J. Bradford DeLong's Blog, page 155

Jan-Werner M��ller: Populism and the People: "No right-wi...

Jan-Werner M��ller: Populism and the People: "No right-wing populist has yet come to power anywhere in Western Europe or North America without the collaboration of established conservative elites. Farage... needed Michael Gove, Boris Johnson et al to assure voters that [Brexit] was a jolly good idea. Trump wasn���t elected as the leader of a spontaneous grassroots movement... [but] needed the support of Chris Christie, Rudy Giuliani, Newt Gingrich���all of whom vouched for him. What happened on 8 November 2016 can in one sense be explained in the most banal terms. Citizens who identify with the Republican Party came out and did what voters do on election day: they cast a ballot for their party. What took place was utterly normal, except that the candidate himself wasn���t quite so normal...

#noted

Paul Krugman: "Very good from @sjwrenlewis. The Trumpist ...

Paul Krugman: "Very good from @sjwrenlewis. The Trumpist right and its equivalents abroad can only gain power with the collaboration of the establishment right. No Trump without the cynicism of a McConnell and the cowardice of a Rubio. The one thing I think Simon may get wrong is suggesting that mainstream conservatives could have made different choices. Anti-immigrant hysteria and austerity mania weren't intellectual slips, they were part of a sustained strategy.... The mainstream conservative agenda has always been unpopular, and needed to be sold with racism and lies. At some point the right-wing elite was likely to lose control to someone who said the dogwhistles out loud, but that was a risk they needed to take...

#noted

Mike Konczal (2013): Reinhart-Rogoff A Week Later: Why Do...

Mike Konczal (2013): Reinhart-Rogoff A Week Later: Why Does This Matter?: "We are seeing subtle distancing by conservative writers on the Reinhart/Rogoff thesis.... Holtz-Eakin writes about Reinhart and Rogoff in National Review, but drops the 'canonical' status. Now they are just two random people with some common sense the left is beating up: 'In order to distract from the dismal state of analytic and actual economic affairs, the latest tactic is to blame... two researchers, Carmen Reinhardt and Kenneth Rogoff, who made the reasonable observation that ever-larger amounts of debt must eventually be associated with bad economic news...' That's not actually what they said, and if you read Holtz-Eakin in February Reinhart-Rogoff is sufficient evidence to enact the specific plans he wants. Now there's no defense of the 'danger zone' argument, just the idea that the stimulus failed. Retreat!... One thing about the 'cliff' metaphor is that there's no tradeoff that would make it acceptable.... There were numerous other ways of describing this scenario, either the technical 'nonlinearities' or the 'danger zone' of Holtz-Eakin just a few months ago. With the danger zone metaphor now out of play, perhaps economists can see the relevant trade-offs more clearly...

#noted

Risks of Debt: The Real Flaw in Reinhart-Rogoff: Hoisted from the Archives

There never was a 90% cliff. And most of the downward slope in teh scatter came not from debt accumulation but from growth that had been slow for other reasons. See Owen Zidar (2013): Debt to GDP & Future Economic Growth:

Hoisted from the Archives: Risks of Debt: The Real Flaw in Reinhart-Rogoff: 2013: A country that spends and spends and spends and spends and does not tax sufficiently will eventually run into debt-generated trouble. Its nominal interest rates will rise as bondholders fear inflation. Its business leaders will hunker down and try to move their wealth out of the corporations they run for fear of high future taxes on business. Real interest rates will rise because of policy uncertainty, and make many investments that are truly socially productive unprofitable. When inflation takes hold, the web of the division of labor will shrink from a global web he'd together by thin monetary ties to a very small web solidified by social bonds of trust and obligation���and a small division of labor means low productivity. All of this is bound to happen. Eventually. If a government spends and spends and spends but does not tax sufficiently.

But can this happen as long as interest rates remain low? As long as stock prices remain buoyant? As long as inflation remains subdued. My faction of economists���including Larry Summers, Laura Tyson, Paul Krugman, and many many others���believe that it will not...

#hoistedfromthearchives #macro #fiscalpolicy #publicsphere #economicsgonewrong

Smackdown: Failing to Do Robustness Checks Is Not a Virtue

This, from this past April of all times, greatly puzzles me: WHAT IN THE HOLY NAME OF THE ONE WHO IS IS GOING ON HERE?!

Let us remember what really happened back in 2011 when the unemployment rate was 9%:

"Reinhart... explained that countries rarely pass the 90 percent debt-to-GDP tipping point precisely because it is dangerous.... Reinhart and Rogoff... 'current debt trajectories are a risk to long-term growth and stability, with many advanced economies already reaching or exceeding the important marker of 90 percent of GDP'..."

Yet there never was any "90 percent debt-to-GDP tipping point".

Reinhart and Rogoff thought there was because they did not do any robustness checks of their data-analysis binning procedures.

Perhaps an apology to the misled world should be a high priority? Perhaps it should be a higher priority than rants claiming that their critics like me���who were right���engaged in "years of mounting polemics against austerity policies, Keynesian dogma has become something close to a secular religion"?

Marking your beliefs to market makes your thoughts stronger and raises your credibility. Not doing so does the reverse:

Ken Rogoff: The Austerity Chronicles: "After years of mounting polemics against austerity policies, Keynesian dogma has become something close to a secular religion in popular economic-policy debates. But a new study of 16 advanced economies shows that, as with all dogmas, righteousness is no substitute for empirical facts...

...Angry polemics that carelessly toss around the word ���austerity��� to encompass a dizzying range of economic issues, ranging from fiscal retrenchment under market duress to any policy that slows the march to socialism.... The term ���austerity��� is often used polemically as a catch-all for almost any fiscal policy that accounts for the risks and realities around government budget constraints. And, unfortunately, in the current illiberal intellectual climate, merely suggesting alternatives to the mainstream progressive dogma can summon the anti-austerity thought police.... Alesina, Favero, and Giavazzi will be tarred and feathered for daring to suggest that... a well-timed and well-designed fiscal retrenchment can sometimes be expansionary... Austria, Denmark, and Ireland in the 1980s.... Spain, Canada, and Sweden in the 1990s.... Alesina has been lambasted by the likes of Paul Krugman... and political scientist Mark Blyth.... I stand by scholars��� right to explore and express their ideas freely without being subjected to personal attacks by other academics when they dare to disagree with narrow-minded Keynesian dogma....

Anyone not hewing exactly to the dogmatists��� policy mix is immediately dismissed as a proponent of ���austerity.��� For example, though it is difficult to fathom his logic, Robert Skidelsky has described the notion that governments might extend the maturity of their rising debts (to reduce long-term refinancing risks) as an argument for ���austerity.���... Alesina, Favero, and Giavazzi point out [that] some of the best candidates for expansionary austerity after 2008, notably Italy, did not even give it a try. Meanwhile, they find that ���the two countries that did better with austerity were Ireland and the United Kingdom���...

Austerity challenges the conventional dogma in a host of other ways that are too numerous to include here.... Two examples deserve to be highlighted. First, it has been widely argued that government spending multipliers are larger at the zero-interest-rate bound.... Second, the authors devote an entire chapter to challenging the popular notion that any politician who tries to adopt an austerity program will be kicked out of office.... Alesina, Favero, and Giavazzi have written a fundamentally non-ideological book that raises the bar... however much left-leaning polemicists try to dismiss it as blasphemy...

#mondaysmackdown #economicsgonewrong #publicsphere #highlighted




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"A Republic, If You Can Keep It": Weekend Reading

James McHenry: Papers: "Monday 17 Sepr. 1787: Read the engrossed constitution. Altered the representation in the house of representatives from 40 to thirty thousand. Dr. Franklin put a paper into Mr. Willson's hand to read containing his reasons for assenting to the constitution. It was plain, insinuating, persuasive-and in any event of the system guarded the Doctors fame. Mr. Randolp[h], Mr. Mason, and Mr. Gerry declined signing. The other members signed...

...Being opposed to many parts of the system I make a remark why I signed it and mean to support it.

Firs[t]ly I distrust my own judgement, especially as it is opposite to the opinion of a majority of gentlemen whose abilities and patriotism are of the first cast; and as I have had already frequent occasions to be convinced that I have not always judged right.

Secondly Alterations may be obtained, it being provided that the concurrence of 2/3 of the Congress may at any time introduce them.

Thirdly Comparing the inconveniences and the evils which we labor under and may experience from the present confederation, and the little good we can expect from it-with the possible evils and probable benefits and advantages promised us by the new system, I am clear that I ought to give it all the support in my power.

Major Jackson Secr[etar]y to carry it to Congress. Injunction of secrecy taken off. Members to be provided with printed copies. Adjourned sine die. Gent[leme]n. of Con[necticut] dined together at the City Tavern.

A lady asked Dr. Franklin: "Well, Doctor, what have we got���a republic or a monarchy?" "A republic", replied the Doctor, "if you can keep it". (The lady here aluded to was Mrs. Powel of Philada[delphia]._

Mr. Martin said one day in company with Mr. Jenifer, speaking of the system before Convention: "I'll be hanged if ever the people of Maryland agree to it. I advise you said Mr. Jenifer to stay in Philadelphia lest you should be hanged."

#history

Socialist Calculation Debate 2.0: Sparsity: On Twitter

Arindrajit Dube and Friends: On Twitter: Socialist Calculation Debate 2.0: "Arindrajit Dube: Prediction: there will be a socialist calculation debate do-over, but the version 2.0 will be focused on a bet on sparsity...

...Suresh Naidu: Right: instead of trying to get all the prices right, the regularization bet is that is that 99% of the benefits of planning can be realized with 1% of the prices planned by the state (e.g. fed rates).

Arindrajit Dube: "The commanding heights were a great idea but need ML to find them"

Brad DeLong: We already have such bets. Milton Friedman bet that fixing the growth of nominal liquidity services at a constant proportional rate got us 99% of the benefits. Alan Greenspan bet fixing the price of nominal liquidity services at his guess at Wicksellian neutral rate got us 99% of benefits...

Suresh Naidu: Yeah my example of fed rates wasn't accidental. Between the central bank and the tax code (Diamond-Mirrlees: tax rates=price setting) neoclassical econ already yields a sparse set of tools to manage the economy without gosplan. A good Austrian would say that is the whole problem...

Suresh Naidu: I agree with @glenweyl that a way to think about the problems with planning/bureaucracy is overfitting. But the solution to overfit isn't to not try to predict, but to regularize the prediction.

(((E. Glen Weyl))): 100%. See RadicalxChange: "Joining artists, entrepreneurs and scholars to heal political divides and inequality through political and economic mechanism design." http://radicalxchange.org I think a lot of James Scott issues can be viewed in that light...

Erik Brynjolfsson: FWIW, I don't think the calculation is the most important or hardest part (even if they're the once econ 101 models). Power and incentives matter a lot more. Decentralized asset ownership => decentralized power and incentives.

Suresh Naidu: I'm sympathetic to this, but have spent enough time around the econophysics crowd to realize a big cost of decentralization is unavoidable inequality (just from maximum entropy principles), so cant fetishize decentralization alone).

Erik Brynjolfsson: My impression is mostly the opposite. But I guess it depends on how you define and implement decentralization, and a lot of other details.

Suresh Naidu: The lesson of the thermodynamics view of markets,I think, is that economic decentralization at the individual level (even with equal initial endowments) results in quite skewed distributions of whatever is conserved by the economic system (eg money or purchasing power). Here's a survey of that literature (lot of this orbits the Santa Fe institute) https://t.co/cSMz491LEf?amp=1.

#economicgoneright


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July 5, 2019: Weekly Forecasting Update

The right response to almost all economic data releases is: Next to nothing has changed. We are where we were a year ago: Stable growth at 2% per year with no signs of rising inflation or a rising labor share. The only significant difference that the Fed has recognized that its hope of normalizing the Fed Funds rate in the foreseeable future is vain. We are one year closer to full employment, yes. But we have extended our view of when we will reach full employment by nine months:

Federal Reserve Bank of New York: Nowcasting Report: Junly 5, 2019: "The... Nowcast stands at 1.5% for 2019:Q2 and 1.7% for 2019:Q3.... Higher than expected exports and imports data, the ISM manufacturing survey, and employment data...

 

Key Points:

Specifically, it is still the case that:

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.

U.S. potential economic growth continues to be around 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.

Changes from 1 month ago: A 1.0%-point decrease in our estimate of what production will be over April-June. The Federal Reserve has���behind the curve���become convinced that it raised interest rates too much in 2018.

A change from 3 months ago: The U.S. grew at 3.2%/year in the first quarter of 2019���1.6%-points higher than had been nowcast���but the growth number you want to put in your head in assessing the strength of the economy is the 1.6%/year number that had been nowcast. The falling-apart of Trump's trade negotiating strategy with China will harm Americans and may disrupt value chains, and the might be becoming visible in the data flow.

A change from 6 months ago: Stunning dysfunctionality in the British Conservative Party has put a destructive, hard, no-deal Brexit on the scenario list...

#macro #forecasting #highlighted


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Gary Forsythe: A Critical History of Early Rome : ...

Gary Forsythe: A Critical History of Early Rome   : "The smaller Latin states, such as Lanuvium, Aricia, Pedum, and Nomentum, were directly incorporated into the Roman state, as had happened with Tusculum in 381 B.C.... retain[ing] their traditional political institutions and... govern[ing] their own local affairs. The two largest Latin states, Tibur and Praeneste, which in the past had rivaled Rome in Latium... were left nominally independent as Latin allies... bound to Rome by bilateral treaties.... Sutrium, Nepet, Ardea, Circeii, Signia, and Setia retained their status as Latin colonies on the confines of the Ager Romanus. But Roman territory was further increased by annexing Antium and Velitrae. A small Roman maritime colony was established at Antium to guard the coast.... The censors... created two new tribes, the Maecia and the Scaptia...

Rome... continued the practice of founding Latin colonies
during the course of its conquest of Italy, in order to secure strategic areas. The inhabitants of these colonies collectively formed the new Latium in Roman law. They enjoyed the same legal rights (commercium, conubium, and ius migrandi) with respect to the Roman state as had the original Latins... but they were individually bound to Rome by bilateral treaties and were subject to Roman military recruitment. These later Latin colonies played a very important role... in Rome���s conquest of... [and] in the Romanization of Italy....

The Romans likewise continued the communal religious traditions of the Latins by having the consuls conduct the Latin festival every year at the Alban Mount, as well as yearly rites to Vesta and the Penates at Lavinium. The... growth of the mythical tradition that Rome had been colonized from Alba Longa, which in turn had been founded by Lavinium.. [and] the Trojan ancestry of the Latin people. Rome had been described as a Trojan foundation by the Greek mythographer, Hellanicus of Lesbos, as early as the second half of the fifth century B.C. (Dion. Hal. 1.45.4���48.1 and 1.72.2). We do not know when the Romans first began to regard themselves as being of Trojan descent, and when this notion was generally embraced by the Latins, but the process of this myth���s genesis probably dates at least as far back as the late fourth century B.C.... Dionysius (1.64.4���5) indicates that Aeneas received worship at Lavinium at an earthen mound thought to be his grave...

#noted

Dionysius of Halicarnassus: Roman Antiquities: Foedus Cas...

Dionysius of Halicarnassus: Roman Antiquities: Foedus Cassianum (493 BC): "Let there be peace between the Romans and all the Latin cities as long as the heavens and the earth shall remain where they are. Let them neither make war upon another themselves nor bring in foreign enemies nor grant a safe passage to those who shall make war upon either. Let them assist one another, when warred upon, with all their forces, and let each have an equal share of the spoils and booty taken in their common wars. Let suits relating to private contracts be determined within ten days, and in the nation where the contract was made. And let it not be permitted to add anything to, or take anything away from these treaties except by the consent both of the Romans and of all the Latins...

#noted