J. Bradford DeLong's Blog, page 1096
January 7, 2015
Re-Reading My Weblog: April 2005
April 2005 found myself arguing with a bunch of students who thought that there must be a there there somewhere deep in Karl Marx's economics, and me trying to clarify my thoughts on why I really didn't think there was much to the argument--a lot of promising starts that then petered out as Marx got himself confused:
A Short Dialogue on the Labor Theory of Value
http://delong.typepad.com/sdj/2005/04/a_short_dialogu.html
2005-04-06
Lire le Capital: Mail Call
http://delong.typepad.com/sdj/2005/04/lire_le_capital.html
2005-04-05
The Bush Administration Social Security privatization effort degenerated into a Clown Show:
It's the Circular Firing Squad of Flying Attack Monkeys!
http://delong.typepad.com/sdj/2005/04/its_the_circula.html
2005-04-29
"Asset Returns and Economic Growth": The Econ 1 Version
http://delong.typepad.com/sdj/2005/04/asset_returns_a_1.html
2005-04-15
The Bush Administration Clown Show Continues...
http://delong.typepad.com/sdj/2005/04/the_bush_admini.html
http://delong.typepad.com/sdj/2005/04/the_bush_admini_1.html
2005-04-07
April 2005 saw me becoming increasingly worried about the possibility of a big financial crisis and a "hard landing":
Hard Landings II...
http://delong.typepad.com/sdj/2005/04/hard_landings_i.html
2005-04-20
Some Simple Analytics for a Hard Landing
http://delong.typepad.com/some_simple_analytics_for_a_hard-landing.pdf
2005-04-20
Our Twin Financial Puzzles: The Long Run May Come Like a Thief in the Night
http://delong.typepad.com/sdj/2005/04/our_twin_financ.html
2005-04-13
A short meditation on artificial birth control and the AIDS crisis:
When the Morning Stars Sang Together
http://delong.typepad.com/sdj/2005/04/when_the_mornin.html
2005-04-04
A short meditation on the unreasonable effectiveness of mathematics in the natural sciences--how the math physicists used knew about quantum mechanics for a decade (and about special relatively for a generation) before the physicists realized what their equations meant:
The Unreasonable Effectiveness of Mathematics in the Natural Sciences
http://delong.typepad.com/sdj/2005/04/the_unreasonabl.html
2005-04-13
A long review of Richard Parker's very nice biography of John Kenneth Galbraith:
J. Bradford DeLong (2005), "Sisyphus as Social Democrat: A review of John Kenneth Galbraith: His Life, His Politics, His Economics, by Richard Parker," Foreign Affairs May/June 2005
http://delong.typepad.com/sdj/2005/04/foreign_affairs.html
2005-04-20
And in praise of the life of the mind:
Estranged from One's Species Being
http://delong.typepad.com/sdj/2005/04/adam_kotsko_is_.html
2005-04-04
The feel-good thing to read is the Parker-Galbraith review:
J. Bradford DeLong (2005), "Sisyphus as Social Democrat: A review of John Kenneth Galbraith: His Life, His Politics, His Economics, by Richard Parker," Foreign Affairs May/June 2005
http://delong.typepad.com/sdj/2005/04/foreign_affairs.html
2005-04-20
The feel-bad thing to read is the AIDS and artificial birth control squib:
When the Morning Stars Sang Together
http://delong.typepad.com/sdj/2005/04/when_the_mornin.html
2005-04-04
Liveblogging World War II: January 7, 1945: Managing Montgomery
From Richard Atkinson: The Guns at Last Light:
On Saturday, January 6, Montgomery cabled Churchill that he planned to summon reporters to explain “how [the] Germans were first ‘headed off,’ then ‘seen off,’ and now are being ‘written off.’” He also intended to rebut any suggestion of American failure in the Ardennes. “I shall show how the whole Allied team rallied to the call and how national considerations were thrown overboard.… I shall stress the great friendship between myself and Ike.” On the same day, he wrote a confidant in London, “The real trouble with the Yanks is that they are completely ignorant as to the rules of the game we are playing with the Germans.”
When Brigadier Williams, the intelligence chief, asked why he intended to hold a press conference, Montgomery explained that Eisenhower’s generalship had been impugned, and “I want to put it right.” Williams offered two words of counsel: “Please don’t.” Others in his headquarters, smelling condescension, also sought to dissuade him. Alan Moorehead pleaded with De Guingand to muzzle Montgomery, lest he “make some bloody awful mistake.” “That’s a funny position for a newsman to take,” De Guingand said. “I want to win the war,” Moorehead replied.
In a double-badged maroon beret and a parachute harness—“dressed like a clown,” in Moorehead’s description—the field marshal appeared before a gaggle of correspondents in Zonhoven on January 7. No doubt he meant well. Praising the American GI as “a brave fighting man, steady under fire, and with that tenacity in battle which stamps the first-class soldier,” he also saluted Eisenhower as “the captain of our team,” declaring, “I am absolutely devoted to Ike. We are the greatest of friends.” No mention was made of Bradley, and an assertion that British troops were “fighting hard” exaggerated their role as reserves very much on the fringe of the battlefield.
Much of the recitation, however, was devoted to describing the field marshal’s own brilliance upon taking command almost three weeks earlier. “The first thing I did,” Montgomery said, “was busy myself in getting the battle area tidy—getting it sorted out”:
As soon as I saw what was happening I took certain steps myself to ensure that if the Germans got to the Meuse they would certainly not get over that river. And I carried out certain movements so as to provide balanced dispositions.… I was thinking ahead.… The battle has been most interesting. I think possibly one of the most interesting and tricky battles I have ever handled.
Montgomery likened “seeing off” the enemy to his repulse of Rommel in Egypt in 1942. He closed by declaring, without a scintilla of irony, “Let us have done with the destructive criticism that aims a blow at Allied solidarity.” “Oh, God, why didn’t you stop him?” Moorehead asked Williams as reporters scattered to file their stories. “It was so awful.”
Many British officers agreed. The field marshal had been “indecently exultant,” as one put it, displaying “what a good boy am I” self-regard, in De Guingand’s phrase, and conveying what another general called his “cock on a dunghill mood.” A headline in the Daily Mail—“Montgomery Foresaw Attack, Acted ‘On Own’ to Save Day”—captured the prevailing Fleet Street sentiment, although Churchill’s private secretary told his diary, “Monty’s triumphant, jingoistic, and exceedingly self-satisfied talk to the press on Sunday has given wide offense.” A mischievous German radio broadcast mimicked the BBC with a phony news flash that quoted Montgomery as describing the Americans as “‘somewhat bewildered.’ … The battle of the Ardennes can now be written off, thanks to Field Marshal Montgomery.”
“He sees fit to assume all the glory and scarcely permits the mention of an army commander’s name,” the Ninth Army war diary complained. “Bitterness and real resentment is [sic] creeping in.” No one was more bitter or resentful than Bradley, whose “contempt had grown into active hatred” for Montgomery, reported one British general at SHAEF. Air Marshal Tedder informed his diary that cooperation between Bradley and the field marshal was now “out of the question.” Bradley twice called Versailles on Tuesday, January 9, “very much upset over the big play up Monty is getting in the British press,” Kay Summersby noted. He, too, summoned reporters, using a map and a pointer to render his own version of events, which included the dubious assertion that American commanders had consciously taken “a calculated risk” in thinning out defenses in theRead more at Ardennes.
Privately he denounced Montgomery’s “attempt to discredit me so he could get control of the whole operation.” The field marshal, he asserted, wanted to “be in on the kill, and no one else.” In another call to Eisenhower, Bradley warned, “I cannot serve under Montgomery. If he is to be put in command of all ground forces, you must send me home.” Eisenhower assured him that he had no plans to expand the field marshal’s authority, then added, “I thought you were the one person I could count on for doing anything I asked you to do.” “This is one thing I cannot take,” Bradley replied.
Once again Eisenhower sought to mollify, to mediate, and to keep his temperamental subordinates concentrated on the task at hand: evicting Rundstedt from the Bulge and resuming the march on Germany. But in a note to Brooke he admitted, “No single incident that I have encountered throughout my experience as an Allied commander has been so difficult.”
January 6, 2015
Books! Books! Books!: Live from Mrs. Dalloway's (and from the Evans Hall Mail Inbox)
Mrs. Dalloway's:
And Evans Hall:
Noted for Your Nighttime Procrastination for January 6, 2015
Over at Equitable Growth--The Equitablog
Yes, the Past Four Years Are Powerful Evidence for the Keynesian View of What Happens at the Zero Lower Bound. Why Do You Ask?
Is 1920-1921 Relevant and Worth Much Attention?
Henry Farrell: Social Democrats in the Twin-Peaked World
Miles Kimball: How Big Is Economics’s Sexism Problem? This Article’s Co-Author Is Anonymous Because of It
Richard Florida: Is Life Better in America’s Red States?
Paul Krugman: Not Invented Here Macroeconomics
AJérémie Cohen-Setton: Permanent QE and Helicopter Money
Joe Romm: 2014 Was Hottest Year On Record Globally By Far, Reports Japan Meteorological Agency
Nick Bunker:
Reference points, loss aversion, and redistribution
Plus:
Things to Read on the Evening of January 6, 2015
Must- and Shall-Reads:
Paul Krugman:
"One thing is not a risk, because it has already happened: the euro area has entered a Japan-style deflationary trap... not literally deflation at an EA-wide level, but... slightly positive and slightly negative inflation with interest rates already at the zero lower bound are essentially the same. Furthermore, southern Europe still needs substantial amounts of ‘internal devaluation’.... And if you look at the implied market forecast, it’s truly disastrous..."
Daron Acemoglu:
Democracy Does Cause Growth
http://www.nber.org/papers/w20004.pdf
Naomi Oreskes:
Playing Dumb on Climate Change
Martin Wolf:
"How far are Koo’s analysis and recommendations right? The diagnosis of ‘debt trauma’ is persuasive... exceptional policies... are likely to endure for many years.... Read Koo. He has a hammer, even if everything is not a nail."
Nick Bunker:
Reference points, loss aversion, and redistribution
Henry Farrell:
Social democrats in the twin-peaked world — Crooked Timber
Anonymous and Miles Kimball:
How Big Is Economics’s Sexism Problem? This Article’s Co-Author Is Anonymous Because of It
Joe Romm:
2014 Was Hottest Year On Record Globally By Far, Reports Japan Meteorological Agency
Paul Krugman:
Not Invented Here Macroeconomics
Richard Florida:
Is Life Better in America’s Red States?
Permanent QE and helicopter money
Eric Engen et al.:
The Macroeconomic Effects of the Federal Reserve’s Unconventional Monetary Policies
Paul Krugman:
About That French Time Bomb
And Over Here:
Over at Equitable Growth: Yes, the Past Four Years Are Powerful Evidence for the Keynesian View of What Happens at the Zero Lower Bound. Why Do You Ask?: Daily Focus
Liveblogging World War II: January 6, 1945: Franklin D. Roosevelt: State of the Union Address
Why Yes, I Do Believe Jeffrey Sachs Has Lost His Mind. Why Do You Ask?: Live from The Roasterie
Henry Farrell:
Social democrats in the twin-peaked world — Crooked Timber:
"There’s plausibly a structural story behind the inability of conventional leftwing parties to challenge conventional orthodoxies.... They haven’t really relied on this constituency for a long time. Peter Mair’s Ruling the Void hasn’t gotten nearly the attention that it deserves.... Mair... makes a strong case that leftwing parties in Europe today have become profoundly disassociated from their voters... ordinary people withdrawing from political parties... elites of parties don’t rely on mass membership to provide resources.... European political parties rather than representing their constituents to the state, tend to represent the state and its imperatives to their constituents. This helps explain the extraordinary haplessness of mainstream leftwing parties faced with the politics of austerity..."
Anonymous and Miles Kimball:
How Big Is Economics’s Sexism Problem? This Article’s Co-Author Is Anonymous Because of It:
"One indication of the career challenges women face in economics is the fact that one of us felt the need to remain anonymous.... Many male economists underestimate the headwinds women face in economics... at every stage of a woman’s career... many forces both large and small that add up to a huge overall damper on the number of women who make it to the higher ranks.... And even when women do reach these higher levels—despite the difficulty of getting their work published in male-dominated journals and in getting promoted even when they do get their work published—their wages remain lower.... Sendhil Mullainathan argues that discrimination often operates at an unconscious level.... Here are a few of the issues women in economics face that their male colleagues might not be aware of..."
Joe Romm:
2014 Was Hottest Year On Record Globally By Far, Reports Japan Meteorological Agency:
"The Japan Meteorological Agency (JMA) has announced that 2014 was the hottest year... by far... [with] no ‘hiatus’ or ‘pause’ in warming. In fact, there has not even been a slowdown.... 1998 is in (a distant) second place--but 1998 was an outlier... boosted above the trendline by an unusual super-El Niño.... If you were wondering how 2014 could be the hottest year on record when it wasn’t particularly hot in the United States (if we ignore California and Alaska)... there’s like a whole planet out there.... Europe was the hottest it’s been in 500 years.... California had record-smashing heat, which helped create its ‘most severe drought in the last 1200 years.’ Australia broke heat records across the continent (for the second year running).... Much of Siberia ‘defrosted in spring and early summer under temperatures more than 9°F (5°C) above its 1981 to 2010 average’... the second exceptionally hot summer in a row for the region.... The permafrost (soon to be renamed the permamelt) contains twice as much carbon as the entire atmosphere. If we don’t reverse emissions trends sharply and soon, then the carbon released from it this century alone could boost global warming as much as 1.5°F..."
Paul Krugman:
Not Invented Here Macroeconomics:
"[Richard] Koo had a big and important idea.... As long as some part of the private sector has... levels of debt that now look excessive, the efforts of debtors to pay off their debts... [is] a persistent drag... hard to counter with monetary policy, because many players in the economy can’t or won’t spend more.... Deficit spending can play a useful role... by providing a favorable environment for debtors to deleverage.... This is a very useful insight..."
Richard Florida:
Is Life Better in America’s Red States?:
"Blue states... are generally richer than red states. But red states, like Texas, Georgia and Utah, have done a better job over all of offering a higher standard of living relative to housing costs.... Red state economies based on energy extraction, agriculture and suburban sprawl may have lower wages, higher poverty rates and lower levels of education... [but] the American dream of a big house with a backyard and a couple of cars is much more achievable in low-tax Arizona than in deep-blue Massachusetts..."
Jérémie Cohen-Setton:
Permanent QE and helicopter money:
"What’s at stake: QE... is believed to matter (beyond the portfolio channel) for inflation and growth... the associated monetary base growth needs to be permanent... the pros and cons of helicopter money... as compared with permanent QE.... David Beckworth writes that... [in] the Fed's quantitative easing programs... the large expansion of the monetary base under QE is temporary... [but] for QE to have made a meaningful difference the associated monetary base growth needed to be permanent. This... is the standard view in modern macroeconomics... Woodford, Svensson, and Obstfeld among others)..."
Eric Engen et al.:
The Macroeconomic Effects of the Federal Reserve’s Unconventional Monetary Policies:
"After reaching the effective lower bound for the federal funds rate in late 2008, the Federal Reserve turned to two unconventional policy tools—quantitative easing and increasingly explicit and forward‐ leaning guidance for the future path of the federal funds rate—in order to provide additional monetary policy accommodation. We use survey data from the Blue Chip Economic Indicators to infer changes in private‐sector perceptions of the implicit interest rate rule that the Federal Reserve would use following liftoff from the effective lower bound. Using our estimates of the changes over time in private expectations for the implicit policy rule, and estimates of the effects of the Federal Reserve’s quantitative easing programs on term premiums derived from other studies, we simulate the FRB/US model to assess the actual economic stimulus provided by unconventional policy since early 2009. Our analysis suggests that the net stimulus to real activity and inflation was limited by the gradual nature of the changes in policy expectations and term premium effects, as well as by a persistent belief on the part of the public that the pace of recovery would be much faster than proved to be the case. Our analysis implies that the peak unemployment effect—subtracting 1 1⁄4 percentage points from the unemployment rate relative to what would have occurred in the absence of the unconventional policy actions—does not occur until early 2015, while the peak inflation effect—adding 1⁄2 percentage point to the inflation rate—is not anticipated until early 2016..."
Paul Krugman:
About That French Time Bomb:
"I’ve written often about the remarkable track record of U.S. debt-and-inflation doomsayers... now completely unwilling to admit that they were wrong, or even that their model of how the world works needs some revision. But... let’s look back at the bad-mouthing of another economy, which looks equally wrong-headed if not more so.... It was the Economist that declared, on its cover more than two years ago, that France was the time bomb at the heart of Europe. And of course the inflationistas were even more certain that France faced imminent doom; for example, John Mauldin proclaimed that France was in fact worse than Greece. Now that time bomb--which has actually had better economic growth since 2007 than Britain--can borrow at an interest rate of only 0.8 percent. It seems obvious to me that the bad-mouthing of France was and is essentially political. Of course France has big problems; who doesn’t? But the real sin of the French body politic is its refusal to buy into the notion that the welfare state must be sharply downsized if not dismantled; hence the continuing warnings that France is doomed, doomed I tell you. And this in turn reflects the larger issue of what calls for austerity are really about. Can we imagine a clearer demonstration that they’re not really about appeasing bond vigilantes?"
Should Be Aware of:
Chris Buckley and Andrew Jacobs:
"China’s Maoist ideologues are resurgent after languishing in the political desert, buoyed by President Xi Jinping’s traditionalist tilt and emboldened by internal party decrees that have declared open season on Chinese academics, artists and party cadres seen as insufficiently red..."
Charles Stross:
"Concorde, flying trans-Atlantic at Mach 2.0, burned about the same amount of fuel as a Boeing 747 of similar vintage flying trans-Atlantic at Mach 0.85 ... while carrying less than a quarter as many passengers..."
Austin Frakt:
"What else can researchers do to keep managers and policymakers informed? There must be something--some kind of an electronic, updatable, web-based thingamabob where one can report on new evidence and put it in context and in relatively simple terms. I can’t quite make out the details, but there’s a free idea out there for someone who can dream up such a thing..."
Jim Webb:
Remarks at the Confederate Memorial
Mark Mazower:
Napoleon the Great by Andrew Roberts:
"Hitler took the most powerful country in Europe and wrecked it for a generation, demonstrating in the process how not to run a continent. The one debt we owe Stalin is that he ensured Hitler’s defeat.... Napoleon--another case entirely. He took a country in the throes of acute fiscal crisis and social unrest and made it the dominant power in Europe; he oversaw the shattering of the old ruling order across the continent; he reformed the government; and he transformed the very idea of what politics could be and man could do. All of these achievements proved to be irreversible..."
Jo Walton:
Gods, Philosophers, and Robots:
"The Just City is a fantasy novel about a group of classicists and philosophers from across all of time setting up Plato’s Republic on Atlantis, with the help of some Greek gods, ten thousand Greek-speaking ten-year-olds they bought in the slave markets of antiquity, and some construction robots from our near future. What could possibly go wrong?Now I get two different immediate reactions to this. The first is from people who say ‘That’s insane, and I want it now!’ The second is from people who say they know nothing about Plato or philosophy in a kind of apologetic way, as if anything that touches on these subjects in any way would require background reading and be kind of boring..."
Evening Must-Read: Henry Farrell: Social Democrats in the Twin-Peaked World
Henry Farrell:
Social democrats in the twin-peaked world — Crooked Timber:
"There’s plausibly a structural story...
behind the inability of conventional leftwing parties to challenge conventional orthodoxies.... They haven’t really relied on this constituency for a long time. Peter Mair’s Ruling the Void hasn’t gotten nearly the attention that it deserves.... Mair... makes a strong case that leftwing parties in Europe today have become profoundly disassociated from their voters... ordinary people withdrawing from political parties... elites of parties don’t rely on mass membership to provide resources.... European political parties rather than representing their constituents to the state, tend to represent the state and its imperatives to their constituents. This helps explain the extraordinary haplessness of mainstream leftwing parties faced with the politics of austerity...
I am skeptical of this explanation--largely because I remember similar haplessness from the left in Britain, Germany, and France during the Great Depression...
Over at Equitable Growth: Yes, the Past Four Years Are Powerful Evidence for the Keynesian View of What Happens at the Zero Lower Bound. Why Do You Ask?: Daily Focus
Over at Equitable Growth: He whom we all disagree with at our grave peril writes:
Paul Krugman:
The Record of Austerity - NYTimes.com:
"How many people, I wonder--even among economists who have eagerly taken sides in the austerity debate...
...have a sense of what the overall picture looks like since the great turn to austerity in 2010... [not] what happened in country X in year Y, which you imagine supports your position... [but] the overall shape...[?] Annual data on the growth of real GDP and of government purchases from Eurostat.... 33 countries for 4 years, 132 observations.... Does this picture make you think that Keynesian economics is nonsense?... The raw observations are consistent with the view that in depressed economies, cutting government spending hurts growth.
Of course, the fit isn’t perfect. In fact, the R-squared is only 0.31. That’s because... stuff happens. And that is why we have statistics.... You can, if you like, try to argue that this relationship is spurious.... But one form of argument that is really illegitimate is to... pick out outliers... claiming that the... outliers--because stuff does, in fact, happen--disproves Keynesian logic. Unfortunately, you see a lot of that, including from economists who really should know better."
If you assume that all of the correlation reflects a causal connection running from fiscal austerity to slower GDP growth, the associated multiplier μ is 2.3. This is an open-economy multiplier, and the typical country in Eurostat is very open indeed. An open-economy multiplier of 2.3 corresponds to the closed economy multiplier of 4.
What I want to add to Paul's discussion here is what I see as the absurdity of the arithmetic underlying the reverse-causation argument:
Write "Δ" for "change", "Y" for "GDP", "μ" for the fiscal multiplier, "G" for "government purchases", "ε" for "other things than government purchases that affect GDP", "λ" for "reverse causation in which falling GDP leads to cuts in government purchases", "η" for "other things besides GDP that affect government purchases":
ΔY = μΔG + ε
ΔG = λΔY + η
Make the truly heroic assumption that ε and η are uncorrelated. Define the ratio σ of the variances of ε and η:
V(ε) = σV(η)
The estimated slope from a regression of ΔY on ΔG is then a weighted average of the true fiscal multiplier μ and the inverse of the reverse-causation effect of falling GDP on government spending:
s = ρ(μ) + (1-ρ)(1/λ)
with the weight ρ given by:
ρ = [1/(λ2σ + 1)]
In order to get a high estimated slope out of reverse causation, the value of the parameter λ has to be small--there has to be relatively little influence of falling GDP on government purchases. But if that is the case, then the weighted average that is the slope will put most of its weight on the true multiplier μ. A high estimated slope--on the order of 4 for the closed-economy case--can only be consistent with a small true multiplier μ for a truly absurdly large value of the variance ratio σ: the level of government purchases then has to be a function of GDP and of GDP alone for the arithmetic to work. And that is simply not the case.
See for yourself (always assuming I have not gotten the arithmetic of the spreadsheet wrong):
556 words
Morning Must-Read: Miles Kimball: How Big Is Economics’s Sexism Problem? This Article’s Co-Author Is Anonymous Because of It
There can be no doubt the gender disparity upon entering PhD programs and the much greater gendered disparity later on in careers indicates collective sociological dysfunction at an extraordinarily great level. We have only 1/3 as many senior women in our profession as men--which means, given that our senior jobs don't come with heavy gendered requirements or advantages, that 1/4 of the brains that ought to be filling those jobs are not, and 1/4 of the brains that are filling those jobs ought to be doing something else...
Anonymous and Miles Kimball:
How Big Is Economics’s Sexism Problem? This Article’s Co-Author Is Anonymous Because of It:
"One indication of the career challenges women face in economics...
...is the fact that one of us felt the need to remain anonymous.... Many male economists underestimate the headwinds women face in economics... at every stage of a woman’s career... many forces both large and small that add up to a huge overall damper on the number of women who make it to the higher ranks.... And even when women do reach these higher levels—despite the difficulty of getting their work published in male-dominated journals and in getting promoted even when they do get their work published—their wages remain lower.... Sendhil Mullainathan argues that discrimination often operates at an unconscious level.... Here are a few of the issues women in economics face that their male colleagues might not be aware of:
New female economics PhD’s have to worry about what to wear... skirt too short vs. too long... nasty misogyny of many threads on http://econjobrumors.com. Students don’t give female professors the same respect as they do male professors.... Female assistant professors have to worry about whether they dare take advantage of tenure clock extensions to have a child, while male assistant professors have no worries about taking advantage of the tenure clock extensions they get when their wives have a child. For the men, it is a simple strategic choice; for the women, it is reminder to their colleagues that (with rare exceptions) they bear the heaviest burden of taking care of a young child... often inundated by students needing more “emotional” mentoring... get[ting] mistaken at social events for an economist’s spouse... how to deal with disrespectful comments or 'jokes' made by their senior colleagues. Fostering awareness of issues like these, and a hundred others... is one of the biggest things that can be done.... Greater gender equality in economics could also be fostered by a better power balance... male economists should find it hard or impossible to exert illegitimate, sexist power over their female colleagues. If this sounds obvious, it’s much harder than it seems. Today, women in economics face a Catch-22, where speaking up can easily make them look like a shrew, while not speaking up robs them of legitimate power..."
January 5, 2015
Nighttime Must-Read: Richard Florida: Is Life Better in America’s Red States?
Richard Florida:
Is Life Better in America’s Red States?:
"Blue states... are generally richer than red states...
...But red states, like Texas, Georgia and Utah, have done a better job over all of offering a higher standard of living relative to housing costs.... Red state economies based on energy extraction, agriculture and suburban sprawl may have lower wages, higher poverty rates and lower levels of education... [but] the American dream of a big house with a backyard and a couple of cars is much more achievable in low-tax Arizona than in deep-blue Massachusetts.... Red state economies are experiencing a vigorous (if ultimately unsustainable) spurt.... For blue state urbanites who toil in low-paying retail, food preparation and service jobs... teachers, civil servants, students and young families, the American dream of homeownership--or even an affordable rental apartment--is increasingly out of reach. Adding insult to injury, rapid gentrification in these larger knowledge hubs brings the constant threat of displacement....
Rick Perry of Texas, a likely 2016 G.O.P. presidential candidate, has taken to bragging.... But fracking and sprawling your way to growth aren’t a sustainable national economic strategy.... As long as the highly gerrymandered red states can keep on delivering the economic goods to their voters, concerted federal action on transportation, infrastructure, sustainability, education, a rational immigration policy and a strengthened social safety net will remain out of reach. These are investments that the future prosperity of the nation, in red states and blue states alike, requires...
This is why I think that the winning strategy for America over the next ten years will be to figure out how to make homeownership in Blue States much more affordable--via a combination of anti-NIMBYism, investments in transportation and other infrastructure, and a reconfiguration of housing finance, with appropriate subsidies for those trying to buy and appropriate wealth taxes on those who have benefitted from antisocial NIMByist local-government policies. Our current situation is one in which relatively small amounts of induced migration from Red States to Blue States would bring with them enormous economic-growth benefits, after all...
Nighttime Must-Read: Paul Krugman: Not Invented Here Macroeconomics
Paul Krugman:
Not Invented Here Macroeconomics:
"[Richard] Koo had a big and important idea....
As long as some part of the private sector has... levels of debt that now look excessive, the efforts of debtors to pay off their debts... [is] a persistent drag... hard to counter with monetary policy, because many players in the economy can’t or won’t spend more.... Deficit spending can play a useful role... by providing a favorable environment for debtors to deleverage.... This is a very useful insight...
But Koo['s]... antipathy to monetary policy does not... emerge naturally.... Yes, it’s going to be hard... but there have to be some players who aren’t excessively indebted.... And to the extent that central banks can raise inflation and/or fight deflation, this is an especially valuable thing.... [Yet] Koo... rejects any alternative... for reasons unclear..."
Where I see Richard Koo's principal value-added is that his analysis provides a handle you can use in thinking about how the IS curve is going to evolve over time: that in the short run only expansionary fiscal policy (government leveraging up to offset the drag produced by private-sector deleveraging) can shift the IS curve, and that in the medium and long runs the recovery of the IS curve is most likely to be driven not by things like summoning the Confidence Fairy but by the slow process of deleveraging.
But to the extent that you believe that expectational shifts can be important--either that balancing the government budget or performing other rituals can summon the Confidence Fairy, or that expansionary monetary policy can summon the Inflation-Expectations Imp--Koo's analysis will look inadequate. And so it does look inadequate to Krugman, at least to the permanent-monetary-expansion-would-fix-the-problem side of Krugman...
Afternoon Must-Read: Jérémie Cohen-Setton: Permanent QE and Helicopter Money
Jérémie Cohen-Setton:
Permanent QE and helicopter money:
"What’s at stake: QE...
is believed to matter (beyond the portfolio channel) for inflation and growth... the associated monetary base growth needs to be permanent... the pros and cons of helicopter money... as compared with permanent QE.... David Beckworth writes that... [in] the Fed's quantitative easing programs... the large expansion of the monetary base under QE is temporary... [but] for QE to have made a meaningful difference the associated monetary base growth needed to be permanent. This... is the standard view in modern macroeconomics... Woodford, Svensson, and Obstfeld among others)....
Paul Krugman writes a stripped down version of his 1998 model to make explicit that QE is expected to be effective only to the extent that the expansion in the money base is permanent.... Simon Wren-Lewis writes that the self-imposed institutional setup of strict separation between monetary and fiscal policy prevents either central banks or governments doing money-financed fiscal stimulus.... Mark Blyth and Eric Lonergan... Keynes proposed burying bottles of bank notes in old coal mines.... Milton Friedman also saw the appeal of direct money transfers.... Dylan Mattews writes that the idea is most closely associated with former Fed chair Ben Bernanke....
Mike Woodford writes that the same equilibrium can be supported by traditional quantitative easing or by helicopter money.... Willem Buiter writes that QE relaxes the intertemporal budget constraint of the consolidated Central Bank and Treasury.... Mike Woodford writes that the effects would only be different if, in practice, the consequences for future policy were not perceived the same way by the public... proposes a policy that delivers exactly the same effect as helicopter money, but would preserve the traditional separation between monetary and fiscal policy... a bond-financed fiscal transfer, combined with a commitment by the central bank to a nominal GDP target path...
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