J. Bradford DeLong's Blog, page 133

Overly cynical, IMHO: Modernization theory is correct in ...

Overly cynical, IMHO: Modernization theory is correct in that the "advanced" shows the "backward" more about the "backward"'s own future than the "backward"'s own past and present show. Picking the most attractive "advanced" society and trying to replicate what it does well is always a smart development strategy, if you can go about it smartly���in an Alexander Hamiltonian vein, say:

Nils Gilman: Modernization Theory Never Dies: "Modernization theory was among the most influential historical and policy paradigms to emerge in the United States during the 1950s, but fell into steep academic disrepute from the 1970s forward. Despite this loss of intellectual credibility, however, it has for fifty years continued to exercise a major influence on the developmental imaginary both in the United States and in many other countries. This article examines how modernization theory���s leading progenitor, Walt Whitman Rostow, developed his narrative of modernization to provide a metahistorical theory of development and asserts that the enduring appeal of modernization theory, despite its intellectual flaws, rests on the optimistic historical narrative it proposes and the flattering role it provides in that narrative for policy and intellectual elites...

#noted

Comment of the Day: Cosma Shalizi : "I have used Google a...

Comment of the Day: Cosma Shalizi : "I have used Google as pretty much my only search engine since it became available, and used Gmail for all my mail since 2012. I've never shared my account (or my credit cards) with anyone else. Google should thus have a very complete idea of what I'm interested in. Here, as of late 2016 when I poked it, was its list of my inferred interests (verbatim): http://www.stat.cmu.edu/~cshalizi/dm/19/crs-google-interests-2016.png I can, with charity, understand 'homemaking and interior decor' (because I'd been researching new window blinds), and 'pet food and supplies' (though my cat had died more than a year before). Everything else was just flat wrong, and often mystifyingly so (I've never played shooter games, can't stand musicals, had to look up reggaeton, and have no feelings or opinions about Chevrolet one way or the other). In conclusion, superintelligence is the idea that eats smart people....

#commentoftheday

August 9, 2019: Weekly Forecasting Update

There was essentially no news about real GDP last week: The Federal Reserve Bank of New York nowcast continues to stand at 1.6% for 2019:Q3. We did see another fifteen basis points of market easing at the long end of the yield. Curve: the 10-Year TIPS yield is now 0.09%. And that, of course, makes equity stock market investments a deal. Patrick Chovanec is worth reading:

Patrick Chovanec: Outlook: "Besides consumption and government spending... the rest was negative in Q2...

...Exports fell by ���5.2% while imports were flat... business investment fell by ���0.6%, its first quarterly decline in over three years.... Durable goods orders in Q2 were down ���2.1% from a year ago.... (The slowdown in U.S. manufacturing matches similar purchasing manager surveys in Europe, Japan, and China, which are all in outright contraction).... Residential investment fell ���1.5% in Q2.... New housing permits... were down ���4.5% in Q2, from a year ago...

The new tariffs on China���10% on virtually all imports that aren���t already tariffed at 25%, scheduled to take effect in September���are exactly what U.S. companies across multiple sectors have worried and warned about for nearly a year now. Though their direct impact may be limited, the prospect of further escalation hangs like a cloud over business confidence....

Given these uncertainties, U.S. share prices may look daunting even at a 12-month trailing P/E ratio of 19.1x operating earnings, which is far from excessive by historical terms. But they look better compared to U.S. Treasuries at an implied P/E ratio of 60x, returning little more than inflation, or the nearly $15 trillion in bonds around the world selling at negative yields. Safe harbors are expensive, and likely to prove costly over the longer term, even if the economy could stumble in the meantime. With an equity risk premium at 5.6%���before the latest dip in share prices and bond yields���the prospective rewards to riding out the storm, as opposed to running for cover at any price, are too high for an investor who can endure a few bumps along the way to ignore...

 

Talking Points:


The Federal Reserve has, largely through jawboning, eased policy substantially over the past six months.
The trade wars that Trump is waging is a major source of uncertainty, and a possible recession risk.
U.S. potential economic growth continues to be a hair above 2%/year.
There are still no signs the U.S. has entered that phase of the recovery in which inflation is accelerating.
There are still no signs of interest rate normalization: secular stagnation continues to reign.
There are still no signs the the U.S. is at "overfull employment" in any meaningful sense.
The Trump-McConnell-Ryan tax cut has been a complete failure at boosting the American economy through increased investment in America.

But it has been a success in making the rich richer and thus America more unequal.
And it delivered a short-term demand-side Keynesian fiscal stimulus to growth that has now ebbed.
Those who beat the drum for it owe us an explanation for why they got it wrong.
They have not provided one: shame on them.

A change from one week ago: The market continues to low4r interest rates at the long end of the yield curve.

A change from one month ago: A no-deal Brexit is now not just a possibility, but more likely than not.

A change from 3 months ago: The Federal Reserve has���behind the curve���become convinced that it raised interest rates too much in 2018, and is now likely to cut them.

A change from 6 months ago: Trump trade-war tensions are higher.

#macro #forecasting #highlighted


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Liveblogging: The Anglo-Saxon Chronicle: Erkenbert

The Anglo-Saxon Chronicle (J.A. Giles and J. Ingram trans.): Erkenbert: "A.D. 639. This year Birinus baptized King Cuthred at Dorchester, and received him as his son. A.D. 640. This year died Eadbald, King of Kent, after a reign of twenty-five winters. He had two sons, Ermenred and Erkenbert; and Erkenbert reigned there after his father. He overturned all the idols in the kingdom, and first of English kings appointed a fast before Easter. His daughter was called Ercongota���holy damsel of an illustrious sire! whose mother was Sexburga, the daughter of Anna, king of the East-Angles. Ermenred also begat two sons, who were afterwards martyred by Thunnor...

#liveblogging #history #anglosaxonchronicle

A Year Ago on Equitable Growth: Fifteen Worthy Reads On and Off Equitable Growth for August 9, 2018

Worthy Reads from Equitable Growth and Friends:

J. Bradford DeLong: The Ahistorical Federal Reserve: "Economic developments over the past 20 years have taught���or ought to have taught���the US Federal Reserve four lessons. Yet the Fed���s current policy posture raises the question of whether it has internalized any of them.... The proper inflation target... should be 4% per year.... The two slope[s of] the Phillips Curve... are smaller.... Yield-curve inversion... monetary policy is too tight.... Principal shocks have not been inflationary...

Mark Paul, Khaing Zaw, Darrick Hamilton, and William Darity Jr.: Returns in the labor market: A nuanced view of penalties at the intersection of race and gender - Equitable Growth: "Multiple identities cannot readily be disaggregated in an additive fashion. Instead, the penalties associated with the combination of two or more socially marginalized identities interact in multiplicative or quantitatively nuanced ways...

Raymond Fisman, Keith Gladstone, Ilyana Kuziemko, and Suresh Naidu: Do Americans want to tax capital? Evidence from online surveys: "Our regression results yield roughly linear desired tax rates on income of about 14 percent... positive desired wealth taxation... three percent when the source of wealth is inheritance, far higher than the 0.8 percent rate when wealth is from savings.... These tax rates are consistent with reasonable parameterizations of recent theoretical optimal wealth tax formulae...

Equitable Growth: #JOLTS: "The quit rate... historically high level.... The ratio of unemployment-to-job openings trended upward slightly in June to just under 1.0.... The Beveridge Curve continues to be at levels similar to those in the expansion of the early 2000s...

Bridget Ansel and Heather Boushey (2017): Modernizing U.S. Labor Standards for 21st-Century Families: "Boosting women���s economic outcomes [via] paid family leave, fair scheduling, and combatting wage discrimination...

Worthy Reads Elsewhere:

I am confident that there will be jobs. I am much less confident that there will be enough middle-class jobs: Adam Ozimek: Robots and Jobs: A Check on Fear: "When it comes to discussing the effects of automation on labor markets, I see far too much partial equilibrium thinking...

If you take the appropriate measure of labor market tightness to be the prime-age employment rate, there is no wage growth puzzle. So why does the Federal Reserve take the unemployment rate as the relevant labor market tightness variable and wring its hands about the wage-growth puzzle, rather than taking the prime-age employment rate as its relevant labor market tightness variable? It is a mystery: Adam Ozimek: Wage growth is right on target folks!

I have always thought that this is a genuinely key insight into social science and about which road leads toward utopia���not just about the "dance of commodities" that is the market economy, but also that this is how "human beings confront all the structures which emerge from our massed interactions... a bureaucracy, or even a thoroughly democratic polity of which one is a citizen, can feel, can be, just as much of a cold monster as the market": Cosma Shalizi (2012): In Soviet Union, Optimization Problem Solves You: "There���s lots to say about Red Plenty as a work of literature; I won���t do so.... There is a passage in Red Plenty which is central to describing both the nightmare from which we are trying to awake, and vision we are trying to awake into. Henry [Farrell] has quoted it already, but it bears repeating...

In my view, successful economic communication of facts in a useful way starts with an anecdote���about, say, Cosette���which is then followed by "Cosette's experiences are typical", and then the numbers: Stefanie Stantcheva: The Fog of Immigration: "Surveyed 22,500 native-born respondents from France, Germany, Italy, Sweden, the UK, and the US. We concluded that much of the political debate about immigration takes place in a world of misinformation...

The rise of the factory���shift from home production to production under the eye of a boss, at a workplace���was underway long before mechanization in numeric calculation as well as in craft piecework: Lorraine Daston (2017): Calculation and the Division Of Labor, 1750-1950: "On an August morning in 1838, the seventeen-year-old Edwin Dunkin and his brother...

Successful place-based policies require what we used to call "local boosters". One problem with so much of the so-called "Red States" is that the local rich are no longer boosters for their communities���indeed, no longer feel a part of the community in any meaningful way: Noah Smith: How to Save the Troubled American Heartland: "James Fallows and Deborah Fallows... notice a number of common approaches among towns that are on the mend. Two of these... universities and immigration...

I find myself wishing that Ricardo had given us some numbers here: How much in the way of resources has the government raised from society via its inflation? And how have those resource flows declined since the 2015 decision to monetize the fiscal deficit?: Ricardo Hausmann: The Venality of Evil: "Inflation in Venezuela... [at] 1,000,000% by year���s end... GDP... 45% below its 2013 level by the same time...

Noah Smith wonders if he can make a supply-and-demand argument to people who are allergic to "supply and demand" with a spoonful of sugar. He has three types of housing: newly-built yuppie fishtanks, old housing that can switch between working-class and yuppie, and newly-built "affordable housing" unattractive to yuppies: Noah Smith: YIMBYism explained without "supply and demand": "YIMBYism is the idea that cities need to build more housing in order to relieve upward pressure on rents...

This point is absolutely cognitive science-statistics-philosophy of probability gold!: Judea Pearl, Madelyn Glymour, and Nicholas P. Jewell (2016): Causal Inference in Statistics: A Primer (New York: John Wiley & Sons: 978119186847>) : "Inquisitive students may wonder why it is that dependencies associated with conditioning on a collider are so surprising to most people���as in, for example, the Monty Hall example. The reason is that humans tend to associate dependence with causation...

Cosma Shalizi (2017): Review of Collins and Evans, Why Democracies Need Science: "This book has two big themes... that the scientific enterprise rests on certain values, which are attractive and should be pursued, and are consonant with a democratic polity and society...

#noted
#hoistedfromthearchives
#equitablegrowth
#weblogs

The China shock was not the only shock American manufactu...

The China shock was not the only shock American manufacturing has experienced. yet New England politics did not turn nativist in the 1960s. What was the difference? No Fox News?: John F. Kennedy: New England Industry and the South: "The southward migration of industry from New England has too frequently taken place for causes other than normal competition and natural advantages...

#noted

Note to Self: Why was Jonathan Weisman's economic policy ...

Note to Self: Why was Jonathan Weisman's economic policy reporting for the Washington Post so execrable back in the mid-2000s? A person who was, as they say, very, very, very, very, very familiar with the matter:

Jonathan's big problem is that he's not that deep into the issues, and he has no backup. There's nobody that he can go to in that building to tell him 'this was how X was trying to mislead you' or 'this is Y's history' or 'be very careful here: if you get this detail Z wrong, they'll come down on you extremely hard'...

In retrospect, I think we can conclude that it was not that Weisman was mismanaged by the Washington Post editorial staff: I'm happy to believe that there was gross mismanagement, but gross mismanagement does not lead one to contrast the view of Paul Krugman with that of Donald Luskin or of a White House aide who does not dare give his name and say "economists furiously debate". That is someone who has made a deliberate decision to make their career by being a complaisant mouthpiece for insider anonymous sources

#journamalism #notetoself #orangehairedbaboons

No, Roxane Gay Does Not Owe Jonathan Weisman an Apology!

Note to Self: Let me say that I am 100% behind Roxane Gay here. When Jonathan Weisman was covering economics and monetary policy, he was a "Paul Krugman and Donald Luskin disagree about the shape of the earth: who can tell who is right?" guy. Those of us who talked to him took the incompetence for granted���and more than that: a willful desire to not understand the issues because then he might be unable to properly suck up to the sources he wished to suck up too.

Given that history, my mind is closed on the incompetence question. And I'm happy to listen on the racism one:

Roxane Gay: "Guys, Jonathan Weisman emailed me to say he thinks I owe him an 'enormous apology'. The audacity and entitlement of white men is fucking incredible. I am legitimately shocked. Like. What? He also emailed my assistant. WTF? And he also emailed Harper Collins. Uhh, @nytimes, get your boy...

#notetoself #journamalism #orangehairedbaboon

Gauti Eggertsson, Jacob A. Robbins, and Ella Getz Wold: K...

Gauti Eggertsson, Jacob A. Robbins, and Ella Getz Wold: Kaldor and Piketty���s facts: The rise of monopoly power in the United States: "The macroeconomic data of the last thirty years has overturned at least two of Kaldor���s famous stylized growth facts: constant interest rates, and a constant labor share. At the same time, the research of Piketty and others has introduced several new and surprising facts: an increase in the financial wealth-to-output ratio in the US, an increase in measured Tobin���s Q, and a divergence between the marginal and the average return on capital. In this paper, we argue that these trends can be explained by an increase in market power and pure profits in the US economy, i.e., the emergence of a non-zero-rent economy, along with forces that have led to a persistent long term decline in real interest rates. We make three parsimonious modifications to the standard neoclassical model to explain these trends. Using recent estimates of the increase in markups and the decrease in real interest rates, we show that our model can quantitatively match these new stylized macroeconomic facts...

#noted

Market forces are voting, strongly, for green energy: Alw...

Market forces are voting, strongly, for green energy: Alwyn Scott: General Electric to Scrap California Power Plant 20 Years Early: "General Electric Co said on Friday it plans to demolish a large power plant it owns in California this year after only one-third of its useful life because the plant is no longer economically viable in a state where wind and solar supply a growing share of inexpensive electricity. The 750-megawatt natural-gas-fired plant, known as the Inland Empire Energy Center, uses two of GE���s H-Class turbines, developed only in the last decade, before the company���s successor gas turbine, the flagship HA model, which uses different technology. The closure illustrates stiff competition in the deregulated energy market as cheap wind and solar supply more electricity, squeezing out fossil fuels...

#noted