J. Bradford DeLong's Blog, page 148

You gotta wonder about any definition of "cognitive elite...

You gotta wonder about any definition of "cognitive elite" that proposes to include Stephen Pinker: When Alan Dershowitz comes up to you and says, "I'm defending a rich pedophile. Hey me for free!" why would anyone not-insane ever say yes? "Even pedophiles deserve to be represented in court" is a thing���but only for lawyers. "I joined the pedophile defense team because the money was good" is a thing. It's not something to be proud of, but at least the money can partially assuage the humiliation. But Pinker got no money, and incurred the repetitional hit as a cheerleader for a sleezebag: Colleen Flaherty: Steven Pinker's Aid in Jeffrey Epstein's Legal Defense Renews Criticism of the increasingly Divisive Public Intellectual: "In 2007, Epstein���s attorneys���including Harvard legal scholar Alan Dershowitz���submitted a letter to federal prosecutors arguing that their client hadn���t violated a law against using the internet to lure minors across state lines for sexual abuse. 'To confirm our view of the "plain meaning" of the words, we asked'��Pinker,��'a noted linguist, to analyze the statute to determine the natural and linguistically logical reading or readings of the section', the letter said. 'We asked whether the statute contemplates necessarily that the means of communication must be the vehicle through which the persuading or enticing directly occurs. According to Dr. Pinker, that is the sole rational reading.'...

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Desmond Lachlan: Trump's bizarre Federal Reserve nominati...

Desmond Lachlan: Trump's bizarre Federal Reserve nomination | TheHill: "Among President Trump���s more bizarre nominations for office has to be his nomination of Judy Shelton to fill one of the Federal Reserve Board governor vacancies.... Shelton manages to hold two contradictory views of monetary policy at the same time... strident advocacy of the return to the gold standard is totally inconsistent with the Trump administration���s economic policy approach.... Normally a person would be in favor of either an easy monetary policy to stimulate the economy or a hard monetary policy to exert discipline on the government. Either way, one would not expect her to hold both views at the same time. Yet Ms. Shelton does exactly that...

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EG: Aggregate Effects of Budget Stimulus: Evidence from the Large Fiscal Expansions Database | PIIE

EG: J��r��mie Cohen-Setton, Egor Gornostay, and Colombe Ladreit de Lacharri��re: Aggregate Effects of Budget Stimulus: Evidence from the Large Fiscal Expansions Database: "This paper estimates the effects of fiscal stimulus on economic activity using a novel database on large fiscal expansions for 17 OECD countries for the period 1960���2006. The database is constructed by combining the statistical approach to identifying large shifts in fiscal policy with narrative evidence from contemporaneous policy documents. When correctly identified, large fiscal stimulus packages are found to have strong and persistent expansionary effects on economic activity, with a multiplier of 1 or above. The effects of stimulus are largest in slumps and smallest in booms https://delong.typepad.com/lfe_database.zip...

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Olivier Blanchard and Jeromin Zettelmeyer believe that It...

Olivier Blanchard and Jeromin Zettelmeyer believe that Italy right now is one of those rare cases in which fiscal expansion is likely to be contractionary: Olivier Blanchard and Jeromin Zettelmeyer: The Italian Budget: A Case of Contractionary Fiscal Expansion?: "Putting fiscal multiplier effects and contractionary interest rate effects together���and being generous about the size of the multiplier and conservative about the effect of the interest rate increase���arithmetic suggests that the total effect on growth will be 0.8 * 1.5 ��� 0.8 * 1.6 ��� ���0.1... [with] risks are skewed to the downside. This means that the planned fiscal expansion will probably fail to increase growth���and may even reduce it. The deficit will come in larger than predicted. Supporters of the government will be disappointed. The government may double down, and investors may flee, leading to a serious crisis. It is possible that Italy will suffer a debt run before it even gets a chance to implement its expansionary budget...

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Economist: Britain���s Brexit Debate Regresses to 2016: T...

Economist: Britain���s Brexit Debate Regresses to 2016: The Tory Time Warp: "Jeremy Hunt and Boris Johnson make much of their Trump-like dealmaking ability.... Red lines of leaving the single market, customs union and European Court of Justice... threatening to walk away with no deal is the best way to extract further concessions from Brussels... adamant that they can get Brexit done by October 31st.... The list of implausible Tory claims is long, including old assertions that Britain holds all the cards in the negotiation, that what is needed is simply more determination, that the EU is desperate for Britain���s money and that a new prime minister can bypass Brussels and deal directly with Berlin and Paris. Equally unbelievable arguments are made about trade. German carmakers and Italian vintners need the British market, it is claimed. Because Britain runs a trade deficit in goods, no-deal would do more damage to the eu. A fall in the pound would offset any tariffs. Most of the world trades on WTO terms, so Britain would be fine doing the same. As for Ireland, the two governments can agree bilaterally not to impose a hard border with customs controls.... The truth about power and red lines is less forgiving.... A shift of Brexit talk towards the extreme, epitomised by the two candidates��� embrace of no-deal. The linguistic changes are telling. Mrs May���s deal used to be termed a 'hard' Brexit, as it would take Britain out of the single market and customs union. Now it is widely derided as 'Brexit in name only'.... Although most Tory party members like the sound of a no-deal Brexit, a majority of mps and voters are firmly against it. Manoeuvring round all these obstacles would test any prime minister, never mind one who still believes old myths from 2016.

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Kim England and Kate Boyer: Women's Work: The Feminizatio...

Kim England and Kate Boyer: Women's Work: The Feminization and Shifting Meanings of Clerical Work: "Up to about the 1940s clerical work illustrated a story of women's expansion into the wage-labor market, and the coding of office work as a good respectable job for (certain kinds of) women: notably young, white, educated women prior to marriage. By the middle third of the twentieth century clerical work became an increasingly important source of income for married women. By this time clerical work was emblematic of women's waged work, and provided a primary source of income for women who were single as well married, including a small but growing number of women of color...

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Few people today want to say "Uber is a bad investment". ...

Few people today want to say "Uber is a bad investment". But its track record of no signs of convergence to profitability gives nobody any reason to believe that it is a good investment. And its prospectus and other documents gives nobody any reason to believe that it is a good investment either. Surely if it were to be a good investment, there would be something you could point to suggesting that it is? I find myself puzzled it has gotten this far���not that ridesharing does not promise to be a sustainable productive activity, but that is a very different question from whether ridesharing will be a wildly profitable activity for the first mover. I think Uber is probably a societal plus: a little creative destruction in taxis and a little destruction of monopoly medallion value is a good thing, plus there is a transfer from rich investors to middle-class riders and working-class drivers. But a good investment going forward? What is the road to pumping value equivalent to a flow of 3.5 billion a year starting now out of the system through control of the hailing-and-billing website?: Ben Thompson: Uber���s Rocky IPO, What Went Wrong, The Perils of Private: "I think the private funding model that Uber pioneered, which puts off going public for years, is terrible for nearly all of the relevant stakeholders.... The private investment market is bad for private investors... dramatically less oversight and accountability.... Most importantly, I think that these private investment rounds are bad for the companies themselves. Being able to attract investors on a vision is a wonderful thing when a company is small, and something that makes Silicon Valley great. Being able to do so when a company is large is a recipe for a lack of discipline and a dismissal of economic realities.... The only way to use the proceeds of such a large round is to take on massive operating losses. Historically, as a company neared an IPO level of revenues (say $50-$100mm), investors would expect convergence toward profitability. As these late-stage private companies digest these large fund raises, they are pushing profitability further and further into the future, as well as the proof that their business model actually works. Let me be clear: I am not saying that Uber is a bad investment. I am reiterating the fact that I don���t know, and that I believe that extremely large late-stage rounds not only denied me that knowledge, but very well may have denied that knowledge to Uber itself...

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A Year Ago on Equitable Growth: Twenty Worthy Reads from the Past Week or so: July 19, 2018

Worthy Reads on and from Equitable Growth:

Here is the website for Zucman, Wier, and Torslavon's work on missing profits from tax avoidance and tax evasion (yes, I have decided I should spend some time occasionally listing paper authors in reverse alphabetical order): Gabriel Zucman et al.: The Missing Profits of Nations: [Working paper][1], June 2018. [Online appendix][2], June 2018. [Presentation slides][3], June 2018...

I have not yet welcomed the extremely sharp Kate Bahn to Equitable Growth: Equitable Growth: Kate Bahn: "Her areas of research include gender, race, and ethnicity in the labor market, care work, and monopsonistic labor markets.... She was an economist at the Center for American Progress. Bahn also serves as the executive vice president and secretary for the International Association for Feminist Economics.... She received her doctorate in economics from the New School... and her Bachelor of Arts... from Hampshire...

Wealth inequality measures have been grossly understating concentration because of tax evasion and tax avoidance in tax havens: Annette Alstads��ter, Niels Johannesen, and GabrielZucman: Who owns the wealth in tax havens? Macro evidence and implications for global inequality: "This paper estimates the amount of household wealth owned by each country in offshore tax havens...

The "optimal tax" literature in economics has always been greatly distorted by the fact that models simple enough to solve bring with them lots of baggage that leads to misleading���and usually anti-egalitarian and anti-equitable growth���conclusions that would not follow if we had better control over our theories. Here Saez and Stantcheva make significant progress in resolving this problem: Emmanuel Saez and Stefanie Stantcheva: A simpler theory of optimal capital taxation: "We first consider a simple model with utility functions linear in consumption and featuring heterogeneous utility for wealth..

Very much worth reading from Equitable Growth alum Nick Bunker: Nick Bunker: Puzzling over U.S. wage growth: "Hiring has not been particularly strong during this recovery...

Worthy Reads Elsewhere:

I am genuinely confused here: Do we have an "eastern heartland" problem? Or do we have a "prime age male joblessness" problem? Those two problems would seem to me to call for different kinds of responses. yet Summers, Glaeser, and Austin are smooshing them into one: Edward L. Glaeser, Lawrence H. Summers and Ben Austin: A Rescue Plan for a Jobs Crisis in the Heartland: "In Flint, Mich., over 35 percent of prime-aged men���between 25 and 54���are not employed...

Wise to people who want to be journalists in our current age: (1) Don't expect backup from your peers. (2) rather, the reverse. (3) Falsehood comes faster than you can report it, let alone debunk it: Alexey Kovalev: A message to my doomed colleagues in the American media: "Congratulations, US media! You���ve just covered your first press conference of an authoritarian leader with a massive ego and a deep disdain for your trade and everything you hold dear. We in Russia have been doing it for 12 years now���������with a short hiatus when our leader wasn���t technically our leader���so quite a few things during Donald Trump���s press conference rang a bell. Not just mine, in fact���read this excellent round-up in The Moscow Times..."

I think that this is a very important thing to remember. The Fed View���and the zero-marginal-product workers view���and a lot of other pessimistic views about the economy's non-inflationary speed limit for recovery and growth were totally, catastrophically wrong over the past decade. The people who strongly advocated for such views thus had a badly-flawed Vision of the Cosmic All. Thus I think there is no reason to put a weight higher than zero on their current views of how the world works���unless they have publicly and substantially done the work to mark their beliefs to market. Certainly the Federal Reserve has not yet done so: Timothy B. Lee: "Every additional month of strong employment growth and weak wage growth makes people who said we were near full employment in 2014, 2015, 2016, and 2017 look wronger..."

If real wages are not growing faster than productivity, we are not yet at full employment. We aren't: Matthew Yglesias: "I think it [a labor shortage] would be a good thing, but it���s also mostly fake. We had a labor shortage in 1999 and it was glorious. I think we���ll get there again. But not yet..."

Extremely wise and interesting on how the more empirical reality tells the Trumpists to mark their beliefs to market, the more desperate they are to avoid doing so: John Holbo: Epistemic Sunk Costs and the Extraordinary, Populist Delusions of Crowds?: "Here���s a thought.... The first rule of persuasion is: make your audience want to believe...

The Trump administration and the Republicans that enable it do not understand that disrupting value chains does not get you the benefits in terms of shifting the terms-of-trade in your favor that (with no retaliation) tariffs can in the "optimal tariff" literature when levied on finished goods: Chad P. Bown:" BMW says it will build more of its SUVs overseas and NOT IN SOUTH CAROLINA because of China���s retaliation on US autos in response to Trump���s tariffs...

People are not effective price-sensitive consumers for health insurance. We can argue why they are not. But first we need to admit that we are not: Zarek C. Brot-Goldberg, Amitabh Chandra, Benjamin R. Handel, and Jonathan T. Kolstad: What does a Deductible Do? The Impact of Cost-Sharing on Health Care Prices, Quantities, and Spending Dynamics: "We leverage a natural experiment at a large self-insured firm that required all of its employees to switch... to a nonlinear, high-deductible plan...

The empirical studies are finding more and more hysteresis���more hysteresis in the sense of a persistent downward shadow cast by a recession than I would have believed likely. I keep hunting for something wrong with these studies. But there are too many of them. And they all���at least all those published that cross my desk���point in the same direction: Karl Walentin and Andreas Westermark: Stabilising the real economy increases average output: "DeLong and Summers (1989)... argue that (demand) stabilisation policies can affect the mean level of output and unemployment...

See: here is another study that finds a lot of hysteresis���an ungodly amount: Christina D. Romer and David H. Romer: Why Some Times Are Different: Macroeconomic Policy and the Aftermath of Financial Crises: "Analysis based on a new measure of financial distress for 24 advanced economies in the postwar period shows substantial variation in the aftermath of financial crises...

I think this a very interesting framework. But it is, I think, too simple to be of material use in trying to understand what is going on in the real world. Your mileage may vary: Daron Acemoglu (2001): Directed Technical Change: "Whether technical change is biased towards particular factors is of central importance...

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...

How to use and misuse the argument ad hominid: Belle Waring (2003): Just Not So Stories: "Like everyone else, I'm tired of hearing about how Darwinian pressures cause men to think that young women with a fetching hip-to-waist ratio...

A paper I badly need to read, and to read today: Talia Bar and Asaf Zussman: Partisan Grading: "We study grading outcomes associated with professors in an elite university in the United States who were identified...

Nick Stern is right: Discount rates are highly endogenous to scenarios���and go way, way down in true catastrophe scenarios in which insurance is not possible. Nick Stern is right: Societal discount rates cannot be read off of imperfect capital markets. Climate change studies that start from either the assumption of a pure positive real intertemporal discount rate or from financial market perfection are, I think, as close to worthless as anything on God's Green Earth: Nicholas Stern: Public economics as if time matters: Climate change and the dynamics of policy https://doi.org/10.1016/j.jpubeco.2018.03.006: "Subjects such as the dynamics of innovation, of potentially immense and destabilising risks, and of political economy, together with technicalities around non-linearities and dynamic increasing returns...

How, again, is Donald Trump supposed to win a breath-holding contest with an authoritarian r��gime that both controls its media and sees little downside in redirecting resources to cushion the impact on potentially noisy losers?: Paul Krugman: How to Lose a Trade War: "Trump���s declaration that 'trade wars are good, and easy to win' is an instant classic, right up there with Herbert Hoover���s 'prosperity is just around the corner'...

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Martin Wolf: China Vattles the US in the Artificial Intel...

Martin Wolf: China Vattles the US in the Artificial Intelligence Arms Race: "What counts is implementation not innovation, and here the Chinese have big advantages.... Kai-Fu Lee.... China has scale... more internet users than the US and Europe combined... a supportive government... [with] ambitious goals... build complementary infrastructure.... Lee distinguishes four aspects of AI: 'internet AI'���the AI that tracks what you do on the internet; 'business AI'���the AI that allows businesses to exploit their data better; 'perception AI'���the AI that sees the world around it; and 'autonomous AI'���the AI that interacts with us in the real world. At present, he thinks China is equal to the US in the first, vastly behind in the second, a little ahead in the third, and, again, far behind in the fourth. But five years from now, he thinks, China might be a little ahead in the first, less far behind in the second, well ahead in the third and equal in the last...

....Ding analyses the drivers differently... China is far behind the US in production of semiconductors, ahead in the number of potential users and has about half the number of AI experts and roughly half the number of AI companies.... The rents created by a lead in an important technology are valuable, though often impermanent...

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Kevin Drum: Liberals Need to Be Lincolnesque In Our Lates...

Kevin Drum: Liberals Need to Be Lincolnesque In Our Latest Race War: "The entire Republican Party is now all-in on this strategy. They mostly stay quiet themselves and let Trump himself do the dirty work, but that���s enough. Nobody talks anymore about reaching out to the black community with a spirit of caring or any other spirit. Nor is there anything the rest of us can do about this. Republicans believe that wrecking the fabric of the country is their only hope of staying in power, and they���re right. If working-class whites abandon them even a little bit, they���re toast. So all we can do is try to crush them. What other options are there?... Liberals need to be as Lincolnesque as possible in this endeavor���we don���t have to win the votes of unrepentent bigots, just the fretful fence-sitters���but we also need to be Lincolnesque in our commitment to winning America���s latest race war...

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