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Preview: Grasping Reality with Opposable Thumbs

Grasping Reality with My Left Hand, My Right Hand, and My Gripping Hand: bradford-delong.com:





Updated: 2017-07-23T20:19:19-07:00

 




2017-07-09T20:20:05-07:00

Highlighted Teaching Reading, Videos, etc. ---- ### **Fairly Recent Must- and Shoulds:** 1. **Anatole Kaletsky**: A “Macroneconomic” Revolution?: "Given the abundance of useful ideas, why have so few of the policies that might have ameliorated economic conditions and alleviated public resentment been implemented since the crisis?... 2. **Doug Elmendorf et al.**: Letter from Former CBO Directors on the Importance of CBO’s Role in the Legislative Process: "The undersigned represent every former Director of the Congressional Budget Office (CBO)... 3. **Timothy Garton Ash** (2007): The Road from Danzig: "The offense is that [Guenter Grass] should for so many years have made it his stock-in-trade to denounce post-war West Germans’ failure to face up to the Nazi past... 4. **Ryan Avent**: Making Monetary Policy Great Again: "Obama’s response to the economic crisis... the timidity of his stimulus plan... his failure to provide broad support to struggling homeowners... his premature pivot to deficit cutting... 5. **Cosma Shalizi** (2006): Accents, Heritability, Measured IQ, the Flynn Effect, and Intelligence: ">Q: Would you put on your right-thinking left-liberal educated-in-Berkeley-and-Madison hat for a moment?... 6. **Noah Smith** (2011): Noahpinion: The liberty of local bullies: "I have not been surprised by any of the quotes that have recently... Highlighted Teaching Reading, Videos, etc. http://www.bradford-delong.com/highlighted.html Fairly Recent Must- and Shoulds: Anatole Kaletsky: A “Macroneconomic” Revolution?: "Given the abundance of useful ideas, why have so few of the policies that might have ameliorated economic conditions and alleviated public resentment been implemented since the crisis?... https://www.project-syndicate.org/commentary/replacement-market-fundamentalism-by-anatole-kaletsky-2017-07 Doug Elmendorf et al.: Letter from Former CBO Directors on the Importance of CBO’s Role in the Legislative Process: "The undersigned represent every former Director of the Congressional Budget Office (CBO)... https://medium.com/@douglas.elmendorf/letter-from-former-cbo-directors-on-the-importance-of-cbos-role-in-the-legislative-process-278863b7e1c6 Timothy Garton Ash (2007): The Road from Danzig: "The offense is that [Guenter Grass] should for so many years have made it his stock-in-trade to denounce post-war West Germans’ failure to face up to the Nazi past... http://www.nybooks.com/articles/2007/08/16/the-road-from-danzig/ Ryan Avent: Making Monetary Policy Great Again: "Obama’s response to the economic crisis... the timidity of his stimulus plan... his failure to provide broad support to struggling homeowners... his premature pivot to deficit cutting... http://democracyjournal.org/magazine/45/making-monetary-policy-great-again/ Cosma Shalizi (2006): Accents, Heritability, Measured IQ, the Flynn Effect, and Intelligence: ">Q: Would you put on your right-thinking left-liberal educated-in-Berkeley-and-Madison hat for a moment?... http://delong.typepad.com/egregious_moderation/2007/07/cosma-shalizi-a.html Noah Smith (2011): Noahpinion: The liberty of local bullies: "I have not been surprised by any of the quotes that have recently come to light from Ron Paul's racist newsletters. I grew up in Texas, remember... http://noahpinionblog.blogspot.jp/2011/12/liberty-of-local-bullies.html Fairly Recent Links: Noah Smith: Redlining Never Went Away: "New research shows that discriminatory lending holds down housing values, hurting black wealth accumulation..." https://www.bloomberg.com/amp/view/articles/2017-07-19/redlining-never-went-away Dylan Matthews: The 2 most popular critiques of basic income are both wrong: "Both the work critique and the cost critique, as cases against the idea of any sort of guaranteed cash grant, fail. They might be hel[...]




2017-07-21T19:36:28-07:00

**Should-Read: Doug Elmendorf et al.**: Letter from Former CBO Directors on the Importance of CBO’s Role in the Legislative Process: "The undersigned represent every former Director of the Congressional Budget Office (CBO)... >...We write to express our strong objection to recent attacks on the integrity and professionalism of the agency and on the agency’s role in the legislative process.... Over the past 42 years CBO has been firmly committed to providing nonpartisan and high-quality analysis—and that commitment remains as strong and effective today as it has been in the past. Because CBO works for the Congress, and only the Congress, the agency’s analysis addresses the unique needs of legislators. To meet the standard of nonpartisan objectivity, CBO makes no recommendations about policy, regularly consults with researchers and practitioners with a wide range of views (as can be seen in the agency’s panels of advisers and reviewers for major studies), and enhances its transparency by releasing extensive descriptions of its analytic techniques and forecast record. To produce estimates of high quality, CBO uses its detailed understanding of federal programs and economic conditions, ongoing interactions with government officials and private-sector experts, the best academic research, and the latest available data consistent with...




2017-07-21T12:16:16-07:00

**Must-Read: Ryan Avent**: Making Monetary Policy Great Again: "Obama’s response to the economic crisis... the timidity of his stimulus plan... his failure to provide broad support to struggling homeowners... his premature pivot to deficit cutting... >...While Roosevelt’s New Deal programs left an indelible mark on the American economy and society, it was his decisive monetary action that saved America from continuing depression. On just his third day... Roosevelt declared a bank holiday... suspended... the... gold standard... a policy of reflation. The economic response was immediate.... Obama would not pursue any comparably radical policy.... His Administration left the hard work of rehabilitating the economy to the Federal Reserve, while the federal government turned to deficit reduction.... >The decades prior to the crisis taught political leaders that economic management was the Fed’s job, one it could handle ably. Experience since the financial crisis strongly suggests that assumption was mistaken. It should not have taken six years to return the unemployment rate to the pre-crisis level, nor should so much of the reduction in unemployment have come in the form of frustrated workers leaving the labor force. American incomes should not have been allowed to fall below the pre-crisis trend, and at least...




2017-07-21T12:08:31-07:00

**Live from the Orange-Haired Baboon Cage**: Bradd Jaffy sends us to White House Communications Director Anthony Scaramucci's opinion of Donald Trump: >[Donald Trump] is just another hack politician. That's another hack politician. He's just a hack politician. [Donald Trump] is probably going to make Elizabeth Warren his Vice Presidential nominee, with comments like that. It's anti-American [for him to criticize hedge funds]. It's very divisive. >I can tell you what he's going to be president of—you can tell Donald I said this—the Queens County Bowling Association. You have to cut it out now. Stop all this crazy rhetoric. >I don't like the way he talks about women. I don't like the way he talks about our friend Megan Kelly. You know what? The politicians don't want to go at Donald Trump because he has a big mouth, and they are afraid he is going to light them up on Fox News. >But I'm not a politician. >You are an inherited money dude from Queens County! Bring it, Donald! Bring it! An inherited money dude from Queens County! >Q: Do you think Walker will do attack ads against [Donald Trump]? >I don't. I think that Walker is a smart guy and...



Spicey go bye-bye / Boing Boing

2017-07-21T11:45:35-07:00

**Live from the Orange-Haired Baboon Cage**: WTFF!?!?!?!? **Xeni Jardin**: Spicey go bye-bye: "Sean Spicer has resigned as President Donald Trump's communications director, and he doesn't like his replacement. From The New York Times... >...Sean Spicer, the White House press secretary, resigned on Friday morning, telling President Trump he vehemently disagreed with the appointment of New York financier Anthony Scaramucci as communications director. Mr. Trump offered Mr. Scaramucci the job at 10 a.m. The president requested that Mr. Spicer stay on, but Mr. Spicer told Mr. Trump that he believed the appointment was a major mistake, according to person with direct knowledge of the exchange. >We'll always have Melissa McCarthy.



A Teaching Note on Barro's (2005) "Rare Events and the Equity Premium" and Rietz's (1988) "The Equity Premium: A Solution"

2017-07-21T11:03:17-07:00

**J. Bradford DeLong** (2007): A Teaching Note on Barro's (2005) "Rare Events and the Equity Premium" and Rietz's (1988) "The Equity Premium: A Solution" : Robert Barro should have called his 2005 "Rare Events and the Equity Premium" paper something like "Rare Events and the Low Riskfree Rate" instead... Barro's paper follows Rietz (1988) and uses the possibility of future disastrous falls in economy-wide consumption and in payouts on equities to explain the high premium equity return relative to bonds, and the low real return on bonds as well. The primary channel is not what you probably think: it is not that the fear of future catastrophe depresses the price and hence raise the in-sample--we here in the United States haven't seen the real catastrophes the lurk out there--average return to equities. The primary channel is that fear of future catastrophe raises desired savings to carry purchasing power forward in time in case of need. But, since assets are in fixed supply in the Lucas-tree model Barro uses, this outward shift in savings demand drives the prices of real bonds up and the returns on real bonds down. It also--for risk-aversion parameters greater than one--drives the prices up and the...




2017-07-21T10:51:25-07:00

**Should-Read: Pedro Nicolaci da Costa**: Ex-Bank of England official says Fed has wrong idea on jobs, inflation: "**The Fed's misleading view of the job market reflects 'a huge intellectual failure'**... >...That's the view of David Blanchflower.... "Prior to 2008, the unemployment rate was a sufficient statistic to tell you about the labor market," Blanchflower said. "The employment rate was mirror image." Today, however, "a cyclical decline in demand means the unemployment rate has fallen but the employment rate has not recovered to precrisis levels," he said. In other words, the economy is still too weak to sustain full employment, and policymakers are not doing enough about it. Explaining the gap are high levels of long-term unemployment and severe underemployment, in addition to persistent racial disparities in job availability and incomes.... >"This is a huge intellectual failure," said Blanchflower.... The same inflation hawks within and outside the central bank have been warning about imminent inflation for years, Blanchflower said, only to be proved wrong time and again: "It's really here, it's really coming, it's really coming, inflation is right around the corner." Indeed, it never has. US inflation continues to undershoot the Fed's 2% target, and it is in fact moving...




2017-07-21T10:47:53-07:00

**Should-Read: Cosma Shalizi** (2006): Accents, Heritability, Measured IQ, the Flynn Effect, and Intelligence: ">Q: Would you put on your right-thinking left-liberal educated-in-Berkeley-and-Madison hat for a moment?... >...A: I'd find nothing easier. (You left out the dirty hippy progressive Montessori school where they taught me Pirandello and Diderot.) >Q: Very good. (It didn't fit the rhythm, and anyway they get the picture.) How would you react to the idea that a psychological trait, one intimately linked to the higher mental functions, is highly heritable? >A: With suspicion and unease, naturally. >Q: It's strongly correlated with educational achievement, class and race. >A: Worse and worse. >Q: Basically nothing that happens after early adolescence makes an impact on it; before that it's also correlated with diet. >A: Do you work at the Heritage Foundation? Such things cannot be. >Q: What if I told you the trait was accent? >A: I'm sorry? >Q (in a transparently fake California accent): When you, like, say words differently than other people? who speak, like, the same language? because that's how you, you know, learned to say them from people around you? >A: Do you have a point to make, or are you just yanking my chain? >Q:...




2017-07-21T10:42:52-07:00

**Must-Read: Timothy Garton Ash** (2007): The Road from Danzig: "The offense is that [Guenter Grass] should for so many years have made it his stock-in-trade to denounce post-war West Germans’ failure to face up to the Nazi past... >...while himself so spectacularly failing to come clean about... his own Nazi past. One painfully disappointed reaction comes from his most recent biographer, Michael Jürgs.... This is not merely “keeping quiet”.... I’d say it counts as lying. What’s more, if a conservative German politician had behaved like this, Grass himself would surely have called it lying, adding a few earthy adjectives to boot. >Worse still, knowing full well his own biography, he nonetheless denounced the joint visit by Ronald Reagan and Helmut Kohl to a cemetery in Bitburg in 1985 where, among many war dead, forty-nine Waffen-SS soldiers were buried. Of the forty-nine, thirty-two were under twenty-five years old. The youngest among them may well have been drafted like Günter Grass. He could have been one of them. To denounce the Bitburg visit without acknowledging that he himself had served in the Waffen-SS was an act of breathtaking hypocrisy, doublethink, and recklessness. >Even more than outrage, there is sheer amazement.... When interviewers...




2017-07-21T10:40:33-07:00

**Must-Read: Anatole Kaletsky**: A “Macroneconomic” Revolution?: "Given the abundance of useful ideas, why have so few of the policies that might have ameliorated economic conditions and alleviated public resentment been implemented since the crisis?... >...The first obstacle has been the ideology of market fundamentalism. Since the early 1980s, politics has been dominated by the dogma that markets are always right and government economic intervention is almost always wrong.... Market fundamentalism also inspired dangerous intellectual fallacies: that financial markets are always rational and efficient; that central banks must simply target inflation and not concern themselves with financial stability and unemployment; that the only legitimate role of fiscal policy is to balance budgets, not stabilize economic growth. Even as these fallacies blew up market-fundamentalist economics after 2007, market-fundamentalist politics survived, preventing an adequate policy response to the crisis. >That should not be surprising. Market fundamentalism was not just an intellectual fashion. Powerful political interests motivated the revolution in economic thinking of the 1970s. The supposedly scientific evidence that government economic intervention is almost always counter-productive legitimized an enormous shift in the distribution of wealth, from industrial workers to the owners and managers of financial capital, and of power, from organized labor to...



Ten Years Ago on Grasping Reality: July 19-21, 2007

2017-07-21T07:43:52-07:00

**Worth Highlighting**: The puzzle about just how and why the brain eater ate Clive Crook's brain—how it was that, starting about a decade ago, one of the most interesting (and intelligent) of the Tories simply lost his grip on reality—remains, to me at least, a mystery. Here is my reaction to one of the first signs of the brain-eating: * Clive Crook vs. The Populist Democratic Politicians ---- **The Full List:** * Twenty-Three Links for 2007-07-22 : Hilzoy: **Media Morons On Parade**: "This has been a particularly loopy day for the media. I learned, to my amazement, that Hillary Clinton has breasts the _Washington Post has the journalistic standards of a dung beetle_..." * Andrew Sullivan Is Trying to Give Me Nightmares... * Jim Fallows Recommends Chuck Ferguson's Movie, "No End in Sight: The American Occupation of Iraq" * Ezra Klein on Video, and Health Care too * Take Me to the River... * Sources of Lifetime Inequality * General Petraeus Has to Decide Who He Works For * Mitt Romney Jumps the Shark * Oliver Willis Cannot Believe that the Washington Post Exists * We Have Succumbed to the iPhone! * Will Severus Snape Die Well? Or Die Badly?...



Hoisted from 2007: Clive Crook vs. "Populist" Democrats: The Brain-Eater Surfaces

2017-07-21T07:38:04-07:00

The puzzle about just how and why the brain eater ate Clive Crook's brain—how it was that, starting about a decade ago, one of the most interesting (and intelligent) of the Tories simply lost his grip on reality—remains, to me at least, a mystery. Here I am hoisting from one of the first full-blown signs of it in 2007. A little background: By 2008 the brain-eating was overwhelming. For example we had Clive Crook on the "huge success" of the nomination of Sarah Palin—meaning, that is, that she was highly qualified to be Vice President and would attract lots of new votes to the McCain-Palin ticket: **Clive Crook** (2008): Democrats must learn some respect: "The problem in my view is less Mr Obama and more the attitudes of the claque of official and unofficial supporters that surrounds him... >...If only the Democrats could contain their sense of entitlement to govern in a rational world, and their consequent distaste for wide swathes of the US electorate, they might gain the unshakeable grip on power they feel they deserve.... But the fathomless cultural complacency of the metropolitan liberal rules this out. The attitude that expressed itself in response to the Palin nomination...



Reading Notes for Robert Skidelsky: "Keynes: A Very Short Introduction"...

2017-07-19T12:32:50-07:00

**John Maynard Keynes**: John Maynard Keynes was brought up a classical liberal and a classical economist. He believed in free trade, economic progress, cultural uplift, and political reason. He then found himself working for the British Treasury during World War I, unable to stop what he thought were disastrous post-World War I political decisions. He then found himself watching as the classical economic mechanisms he had been taught to admire all fell apart. He then picked himself up. After World War I Keynes used what power he had to—don't laugh—try to restore civilization. He had, all things considered, amazing success and an amazing impact. In Skidelsky's—powerful and I believe correct--interpretation, Keynes before 1914: >believed (against much evidence, to be sure) that a new age of reason had dawned. The brutality of the closure applied in 1914 helps explain Keynes’s reading of the interwar years, and the nature of his mature efforts... to restore the expectation of stability and progress in a world cut adrift from its nineteenth-century moorings... (ES, page xv) Thus he then spent the rest of his life arguing that, if only statesmen would be farsighted and clever enough, they could put Humpty-Dumpty back together again: the world...



World War II at the Operational Level: The Fall of France 1940 (Prompted by the Forthcoming Release of "Dunkirk")

2017-07-21T07:43:35-07:00

Will the "Dunkirk" movie be any good? I cannot say that I am optimistic. But if you want to understand the bigger picture, here is my take on it: ---- **From**: My Very Short Take on World War II... : How are we to understand World War II? One way is to take a look at the first three major campaigns—the Polish campaign of September 1939, the French campaign of May-June 1940, and the first six months of the Russian campaign from June 22 to the end of 1941. In the 1939 Polish campaign, the Nazis lost 40,000 soldiers killed and wounded. The Poles lost 200,000 killed and wounded. The Poles also lost about 1,000,000 taken prisoner. In the 1940 French campaign, the Nazis lost 160,000 soldiers killed and wounded. The allies lost 360,000 soldiers killed and wounded. And the allies also lost 2,000,000 soldiers taken prisoner. In the first six months of the 1941 Russian campaign, the Nazis lost 1,000,000 soldiers killed and wounded. The Russians lost 4,000,000 soldiers killed and wounded. And the Russians lost 4,000,000 soldiers taken prisoner. The Nazis were simply better, tactically, at the business of war then any of their enemies. They understood dive...




2017-07-19T10:35:48-07:00

**Must-Read: Nick Bunker**: Recessions, recoveries, and racial employment gaps in the United States: "The unemployment gap between black and white workers... can’t be explained by black Americans having lower levels of education or differences in demographics... >...The unexplained portion—in this case almost all of the gap—is likely due to either direct discrimination and bias in the labor market or unequal access to resources such as education.... The job-separation rate—moving from employment to unemployment—is the biggest driver of the racial differences in the unemployment rate and accounts for the increases in the gap during recessions. The importance of the job-separation rate would mean that a strong labor market reduces the racial unemployment gap not because it’s boosting hiring rates disproportionately more for black workers but rather because it’s preventing the disproportionate firing that black workers experience during recessions...




2017-07-19T09:57:47-07:00

**Should-Read: Nick Bunker**: Is declining competition causing slow U.S. business investment growth?: "Germán Gutiérrez and Thomas Philippon... the divergence between investment and profits... employ a so-called natural experiment where the entrance of competition from China changed investment decisions... >...find a causal link between competition and investment. The increase in competition resulting from increased Chinese manufacturing imports led to increased investment among leading firms facing this overseas competition. Industries that saw more “excess entry” also were the industries that showed rising investment.... The case that declining competition is causing, at least in part, the reduction in investment growth seems quite strong...




2017-07-19T09:57:33-07:00

**Must-Read**: To leave their successors half a cable off of a lee shore in hurricane season may well turn out to have been the biggest failure of the Bernanke-Yellen Federal Reserve: **Mark Thoma**: Here’s Why We’re Not Prepared for the Next Recession: "When will the next recession hit?... >...Will monetary and fiscal policymakers have the ability to respond effectively?... This is not a prediction that a recession is just around the corner.... It’s a warning that we need to be ready in case a recession does hit relatively soon, as it well could. The problem is, we aren’t ready. Even a year or so from now, the Fed’s target interest rate won’t be high enough to leave much room for cuts in response to an economic downturn.... >Criticism from the right over the Fed’s quantitative easing policies... related to fears of inflation that never materialized, was loud and widespread on the political right. Without much room to cut interest rates, and without support from the Trump Fed for other stimulative measures, there’s little the Fed will be willing and able to do in response to economic problems. As for fiscal policy, when the recession does hit the economy keep your...




2017-07-19T10:40:21-07:00

**Must-Read**: A propos of Nancy MacLean's _Democracy in Chains_ : My view is that Brown v. Board of Education was not the major cause of James Buchanan's decision to try too build and U VA President Colgate Darden's decision to fund the "Virginia School of Political Economy"—Public Choice as a discipline that had only one wing, a right one, and that would, as the late Mancur Olson liked to say, "never be healthy until its left wing was as strong as its right, and it was no longer an ideological movement masquerading as an academic sub discipline". But it was certainly a trigger, and support was always very welcome from those whose concerns about appropriate governmental decentralization, limited powers, and checks and balances started and ended with preserving white supremacy. Noah Smith was on the case back in 2011: **Noah Smith** (2011): Noahpinion: The liberty of local bullies: "I have not been surprised by any of the quotes that have recently come to light from Ron Paul's racist newsletters. I grew up in Texas, remember... >...If you talk to a hardcore Paul supporter for a reasonable length of time, these sorts of ideas are more likely than not to come...




2017-07-19T09:57:41-07:00

**Should-Read: Christina Romer and David Romer** (2009): Do Tax Cuts Starve the Beast? The Effect of Tax Changes on Government Spending: "The hypothesis that decreases in taxes reduce future government spending is often cited as a reason for cutting taxes... >...This paper examines the behavior of government expenditure following legislated tax changes that narrative sources suggest are largely uncorrelated with other factors affecting spending. The results provide no support for the hypothesis that tax cuts restrain government spending; indeed, the point estimates suggest that tax cuts increase spending. The results also indicate that the main effect of tax cuts on the government budget is to induce subsequent legislated tax increases. Examination of four episodes of major tax cuts reinforces these conclusions...



Clueless DeLong Was Clueless: Hoisted from the Archives from 2007: The Domestic Macroeconomic Outlook: February 28, 2007

2017-07-18T13:43:06-07:00

**Clueless DeLong Was Clueless**: Hoisted from February 2007: The Domestic Macroeconomic Outlook: February 28, 2007 : It looks like I'm not going to get to give my short talk on the domestic macroeconomic outlook up at Lake Tahoe this weekend: That's too bad, because such talks quickly grow stale. One of the major points of my schtick is that the macroeconomic outlook rarely changes suddenly, so that 90% of the time it is perfectly OK to say, "things are like they were, only three months ago." Nevertheless such talks have a very short half life: people like to know how the most recent news affects things, even if the usual answer is "not much"--except, of course, for those turning points where things do change a great deal, and which we usually see clearly only in retrospect. I was going to hit three big points: **The Great Moderation**: * The business cycle is smaller than it used to be * Fewer recessions in industrial production * Largely good luck * But are there structural causes--better financial intermediation, et cetera? * We don't really know: * Why shallower recessions in industrial production? * Is the Federal Reserve is doing a much better... Clueless DeLong Was Clueless: Hoisted from February 2007: The Domestic Macroeconomic Outlook: February 28, 2007 http://www.bradford-delong.com/2007/02/the_domestic_ma.html: It looks like I'm not going to get to give my short talk on the domestic macroeconomic outlook up at Lake Tahoe this weekend: That's too bad, because such talks quickly grow stale. One of the major points of my schtick is that the macroeconomic outlook rarely changes suddenly, so that 90% of the time it is perfectly OK to say, "things are like they were, only three months ago." Nevertheless such talks have a very short half life: people like to know how the most recent news affects things, even if the usual answer is "not much"--except, of course, for those turning points where things do change a great deal, and which we usually see clearly only in retrospect. I was going to hit three big points: The Great Moderation: The business cycle is smaller than it used to be Fewer recessions in industrial production Largely good luck But are there structural causes--better financial intermediation, et cetera? We don't really know: Why shallower recessions in industrial production? Is the Federal Reserve is doing a much better job of responding to recessions in real time? How has, in large part, the Federal Reserve has not let itself get wedged into a situation where it feels it can't respond to recession because inflation is still uncomfortably high? Does it matter that industrial production matters less for the economy as a whole? It used to be that fluctuations in the harvest were a really big deal for the macroeconomy Someday, somebody will write: "it used to be that fluctuations in industrial production were a really big deal for the macroeconomy"--but not today, not quite yet Major but still low-probability risk: a steep fall in the dollar accompanied by substantial import price passthrough wedges the Federal Reserve   Productivity and Its Contents: The alarmingly large productivity gains of the early 2000s appear to have been one-off benefits from restructuring However, the Silicon Valley-driven productivity speedup of the 1990s is still with us, as strong as ever: In the late 1990s the gains went to established high-tech companies and to dot-commers and their VCs Since 2000 the gains have gone to companies that use computers and communications, and as competition sets in to t[...]



Clueless DeLong Still Clueless, But Slightly Less So: Hoisted from Ten Years Ago: High-Grade Structured Credit, and Time for the Fed to Start Cutting Interest Rates

2017-07-19T09:19:51-07:00

**Clueless DeLong Still Clueless—Albeit Slightly Less So**: High-Grade Structured Credit, and Time for the Fed to Start Cutting Interest Rates: Hoisted from Ten Years Ago : BondDad writes: >Daily Kos: $10 Billion Hedge Fund Now WORTHLESS: $10 Billion Hedge Fund Now WORTHLESS: From CBS Marketwatch: >>A Bear Stearns Cos. hedge fund that made leveraged bets in the subprime mortgage market is worth nearly nothing, according to two people briefed by the investment bank. Investors have been waiting for Bear to update them on the High-Grade Structured Credit Enhanced Leveraged Fund and a larger, less leveraged fund called the High-Grade Structured Credit Fund. The Wall Street Journal reported on Tuesday that the larger High-Grade Structured Credit Fund is worth roughly 9% of its value at the end of April. >bonddad's diary :: For those of you catching up on this story, here's the short version. About 2-3 weeks ago, Bear Stearns announced that two hedge funds invested primarily in the structured finance area (Collateralized Debt Obligations and Collateralized Loan Obligations) were experiencing record redemption requests. The problem with these requests is the fund was heavily leveraged -- meaning they had borrowed a ton of money. Reports have the leverage ratio at...



Ten Years Ago in Grasping Reality: July 16-18, 2007

2017-07-19T09:06:40-07:00

**Worth Highlighting**: * High-Grade Structured Credit, and Time for the Fed to Start Cutting Interest Rates : I have been an optimist about the subprime market.... Now I am not so sure. It no longer looks like things are as contained as I had thought... * Those Poor People! Mark Kleiman Needs to Learn Theology from "Galaxy Quest" : I suggest that Mark Kleiman turn on his cable TV channels, and watch... * The Buried Past of the Democratic Party : It is certainly true that up until some moment not all that long ago--1933? 1948? 1960?--the Democratic Party was the party of racism... * DeLong Smackdown Watch: Dani Rodrik Strikes Back ---- **The Full List:** * Eighteen Links for 2007-07-19 * Recent Delinquency Rates by Mortgage Type : The composition of mortgages has, however, shifted: there are a lot more subprime adjustable than there used to be. Subprime-variable mortgages are now up to 9% of the outstanding mortgage stock, according to the Fed. This is a series to watch as ARM resets kick in over the next year... * Felix Salmon Says that the New York Times Shrinks Its Economics Coverage * How Costco Became the Anti-Wal-Mart * High-Grade...



The Most Mendacious Graph the Wall Street Journal Ever Published: Paul Gigot and Kevin Hassett Smackdown/Hoisted from 2007:

2017-07-19T10:54:08-07:00

...Thanks, Paul Gigot! Thanks, Kevin Hassett! **Hoisted from 2007**: Most Dishonest Wall Street Journal Editorial Ever : Yes, it's the Wall Street Journal editorial page reporting more American Enterprise Institute-quality research from Kevin Hassett. This is the most mendacious ever. Mark Thoma is on the case. Here's the graph: Here is the accompanying text: [We're Number One, Alas][]: "The nearby chart shows the Laffer Curve effect from business taxation. Tax receipts tend to fall below their optimum potential when corporate tax rates are so high that they lead to the creation of loopholes and the incentive to move income to countries with a lower tax rate. Ireland is the classic case of a nation on the "correct side" of this curve. It has a 12.5% corporate rate, nearly the lowest in the world, and yet collects 3.6% of GDP in corporate revenues, well above the international average. The U.S., by contrast, with its near 40% rate has been averaging less than 2.5% of GDP in corporate receipts. Kevin Hassett, an economist at the American Enterprise Institute who has studied the impact of corporate taxes, says the U.S. 'appears to be a nation on the wrong side of the Laffer Curve:...




2017-07-18T13:47:16-07:00

**Must-Read: Maarten de Ridder and Coen Teulings**: Endogenous growth and lack of recovery from the Global Crisis: "The crisis [is] a quasi-natural experiment to test the endogenous growth hypothesis... >...suggests that output has not recovered because the crisis affected the rate of technological progress. Firms that preferred a bank that was more severely affected by the crisis experienced a large fall in R&D investment and a persistent fall in output in subsequent years. This suggests a direct link between R&D and future productivity, as predicted by endogenous growth models...




2017-07-18T13:43:25-07:00

**Should-Read: Christian Odendahl**: The Hartz Myth: "Germany’s labour market and welfare reforms of the early 2000s have gained an outsized importance over time... >...For some, these reforms put an end to Germany’s social market economy and pushed millions into insecure, low wage jobs. For others, notably many international observers, these ‘Hartz reforms’ are one if not the main reason why Germany–formerly known as the ‘sick man of Europe’–is now Europe’s export powerhouse and strongest economy.... A sober look at the German reforms shows that their economic impact was modest. They targeted weaknesses in Germany’s labour market and benefits system... combined unemployment and social assistance into a single system, to help more people find jobs or retrain; curbed incentives to ‘retire early’ by preventing people from claiming generous unemployment benefits... made job search, training and job centres more efficient, which helped to reduce unemployment... and provided more incentives to take up work, which increased temporary and marginal employment. There were fewer negative side effects than are commonly attributed to the reforms.... But the number of people in insecure jobs and at risk of poverty increased after the reforms. The effect on income inequality is ambiguous...




2017-07-18T13:34:32-07:00

**Should-Read: Ann Marie Marciarille**: Those Pesky Pre-Dispute Arbitration Agreements for Skilled Nursing Facilities: "Assisting a parent or loved one in seeking skilled nursing facility admission is no joke... >...which is part of the reason it may be so liberating to laugh about what the snf admissions process may ask of adult sons and daughters of potential patients. Oh, the machinations for admission in an industry where admittance is not guaranteed and where trying to put your best foot forward (easy family to deal with; uncomplicated patient; commercially insured and so on) can bear some resemblance to a fraternity or sorority rush-with all the frantic pleas to "please like me!" I have never seen this depicted more accurately and more achingly than in the 2007 movie "The Savages." Laugh-out-loud funny scenes where the adult brother and sister, played by Philip Seymour Hoffman and Laura Linney, try to work the system to get their Dad admitted.... >In light of all of this... why be taken back that many if not most snfs include a clause in their nursing home admission agreements requiring the signing party (capacitant older individual or responsible family member) to waive the right to a jury trial on many...



Europe's Post-World War I Crisis Through the Lens of the Life of John Maynard Keynes: Hoisted from Ten Years Ago

2017-07-18T10:57:04-07:00

**Hoisted from Ten Years Ago**: Europe's Post-World War I Crisis Through the Lens of the Life of John Maynard Keynes : World War I makes it impossible to be a liberal believer in progress, peace, rationality, equilibrium, the benevolence of the market, the triumph of reasoned discussion, et cetera. So what do you do? The answer is "managerialism." Muddling through. Trying desperately to somehow cobble together something like pre-WWI liberalism—to make it true in practice even though it isn't true in theory, and to do so somehow. Hence Keynes. And here I have little to say that I haven't stolen from Robert Skidelsky's magnificent three-volume biography of Keynes: Skidelsky's first two volumes give us John Maynard Keynes's life up to 1937 entire, and he does so with wit, charm, control, scope, and enthusiasm. You read these books and you know Keynes—who he was, what he did, and why it was so important. Who was this guy? Keynes was an academic, but also a popular author. His books were read much more widely outside of academia than within it. Keynes was a politician—trying to advance the chances of Britain's Liberal Party between the wars—but also a bureaucrat: at times a key...




2017-07-18T09:59:48-07:00

**Live from the Orange-Haired Baboon Cage: Duncan Black**: Well Then: Jackie Alemany @JaxAlemany: "Trump WH still struggles w conference calls. V weird OH comment from unmuted caller during Iran briefing: "My inflatable doll is a lesbian."




2017-07-17T20:36:46-07:00

**Must-Read: Adam Jentleson**: @AJentleson on Twitter: "Having spent countless hours listening to McConnell & years working with his office, I'd like to offer a few thoughts on tonight's news... >First & foremost, what we're witnessing is an unprecedented, full-blown rebellion by Republican senators against their leader, McConnell. I worked for Reid for years. Democratic senators criticized him occasionally, although they'd usually joke about it. Reid's status as leader was based on a mixture of love & respect from the caucus. McConnell's, only on respect - very little love. >McConnell's political victories have come at a steep price for the institution. He has taken power & influence away from other senators. His fellow Rs did not like losing their individual power, but they were willing to abide it as long as McConnell delivered victories. The ? has always been, what happen to McConnell when he hits a dry spell - especially one that his scorched-Earth tactics precipitated. We're seeing indications of that tonight. >This sounds like trolling but I'm honestly shocked at how nasty Repuicans are being towards him. Accusing your leader of a "significant breach of trust" is about as harsh as it gets in Senate-speak.. Senators want to get...




2017-07-17T19:16:51-07:00

**Should-Read**: The problem with the current crop of Republican politicians is that I cannot decode their map between what they say, what they would vote for, and what they could be induced to vote for relatively cheaply. That makes decoding what this—or, indeed, anything they do or say—really means for the future every difficult: **Jonathan Cohn, Paige Lavender, and Chris D’Angelo**: Senate Republicans Just Killed Their Health Care Bill Again: "**But it could come back in another form. Like a zombie**... ...WASHINGTON — Two conservative senators on Monday evening announced their opposition to the Senate Republican health care bill, dealing a serious and possibly crippling blow to the GOP’s effort to repeal the Affordable Care Act... Sens. Jerry Moran (R-Kan.) and Mike Lee (R-Utah).... >>There are serious problems with Obamacare, and my goal remains what it has been for a long time: to repeal and replace it. This closed-door process has yielded the [Better Care Reconciliation Act], which fails to repeal the Affordable Care Act or address healthcare’s rising costs. For the same reasons I could not support the previous version of this bill, I cannot support this one. We should not put our stamp of approval on bad policy...... Should-Read: The problem with the current crop of Republican politicians is that I cannot decode their map between what they say, what they would vote for, and what they could be induced to vote for relatively cheaply. That makes decoding what this—or, indeed, anything they do or say—really means for the future every difficult: Jonathan Cohn, Paige Lavender, and Chris D’Angelo: Senate Republicans Just Killed Their Health Care Bill Again: "But it could come back in another form. Like a zombie... [...]




2017-07-17T16:36:37-07:00

**Should-Read: Nancy Folbre**: Why current definitions of family income are misleading, and why this matters for measures of inequality: "Researchers studying income distribution in the United States seem reluctant to acknowledge the family as an important unit of production and distribution... >...Incomplete definitions of both family and income either obscure or render invisible transfers between and within households, including the value of housework and family care. Evidence from specialized surveys—such as the Health and Retirement Survey, the Panel Survey of Income Dynamics, the Survey of Income and Program Participation, and the American Time Use Survey—clearly demonstrate the quantitative relevance of these omissions.... >Overall, such transfers may have an equalizing effect because they generally flow from those with more market income to those with less. But young white adults are more likely to receive transfers from relatively affluent parents, while young black adults are more likely to transfer income to those closer to the bottom of distribution.... >Changes in the family economy of the United States have probably had only small effects on the relative income of the top 1 percent or the top 5 percent. They have larger implications for both the reality and the perception of relative income among...




2017-07-17T16:31:01-07:00

**Should-Read: Nick Bunker**: Weekend reading: “Let’s make this post more democratically accountable” edition: "The newest set of releases in the Equitable Growth Working Paper series... >...contains new research on housing insecurity, labor force attachment on tribal reservations, the impact of credit supply shocks, and state and local government balance sheets. Earlier this week the U.S. Bureau of Labor Statistics released the new data on hiring, firing, and other labor market flows in the U.S. labor market. Check out three key graphs from the new release of the Job Openings and Labor Turnover Survey...




2017-07-17T16:10:20-07:00

**Should-Read: Robert Caro**: Means of Ascent: Carpetbaggers and Scalawags: "[Richard Coke,] a Confederate veteran who in 1873 wrested the government of Texas from the Carpetbaggers and freed the state from the injustices of Reconstruction..." ...as quoted by Sidney Blumenthal.




2017-07-17T15:37:20-07:00

**Should-Read: John Maynard Keynes** (1924): Obituary for Alfred Marshall: "The study of economics does not seem to require any specialised gifts of an unusually high order... >...Is it not, intellectually regarded, a very easy subject compared with the higher branches of philosophy and pure science? Yet good, or even competent, economists are the rarest of birds. An easy subject, at which very few excel! The paradox finds its explanation, perhaps, in that the master-economist must possess a rare combination of gifts. He must reach a high standard in several different directions and must combine talents not often found together. He must be mathematician, historian, statesman, philosopher—in some degree. He must understand symbols and speak in words. He must contemplate the particular in terms of the general, and touch abstract and concrete in the same flight of thought. He must study the present in the light of the past for the purposes of the future. No part of man's nature or his institutions must lie entirely outside his regard. He must be purposeful and disinterested in a simultaneous mood; as aloof and incorruptible as an artist, yet sometimes as near the earth as a politician...



Needed: An Initial Introductory Pre-Semester Orienting Reading for Intermediate Macroeconomics...

2017-07-17T15:23:56-07:00

I cannot think of anything better than Robert Skidelsky's _Keynes: A Very Short Introduction_ , possibly paired with Keynes's own 1931 _Unemployment as a World Problem_ But there must be something better. What might it be?



Links for the Week of July 18, 2017

2017-07-17T09:19:47-07:00

**Must-Reads:** * **Ann Marie Marciarille**: More Than One Way to Say "No": "When I teach my students about the concept of guaranteed issue in health insurance I always make it clear that without some constraints on individual underwriting it can mean very little... * **Adam Ozimek**: There Is No U.S. Wage Growth Mystery: "Economists... puzzled over U.S. wage growth... wondering why it has been so slow despite a labor market that is allegedly back to or close to full employment... * **Dani Rodrik**: Economics of the populist backlash: The populist backlash to globalisation should not have come as a surprise, in light of economic history and economic theory... * **Matthew Yglesias**: On Twitter: "Nostalgia-drenched anti-intellectual populism can be a cause rather than a consequence of community economic decline" * **Paul Krugman**: When Was The Golden Age Of Conservative Intellectuals?: "Bret Stephens’s... [on] the intellectual decline of conservatism... the modern degeneracy... * **Larry Summers**: Donald Trump’s alarming G20 performance: "the content of the [of the G-20] communiqué [is] a confirmation of the breakdown of international order that many have feared since the election of Donald Trump... ---- **Should-Reads:** * **Paul Krugman**: Formerly True Theories (Wonkish and Self-Indulgent): "Are there other examples?...



Procrastination on July 17, 2017

2017-07-17T16:32:23-07:00

**Over at [Equitable Growth](http://EquitableGrowth.org): Must- and Should-Reads:** * **Nick Bunker**: Weekend reading: “Let’s make this post more democratically accountable” edition: "The newest set of releases in the Equitable Growth Working Paper series... * **John Maynard Keynes** (1924): Obituary for Alfred Marshall: "The study of economics does not seem to require any specialised gifts of an unusually high order... * **Robert Caro**: Means of Ascent: Carpetbaggers and Scalawags: [Richard Coke] a Confederate veteran who in 1873 wrested the government of Texas from the Carpetbaggeres and freed the state from the injustices of Reconstruction..." * **John Maynard Keynes** (1938): On Tinbergen. To Harrod : "My dear Roy... * **Paul Krugman**: Formerly True Theories (Wonkish and Self-Indulgent): "Are there other examples? The self-correcting economy... * **Robert Solow**: Improving the measurement and understanding of economic inequality in the United States: "There has long been interest in extending and improving the National Income and Product Accounts... * **Ann Marie Marciarille**: Let's Make a Deal and the Better Care Reconciliation Act of 2017: A Car or A Goat?: "I am as mesmerized as anyone else by the repeated iterations of the Better Care Reconciliation Act of 2017... * **Helene Rey**: The Global Financial System, the Real...




2017-07-17T09:20:37-07:00

**Must-Read: John Maynard Keynes** (1938): On Tinbergen. To Harrod : "My dear Roy... >...I think we are a little bit at cross purposes. There is really nothing in your letter with which I disagree at all. Quite the contrary. I think it most important, for example, to investigate statistically the order of magnitude of the Multiplier, and to discover the relative importance of the various facts which are theoretically possible. >My point against Tinbergen is a different one. In chemistry and physics and other natural sciences the object of experiment is to fill in the actual values of the various quantities and factors appearing in an equation or a formula; and the work when done is once and for all. In economics that is not the case, and to convert a model into a quantitative formula is to destroy its usefulness as an instrument of thought. Tinbergen endeavours to work out the variable quantities in a particular case, or perhaps in the average of several particular cases, and he then suggests that the quantitative formula so obtained has general validity. Yet in fact, by filling in figures, which one can be quite sure will not apply next time, so far...



Weekend Reading: Joshua Micah Marshall (2002): Strange Victory

2017-07-16T12:02:27-07:00

**Joshua Micah Marshall** (2002): "I really, really, really want to recommend a book to you. It's called Strange Victory: Hitler's Conquest of France and it's by Ernest R. May, a highly respected diplomatic historian... >...There are two reasons why this book is so good. The first is that it is just a marvelously engrossing narrative of one of the most pivotal moments of the 20th Century: the lead-up to the Second World War and particularly Hitler's lightning victory over France in May and June of 1940. It's just a very polished, compelling World War Two book and a very good read. But it's much more than that. >May begins with a question that most of us would probably not imagine really was a question. That is, why did France lose? >From the newsreels, many histories, and the mythology of appeasement you'd get the impression that this was just a given, that Germany was strong and armed-to-the-teeth and France was unprepared and weak. But this just wasn't the case. May makes very clear that France (and especially France and Britain together) were both quantitatively and qualitatively stronger and better prepared for war. Simply put, on balance, they had more stuff and...




2017-07-16T09:26:15-07:00

**Should-Read**: Is this right? Certainly before 1800 we do not see a banking crisis produce a collapse of the circulating medium and a large excess demand for cash and thus a large excess supply of pretty much anything—a banking crisis-driven general glut. And certainly before 1800 we do not see an economy-wide shortage of investment opportunities producing a Wicksellian real neutral rate below the market rate. And certainly before 1800 we do not see a virulent debt-deflation collapse cycles—if Antonio the merchant of Venice goes bankrupt, his goods are sold at market on the Rialto rather than his factories standing idle, and the chance that his creditors are also caught up in a bankruptcy chain is much less. But I am not at all sure that the (real productivity-adjusted) wage flexibility we think we see in the later nineteenth century applied before. The Jacksonian economy was still in many of its aspects a pre-industrial economy—an agricultural, mercantile economy. And yet _The Jacksonian Economy_ definitely had a large, albeit policy driven cycle produced by a government policy shock. Did policy, war, and harvest shocks have similar effects earlier in economies? Probably not *if* wages were flexible. But were they? **Paul Krugman**:...




2017-07-16T09:26:41-07:00

**Should-Read: Robert Solow**: Improving the measurement and understanding of economic inequality in the United States: "There has long been interest in extending and improving the National Income and Product Accounts... >...The accounts, and the summary Gross Domestic Product number, were not initially intended as an indicator of welfare, but rather as a measure of economic activity—even misdirected activity such as the production of cigarettes. Even on that basis, there is room for improvement: Perhaps the most commonly suggested extension has been the explicit inclusion of environmental degradation and improvement, along with other instances of resource depletion. I would certainly be in favor. Nevertheless, I want to begin with a retrograde suggestion. Whatever is eventually done with NIPA and GDP, I hope it is done in such a way that it will always be possible easily to extract from the new NIPA most of the components of the old NIPA.... Having a fairly consistent quarterly time series going back to 1949 is a wonderful thing. Even with those data, it is a hard problem—without them, it would be hopeless. Another 65 years of compatible data would be more than welcome. >From the very beginning of national accounting, it has been understood...




2017-07-16T09:27:03-07:00

**Should-Read: Ann Marie Marciarille**: Let's Make a Deal and the Better Care Reconciliation Act of 2017: A Car or A Goat?: "I am as mesmerized as anyone else by the repeated iterations of the Better Care Reconciliation Act of 2017... >...The New York Times's] astonishingly sports page-like coverage scoring of winners and losers for each version, and tales of back room sweeteners ("Klondike Kickback" being my personal favorite coinage so far). But none of this... distracts me from the fact that it is all about persuading elected officials and the American public that what they have in hand (the Affordable Care Act) would be better surrendered for one of these myriad other offerings. And the offers do keep coming... with such frequency but with such slight variation from each other that I can't help but wonder about that variation on the old Monty Hall Probability Problem where, if the host is not required to make the offer to switch yet repeatedly does so, the player has to suspect malice and wonder if, in fact, the player has already chosen the car and that the host is merely trying to shake them loose from that choice.... >The correct next move... turns...



It Was December 28, 1996, That the Wayback Machine First Crawled My Website

2017-07-15T22:27:46-07:00

This is the state of my website when that happened: Brad De Long's Website Pages up as of that crawling included: New Stuff * A Decade of the New Growth Economics : A Comment on Sala-i-Martin, "I Just Ran Two Million Regressions"... **Highlight** * Billionaires **Highlight** * It Doesn't Work : A Review of _Out of Work: Unemployment and Government in Twentieth-Century America_, by Richard K. Vedder and Lowell E. Galloway... **Highlight** * Review: Against the Tide : _An Intellectual History of Free Trade_, by Douglas Irwin... **Highlight** * Review of The Misfortunes of Prosperity : _An Introduction to Modern Political Economy_, by Daniel Cohen... **Highlight** * **Richard S. Grossman and J. Bradford DeLong**: The British Stock Market and British Economic Growth, 1870-1914 **Highlight** * **J. Bradford DeLong and Carlos D. Ramirez**: Understanding America’s Hesitant Steps Toward Financial Capitalism **Highlight** * Alan Greenspan and the Stock Market : Is the Stock Market Overvalued?... * Improving Economic Growth : A Short Review of Economic Growth: Theories and Policies... * The Political Economy of the Asia-Pacific Region: Trends and Cycles ---- * Keynes : John Maynard Keynes deserves a webpage of his own... * Gene Sperling is not an economist but deserves...



Ten Years Ago on Grasping Reality: July 13-15, 2007

2017-07-15T21:23:17-07:00

Most worth reading: 1. Rick Perlstein has a sense not of what is coming with the fallout from the collapse of the housing bubble, but that the immediate effects are bad. 2. The story of Paul Gigot, Kevin Hassett, and the worst—the absolute worst—the most mendacious, deceptive and unprofessional graph that the _Wall Street Journal_ has ever published. You can find it here: . As Ezra Klein wrote: **Ezra Klein** (2007): **Is The Wall Street Journal Worth Saving?** : "Brad DeLong described this as 'Most Dishonest Wall Street Journal Editorial Ever'. I thought that was obvious hyperbole, if for no other reason than the data set encompassing dishonest Wall Street Journal editorials is far, far too large for Brad to have comparatively evaluated in a mere day or two. It'd be like declaring a yawn from moments ago your favorite breath of air ever. It might have felt that way, but that's a hasty choice from a large pool. Brad, however, may be right. One of the ways that mendacious ideologues can lie with statistics is to simply draw and ill-fitting line through the data, pretending it shows something entirely different than it really does..." All I can say is:... Most worth reading: Rick Perlstein has a sense not of what is coming with the fallout from the collapse of the housing bubble, but that the immediate effects are bad. The story of Paul Gigot, Kevin Hassett, and the worst—the absolute worst—the most mendacious, deceptive and unprofessional graph that the Wall Street Journal has ever published. You can find it here: https://www.wsj.com/articles/SB118428874152665452. As Ezra Klein wrote:   Ezra Klein (2007): Is The Wall Street Journal Worth Saving? http://ezraklein.typepad.com/blog/2007/07/is-the-wall-str.html: "Brad DeLong described this as 'Most Dishonest Wall Street Journal Editorial Ever'. I thought that was obvious hyperbole, if for no other reason than the data set encompassing dishonest Wall Street Journal editorials is far, far too large for Brad to have comparatively evaluated in a mere day or two. It'd be like declaring a yawn from moments ago your favorite breath of air ever. It might have felt that way, but that's a hasty choice from a large pool. Brad, however, may be right. One of the ways that mendacious ideologues can lie with statistics is to simply draw and ill-fitting line through the data, pretending it shows something entirely different than it really does..." All I can say is: every economist who signed that letter supporting Kevin Hassett for CEA Chair has a lot of explaining to do, and should be searching their soul very hard right now trying to figure out how they went astray... Worth Hoisting: Most Dishonest Wall Street Journal Editorial Ever http://www.bradford-delong.com/2007/07/most-dishonest-.html: Yes, it's the Wall Street Journal editorial page reporting more American Enterprise Institute-quality research from Kevin Hass[...]



How to Think Like an Economist (If, That Is, You Wish to...)

2017-07-16T09:51:41-07:00

I have long had a "thinking like an economist" lecture in the can. But I very rarely give it. It seems to me that it is important stuff—that people really should know it before they begin studying economics, because it would make studying economics much easier. But it also seems to me—usually—that it is pointless to give it at the start of a course to newBs: they just won't understand it. And it also seems to me—usually—that it is also pointless to give it to students at the end of their college years: they either understand it already, or it is too late. By continuity that would seem to imply that there is an optimal point in the college curriculum to teach this stuff. But is that true? What do you think? + + + + ---- ## How to Think Like an Economist key: Every new subject requires new patterns of thought; every intellectual discipline calls for new ways of thinking about the world. After all, that is what makes it a _discipline_: a discipline that allows people to think about a subject in some new way. Economics is no exception. In a way, learning an intellectual discipline like... I have long had a "thinking like an economist" lecture in the can. But I very rarely give it. It seems to me that it is important stuff—that people really should know it before they begin studying economics, because it would make studying economics much easier. But it also seems to me—usually—that it is pointless to give it at the start of a course to newBs: they just won't understand it. And it also seems to me—usually—that it is also pointless to give it to students at the end of their college years: they either understand it already, or it is too late. By continuity that would seem to imply that there is an optimal point in the college curriculum to teach this stuff. But is that true? What do you think? + + + + How to Think Like an Economist key: https://www.icloud.com/keynote/0Lvx3IfBcDQWga2Y3ERk72Zkg Every new subject requires new patterns of thought; every intellectual discipline calls for new ways of thinking about the world. After all, that is what makes it a discipline: a discipline that allows people to think about a subject in some new way. Economics is no exception. In a way, learning an intellectual discipline like economics is similar to learning a new language or being initiated into a club. Economists’ way of thinking allows us to see the economy more sharply and clearly than we could in other ways. (Of course, it can also cause us to miss certain relationships that are hard to quantify or hard to think of as purchases and sales; that is why economics is not the only social science, and we need sociologists, political scientists, historians, psychologists, and anthropologists as well.) In this chapter we will survey the intellectual landmarks of economists’ system of thought, in order to help you orient yourself in[...]



Weekend Reading: Ursula LeGuin (2007): Genre Fiction

2017-07-15T07:17:14-07:00

**Weekend Reading**: Ansible 240, July 2007 : On Serious Literature: >Michael Chabon has spent considerable energy trying to drag the decaying corpse of genre fiction out of the shallow grave where writers of serious literature abandoned it... Ruth Franklin (Slate, 8 May 2007) **Ursula K. Le Guin**: Something woke her in the night... >...Was it steps she heard, coming up the stairs–somebody in wet training shoes, climbing the stairs very slowly... but who? And why wet shoes? It hadn't rained. There, again, the heavy, soggy sound. But it hadn't rained for weeks, it was only sultry, the air close, with a cloying hint of mildew or rot, sweet rot, like very old finiocchiona, or perhaps liverwurst gone green. >There, again–the slow, squelching, sucking steps, and the foul smell was stronger. Something was climbing her stairs, coming closer to her door. As she heard the click of heel bones that had broken through rotting flesh, she knew what it was. But it was dead, dead! >God damn that Chabon, dragging it out of the grave where she and the other serious writers had buried it to save serious literature from its polluting touch, the horror of its blank, pustular face, the...




2017-07-15T07:03:40-07:00

**Should-Read: Helene Rey**: The Global Financial System, the Real Rate of Interest and a Long History of Boom-Bust Cycles: "Financial cycles strongly determine real short-term interest rates... >...Wealth increases rapidly during financial booms, faster than consumption itself. As a consequence, the consumption to wealth ratio declines, as happened in the “Roaring 20s” and the “Exuberant 2000s”. In the subsequent busts, savings increase and keep real interest rates low. The related global financial cycle constrains monetary policy independence, even for countries with flexible exchange rates, transforming the Mundellian trilemma into a dilemma. Tackling these issues calls for combinations of monetary and fiscal policy coordination, macro-prudential policies, and possibly capital controls. It also means considering the role of the US as a provider of safe assets, and asking whether a multipolar system would be advantageous...




2017-07-14T18:20:47-07:00

**Must-Read: Ann Marie Marciarille**: More Than One Way to Say "No": "When I teach my students about the concept of guaranteed issue in health insurance I always make it clear that without some constraints on individual underwriting it can mean very little... >...In short, there is more than one way to say "no" to an applicant for health insurance. A health insurance company could decline to issue a policy or it could offer coverage at such an incredibly high cost that the answer might as well be no. The latter has the virtue of being nominally non-exclusionary, because the only problem is "affordability", but if that problem is not remedied by some kind of subsidy or discount it is the problem that can end all access. >Senator Cruz's subsidies proposal max's out subsidies at the $42,000 in annual income level, much much lower than the current ACA level, leaving a significant coverage and affordability gap to only widen. >All of this is pretty much what is at stake with Ted Cruz's market segmenting proposal to fix the Senate GOP health care reform proposal. Insurers, under it, may sell non-ACA conforming products so long as they sell one ACA conforming product....



Assignment Desk: What Are the Best Readings for a Week Spent Teaching James C. Scott-Stuff?

2017-07-14T11:56:02-07:00

The night watchman state that supports the fully-developed market economy is one of the most strange and significant historical development in political economy. Any analysis of it requires that one view hit in perspective—that one examine other the other alternative forms that state power and authority can and do take and have taken. And the greatest sociologist-political scientist-historian of our age analyzing such things is James C. Scott. I have often wished that I had a reading list on Scott-stuff to hand. And I wish somebody would construct an annotated one: **Here are my thoughts:** * James Scott and Friedrich von Hayek * Perhaps. And Sometimes ---- **Here are some more starting points:** * **James C. Scott**: Seeing like a State: How Certain Schemes to Improve the Human Condition Have Failed * **James C. Scott**: Against the Grain: A Deep History of the Earliest States * **James C. Scott**: The Trouble with the View from Above * **Timothy B. Lee**: Of Hayek and Rubber Tomatoes * **Friedrich von Hayek**: The Use of Knowledge in Society * **Paul Seabright**: * **Mark Koyama**: Some Thoughts on “Seeing Like a State” * **Noel D. Johnson and Mark Koyama**: * **Jacob T. Levy**: On...



Weekend Reading: A Historical Document: John Maynard Keynes to Franklin Delano Roosevelt at the End of 1933

2017-07-14T11:08:07-07:00

**Weekend Reading**: Keynes's thoughts on the first nine months of the New Deal: A Historical Document: John Maynard Keynes to Franklin Delano Roosevelt at the End of 1933 : "You have made yourself the Trustee for those in every country who seek to mend the evils of our condition by reasoned experiment within the framework of the existing social system... >...You are engaged on a double task, Recovery and Reform;--recovery from the slump and the passage of those business and social reforms which are long overdue. For the first, speed and quick results are essential. The second may be urgent too; but haste will be injurious, and wisdom of long-range purpose is more necessary than immediate achievement. It will be through raising high the prestige of your administration by success in short-range Recovery, that you will have the driving force to accomplish long-range Reform. On the other hand, even wise and necessary Reform may, in some respects, impede and complicate Recovery. For it will upset the confidence of the business world and weaken their existing motives to action, before you have had time to put other motives in their place. It may over-task your bureaucratic machine, which the traditional individualism...