J. Bradford DeLong's Blog, page 210

Comment of the Day: Graydon: "Education could do with muc...

Comment of the Day: Graydon: "Education could do with much, much more of 'theory informs; practice convinces'. If you want people to exhibit empathy for those whose state is not theirs and whose expertise is different, you need to make most of education involve failure; do this material thing at which you are unskilled. Allowing education to be narrow, and to avoid all reminder that the world is wider and that to a first approximation everyone is utterly incompetent, just encourages arrogance. Arrogance is terrible insecurity management; it makes the other monkeys less inclined to help you. (Yes of course we should overtly teach both insecurity management and band-forming best practices in simple overt language.)...

#commentoftheday

Note to Self: There are few enough things in the world or...

Note to Self: There are few enough things in the world or concerning the state of the (non-House) federal government to be thankful for these days. But one i that, despite his enormous deficits and unfitness for the office of president, Donald Trump is not a chickenhawk:

Hoisted from the Archives: Why We Have Good Reason to Hate Chickenhawks

Hoisted from the Archiyes: Why We Hate Chickenhawks: Selections from SFF Author David Drake

Homer's Odyssey Blogging: Register that: As when thrushes... or doves fall into a net... the most pitiful death. And they writhed with their feet for a little space, but for no long while... They die the most pitiful death, and they writhe with their feet, but for no long while. That is what Telemakhos wanted. Nobody disagrees with him. And one of the subplots of the Odyssey is: Telmakhos���far-thrower, he who can cast the spear a great distance���grows up...

#moralresponsibility #orangehairedbaboons #strategy #notetoself

Hoisted from the Archiyes: Why We Hate Chickenhawks: Selections from SFF Author David Drake

David Drake, a good chunk of whose work is best classified as horror and is really about his experiences as an interrogator in the 11th Armored Cavalry Regiment, the "Blackhorse", when it went through the Cambodian market town of Snuol:

I [now] had much more vivid horrors than Lovecraft's nameless ickinesses to write about.... I wrote about troopers doing their jobs the best they could with tanks that broke down, guns that jammed���and no clue about the Big Picture.... I kept the tone unemotional: I didn't tell the reader that something was horrible, because nobody told me.... Those stories... were different. They didn't fit either of the available molds: "Soldiers are spotless heroes," or... "Soldiers are evil monsters"... [...] The... stories were written with a flat affect, describing cruelty and horror with the detachment of a soldier who's shut down his emotional responses completely in a war zone... as soldiers always do, because otherwise they wouldn't be able to survive. Showing soldiers behaving and thinking as they really do in war was... extremely disquieting to the civilians who were editing magazines...

David Drake: Newsletter #82: "I was a conservative kid...

...Dad worked with his hands���he was an electrician���but he was anti-union and identified with the middle class rather than radical labor. Our family had middle-class values, read slick magazines rather than pulps, and voted Republican.... A lot of people raised the way I was think that Something Should Be Done about this or that world problem... Boko Haram���s kidnapping... the Lord���s Resistance Army... the Islamic State.... All of these organizations do horrific things by the standards of any civilized human being, myself included... [and] are demonstrably beyond the capacity of local governments to deal with.... If I hadn���t ridden a tank in SE Asia, I probably would have been on one or all of those bandwagons and on many others over the years.

The thing is, I know what Doing Something means at the sharp end. I���ve helped to burn a village, I���ve watched a gutshot girl die (she���d been transporting rice for the NVA), and I was involved with a variety of other things that make me doubt the value to the ordinary people of Viet Nam and Cambodia of what we did there. Would it be different in Africa or the Middle East? Maybe, but I find wars have a logic of their own for the people in the mud and the dust and the insects. I think it would be good for folks who say, ���We have to do something!��� to at least talk to some of us who���ve Done Something ourselves. Talk to us���or keep their mouths shut...

hard power can be decisive--but one needs to have a lot of it, and be willing not just to threaten to use it but to actually use it, and not care that one's use of it may lead the abyss to look into you, and turn you into something you did not want to be, and so cause you to lose even as you "win".And I think: The science fiction/horror/fantasy author David Drake very effectively and rightly, I think, puts it thus in the mouth of one of his characters, the Goddess Athene Danny Pritchard:

Force accomplishes a lot of things. They just aren���t the ones you want here. Bring in the Slammers [Regiment] and we kick ass for as long as you pay us. Six months, a year. And we kick ass even if the other side brings in mercs of their own--which they���ll do--but that���s not a problem, not if you���ve got us. So, there���s what? Three hundred thousand people....

So, you want to kill fifty kay? Fifty thousand people, let���s remember they���re people for the moment.... You see, if we go in quick and dirty, the only way that has a prayer of working is if we get them all. If we get everybody who opposes you, everybody related to them, everybody who called them master--everybody.... They���re not dangerous now, but they will be after the killing starts. Believe me. I���ve seen it often enough. Not all of them, but one in ten, one in a hundred. One in a thousand���s enough when he blasts your car down over the ocean a year from now. You���ll see. It changes people, the killing does. Once it starts, there���s no way to stop it but all the way to the end. If you figure to still live here on Tethys....

What do you think the Slammers do, milady? Work magic? We kill, and we���re good at it, bloody good. You call the Slammers in to solve your problems here and you���ll be able to cover the Port with the corpses. I guarantee it. I���ve done it, milady. In my time...

David Drake: The Complete Hammer's Slammers: "I'm going to do more stories... [that are] a vehicle for a message that I think needs to be more widely known. Veterans who have written or talked to me already understand, but a lot of other people don't: When you send a man out with a gun, you create a policymaker. When his ass is on the line, he will do whatever he needs to do [to try to survive, physically and psychologically]. And if the implications of this bother you, the time to do something about it is before you decide to send him out...

David Drake makes a claim about the secret history of the Cold War:

David Drake: The problem... is that the proxies have policies of their own. Not infrequently, things go wrong for the principal when the proxy decides to implement its separate policies....

In the [late] 1970s the US hired a battalion of troops from Argentina, called them ���the Contras��� and employed them to fight the socialist government of Nicaragua. The military dictatorship running Argentina at the time was more than happy to support the US effort.

Unfortunately for everybody (except ultimately the Argentine people), General Galtieri and his cronies (some of whom, amazingly, were even stupider and more brutal than he was) decided that their secret help to the US meant that the US would protect them from Britain when they invaded the Falklands and subjected the islands��� English-speaking residents to what passed for government in Argentina. Galtieri was wrong���the tail didn���t wag the dog during the Falklands War���and Argentina ousted the military junta as a result of its humiliation by Britain; but there might not have been a Falklands War if the US had not used Argentina as a military proxy in Nicaragua....

I could mention cases where US proxy involvements have led to even worse results. If the shoe fits, wear it...

#strategy #books #sciencefiction #hoistedfromthearchives #moralresponsibility

Hoisted from the Archives: Why We Have Good Reason to Hate Chickenhawks

Hard Power, Soft Power, Muscovy, Strategy, and My Once-Again Failure to Understand Where Niall Ferguson Is Coming From: Live from Le Pain Quotidien: In which I once again fail to understand where Niall Ferguson is coming from:

Niall Ferguson: The ���Divergent��� World of 2015: "Hard power is resilient...

...Having annexed Crimea to Russia, President Putin still has forces camped out in eastern Ukraine. And all over the Muslim world, myriad Islamist organizations, from Islamic State to the Taliban, are using violence to pursue their atavistic goals. In practice, the Obama administration has had little choice but to keep using hard power, from the airstrikes on Islamic State to the economic sanctions on Russia...

And I think: Of course hard power can be decisive--but one needs to have a lot of it, and be willing not just to threaten to use it but to actually use it, and not care that one's use of it may lead the abyss to look into you, and turn you into something you did not want to be, and so cause you to lose even as you "win".And I think: The science fiction/horror/fantasy author David Drake very effectively and rightly, I think, puts it thus in the mouth of one of his characters, the Goddess Athene Danny Pritchard:

Force accomplishes a lot of things. They just aren���t the ones you want here. Bring in the Slammers [Regiment] and we kick ass for as long as you pay us. Six months, a year. And we kick ass even if the other side brings in mercs of their own--which they���ll do--but that���s not a problem, not if you���ve got us. So, there���s what? Three hundred thousand people....

So, you want to kill fifty kay? Fifty thousand people, let���s remember they���re people for the moment.... You see, if we go in quick and dirty, the only way that has a prayer of working is if we get them all. If we get everybody who opposes you, everybody related to them, everybody who called them master--everybody.... They���re not dangerous now, but they will be after the killing starts. Believe me. I���ve seen it often enough. Not all of them, but one in ten, one in a hundred. One in a thousand���s enough when he blasts your car down over the ocean a year from now. You���ll see. It changes people, the killing does. Once it starts, there���s no way to stop it but all the way to the end. If you figure to still live here on Tethys....

What do you think the Slammers do, milady? Work magic? We kill, and we���re good at it, bloody good. You call the Slammers in to solve your problems here and you���ll be able to cover the Port with the corpses. I guarantee it. I���ve done it, milady. In my time...

And I think: Putin does not have enough hard power to dominate the world, or the North Atlantic, or the ex-Soviet Empire, or even Russia's Muscovy's near abroad.

What he has managed to do with his hard power is grab one peninsula (the Crimea), and four provinces���Abkhazia, South Ossetia, Luhansk, and Donetsk. In return, he has shrunk Russia���formerly the predominant power in eastern Europe and the primus inter pares of the Slavic nations���into a generally-disliked albeit somewhat-feared Muscovy. The Muscovite generals who danced in Paris in 1815, in Berlin in 1945, in Havana in 1962, and in Saigon in 1975 are now... camped along the right bank of the lower Don near the Sea of Azov? Siberia aside, the borders of Muscovy look a lot like those under... Dread Ivan Rurik at the time of the Livonian War?

And this is supposed to be a demonstration of Putin's hard power? Of the rewards to military adventurism, and evidence that we should do what we did in Iraq in 2003 again?

#strategy #moralresponsibility #sciencefiction #books #hoistedfromthearchives

The Fed Should Buy Recession Insurance: Now Not Quite so Fresh at Project Syndicate

Now Not Quite so Fresh at Project Syndicate: The Fed Should Buy Recession Insurance: If the United States falls into recession in the next year or two, the US Federal Reserve may have very little room to loosen policy, yet it is not taking any steps to cover that risk. Unless the Fed rectifies this soon, the US���and the world���may well face much bigger problems later.

BERKELEY���The next global downturn may still be a little way off. The chances that the North Atlantic as a whole will be in recession a year from now have fallen to about one in four. German growth may well be positive this quarter, while China could rebound, too. And although US growth is definitely slowing���to 1% or so this quarter���this may yet turn out to be a blip.

Let���s hope so.

Because if the next downturn is looming, North Atlantic central banks do not have the policy room to fight it effectively. Should a recession arrive, the US Federal Reserve would ideally be able to cut interest rates by five percentage points, as is customary in such situations. But with short-term safe interest rates currently at 2.4%, it cannot. And with euro and yen interest rates still around zero, the European Central Bank and the Bank of Japan would be unable to help much, either.��

Looking ahead, therefore, the big risk is not that inflation will start spiraling upward, with the Fed unable to raise interest rates fast enough to stabilize the economy. Rather, it is the downside risk that a year from now, the North Atlantic will be in recession, governments will not provide enough fiscal stimulus, and the Fed won���t be able to reduce interest rates enough���leaving it nearly helpless to even try to stabilize the economy.

The logical response to such an asymmetric risk is���or ought to be���to buy insurance to cover it. Worryingly, however, the Fed is not taking out any policy insurance at all against a possible recession, despite having at least three possible options from which to choose.

For starters, the Fed could raise interest rates further now, creating more room for rate cuts if the US economy subsequently falls into recession. I think this would not work: it hinges on the economy's being boosted more by one large rate cut in the future than it is retarded now by a drip-drip of small rate increases. While many economists believe this is the case, I have never seen convincing evidence. But it would, at least, be a plan.

However, Fed Chair Jerome Powell seems to have ruled out this option for the time being. In a recent interview, Powell said the Fed���s policy rate ���is in an appropriate place��� in view of ���muted��� US inflation and increasing evidence that the global economy is slowing. ���We���re going to wait and see how those conditions evolve before we make any changes to our interest-rate policy,��� he said.

Alternatively, the Fed could cut interest rates today to try to compensate for its inability to reduce rates enough in a future downturn. If growth then recovers and strengthens���as more likely than not it will���there is no harm done. US inflation expectations are well anchored, so the Fed could fully and cheaply offset looser monetary policy now with a tighter stance later.

But if growth does not pick up, and the North Atlantic falls into recession, the Fed will have to cut interest rates frantically at the end of this year. And it will greatly regret that it did not get ahead of the curve by preemptively lowering rates today.

The Fed���s third option is to leave interest rates unchanged for now, but clearly and aggressively explain how it would fight a recession effectively, should one arrive over the course of the next year. In doing so, the Fed would need to be far more convincing than it was from 2010 onward, when the US economy was struggling to recover from the 2008 financial crisis.

On that occasion, then-Fed Chair Ben Bernanke���s monetary policy���and his pleas to Republican legislators and austerity hawks to put the national interest ahead of partisan point-scoring and support aggressive fiscal stimulus���were completely ineffective in generating growth above previous trend rates. As a result, the US recovery was anemic and unsatisfactory.

A more credible Fed plan to fight a possible recession in 2020, 2021, or thereafter might well boost business confidence and make the central bank���s policies more effective. At the very least, it would reassure companies and investors who, fearing that US aggregate demand will be weak in 2020, might be starting to pull back. But this third option would require an aggressive intellectual and communications effort from the Fed, and there is currently no evidence of one.

If the US falls into recession over the next year or two, the Fed may have very little room to loosen policy. And yet it is not taking any steps to cover that risk. That is unwise. Unless the Fed buys some recession insurance soon, the US���and the world���may well face much bigger problems later...

#highlighted #projectsyndicate #monetarypolicy

A Firebell in the Morning...

Lesson one of central banking: yield curve inversion should only be allowed when the central bank wants to push inflation down. So what does the Fed think it's doing? Is it that confident that the bond market does not know what it is doing? Show me any optimal control exercise that says that right now is a good time to allow yield curve inversion: Vildana Hajric and Sarah Ponczek: Stock Market Today: Dow, S&P Live Updates for March 22, 2019: "U.S. equities fell and Treasuries rose after miserable data from the German manufacturing sector.... The yield on 10-year Treasuries, already at a more-than-one-year low, extended its decline. The three-year/10-year yield curve inverted for the first time since 2007...

#noted

This Has Certainly Been One Crazifying Fed Tightening Cycle...

This has certainly been one crazifying Fed tightening cycle.

The 10-year nominal Treasury rate is only 0.2%-points higher than it was back in mid-2015, when liftoff appears imminent. the 10-year real rate is back where it started at 0.65, after having gone as low as zero and as high as 1.1%. And���unless it is triggered by strong good growth news���any further increase in the federal funds rate would invert the yield curve, which the Federal Reserve has decided not to do.

I really wish I had some idea of just what the Federal Reserve plans to do to fight the next recession, whenever the next recession come along. It has know since at least mid-2010 that the bond market believes that secular stagnation���at least in its effect on long-term interest rates���is a very real thing.

Presumably the Fed still believes that when the next recession comes it has one job: to drop the 10-year real Treasury rate so that expanded construction and exports can take up some of the emerging labor-market slack and so cushion the downturn. But I have no idea what policies it thinks it will pursue that will accomplish that...

#notetoself #monetarypolicy #highlighted

A Baker's Dozen of Books Worth Reading...

The Vela https://www.serialbox.com/serials/the-vela
Barbara Chase-Ribaud: Sally Hemings; A Novel https://books.google.com/books?isbn=1569766797
Annette Gordon-Reed: Thomas Jefferson and Sally Hemings: An American Controversy https://books.google.com/books?isbn=0813933560
Kevin O'Rourke: A Short History of Brexit https://books.google.com/books?isbn=0241398339
E.M. Halliday: Understanding Thomas Jefferson https://books.google.com/books?isbn=0060957611
Guy Gavriel Kay: A Song for Arbonne https://books.google.com/books?isbn=1101667435
Harriet Beecher Stowe: A Key to Uncle Tom's Cabin https://books.google.com/books?isbn=1557094934
Keri Leigh Merritt: Masterless Men https://books.google.com/books?isbn=110718424X
Gareth Dale: Karl Polanyi: A Life on the Left https://books.google.com/books?isbn=0231541481
Philip Auerswald: The Code Economy: A Forty-thousand-year History https://books.google.com/books?isbn=0190226765
John Judis: The Nationalist Revival: Trade, Immigration, and the Revolt Against Globalization https://books.google.com/books?isbn=099974540
Richard Baldwin: The Globotics Upheaval: Globalization, Robotics, and the Future of Work https://books.google.com/books?isbn=0190901772
Patricia Crone: Pre-Industrial Societies: Anatomy of the Pre-Modern World https://books.google.com/books?isbn=1780748043



#books #notetoself #highlighted

Martin Wolf: Theresa May Is Taking a Hideous Brexit Gambl...

Martin Wolf: Theresa May Is Taking a Hideous Brexit Gamble: "Why, then is the prime minister so set on getting this deal through parliament? It is surely because she believes it is the only way to achieve three conflicting objectives at one and the same time: keep her party united; agree with the EU; and deliver the promised Brexit. These objectives are not unreasonable.... But sticking so doggedly to this strategy is also extremely risky...

...A bolder and more flexible leader than Mrs May would have stuck to the idea of a long extension... pursue[d] the option of second referendum.... Another referendum would carry political risks. But so would her deal, let alone a no-deal Brexit. The latter would poison relations between the UK and its economic partners, savage the country���s influence in the world and damage the economy. The prime minister seems to have ruled out any possibility of such a shift in approach. Meanwhile, parliament is unable to agree to any such radical change in the absence of action by the government. That, it appears, will not happen: to Mrs May, the referendum is a sacrosanct instruction and survival of the divided Conservative party a sacred duty. Thus, the country seems set to make the gamble between her deal and none. True leaders do not behave this way...

#noted

Fairly Recently: Must- and Should-Reads, and Writings... (March 21, 2019)

Comment of the Day: Erik Lund: "In later stages, the AI taught itself to recognise school ties and to perform Masonic handshakes. Unfortunately, on being informed that software wasn't eligible for Skull and Bones or Opus Dei, it became critically unstable...

Raising the Curtain: Trade and Empire: Yet Another Outtake from "Slouching Towards Utopia?: An Economic History of the Long Twentieth Century, 1870-2016"...

���An Extraordinary Episode in the Economic Progress of Man!���: Yet Another Outtake from "Slouching Towards Utopia?: An Economic History of the Long Twentieth Century, 1870-2016"...

Six Migrants and Their Descendants Who Made History: Yet Another Outtake from "Slouching Towards Utopia?: An Economic History of the Long Twentieth Century, 1870-2016"...

David Warsh: Austerity is Defunct: "Long-term stagnation is a real possibility...

Wikipedia: Gregor MacGregor

Andy Matuschak and Michael Nielsen: Quantum Computing for the Very Curious: "Presented in an experimental mnemonic medium, which makes it almost effortless to remember what you read...

Remaniacs Podcast

Laura Tyson and Susan Lund: The Blind Spot in the Trade Debate: "Digital flows and services.... As governments assess their external balances and competitive positions, hammer out trade deals, and set national policy agendas, they need to look beyond manufacturing and agriculture...

Notice anyone missing from Clive Crook's list of Brexit villains? That's right: no Johnsons, no Farages, no ERGs. Somehow the right-wing nutjobs whom he has spent so much of his career carrying water for have no agency, and so are not worth mentioning as bearing responsibility. Bless their little hearts: Clive Crook: Britain���s Next Great Brexit Mistake: "No great regard for the EU.... Cameron���s bungling.... Rarely... did May miss a chance to make things worse.... This pitiful result... the Remain majority in Parliament chose to let it happen...

Casey Newton: Instagram's Reckoning Arrives

Petitions: Revoke Article 50 and remain in the EU: "The government repeatedly claims exiting the EU is 'the will of the people'. We need to put a stop to this claim by proving the strength of public support now, for remaining in the EU. A People's Vote may not happen-so vote now...

Robert Shrimsley: No words: "We're close to a gangrene moment" said one senior European Commission official...

Excellent insight into police-community relations in America from a very observant and thoughtful peace officer: Patrick Skinner: "One of the questions I ask every class: When was the last time you had a positive encounter with a cop who didn���t know you were a cop in which she wasn���t telling you to do something (Traffic) or you weren���t asking something. The answer 100% has been ���never���. That���s an issue.... I���m speaking to literally the most cop supportive group-other cops-and they can���t think of a positive voluntary encounter with a cop. The problem isn���t our neighbors. It���s us the cops. It doesn���t have to be this way. So, that���s my whole 1 day course kinda.... We need to train cops entirely as if they didn���t have a badge and a gun. And only at the end say ���by the way, you have this authority, use it as a parachute.��� The badge gets you in the door. The rest is anti-drama. Act accordingly...

Jacob Levy: Democracy for Republicans: "American conservatism and market liberalism... overlook the deep relationship between democratic government and modern commercial capitalism.... The kind of positive-sum market economy that has transformed the world since 1800 through compounding productivity increases and economic growth is very different from the ancient Rome riven by class conflicts over zero-sum land distribution, but the Founders understood the Roman precedents better than they understood the world that was about to emerge. And that economic world emerged with, not against, the development of a kind of democratic government they also did not foresee, government by contending, permanent political parties alternating in power by competing for votes in a mass-suffrage society...

Wise from Simon: a "Green New Deal" needs to be not just technocratically efficient but politically popular: Simon Wren-Lewis: How to Pay for the Green New Deal: "Tackling climate change is resisted by powerful political forces that have in the past prevented the appropriate taxes, subsidies and regulations being applied. Which is a major reason why the world has failed to do enough to mitigate climate change.... Just as proponents of a Green New Deal are savvy about the need to overcome the resistance of, for example, the oil and gas industry, they also realise that the Green New Deal needs to be politically popular. So the New Deal package has to include current benefits for the many, perhaps at the expense of the few.... If you cannot make the polluter pay, it is still better to take action to stop climate change even if future generations have to pay the cost of that action...

"A 'period'... could be three years, or it could be 20": Paul Krugman (May 1998): Japan's Trap: "The basic premise-that even a zero nominal interest rate is not enough to produce sufficient aggregate demand-is not hypothetical: it is a simple fact about Japan right now. Unless one can make a convincing case that structural reform or fiscal expansion will provide the necessary demand, the only way to expand the economy is to reduce the real interest rate; and the only way to do that is to create expectations of inflation. Of course, it is not necessary that Japan do anything. In the quasi-static IS-LM version of the liquidity trap, it appears as if the slump could go on forever. A dynamic analysis makes it clear that it is a temporary phenomenon-in the model it only lasts one period, although the length of a "period" is unclear (it could be three years, or it could be 20). Even without any policy action, price adjustment or spontaneous structural change will eventually solve the problem. In the long run Japan will work its way out of the trap, whatever the policy response. But on the other hand, in the long run...

Equitable Growth: Interview with Kyle Moore, Dissertation Scholar at Equitable Growth: "rResearch on racial stratification and stress-related morbidity among older Americans. See his bio on Equitable Growth's website for more information https://equitablegrowth.org/people/kyle-moore/...

James Felton: Nine days from ���Brexit day���, does anyone have a clue what���s happening?: "We���re begging for an extension and seeking trade deals with the mighty Liechtenstein. Everything is fine.... It was admittedly quite funny that Theresa May is in the position of defending getting people to vote over and over again until she gets the result that she wanted.... After the announcement, some ERG members expressed dismay that they weren���t allowed to vote again (see how funny this is?) Strongly approve of Bercow making decisions based on how funny they are to people who retain the capacity for rational thinking)....If only they���d treated the meaningful vote more like a meaningful vote and less like tantric legislative foreplay before a full 29 March climax, but you live and learn.... So here we are. Nine days to go, hoping that 27 countries that May said would be crushed if they didn���t offer her a good deal are kind enough to all let us stay a little longer if we beg. If we���ve annoyed any one of them enough, say, by calling them Nazis or likening them to Soviet prisons for the past three years, they could veto our extension...

A brilliant paper. But I have a worry: those at the upper tail of the income distribution are, to a substantial degree, those whose broadly-construed portfolios are ludicrously risky who happen to be unusually lucky. I am not sure they have properly accounted for luck here: Matthew Smith, Danny Yagan, Owen M. Zidar, and Eric Zwick: Capitalists in the Twenty-First Century: "Entrepreneurs who actively manage their firms are key for top income inequality. Most top income is non-wage income, a primary source of which is private business profit. These profits accrue to working-age owners of closely-held, mid-market firms in skill-intensive industries. Private business profit falls by three-quarters after owner retirement or premature death. Classifying three-quarters of private business profit as human capital income, we find that most top earners are working rich: they derive most of their income from human capital, not physical or financial capital. The human capital income of private business owners exceeds top wage income and top public equity income. Growth in private business profit is explained by both rising productivity and a rising share of value added accruing to owners...

Andrew Rilstone: The Opening of the Gospel of Mark: "I almost wish that Mark's Gospel could be presented in some kind of Tony Harrison pidgin: 'God-Is-Gracious dips people in the Desolation./God-Is-Gracious heralds dipping to change their minds and undo their near-misses./Everyone from Praise-Land comes!/Everyone from��Peace-town!/They are all dipped in the Flowing/Acknowledging their near-misses...

Question: Howe long before internet searches for "Delong economist" come up not with me but with this guy?: Delong Meng: Optimal Mechanisms for Repeated Communication: "We consider a repeated communication model with a long-run sender and a long-run receiver.... A biased adviser who prefers policy �� + b, whereas the receiver wants to implement policy ��. The sender���s utility is uS(a,��) = -(a��������b)2, and the receiver���s utility is uR(a,��)= ���(a�����)2.... For the optimal mechanism the receiver chooses a function a(ht) that maximizes her expected payoff with respect to the sender���s incentive constraint.... We characterize the payoff set as the discount factor goes to one, and we analyze the rate of convergence to points on the frontier of this limit payoff set...

Save for white baby-boomers and pre-baby boomers who rode the post-WWII wave of government-sponsored housing finance and inflation on the one hand and union and white-collar defined-benefit pensions on the other, by and large the "middle class" in terms of wealth has always been a multi-generational phenomenon: what with keeping-up-with-the-joneses and the slings-and-arrows-of-fortune, several generations of middle-class incomes are required to build up anything that can be called a middle-class wealth stock. And racial discrimination has made it impossible for African-Americans to have such a run of security: Darrick Hamilton: Racial Equality Is Economic Equality: "Race is a stronger predictor of wealth than class itself. The 2017 Survey of Consumer Finances indicates that the typical black family has about 17,600 in wealth (inclusive of home equity); in contrast, the typical white family has about 171,000. This amounts to an absolute racial wealth gap where the typical black family owns only ten cents for every dollar owned by the typical white family!...

Pedro Nicolaci da Costa, newly-installed over at EPI, is doing a bang-up job: Pedro Nicolaci da Costa: These 5 Charts Show Inequality Is Bad for Your Health���Even If You Are Rich: "Pickett and Wilkinson kept coming back to a single uniting factor���inequality: 'What the research shows���not just ours but that of hundreds of researchers around the world���is that inequality brings out features of our evolved psychology, to do with dominance and subordination, superiority and inferiority, and that affects how we treat one another and ourselves, it increases status competition and anxiety, anxieties about our self worth, worries about how we are seen and judged'.... Here are five charts from their presentation...

Dani Rodrik has, I think, a better way to frame the problems that he and Richard Baldwin are both thinking about this winter: Dani Rodrik: The Good Jobs Challenge: "[For] developing countries... existing technologies allow insufficient room for factor substitution: using less-skilled labor instead of skilled professionals or physical capital. The demanding quality standards needed to supply global value chains cannot be easily met by replacing machines with manual labor. This is why globally integrated production in even the most labor-abundant countries, such as India or Ethiopia, relies on relatively capital-intensive methods.... The standard remedy of improving educational institutions does not yield near-term benefits, while the economy���s most advanced sectors are unable to absorb the excess supply of low-skilled workers. Solving this problem may require... boosting an intermediate range of labor-intensive, low-skilled economic activities. Tourism and non-traditional agriculture... public employment ... non-tradable services carried out by small and medium-size enterprises, will not be among the most productive, which is why they are rarely the focus of industrial or innovation policies. But they may still provide significantly better jobs than the alternatives in the informal sector...

In response to a query from Nancy M. Birdsall on what are the most important contributions to feminist economics, Equitable Growth's Kate Bahn provides a shoutout to, among others, my college classmate Joyce Jacobsen of Wesleyan���who got me my first economics RA job: Kate Bahn: "Some good resources are Beyond Economic Man and Toward a Feminist Philosophy of Economics. I particularly like Joyce Jacobsen's essay on 'Some implications of the feminist project in economics for empirical methodology' in the latter...

The real lesson, I think, from AI-machine learning is that AI-machine learning is a lot like "human judgment"���we have remarkably little insight into what features decisions of the situation are salient to the mind or to the whatever that is actually making the deciding. Thus this is not just a cautionry tale for AI-machine learning, it is also a cautionary tale for human "experts": Andrew Hill: Amazon Offers Cautionary Tale Of AI-Assisted Hiring: "Amazon, one of the most innovative and data-rich companies in the world, leapt on that possibility as early as 2014. It built a recruiting engine that analysed applications submitted to the group over the preceding decade and identified patterns. The idea was it would then spot candidates in the job market who would be worth recruiting...

John Authers: Things Are Finally Looking Up for Theresa May: "EU... patience has run out and they do not want to waste more time waiting for the infuriating British to make up their minds.... EU��leaders have decided that they are ready for a no-deal��Brexit and could handle the consequences. This is probably not true of the U.K. And so the EU is prepared to risk forcing the issue, and forsaking the (still slim) chance that the U.K. might yet��decide to stay. Thus, Theresa May, for whom personal support appears to have evaporated, might conceivably be in position to snatch victory from the jaws of defeat...

I agree. This is bending to reality. But the reality has only changed a little bit since last December: John Authers: Federal Reserve Bends to Economic Reality: "Looking at various��recession indicators, several of which are produced by the Fed, it looks as though Powell may be bending to the evidence of economic trouble ahead��and not, as many claim, bending to pressure from the financial markets...

Donald Tusk: "There is a special place in hell for those who promoted Brexit without even a sketch of a plan": ���According to our Pope, hell is still empty. It means there is a lot of space.��� European Commission President Jean-Claude Juncker interjected: ���Don���t go to hell!���...

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