J. Bradford DeLong's Blog, page 243

Back in the mid-1990s I thought that George H.W. Bush was...

Back in the mid-1990s I thought that George H.W. Bush was below replacement as a Republican President. Three things, especially, disappointed me. "Read my lips: no new taxes" was destructive. The attacks on Clinton for "demonstrating against his country on foreign soil" were classless. And his ostentatious pre-firing of advisors who had served him well and to the best of their ability���that was simply graceless and classless: R.W. Apple (October 12, 1992): The 1992 Campaign: The Debate; Bush Stresses His Experience But 2 Rivals Cite Economic Lag: "White House officials said later that if he was re-elected Mr. Bush planned to dismiss his three top economic advisers, as demanded for months by Republican conservatives outraged over tax increases. They are Nicholas F. Brady, the Treasury Secretary; Richard G. Darman, the budget director, and Michael J. Boskin, the top White House economist...

#shouldread

WTF?????. How? Working through the investment channel, bo...

WTF?????. How? Working through the investment channel, boosting growth by 0.5%/year requires boosting the growth rate of the 60 trillion dollar capital stock by 1.5%/year, which requires a permanent one-time upward jump in investment of 4.5% of national income���of 900 billion a year. We are not getting that. Are there other channels Manki regars as "reaonable"? What are they?: Greg Mankiw: The Bad Economics Behind Trump's Policies: "One might reasonably argue that Trump���s tax cuts will increase growth over the next decade by as much as half a percentage point per year...

#noted

Shachar Kariv: The Best Talk On Behavioral Economics: "Fu...

Shachar Kariv: The Best Talk On Behavioral Economics: "Fundamental trade-offs... risk vs. return; today vs. tomorrow; personal well-being vs. the well-being of others; what kind of investor should go to a financial advisor; why people should list their goals, constraints, and preferences to arrive at sensible solutions to their problems; the difference between risk aversion and loss aversion; what is 'ambiguity aversion' and why risk profiling in the financial advisory industry is 'completely broken'; what is home bias and why emerging market investing frightens people beyond objective considerations of risk; why your financial advisor may be more important than your personal physician (and which financial advisors you should run away from)...

#noted

Jared Bernstein: No Correlation Between Top Tax Rates and...

Jared Bernstein: No Correlation Between Top Tax Rates and Growth Rates: "In a piece in WaPo today, I note in passing that there���s no persistent correlation between top tax rates and growth rates across the US time series, nor in oft-cited international data from Saez et al...

#noted

Bijan Parsia: Blocked on Twitter: "Noted author and liter...

Bijan Parsia: Blocked on Twitter: "Noted author and literary journalist Ron Rosenbaum... made a mistake: https://twitter.com/RonRosenbaum1/status/1079006088522067969. The thread is hilarious: https://twitter.com/maxkennerly/status/1078777955562729472?s=21.... Ron did not handle this well.... I decided to jump in but to do so without mockery and with some attempt at sympathy: https://twitter.com/bparsia/status/1079073455725862913?s=21 In particular: https://twitter.com/bparsia/status/1079080278155579392?s=21 Welp, Ron did not like this and went down the insult trail until he blocked me.... Note that one move I made that definitely didn���t help was not giving him any way of being right. Of course, there is in fact no way for him to be right but it���s even harder for people to get out of those situations without a way of feeling that they were right about something...

#noted

Note to Self In response to EconSpark: Ben Bernanke: "How...

Note to Self In response to EconSpark: Ben Bernanke: "How important was the financial panic as a cause of the Great Recession?"

One picture I have always found very illuminating is this one:

Real exports, real private nonresidential fixed investment, real residential fixed investment, real government purchases, all as deviations from their 2007:IV shares of real potential GDP.

From 2005 through the end of 2007 the housing bubble breaks���and real housing investment relative to potential real GDP falls by 3.3%-points of real potential GDP. Yet there is no recession. Expenditure is smoothly switched from residential investment to exports and non-residential investment. Consumption is not noticeably weak in spite of the impact of diminished housing wealth on households.

Thus my belief that if the financial crisis had been managed���if the Bagehot Rule had been followed, and if there had been authorities to lend freely at a penalty rate on collateral that was good in normal times���and if 2008 had passed without a crash, then our proves would have been over. It was not the case that the economy in November 2008 "needed a recession" as John Cochrane liked to claim, "because people pounding nails in Nevada needed to find something else to do". The expenditure-switching had already happened. All that needed to be done was to keep demand for safe assets from exploding���and that is what lending freely at a penalty rate on collateral good in normal times is supposed to do.

And then, of course, in late 2008 things go to in a handbasket. And fiscal support is inadequate by orders of magnitude. And then after 2008 nothing is done to restart financial intermediation in the housing sector at its normal pace. And after 2010 we see fiscal shock after fiscal shock after fiscal shock...

And so here we are, 10% poorer than we thought a decade ago we would be now. And with lots of scarring on lots of lives and organizations...

#noted #econspark #macro #finance

Adam Tooze attributes to me the idea that many of the pro...

Adam Tooze attributes to me the idea that many of the problems fo the past decade stem from the fact that we had "the wrong crisis"���and that we then in large part reacted to the crisis we had expected but did not in fact have. But I think this point is more Matt's than mine: Matthew Yglesias (2012): The Crisis We Should Have Had: "The US economy from 2002-2006... someday soon, the capital flows would come to an end... the value of the dollar would crash, restraining inflation would require high interest rates, and the US economy would feature a period of painful restructuring.... Sections of Tyler Cowen���s The Great Stagnation are about the crisis we should have had... Spence���s The Next Convergence... Stiglitz��� recent Vanity Fair article... Mandel���s piece on the myth of American productivity.... I can name others.... An awful lot of the Obama agenda has been about efforts to address the crisis we should have had. That���s why long-term fiscal austerity is important and why there was no ���holy crap the economy���s falling apart, let���s forget about comprehensive reform of the health, energy, and education sectors��� moment back in 2009...

#noted

Adam Gurri: The Minefield of Prejudice: "One common appro...

Adam Gurri: The Minefield of Prejudice: "One common approach for discrediting an opponent���s ideas without engaging with them on their merits is to attempt to place them in an unsavory history.... Recent projects in this spirit include Thomas Leonard���s Illiberal Reformers, about the ideological allegiance of the early progressive economists to the principles of eugenics, and Nancy MacLean���s Democracy in Chains.... History of this kind is important, but to think that it is in itself discrediting is mistaken.... Investigating the histories of frameworks is important precisely because we aren���t in a position to align ourselves with something entirely pure. It is therefore imperative that we wrestle with the potential dangers in how our ideas and other alignments prejudice us, and 'genealogy' of Nietzsche���s sort can be an invaluable tool.... We are not the third-person omniscient narrators of our lives.... Scrutinizing the sources of our orientation is an important way we can learn more about our prejudices...

#noted

Otto English: Brexit has become a Doomsday Cult: "But May...

Otto English: Brexit has become a Doomsday Cult: "But May���s ardour is as nothing next to Mystic Mogg and his followers, who seem ever more bent on a 'Branch Davidian' path, unsullied by the compromises of reality. Redemption is attainable���if only everyone could see things their way. The true path has been corrupted by concession���only a mythical ���No Deal��� Brexit will fulfil the destiny of the great flight from Dunkirk. Planet Brexit can be reached, the spaceship is coming, we simply have to extract the metal bits from our bras and check that we have set our watches correctly. Beyond parliament rank and file converts remain... in thrall.... They stand on the pavements outside Westminster, shouting meaningless platitudes 'WTO rules' or 'Leave Means Leave'���and waiting for the Brexit Clarions to appear...

#noted

Alice Dreger: Why I Escaped the ���Intellectual Dark Web�...

Alice Dreger: Why I Escaped the ���Intellectual Dark Web���: "Pissing off progressives isn���t intellectual progress. Conventional wisdom says that if a staff writer for The New York Times wants to feature you in a story about brave intellectuals, you reply, 'Yes, please!'... But every time that Times writer, Bari Weiss, called to talk with me about the 'Intellectual Dark Web' and my supposed membership in it, I just started laughing.... Why was I laughing? The idea that I was part of a cool group made me think there was at least some kind of major attribution error going on.... I���m all for bringing intellectualism to the masses, but like a lot of academics, I value ambivalence itself, along with intellectual humility. Yet these values seem in direct opposition to the kind of cocksure strutting that is the favored dance move of the IDW.... Professors, listen to me: You don���t want to be in this dark-web thing, even if it comes with an awesome trading-card photo. You are in the right place. Carry on...

#noted