly 5% year-over-year rate…. The general continued strength in spending reflects the solid labor market. In my opinion, job losses need to mount before consumer spending will crumble. Low and steady initial unemployment claims indicate that those job losses are not yet on the horizon…

  11. Guido Alfani and Cormac Ó Gráda: The Timing and Causes of Famines in Europe: "Studies of modern famines tend to consider them ‘man-made’, resulting from war or from adverse shocks to food entitlements. This view has increasingly been applied to historical famines, against the earlier Malthusian orthodoxy. We use a novel dataset and temporal scan analysis to identify periods when famines were particularly frequent in Europe, from ca. 1250 to the present. Up to 1710, the main clusters of famines occurred in periods of historically high population density. This relationship disappears after 1710. We analyse in detail the famines in England, France and Italy during 1300–1850, and find strong evidence that before 1710 high population pressure on resources was by far the most frequent remote cause of famines (while the proximate cause was almost invariably meteorological). We conclude, in contrast with the currently prevailing view, that most preindustrial famines were the result of production, not distribution issues. Only after 1710 did man-made famines become prevalent…

  12. I missed this too when it came out three years ago: Chris Blattman: Black Lives Matter, Economic History Edition: "Trevon Logan’s Presidential address to the National Economics Association. Partly he calculates the productivity of his sharecropping ancestors relative to slave holding estates a century before (a persistent question in American economic history). But mainly he makes an argument for doing more qualitative interviews, which seems like an obvious point, except that systematic qualitative work is the exception in economic history (as it is in development economics): 'That richer, fuller picture reveals that the work behind the estimates came to define the way that the Logan children viewed racial relations, human capital, savings, investment, and nearly every aspect of their lives….. We also learn that it is impossible to divorce the work from its social environment, an era in which Jim Crow, segregation, and other elements of overt racial oppression were a fact of life…

  13. Project Syndicate: Brad DeLong for PS Say More: "Welcome to Say More, a new weekly newsletter that brings Project Syndicate's renowned contributors closer to readers. Each issue invites a selected contributor to expand on topics covered in their commentaries, delve into new ones, and share recommendations, offering readers exclusive insights into the ideas, interests, and personalities of the world's leading thinkers. This week, Project Syndicate catches up with Brad DeLong…

  14. Donald Trump: "That is why we need strong, sound, and steady [pause] leadership, at the United States Federal Reserve. I have nominated Jay to be our next Federal Chairman. [pause] And so important, because he will provide exactly that type of leadership. He's strong. He's committed. He's smart. And, if he is confirmed by the Senate, Jay will put his considerable talents to work, leading our nation's independent central bank. Jay has learned the respect and admiration of his colleagues for his hard work, expertise, and judgment. Based on his record, I am confident Jay has the wisdom and leadership to guide our economy through any challenges that our great economy may face…

  15. Donald Trump: Our Economy is very strong, despite the horrendous lack of vision by Jay Powell and the Fed, but the Democrats are trying to “will” the Economy to be bad for purposes of the 2020 Election. Very Selfish! Our dollar is so strong that it is sadly hurting other parts of the world. The Fed Rate, over a fairly short period of time, should be reduced by at least 100 basis points, with perhaps some quantitative easing as well. If that happened, our Economy would be even better, and the World Economy would be greatly and quickly enhanced-good for everyone!…

  16. Abby D. Phillip: "Melania Trump has never met North Korea's Kim Jong Un…. Trump claimed she has a good relationship with him. Here's how @PressSec explains the discrepancy https://t.co/47dp8U9dRO: 'While the First Lady hasn't met him, he feels like she's gotten to know him too…

  17. Ben Thompson: The WeWork IPO: "The 'unsavoriness'… is hardly limited to the fact that WeWork can stiff its landlords in an emergency. The tech industry generally speaking is hardly a model for good corporate governance, but WeWork takes the absurdity an entirely different level. For example: WeWork paid its own CEO, Adam Neumann, $5.9 million for the 'We' trademark…. WeWork previously gave Neumann loans to buy properties that WeWork then rented. WeWork has hired several of Neumann’s relatives, and Neumann’s wife would be one of three members of a committee tasked to replace Neumann if he were to die or become permanently disabled over the next decade. Neumann has three different types of shares that guarantee him majority voting power…. Neumann has already reportedly cashed out 700 million of his holdings via sales and loans. Everything taken together hints at a completely unaccountable executive looting a company that is running as quickly as it can from massive losses that may very well be fatal whenever the next recession hits…. The WeWork bull case and bear case… both are the logical conclusion of effectively unlimited capital. The bull case is that WeWork has seized the opportunity presented by that capital to make a credible play to be the office of choice for companies all over the world, effectively intermediating and commoditizing traditional landlords. It is utterly audacious, and for that reason free of competition. The bear case, meanwhile, is that unlimited capital has resulted in a complete lack of accountability and a predictable litany of abuses, both in terms of corporate risk-taking and personal rent-seeking…

  18. Kevin Drum: Donald Trump Is Not Well: "Prime Minister Mette Frederiksen of Denmark said today that talk of selling Greenland to the US was an “absurd discussion,” adding that Greenland Premier “Kim Kielsen has of course made it clear that Greenland is not for sale. That’s where the conversation ends.” Donald Trump responded by canceling his upcoming visit to Copenhagen: Donald J. Trump: 'Denmark is a very special country with incredible people, but based on Prime Minister Mette Frederiksen’s comments, that she would have no interest in discussing the purchase of Greenland, I will be postponing our meeting scheduled in two weeks for another time…' Can we finally start talking publicly about Trump’s mental state? This is the action of a child, not an adult in full control of his faculties. Everyone aside from Trump understood that his Greenland compulsion was a sign of cognitive regression in the first place, and this episode demonstrates that it was no passing fantasy. Trump took it seriously enough to treat Frederiksen’s comments as just another incitement to a feud with a political enemy. The man is not well. I don’t care what you want to call his condition, but he’s not well. I can only shiver at the thought of what the folks who work regularly with Trump really think of him these days…

  19. John Haltiwanger: @jchaltiwanger: "In the past 24 hours Trump cancelled a trip to Denmark because it wouldn’t sell him Greenland, referred to American Jews who vote Democratic as disloyal, and tweeted Israeli Jews view him as the 'second coming of God' and the 'King of Israel'…

  20. Duncan Black: But 100% Of Trump Supporters Who Say They Still Support Trump Still Support Trump: "The bizarre coverage of the electorate in the age of Trump-and all reporters are quite aware of this criticism and they do it anyway-is that the only voters who matter are the people who support Trump. Weirdly if you focus on them, it seems like Trump has 100% support!… Trump has never been popular…. But Obummer was always treated as a fairly unpopular president-with his critics dominating the narrative-and Trump has been treated as a popular one. Again, reporters know this…. They are not too stupid to be aware that this is what they have been doing…. 'Trump's low approval provides a unique challenge for Democrats' will be a NYT headline soon. And the sad thing is, Democrats will believe it…

  21. John Maynard Keynes (1919): The Economic Consequences of the Peace, by : "What an extraordinary episode in the economic progress of man that age was which came to an end in August, 1914!…

  22. Duncan Black: No Method In The Madness: "One might be tempted to see bucking trade orthodoxies and reconsidering our various relationships with China as good things. They probably are good things! But Trump has no idea what he's doing and even if he accidentally settled on smart policies he'd forget about them and do something differently the next day…

  23. Steve M.: Neither Haley Nor Pence Will Be the Republican Nominee: "Elizabeth Bruenig… a conversation… with several evangelical Trump supporters in Texas…. 'I asked whether any of them would be willing to vote for a more traditional evangelical challenger to Trump, should one hypothetically rise to oppose him in the primaries…. Maria Ivy warned that Pence is soft compared with Trump, too decent and mannerly…. Bob Collins agreed: “The president is having to deal with a den of vipers,” he said. “I’m not sure Pence could do that.” “It’s spiritual warfare,” Dale Ivy added, emphasizing that Trump is the only man in the field who seems strong enough to confront it.' Given the choice between a brawler who doesn't talk about Jesus enough and a devout Christian who doesn't brawl enough, evangelical voters will choose the brawler every time…. Dan Crenshaw, Tom Cotton, Liz Cheney, Matt Gaetz, Donald Junior. (UPDATE: I should add Josh Hawley to this list.)… The nominee won't be a break from Trumpism or a 'healer'…

  24. Ian Dunt: "Right well, the most historic day in parliament since the last one is about to kick off. You can follow along here https://t.co/nMVmrBf2pY

  25. **Erica Grieder (2015)The Politics of Jade Helm: "Greg Abbott’s announcement… that he would direct the Texas State Guard to monitor Operation Jade Helm… has been widely derided as political pandering, stoking paranoia, wasting state resources, and making Texas look silly. Way harsh, guys…. LTC Mark Lastoria did a good job of explaining the purpose of the operation and how local residents specifically might be affected. Less clear, at least to me, is whether the community as a whole was being unduly conspiratorial…. Several… had tinfoil-hat type questions…. Others may just have been wondering whether to make note of any planned amphibious landings at Lost Pines, or trying to assess the risk of cross-fire at Buc-ees. The latter type of concern is not deranged, especially coming from civilians who may have had little personal experience with the military or military personnel. And Abbott’s announcement is apparently in response to such concerns, rather than those being fueled by the right-wing fear machine…. Abbott notes that US Special Operations Command has already assured the state that there will be no risks to the safety of residents, or their rights, but he wants the Texas State Guard to keep an eye on the situation, just in case…. Activating the Texas State Guard in such a situation would entail some costs to the state (from current appropriations) and I wouldn’t call it the best use of state resources. Other than that, though, I don’t really see the harm…

  26. In the modern world, it is not tariff reduction but regulatory harmonization that is required for grasping increased benefits from the world division of labor. We need to work to level up rather than level down or level stupid, but we need to work to level the regulatory landscape. The Brexit hope is for a free-trade zone with the United States but also with "national sovereignty" over regulatory matters. That is just not how it works: N. Piers Ludlow: Did We Ever Really Understand How the EU Works?: "Michael Gove… referred… to a free trade zone… from Iceland to Turkey of which Britain would, he was confident, still be part… irrespective of the outcome of the referendum. But this focus on tariffs was quaintly anachronistic, because ever since the 1980s the main target of European liberalisation efforts has… been… non-tariff barriers… regulatory convergence…. But–remarkably–hardly anyone took Gove to task for this misleading claim. Instead the vast majority of commentators seem to have regarded his statement as relevant and legitimate…. A second feature of the EU that we ought to have known about but have blithely failed to think through is the importance of timetables. European integration history is studded with the use of timetables and deadlines designed to compel member states to respect their obligations and to bring about simultaneously the administrative, commercial and legal changes that they have agreed to make…. Another avoidable error has been to underestimate the degree to which Brexit’s impact upon Ireland would become a central concern for the whole EU…. The EU is always prone to support an insider in a tussle with an outsider…. Finally, and perhaps most fundamentally, the British debate about what was likely to prove negotiable has failed repeatedly to take into account the political nature of the entity with which it is dealing, and the fact that it is the UK and not the EU that is asking for change. The first of these realities is best illustrated by the Boris Johnson ‘prosecco’ argument–or the idea that the strength of Britain’s bargaining position in the negotiations springs from the commercial interest of many continental exporters in keeping access to the lucrative UK market. This overlooks the extent to which all of the EU27 regard a flourishing EU as even more valuable than the British market, whether economically or politically…

  27. Doug Jones: language Evolution: "People don’t just communicate by encoding and decoding literal meanings, but by inferring one another’s communicative intentions, always thinking 'I wonder what he meant by that'. There’s a whole branch of linguistics, linguistic pragmatics, that studies how this works. And pragmatic inference in language is just one instance of a special, powerful human aptitude for creating shared intentions. This aptitude means that there are always ways to subvert official speech, in any language, even Ascian or Newspeak. Or Korean: the news several years ago was that North Korea had banned sarcasm:׳Officials told people that sarcastic expressions such as “This is all America’s fault” would constitute unacceptable criticism of the regime׳…

  28. Aldous Huxley: Brave New World: "Outside, in the garden, it was playtime. Naked in the warm June sunshine, six or seven hundred little boys and girls were running with shrill yells overs the lawns, or playing ball games, or squatting silently in twos or threes among the flowering shrubs […] The air was drowsy with the murmur of bees and helicopters. The Director and his students stood for a short time watching a game of Centrifugal Bumble-puppy. Twenty children were grouped in a circle round a chrome steel tower. A ball thrown up so as to land on the platform at the top of the tower rolled down into the interior, fell on a rapidly rotating disk, was hurled through one or other of the numerous apertures pierced in the cylindrical casing, and had to be caught. 'Strange', mused the Director, as they turned away, 'strange to think that even in Our Ford’s day most games were played without more apparatus than a ball or two and a few sticks and perhaps a bit of netting, imagine the folly of allowing people to play elaborate games which do nothing whatever to increase consumption. It’s madness. Nowadays the Controllers won’t approve of any new game unless it can be shown that it requires at least as much apparatus as the most complicated of existing games'…

  29. Alexis Lothian: Alice Sheldon and the Name of the Tiptree Award: "In recent days, we’ve seen questions raised on social media about whether the name of the Tiptree Award should be reconsidered…. The questions relate to Alice Sheldon’s actions at the end of her life. On May 19, 1987, she shot first her husband, Huntington Sheldon, and then herself…. The Motherboard does not believe that a change to the name of the Tiptree Award is warranted now. But we believe that this is a very important discussion, and we do not think it is over. The community that has grown up around this award since its founding in 1991 deserves to have its voice heard in any conversation as significant as renaming…. Alice Sheldon… the story of how she and her husband, Huntington Sheldon (known as Ting), died. Friends and family—and the science fiction community at the time—viewed this tragedy as resulting from a suicide pact: the desperate and tragic result of a combination of physical and mental illness and the Sheldons’ desire to die on their own terms. He was 84 years old; she was 71. However… the story can also be seen as an act of caregiver murder…. Ting’s friends and family understood his death and Alice’s as the fulfilment of an agreement between the two of them…. Phillips writes: 'Ting didn’t leave a statement, but all Ting’s friends that I talked to plus his son Peter were unanimous that it was a pact, and that Ting’s health was failing'…

  30. Jess Phillips: House of Commons: ""Tonight I will vote against a general election just like I will vote against pretty much anything the current PM put in front of me…. I have no faith in literally anything the prime minister says. There is no distance that I could trust him…. The PM is playing some bully boy game, of some bully boy public school that I probably won't understand. [Tory MP shouting] Sorry, would the hon gentleman like to make an intervention? Crack on…. Yesterday I watched Conservative colleagues begging him to tell them what he wanted… to give them a deal to vote for. This is some game that three men in No. 10 have come up with to try to game the system so that they win…. Personally I will not vote for any election that falls before October 31st….. "It's just a shame that quite a lot of the people who are sat in front of me who know that what happened over the last two days is wrong are too cowardly to actually say in here, in public, what they're all saying in the tea rooms. "You've all crowed and given sympathy to me about the problems that we have in the Labour Party and you have just sat by silently as your colleagues were marched out…. "We shouldn't go on conference recess. We shouldn't be proroguing parliament. We are currently in a national crisis. This is not a game. This is not some toy we can play with…. I'm meant to believe the PM is really doing this because he has a vision for the people in this country? He has a vision that comes to him every night and it is his own face…

  31. Josiah Ober: The Greeks and the Rational: The Discovery of Practical Reasons: "September 19 Lecture 1. Gyges’ Choice: Rationality and Visibility. September 26 Lecture 2. Glaucon’s Dilemma: Origins of Social Order. Lecture 3. Deioces’ Ultimatum: How to Choose a King. Lecture 4. Cleisthenes’ Wager: Democratic Rationality. Lecture 5. Melos’ Prospects: Rational Domination. Lecture 6. Agamemnon’s Cluelessness: Reason and Eudaimonia…

  32. Larry Meyer: In John Cassidy: The Decline of Economics: "In our firm, we always thanked Robert Lucas for giving us a virtual monopoly. Because of Lucas and others, for two decades no graduate students are trained who were capable of competing with us by building econometric models that had a hope of explaining short-run output and price dynamics. [Academic economics Ph.D. programs] educated a lot of macroeconomists who were trained to do only two things–teach macroeconomics to graduate students, and publish in the journals…

  33. Filipe Campante and Edward L. Glaeser: Yet Another Tale of Two Cities: Buenos Aires and Chicago: "Buenos Aires and Chicago grew during the nineteenth century for remarkably similar reasons. Both cities were conduits for moving meat and grain from fertile hinterlands to eastern markets. However, despite their initial similarities, Chicago was vastly more prosperous for most of the twentieth century. Can the differences between the cities after 1930 be explained by differences in the cities before that date? We highlight four major differences between Buenos Aires and Chicago in 1914. Chicago was slightly richer, and significantly better educated. Chicago was more industrially developed, with about 2.25 times more capital per worker. Finally, Chicago’s political situation was far more stable and it was not a political capital. Human capital seems to explain the lion’s share of the divergent path of the two cities and their countries, both because of its direct effect and because of the connection between education and political instability…

  34. It is certainly true that you have to look at both demand and supply to figure out what happens in equilibrium. But Milton Friedman's first rule is that supply curves do slope upward. Things have to be very weird indeed for equilibrium effects to do more than modestly attenuate impact effects. Sometimes things are really weird But that is not the way to bet: Raj Chetty: In Conversation: "We talked about moving-to-opportunity…. You might worry that if we help one low-income family move out of a low-opportunity area, do they simply get replaced by another low-income family who moves into that area, so we have essentially a musical chairs phenomenon?… Empirical research has recently mainly been focused on identifying individual-level effects. But trying to figure out how things play out in equilibrium is a very challenging problem, which, I think, is something we should have on our agenda to focus on going forward…

  35. One problem here is that strongly progressive taxes, national health insurance, expanded social security, and universal basic income are the most effective remedies to inequality and insecurity, yet those who vote for modern-day neo-fascist poliicians vote for politicians who oppose such police, root and branch—maybe not in their rhetoric, but in committee and on the floor where the rubber hits the road. The dominant rhetorical mode is not "we need to help each other through our agency that is the government" but rather "we need to crush our enemies, and then everything will be okay". My view is that equitable growth policies are worth doing for their own sake, but do not expect them to have much purchase in preserving liberal democracy: Dani Rodrik: What’s Driving Populism?: "If… [fascism] is rooted in… culture and values, however, there are fewer options. Liberal democracy may be doomed by its own internal dynamics and contradictions…. Racism in some form or another has been an enduring feature of US society and cannot tell us, on its own, why Trump’s manipulation of it has proved so popular…. Will Wilkinson… urbanization… creates thriving, multicultural, high-density areas where socially liberal values predominate. And it leaves behind rural areas and smaller urban centers that are increasingly uniform in terms of social conservatism and aversion to diversity. This process, moreover, is self-reinforcing…. The cultural trends… are of a long-term nature, they do not fully account for the timing of the populist backlash…. Those who advocate for the primacy of cultural explanations do not in fact dismiss the role of economic shocks. These shocks, they maintain, aggravated and exacerbated cultural divisions, giving… [fascists] the added push they needed….. The precise parsing of the causes… may be less important than the policy lessons…. There is little debate here. Economic remedies to inequality and insecurity are paramount…

  36. The extremely sharp center-right economist Ricardo Hausmann comes from Venezuela, and has been trying to understand the roots of the collapse of the social contract there. The great fear is that Veneezuela is, for us, the canary in the coal mine. His argument is strong, and I think that I have heard his argument before, in Plutarch's understanding of the downward spiral of the last days of the Roman Republic: Plutarch: _ Life of Tiberius Gracchus_: "This is said to have been the first sedition at Rome, since the abolition of royal power, to end in bloodshed and the death of citizens; the rest though neither trifling nor raised for trifling objects, were settled by mutual concessions, the nobles yielding from fear of the multitude, and the people out of respect for the senate…": Ricardo Hausmann: How the Failure of “Prestige Markets” Fuels Populism: "Given the requirements of today’s technology, dismissing expertise as privilege is dangerous. That's why a well-functioning prestige market is essential to reconciling technological progress and the maintenance of a healthy polity…. Henrich suggests… prestige is payment for the generosity with which the prestigious share their knowledge…. A model of human behavior proposed by George Akerlof and Rachel Kranton…. Rising wage differentials may destroy the equilibrium proposed by Henrich. If the prestigious are already very well paid, and are not perceived as being generous with their knowledge, prestige may collapse. This may be another instance of the incompatibility between homo economicus and community morality emphasized by Samuel Bowles…. The collapse in the prestige equilibrium can do enormous damage to a society, because it may break the implicit contract whereby society uses critical skills. To see why and how, look no further than what has happened in Venezuela…

  37. Nice piece on the origins of the alt-right: John Ganz: The Year the Clock Broke: "Murray Rothbard loved The Godfather… even thought that the Godfather reflected his own worldview: 'Organized crime is essentially anarcho-capitalist, a productive industry struggling to govern itself.'… As early as the Reagan years, [Samuel] Francis called for Middle Americans to ally with a populist, 'Caesarist' presidency to accomplish their revolution, just as the French bourgeoisie aligned themselves with Napoleon…. He didn’t know it yet, but his Bonaparte was right there the whole time. On November, 9, 1992… New York magazine put Donald Trump on the cover…

  38. Per Kurowski: We Need Worthy and Decent Unemployments: "Two decades ago, concerned about growing unemployment, half in jest, in an Op-Ed in El Universal of Caracas, I asked something like whether it was better to have one hundred thousand unemployed running each on his side as broody hens, or to seat them all in a huge human circle where everyone would scratch the backs of one of his neighbors, charging a lot for his services, while his own back was scratched by his other neighbor, at an equally high price. The tragedy is that this question seems to me now less and less hypothetical…

  39. Jeb Bush: "When it comes to my brother, there's one thing I know for sure. He kept us safe."

  40. The interest rate is an optimal-control variable. Almost always, in an optimal control problem—like in steering a boat—you are doing one of two things (1) as much as you can (wheel hard left or hard right), or (2) staying the course (wheel center, unsure whether your next move will be to nudge it left or right, but certainly your next move will be small. Only when something special is going on—like following a narrow channel, or passing a reef—do you tend to deviate from that rule. The Fed knows that its next move is highly likely to be a rate cut. I see no reef. I see no island. Why has the rate cut not happened already? What is the reason?: Tim Duy: Gearing Up For A Rate Cut: "One take on the numbers is fairly positive. The economy continues to generate jobs at a pace sufficient to either lower unemployment further or encourage more people to enter the labor force. The jump in wage growth might even suggest that the economy is finally bumping up against full capacity and that is the primary culprit behind slower job growth. And maybe the August jobs number is revised up. Another take is less positive.The job market has clearly slowed, and, after accounting for the Census hires, may have slowed very close to the point where unemployment at best holds steady. That significant downshift in momentum is very worrisome. The second derivative here is not our friend. Moreover, don’t take too much comfort in the stronger wage numbers as that can easily be a lagging variable; wages might not take a hit until unemployment starts rising…. GDP tracking measures from the New York and Atlanta Federal Reserve Banks are both at a below trend 1.5% for the third quarter. New York is looking at 1.1% growth for the fourth quarter. Most definitely nothing to write home about…

  41. Let me endorse this from Larry Summers: Hailey Waller: Economy at Riskiest Point in a Decade, Lawrence Summers Says: "Former treasury secretary calls U.S. trade conflicts ‘foolish’. Economy to be ‘worse off’ based on current policies: Summers: The U.S. and world economies are at their riskiest moment since the global financial crisis a decade ago as trade tensions continue to grow, former Treasury Secretary Lawrence Summers said on Sunday. Summers spoke on CNN’s 'Fareed Zakaria GPS' about what he called a 'sadomasochistic and foolish trade conflict' the U.S. has engaged with China under President Donald Trump. 'We are losing very substantial amounts in terms of uncertainty, reduced investment, reduced job creation, for the sake of benefits that are very unlikely to be of substantial magnitude…. I don’t think there’s any question that American workers are going to be poorer, American companies are going to be less profitable, and the American economy is going to be worse off because of the course we’re on'…

  42. 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…

  43. Nikita Khrushchev (1959): On Peaceful Coexistence: "The socialist states are ruled by the working people themselves…. To them war spells grief and tears, death, devastation and misery. Ordinary people have no need for war…. Peaceful coexistence does not mean merely living side by side… with the constantly remaining threat of [war] breaking out in the future. Peaceful coexistence can and should develop into peaceful competition for the purpose of satisfying man's needs in the best possible way…. Let us try out in practice whose system is better, let us compete without war. This is much better than competing in who will produce more arms and who will smash whom. We stand and always will stand for such competition as will help to raise the well-being of the people to a higher level…. We Communists believe that the idea of Communism will ultimately be victorious throughout the world, just as it has been victorious in our country, in China and in many other states…. We may argue, we may disagree with one another. The main thing is to keep to the positions of ideological struggle, without resorting to arms in order to prove that one is right…. With military techniques what they are today, there are no inaccessible places in the world. Should a world war break out, no country will be able to shut itself off from a crushing blow…. Ultimately that system will be victorious on the globe which will offer the nations greater opportunities for improving their material and spiritual life…

  44. Being poor—and, more so, being poorer than you had expected you would be and having to retrench—stresses you out and makes you unhappy. Blanchflower and Clark decompose the children-make-you-unhappy fact in Europe into a "poverty" and an "other" component, and what they report makes a slot of sense: Children in a well-funcioning family setting are a source of profound happiness, and poverty in particular and stress in general are sources of profound unhappiness: David G. Blanchflower and Andrew E. Clark: Children, Unhappiness and Family Finances: Evidence from One Million Europeans: "The common finding of a zero or negative correlation between the presence of children and parental well-being continues to generate research interest…. One million observations on Europeans from ten years of Eurobarometer surveys…. Children are expensive, and controlling for financial difficulties turns almost all of our estimated child coefficients positive…. Marital status matters. Kids do not raise happiness for singles, the divorced, separated or widowed…

  45. I used to push back against those who said that, with Trump administration immigration policy, the cruelty is the point. I can no longer do so. In Guatemala Maria Isabel Bueso would die quickly for lack of cutting-edge treatments: Farida Jhabvala Romero: Feds to Reconsider Case of Bay Area Woman Getting Lifesaving Treatment Who Faces Deportation: "Maria Isabel Bueso has overcome many challenges as a result of the debilitating genetic disease she was born with that eventually left her confined to a wheelchair, breathing through a device and reliant upon weekly treatments to survive. She trained to become a dance teacher and now is an instructor, and she graduated summa cum laude from California State University, East Bay—where she set up a scholarship fund for students with disabilities. She also advocates for people with her disease and other rare illnesses, traveling to Washington, D.C., to lobby for medical research. Now, Bueso is fighting for her life once more. Immigration authorities previously told her and her family to leave the U.S. by mid-September—or face deportation to her home country of Guatemala…

  46. Let me direct your attention to one of the WCEG's young whippersnapper grantees writing smart things: Samir Sonti: The Politics of Inflation: "amir Sonti studies 20th century U.S. labor and economic history. Sonti’s dissertation focuses on the politics of inflation in the United States from the 1930s to the 1980s. He received a bachelor of arts degree in political science and a bachelor of science degree in economics from the University of Pennsylvania…

  47. Moral fault attaches to anyone who supports the New York Times. That is all.

  48. Frederick Douglass (1870): The Cause of Death of Robert E. Lee: "We are beginning to get at the cause of General Lee's death. Jeff. Davis says, that 'he died of a broken heart'; and one journal has declared, that he died being sadly depressed at the condition of the country, that he could stand it no longer. From which we are to infer, that the liberation of four millions of slaves and their elevation to manhood, and to the enjoyment of their civil and political rights, was more than he could stand, and so he died…

  49. Brad DeLong, Reed Hundt, and Joshua Cohen: Neoliberalism and Its Discontents: "At the end of the Carter administration and throughout the Reagan Revolution, belief in the power of markets became America's preferred economic policy doctrine. President Bill Clinton all but announced the triumph of free markets when he declared that 'the era of big government is over'. President Barack Obama faced the worst economic crisis since the Great Depression and pushed a recovery plan that was more limited than many had hoped, seeming to protect the very sectors that had created it…. In his new book, A Crisis Wasted, Reed Hundt… makes the argument that Obama missed an opportunity to push for a new progressive era of governance, a miscalculation that ultimately hobbled his administration…. A very special conversation between Hundt and DeLong about the limits of, and challenges to, free-market economics… in conversation with Joshua Cohen, co-editor of Boston Review…

  50. I would like to say that the very sharp Rana Foroohar is wrong here, that global recession probabilities are low. The problem is that we live in a world of multiple equilibria, and so—if enough people are now thinking like she is thinking—she may well be right: Rana Foroohar: Braced for the Global Downturn: "Well-meaning central bankers cannot offset the impact of an erratic US president on the real economy…. Last week’s market volatility… at heart, it’s about the inability of the Federal Reserve to convince us that its July rate cut was merely 'insurance'… Any number of indicators now show… [that] the global downturn has already begun. Asset prices will undoubtedly begin to reflect this, and possibly quite soon…. 'US equities are at the second most expensive period in 150 years', says Mr Lindahl. 'Prices must fall'. I don’t think it’s a question of whether we’ll see a crash—the question is why we haven’t seen one yet…

  51. Tim Duy believes that the Fed will cut interest rates fast enough and far enough to avoid a recession, and that that—rather than a recession—is the scenario driving the current inversion of the yield curve. After the recent declines in interest rates, I would give that only a 50-50 chance of being true. Equilibria are fragile, and multiple. At an equity P/E of 20, a 100 basis-point fall in the very long bond rate should carry with it a 20% increase in equity value, holding risk adjusted expected future cash flows constant. Yet the S&P composite has not moved since late October. That is a hell of a large fall in risk adjusted expected future cash flows: Tim Duy: On Rising Recession Probabilities: "My interpretation is that market participants have correctly anticipated the Fed’s reaction function with the expectation of substantial easing in the months ahead hence creating the inversion on the short end. This easing will be sufficient to derail impending recessionary threats. If the Fed’s easing was expected to be insufficient, I would expect that the 10s2s spread would be inverted. Consequently, at this point I still do not expect a recession in the near year. Under my baseline scenario, the Fed’s upcoming rates cuts will slightly steepen yield curve and the picture will look like 1995…

  52. Gary Forsythe: A Critical History of Early Rome: "Beloch (1926, 602) estimated that at the end of the Latin War Roman territory had grown to 5,289 square kilometers, which is about three and a half times his estimate of 1,510 square kilometers for the size of the Roman state in 396 B.C., following the conquest and annexation of Veii. Under the Varronian year 332 B.C., Livy (8.17.10) records that the Romans concluded a treaty with Alexander, the king of Epirus and the uncle of Alexander the Great, who had crossed over into southern Italy at the request of Tarentum in order to defend the Greek cities from the expanding pressure of Oscan-speaking people.15 The only major military operations conducted by the Romans during these years were directed against the Volscian town of Privernum (Livy 8.20–21). This minor war, however, offers perhaps the first clear picture of Roman stan- dard methods and thoroughness in dealing with resistance. After putting up a valiant effort against Rome for a few years, Privernum was finally cap- tured in 329 B.C., and the principal leader of the resistance, Vitruvius Vaccus, was apprehended and executed, while the senators of Privernum were sentenced to live north of the Tiber. Although Livy (8.21.10) says that the general population of Privernum was given Roman citizenship, it is likely that they received the status of civitas sine suffragio, just like the neigh- boring Volscian towns of Fundi and Formiae. Besides this modest augmen- tation, the Romans founded three colonies at this time. In 334 (Livy 8.16.13–14), the Latin colony of Cales was established with twenty-five hun- dred settlers, on land in northern Campania near Teanum Sidicinum and the Ager Falernus, one of the richest agricultural districts in Italy. In 329 (Livy 8.21.11), three hundred settlers were sent out to form a Roman maritime colony at the Volscian coastal site of Anxur, which was renamed Terracina. It commanded a strategic node along the Volscian coast, a place where the mountains come down almost to the sea, forming a narrow pass. In 328 (Livy 8.22.2), a Latin colony was founded at Fregellae on the farther bank of the Liris River near its junction with the Trerus. It was doubtless intended to be an outpost to confront the Samnites…

  53. I think Kevin Drum is wrong here: if Trump were merely a race-baiter, he could turn it and and off—and would, for tactical effectiveness reasons. He can't turn it off. The Washington Post of course has bigger problems: it's not a "branding crisis": Kevin Drum: Here’s How Donald Trump Can Fix His Racist Branding Problem: "The Washington Post has a headline today that makes you go hmmm: 'Trump Vexed by Branding Crisis: How to Shed the Label of "Racist".' I think we all have a pretty good idea of how Trump could avoid being called a racist. He could stop saying racist stuff all the time. Easy peasy. For my money, I probably wouldn’t call Trump a racist…. I’d call him a race-baiter… someone who may or may not be personally racist but is perfectly happy to make money or win political office by appealing to racists…. Race-baiters the most dangerous of them all. Fox News is far worse than their viewers and Donald Trump is far worse than his base. Those are the people to fight, not the yahoos who yell 'Send them back!' at Trump rallies. Without Trump, they’d just be sitting at home and occasionally telling off-color jokes to their buddies. It’s only with people like Trump around that they become toxic…

  54. Telling lies about what the law has been in the past in the hope of persuading people that this is how the law should be in the future: this is a very strange mode of rhetoric indeed… I suppose we owe this to Sir Edward Coke: "I am afraid we should get rid of a great deal of what is considered law in Westminster hall, if what Lord Coke says without authority is not law…"—William Best (1824).

  55. I confess that I am a profound skeptic about deep negative nominal interest rates. A slightly higher inflation target and policies to fight the asset price configuration called "secular stagnation" would largely obviate the need, and leave behind a problem easily and straightforwardly dealt with via expansionary fiscal policy. And we really do not know how such an institutional reconfiguration would actually work. Confronted with a choice between known and understood policies that would work, and new ones with unknown side effects and effects that might, I do not undertstand the enthusiasm for the second: Ruchir Agarwal and Miles Kimball: Enabling Deep Negative Rates to Fight Recessions: A Guide: "we (i) survey approaches to enable deep negative rates… (ii) establish… enabling negative rates while remaining at a minimum distance from the current paper currency policy and minimizing the political costs; (iii) discuss why standard transmission mechanisms… are likely to remain unchanged in deep negative rate territory; and (iv) present communication tools that central banks can use…

  56. I never understood why so many people were desperate to interpret financial crises as things that destroyed firms' abilities to produce rather than things that made people want to hoard their cash. Yes, a numbers of firms are short of cash and need trade credit. But most healthy firms do not: Felipe Benguria and Alan M. Taylor: After the Panic: Are Financial Crises Demand or Supply Shocks? Evidence from International Trade: "Are financial crises a negative shock to demand or a negative shock to supply?… Arguments for monetary and fiscal stimulus usually interpret such events as demand-side shortfalls. Conversely, arguments for tax cuts and structural reform often proceed from supply-side frictions…. simple small open economy… deleveraging shocks that impose binding credit constraints on households and/or firms…. Household deleveraging shocks are mainly demand shocks, contract imports, leave exports largely unchanged, and depreciate the real exchange rate. Firm deleveraging shocks are mainly supply shocks, contract exports, leave imports largely unchanged, and appreciate the real exchange rate…. Empirical analysis reveals a clear picture: after a financial crisis event we find the dominant pattern to be that imports contract, exports hold steady or even rise, and the real exchange rate depreciates. History shows that, on average, financial crises are very clearly a negative shock to demand…

  57. Josiah Ober: The Greeks and the Rational: The Discovery of Practical Reasons: "September 19 Lecture 1. Gyges’ Choice: Rationality and Visibility. September 26 Lecture 2. Glaucon’s Dilemma: Origins of Social Order. Lecture 3. Deioces’ Ultimatum: How to Choose a King. Lecture 4. Cleisthenes’ Wager: Democratic Rationality. Lecture 5. Melos’ Prospects: Rational Domination. Lecture 6. Agamemnon’s Cluelessness: Reason and Eudaimonia…

  58. Mary Robinette Kowal (2014): Me, as a Useful Representative Example: "Some people said some not nice things about me in a public space, and the story has been picked up as an example of sexism in part because one of the people saying those things works for my publisher. Silvia Moreno-Garcia has done a good analysis of the sexism in what’s going on, so I’m not going to rehash that. Instead I’m going to talk about how this affects me…. My impulse is to tell you all that I’m fine and that this has no material affect on my life. And that is true. But I also know that I am a useful representative sample of the abuse that happens to other women. I know that there are a ton of women who have received similar messages…. Sexism happens all the time. It’s visible in SFWA because people are actively fighting against it. Too many places, too many women, get this sort of unwelcome attention and commentary about what they were wearing but no one does anything. It’s always, 'Laugh about it' or 'Just shrug it off', or 'Ignore it and he’ll go away'. You see how well that last is working? So, I really, truly am fine. But watch what happens to me now that I’m posting. Read the comments when they happen. Note the people who say that because I’m talking about the abuse, I must be begging for attention. Take me as a useful representative example. And know that I am not an isolated case…

  59. From the past. Worth highlighting. Why? Because when the nest recession comes, the usual suspects will once gain start claiming the the should not do anything to shorten or cushion it. And the usual suspects will once again be wrong: Paul Krugman (2008): Hangover Theorists: "Somehow I missed this: via Steve Levitt, John Cochrane explaining that recessions are good for you…. The basic idea is that a recession, even a depression, is somehow a necessary thing, part of the process of 'adapting the structure of production'. We have to get those people who were pounding nails in Nevada into other places and occupation, which is why unemployment has to be high in the housing bubble states for a while. The trouble… is twofold: 1. It doesn’t explain why there isn’t mass unemployment when bubbles are growing as well as shrinking—why didn’t we need high unemployment elsewhere to get those people into the nail-pounding-in-Nevada business? 2. It doesn’t explain why recessions reduce unemployment across the board, not just in industries that were bloated by a bubble…. The current slump is affecting some non-housing-bubble states as or more severely as the epicenters of the bubble…. Unemployment is up everywhere. And while the centers of the bubble, Florida and California, are high in the rankings, so are Georgia, Alabama, and the Carolinas. So the liquidationists are still with us. According to Brad DeLong, 'Milton Friedman would recall that at the Chicago where he went to graduate school such dangerous nonsense was not taught…' But now, apparently, it is. Update: Not to mention the idea that employment is dropping because workers don’t feel like working…

  60. Ken White (2014): Science Fiction Community Generates This Weekend's Buffoonish Defamation Threat: "Sean P. Fodera is a science fiction writer who works in the publishing industry. He's angry. He started out angry over ongoing upheaval in the science fiction and fantasy literature community. That upheaval is mirrored in the gaming community and skeptic community and other communities with devoted and vocal fanbases. It's a conflict between two groups: a group that thinks the communities have a problem with racism, sexism, and harassment and should take steps to address it, and a group that thinks that the first group is engaged in free-speech-suppressing political correctness and should be resisted. A full description of the dispute would be too lengthy for this post…

  61. The very sharp Barry Eichengreen has a theory of why Donald Trump wants to put ex-tight money advocate Judy Shelton on the Federal Reserve Board. It is certainly a more plausible and sensible theory of what they are aiming at than any other theory that I have seen put forward. But I fear that it is wrong: understanding a word or deed of the Trump administration from the standpoint that there is a coherent vision of the world from which it is plausible and sensible seems deeply flawed to me: Barry Eichengreen: Trump’s Cross of Gold: "Shelton is a proponent of fixed exchange rates. Her belief in fixed rates is catnip to an administration that sees currency manipulation as a threat to winning its trade war. Team Trump wants to compress the United States trade deficit and enhance the competitiveness of domestic manufactures by using tariffs to raise the price of imported goods. But a 10% tariff that is offset by a 10% depreciation of foreign currencies against the dollar leaves the relative prices of US imports unchanged…. Thus, the challenge for Team Trump is to get other countries to change their policies to prevent their currencies from moving. That’s what the demand for stable exchange rates and an end to 'currency manipulation' is all about…. But in the absence of a global conference—something that would be anathema to Trump—the way to get there is the same as under the nineteenth-century gold standard…. If the US moves first, 'preemptively' as Shelton puts it, other countries will follow. Behind this presumption, however, lie a number of logical non-sequiturs. First, other countries show little desire to stabilize their exchange rates…. Second, gold is no longer a stable anchor…. Today… the stabilizing capacity of the mining industry is weaker…. Arguments for a gold standard and pegged exchange rates are deeply flawed. But there is a silver lining, as it were: nothing along these lines is going to happen, Governor Shelton or not…

  62. Relationships between user and supplier firms were never arms-length. But while the assumption that they were may have been a minor error three generations ago, it is a major error today. We need more people like Susan Helper thinking about the consequences of the information and technology flows generated in today's value-chain economy. Such flows are a very important piece of our community of engineering practice: Susan Helper: Building High-Road Supply Networks in the United States: "A different kind of outsourcing is possible—'high-road' supply networks that benefit firms, workers, and consumers… collaboration between management and workers and along the length of the supply chain, sharing of skills and ideas, new and innovative processes, and, ultimately, better products that can deliver higher profits to firms and higher wages to workers. Firms could take a key step by themselves, since it could improve profits. Collaboration among firms along a supply chain can lead to greater productivity and innovation. Lead firms can raise the capabilities of supplier firms and their workers such that even routine operations can benefit from collaboration for continuous improvement…

  63. This is exactly the kind of work we at Equitable Growth want to see carried out by exactly the kind of young people we ought to be financing. Very well done: Ellora Derenoncourt and Claire Montialoux: Minimum Wages and Racial Inequality: "The earnings difference between black and white workers fell dramatically in the United States in the late 1960s and early 1970s. This paper shows that the extension of the minimum wage played a critical role in this decline. The 1966 Fair Labor Standards Act extended federal minimum wage coverage to agriculture, restaurants, nursing homes, and other services which were previously uncovered and where nearly a third of black workers were employed…

  64. I missed this when it came out three years ago: Melany De La Cruz-Viesca, Zhenxiang Chen, Paul M. Ong, Darrick Hamilton, and William A. Darity Jr.: The Color of Wealth in Los Angeles: "White households in Los Angeles have a median net worth of 355,000…. Mexicans and U.S. blacks have a median wealth of 3,500 and 4,000, respectively…. Japanese (592,000), Asian Indian (460,000), and Chinese (408,200) households had higher median wealth than whites…. African blacks (72,000), other Latinos (42,500), Koreans (23,400), Vietnamese (61,500), and Filipinos (243,000)…. The median value of liquid assets for Mexicans and other Latinos is striking, zero dollars and only 7, respectively, whereas, the median value of liquid assets for white households was 110,000…

  65. As I say, there are many things deeply wrong with the culture of the New York Times: John Gruber: Let’s Go Further and Hope for Every Last Drop of Joy to Be Drained From the World https://daringfireball.net/2019/09/drain_all_the_joy: "Charlie Warzel… column for The New York Times… is a bluff. If there’s even a whiff of seriousness to Warzel’s proposal, it’s that—what?—the tens of millions of people interested in learning about Apple’s new products would be better served reading about it in publications like, oh, say, The New York Times? Filtered by writers like Warzel, who is so jaded he’s already deemed the new phones 'a commodity', and his colleague Jack Nicas, who mocked a woman wearing a media badge at the event for crying 'during an Apple Watch ad'. That was good for a 'we’re above any sense of emotion' laugh until the woman in question, Ellen Cushing of The Atlantic, piped into the thread…. What Warzel has written—not on his personal blog, mind you, but in a column in the goddamn New York Times—has nothing to do with Apple, nothing to do with iPhone users, and nothing to do with society or culture at large. It is not an honest attempt to persuade anyone about anything. It’s all about Charlie Warzel. Warzel wrote an entire column in The New York Times to let the world know that even though he writes about technology, he’s so far above getting excited about any of it that he thinks Apple should stop holding events to introduce new products. To quote my favorite spiritual leader, 'Well, isn’t that special?'…

  66. There are many things desperately wrong with people who write for the New York Times. Here we have Jack Nicas, boy mocking girl for crying, which is a not-good and very middle-school look: Jack Nicas: "What's strange about Apple events https://twitter.com/elcush/status/1171863358137454593: Many Apple bloggers act as fans, not journalists. One person in the media section literally gave Tim Cook a standing ovation; another cried during an Apple Watch ad… Ellen Cushing: i was the crying reporter sitting next to Jack. I was crying because it’s a video about people with disabilities overcoming challenges and also sometimes my face makes water whether I want it to or not??

  67. On the 'use of 'scare quotes': Edward P. Thompson (1978): The Poverty of Theory, or, an Orrery of Errors https://www.marxists.org/archive/thompson-ep/1978/pot/essay.htm: "Althusser… patiently explains it thus: 'The critique of Stalinist "dogmatism" was generally "lived" by Communist intellectuals as a "liberation". This 'liberation' gave birth to a profound ideological reaction, "liberal" and "ethical" in tendency, which spontaneously rediscovered the old philosophical themes of "freedom", "man", the "human person" and "alienation"' (F.Af. 10). (It must be difficult to ‘speak’ a theory like this, when at every second word, one must ‘contort’ one’s features into a knowing ‘leer’, to ‘signify’ to the reader that one ‘knows’ the true meaning of these words behind their apparent ‘meaning’)…. In 1972 he had become more blunt; he had only one recourse to inverted commas; ‘after the Twentieth Congress an openly rightist wave carried off… many Marxist and Communist “intellectuals’…. This, then, is the missing protagonist with whom Althusser wrestles in For Marx and Reading Capital: the anti-Stalinist revolt… ‘socialist humanism.’… This, if anywhere, is where all these critiques and actions converged. This is the object of Althusser’s police action, the unnamed ghost at whom his arguments are directed…

  68. Dylan Riley (2011): Tony Judt: A Cooler Look https://newleftreview.org/issues/II71/articles/dylan-riley-tony-judt-a-cooler-look: "Marxism and the French Left’s discussion of the post-war intellectual scene… fails the elementary test of chronology: The two greatest products of post-war French Marxism, Sartre’s Critique of Dialectical Reason and Althusser’s Reading Capital, were published in 1960 and 1968…. In the late 1980s, apparently bored by French history (and by his wife), Judt followed the trail blazed by Timothy Garton Ash and numerous others to Eastern Europe. Gorbachev’s diplomacy had removed any obstacles to humanitarian tourism…. A crash course in Czech, and meetings with Michnik, Havel and Kis, equipped Judt to present his credentials to Washington in the form of a paper given at the Wilson Center in 1987, ‘The Politics of Impotence?’… Freed—as the interrogative ironization of the title tried to indicate—from any concrete political engagement by the force of circumstance, intellectuals like Havel answered to a higher ‘moral responsibility’, just as Judt had told French socialists to do…. ‘The Politics of Impotence?’ reported that, since 1968, oppositional Marxism in Eastern Europe had been replaced by a healthy focus on ‘rights’…

  69. Edward Thompson (1978): The Poverty of Theory, or, An Orrery of Errors https://www.marxists.org/archive/thompson-ep/1978/pot/essay.htm: "By 1969 Althusser had narrowed the fully-approved texts to two: the Critique of the Gotha Programme (1875) and the Marginal Notes on Wagner’s ‘Lehrbuch der politischen Okonomie) (1880): these alone ‘are totally and definitively exempt from any trace of Hegelian influence’ (L. & P. 90). See also Francois George, ‘Lire Althusser’, Les temps modemes (May, 1969)…

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

  71. Heather Boushey: In Conversation with Gabriel Zucman: Zucman: "Even this mediocre growth performance is much more than what’s been experienced by most of the population. Almost 90 percent of the population has seen its income grow by less than that. And for half of the U.S. population—about 120 million adults today—there’s been zero growth in average pretax income since 1980. This means that in 1980, for the bottom 50 percent, average income before government intervention was $16,000 a year, adjusted for inflation. Today, it’s still 16,000 a year. That’s a generation-long stagnation in income for half of the population…

  72. Shira Ovide: Lies-as-a-Service: "I admit that I don't know what Twitter or Facebook should do in dealing with potentially harmful propaganda from Chinese officials, or anyone else. Should Facebook, for example, declare that Philippines President Rodrigo Duterte shouldn't be allowed to have an account because he or his allies use the social network to launch vicious online attacks against critics? Should Twitter label incendiary tweets from anti-immigrant political parties in Italy as abusive behavior, as they have (sort of) sought to do with Donald Trump? Should the companies have different rules about the hand-holding they provide to prominent people, depending on whether they're a member of the Kardashian family or a Chinese diplomat? It's tricky, and I'm not suggesting there are easy answers. But what Shelly and Sarah wrote about gets to the heart of the contradiction in social media companies' approach to potentially harmful or outright false information. They want to be the go-to sources of information online, but they don't want to be arbiters of what's true…. Nor do they believe it's practical to fact-check the billions of tweets and Facebook posts…. Twitter's approach with these Chinese officials, and that of Facebook in places such as the Philippines, seem to be that potentially harmful state-backed propaganda can be fine, unless those state-linked actors are spreading the propaganda with accounts pretending to be someone else. In that approach, the veracity of the information isn't what matters, nor the harm it causes. What matters is the veracity of the identity of the accounts behind that information. That is a tough line to walk…

  73. This is, I think, A very important observation from Robert Waldmann—one that has escaped the mainstream public finance literature. He has convinced me that what the utilitarian math says has always been… misread… in an elementary mistake similar to the "neo-Fisherian" claim that the way to raise inflation is to raise nominal interest rates: it is a fundamental misunderstanding of the properties of the dynamic system: Robert Waldmann: If one wishes to redistribute from the rich, and also worries about the effect of taxes on wealth on incentives to save, then the correct strategy is to tax at the maximum rate possible until there is no longer any reason to redistribute http://rjwaldmann.blogspot.com/2008/06/optimal-capital-income-taxation-it-is.html. This is a mathematical result based on the most standard economic model. Math doesn't care about Alan Cole's feelings. In a one period model, one must settle for the second best. In an infinite horizon model one eventually gets to first best from now on. It is widely noted that [in a model with T periods] the optimal tax on wealth (and on capital income) goes to zero as T goes to infinity. It is less often noticed that the way this happens is all taxation which serves any [redistributive] purpose is completed as quickly as possible…

  74. Alan Cole: "I have seen this response several times from wealth tax advocates. Not once have I seen them do anything to help savers or investors at any level of income. Put money away for later and you become a piñata for them to beat at with a stick. It's short-termism all the way down…

  75. Nick Beaudrot: "Ah yes, all those 'savers' who 'put money away' until it reaches :checks Warren's plan: $50MM in assets. https://twitter.com/AlanMCole/status/1169610684465913856

  76. David Frum: "Years later, I wrote of the George W. Bush administration: 'The Bush administration opened with a second Pearl Harbor, ended with a second Great Crash and contained a second Vietnam in the middle'. My own role in the administration was both brief and modest…. Yet because the administration is so widely perceived as unsuccessful, it feels cowardly to remark this truth, as if I were looking for some kind of personal exit. I came away from my Bush experiences with two resolutions : 1) Never to let any group do any iota of my thinking for me. If I lacked the expertise to think something through for myself, then I wouldn't have an opinion about it at all. 2) To devote more of my own personal political thinking to the question of what citizens of a modern nation owe each other. Which is why the headline that is on my mind this day pertains not to the past, but to the present…. Inevitably, the impress of 9/11 must fade. My youngest daughter was born a month afterward…. Her generation will have its own memorial days. We can't bequeath our memories to them, and it would be oppressive if we could. Instead, let's bequeath them a better country, where fewer die by the gun and more have care when they need it…

  77. Christopher Federico: Trump as "Replacement-Level Fox News Junkie" http://www.lawyersgunsmoneyblog.com/2019/09/trump-as-replacement-level-fox-news-junkie: "One of the best ways of characterizing Trump is that he’s just a replacement-level seventy-something Fox News viewer. He does not have even the level of sophistication you’d find at the high end of the expertise/awareness distribution in the mass public, let alone a bona-fide member of the political elite…. Like any other replacement-level Fox News junkie, he loves the symbolism of toughness…. The problem is that the average old man parked in front of Fox for his daily mainline hit of resentment and identity politics doesn’t have to grapple with the real-world implications of performative toughness. But Trump eventually does, and he fails to grok those implications until he’s beaten over the head with them at the very last minute by one or two of the few non-yes-men he has left (e.g., Dunford, nameless Pentagon lawyers). And in Trump’s somewhat idiosyncratic case, this is compounded by the fact that he combines his penchant for performative toughness with an isolationist streak—and seems to have little consciousness of how the implications of those two things might conflict with one another. The result is strategic incoherence: '"Trump is in a box of his own making", said Philip Gordon…. "He has put in place policies—'maximum pressure' on Iran—guaranteed to provoke an aggressive Iranian response, but he’s not prepared to respond aggressively in turn, and the Iranians know it"'…

  78. Adam Ozimek: _"Okay FOMC tweet storm… https://twitter.com/ModeledBehavior/status/1174386524806438914 The Fed’s pivot to a more dovish stance over the last year is due to multiple factors. One is that the Fed sees an elevated risk of a recession. Given that rates are already low, they’d rather cut early to prevent a downturn than cut late and risk hitting the zero lower bound. The other factors are slower moving. 1st is the stubborn inability of inflation to sustainably hit the target of 2%. 2nd is the closely related trend that the economy is not yet at full-employment. More than the risk of a recession, these slower moving factors provide a stronger basis for cutting rates and are more consequential for understanding the economy today. One reason this is consequential is that labor market slack , and the Fed’s consistent underestimate of it, goes a long way in explaining the troubling inflation trends…

  79. Joseph Stalin (1935): "The Pope! https://en.wikiquote.org/wiki/Joseph_Stalin How many divisions has he got?… (Said sarcastically to Pierre Laval in 1935, in response to being asked whether he could do anything with Russian Catholics to help Laval win favour with the Pope, to counter the increasing threat of Nazism; as quoted in The Second World War (1948) by Winston Churchill vol. 1, ch. 8, p. 105.)

  80. Highest-quality economic theory on how to do the analysis of societal well-being right, and in the process nest utilitarianism in a broader sensible framework: Emmanuel Saez and Stefanie Stantcheva (2016): Generalized Social Marginal Welfare Weights for Optimal Tax Theory: "Evaluat[ing] tax reforms by aggregating money-metric losses and gains of different individuals using 'generalized social marginal welfare weights.' Optimum tax formulas take the same form as standard welfarist tax formulas…. Weights directly capture society’s concerns for fairness without being necessarily tied to individual utilities. Suitable weights can help reconcile discrepancies between the welfarist approach and actual tax practice, as well as unify in an operational way the most prominent alternatives to utilitarianism…. There is no social-welfare objective primitive…. Instead, our primitives are generalized social marginal-welfare weights which represent the value that society puts on providing an additional dollar of consumption to any given individual. These weights directly reflect society’s concerns for fairness…. We define a tax system as locally optimal if no small reform is desirable… Slides

  81. Per-Anders Edin, Tiernan Evans, Georg Graetz, Sofia Hernnäs, and Guy Michaels: The Individual Consequences of Occupational Decline: "Outcomes for similar workers in similar occupations over 28 years… the consequences of large declines in occupational employment…. Mean losses in earnings and employment for those initially working in occupations that later declined are relatively moderate, [but] low-earners lose significantly more…

  82. I would note that the "boom" in capital investment we had in 2018 was on the order of 1/5 of what the Trumpets had promised. Rana and Daniel's point is that the "boom" we had was directed in directions that substitute for rather than complement labor—and thus claims it will drive wage gains are implausible: Rana Foroohar (November 2018): US Capital Expenditure Boom Fails to Live Up to Promises: "One of the key economic tales told by the Trump administration is that corporate tax cuts would spur huge investment and growth in the US economy, raising wages and ushering in a new era of bullishness. Not quite…. Nearly half of the corporate profits that were repatriated went straight into stock price-bolstering share buybacks. Capital expenditures grew too, at least for a couple of quarters. But what business is investing in has changed quite a lot… and that alters everything…. Back in 1998… 48.3 per cent of business investment went to new structures and industrial equipment and about 30 per cent into technology such as information processing equipment and various types of intellectual property, according to data compiled by Daniel Alpert…. This year, only 28.6 per cent went to structures and industrial equipment, while technology and intellectual property made up 52 per cent of all new investment…

  83. Diverse scholars at conferences ask different questions, and questions as if not more important than the mainstream. Will McGrew reports Will McGrew: The National Economic Association and the American Society of Hispanic Economists Work to Diversify and Strengthen Economics Research: "Last month, the National Economic Association and the American Society of Hispanic Economists hosted the sixth annual NEA-ASHE Freedom and Justice Conference at University of New Mexico’s Department of Economics. As in previous years, this conference provided an invaluable contribution to the field by elevating new communities, topics, and methodologies within economics research. Indeed, the papers presented at the conference painted a fuller picture of the current state of the U.S. economy and provided empirically grounded recommendations for a stronger and fairer economic future…

  84. Tremendously disturbing. The question in the marketplace should aways be "is your money good?" not "I don't like your face". The second is tremendously destructive to human liberty: Kevin Drum: A Third of Republicans Think It’s OK to Refuse Service to Muslims: "I’m never quite sure how seriously to take survey results, and today Paul Waldman points to a new PRRI survey that I really, really don’t want to take seriously…. Thanks to a baker in Colorado, we’re all accustomed to the idea that conservatives think business owners should be free to refuse service to gay people if their refusal is based on religious belief. But apparently large numbers of them also think it’s fine to refuse service to Muslims, Jews, and African Americans…. Among Democrats, there’s apparently a single, smallish contingent—around 14-19 percent of the total—that thinks it’s OK to discriminate against anyone. But among Republicans, it varies. About 18 percent think it’s OK to discriminate against blacks compared to 47 percent who think it’s OK to discriminate against gay people. Jews and Muslims and atheists are in the middle…. There’s a liberal bloc that, on principle, thinks businesses should be allowed to discriminate however they want. Conservatives, by contrast, don’t think that. They endorse discrimination more or less strongly depending on how much they dislike the group in question. So to circle back to the beginning, I wonder how seriously to take this?…

  85. This is key to why distributional national accounts are becoming increasingly essential for understanding what is going on: Heather Boushey: Testimony before the House Budget Committee https://equitablegrowth.org/testimony-by-heather-boushey-before-the-house-budget-committee/: "National economic statistics are becoming less representative of the experience of most Americans. The implication for how policymakers and economists alike evaluate the economy is that average economic progress is pulling away from median economic progress. We see these same divergent trends across multiple measures of economic wellbeing: wages, income, and wealth…

  86. James Harding: Tortoise: What We Are For: "We believe that the coming age of artificial intelligence requires a moral intelligence–and so, as innovation permeates our lives, we stand for the human interest…. The power gap is widening. The powerful are fewer in number, more remote and less accountable…. People are locked out of the decisions that govern their lives; leadership’s gone AWOL; democracy is weakening. If we can agree on anything, it’s that our times require new thinking. We hope that if we take a little longer and open up the process of journalism, we can better understand these problems and foster new ideas. We’re trying to come to a better informed point of view on our future…. We are, let’s face it, a tiny journalism start-up. We’ve only recently moved out of my kitchen. We don’t have a manifesto. We’re not running for office; we’ve only just rented one…. We’d like to tell some stories…. We aim to tell original ones well, to report them deeply and discuss them openly…

  87. New and well worth reading from Lisa Cook and Jan Gerson: The Implications of U.S. Gender and Racial Disparities in Income and Wealth Inequality at Each Stage Of The Innovation Process: "Women and underrepresented minorities in the United States have obtained an increasing share of bachelor’s degrees and other advanced degrees in… STEM…. Yet there has been no similar increase in patenting…. Closing this gender and racial gap in the U.S. innovation process could increase U.S. Gross Domestic Product per capita by 2.7 percent…. Mentoring…. Exposing children to invention and innovation…. A recent paper in Nature finds that… patent applications with women as lead inventors are rejected more often…. Workplace climate…

  88. An excellent conversation with Janet Currie on how, in America today, choosing the right parents does a lot to determine your life-chances in America today. But it does not have to be that way: Janet Currie: In Conversation: "It is hard to talk about prenatal influences without sounding deterministic, but outcomes aren’t deterministic at all. One way that you can see that is that the same negative shock, such as a given level of air pollution, will typically have a much greater effect on a poor infant than on a richer infant. What that observation tells you is that there is something that can be done to mitigate the effects of a harmful shock, and the richer parents are doing it, whatever it is. If you could find that and put it in a bottle, or put it in a program, then you would be able to mitigate the effects of these early-childhood insults. And in fact, we have had reasonable success in mitigating the effects of some types of prenatal disadvantage through public programs. There is a great deal of evidence, some to which I have contributed, on the positive effects of the Supplemental Nutrition Program for Women, Infants, and Children during pregnancy on infant health outcomes. These positive effects are striking, given that the dollar value of WIC benefits is fairly small. It may well be that modest amounts of money combined with improved access to medical care and some psychosocial support can go a long way toward improving the health of mothers and their babies…

  89. The family occupational history of Equitable Growth alumnus Nick Bunker: Nick Bunker: @NickBunker: "'What’s a cool bit of family history you know?' My great-great-great grandfather was killed by a whale. To be fair to the whale, Great-Great-Great Grandpa Bunker and his coworkers were trying to kill it. My dad, looking at a whale skeleton: 'Did I tell you one of those killed my great-great grandfather?'…

  90. Douglas Almond, Michael Greenstone, and Kenneth Y. Chay: Civil Rights, the War on Poverty, and Black-White Convergence in Infant Mortality in the Rural South and Mississippi: "For the last sixty years, African-Americans have been 75% more likely to die during infancy as whites. From the mid-1960s to the early 1970s, however, this racial gap narrowed substantially. We argue that the elimination of widespread racial segregation in Southern hospitals during this period played a causal role in this improvement. Our analysis indicates that Title VI of the 1964 Civil Rights Act, which mandated desegregation in institutions receiving federal funds, enabled 5,000 to 7,000 additional black infants to survive infancy from 1965-1975 and at least 25,000 infants from 1965-2002. We estimate that by themselves these infant mortality benefits generated a welfare gain of more than $7 billion (2005$) for 1965-1975 and more than $27 billion for 1965-2002. These findings indicate that the benefits of the 1960s Civil Rights legislation extended beyond the labor marker and were substantially larger than recognized previously…

  91. Remember: The current Republican administration's foreign policy is even less coherent and more deranged than his economic policy: Josh Barro: "I don't understand the point of withdrawing from the Iran deal and sanctioning Iran, but then giving Iran financial aid to offset the effects of the sanctions in order to induce them to stay in the deal…

  92. Politico is giving Equitable Growth's fearless leader Heather Boushey a platform to argue for distributional national accounts. This is, I think, a very good sign: Politico had followed the National Journala model of focusing on gossip and personnel, but their willingness to give serious people the mic to talk about actual policy is a sign that they may be moving beyond the idea that their role is to provide celebrity gossip about ugly people: Heather Boushey: How To Fix Inequality: Publish Distributional, Not Just Aggregate, Growth Data https://www.politico.com/interactives/2019/how-to-fix-politics-in-america/inequality/publish-distributional-not-just-aggregate-growth-data/: "To tell us how Americans—low-, middle- and high-income alike—are faring in the current economy, relative to other groups and to the average, federal agencies need to produce distributional statistics alongside the aggregate ones. That means offering not just one estimate of growth but several: growth for those with different levels of income, of different races and ethnicities, and also for variation by state or other levels of geography. Legislation has been passed that encourages the BEA to add the disaggregated data, but the law provides no new funding and doesn’t go beyond encouragement. If we do not change the way we conceptualize and analyze economic progress, we are unlikely to have very much of it. Better, fairer growth measures are a vital step toward better, fairer growth…


At Grasping Reality:

  • Yes, the New York Times Is Corrupt AF: Why Do You Ask? https://www.bradford-delong.com/2019/09/yes-the-new-york-times-is-corrupt-af-why-do-you-ask.html: "Dexter Fergie:'Got some breaking news from the NYT's intellectually diverse Never Trumpers…

  • At Equitable Growth: Fifteen Worthy Reads from September 27, 2018 https://www.bradford-delong.com/2019/09/fifteen-worthy-reads-for-september-27.html: "at Equitable Growth…

  • Weekend Reading: The Deeds of the Divine Augustus, by the Divine Augustus https://www.bradford-delong.com/2019/09/the-internet-classics-archive-the-deeds-of-the-divine-augustus-by-augustus.html: "In my nineteenth year, on my own initiative and at my own expense, I raised an army with which I set free the state, which was oppressed by the domination of a faction. For that reason, the senate enrolled me in its order by laudatory resolutions, when Gaius Pansa and Aulus Hirtius were consuls (43 B.C.E.), assigning me the place of a consul in the giving of opinions, and gave me the imperium. With me as propraetor, it ordered me, together with the consuls, to take care lest any detriment befall the state. But the people made me consul in the same year, when the consuls each perished in battle, and they made me a triumvir for the settling of the state…

  • Note to Self: Polanyi's problem https://www.bradford-delong.com/2019/09/polanyis-problem-is-he-writes-badly-hyman-minsky-had-no-footprint-until-charlie-kindleberger-took-minskys-view-of-the-worl.html is he writes badly. Hyman Minsky had next-to-no footprint until Charlie Kindleberger took Minsky's view of the world and turned it into a readable history. There's definitely space to do something like that with Polanyi—fictitious commodities, the market wants to treat your community, your occupation, your security of employment as market commodities, but people believe they have rights beyond market rights when the market gives rights only to those who control resources useful for making things for which rich people have serious Joneses…

  • Weekend Reading: https://www.bradford-delong.com/2019/09/john-stuart-mill-1829-_of-the-influence-of-consumption-on-production_-periods-of-brisk-demand-are-also-the-period.html: The birth of macroeconomics as we know it back in 1829. But Mill gets one big thing wrong: a depression happens whenever there is an uncompensated sharp rise in the demand for money, and such sharp rises can and do have many causes—nominal illusion in a time of inflation leading to "over investment" is only one of them. And, of course, Mill as absolutely hopeless with respect to the cure: John Stuart Mill (1829): Of the Influence of Consumption on Production: "Periods of 'brisk demand' are also the periods of greatest production: the national capital is never called into full employment but at those periods…

  • Hoisted from the Archives: From 2007: Your One-Stop Shop for All Your 70th Anniversary Leftist Sectarian Polemic Blogging Needs https://www.bradford-delong.com/2019/09/hoisted-from-the-archives-from-2007-your-one-stop-shop-for-all-your-70th-anniversary-leftist-sectarian-polemic-blogging-nee.html: https://delong.typepad.com/sdj/2007/03/your_onestop_sh.html: In anticipation of the 70th anniversary of the bloody Stalinist suppression of the Partido Obrero de Unificación Marxista in the Barcelona May Days, we are–thanks to Jacob Levy–proud to bring you the latest in sectarian Marxist polemics blogging. First, we have Eric Hobsbawm declaring that George Orwell was a Traitor to Humanity by telling the truth about what he saw in Spain…

  • Hoisted from the Archives: Unstructured Procrastination https://www.bradford-delong.com/2019/09/unstructured-procrastination-hoisted-from-the-archives.html: https://www.bradford-delong.com/2005/08/unstructured_pr.html: I usually am quite good at structured procrastination—working not on the thing that is most immediate and imminent on my calendar, but on the priority #3 or #4 that is actually more important in the long run and that excites me at the moment. But today this system has broken down. I have done something nobody should ever do: I have spent an hour thinking about Louis Althusser. It's all Michael Berube's fault, but its worth it, for (highlighted below) he has the best paragraph on Louis Althusser ever written. The rest is (or ought to be) silence: Michael Berube: "The otherwise incomprehensible question of why anyone would think it necessary to devise a 'structuralist Marxism'. Structuralism is so antipathetic to all questions of hermeneutics and historicity that one might imagine the desire for a structuralist Marxism to be something like a hankering for really spicy ice cream. And yet, in the work of Louis Althusser, spicy ice cream is exactly what we have. I don’t like it myself. But because it’s an important byway in the history of ice cream… er, I mean the history of Marxist theory—-I still find it necessary to tell students about it, partly in order to warn them that it will very likely leave a bad taste in their mouths…. Let’s not jump ahead just yet; let’s work to get that bad taste in our mouths first…. As Tony Judt pointed out in a devastating review of Althusser’s career (in the March 7, 1994 issue of The New Republic), Althusserian Marxism was, for a brief period, a lingua franca spoken widely on the Continent: 'When I arrived in Paris as a graduate student in the late ‘60s, I was skeptically curious to see and to hear Louis Althusser. In charge of the teaching of philosophy at the Ecole Normale Superieure, the French elite academy for future teachers and leaders, Althusser was touted by everyone I met as a man of extraordinary gifts, who was transforming our understanding of Marx and reshaping revolutionary theory. His name, his ideas, his books were everywhere…

  • Hoisted from the Archives: John Holbo (2010): If Those Women Were Really Oppressed, Someone Would Have Tended to Have Freed Them by Then https://www.bradford-delong.com/2019/09/hoisted-from-the-archives-john-holbo-2010-if-those-women-were-really-oppressed-someone-would-have-tended-to-have-freed-t.html: http://crookedtimber.org/2010/04/13/if-those-women/: "Having made one non-libertarian-related post, I can now say, with a good conscience, that Bryan Caplan has responded to his critics. It is a wonder to behold…. A lot of the trouble here obviously rotates around the issue of systematic social oppression. Caplan barrels straight through like so: 'there’s a fundamental human right to non-violently pressure and refuse to associate with others'…. Caplan doesn’t notice that, even if he’s right about this fundamental human right, he’s no longer even defending the proposition that women were more free in the 1880’s, never mind successfully defending it. He’s defending the proposition that there is a fundamental right, which can be exercised, systematically, to make women much less free, that was better protected in the 1880’s. So if women value this libertarian right more than freedom, they might rationally prefer that sort of society. But even so, they should hardly regard themselves as more free, for enjoying this right. Rather, they should regard themselves as (rationally) sacrificing liberty, a lesser value, for love of libertarianism, a higher value and separate jar of pickles altogether…

  • Hoisted from the Archives: Department of "Huh!?": Raghu Rajan Is a Member of the Pain Caucus, and I Don't Understand Why… https://www.bradford-delong.com/2019/09/department-of-huh-raghu-rajan-is-a-member-of-the-pain-caucus-and-i-dont-understand-why.html: Back in 2010, there were a great many people for whom I had immense respect who were members of the Pain Caucus. And I still cannot follow what they were thinking at all. Construction had already shrunk fully by late 2007. It remains a great mystery—was it just a Chicago echo chamber in which people did not look at data?: Raghu Rajan Is a Member of the Pain Caucus, and I Don't Understand Why…: Raghu Rajan: "this recession is not a 'usual' recession. It followed a period of ultra-low interest rates when interest sensitive segments of the economy got a tremendous boost. The United States had far too much productive capacity devoted to durable goods and houses, because consumers could obtain financing for them easily. With households recovering slowly from the overhang of debt resulting from the binge, and with lenders extremely risk averse, it is unrealistic to expect households to spend beyond their means again, and unwise to try to tempt them to do so. If households are going to want fewer houses, industries such as construction will have to shrink (as should the financial sector that channeled the easy credit). A significant number of jobs will disappear permanently, and workers who know how to build houses or to sell them will have to learn new skills if they can. Put differently, the productive capacity of the economy has shrunk. Resources have to be reallocated into new sectors so that any recovery is robust, and not simply a resumption of the old unsustainable binge.  The United States economy has to find new pathways for growth. And this will not necessarily be facilitated by ultra-low interest rates…" But… but… but… construction already shrank! As of the end of 2010, the construction sector will have shrunk in nominal terms to its size in 1999, when the economy as a whole was only 57% as large as it is today…

  • Monday Smackdown/Hoisted from the Archives: Paul Krugman: March of the Peacocks https://www.bradford-delong.com/2019/09/march-of-the-peacocks-the-new-york-times.html: I was hissed at a Pete Buttigieg fundraiser in August when I said that the Obama presidency had been disappointing. But I do believe this is right, and I think this taking your eye off the good-policy ball in order to strut about peacocking was a major thing that went wrong: Paul Krugman (2010): March of the Peacocks: "Last week, the Center for American Progress, a think tank with close ties to the Obama administration, published an acerbic essay about the difference between true deficit hawks and showy 'deficit peacocks'. You can identify deficit peacocks, readers were told, by the way they pretend that our budget problems can be solved with gimmicks like a temporary freeze in nondefense discretionary spending. One week later, in the State of the Union address, President Obama proposed a temporary freeze in nondefense discretionary spending. Wait, it gets worse. To justify the freeze, Mr. Obama used language that was almost identical to widely ridiculed remarks early last year by John Boehner, the House minority leader. Boehner then: 'American families are tightening their belt, but they don’t see government tightening its belt.' Obama now: 'Families across the country are tightening their belts and making tough decisions. The federal government should do the same.' What’s going on here? The answer, presumably, is that Mr. Obama’s advisers believed he could score some political points by doing the deficit-peacock strut. I think they were wrong, that he did himself more harm than good. Either way, however, the fact that anyone thought such a dumb policy idea was politically smart is bad news because it’s an indication of the extent to which we’re failing to come to grips with our economic and fiscal problems…

  • Hoisted from the Archives: Why Everybody Should Be Short Louis Althusser and His Intellectual Children https://www.bradford-delong.com/2019/09/why-everybody-should-be-short-louis-althusser-and-his-intellectual-children.html: https://delong.typepad.com/sdj/2007/06/why_everybody_s.html: William Lazonick (1982), "Discussion of Resnick and Wolff, Feiner, Jensen, and Weiss," +Journal of Economic History_, 42:1 (March), pp. 83-85 http://links.jstor.org/sici?sici=0022-0507%28198203%2942%3A1%3C83%3ADORAWF%3E2.0.CO%3B2-G: "I find the title of this session—'Marxist Approaches to Economic History'—to be inappropriate…. First, what we have heard here are not "approaches" but one approach repeated four times…. Second… the approach presented here… relates not to economic history… not even an approach to the actual study of social history…. It is philosophical thinking about how one might develop an analytical framework for studying feudalism, capitalism, and so on…. Third… the extent to which the approach is "Marxist."… [Is] historical interpretation [to be]… a mere reflection of one's theoretical constructs… [or] must theoretical conceptions, if they are to have any practical relevance… emerge from historical analysis[?]… The crucial isdue in the utilization of a Marxist persepctive… is not who has the "right" to appropriate the "Marxist" label…. It is the substance of the approach to history… that is important…. What transformed Marx from a philosopher into a social scientist… was his study of history to develop a theory of history… he studied the history of capitalist development in Britain in order to construct a theory of capitalist development…. on the basis of a detailed historical analysis of a particular historical epoch…. Even Marx's basic philosophical and ideological orientations were influenced by his confrontation with historical facts… his observation that peasants did not have the right to gather wood… was instrumental in his transformation from Hegelian idealism to historical materialism…. Marx's theory… was made up of a series of testable (and hence refutable) hypotheses that he himself sought to support with empirical evidence…

  • For the Weekend: Fred Clark: The Duty of Speaking Ill of the Dead https://www.bradford-delong.com/2019/09/for-the-weekend-the-duty-of-speaking-ill-of-the-dead-fred-clark.html: "Dickens… does not disapprove of the indifference or even the sneering mockery expressed by the businessmen earlier. Dickens saw that as necessary. Speaking ill of the dead after a selfish, harmful life, Dickens saw, was essential because it was true and because it demonstrated to those still living such lives the urgency of their need for repentance. It was only because he was granted the grace of hearing the harsh words spoken about him after his own death that Ebenezer Scrooge found a path to redemption…. Yes, David Koch may be “past relenting,” but Charles Koch is not. Time is running out for him as well, but he still has time enough to follow the example of Ebenezer Scrooge or Zacchaeus and transform his life. Unlikely, perhaps, but possible. Yet far less likely and far less possible if we all decide to discourage him from doing so by filling his ears with pleasant lies, reassuring him that his reputation will be restored in death. Pretending that he’s already heading toward a happy ending helps to ensure that he’ll never get there…

  • Notes and References for: Lecture Notes: Introduction to Economic History: The Ancient Economy https://www.bradford-delong.com/2019/09/notes-and-references-for-ancient-economy.html

  • Note to Self: Trying (without much success) https://www.bradford-delong.com/2019/09/note-to-self-trying-without-much-success-to-gain-some-intuition-with-respect-to-what-gini-coefficient-_mean_.html to gain some intuition with respect to what Gini coefficients mean

  • Four hours spent so far https://www.bradford-delong.com/2019/09/i-can-no-longer-claim-to-read-french.html, and I am only 160 pages into Thomas Pikietty's Capital et Ideologie http://books.google.com/?isbn=9780674980822 I can no longer claim to "read French" in anything other than a menus-and-street-signs sense…

  • Telling lies https://www.bradford-delong.com/2019/09/a-very-strange-mode-of-rhetoric-indeed.html about what the law has been in the past in the hope of persuading people that this is how the law should be in the future: this is a very strange mode of rhetoric indeed… I suppose we owe this to Sir Edward Coke: "I am afraid we should get rid of a great deal of what is considered law in Westminster hall, if what Lord Coke says without authority is not law…"—William Best (1824)…

  • Hoisted from the Archives: David Glasner Says That I Am More of a Hayekian than I Think I Am… https://www.bradford-delong.com/2019/09/hoisted-david-glasner-says-that-i-am-more-of-a-hayekian-than-i-think-i-am-wherein-hayek-agrees-with-delong-that-just-beca.html: David Glasner: Wherein Hayek Agrees with DeLong that Just Because You’re Rich, It Doesn’t Mean You Deserve to Be: "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…”…

  • Podcast: Neoliberalism and Its Discontents https://www.bradford-delong.com/2019/09/eg-neoliberalism-and-its-discontents-commonwealth-club.html: Brad DeLong, Reed Hundt, and Joshua Cohen: Neoliberalism and Its Discontents: "At the end of the Carter administration and throughout the Reagan Revolution, belief in the power of markets became America's preferred economic policy doctrine. President Bill Clinton all but announced the triumph of free markets when he declared that 'the era of big government is over'. President Barack Obama faced the worst economic crisis since the Great Depression and pushed a recovery plan that was more limited than many had hoped, seeming to protect the very sectors that had created it…. In his new book, A Crisis Wasted, Reed Hundt… makes the argument that Obama missed an opportunity to push for a new progressive era of governance, a miscalculation that ultimately hobbled his administration…. A very special conversation between Hundt and DeLong about the limits of, and challenges to, free-market economics… in conversation with Joshua Cohen, co-editor of Boston Review…

  • Comment of the Day: Ebenezer Scrooge https://www.bradford-delong.com/2019/09/commcomment-of-the-day.html: "I've never met an absolute property right. Every damned one of them has an exception. Even a person's right to their own labor—the inalienable right guaranteed by the 13th Amendment—is subject to the draft, imprisonment, and covenants not to compete. Non-allodial rights in real estate are conditional on paying taxes and subject to takings. (While on takings, not all takings are compensated.) Copyright is subject to fair use. Property rights of use ('enjoyment', in the Hegelian trichotomy) are subject to many restrictions—consider all the things you could do with a baseball bat that would result in jail time. Property rights of exclusion or alienation I'll leave as an exercise to the reader. Etc., etc. The proper term is 'strong' property right…

  • _Moral fault _ https://www.bradford-delong.com/2019/09/moral-fault-attaches-to-anyone-who-supports-the-_new-york-times_-that-is-all.html attaches to anyone who supports the New York Times. That is all: "having a penis thirst in your face at a drunken dorm party may seem like harmless fun. But when Brett Kavanaugh did it to her, Deborah Ramirez says, it confirmed that she didn't belong at Yale in the first place…

  • Note to Self: This From Dan Alpert Still Makes Immense Sense https://www.bradford-delong.com/2019/09/this-from-dan-alpert-still-makes-immense-sense.html: 30-Year Treasury bonds continue astonishingly, bizarrely low: It is no longer the case that they are at their lowest levels ever, but this from Dan Alpert still makes immense sense: Dan Alpert: "We awake this morning to an all-time low yield on 30 year US Treasury bond: 2.107%. This is nearly 40 basis points below the average interest rate on all marketable treasury securities https://t.co/j3trQPFxfN. It is time to borrow and invest in infrastructure #LockItIn…

  • Weekend Reading: Leo Strauss Gives a Cheer for His Right-Wing Principles: Fascist, Authoritarian, Imperial https://www.bradford-delong.com/2019/09/leo-strauss-gives-a-cheer-for-right-wing-principles-fascist-authoritarian-imperial.html: I wonder what form his critique of the Nazi regime from those principles actually took?: "Dear Mr. Löwith…. The entire German-Jewish intellectual proletariat is assembled here. It’s terrible—I’d rather just run back to Germany…. [But] I see no acceptable possibility of living under the swastika, i.e., under a symbol that says nothing more to me than: you and your ilk, you are physei subhumans and therefore justly pariahs…. The fact that the new right-wing Germany does not tolerate us says nothing against the principles of the right. To the contrary: only from the principles of the right, that is from fascist, authoritarian and imperial principles, is it possible with seemliness, that is, without resort to the ludicrous and despicable appeal to the droits imprescriptibles de l’homme to protest against the shabby abomination…

  • The Sing-Off: Melissa Etheridge and Serena Ryder https://www.bradford-delong.com/2019/09/294-melissa-etheridge-and-serena-ryder-the-sing-off-toronto-11-mar-11-youtube.html

  • Weekend Reading: Nikita Khrushchev (1959): On Peaceful Coexistence https://www.bradford-delong.com/2019/09/weekend-reading-nikita-khrushchev-1959-on-peaceful-coexistence.html: "The socialist states are ruled by the working people themselves…. To them war spells grief and tears, death, devastation and misery. Ordinary people have no need for war…. Peaceful coexistence does not mean merely living side by side… with the constantly remaining threat of [war] breaking out in the future. Peaceful coexistence can and should develop into peaceful competition for the purpose of satisfying man's needs in the best possible way…. Let us try out in practice whose system is better, let us compete without war. This is much better than competing in who will produce more arms and who will smash whom. We stand and always will stand for such competition as will help to raise the well-being of the people to a higher level…. We Communists believe that the idea of Communism will ultimately be victorious throughout the world, just as it has been victorious in our country, in China and in many other states…. We may argue, we may disagree with one another. The main thing is to keep to the positions of ideological struggle, without resorting to arms in order to prove that one is right…. With military techniques what they are today, there are no inaccessible places in the world. Should a world war break out, no country will be able to shut itself off from a crushing blow…. Ultimately that system will be victorious on the globe which will offer the nations greater opportunities for improving their material and spiritual life…

  • Weekend Reading: Charles Kindleberger: Anatomy of a Typical Financial Crisis https://www.bradford-delong.com/2019/09/weekend-reading-charles-kindleberger-anatomy-of-a-typical-financial-crisis.html

  • Hoisted from the Archives: In the interest of keeping our eye on the ball in FinReg https://www.bradford-delong.com/2019/09/hoisted-from-the-archives-in-the-interest-of-keeping-our-eye-on-the-ball-in-finreg-let-me-present-alan-blinder-stating.html, 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…

  • Comment of the Day: Erik Lund https://www.bradford-delong.com/2019/09/comment-of-the-day-_erik-lundhttpswwwbradford-delongcom201909jeb-bush-_when-it-comes-to-my-brother-theres-one.html: "This is fun! When it comes to Santa Claus, there's one thing I know for sure. He's the last great follower of Ayn Rand. When it comes to J. R. R. Tolkien, there's one thing I know for sure. He kept it brief! When it comes to Erich von Daniken, there's one thing I know for sure. He's one of the great scholars of our time! When it comes to General Custer, there's one thing I know for sure. He's one of the Great Captains. When it comes to me, there's one thing I know for sure. I provide hours of high quality comment on this blog…

  • Comment of the Day: Ebenezer Scrooge https://www.bradford-delong.com/2019/09/author-_httpswwwbradford-delongcom201906american-conservative-fusionism-was-always-weird-anti-communists-thos.html: "I don't see it. The various wings of the Republican Party, ever since Nixon, have always been a coalition of losers from the democratic process who realized that they can each win in their respective sphere if they just gang up with the other losers. They never have any respect for the others' spheres. The neocons always knew their allies were evil plutocrats, racists, and Talibans. The Talibans always knew their allies were godless plutocrats and Jews. (Some Talibans are racists: others are not.) The racists always knew their allies were godbags, moneybags, and big beautiful mosaic types. But each of these groups knew that they needed the others to get their own goals. And they still know it. On this backdrop, the squabbles of a few intellectuals are irrelevant…

  • Liveblogging: The Anglo-Saxon Chronicle: The Comet-Star https://www.bradford-delong.com/2019/09/liveblogging-the-anglo-saxon-chronicle-the-comet-star.html: "A.D. 678. This year appeared the comet-star in August, and shone every morning, during three months, like a sunbeam. Bishop Wilfrid being driven from his bishopric by King Everth, two bishops were consecrated in his stead, Bosa over the Deirians, and Eata over the Bernicians. About the same time also Eadhed was consecrated bishop over the people of Lindsey, being the first in that division…

  • Liveblogging: The Anglo-Saxon Chronicle: MOAR About the Property and Lands of Medhamsted https://www.bradford-delong.com/2019/09/liveblogging-the-anglo-saxon-chronicle-moar-about-the-property-and-lands-of-medhamsted.html: "The Anglo-Saxon Chronicle (J.A. Giles and J. Ingram trans.): MOAR About the Property and Lands of Medhamsted: "A.D. 675. This year Wulfere, the son of Penda, and Escwin, the son of Cenfus, fought at Bedwin. The same year died Wulfere, and Ethelred succeeded to the government…

  • Comment of the Day: RW https://www.bradford-delong.com/2019/09/comment-of-the-day-_rwhttpswwwbradford-delongcom201909aldous-huxley-_brave-new-worldhttpwwwmicroethologyneton.html: "Cultures do not articulate authoritarianism the same everywhere; e.g., Trump/Johnsonism appears less 1984 and more Brave New World: 'What Orwell feared were those who would ban books. What Huxley feared was that there would be no reason to ban a book, for there would be no one who wanted to read one. Orwell feared those who would deprive us of information. Huxley feared those who would give us so much that we would be reduced to passivity and egoism. Orwell feared that the truth would be concealed from us. Huxley feared the truth would be drowned in a sea of irrelevance. Orwell feared we would become a captive culture. Huxley feared we would become a trivial culture." —Neil Postman…

  • Liveblogging: The Anglo-Saxon Chronicle: Centwin King of Wessex https://www.bradford-delong.com/2019/09/liveblogging-the-anglo-saxon-chronicle-centwin-king-of-wessex.html: "The Anglo-Saxon Chronicle (J.A. Giles and J. Ingram trans.): Centwin King of Wessex: "A.D. 676. This year, in which Hedda succeeded to his bishopric, Escwin died; and Centwin obtained the government of the West-Saxons. Centwin was the son of Cynegils, Cynegils of Ceolwulf. Ethelred, king of the Mercians, in the meantime, overran the land of Kent…

  • Note to Self: Neoliberalism and Its Discontents https://www.bradford-delong.com/2019/09/note-to-self-_neoliberalism-and-its-discontentshttpsmailchimpbostonreviewneoliberalism-and-its-discontentse8a.html: "Since the recession a decade ago, free-market economics (also known as neoliberalism) has been questioned on multiple fronts. As the dominant governing strategy for the past 40 years—including the Democratic administrations of Bill Clinton and Barack Obama—the Left today is increasingly challenging neoliberalism. Indeed, as the primaries approach, many former Clinton and Obama officials are even openly challenging the 'power of markets' belief. In his new book, A Crisis Wasted, Reed Hundt, chair of the Federal Communications Commission under Clinton and a member of Obama’s transition team, makes the argument that Obama missed an opportunity to push for a new progressive era of governance, a miscalculation that ultimately hobbled his administration. Hundt is not alone on this score. In a viral Vox article earlier this year, former Clinton administration economist Brad DeLong said that the Democratic Party has and should move past market friendly neoliberals like himself. Please join us for a very special conversation between Hundt and DeLong about the limits of, and challenges to, free-market economics with Joshua Cohen, co-editor of Boston Review. WHERE: Outdoor Art Club, One West Blithedale, Mill Valley, CA 94941. WHEN: Monday, September 9, 2019, 7:00 pm – 9:00 pm (PST)…

  • Liveblogging: The Anglo-Saxon Chronicle: Escwin King of Wessex https://www.bradford-delong.com/2019/09/liveblogging-the-anglo-saxon-chronicle-escwin-king-of-wessex.html: "A.D. 674. This year Escwin succeeded to the kingdom of Wessex. He was the son of Cenfus, Cenfus of Cenferth, Cenferth of Cuthgils, Cuthgils of Ceolwulf, Ceolwulf of Cynric, Cynric of Cerdic…

  • Liveblogging: The Anglo-Saxon Chronicle: Founding of Ely https://www.bradford-delong.com/2019/09/liveblogging-the-anglo-saxon-chronicle-founding-of-ely.html: "TA.D. 672. This year died King Cenwal; and Sexburga his queen held the government one year after him. A.D. 673. This year died Egbert, King of Kent; and the same year there was a synod at Hertford; and St. Etheldritha began that monastery at Ely…

  • Comment of the Day: Kaleberg https://www.bradford-delong.com/2019/09/comment-of-the-day-_kaleberghttpswwwbradford-delongcom201909note-to-self-_the-ten-americans-who-did-the-most-.html: "The general effect of cold war extremism was to delay rather than hasten the great change that overtook the Soviet Union by the end of the 1980s.' – George Kennan. 'The suggestion that any Administration had the power to influence decisively the course of a tremendous domestic political upheaval in another great country on another side of the globe is simply childish. No great country has that sort of influence on the internal developments of any other one.' – also George Kennan. Still, the Cold War was a wonderful piece of myth making. It was the end of history and the start of history. Novus ordo seclorum….

  • Fifteen Worthy Reads for September 6, 2018 https://www.bradford-delong.com/2019/09/fifteen-worthy-reads-for-september-6.html

  • Liveblogging: The Anglo-Saxon Chronicle: Eoppa Brings Baptism to the Isle of Wight https://www.bradford-delong.com/2019/09/liveblogging-the-anglo-saxon-chronicle-eoppa-brings-baptism-to-the-isle-of-wight.html: "A.D. 658. This year Kenwal fought with the Welsh at Pen, and pursued them to the Parret. This battle was fought after his return from East-Anglia, where he was three years in exile. Penda had driven him thither and deprived him of his kingdom, because he had discarded his sister.. A.D. 660. This year Bishop Egelbert departed from Kenwal; and Wina held the bishopric three years. And Egbert accepted the bishopric of Paris, in Gaul, by the Seine. A.D. 661. This year, at Easter, Kenwal fought at Pontesbury; and Wulfere, the son of Penda, pursued him as far as Ashdown. Cuthred, the son of Cwichelm, and King Kenbert, died in one year. Into the Isle of Wight also Wulfere, the son of Penda, penetrated, and transferred the inhabitants to Ethelwald, king of the South-Saxons, because Wulfere adopted him in baptism. And Eoppa, a mass-priest, by command of Wilfrid and King Wulfere, was the first of men who brought baptism to the people of the Isle of Wight…

  • Note to Self: The Ten Americans Who Did the Most to Win the Cold War https://www.bradford-delong.com/2019/09/note-to-self-_the-ten-americans-who-did-the-most-to-win-the-cold-war-hoisted-from-the-archiveshttpswwwbradford-de.html: Harry Dexter White… George Kennan… George Marshall… Arthur Vandenberg… Paul Hoffman… Dean Acheson… Harry S Truman… Dwight D. Eisenhower… Gerald Ford…

  • Liveblogging: The Anglo-Saxon Chronicle: Egferth and Lothere https://www.bradford-delong.com/2019/09/liveblogging-the-anglo-saxon-chronicle-egferth-and-lothere.html: "A.D. 670. This year died Oswy, King of Northumberland, on the fifteenth day before the calends of March; and Egferth his son reigned after him. Lothere, the nephew of Bishop Egelbert, succeeded to the bishopric over the land of the West-Saxons, and held it seven years. He was consecrated by Archbishop Theodore. Oswy was the son of Ethelfrith, Ethelfrith of Ethelric, Ethelric of Ida, Ida of Eoppa…

  • Sixteen Worthy Reads for August 30, 2018 https://www.bradford-delong.com/2019/09/sixteen-worthy-reads-for-august-30-2018.html

  • Grand Narrative: An Intake from Slouching Towards Utopia?: An Economic History of the Twentieth Century, 1870-2016 https://www.bradford-delong.com/2019/08/grand-narrative-an-intake-from-slouching-towards-utopia-an-economic-history-of-the-twentieth-century-1870-2016.html

  • *Liveblogging: The Anglo-Saxon Chronicle: *: Plague of Fowls https://www.bradford-delong.com/2019/08/liveblogging-the-anglo-saxon-chronicle-plague-of-fowls.html: "A.D. 671. This year happened that great destruction among the fowls…

  • DevEng 215: Pre-Class Note: Welcome! https://www.bradford-delong.com/2019/08/deveng-215-pre-class-note-welcome.html

  • American Twentieth-Century Exceptionalism: An Outtake from "Slouching Towards Utopia: An Economic History of the Long Twentieth Century 1870-2016" https://www.bradford-delong.com/2019/08/american-twentieth-century-exceptionalism-an-outtake-from-slouching-towards-utopia-an-economic-history-of-the-long-twentie.html

  • Comment of the Day: Marc Robbins https://www.bradford-delong.com/2019/08/comment-of-the-day-_marc-robbins-on-economist-james-buchananhttpswwwbradford-delongcom201905buchananhtmlcom.html: On Economist James Buchanan: "I think this falls into the "hypocrisy is the tribute vice pays to virtue" category. He's guilty enough to acknowledge that discrimination is a problem and greedy enough to clothe himself in those vestments. I think that people who follow this line are actually more vulnerable to coming around than the true believers and principled types who don't believe that in a free-market, libertarian heaven discrimination is impossible…

  • Liveblogging: The Anglo-Saxon Chronicle: Solar Eclipse https://www.bradford-delong.com/2019/08/liveblogging-the-anglo-saxon-chronicle-solar-eclipse.html: "A.D. 664. This year the sun was eclipsed, on the eleventh of May; and Erkenbert, King of Kent, having died, Egbert his son succeeded to the kingdom. Colman with his companions this year returned to his own country. This same year there was a great plague in the island Britain, in which died Bishop Tuda, who was buried at Wayleigh—Chad and Wilferth were consecrated—And Archbishop Deus-dedit died. A.D. 667. This year Oswy and Egbert sent Wighard, a priest, to Rome, that he might be consecrated there Archbishop of Canterbury; but he died as soon as he came thither. A.D. 668. This year Theodore was consecrated archbishop, and sent into Britain. A.D. 669. This year King Egbert gave to Bass, a mass-priest, Reculver—to build a minster upon…

  • Note to Self: A not atypical tankie: Paul M. Sweezy https://www.bradford-delong.com/2019/08/note-to-self-a-not-atypical-tankie-paul-m-sweezy-an-obituary-2004-_marxist-economist-paul-sweezy-is-dead-ar.html: An Obituary (2004): Marxist Economist Paul Sweezy Is Dead: Archive Entry From Brad DeLong's Webjournal: I would like Paul Sweezy to be remembered for the following passage: "The publication in 1952 of Stalin’s Economic Problems of Socialism in the USSR would make possible today a more satisfactory reply.…In the light of [Stalin’s] explanation…I would like to amend the statement which Mr. Kazahaya criticizes.…[The amended statement] conveys my meaning more accurately than the original wording and is, I think entirely in accord with Stalin’s view." (Paul Sweezy (1953): The Present as History (New York: Monthly Review Press), p. 352.) Paul Sweezy called himself an intellectual. Paul Sweezy publicly revised his opinion on an analytical issue in order to agree with the position taken by a genocidal tyrant. Fill in the blank: Paul Sweezy was a…

  • Monday Smackdown/Hoisted from 2015: John Cochrane Prostitutes Himself to Republican Politicians Department https://www.bradford-delong.com/2019/08/john-cochrane-prostitutes-himself-to-republican-politicians-department-monday-smackdownhoisted-from-2015.html: Noah Smith: "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…

  • Note to Self: Who Are the Tankies, and Why Do They Fight for Dystopia? https://www.bradford-delong.com/2019/08/who-are-the-tankies-and-why-do-they-fight-for-dystopia.html: And, of course, the curious thing is that when the chips are down it is the authoritarianism rather than the abolition of private property that is the key: Urban Dictionary: Tankie: "The term derives from the fact that the divisions within the communist movement first arose when the Soviet Union sent tanks into communist Hungary in 1956, to crush an attempt to establish an alternative version of communism which was not embraced by the Russians. Most communists outside the eastern bloc opposed this action and criticised the Soviet Union. The 'tankies' were those who said 'send the tanks in'. The epithet has stuck because tankies also supported 'sending the tanks in' in cases such as Czechoslovakia 1968, Afghanistan 1979, Bosnia and Kosovo/a (in the case of the Serbian state)…

  • Outtake from "Slouching Towards Utopia: An Economic History of the Long Twentieth Century 1870-2016: Migration 1870-1925 and International Economic Inequality https://www.bradford-delong.com/2019/08/migration-1870-1925-and-international-economic-inequalityouttake-from-slouching-towards-utopia-an-economic-history-of-the-l.html: "What did matter for inequality and upward mobility in the pre-World War I era was not trade but migration. The descendants of those who lived in Ireland at the start of the nineteenth century are, today, one of the richest groups in the world: less than half of the descendants of the Irish of 1800 live in Ireland today; instead, they are spread throughout America, Britain, and Australia, and they have prospered…

  • Bruce Springsteen: _ You Never Can Tell: For the Weekend_ https://www.bradford-delong.com/2019/08/324-bruce-springsteen-you-never-can-tell-leipzig-7713-youtube.html: YouTube: https://www.youtube.com/watch?v=L-Ds-FXGGQg

  • Twenty Worthy Reads at Equitable Growth and Elsewhere… August 23 https://www.bradford-delong.com/2019/08/twenty-worthy-reads-at-equitable-growth-and-elsewhere-august-23.html

  • Liveblogging: The Anglo-Saxon Chronicle: The Founding of Medhamsted https://www.bradford-delong.com/2019/08/liveblogging-the-anglo-saxon-chronicle-the-founding-of-medhamsted.html: "A.D. 656. This year was Peada slain; and Wulfhere, son of Penda, succeeded to the kingdom of the Mercians. In his time waxed the abbey of Medhamsted very rich, which his brother had begun. The king loved it much, for the love of his brother Peada, and for the love of his wed-brother Oswy, and for the love of Saxulf the abbot. He said, therefore, that he would dignify and honour it by the counsel of his brothers, Ethelred and Merwal; and by the counsel of his sisters, Kyneburga and Kyneswitha; and by the counsel of the archbishop, who was called Deus-dedit; and by the counsel of all his peers, learned and lewd, that in his kingdom were. And he so did…

  • Note to Self: I Want My Country Back! https://www.bradford-delong.com/2019/08/i-want-my-country-back.html: "It is a really strange situation. It has a lot of "if he were nots": If he were not president, Trump’s family would already have moved for a guardianship… If he were not so authoritarian, we would be profoundly sad that someone—hate him, love him, simply be amused by him—has been such an entertaining celebrity… And if he were not so deranged, we would be in the streets demanding the constitutional order be observed and wondering just what we should do when someone begins taking him seriously and literally when he says that the Washington Post and Catherine Rampell are the enemies of the people, when he says what we really need to do is get rid of the judges, when he says we should let the guys in the mirrored sunglasses in the security agencies do their thing. It is not an America I ever thought that I would live in, I must say… #notetoself #orangehariebaboons…

  • Hoisted from the Archives: What Is This "White" You Speak of, Kemosabe? https://www.bradford-delong.com/2019/08/what-is-this-white-you-speak-of-kemosabe.html: "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…

  • Introducing Partha Dasgupta: Economics: A Very Short Introduction https://www.bradford-delong.com/2019/08/introducing-partha-dasgupta-economics-a-very-short-introduction.html http://amzn.to/2gR2jH3: Back in 1800, nearly the entire world lived in dire poverty—what we today see as the dire poverty line of $1.90 a day, a level at which you are spending more than half your income on bare calories and essential nutrients, the minimum of heat and shelter, and the minimum of clothing. Below that line, certainly your health and perhaps your life is impacted: women become too skinny to reliably ovulate, and children become too malnourished to have healthy and effective immune systems. Back in 1800, there were only a few economies where the median household had a standard of living of more than $3 a day: Germany, France, Austria, Denmark, Belgium, Holland, Switzerland, the U.K., the U.S., and that was it. Today the median household's standard of living in the United States, Switzerland, or Singapore is 55 times that dire poverty line of $1.90 a day…

  • Project Syndicate: Brad DeLong for PS Say More https://www.bradford-delong.com/2019/08/project-syndicate-_brad-delong-for-ps-say-morehttpsus10campaign-archivecomu9116789a51839e0f88fa29b83id646c7.html: "Welcome to Say More, a new weekly newsletter that brings Project Syndicate's renowned contributors closer to readers. Each issue invites a selected contributor to expand on topics covered in their commentaries, delve into new ones, and share recommendations, offering readers exclusive insights into the ideas, interests, and personalities of the world's leading thinkers. This week, Project Syndicate catches up with Brad DeLong…

  • Liveblogging: The Anglo-Saxon Chronicle: Death of Penda https://www.bradford-delong.com/2019/08/liveblogging-the-anglo-saxon-chronicle-death-of-penda.html: "A.D. 655. This year Penda was slain at Wingfield, and thirty royal personages with him, some of whom were kings. One of them was Ethelhere, brother of Anna, king of the East-Angles. The Mercians after this became Christians. From the beginning of the world had now elapsed five thousand eight hundred and fifty winters, when Peada, the son of Penda, assumed the government of the Mercians. In his time came together himself and Oswy, brother of King Oswald, and said, that they would rear a minster to the glory of Christ, and the honour of St. Peter. And they did so, and gave it the name of Medhamsted; because there is a well there, called Meadswell. And they began the groundwall, and wrought thereon; after which they committed the work to a monk, whose name was Saxulf. He was very much the friend of God, and him also loved all people. He was nobly born in the world, and rich: he is now much richer with Christ. But King Peada reigned no while; for he was betrayed by his own queen, in Easter-tide. This year Ithamar, Bishop of Rochester, consecrated Deus-dedit to Canterbury, on the twenty-sixth day of March…

  • Jupyter Notebook: Ancient Economies: A Malthusian Model https://www.bradford-delong.com/2019/08/ancient-economies-a-malthusian-model-markdown-notebook.html: DRAFT: Ancient Economies: A Malthusian Model : The math for complicating the standard Solow Growth Model with (a) a rate of population growth that depends positively on the excess of spending on necessities above "subsistence" and (b) a level of the efficiency-of-labor that depends inversely on population, as a higher population induces resource scarcity that makes labor less productive. For understanding both the long-term apparent stagnation of living standards between the Neolithic and the Industrial Revolutions, and for understanding the rise and fall of ancient civilizations. Question: How should we add on to the Python class for the Solow Growth Model to turn this into a tool for doing problem sets for Econ 101b (and perhaps 135): https://nbviewer.jupyter.org/github/braddelong/LS2019/blob/master/2019-08-17-Ancient_Economies.ipynb

  • Jupyter Notebook: A Competitive Market: Python Class https://www.bradford-delong.com/2019/08/a-competitive-market-python-classnotebook.html: DRAFT: A Competitive Market: A Python class for a competitive market equilibrium with linear supply and demand curves—equilibrium price, equilibrium quantity, producer surplus, consumer surplus, total surplus. Looks for input parameters giving the slopes of the demand and supply curves, plus the maximum willingness-to-pay of the most eager demander and the minimum opportunity cost of the most efficient supplier. Now ready to hand over to others for editing, tightening, and additions: https://nbviewer.jupyter.org/github/braddelong/LS2019/blob/master/2019-08-10_market.ipynb

  • Jupyter Notebook: Solow Growth Model: Python Class https://www.bradford-delong.com/2019/08/solow-growth-model-python-classnotebook.html: CANDIDATE: Solow Growth Model Derived and modified from Stachurski-Sargent http://quantecon.org. A Python class for simulations using the Solow Growth Model, with additional code for performing simulations with baseline- and alternative-scenario parameter values. Focuses on the capital-output ratio κ as the key state variable, as it is (a) observable, and (b) with constant growth-model parameter values converges exactly (in continuous time at least) as an exponential. Now ready to hand over to others for tightening and additions: https://nbviewer.jupyter.org/github/braddelong/LS2019/blob/master/2019-08-08-Sargent-Stachurski.ipynb

  • Weekly Forecasting Update: August 16, 2019 https://www.bradford-delong.com/2019/08/august-16-2019-weekly-forecasting-update.html: The market has now delivered 100 basis points of easing in the ten-year Treasury window since the end of last October. On the 30-year bond, you would have made a 20% profit if you both it last October and sold it today, compared to a 3.5% profit on the S&P Composite over the same period. That is a major, major sentiment shift. That means that a number of people short debt with riskier operations than the S&P Composite are about to face margin calls and rollover difficulties. We will shortly see how solvent the market judges them. Meanwhile, There was essentially no news about real GDP last week: The Federal Reserve Bank of New York nowcast stands at 1.8% for 2019:Q3…

  • Worthy Reads at Equitable Growth and Elsewhere… August 16, 2018 https://www.bradford-delong.com/2019/08/twenty-worthy-reads-at-equitable-growth-and-elsewhere-august-16.html

  • Liveblogging: The Anglo-Saxon Chronicle: Conversion of the Middle-Angles https://www.bradford-delong.com/2019/08/liveblogging-the-anglo-saxon-chronicle-conversion-of-the-middle-angles.html: "A.D. 652. This year Kenwal fought at Bradford by the Avon. A.D. 653. This year, the Middle-Angles under alderman Peada received the right belief. A.D. 654. This year King Anna was slain, and Botolph began to build that minster at Icanhoe. This year also died Archbishop Honorius, on the thirtieth of September…

  • Looking Backwards from This Week at 24, 16, 8, 4, 2, 1, 1/2, and 1/4 Years Ago (August 7-August 13, 2019) https://www.bradford-delong.com/2019/08/looking-backwards-from-this-week-at-24-16-8-4-2-1-12-and-14-years-ago-august-7-august-13-2019.html: 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…


#noted #weblogs



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Economy

The Fama Puzzle at 40

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Fama (JME, 1984) was published 35 years ago, but the earlier — perhaps the earliest — appearance of the Fama regression is in Tryon (1979). While the puzzle has largely persisted since then, it has seemingly disappeared since the global financial crisis.

Figure 1: Ex post one year depreciation of euro/dollar up to 2007M08 against one year offshore US-euro interest differential (up to 2006M08). 

Recall the puzzle: If the joint hypothesis of uncovered interest rate parity (UIP) and rational expectations –- sometimes termed the unbiasedness hypothesis — held, then the slope of the regression lines (in red) would be indistinguishable from unity. In fact, they are significantly different from that value. This pattern of coefficient reversal holds up for other dollar-based exchange rates, as well as for other currency pairs (with a couple exceptions). The fact that the coefficient is positive in the post-global financial crisis period is what we term “the New Fama puzzle”.

Interestingly, after 2006, the relationship flips.

Figure 2: Ex post one year depreciation of eur/dollar up to 2019M06 against one year offshore US-euro area interest differential (up to 2018M06). 

In a revision to NBER working paper just released (No. 24342, posted 12/11), coauthored with Matthieu Bussière (Banque de France), Laurent Ferrara (SKEMA Business School), Jonas Heipertz (Paris School of Economics), we re-examine uncovered interest parity – the proposition that anticipated exchange rate changes should offset interest rate differentials, with data up to mid-2019.

This is one of the most central concepts in international finance. At the same time, empirical validation of this concept has proven elusive. In fact, the failure of the joint hypothesis of uncovered interest rate parity (UIP) and rational expectations – sometimes termed the unbiasedness hypothesis – is one of the most robust empirical regularities in the literature, vigorously examined since Fama’s (1984) finding that interest rate differentials point in the wrong direction for subsequent ex-post changes in exchange rates.

The most commonplace explanations – such as the existence of an exchange risk premium, which drives a wedge between forward rates and expected future spot rates – have some empirical verification, albeit fragile.

One key development prompts this revisit. First and foremost, the last decade includes a period in which short rates have effectively hit the zero interest rate bound. This point is clearly illustrated in Figure 1 where we plot one-year interest rates for a set of eight selected economies and the US. This development affords us the opportunity to examine whether the Fama puzzle is a general phenomenon or one that is regime-dependent.

Figure 3: One year yields on Eurocurrency deposits.

As shown in Figure 3, more recently — and since the first version of this paper — short rates in the US have risen above the zero lower bound. This allows us to test to the robustness of our findings.

We obtain the following findings. First, Fama’s result is by and large replicated in regressions for the full sample, ranging from 1999 to June 2018 (for exchange rate changes ending in June 2019). However, the results change if the sample is truncated to apply to only the most recent decade, the period for which interest rates are essentially at zero. For that period, interest differentials correctly signal the right direction of subsequent exchange rate changes, but with a magnitude that is altogether not reconcilable with the arbitrage interpretation of UIP. In other words, we obtain positive coefficients at exactly a time of high risk when it would seem less likely that UIP would hold.

The use of survey based expectations — thereby dropping the rational expectations hypothesis — data provides the following insights. First, interest differentials and anticipated exchange rate changes are positively correlated, consistent with the proposition that investors tend to equalize at least partially expected returns expressed in common currency terms (see also Chinn and Frankel (2019) for results 1986-2017).

Second, the switch in the β coefficient at the one year horizon arises because the correlation of expectations errors (defined as expected minus actual) and interest differentials changes substantially between pre- and post-crisis periods. This is important, as can be seen by examining the probability limit of the β’ coefficient in a Fama regression:

s+1 – s = α’ + β'(i-i*) + error

so:

plim(β’) = 1 – [A] – [B] – [C]

Where

[A] ≡ cov(covered interest diff.,i-i*)/var(i-i*)
[B] ≡ cov(risk premium, i-i*)/var(i-i*)
[C] ≡ cov(forecast error, i-i*)/var(i-i*)

covered interest differential = – [(f – s) – (i-i*)]
risk premium = f – ε(s+1)
forecast error = ε(s+1) – s
f is the forward rate for period +1
s is the current spot exchange rate
ε(s+1) is subjective market expectations of the future spot exchange rate (proxied using Consensus Forecasts survey data).

The decomposition for the euro/dollar β’ is shown in the Figure 4 below, for the 2003M01-2018M06 period (defined by the survey data). The components are shown as theoretical β’ + [-A] + [-B] + [-C], so as to add up to the estimated β’.


Figure 4: Decomposition of euro/dollar β’. [A] is brown, [B] is blue, [C] is green; black square denotes estimated β’, line at 1 denotes theoretical β’ under unbiasedness hypothesis. Source: BCFH (2019).

Exchange risk comovement with the interest differential does not appear to be the primary reason why the Fama coefficient has been so large in recent years (although the altered behavior of exchange risk does play a role). Rather, how expectations errors comove with the interest differential appears of central importance — that is the [C] component. This correlation changes because in the pre-crisis period, the dollar depreciated more than anticipated, while that is no longer true post-crisis. The size of the swing is partly due to the fact that interest differentials are now less variable (the variance has shrunk).

So far the change has proved durable despite the liftoff of short rates — at least in the US, Canada and UK. Whether this will continue to be the case remains to be seen.

Ungated version of the paper, here.



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Economy

Bonus Quotation of the Day…

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… is from page 426 of the late Jan Tumlir’s January 1984 speech at the Cato Institute – a speech titled “Economic Policy for a Stable World Order” – as this speech is reprinted in Dollars, Deficits, & Trade (James A. Dorn and William A. Niskanen, eds., 1989):

Indeed the difficulty for the economist may now lie in explaining why the world economy still functions at all, however dissatisfied we may be with its functioning. The answer is, of course, that there is a lot of ruin in any economy with a modicum of freedom. I am sometimes unsure whether it is actually an advantage of the capitalist system that it can take such an enormous amount of beating. If it were in the habit of collapsing more frequently, we would perhaps govern ourselves more prudently (and more cheaply to boot).

DBx: Indeed.

I’ve long argued that the economist’s standard assertion that government intervenes into the economy first and foremost to correct market failures fails spectacularly as a positive theory of government intervention into the economy. It’s far closer to the truth to say that government intervention into the economy is fueled not by market failures (as understood by economists) but, rather by the market’s astonishing success and robustness.

The market’s success at raising people’s standards of living creates the expectation that wealth creation is easy and normal while poverty is out of the ordinary. But of course historically poverty is the norm – and poverty so deep, unrelenting, and overwhelming that few Americans today can begin to imagine a condition so crushing. Because the market makes wealth so abundant and its production appear to be normal and easy to the point of being practically automatic – and because nearly all of the massive number of details of the intricate processes at work at every moment to create wealth are hidden from view – the market’s ‘failure’ to create heaven on earth is believed by many to be an unanswerable indictment of the market.

On top of this ‘problem’ is the market’s mighty robustness: tax it, saddle it with diktats, poison it with easy money, accuse it of being run by and for demons and devils, and the market keeps motoring along, improving the lives even of those who most hate it and who do the most to harass it. The market works less well than it would absent these intrusions, of course, but it still works surprisingly well. As long as, and insofar as, prices and wages are allowed to adjust according to the forces of supply and demand, the market’s robustness is Herculean. (The market is not, however, indestructible. Harass it too much and it will quit working.)

If the market truly collapsed completely more often, giving people a taste of what life is like without it, the world would have in it not only far fewer communists and socialists, but also far fewer “Progressives” and “conservative nationalists.”

The market’s true failure, in short, lies is its incredible capacity to succeed and to keep on keeping on. The market fails to prevent people from taking it for granted.

The post Bonus Quotation of the Day… appeared first on Cafe Hayek.



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Economy

Market Talk – December 12, 2019

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ASIA:

According to reports from Reuters, China is trying to propose a plan to promote Macau to be its next “Hong Kong” by building it into a world-leading financial center. China unveiled plans of creating a yuan-denominated stock exchange, as well as allocating extra land to Macau for it to grow. The region was a former Portuguese colony and will target companies from Portuguese speaking countries such as Brazil in order to avoid direct competition with China and the mainland.

Indian Parliament passed Citizenship Amendment Bill on 11-Dec-2019, which proposes to accord citizenship to illegal Hindu, Sikh, Buddhist, Jains, Parsis and Christian migrants from Pakistan, Bangladesh and Afghanistan. It, naturally, implies that migrants, who identify themselves with any group or community other than those mentioned above, from these countries won’t be eligible for citizenship. The bill also relaxes the provisions for “Citizenship by naturalization.” The proposed law reduces the duration of residency from the existing 11 years to just five years for people belonging to the same six religions and three countries. The bill covers six communities namely Hindu, Sikh, Buddhists, Jains, Parsis and Christian migrants from Pakistan, Bangladesh and Afghanistan.

The Indian government has prohibited gift imports through e-commerce portals except life-saving drugs and rakhi. The import of goods was earlier free and not subject to customs duties. The move will impact Chinese e-commerce web sites like Club Factory, Ali Express and Shein who are the largest users of this route.

The US reprimanded Pakistan Air Force chief for misusing F-16 fighter jets by undermining their shared security platforms and infrastructures months after the Indian Air Force shot down an F-16 jet of Pakistan Air Force during an aerial combat over Kashmir. Andrea Thompson, the then-undersecretary of State for Arms Control and International Security Affairs, wrote a letter to Pakistani Air Force Chief Air Chief Marshal Mujahid Anwar Khan in August over the matter.

The major Asian stock markets had a mixed day today:

  • Shanghai decreased 8.72 points or -0.30% to 2,915.70
  • Kospi increased 31.73 points or 1.51% to 2,137.35
  • ASX 200 decreased 43.80 points or -0.65% to 6,708.80
  • NIKKEI 225 increased 32.95 points or 0.14% to 23,424.81
  • Hang Seng increased 348.71 points or 1.31% to 26,994.14
  • SENSEX increased 169.14 points or 0.42% to 40,581.71

The major Asian currency markets had a mixed day today:

  • AUDUSD increased 0.00241 or 0.35% to 0.68931
  • NZDUSD increased 0.00003 or 0.00% to 0.65823
  • USDJPY increased 0.5860 or 0.54% to 109.1310
  • USDCNY decreased 0.04597 or -0.65% to 6.98293

Precious Metals:

  • Gold decreased 5.54 USD/t oz. or -0.38% to 1,470.81
  • Silver increased 0.013 USD/t. oz or 0.08%% to 16.9207

Some economic news from last night:

Singapore:

Unemployment Rate (Q3) remain the same at 2.3%

Japan:

Core Machinery Orders (MoM) (Oct) decreased from -2.9% to -6.0%

Core Machinery Orders (YoY) (Oct) decreased from 5.1% to -6.1%

Foreign Bonds Buying increased from -511.1B to 235.8B

Foreign Investments in Japanese Stocks decreased from 394.0B to -200.4B

Australia:

MI Inflation Expectations remain the same at 4.0%

New Zealand:

External Migration & Visitors (Oct) decreased from 1.40% to 0.10%

FPI (MoM) (Nov) decreased from -0.3% to -0.7%

Permanent/Long-Term Migration (Oct) decreased from 4,290 to 4,120

Visitor Arrivals (MoM) increased from -0.1% to 0.0%

Some economic news from today:

Singapore:

Retail Sales (MoM) (Oct) decreased from 2.0% to -2.2%

Retail Sales (YoY) (Oct) decreased from -2.1% to -4.3%

India:

CPI (YoY) (Nov) increased from 4.62% to 5.54%

Cumulative Industrial Production (Oct) decreased from 1.30% to 0.50%

Industrial Production (YoY) (Oct) increased from -4.3% to -3.8%

Manufacturing Output (MoM) (Oct) increased from -4.0% to -2.1%

EUROPE/EMEA:

UK elections went underway today, with still the outcome being unpredictable. The election results will be counted out in the morning. Yesterday, both Labour and Conservatives gave their final pitches with PM Boris Johnson saying his side was the only side who can bring Brexit forward.

France is gearing up for another round of strikes tomorrow over the proposed reforms of the pension plan and age of retirement.

According to the WSJ, Saudi Arabia is seeking to defuse the situation with Iran, with the Pakistani FM acting as a mediator between the two.

The US senate comittee has now officially signed off a bill which places sanctions on Turkey over thier recent purchase of the S-400 missile defense system.

The major Europe stock markets had a green day today:

  • CAC 40 increased 23.39 points or 0.40% to 5,884.26
  • FTSE 100 increased 57.22 points, or 0.79% to 7,273.47
  • DAX 30 increased 74.90 points or 0.57% to 13,221.64

The major Europe currency markets had a mixed day today:

  • EURUSD decreased 0.00204 or -0.18% to 1.11126
  • GBPUSD decreased 0.00821 or -0.62% to 1.31169
  • USDCHF increased 0.00346 or 0.35% to 0.98606

Some economic news from Europe today:

UK:

Thomson Reuters IPSOS PCSI (Dec) increased from 47.8 to 48.5

RICS House Price Balance (Nov) decreased from -6% to -12%

Germany:

Germany Thomson Reuters IPSOS PCSI (Dec) decreased from 53.55 to 53.43

German CPI (YoY) (Nov) remain the same at 1.1%

German CPI (MoM) (Nov) decreased from 0.1% to -0.8%

German HICP (YoY) (Nov) increased from 0.9% to 1.2%

German HICP (MoM) (Nov) decreased from 0.1% to -0.8%

Swiss:

SNB Interest Rate Decision remain the same at -0.75%

PPI (YoY) (Nov) decreased from -2.4% to -2.5%

PPI (MoM) (Nov) decreased from -0.2% to -0.4%

France:

France Thomson Reuters IPSOS PCSI (Dec) decreased from 43.69 to 42.49

French CPI (YoY) increased from 0.8% to 1.0%

French CPI (MoM) (Nov) decreased from 0.0% to -0.1%

French HICP (YoY) (Nov) increased from 0.9% to 1.2%

French HICP (MoM) (Nov) increased from -0.1% to 0.1%

Italy:

Italian Quarterly Unemployment Rate decreased from 9.9% to 9.8%

Italy Thomson Reuters IPSOS PCSI (Dec) increased from 38.88 to 40.11

Euro Zone:

Industrial Production (YoY) (Oct) decreased from -1.8% to -2.2%

Industrial Production (MoM) (Oct) decreased from -0.1% to -0.5%

Deposit Facility Rate (Dec) remain the same at -0.50%

ECB Marginal Lending Facility remain the same at 0.25%

ECB Interest Rate Decision (Dec) remain the same at 0.00%

US/AMERICAS:

The US-China trade deal is close to completion, according to President Trump. “Getting VERY close to a BIG DEAL with China. They want it, and so do we!” he posted this Thursday. CNBC reported that US negotiators are ready to cancel the new tariffs and cut existing tariffs by 50% ($360 billion). With only three days left before the US imposes an additional $156 billion on Chinese goods, time is of the essence.

Bank of Canada Governor Stephen Poloz sees Canada’s economy expanding in the new year at a steady. Last week, the central bank voted to maintain the target rate at 1.75% where it has remained for over a year. Growing government debt, not just in Canada, is one of Poloz’s main concerns. “Experience shows that high debt levels can amplify the impact of a shock on the economy,” the governor stated. Poloz expressed concerns over global trade as well, stating that companies are dismantling supply chains in favor of cheaper, less effective, options.

Canada’s Conservative Party Leader Andrew Scheer resigned this Thursday. Scheer’s resignation comes after it was revealed that he used Conservative Party funds to pay for his children to attend private school. Dustin van Vugt, executive director of the party, may be forced to resign as well for similar reasons.

Brazil’s central bank voted in favor of dropping the target rate to 4.5%. “Essential conditions for sustained growth were laid down in 2019. Brazil is ready for a new development cycle,” stated Waldery Rodrigues, special secretary to Brazil’s Economy Ministry. Brazil certainly amped up efforts to build business, attract foreign and domestic capital, lower the debt ceiling, and solve the ongoing pension crisis. However, the pension dilemma is ongoing as are domestic conflicts such as the Amazon wildfires. Unemployment remains high at 11.6%, but is expected to decline in the new year. The government cited optimism about continued economic growth and predicts GDP to rise to 2.3% in 2020.

US Market Closings:

  • Dow advanced 220.75 points or 0.79% to 28,132.75
  • S&P 500 advanced 26.94 points or 0.86% to 3,168.57
  • Nasdaq advanced 63.27 points or 0.73% to 8,717.32
  • Russell 2000 advanced 12.89 points or 0.79% to 1,644.81

Canada Market Closings:

  • TSX Composite advanced 7.29 points or 0.04% to 16,946.90
  • TSX 60 advanced 1.56 points or 0.15% to 1,012.93

Brazil Market Closing:

  • Bovespa advanced 1,235.87 points or 1.11% to 112,199.74

ENERGY:

The IEA report was released this week which was contrary to the OPEC optimism for demand.

The oil markets had a green day today:

  • Crude Oil increased 0.4992 USD/BBL or 0.85% to 59.3943
  • Brent increased 0.4959 USD/BBL or 0.78% to 64.3858
  • Natural gas increased 0.0381 USD/MMBtu or 1.68% to 2.3095
  • Gasoline increased 0.0032USD/GAL or 0.20% to 1.6422
  • Heating oil increased 0.0141 USD/GAL or 0.73% to 1.9477
  • Top commodity gainers: Wheat(2.16%),Steel(13.28%),Ethanol(1.90%), and Natural Gas(1.68%)
  • Top commodity losers: Cocoa(-9.37%), Oat(-5.03%), Baltic Dry (-4.93%), and Orange Juice(-0.97%)

The above data was collected around 12:40 EST on Thursday.

BONDS:

Japan -0.02%(-2bp), US 2’s 1.63% (+2bps), US 10’s 1.88%(+9bps);US 30’s 2.24%(+2bps), Bunds -0.32% (-0bp), France 0.03% (-1bp), Italy 1.34% (+2bp), Turkey 12.10% (-8bp), Greece 1.39% (-61bp), Portugal 0.41% (+5bp), Spain 0.47% (+4bp) and UK Gilts 0.82% (+5bp).

  • US 30-Year Bond Auction decreased from 2.430% to 2.307%
  • US 4-Week Bill Auction increased from 1.500% to 1.540%
  • US 8-Week Bill Auction increased from 1.520% to 1.540%

 



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