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Grasping Reality with Both Hands: bradford-delong.com:



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Updated: 2017-11-26T21:19:19-08:00

 



Some Fairly-Recent Must- and Should-Reads...

2017-11-14T06:20:15-08:00

1. **Paul Krugman**: [Tax Cuts, Growth, and Leprechauns](https://krugman.blogs.nytimes.com/2017/11/21/tax-cuts-growth-and-leprechauns/): "The Tax Policy Center released its macroeconomic analysis of the House tax cut bill... 2. **Peter Lindert**: [The rise and future of progressive redistribution](http://voxeu.org/article/rise-and-future-progressive-redistribution): "There has been a blossoming of research into fiscal incidence by income class... 3. **Brink Lindsey**: [Further thoughts on libertarian anti-democracy](https://twitter.com/lindsey_brink/status/931591616565006343): "Further thoughts by Will on libertarian anti-democracy’s effect on the GOP... 4. **Martin Wolf**: [A Republican tax plan built for plutocrats](https://www.ft.com/content/e494f47e-ce1a-11e7-9dbb-291a884dd8c6): "How does a political party dedicated to the material interests of the top 0.1 per cent of the income distribution win and hold power in a universal suffrage democracy?... 5. **Paul Krugman**: [Leprechaun Economics, With Numbers](https://krugman.blogs.nytimes.com/2017/11/09/leprechaun-economics-with-numbers/): "8% is a reasonable number for after-tax required return... 6. **Stan Collender**: [GOP Tax Bill Is The End Of All Economic Sanity In Washington](https://www.forbes.com/sites/stancollender/2017/11/19/gop-tax-bill-is-the-end-of-all-economic-sanity-in-washington/#be45d8a77ef7): "The GOP tax bill will increase the federal deficit by $2 trillion or more over the next decade (the official estimates of $1.5 trillion hide the real amount with a witches' brew of gimmicks and outright lies)... 7. **Greg Leiserson**: [The Tax Foundation’s score of the Tax Cuts and Jobs Act](http://equitablegrowth.org/research-analysis/the-tax-foundations-score-of-the-tax-cuts-and-jobs-act/): "First, the Tax Foundation appears to incorrectly model the interaction between federal and state corporate...




2017-11-22T06:32:21-08:00

**Comment of the Day: Charles Steindel**: [This Is Your Reminder...](http://www.bradford-delong.com/2017/11/note-to-self-this-is-your-reminder-1784-million-people-are-represented-by-the-48-senators-who-caucus-with-the-democ.html?cid=6a00e551f08003883401b8d2c0bcc1970c#comment-6a00e551f08003883401b8d2c0bcc1970c): "James Madison was appalled that the Constitutional Convention agreed to equal state representation in the Senate. He was dragged kicking and screaming into accepting that compromise (it's a bit odd to think nowadays that New Jersey—perhaps no longer a "large" state, but certainly, in population, considerably above the median—was then the leader of the small state bloc)."



Happy Thanksgiving Everybody!

2017-11-22T06:09:52-08:00

[Addams Family Values](https://www.youtube.com/watch?v=rVQqQuOO9yQ):

Addams Family Values:

width="560" height="315" src="https://www.youtube.com/embed/rVQqQuOO9yQ" frameborder="0" allowfullscreen>




This Is Your Reminder...

2017-11-21T16:20:23-08:00

**Note to Self**: This is your reminder: * 178.4 million people are represented by the 48 senators who caucus with the Democrats. * 144.1 million people are represented by the 52 senators who caucus with the Republicans. * 65.9 million people voted for Hillary Rodham Clinton and Tim Kaine to be their president and vice president * 63.0 million people voted for Donald Trump and Mike Pence to be their president and vice president.




2017-11-21T15:51:26-08:00

**Should-Read**: I'm really not surprised that the only economist out of 42 willing to believe this is from Robber-Baron Crony-Capitalism **Stanford** University. But I am embarrassed for my profession that there is even one: **Justin Wolfers**: [@justinwolfers on Twitter](https://twitter.com/JustinWolfers/status/933084769583235072): "The University of Chicago surveyed 42 leading economists and found exactly one who believes the Republican claim that their tax bill will grow the economy. " His comment doesn't suggest he spent much time thinking about it: >A reduced corporate tax reduction is likely to grow GDP. Whether the overall tax plan is distributionally fair is another matter. So does Darrell Duffie not believe in the government budget constraint? The right one-sentence is not Duffie's but rather: "An unfunded tax cut that increases the deficit in an economy near full employment is likely to slow the growth of GDP". I would be interested in a further explanation from him: Why is it that we should think that the substitution effect should dominate the income effect here, and that consumption plus net exports is likely to fall rather than rise? But I don't suppose I am likely to get a coherent one.




2017-11-21T12:19:01-08:00

**Should-Read: Dave Drake**: [Statues of the Boys in Grey](http://david-drake.com/2017/newsletter-99/): "In Durham last month, a peaceful mob pulled down a Confederate monument on the grounds of the old courthouse. It wasn’t a statue of Lee or Jackson; it was dedicated To the Boys in Gray... >...This initially made me sad. Both Lee and Jackson were individually good men, but I figure generals can take care of themselves; goodness knows, the ones I’ve seen have certainly done so. But I was a grunt; my Civil War ancestor was a grunt; and the statue in Durham was dedicated to grunts. >Were the Boys in Gray fighting for a bad cause? I think so. But I was fighting for a bad cause also; I believed that at the time, and nothing I’ve learned since has caused me to change my mind. >I take citizenship seriously, and I entered the army as a citizen of a representative democracy. I’ve often disagreed with the choices my leaders made, but I believe in the system. >I loathe the mindset of a man like Henry Kissinger, who could dismiss as ‘a sideshow’ the Cambodian invasion (of which I was a part) and the millions of deaths it caused,...




2017-11-21T11:30:30-08:00

**Should-Read: Stan Collender**: [GOP Tax Bill Is The End Of All Economic Sanity In Washington](https://www.forbes.com/sites/stancollender/2017/11/19/gop-tax-bill-is-the-end-of-all-economic-sanity-in-washington/#be45d8a77ef7): "The GOP tax bill will increase the federal deficit by $2 trillion or more over the next decade (the official estimates of $1.5 trillion hide the real amount with a witches' brew of gimmicks and outright lies)... >...The GOP's insanity is compounded by its moving ahead without having any idea of what this policy will actually do to the economy. The debates... took place before the Congressional Budget Office's analysis and, if it really exists, the constantly-promised-but-never-seen report from the Treasury on the economics of this tax bill.... The GOP tax bill may be enacted without anyone who votes for it having any understanding of the damage it could do.... On top of everything else, there is no reason to rush this debate.... >If the GOP tax bill is enacted, Congress and the president this year will give up almost all ability to deal with the U.S. economy for at least a decade even when, as almost certainly will happen, there's a downturn. No one else will be able to fulfill this role. That's almost a textbook definition of economic insanity...




2017-11-21T10:42:22-08:00

**Should-Read**: It is now almost forty years since Tennessee Senator Howard Baker characterized Republican fiscal policy as a "riverboat gamble"—where if you lose, you don't pay up but instead abandon ship, jump overboard, and swim to shore. It is more than 35 years ago since Reagan OMB Director David Stockman said, of the Republican members of congress's understanding of fiscal policy: "nobody understands these numbers". I say it reminds me of fratboys who haven't done the reading winging it in a budget simulation course. And I do find myself resenting former Bush CEA Chairs Eddie Lazear's and Glenn Hubbard's endorsements of this "unworkable mess", in the words of their colleague Greg Mankiw. They owe the country better: **Paul Krugman**: [Tax Cuts, Growth, and Leprechauns](https://krugman.blogs.nytimes.com/2017/11/21/tax-cuts-growth-and-leprechauns/): "The Tax Policy Center released its macroeconomic analysis of the House tax cut bill... >...TPC is not impressed: their model says that GDP would be only 0.3 percent higher than baseline in 2027, and that revenue effects of this growth would make only a tiny dent in the deficit. But... focusing on GDP is itself misleading, because we’re a financially open economy with a lot of foreign ownership already, and a large part of the alleged...




2017-11-21T10:42:14-08:00

**Must-Read**: I remember when Martin Wolf was the very smart, very reality based, but very sincere and committed Tory. (He would probably say that he still is such.) Yet now his shrillness is up to 11 on the 10-point Krugman scale... And the owl was once the baker's daughter: **Martin Wolf**: [A Republican tax plan built for plutocrats](https://www.ft.com/content/e494f47e-ce1a-11e7-9dbb-291a884dd8c6): "How does a political party dedicated to the material interests of the top 0.1 per cent of the income distribution win and hold power in a universal suffrage democracy?... >...That is the challenge confronting the Republican party. The answer it has found is “pluto-populism”. This is a politically successful, but dangerous, strategy... [that has] brought Donald Trump to the presidency. His failure might bring someone more dangerous, more determined, to power. This matters to the US and, given its power, to the wider world.... About 45 per cent of the tax reductions in 2027 would go to households with incomes above $500,000.... This simply is reform for plutocrats.... The bill might also increase the cumulative fiscal deficit by about $1.5tn over the coming decade.... In all, then, this is a determined effort to shift resources from the bottom, middle and even upper...



You Just Cannot Be an Honest Neoclassical Economist and Make the Trumpublican Tax "Reform" a Winner for U.S. National Income Growth...

2017-11-20T15:52:03-08:00

...or, especially, after-tax real median growth. Or even 2%-ile income growth. Let alone well-being after cuts in public services. You just can't. It doesn't add up at any level. As a matter of arithmetic... Just too much of existing capital income flows to foreigners. Too much of extra production generated by a capital inflow would be credited to foreigners. And domestic savings supply is relatively inelastic. Even if you put both hands on the scale and lean hard, it just doesn't work, even without noting how much of payments to capital are monopoly rents and payments to other forms of capital that are not interest sensitive... And Paul Krugman has been on fire this fall: (Plus the salmon (on my machine) rectangle, minus the... what color is that? (on my machine) brownish-gold rectangle—that's the long-run change in U.S. national income from a _budget neutral_ tax "reform" like that Trumpublicans are proposing. The effects of a deficit-increasing one are... less favorable.) Krugman this fall: * (2017-10-05) **Paul Krugman**: [The Transfer Problem and Tax Incidence](https://krugman.blogs.nytimes.com/2017/10/05/the-transfer-problem-and-tax-incidence-insanely-wonkish/?_r=0): "Assuming I’ve done the algebra right, I get a rate of convergence of .059–that is, about 6 percent of the deviation from the long run eliminated each...




2017-11-20T15:49:24-08:00

**Must-Read: Martin Sandbu**: [Who should govern the euro?](https://www.ft.com/content/bc5f7d56-cdc7-11e7-b781-794ce08b24dc): "I have long argued against further centralisation of fiscal and structural policies, and proposed that some autonomy should instead be returned to the national level... >...First, policies must respond to the real differences in policy preferences and economic conditions between countries.... Second, we can learn from diversity.... Think of how influential Germany’s Hartz reforms or Denmark’s “flexicurity” model have been.... Third, even where there is a case for centralised decision making, it is politically dangerous to introduce it without broad popular support.... That some economic policy power should be re-devolved does not mean every country should do its own thing. There are often good reasons to harmonise policy, but this can usefully be done by pioneering “coalitions of the willing” that leave the door open for others to join later. We should add that there are some areas where it does make sense to pool sovereignty further—defining the corporate tax base jointly to avoid tax avoidance is the prime example.... >This leaves the governance of “the euro” itself.... The ECB has much less control over the currency even in the most basic sense than it should. Most of the money supply... is...



Monday Smackdown: Republican Whoppers on Tax "Reform" from Politicians, Non-Technocrats, and Technocrats Edition...

2017-11-20T15:59:04-08:00

How did we get here? First, where are we? **Matthew Yglesias**: [If the GOP tax plan is so good, why do they lie so much about it?](https://www.vox.com/policy-and-politics/2017/11/20/16674640/gop-tax-plan-lies): "Democratic programs may or may not be... good idea[s], [but] the bills they write that they say will expand the provision of social services in the United States really do expand the provision of social services... >...Not so... with the Republican plan.... >Trump ran on promising a middle-class tax cut.... At the beginning of the month, Trump was on the same page, saying.... Treasury Secretary Steve Mnuchin made an unambiguous promise that there would be “no absolute tax cut for the upper class”.... Trump went so far as to phone up a group of Senate Democrats to tell them, “My accountant called me and said, 'You're going to get killed in this bill.’” This is all a bunch of lies.... Rather than own up to the reversal and defend it on the merits, Trump’s team is now engaging in bizarre deflections.... >A telling thing about the cavalcade of lies Republicans are telling about taxes is the party can’t quite get its story straight as to what the policy agenda even is here. They...




2017-11-20T09:32:51-08:00

**Must-Read: Matthew Yglesias**: [If the GOP tax plan is so good, why do they lie so much about it?](https://www.vox.com/policy-and-politics/2017/11/20/16674640/gop-tax-plan-lies): "Democratic programs may or may not be... good idea[s], [but] the bills they write that they say will expand the provision of social services in the United States really do expand the provision of social services... >...Not so... with the Republican plan.... Trump ran on promising a middle-class tax cut.... At the beginning of the month, Trump was on the same page, saying.... Treasury Secretary Steve Mnuchin made an unambiguous promise that there would be “no absolute tax cut for the upper class”.... Trump went so far as to phone up a group of Senate Democrats to tell them, “My accountant called me and said, 'You're going to get killed in this bill.’” This is all a bunch of lies.... Rather than own up to the reversal and defend it on the merits, Trump’s team is now engaging in bizarre deflections.... >A telling thing about the cavalcade of lies Republicans are telling about taxes is the party can’t quite get its story straight as to what the policy agenda even is here. They are telling deficit hawks that the bill is...




2017-11-20T06:34:50-08:00

**Comment of the Day: Joe B**: [Six Faces of Right-Wing Chain-Forging Economist James Buchanan...](http://www.bradford-delong.com/2017/11/six-faces-of-right-wing-chain-forging-economist-james-buchanan.html?cid=6a00e551f08003883401b7c935a526970b#comment-6a00e551f08003883401b7c935a526970b): "It seems to me that you need to provide some concrete examples of being "struck by the contrast". Where in the text, exactly, do Farrell and Teles bend over backward to be fair to Buchanan and unfair to MacLean?..." Fair question... Let's look at: **Henry Farrell and Steven Teles**: [When Politics Drives Scholarship](http://bostonreview.net/class-inequality/henry-farrell-steven-m-teles-when-politics-drives-scholarship)... Let's go to paragraph six, in its entirety: >MacLean also has a tin ear for how libertarians and public choice economists actually think and argue. Reading the book provides the impression that MacLean is like an anthropologist trying to explain a culture that she has never encountered directly, even though it can be found a short distance from her own office building. Much of her evidence is correspondence with Buchanan’s donors, evidence that is inherently problematic on its own as a guide to underlying intent, as anyone who has ever communicated with a donor can confirm... Actually, few academics lie to their donors. For one thing, it's wrong to lie. For another, lying to your donors is an easy way to get a reputation as, well, a liar—and with a community that you...




2017-11-20T05:35:10-08:00

**Should-Read: Peter Lindert**: [The rise and future of progressive redistribution](http://voxeu.org/article/rise-and-future-progressive-redistribution): "There has been a blossoming of research into fiscal incidence by income class... >...This column combines century-long histories for Britain and South American countries with previous research to offer a global history of government income redistribution. Contrary to some allegations, the shift towards progressivity in government budgets over the last 100 years has not been reversed since the 1970s. The rise in inequality since the 1970s therefore appears to owe nothing to a net shift government redistribution toward the rich...




2017-11-19T12:04:52-08:00

**Should-Read: Jo Mitchell**: [Dilettantes Shouldn’t Get Excited](https://criticalfinance.org/2017/11/19/dilettantes-shouldnt-get-excited/): "The Freshwater version of the model concluded that all government policy has no effect and that any changes are driven by an unexplained residual... >...The more moderate Saltwater version, with added Calvo fairy, allowed a rediscovery of Milton Friedman’s main results: an expectations-augmented Phillips Curve and short-run demand effects from monetary policy. The model has two basic equations.... >The first... aggregate demand... based on an... assumption about how households behave in response to changes in the rate of interest. Unfortunately, not only does the equation not fit the data, the sign of the main coefficient appears to be wrong. This is likely because, rather than trying to understand the emergent properties of many interacting agents, modellers took the short-cut of assuming that the one big person assumed to represent the economy would simply replicate the behaviour of a single textbook-rational individual—much like assuming that the behaviour of an ant colony would be the same as that of one big textbook ant. It’s hard to see how one can make an argument that this has advanced knowledge beyond what you could glean from a straightforward Keynesian or Modigliani consumption function.... >[The second,] the Phillips...



Greg Leiserson Has Been on Fire This Fall...

2017-11-18T16:27:59-08:00

Attracting him a very great move by , I must say... Greg Leiserson has been killing it on tax policy this late summer and fall, most notably with [The Tax Foundation’s score of the Tax Cuts and Jobs Act](http://equitablegrowth.org/research-analysis/the-tax-foundations-score-of-the-tax-cuts-and-jobs-act/). But there is lots more good stuff as well: * **Greg Leiserson** (2017-11-09): [The Tax Foundation’s score of the Tax Cuts and Jobs Act](http://equitablegrowth.org/research-analysis/the-tax-foundations-score-of-the-tax-cuts-and-jobs-act/): "First, the Tax Foundation appears to incorrectly model the interaction between federal and state corporate income taxes, thus overstating the effect of statutory rate cuts. Second, the Tax Foundation appears to treat the estate tax as a nondeductible annual property tax paid by businesses, which results in inflated estimates of the effect of repealing the tax. Appropriately addressing the issues raised in this note could reduce the Tax Foundation’s estimate of the increase in GDP that would result from the legislation to 1.9 percent—a reduction of roughly half—even if there are no other issues with the Tax Foundation’s estimates...." * **Equitable Growth** (2017-11-10): [Statement on status of Tax Foundation response to Equitable Growth critique](http://equitablegrowth.org/equitablog/response-to-the-tax-foundation/): "The Tax Foundation has since acknowledged that the interaction between federal and state corporate income taxes in its model is incorrect and stated...




2017-11-18T16:25:18-08:00

**Must-Read**: I think Greg is right here: **on their own terms** the Tax Foundation's calculations look to be twice as big as they ought to be—and, as you know, everybody else involved has very large doubts about whether one should take the Tax Foundation's calculations as proper professional estimates: **Greg Leiserson**: [The Tax Foundation’s score of the Tax Cuts and Jobs Act](http://equitablegrowth.org/research-analysis/the-tax-foundations-score-of-the-tax-cuts-and-jobs-act/): "First, the Tax Foundation appears to incorrectly model the interaction between federal and state corporate income taxes... >...Second, the Tax Foundation appears to treat the estate tax as a nondeductible annual property tax paid by businesses, which results in inflated estimates of the effect of repealing the tax. Appropriately addressing the issues raised in this note could reduce the Tax Foundation’s estimate of the increase in GDP that would result from the legislation to 1.9 percent—a reduction of roughly half—even if there are no other issues with the Tax Foundation’s estimates.... Critical assessment of the Tax Foundation’s analysis is particularly warranted, as some legislators have suggested that they might consider dynamic scores from organizations other than the nonpartisan Joint Committee on Taxation—the traditional source of nonpartisan estimates of congressional tax proposals—in determining the budgetary effects of the legislation....




2017-11-18T08:34:46-08:00

**Must-Read: Brink Lindsey**: [Further thoughts on libertarian anti-democracy](https://twitter.com/lindsey_brink/status/931591616565006343): "Further thoughts by Will on libertarian anti-democracy’s effect on the GOP... >...and a thread with a few thoughts of my own . In Will’s telling, libertarian property rights absolutism moralizes and thereby strengthens other sources of antipathy to democracy on the right. I think that’s right and important, but there’s another channel of influence I want to focus on. It goes like this: property rights absolutism -> “taxation is theft” -> tax-supported governments are illegitimate and indistinguishable from organized crime -> delegitimizing “the state” and exposing its criminality are therefore a necessary precondition for a truly free society. >Buying into this leads straight to “the worse, the better” nihilism. Anything that reduces public confidence in their rulers is a good thing. Declining trust in government (i.e., in democracy) is celebrated as a move in a libertarian direction. >Most self-described libertarians share this mindset to a substantial degree. Such thinking is most pronounced among anarchist libertarians—who, I believe, now dominate the libertarian rank and file thanks to the Ron Paul movement and the Mises Institute. When you think this way, you have no reason to defend the norms and institutions of liberal democracy,...



The Page Which All Discussion of the Trumpublican Tax... "Reform"? "Cut"? "Giveway"? Should Start from...

2017-11-18T07:48:40-08:00

Information from the very sharp **Eric Toder**: [The House Ways and Means Tax Bill Would Raise the National Debt to 123 percent of GDP by 2037](http://www.taxpolicycenter.org/taxvox/house-ways-and-means-tax-bill-would-raise-national-debt-123-percent-gdp-2037): "The Tax Policy Center estimates that the House Ways and Means Committee’s version of the Tax Cut and Jobs Act (TCJA)... >...over the first decade... increases the deficit by 1.7 trillion dollars.... Between 2028 and 2037, the TCJA would reduce net receipts by 1.6 trillion dollars and add 920 billion dollars in additional interest costs. Over the entire 20-year period, the combination of reduced revenues and higher interest payments would raise the federal debt held by the public by 4.2 trillion dollars... This is based on: >the baseline economic and budget estimates in the Congressional Budget Office’s (CBO) March, 2017 long-term and June, 2017 updated 10-year budget projections... But, of course, if the Trumpublican plan is passed, the best forecast of how the economy would evolve would not be the baseline CBO spring 2017 projections, but would be different. How different, and in which direction? The best way to explain what professional economists think is to follow turn-of-the-twentieth-century British economist Alfred Marshall and divided the analysis up into four "runs", each of which corresponds...



Weekend Reading: The 9 Circles of Scientific Hell

2017-11-18T07:47:36-08:00

**Neuroskeptic** (2010): [The 9 Circles of Scientific Hell](http://blogs.discovermagazine.com/neuroskeptic/2010/11/24/the-9-circles-of-scientific-hell/#.WbVxRcaZNE4): "_Dante’s Inferno_: a classic of world literature, the definitive statement of the mediaeval Christian world-view, the first major work in the Italian language, and the basis for a violent videogame... >...The poem offers a tour through the nine increasingly horrible levels of Hell, in which sinners are tormented forever. >But Dante lived before the era of modern science. I thought I’d update his scheme to explain what happens to those guilty of various scientific sins, ranging from the commonplace to the shocking. >Bear in mind that Dante’s Hell had a place for everyone, and it was only Christ’s intervention that saved anyone from it; even “good” people went to Hell because everyone sins. But they are still sins. Likewise, very few scientists (and I’m certainly not one of them) would be able to avoid being condemned to some level of this Inferno… but, that’s no excuse. ---- >**First Circle: Limbo**: “The uppermost circle is not a place of punishment, so much as regret. Those who have committed no scientific sins as such, but who turned a blind eye to it, and encouraged it by their awarding of grants and publications, spend eternity...




2017-11-18T04:51:28-08:00

**Comment of the Day: Howard**: [](http://www.bradford-delong.com/2017/11/should-read-charles-j-sykes-year-one-the-mad-kinghttpwwwnybookscomdaily20171110year-one-the-mad-king.html?cid=6a00e551f08003883401b7c9335a77970b#comment-6a00e551f08003883401b7c9335a77970b): "There are a handful of conservatives... >...jennifer rubin, max boot, bill kristol, john podhoretz, ric wilson, and stuart stevens all quickly come to mind, and i may be missing some - who are going to emerge from the trump years with their heads held high for their willingness to stand up for reality, and sykes is turning out to be one of the most on-the-money...




2017-11-18T04:38:12-08:00

**Should-Read: Jason Fruman**: [On Twitter: "Hahahahahahahahahahahahahahahahahaha..."](https://twitter.com/jasonfurman/status/930852679336775684): "It is hard to know where to start on Treasury's comments on their analysis of dynamic scoring... >...But a few points.... "[Treasury] had published research... spur enough economic growth to offset the deficits..." No it has not. The two reports I am aware of contradict this claim—not producing needed growth even for more radical, paid for plans. . "Treasury will be releasing information on how the tax plan does under various growth rates." Do they think we're idiots? You can already get that from OMB and CBO. . "Mnuchin has worked with the Council of Economic Advisers on growth projections." I love CEA, but they do not have anything resembling the sophistication of models that the Treasury career staff have—which is why Treasury career staff have done this dynamic analysis in the past. "We support transparency". HahahahahahahahahahahahahahahahahahahahahahaHahahahahahahahahahahahahahahahahahahahahahaHahahahahahahahahahahahahahahahahahahahahahaHahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahaha.




2017-11-18T04:17:25-08:00

**Must-Read: Paul Krugman**: [Leprechaun Economics, With Numbers](https://krugman.blogs.nytimes.com/2017/11/09/leprechaun-economics-with-numbers/): "8% is a reasonable number for after-tax required return... >...with a 35% tax rate, this means a pre-tax rate of 12.3%. Cut the tax rate to 20%, and the pre-tax return should fall to 10%. The increment of capital should have a rate of return roughly halfway between, 11.15%. Tax Foundation asserts that capital inflows will be enough to raise GDP more than 3%, which is wildly implausible. But let’s go with it for the sake of argument. This means inflows of around 30 percent of pre-CCC [annual] GDP. So how much does this raise foreign investment income? The answer is, 8% times 30%, or 2.4 percent of GDP out of a GDP rise of 3.45 percent in my example. In other words, the true gain to the US is 1.05%, not 3.45%. That’s a big difference, and not in a good way.... >Even if you believe the whole “we’re a small open economy so capital will come flooding in” argument, it buys you a lot less economic optimism than its proponents imagine...




2017-11-18T04:11:16-08:00

**Should-Read: Paul Krugman**: [Everybody Hates the Trump Tax Plan](https://www.nytimes.com/2017/11/16/opinion/trump-tax-plan-hate.html?action=click&pgtype=Homepage&clickSource=story-heading&module=opinion-c-col-right-region®ion=opinion-c-col-right-region&WT.nav=opinion-c-col-right-region&_r=0): "Gary Cohn, Donald Trump’s chief economic adviser, met with a group of top executives... asked to raise their hands if lower taxes would lead them to raise capital expenditures... >...only a handful did. “Why aren’t the other hands up?” asked Cohn, plaintively. The answer is that C.E.O.s, living in the real world of business, not the imaginary world of right-wing ideologues, know that tax rates aren’t that important a factor in investment decisions. So they realize that even a huge tax cut wouldn’t lead to much more spending. And with that realization, the rationale for this tax plan, such as it is, falls apart, leaving nothing but a scheme to make the rich—especially those who rake in investment income rather than working for a living—richer at everyone else’s expense.... >Their claim is that cutting taxes on corporate profits would lead to an explosion in private investment and faster economic growth.... About that economic growth: Foreign investors would be earning profits and taking them home. So much—probably most—of any growth we would get from cutting corporate taxes would accrue to the benefit of foreigners, not Americans. But don’t worry too much about...




2017-11-18T04:04:24-08:00

**Should-Read: Paul Krugman**: [Days of Greed and Desperation](https://krugman.blogs.nytimes.com/2017/11/17/days-of-greed-and-desperation/?smid=tw-share): "The House tax bill is wildly regressive; the Senate bill actually raises taxes on most families, while including a special tax break for private planes... >...In effect, the GOP is giving middle-class Americans a giant middle finger. What’s going on?... [Perhaps] many Republicans now see themselves and/or their party in such dire straits that they’re no longer even trying to improve their future electoral position; instead, it’s all about grabbing as much for their big donors while they still can.... This calculus is clearest in the case of House members representing the kinds of districts — educated, relatively affluent, traditionally moderate Republican—that went Democratic by huge landslides in Virginia. If 2018 ends up being anything like what now seems likely, these members will need new jobs in 2019 whatever they do—and the best jobs will be as K Street lobbyists.... Their future lies in collecting wingnut welfare, which means that their incentives are entirely to be loyal ideologues even if it’s very much at their constituents’ expense. >The Senate is a bit different; there aren’t a lot of obviously doomed Republicans. But... the next few months [may] be the last chance they...




2017-11-18T03:57:48-08:00

**Must-Read**: As one would expect, Paul Krugman is right here: If the Tax Foundation's model is a good projection of the effects of the Trumpublican tax cut for the rich, it would indeed reduce manufacturing employment by around 2.5 million". Now it is highly unlikely that it would do that—a tenth of that number would be more on the mark. IMHO, take the Tax Foundation's claims about the bill and divide the benefits by 10—and recognize that the Tax Foundation does not assess the costs of the bill at all: **Paul Krugman**: [Tax Cuts and The Trade Deficit](https://krugman.blogs.nytimes.com/2017/11/14/tax-cuts-and-the-trade-deficit/?_r=0): "TF provides very little detail on their model, which is itself a flashing red light: transparency is essential... >...But... read in a ways, there’s a table.... >In... a decade... the U.S capital stock will be 9.9% bigger than it would otherwise have been. Where do the savings for that increase in capital come from? Since there’s nothing in the bill that would increase domestic savings—on the contrary, the budget deficit would reduce national savings—they come from inflows of foreign capital... extra... trade deficits... more than $600 billion a year. Somehow, TF isn’t advertising that point.... Mainly it would come from manufacturing.... The...



For the Weekend: Stephen Vincent Benet: The Devil and Daniel Webster XII

2017-11-18T03:41:20-08:00

**For the Weekend: Stephen Vincent Benet**: The Devil and Daniel Webster XII : "Walter Butler rose in his place and his face had a dark, gay pride on it... >..."The jury has considered its verdict," he said, and looked the stranger full in the eye. "We find for the defendant, Jabez Stone." >With that, the smile left the stranger's face, but Walter Butler did not flinch. >"Perhaps 'tis not strictly in accordance with the evidence," he said, "but even the damned may salute the eloquence of Mr. Webster." >With that, the long crow of a rooster split the gray morning sky, and judge and jury were gone from the room like a puff of smoke and as if they had never been there. The stranger turned to Dan'l Webster, smiling wryly. "Major Butler was always a bold man," he said. "I had not thought him quite so bold. Nevertheless, my congratulations, as between two gentlemen." >"I'll have that paper first, if you please," said Dan'l Webster, and he took it and tore it into four pieces. It was queerly warm to the touch. "And now," he said, "I'll have you!" and his hand came down like a bear trap on...




2017-11-17T07:45:25-08:00

**Comment of the Day**: I have evoked some rants from Robert Waldmann... **Robert Waldmann**: [Monday Smackdown: Oh Dear!](http://www.bradford-delong.com/2017/11/monday-smackdown-oh-dear.html?cid=6a00e551f08003883401b8d2bf205d970c#comment-6a00e551f08003883401b8d2bf205d970c): "It isn't exactly Robert Waldmann's critique... >...In 1982 someone told me that he thought macroeconomics had taken a wrong turn and commenced a sterile research program which would last decades and be fruitless. That's a lot more impressive than saying such a thing now. >Who was that guy? Oh yeah, his name was Brad DeLong. >He was explaining why he had chosen history and econometrics as fields. >Experiments? Bah, humbug! >I don't know where to put this, but I have a theory as to why people call simulations experiments: If you are dealing with something you don't understand, you attempt to learn how it works with experiments. The perception that theoretical work assisted by computers is experimental is due to the fact that no one understands what drives the behavior of modern DSGE models. >This is one of their defects. One use of a model is to clarify thought. A model which is mysterious like a cell (or an economy) can't clarify thought. If you need to do numerical experiments to understand the behavior of your model, it has failed one of...




2017-11-17T06:17:18-08:00

**Should-Read: Martin Wolf**: [A bruising Brexit could shipwreck the British economy](https://www.ft.com/content/e09d1f88-c9fe-11e7-ab18-7a9fb7d6163e): "The UK economy remains the most regionally divided in Europe... >...Inner London is the richest region in Europe. The other regions (apart from the rest of London and the southeast) are far poorer.... Gross domestic product per head has also only regained pre-crisis levels in London and the southeast.... Various categories of insecure work have greatly increased. In 2016, for example, 2.8 per cent of all people in employment were on zero-hours contracts.... It must be hard for people working under such contracts to have much control over their lives. >The UK’s level of inequality is among the highest in Europe.... People might wonder, given UK performance, what these business leaders have done to justify such huge increases. They might also point to the facts that the UK’s average productivity per hours worked is among the lowest among high-income countries and, still worse, productivity has flatlined since the crisis.... Last, but not least, on this list of failings, UK investment is exceptionally weak.... Spending on research and development is also relatively weak.... This is not a vigorous and healthy economy well able to take the shock of substantially worse...




2017-11-16T18:35:57-08:00

**Should-Read: Matthew Yglesias**: [Watch CEOs admit they won’t actually invest more if tax reform passes](https://www.vox.com/policy-and-politics/2017/11/15/16653698/ceos-investment-tax-reform): "A telling and important moment... >...Awkward.... John Bussey... asks the CEOs in the room, “If the tax reform bill goes through, do you plan to increase investment—your companies’ investment—capital investment,” and requests a show of hands. Only a few hands go up, leaving Cohn to ask sheepishly, “Why aren’t the other hands up?” The reason few hands are raised is there’s little reason to believe that the kind of broad corporate income tax cut Republicans are pushing for will induce much new investment. A tax plan that was specifically designed to reduce taxation of new investments might do that. But most corporate profits are, of course, the result of activities undertaken in the past. So a broad cut in corporate tax rates is a windfall for what in tax policy jargon is called “old capital,” as well as for monopoly and quasi-monopoly rents and various other things that have nothing to do with incentivizing new investment. >The biggest immediate winners, in fact, would be big, established companies that are already highly profitable. Apple, for example, would get a huge tax cut even though the company’s...




2017-11-16T18:22:45-08:00

**Comment of the Day**: [Six Faces of Right-Wing Chain-Forging Economist James Buchanan...](http://www.bradford-delong.com/2017/11/six-faces-of-right-wing-chain-forging-economist-james-buchanan.html): It's by, well, me: What seems to me a very strange comment on Twitter from Henry Farrell , who appears to deny that he (and Steve Teles) bend over backwards to be "fair" to Buchanan, while providing no such charity to McLean: >As I read our essay, our positive claims are (1) that public choice has some intellectual value and (2) that Buchanan saw himself as engaged in a project of counter-entrenchment. For the rest, we extend to Buchanan only that minimal form of intellectual generosity we'd all like-that when someone is accused of looking to protect the Southern way of life against the civil rights movement, masterminding Pinochet's constitution, & being the sinister intellectual Svengali behind the rise of the anti-democratic right, one would like to see supporting evidence. >As we explicitly note in the essays, we would not at all be discomfited if evidence emerged showing that either Buchanan or other public choicers had problematic views or pasts-on the basis of my run-ins with Charles Rowley, I know that there is a lot of nutty thinking there. But basic standards of intellectual argument demand that if...




2017-11-16T17:50:20-08:00

**Must-Read**: @dashching seems like an unhappy camper today—unhappy with the Tax Foundation setting forth a model that (a) they know is inaccurate even on their own methodologies, and (b) based on a methodology—that the medium-run drag on growth from a larger deficit does not exist—that I do not believe can be defended in a professional manner: **Chye-Ching Huang**: [@dashching on Twitter](https://twitter.com/dashching/status/931207023596900352): "A Tax Foundation dynamic score that no-one should pay any attention to an indication of what this bill would do for growth... >...Two major problems: >1. Unlike mainstream models, the Tax Foundation's ignores deficits. Would be very strange for lawmakers concerned about deficits to rely on a model that ignores them . >2. Further, @gregleiserson has identified two major *additional* conceptual errors with the model , that don't seem fully resolved. These are not errors modeling specific proposals, but affect the model's results, *every time* it runs...




2017-11-16T17:28:47-08:00

**Should-Read: Douglas L. Campbell**: [Ancestry and Development: the Power Pose of Economics?](http://douglaslcampbell.blogspot.ru/2017/11/ancestry-and-development-power-pose-of.html): "George Mason... asked me to present my work joint with Ju Hyun Pyun, taking down the "genetic distance to the US predicts development"... >...This has evolved into an Amy Cuddy "Power Pose" situation, in which Spolaore and Wacziarg refuse to admit that there is any problem with their research, and continue to run income-level regressions and write papers using genetic distance which do not include a dummy for sub-Saharan Africa, but exclude that region instead.... The remaining question is how robust the genetic distance-development relationship is in Europe. In fact, there is already a paper, by Giuliano, Spilimbergo, and Tonon, saying that the impact of genetic distance on both trade and GDP in Europe is not robust.... The early drafts of that paper also said something about GDP in Europe, while the published version stripped out GDP precisely because the referees—likely Spolaore or Wacziarg—wouldn't allow it.... >Wacziarg has now posted regressions on his website used by this referee, so I gather that he must be the author... had some very choice words for this paper... "Giuliano, Spilimbergo and Tonon, the authors of this paper are clearly referring to...




2017-11-16T17:24:37-08:00

**Should-Read**: The point, though, of being a party of cultural grievance-mongers catering to symbolic and social recognition ethno-sectarian demands is that one can also, on the side as it were, enrich plutocrats. As Lyndon Johnson said in Bill Moyers's hearing: "If you can convince the lowest white man he's better than the best colored man, he won't notice you're picking his pocket. Hell, give him somebody to look down on, and he'll empty his pockets for you..." This has been going on since the 1890s... hell, the 1870s... hell, the 1810s. It used to be the business model of the Royalist wing of the Southern Democratic Party. Now it is the business model of the Republican Party. The interesting thing is that they do not seem able to execute it very well: **Matthew Yglesias**: [Republicans should admit to themselves they mostly don’t want big change](https://www.vox.com/policy-and-politics/2017/11/3/16596440/republicans-change): "It’s a cranky old person party, not a policy visionary party... >...Republicans are mostly a party of cultural grievance-mongers, not ambitious legislators. That’s why Donald Trump is their president. That’s why they don’t seem to notice or care that Paul Ryan is a total fraud. They’d be a lot happier if they just owned it....




2017-11-16T17:21:12-08:00

**Comment of the Day: Erik Lund**: [The Robert Heinlein Wars, Part MDCCLXIV: Hoisted from 2006](http://www.bradford-delong.com/2017/10/the-robert-heinlein-wars-part-mdcclxiv-hoisted-from-2006.html?cid=6a00e551f08003883401b8d2b4cc69970c#comment-6a00e551f08003883401b8d2b4cc69970c): "It's pointless to read Heinlein through a political lens. He was a narcissist; it's all about him... >...Starship Troopers was written for Heinlein's Scribner's contract. He was supposed to produce an annual juvenile novel for the Christmas season. The novel was written in a hurry, submitted too late for editorial revision, and rejected by his long-time editor, Alice Dalgleish, sometimes mischaracterised as a blue-stocking prude. (Well, I suppose she could have been; LGBTQs can be prudes, after all.) >With the rejection, Heinlein was free to shop Starship Troopers around. Later, he characterised this as his plan, all along. He was tired of juveniles. (Except that he returned to the well with Putnam in Podkayne in 1963.) >So what else might have been going on in Heinlein's mind? Many of Heinlein's early books were dedicated to family members; but ST is dedicated to a a crazy guy who was lobbying to get the United States to redeclare war on North Korea and save his son from the sekrit Commie prison camp he was sure the boy was in. (You may recall this as a background point...




2017-11-16T17:16:19-08:00

**Should-Read: Nick Bunker**: [The forces behind the highly unequal U.S. wealth distribution](http://equitablegrowth.org/equitablog/value-added/the-forces-behind-highly-unequal-u-s-wealth-distribution/): "Two papers... give us some guidance on the forces that have led to such an unequal wealth distribution in the United States... >...Jess Benhabib and Alberto Bisin... an overview of previous research... three broad mechanisms or explanations that have been the focus of previous research and consider how much they could help explain this “fat tail” of wealth.... The first mechanism deals with income inequality and how that arises from shocks to individuals’ earnings. The second is related to capital income risk, or differences in the rate of return on investments at different levels of wealth. The third factor is “explosive” wealth accumulation.... >Benhabib, Bisin, and Mi Luo (also of NYU), is an attempt to parse out the influences of these three factors on U.S. wealth distribution.... Differences in the rate of return on capital and in savings rates are the main factors explaining the distribution of wealth in the United States. As suggested by the first paper, the differences in income caused by shocks don’t explain much—though shocks do contribute significantly to mobility up and down the rungs of the wealth ladder. The differences in savings rates—documented...




2017-11-16T16:58:14-08:00

**Comment of the Day**: "Praise then darkness and creation unfinished"; "praise the fire and the impulse of making"; isn't there another large, very densely-written book by now? **Graydon**: [](http://www.bradford-delong.com/2017/11/a-very-nice-essay-on-sexual-morality-from-elizabeth-bruenig-but-it-could-have-been-shorter.html?cid=6a00e551f08003883401bb09d68667970d#comment-6a00e551f08003883401bb09d68667970d): ""Good" is a value judgement, subject to context and hindsight, and it's subject to hindsight forever... >...There are a whole bunch of things even in Christianity about this -- "we do not presume to come to this thy table, O merciful Lord, trusting in our own righteousness" -- that a whole lot of people clinging to morals over material consequences could do with considering. (Similarly the really very trivial observation that morals do not and cannot scale to large groups; this is why prophets have railed against cities for such a very long time. A working city is not run on the basis of morals. If there are no working cities, there is no economy.) >"Praise ice when it is crossed, ale when it is drunk, a ship returned to harbour, a friend on the pyre..." Moral judgements happen, when it is possible for them to happen, afterwards, in difficulty, in complexity, and -- none of us being divine beings -- in doubt. >Everyone is always responsible for everything they do....




2017-11-16T10:54:10-08:00

**Must-Read**: Noah Smith gets this 100% right, IMHO **Noah Smith**: [On Twitter @noahpinion](https://twitter.com/Noahpinion/status/931200696900128768): "Nasty tweets are like nasty blog comments... >...My feed is like a blog. And because Twitter has no way to delete or moderate individual tweets, blocking is the only option for curation.... >Blocking isn't for my own benefit. It's to protect my timeline and my followers from people who just come to disrupt conversation and create unnecessary bad feelings!... [People muted] still respond to my tweets and engage with my followers, this disrupting the friendly, positive community I want to create in my timeline... Now it is time for 560 to make it even more like a weblog!



Six Faces of Right-Wing Chain-Forging Economist James Buchanan...

2017-11-16T09:34:18-08:00

Six Faces of Right-Wing Chain-Forging Economist James Buchanan... Steven Teles inquired why I liked Will Wilkinson's essay [How Libertarian Democracy Skepticism Infected the American Right](https://niskanencenter.org/blog/libertarian-democracy-skepticism-infected-american-right/) much more than I liked **Henry Farrell** and **Steven Teles's** essays [When Politics Drives Scholarship](http://bostonreview.net/class-inequality/henry-farrell-steven-m-teles-when-politics-drives-scholarship) and [Even the intellectual left is drawn to conspiracy theories about the right. Resist them](https://www.vox.com/the-big-idea/2017/7/14/15967788/democracy-shackles-james-buchanan-intellectual-history-maclean) as takes on **Nancy McLean's** Democracy in Chains ... I must confess that I **was** struck by the contrast between the, on the one hand, enormously generous hermeneutic through which [Steve Teles and Henry Farrell] read James Buchanan and the, on the other hand, ungenerous hermeneutic through which [they] read Nancy McLean.... I see at least six James Buchanans: 1. The brilliant academic thinker behind the genius insights of Calculus of Consent . It is worth noting that the framework underlying _CoC_ with its emphasis on unanimity at the constitutional stage for _any_ regime that can be just or justified, has a profoundly egalitarian and even Rawlsian bent—a bent that becomes stronger the thinner you make the veil of ignorance and the more averse to risk you make the people behind it. Thus the fact that Buchanan deduces a profoundly anti-egalitarian politics and built from...




2017-11-16T06:24:26-08:00

**Should-Read: Krystal Ball and Ro Khanna**: [Lessons for Democrats after Virginia election and how tech can help](http://www.businessinsider.com/lessons-for-democrats-virginia-election-tech-2017-11): "Given modern communications technology, there’s no reason why good jobs in the new economy should be sequestered in a few hubs... >...The greatest challenge to shared prosperity may well be psychological.... Krystal recently accompanied Richard Ojeda... from West Virginia, to Ro’s district for a fundraising event. In a room full of tech leaders, executives and entrepreneurs, Richard said something simple but powerful: “You know, we have smart people in West Virginia too.”... All of us need to do a better job harnessing the work ethic and sense of pride that is present in communities across America and empowering those communities to shape their own economic destiny. To borrow a Silicon Valley phrase, we need distributed networks for jobs. >Unless we integrate every community back into our national economy, we will not succeed in keeping this whole project we call America stitched together. And unless the Democratic Party offers a plan for economic opportunity for twenty-first century jobs in places left behind, we will not earn a governing majority...




2017-11-15T16:16:34-08:00

**Should-Read: Noah Smith**: [The "cackling cartoon villain" defense of DSGE](http://noahpinionblog.blogspot.com/2017/11/the-cackling-cartoon-villain-defense-of.html): "The new defense of DSGE by Christiano, Eichenbaum, and Trabandt is pretty cringe-inducing... >...reads like a line from a cackling cartoon villain. "Buahahaha, you pitiful fools" kind of stuff. It's so silly that I almost suspect Christiano et al. of staging a false-flag operation to get more people to hate DSGE modelers.... Calling DSGE critics "dilettantes" was a bad move. By far the best recent critique of DSGE (in my opinion) was written by Anton Korinek of Johns Hopkins. Korinek is a DSGE macroeconomist. He makes DSGE models for a living. But according to Christiano et al., the fact that he thinks his own field has problems makes him a "dilettante."... >Dismissive snorting is... a bad look. Why? Because declaring that outsiders are never qualified to criticize your field makes you look insular and arrogant. Every economist knows about regulatory capture. It's not much of a leap to think that researchers can be captured too -- that if the only people who are allowed to criticize X are people who make a living doing X, then all the potential critics will have a vested interest in preserving the status quo.......




2017-11-15T16:11:10-08:00

**Live from the U.S. Mint**: I would pay to watch whatever movie these pictures are publicity stills for!:




2017-11-15T15:16:56-08:00

**Note to Self**: Malthusian Growth Epoch Differential Equations—Analytic: **Principal Reference**: **Mark Koyama**: [Could Rome Have Had an Industrial Revolution?](https://medium.com/@MarkKoyama/could-rome-have-had-an-industrial-revolution-4126717370a2) ---- ## Quantifying "Two Heads Are Better than One" Let us take four cases as possible rough descriptions of the agrarian age from 5000 BCE to 1500 CE. Note that all of these apply _only_ during the agrarian age Malthusian epoch. They are irrelevant and do not apply during the previous pre-agriculture, pre-herding, pre-writing gatherer-hunter age. They are irrelevant and do not apply during the subsequent commercial age, when it did or whenever it would have started. They are: 1. Two heads are better than one, and twice as good as one: the rate of technological and organizational progress might be proportional to the global population. 2. While two heads are better than one, each of us has only a limited amount of time to listen; The rate of technological and organizational progress might be proportional to the square root of the global population. 3. While two heads are better than one, we really are far from being a true anthology intelligence: each doubling of the population only does as much to advance inmeaning that the rate of technological and organizational...



Shiller CAPE Is Currently Pricing in One Great Recession Every Decade

2017-11-16T09:41:13-08:00

**Note to Self**: Spent the Berkeley Econ faculty lunch talking to Yuriy Gorodnichenko, Pierre-Olivier Gourinchas, St. Matthew the Greater, Dmitriy Sergeyev, and a couple of others about a very wide range of topics, ending with r-star (which Yuriy has to discuss Saturday at the Clausen [Center Conference](http://clausen.berkeley.edu/event/ccc2017/)). I left the conversation desperate to figure out how Shiller's stock-market CAPE index which currently suggests substantial stock market valuation even with a low fundamental safe real interest rate r-star is affected by the low earnings of the crisis years 2008-2011... Yes, it makes a significant difference: Replacing actual earnings from 2007 on with just flat real earnings until actual earnings catch up knocks the Alternative CAPE index down by 5, from higher than any time save during the High Dot-Com Bubble to lower than during the 1995-2007 part of the Great Moderation era. Taking Shiller CAPE at face value means that your idea of stock market fundamentals is currently pricing in one Great Recession every decade. If you do not believe that, you should not take Shiller CAPE at face value... ---- Data: Notebook: ---- # set up function to import data as a pandas time series dataframe object import pandas as...




2017-11-14T15:27:47-08:00

**Should-Read: Jasjeet S. Sekhon**: [Causal Inference in the Age of Big Data](https://bids.berkeley.edu/events/causal-inference-age-big-data): "The rise of massive datasets that provide fine-grained information about human beings and their behavior offers unprecedented opportunities... >...for evaluating the effectiveness of social, behavioral, and medical treatments. With the availability of fine-grained data, researchers and policymakers are increasingly unsatisfied with estimates of average treatment effects based on experimental samples that are unrepresentative of populations of interest. Instead, they seek to target treatments to particular populations and subgroups. Because of these inferential challenges, Machine Learning (ML) is now being used for evaluating and predicting the effectiveness of interventions in a wide range of domains from technology firms to clinical medicine and election campaigns. >However, there are a number of issues that arise with the use of ML for causal inference. For example, although ML and related statistical models are good for prediction, they are not designed to estimate causal effects. Instead, they focus on predicting observed outcomes. Treatment effects, however, are never directly observed, and creating validation datasets where ground truth is known is difficult. Such validation is of particular importance because although ML algorithms have been designed to overcome prediction challenges when the data generating process is...




2017-11-14T14:28:52-08:00

**Should-Read: Lant Pritchett**: [The Perils of Partial Attribution: Let’s All Play for Team Development](https://www.cgdev.org/publication/perils-partial-attribution-lets-all-play-team-development): "There was a growth acceleration in 1993 that created 1.1 trillion in additional GDP... >...Then, there was another growth acceleration in 2002 that created another 2.5 trillion in GDP (over and above the previous). Together, relative to the “business as usual” trajectory there has been 3.6 trillion dollars in gain (this cumulative additional GDP is larger than the annual total of the UK or France of about 2.8 trillion). >What caused this additional gain? Of course, no one is really sure exactly what it was and how to parse out the factors and simplistic (e.g. “trade reform”) explanations are almost certainly, well, simplistic. But something did happen and it almost certainly had to do with deft handling of the macro-economy plus a well-executed shift in strategy towards greater reliance on markets and more openness to the global economy (which is not saying that “laissez faire” was the answer or that India turned into a “neo-liberal” state). >Who caused this additional gain? In order to achieve a national policy shift there were of course hundreds, if not thousands of people who participated in producing evidence, disputing explanations...




2017-11-07T13:46:01-08:00

**Should-Read: Equitable Growth**: [Jobs Day Graphs: October 2017 Report Edition](http://equitablegrowth.org/equitablog/equitable-growths-jobs-day-graphs-october-2017-report-edition/): "After an increase in September, the prime employment rate fell slightly to 78.8 percent in October... >...Even with an unemployment rate just above 4 percent, the labor market won’t be at full employment until the employment rate further strengthens...




2017-11-14T14:18:56-08:00

**Should-Read: Matteo Maggiori, Brent Neiman, and Jesse Schreger**: [International Currencies and Capital Allocation](http://events.berkeley.edu/index.php/calendar/sn/econ.html): "The external wealth of countries has increased dramatically over the last forty years... >...Much is still unknown about trillions of dollars of capital allocated across the globe. Using a novel security-level dataset covering more than $27 trillion of global securities portfolios we find that the structure of global portfolios is driven, at both the macro and micro level, by an often neglected aspect: the currency of denomination of the assets. If a bond is denominated in the currency of one particular country, then investors based in that country tend to own the vast majority of that bond. This implies that the much-studied home bias in bonds is instead mostly currency bias. >Foreigners' portfolios are very different from domestic portfolios: foreigners only finance a subset of domestic firms, those that issue bonds in the foreigners' currency. The dollar and the euro are exceptions to this pattern, with companies in the US and EMU uniquely able to place local currency bonds in foreign portfolios. We uncover a large and pervasive shift in the use of these international currencies starting around the 2008 financial crisis. Cross-border portfolio holdings have starkly...




2017-11-14T12:47:18-08:00

**The Robot Uprising Is Near**: Berkeley's Blum Center Building wants me to pay with Apple Pay in order for me to enter itself... ---- **Vernor Vinge**: A Fire Upon the Deep: "How could this happen?... >...A million schedules were suddenly advanced. An orderly flowering was out of the question now, and so there was no more need for the humans left in the Lab. The change was small for all its cosmic significance. For the humans remaining aground, a moment of horror, staring at their displays, realizing that all their fears were true (not realizing how much worse than true). Five seconds, ten seconds, more change than ten thousand years of a human civilization. A billion trillion constructions, mold curling out from every wall, rebuilding what had been merely superhuman. This was as powerful as a proper flowering, though not quite so finely tuned...