J. Bradford DeLong's Blog, page 102

Perhaps the most interesting thing to happen in political...

Perhaps the most interesting thing to happen in political economy over the summer was the American Business Roundtable's declaration that it no longer believed in "shareholder primacy". "Shareholder primacy" is the doctrine that a corporation's managers have a twofold and only twofold duty: (1) obey the law, and (2) maximize the stock market value possessed by its shareholders. All other considerations are, according to "shareholder primacy" not the proper business of the corporation: rather, they are the business of the government officials who make the laws and write the regulations to enforce them, the politicians who compete to boss the government officials, and the voters who elect them. The alternative view was always that shareholders were just one of the groups of stakeholders, albeit one of the most important groups by virtue of their status as residual claimants and their powers to choose corporate officers, whose interests were to be advanced and balanced. Here my old teacher Mike Spence has smart things to say about the possible advantageous consequences that opening the door to the possibility of moving away from "shareholder primacy" might produce:

Michael Spence: The End of Shareholder Primacy? https://www.project-syndicate.org/commentary/shareholder-vs-multi-stakeholder-model-by-michael-spence-2019-08: "An even more exciting feature of the shift toward socially conscious corporate governance is that it opens the door for new, more creative business models.... Alibaba [was founded with the goal of expanding market access for small and medium-size companies... [and] remain[s] committed.... Mukesh Ambani... identified Reliance���s stakeholders as the 'Indian economy, Indian people, our customers, employees, and shareowners'.... Digital technologies tend to come with high fixed costs, but low to negligible variable costs. Once established, a firm like Alibaba or Jio can thus provide a platform for countless other business models built around social objectives. And this effect is especially powerful in potentially large markets like China, India, Indonesia, Brazil, and the United States. The Business Roundtable���s recent declaration represents a major step forward for the multi-stakeholder model. The example set by industry leaders matters. And it is no accident that some of today���s most successful global companies were explicitly conceived and built on the basis of multi-stakeholder values...

#noted #2019-10-19

Comment of the Day: Graydon https://www.bradford-delong.c...

Comment of the Day: Graydon https://www.bradford-delong.com/2019/10/richard-grabowski-2002-_east-asia-land-reform-and-economic-development_-in-trying-to-explain-the-economic-success.html?cid=6a00e551f0800388340240a4dbfad3200b#comment-6a00e551f0800388340240a4dbfad3200bre "It is hard for an economist using an economic perspective to understand why landlords or the landed elite would have an innate tendency to be an obstacle to long-run economic development": "Because they're in a position of power and seriously dependent on things not changing. Farms are a big lump of capital, but it's relatively static capital; you can't change your type of output on anything less than multi-year timescales, and that involves a lot of liquid capital you don't generally have. So a landed aristocracy with its income and relative social position dependent on having got their static capital just so does not want change and will do what it can to prevent such a thing. (The US does not lack for examples.) Consider the views of canal owner/operators with respect to railroads from 1840 through about 1860 in the US; the canal is an analogous type of capital...

#commentoftheday #2019-10-19

My friend Jason Furman keeps telling me that the Obama Ad...

My friend Jason Furman keeps telling me that the Obama Administration sincerely sought throughout its tenure in office to boost employment in America via expansionary fiscal policy. I agree that Jason did. But the administration? No. When Jason and company could win internal fights, yes. But otherwise the Obama Administration seemed to me to be focused on winning the day's media narrative, and if dingbat kabuki moves that were destructive of employment growth could attain that daily goal, they were gleefully and joyfully embraced���even if they were pointlessly cruel to those4 on whom the success of the Obama Administration rested. For example:

Jack Lew (November 29, 2010): Tightening Our Belts https://obamawhitehouse.archives.gov/blog/2010/11/29/tightening-our-belts: "To lay the foundation for long-term economic growth and to make our nation competitive for years to come, we must put the United States back on a sustainable fiscal course. And that���s going to require some tough choices. Today, the President made one of those: proposing a two-year pay freeze for all civilian federal workers. This will save�� 2 billion over the remainder of this fiscal year, 28 billion in cumulative savings over the next five years, and more than 60 billion over the next 10 years. The freeze will apply to all civilian federal employees, including those in various alternative pay plans and those working at the Department of Defense ��� but not military personnel.... Make no mistake: this decision was not made lightly. Like everyone honored to serve in the White House or the Cabinet, we work with extraordinarily talented public servants every day.... Indeed, anyone who has flown safely, enjoyed our national parks, received a Pell grant to go to college, or relied on a Social Security check to retire in dignity has benefited from the service of federal workers. This pay freeze is not a reflection on their fine work. It is a reflection of the fiscal reality that we face: just as families and businesses across the nation have tightened their belts, so must the federal government...

#noted #2019-10-19

Once again, we have a piece by an impressively credential...

Once again, we have a piece by an impressively credentialed academic Republican economists that seems to me to have... no contact with reality. There is no economist I know of save for Robert Barro who has ever said or implied that the "neutral" real interest rate today is the same 2.4% that the average real interest rate was from 1986-2008. To the contrary, there has been a very long and active discussion���led over the past two decades by current New York Fed President John Williams���about how far the "neutral" rate has fallen, and how persistent that fall will be. And one conclusion of that debate has been that the current real federal funds rate of "only 0.7%" does indeed look "high" by some important metrics. So why would anyone write as thought this literature does not exist?:

Robert J. Barro: Is Politics Getting to the Fed?: "From the early 1980s until the start of the financial crisis in September 2008, the US Federal Reserve seemed to have a coherent process for adjusting its main short-term interest rate, the federal funds rate. Its policy had three key components: the nominal interest rate would rise by more than the rate of inflation; it would increase in response to a strengthening of the real economy; and it would tend toward a long-term normal value. Accordingly, one could infer the normal rate from the average federal funds rate over time. Between January 1986 and August 2008, it was 4.9%, and the average inflation rate was 2.5%.... The Fed���s prolonged low-interest-rate policy, which was supplemented by quantitative easing (QE), seems misguided, considering that the economy had long since recovered, at least in terms of the unemployment rate. The nominal federal funds rate was not placed on an upward trajectory until the end of 2016.... It is hard to view today���s nominal federal funds rate of 2.4% as high. With an inflation rate of 1.7%, the real federal funds rate is only 0.7%. And yet the Fed���s ���high���-interest-rate policy was fiercely attacked by Wall Street.... That view is not crazy if you are focused solely on boosting the stock market. On average, interest-rate cuts do tend to stimulate the stock market by making real returns on bonds less competitive. But that does not mean it is good economic policy always to be cutting rates...

#noted #2019-10-19

Alan Levin and Ryan Beene: Boeing Pilot Expressed Worries...

Alan Levin and Ryan Beene: Boeing Pilot Expressed Worries About 737 Max Safety in 2016 https://www.bloomberg.com/news/articles/2019-10-18/faa-says-boeing-was-tardy-in-turning-over-737-max-evidence?srnd=premium: "FAA chief, in letter, demands explanation from planemaker. Pilots were alarmed by performance of MCAS feature on jet: The November 2016 instant messages, which were reviewed by Bloomberg News, were exchanges between Mark Forkner, then Boeing���s chief technical pilot for the 737, and another 737 technical pilot, Patrik Gustavsson. In the messages, Forkner described his alarm at simulator tests in which he encountered troubling behavior of the automated flight control system implicated in the two fatal crashes. Boeing had earlier assured the aviation regulator that the feature known as Maneuvering Characteristics Augmentation System was benign and didn���t need to be included in the plane���s flight manuals, according to a person familiar with the issue. Forkner told Gustavsson that MCAS was 'running rampant in the sim on me', referring to simulator tests of the aircraft. Forkner expressed concern that he may have unknowingly misled the FAA. 'So I basically lied to the regulators (unknowingly)', he wrote.... 'I���m levelling [sic] off at like 4000 ft, 230 knots and the plane is trimming itself like craxy [sic]', Forkner said. 'I���m like, WHAT?'... After Forkner said he was concerned about misleading regulators, Gustavsson replied that 'it wasn���t a lie, no one told us that was the case'. 'I don���t know, the test pilots have kept us out of the loop', Gustavsson said. Forkner replied, 'they���re all so damn busy, and getting pressure from the program'...

#noted #2019-10-18

Wikipedia: Ragnar Lodbrok https://en.wikipedia.org/wiki/R...

Wikipedia: Ragnar Lodbrok https://en.wikipedia.org/wiki/Ragnar_Lodbrok: "According to traditional sources, Ragnar (possibly as a literary composite) was: (a) married three times, to the shieldmaiden Lagertha, the noblewoman Th��ra Borgarhj��rtr and Aslaug (also known as Kr��ka, Kraba), a Norse queen; (b) the father of historical Viking figures including Ivar the Boneless, Bj��rn Ironside, Halfdan Ragnarsson, Hvitserk, Sigurd Snake-in-the-Eye, and Ubba; (c) captured by King ��lla of Northumbria and died after ��lla had him thrown into a pit of snakes; and (d) avenged by the Great Heathen Army that invaded and occupied Northumbria and adjoining Anglo-Saxon kingdoms...

#noted #2019-10-18

On the Word "Growth"...

"Growth" is a word borrowed from the Norse gro��i, the process of vegetation becoming green and becoming larger. In the later 800s, you see, England was invaded by an army of Danes. This Great Heathen Army's leaders wanted to avenge the execution by being thrown into a pit of poisonous snakes of their father Ragnar Lothbrok���Ragnar "Furry Pants", supposedly because he had successfully fought a giant snake while wearing furry pants that the snake could not bite through. The sons of Ragnar were: Ivar the Boneless (or Legless?), Bj��rn Ironside, Sigurd Snake-in-the-Eye, Halfdan Ragnarsson King of Dublin, Hvitserk, and Ubba. (Halfdan and Hvitserk may have been the same person���Hvitserk means "white shirt" and would thus be much more appropriate as a nickname like "Boneless", "Ironside" or "Snake-in-the-Eye".

No, I do not know why Ubba does not have a colorful nickname.

At least some of these sons of Ragnar were also the sons of Aslaug the witch-woman, Ragnar's third wife.

Aslaug was supposedly the daughter of Siegfried (or Sigurd) the Volsung, called Fafnir's-bane because he killed the genuine dragon Fafnir. Fafnir had become a genuine dragon because he was excessively greedy for the cursed gold���especially the cursed gold ring���of the Rhine. Loki had tricked the dwarf Andvari into giving him the gold, which Loki had then had to give to Fafnir's family in order to repay them and thus free himself, Hoenir, and Odin from the obligation incurred by Loki's thoughtlessly killing Fafnir's brother Otter with a thrown stone while Otter was in his shape-changed shifter form of, well, an otter.

Aslaug was supposedly also the daughter of Brunhilda, who was either (a) the favored valkyrie of Odin, one of those who carried the souls of the brave warrior dead to Valhalla in Asgard, where they feasted and trained for their task as Odin's army when Armageddon should come; (b) queen-regent of the Frankish kingdom of Austrasia and the Burgundian kingdom of Burgundy from 575-613; and/or (c) the favorite sister of Attila the Hun (406-53), who brought the wrath of the Huns down on the Burgundians after their leaders had treacherously murdered her husband Siegfried (or Sigurd), who could understand the speech of the birds because he had eaten Fafnir's heart.

History... myth... mythestery

We do know that in 436-7 the Roman General Flavius Aetius used imperial silver and his personal contacts with the Huns among whom he had lived as a hostage when young to induce the Huns to destroy the Burgundian kingdom then located near Wurzburg, after which he resettled the survivors around Lyons. We do know that Alfred the Great the Anglo-Saxon King of Wessex and Guthrum the Danish King of East Anglia agreed that the line Liverpool-Windsor-Margate would separate their kingdoms and that Anglo-Saxon law would prevail to the southwest and Danish law to the northeast. We do know that Late Old English emerged in the 800s and 900s as a creole of Anglo-Saxon and Old Norse.

And so "growth" became a word we use...

Cf.: Vikings https://en.wikipedia.org/wiki/Vikings_(2013_TV_series), The Last Kingdom https://en.wikipedia.org/wiki/The_Last_Kingdom_(TV_series), Tale of Ragnar's Sons https://en.wikipedia.org/wiki/Tale_of_Ragnar%27s_Sons, Tale of Ragnar Lodbrok https://en.wikipedia.org/wiki/Tale_of_Ragnar_Lodbrok, V��lsunga Saga, Nibelungenlied https://en.wikipedia.org/wiki/Nibelungenlied, Kingdom of the Burgundians https://en.wikipedia.org/wiki/Kingdom_of_the_Burgundians, Brunhilda of Austrasia https://en.wikipedia.org/wiki/Brunhilda_of_Austrasia.

#history #mythology #2019-10-18

Danelaw - Wikipedia

Wikipedia: Danelaw https://en.wikipedia.org/wiki/Danelaw#Establishment_of_Danish_self-rule: "as recorded in the Anglo-Saxon Chronicle, is a historical name given to the part of England in which the laws of the Danes held sway[2] and dominated those of the Anglo-Saxons. Danelaw contrasts with West Saxon law and Mercian law. The term is first recorded in the early 11th century as Dena lage. Modern historians have extended the term to a geographical designation. The areas that constituted the Danelaw lie in northern and eastern England. The Danelaw originated from the Viking expansion of the 9th century, although the term was not used to describe a geographic area until the 11th century. With the increase in population and productivity in Scandinavia, Viking warriors, having sought treasure and glory in the nearby British Isles, 'proceeded to plough and support themselves', in the words of the Anglo-Saxon Chronicle for the year 876. Danelaw can describe the set of legal terms and definitions created in the treaties between the King of Wessex, Alfred the Great, and the Danish warlord, Guthrum, written following Guthrum's defeat at the Battle of Edington in 878...

#noted #2019-10-18

Comment of the Day: Meno https://www.bradford-delong.com/...

Comment of the Day: Meno https://www.bradford-delong.com/2019/10/eg-a-growing-problem-in-real-estate-too-many-too-big-houses-wsj.html: "Occasionally you post something like this that reminds us how foreign the USA is to some of us. Mansions, that we get. Rock stars and film moguls need to live somewhere, with their minders, crew, and hangers-on. 2,000 square foot ���shacks��� at the beach that stand empty most of the year-sure. Lawyers��� families gotta go somewhere on the weekend to take the boat out. It���s the McMansions that are odd. Who the heck buys a 7-bedroom 8,000 square foot house? And why? What does a couple do with all that space? It���s not the price, it���s the size...

#commentoftheday #2019-10-18

Comment of the Day: Maurits Pino https://www.bradford-del...

Comment of the Day: Maurits Pino https://www.bradford-delong.com/2019/10/eg-a-growing-problem-in-real-estate-too-many-too-big-houses-wsj.html: "Housing & life cycle needs are badly adjusted. We either need to move more or have a better functioning rental market. Small kids: Need: a garden. Get: apartment/too small house. Big kids: Need: mobility for the kids (city centre/public transport). Get: a house with a garden. Post kids: Same as previous but smaller. Time for music, cinema etc. Get: a house with a garden, half empty. Or perhaps an even bigger one. Retired: Need: A place in nature & a studio in town for culture. At least as long as living independently. Get: a house with garden. Still half empty but now a bit run down. First floor unused because of the stairs...

#commentoftheday #2019-10-18