J. Bradford DeLong's Blog, page 2108

Google vs. The Screen Scrapers...

Matt Cutts:

Algorithm change launched: I just wanted to give a quick update on one thing I mentioned in my search engine spam post. My post mentioned that “we’re evaluating multiple changes that should help drive spam levels even lower, including one change that primarily affects sites that copy others’ content and sites with low levels of original content.” That change was approved at our weekly quality launch meeting last Thursday and launched earlier this week. This was a pretty targeted launch: slightly over 2% of queries change in some way, but less than half a percent of search results change enough that someone might really notice. The net effect is that searchers are more likely to see the sites that wrote the original content rather than a site that scraped or copied the original site’s content.

Thanks to Jeff Atwood and the team at Stack Overflow for providing feedback to Google about this issue. I mentioned the update over on Hacker News too, because folks on that site had been discussing specific queries too.

Mark Thoma Sends Us to Andre Meier: Still Minding the GapInflation Dynamics during Episodes of Persistent Large Output Gaps

Russian History...

Anybody read Rachel Polonsky's Molotov's Magic Lantern: Travels in Russian History?

The Kindle version costs $14.99, which is four figures, so I won't simply buy it on spec...

Joint "Friends Don't Let Friends Support the Republican Party" and "Why Oh Why Can't We Have a Better Press Corps?"

TEH STUPID!! IT BURNS!!!!

Outsourced to Jonathan Chait:

Who Wants To Be Paul Ryan's Press Secretary?: News stories about Paul Ryan have increasingly come to resemble an open competition for the job of Paul Ryan's press secretary. The latest audition, from ABC News, actually compares him to Kevin Kline's character in "Dave," an earnest wonk combing through the federal budget for examples of waste.... Hilariously, the result of Ryan's Dave-like search through the budget -- and the only example of a putative budget savings mentioned anywhere in the piece -- is his claim to have discovered a savings in the student loan program. In fact, this example is exactly the opposite of what Ryan (and the story) proclaim.

The old federal student loan program guaranteed loans made from private banks to students. This gave the banks incentive to shovel money out the door, knowing Uncle Sam would back them up in case of failure, which of course happened constantly. President Clinton cut, and then President Obama eliminated,the subsidy to the banks, saving taxpayers tens of billions of dollars. Here is the Congressional Budget Office's description:

Despite the many similarities between the FDLP [Federal Direct Loan Program] and the FFEL [Federal Family Education Loan, aka guaranteed lending] program, the latter is significantly more costly for the federal budget. For example, CBO recently estimated that the President’s proposal to eliminate the FFEL program and replace it with additional direct lending would save the government a total of $62 billion between 2010 and 2020. Although the federal cost per dollar of student loans originated varies from year to year and among different types of loans, a loan made in the FFEL program consistently shows a much higher budgetary cost than if it had been made in the direct loan program…

The higher costs in the guaranteed loan program (on both a FCRA and a fair-value basis) result mainly from the way in which the government compensates FFEL lenders. Payments to those lenders are fixed in legislation rather than set through a mechanism—such as a competitive bidding process—that ties reimbursement to actual costs incurred. In general, those statutory payments appear to exceed lenders’ basic administrative costs and their funding costs under normal market conditions (although during the financial crisis, the payments proved too low to cover the surge in lenders’ borrowing costs). Because FFEL lenders must compete to attract borrowers, any difference between the statutory payments they receive and their basic costs is mostly absorbed by increasing marketing efforts, enhancing the administrative services they provide, or offering other benefits to schools and students. Thus, competition between lenders benefits schools and borrowers rather than lowering costs to the government. In addition, FFEL lenders fund their loans in the capital markets, which introduces additional costs and risks to the program that do not arise when loans are funded through the Treasury.

Ryan is a fervent ally of the college lending industry. In 2007, he was one of only 71 Republicans to vote against the College Student Relief Act, which would have cut the interest rate on many student loans, including the FFEL program, in half. Inside Higher Ed notedthat the bill would cut “deeply and directly into lenders' profits.” The bill passed the House 356-71, but stalled in the Senate.

So, that's the one idea this fresh-faced reformer comes up with the balance the budget: shovel billions of dollars in extra subsidies to an inefficient and wildly corrupt industry whose water he has faithfully carried. And this isn't an exception --Ryan's record is one of wild fiscal profligacy. I realize he's cute and energetic and exudes an aw-shucks Midwestern earnestness, but the reality bears absolutely no relation to the image.

Lieberman Wants the U.S. President to Have the Power to Do a Mubarrak

Sean Bonner:

Egypt turns off internet, Lieberman wants same option for US - Boing Boing: On Thursday Jan 27th at 22:34 UTC the Egyptian Government effectively removed Egypt from the internet. Nearly all inbound and outbound connections to the web were shut down. The internet intelligence authority Renesys explains it here and confirms that "virtually all of Egypt's Internet addresses are now unreachable, worldwide." This has never happened before in the entire history of the internet, with a nation of this size. A block of this scale is completely unheard of, and Senator Joe Lieberman wants to be able to do the same thing in the US.

This isn't a new move, last year Senators Lieberman and Collins introduced a fairly far-reaching bill that would allow the US Government to shut down civilian access to the internet should a "Cybersecurity Emergency" arise, and keep it offline indefinitely. That version of the bill received some criticism though Lieberman continued to insist it was important. The bill, now referred to as the 'Protecting Cyberspace as a National Asset Act' (PCNAA) has been revised a bit and most notably now removes all judicial oversight. This bill is still currently circulating and will be voted on later this year. Lieberman has said it should be a top priority.

Hayekianism Plus Some Original Errors...

That, the late Rudi Dornbusch might have but did not say, appears to be the current state of Marxian crisis theory.

Matthew Yglesias directs us to Benjamin Kunkel and notes his allegiance to the Boehner-McConnell-Hayek-Hoover-Mellon-Marx axis on economic policy:

Karl Marx, Real Business Cycle Theorist: Kudos to Benjamin Kunkel for trying to present an accessible Marxist account of the current financial crisis. I was struck reading the piece, though, by how similar the Kunkel/Harvery/Marx account of the crisis is to linguistically and ideologically quite different accounts from the right.... [T]he Marxist and the real business cycle theorist are united in the view that these things happen and mass unemployment and prolonged periods of immiseration are just what happens in a market economy. The RBC stops there while the Marxist looks forward to the construction of an entirely new system.... The range of views associated with John Maynard Keynes and... Milton Friedman... says... no. A transient period of somewhat elevated unemployment could reflect a change in tastes.... But a prolonged period of widespread mass unemployment paired with a collapse in overall spending reflects something else. People haven’t decided they want fewer apples and more pears, they’ve decided they want fewer goods and services and more safe liquid financial instruments. What has to happen in response is that governments need to create more safe liquid financial instruments—more dollars, more euros, more Swiss & British sovereign debt—until people decide they’ve had enough and want to increase their demand for goods and services.

Here is Benjamin Kunkel:

How Much Is Too Much?: The deepest economic crisis in eighty years prompted a shallow revival of Marxism.... [T]he elements of a Marxian crisis theory, one never fully articulated by Marx himself, lie... scattered throughout Theories of Surplus Value, the Grundrisse and above all the posthumous second and third volumes of Capital.... To date, a revived Keynesianism has formed a left boundary of economic debate.... Not until now, with David Harvey’s Enigma of Capital, have we had a book-length example of Marxian crisis theory addressed to the current situation....

Harvey adds new features to a simple model of the ‘overaccumulation of capital’.... [O]veraccumulation remains... the fount of all crisis. The term may seem paradoxical: what could it mean for capital to overaccumulate, when the entire spirit of the system is, as Marx wrote, ‘accumulation for accumulation’s sake’? How could capitalism acquire too much of what it regards as the sole good thing?

Overaccumulated capital can be defined as capital unable to realise the expected rate of profit.... Imagine an economy consisting of a single firm which has bought means of production and labour power for a total of $100, in order to produce a mass of commodities it intends to sell for $110.... As Harvey explains in The Limits to Capital, effective demand ‘is at any one point equal to C+V, whereas the value of the total output is C+V+S. Under conditions of equilibrium, this still leaves us with the problem of where the demand for S, the surplus value produced but not yet realised through exchange, comes from’... ‘the creation of what Marx calls “fictitious capital” – money that is thrown into circulation as capital without any material basis in commodities or productive activity’... an anticipation of future value without which the creation of present value stalls.... Inevitably, the risk is that a given territory... comes to prosper thanks to a stream of finance that one day flows elsewhere. A devaluation of the abandoned land along with its ‘overaccumulated’ workers, industries and infrastructure will ensue. This harsh sequel to the spatial fix Harvey calls a ‘switching crisis’....

The more the forces of geographical inertia prevail, the deeper will the aggregate crises of capitalism become and the more savage will switching crises have to be.... Local alliances will have to be dramatically reorganised (the rise of Fascism being the most horrible example), technological mixes suddenly altered (incurring massive devaluation of old plant), physical and social infrastructures totally reconstituted (often through a crisis in state expenditures) and the space economy of capitalist production, distribution and consumption totally transformed. The cost of devaluation to both individual capitalists and labourers becomes substantial. Capitalism reaps the savage harvest of its own internal contradictions....

[I]t is the broader and more systematic Marxist perspective that ultimately and properly contains Keynesianism within it, and a crude Marxist catechism may be in order. Where does an excess of savings come from? From unpaid labour – for example, that of Chinese or German workers. And why would such funds inflate asset bubbles rather than create useful investment? Because capital pursues not ‘high social returns’, but high private returns.... Not only Americans and Britons but the Irish, Spanish and Emiratis live today among the ruins of a broken spatial fix....

Harvey doesn’t spell out why growth must have a stop, and the outlines of an ecologically stable and politically democratic future socialism remain as blurry in his later work as they do almost everywhere else. At the moment Marxism seems better prepared to interpret the world than to change it. But the first achievement is at least due wider recognition, which with the next crisis, or subsequent spasm of the present one, it may begin to receive.

The original errors are that the divorces between exchange value and use value and the wedges between private profits and social returns have absolutely nothing to do with overaccumulation crises--Hayek and company, after all, manage to construct a perfectly coherent and functional model of overaccumulation crises without them at all.

Why the Affordable Care Act and the Rest of Our Safety Net Are Very Good Things That Need Strengthening

Ezra Klein:

Too young not to work, too old to get a job, Part II: From the inbox:

Some of my work is as a primary doctor at a VA primary care clinic in Southeast Michigan. We are totally overwhelmed right now with people who lost their insurance from auto-related layoffs and are using VA eligibility for the first time. It is totally awful. Think about the job prospects for a high-school educated 50-year-old with 32 years experience with one employer welding a single auto part near Detroit. These are good people who lived and taught their kids with a perspective on life -- work hard and stay out of trouble to earn a middle class life -- that is now totally wrong. They're essentially unemployable here but sure aren't going to leave friends and family for a job at a Panera in Arizona. I suppose that's the nature of technology and change, but it's pretty brutal in this neighborhood.

Matthew Yglesias:

Yglesias: This is the central problem with dynamic, growth-oriented market economies. It’s really not just something that is “now totally wrong,” though the recession is making it a particularly intense problem in Michigan. My mother went to college, worked for years as a graphic designer, and attained middle age in possession of a valuable set of skills related to a period in which “cut and paste” was not a metaphor. Then, quite suddenly, the economic value of those skills was wiped out and her labor market possibilities took a huge negative hit through no fault of her own notwithstanding the fact that she “did everything right.”

It’s clear if you look at the past 300 years of human history that allowing this process of change to move forward leads to huge increases in average living standards. But the notion that it makes everyone better off or that market outcomes are “fair” is a lie. Hence the need for redistribution in general and, ideally, some kind of active labor market policy for people like these former auto workers.

What Should Obama Do with Respect to Egypt?

Outsourced to Marc Lynch:

Obama's handling Egypt pretty well: After President Obama spoke last night about the situation in Egypt, my Twitter feed and inbox filled up with angry denunciations.... Once I actually read the transcript of his remarks, though, I felt much better. I think the instant analysis badly misread his comments and the thrust of the administration's policy. His speech was actually pretty good.... The administration, it seems to me, is trying hard to protect the protestors from an escalation of violent repression, giving Mubarak just enough rope to hang himself, while carefully preparing to ensure that a transition will go in the direction of a more democratic successor.

It's crucial to understand that the United States is not the key driver....

What [the protesters] do need, if they think about it, is for Obama to help broker an endgame... to ease Mubarak out of power, and to try to ensure that whatever replaces Mubarak commits to a rapid and smooth transition to civilian, democratic rule. And that's what the administration is doing....

I completely understand why activists and those who desperately want the protestors to succeed would be frustrated --- anything short of Obama gripping the podium and shouting "Down With Mubarak!" probably would have disappointed them. But that wasn't going to happen, and shouldn't have....

The key to the administration's emerging strategy is the public and private signal that this is Mubarak's last chance, that the administration does not expect him to seize it, and that the U.S. has clear expectations of those who might succeed him. The key line in his remarks here is this:

When President Mubarak addressed the Egyptian people tonight, he pledged a better democracy and greater economic opportunity. I just spoke to him after his speech and I told him he has a responsibility to give meaning to those words, to take concrete steps and actions that deliver on that promise.

This is not the language of capitulation to Mubarak's empty promises of reform. It's a pretty sharp challenge to him to demonstrate serious change immediately.... This blunt conditionality has to be understood in tandem with White House Spokseman Robert Gibbs' carefully chosen words that U.S. economic and military aid to Egypt would now be reviewed -- a direct, almost unprecedented form of pressure on Egypt for which many democracy activists have clamored for years to no avail.

It's also crucial that the U.S. is signaling directly and clearly to the Egyptian military that the administration will not accept a massive, bloody escalation....

What happens next? I really don't think that Mubarak's gambit of dismissing the government is going to work. The protestors want to be rid of him, not of a faceless government of technocrats. His speech last night had an air of desperation, disconnect and delusion which will only feed the protests. Al-Jazeera has been filling up with prominent Egyptian figures disparaging Mubarak, and there's a palpable sense of people positioning themselves for a new era. It isn't over yet --- Mubarak is likely calculating that if he can survive only a few more days, the protest fever will break and he can go back to the old status quo. It's not like he had much legitimacy or popular support before these protests, and his regime has long been comfortable ruling without it. But the rush of events has a feel of finality to it. It's hard to believe, and it's far from certain even now, but as an accelerated Ben Ali script plays out it really is possible that Mubarak could be gone by tonight.

And then will come the hard part. This part of the speech, which went largely unremarked, may prove to be the key to the future: "When I was in Cairo, shortly after I was elected President, I said that all governments must maintain power through consent, not coercion. That is the single standard by which the people of Egypt will achieve the future they deserve." If the U.S. can help the Egyptian people achieve those aspirations, then it will be a major diplomatic success which resonates far beyond Egypt's borders.

Bankers Think They Need More Praise

To fail to understand your own leverage and so push the world economy into a deep recession is something that would normally lead to some criticism. But "bankers" think they should be immune.

Paul Krugman watches the train wreck:

MHLAMF in Davos: From the FT:

Governments around the world must stop banker-bashing and create the right environment for lenders to support economic growth, some of the world’s most powerful bankers will tell finance ministers on Saturday.

So “Ma! He’s looking at me funny!” is now at the core of the financial sector’s complaints. And the world’s top bankers feel that after bringing on a gigantic crisis that has left millions unemployed, being bailed out, and receiving huge paychecks all the while, they now have the right to demand that people stop saying critical things about them.

Oh, and substantively, they want interest rates to rise despite the persistence of high unemployment.

Forthcoming New York Times Story on Academic Webloggers

I have an email from Pamela Paul of the New York Times:

I am very eager to get in touch to talk to you about my story about academic bloggers. Basically, I am profiling 7 of the most prominent and influential blogs written by professors and yours is one. I have interviewed every other professor for the story (Becker/Posner, Glenn Reynolds, Juan Cole, Greg Mankiew, Eugene Volokh, Ann Althouse) and I really want to speak with you as well. I will profile your blog no matter what, but it is so much more interesting to readers and informative if I can include your quotes in the piece. If you get a chance, please do let me know when we could talk and I promise I won't take more than 5 minutes of your time.

I'm thinking of offering her one single quote to be used on an all-or-nothing basis: use it all or use nothing. Perhaps:

I think that what those of us who see ourselves as the best webloggers are doing is an experiment in trying to shift the focus of America's public sphere away from celebrity journalism--Peter Baker's New York Times Magazine article of last weekend comes to mind--and toward the policy substance. We all agree that this job ought to be done: it is the policy substance that really matters for Americans' lives and Americans' futures. And we all agree 100% that our press corps is failing to do it.

I remember how back in 2004 it was Greg Mankiw's turn to be unfairly caught in an absurd media-political firestorm. As he puts it, the "reporters writing the stories universally acknowledged in private that [what Mankiw had said] was both correct and unremarkable on the [policy] substance." Yet the reporters claimed that "as journalists they were obligated to cover the political reaction"--and, in their minds, covering the political reaction meant doing so without foregrounding the policy substance. Why not foreground the policy substance in their "politics" stories? I think it was because doing so would have made both Republican Dennis Hastert and Democrat John Kerry look like idiots--and that was a thing that few reporters for mainstream publications and no editors really wanted to do.

Whether we will collectively succeed or not in the long run is anyone's guess. But I think it will be a better world if we collectively succeed.

What do people think?

FYI, I remember Pamela Paul writing:

Raise the Price of Toys: [M]any of us lament the fact that elementary, high school and even college students today seem creatively bankrupt, bereft of problem-solving skills, and completely lacking resourcefulness. Is it any surprise when we cater to them from infancy with a barrage of cheap toys. That they treat their playthings carelessly, fail to value material goods, and become indifferent to waste? And that they then complain of boredom as they get older? Kids would be a lot better off getting five new toys a year and playing with them 50 different ways. The best toys, after all, are the ones that look most "boring" from the outside. A good rule of thumb is that toys should be 10% toy, 90% child. It's what a child puts into a toy that counts. Take plain wooden blocks. At two months, a baby chews on the block and learns what wood tastes and feels like. At six months, he learns to throw the block and at ten months, he bangs them together. By age four, he is building castles and bridges. Toys are so cheap that it's hard to rationalize not buying them. But perhaps we need to raise the price of toys so that parents and children learn to value them again...