J. Bradford DeLong's Blog, page 258

Fairly Recently: Must- and Should-Reads, and Writings... (December 29, 2018)

Comment of the Day: Graydon: Insecurity Management : "I think you're missing the central thing about Drake's writing. It is not so much that, yeah, these are not the best circumstances and our feels are in abeyance; that happens, that's depicted. But among that depiction you get what I think of as the essential Drake thing, which is a vehicle crew. They may not like each other much; they may not, in some senses of the word, trust one another. But they are entirely predictable to one another, and reliable...





Jon Schwarz: The 10 Most Awful Articles in the Weekly Standard���s Short Life : "Honorable Mention. Self-Flattering Quote��by��Anonymous Weekly Standard Minion [David Brooks], 2018: This isn���t an article, but deserves to be included here due to its timeless, crystalline beauty: According to a nameless Weekly Standard staffer, the magazine���s original masthead constituted 'one of the greatest collections of writerly talent ever put together outside the New Yorker. What makes this so perfect is that it shows the Weekly Standard training its keen power of observation upon itself.... Tucker Carlson, John Podhoretz��and Charles Krauthammer somehow become James Thurber, Dorothy Parker and E.B. White. No matter the subject, the Weekly Standard assessed it with the exact same��hubris, blindness, and lunatic hyperbole...

2.Ray Dalio: Principles for Navigating Big Debt Crises

PS editors: PS Commentators��� Best Reads in 2018: "Project Syndicate contributors once again share some of the books that resonated with them the most over the past year. From sweeping histories to ambitious new works of fiction, readers of all tastes and persuasions should find something to pique their interest in this year���s selection...

Barry Ritholtz: How to Use Behavioral Finance in Asset Management, Part I: "Annual Mea Culpas: I learned this from Ray Dalio about a decade ago: every year I make a list of what I got wrong and what I learned from the experience.... Acknowledging your mistakes...

Cosma Shalizi (2007): g, a Statistical Myth: "Factor analysis is handy for summarizing data, but can't tell us where the correlations came from; it always says that there is a general factor whenever there are only positive correlations. The appearance of g is a trivial reflection of that correlation structure. A clear example, known since 1916, shows that factor analysis can give the appearance of a general factor when there are actually many thousands of completely independent and equally strong causes at work...

Sean Illing: What Is Fascism? Yale Philosopher Jason Stanley Explains How It Works: "This is probably a good time to pivot to the glittering elephant in the room: Donald Trump. Is he a fascist?" Jason Stanley: "I make the case in my book that he practices fascist politics. Now, that doesn���t mean his government is a fascist government. For one thing, I think it���s very difficult to say what a fascist government is...

Raymond Fisman, Keith Gladstone, Ilyana Kuziemko, and Suresh Naidu (2017): Do Americans Want to Tax Capital?: Evidence from Online Surveys: "A vast theoretical literature in public finance has studied the question of the desirability of capital taxation. Distinct from questions of the optimality of taxing wealth is whether it is politically feasible. We provide, to our knowledge, the first investigation of individuals��� preferences over jointly taxing income and wealth, via a survey on Amazon���s Mechanical Turk...

Wikipedia: Tzoah Rotachat

Carlos Lozada: Anti-Trump Conservatives Want to Reverse the GOP���s Destruction. But They Helped Light the Fuse: "What kind of conservatism can survive, let alone thrive, in American politics today? The question hangs over the Never Trump volumes.... Flake... keeps the faith. 'With hard work... and maybe a little luck, we will right this ship'... #orangehairedbaboons #moralresponsibility

Megan Burbank: A "neat" thing I have learned from writing food reviews: "There is nothing more upsetting to some people than a woman saying she ate a lot without caging it in guilt or apology. It was truly weird to discover people will actually chastise you for saying you ate a lot IN A FOOD REVIEW, where eating is, you know, essential. The absurdity mounts: the first time this happened to me it was on a story where I said I biked 7 miles before eating (and after). Look, no one should be food-shamed, I have so little time for it, and fitness is not a virtue, but I biked 14 miles. I gotta refuel! The second was on a story where I said I ate three pastries and was pretty gleeful about the whole thing. but if somebody enjoying what they eat is personally upsetting...

Mariana Zerpa: Short and Medium Run Impacts of Preschool Education: Evidence from State Pre-K Programs: "I also provide a discussion of two local average treatment effects under different counterfactual child care arrangements. I find implied effects that are very large, although not very different from the estimates found in the literature on Head Start. This finding highlights the relevance of estimating intention- to-treat effects on the full affected cohorts.... The relevance of externalities and peer effects in early childhood experience is an open question that is part of a promising research agenda...

Benjamin F. Jones and Benjamin A. Olken: Do Leaders Matter?: National Leadership and Growth Since World War II: "We use deaths of leaders while in office as a source of exogenous variation in leadership, and ask whether these plausibly exogenous leadership transitions are associated with shifts in country growth rates. We find robust evidence that leaders matter... strongest in autocratic settings where there are fewer constraints on a leader���s power...

Matthew Yglesias, Ezra Klein, and Dylan Matthews: 2020 Democratic Nomination Predictions: Who���s Overrated and Underrated: "Nobody outside Amy Klobuchar���s state knows who the senior senator from Minnesota is, except for hardcore political junkies. But here���s the thing that hardcore political junkies know about her: She���s probably the most popular politician in America.... Even though Klobuchar isn���t well-known, she clearly has some political skills.... To the extent that Democrats want to put their various factional disputes aside and just try to win the damn election, Klobuchar smells a lot like the electability candidate...

Matthew Yglesias, Ezra Klein, and Dylan Matthews: 2020 De...

Matthew Yglesias, Ezra Klein, and Dylan Matthews: 2020 Democratic Nomination Predictions: Who���s Overrated and Underrated: "Nobody outside Amy Klobuchar���s state knows who the senior senator from Minnesota is, except for hardcore political junkies. But here���s the thing that hardcore political junkies know about her: She���s probably the most popular politician in America.... Even though Klobuchar isn���t well-known, she clearly has some political skills.... To the extent that Democrats want to put their various factional disputes aside and just try to win the damn election, Klobuchar smells a lot like the electability candidate...

#shouldread

Carlos Lozada: Anti-Trump Conservatives Want to Reverse t...

Carlos Lozada: Anti-Trump Conservatives Want to Reverse the GOP���s Destruction. But They Helped Light the Fuse: "What kind of conservatism can survive, let alone thrive, in American politics today? The question hangs over the Never Trump volumes.... Flake... keeps the faith. 'With hard work... and maybe a little luck, we will right this ship'...

...Boot, by contrast, no longer claims the conservative label. And while he admires some of the Never Trumpers who stay and fight to retake the Republican Party, he deems the battle lost. The GOP has become ���the stupid party,��� one that ���does not deserve to survive.��� Wilson... [says] here was always ���a whiff of bulls������ about Republican calls for fiscal conservatism, he acknowledges, much as how ���we talk a good game about putting Main Street before Wall Street, but talk is all it���s been.��� Nonetheless, he contends that Trumpism will someday be deemed a temporary aberration.... Sykes calls for ���restoring the conservative mind,��� yet he admits there may be little audience for it...

#shouldread #orangehairedbaboons #moralresponsibility

Comment of the Day: Graydon: Insecurity Management: "I th...

Comment of the Day: Graydon: Insecurity Management: "I think you're missing the central thing about Drake's writing. It is not so much that, yeah, these are not the best circumstances and our feels are in abeyance; that happens, that's depicted. But among that depiction you get what I think of as the essential Drake thing, which is a vehicle crew. They may not like each other much; they may not, in some senses of the word, trust one another. But they are entirely predictable to one another, and reliable. And it's that obligation of reliability that lets people get their head out of hell, whether as imperfectly as Danny Pritchard does it or as entirely as the protagonist of Redliners does. (You can see much the same flavour of reliable between Gunnar and Brennu-Nj��ll.)...

...In terms of common elements, Drake's characters are moderns or post-moderns; they are there in an environment with state and post-state actors. Their battles are in that anonymous impersonal context of abstractions like commodity prices. If they are to have anything in common with Odysseus or Telemachus, persons of a time when the notion of "king" was doubtful and all authority was personal authority, it has to be something basic.

I think the notion of insecurity management is more fundamental than basic; it's much or most of why we're a band-forming primate. (Orangutans are not, most gibbons are not; band-forming is not a primate requirement.) In Heroic Age���any heroic age���societies, your insecurity is���if you are not one already���how you stay out of "women, cattle, and slaves", because in there, anyone can do anything to you; your insecurity is vast. (It's pretty silly to pretend that the slave women had an option of refusing the suitors; the idea being reinforced its that it's better to get yourself killed turning the suitor down, because when the master returns you will as surely die, and less honorably. I doubt the slave women thought was a sensible construction of their circumstances.)

You don't get an understanding of anything important about insecurity management���that fear is in you, so killing fear means killing yourself; that you are helpless, but maybe not hapless; that it is not so much "bare is back without brother behind it" as "lone monkeys die"���in the abstract, by study, or by reading. You get it by doing actually dangerous things[1] in groups. Much effort has gone into preventing any such thing for anyone we'd call "educated" for a few generations now, and this is a mistake. If you have no personal experience of the whole band-forming process, this might benefit the randite myth of the individual and it certainly benefits the corporate desire to prevent any ganging up on problems by the prey animals, but it does not benefit you at all.

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.)

[1] I do not mean "fight in a war"; I mean "use power tools", "split wood/use an axe", "build something to keep the rain off and sleep under it", "assemble a pontoon bridge", "portage in haste", "use a wood-fired oven", "make jam" (think about the failure modes for a minute), and such like; all of these things can hurt or kill you, and at group scales you can't possibly take sufficient care of yourself by yourself. Such activities don't usually do us any harm because we're pretty good at being a band-forming primate and working out social mechanisms to control the collective machinery of our effort....

#commentoftheday

Raymond Fisman, Keith Gladstone, Ilyana Kuziemko, and Sur...

Raymond Fisman, Keith Gladstone, Ilyana Kuziemko, and Suresh Naidu (2017): Do Americans Want to Tax Capital?: Evidence from Online Surveys: "A vast theoretical literature in public finance has studied the question of the desirability of capital taxation. Distinct from questions of the optimality of taxing wealth is whether it is politically feasible. We provide, to our knowledge, the first investigation of individuals��� preferences over jointly taxing income and wealth, via a survey on Amazon���s Mechanical Turk...

...We provide subjects with a set of hypothetical individuals��� incomes and wealth and elicit subjects��� preferred (absolute) tax bill for these individuals. Our method allows us to unobtrusively map both income earned and accumulated wealth into desired tax levels. Our regression results yield roughly linear desired tax rates on income of about 14 percent. Respondents��� suggested tax rates indicate positive desired wealth taxation. When we distinguish between sources of wealth we found that, in line with recent theoretical arguments, subjects��� implied tax rate on wealth is three percent when the source of wealth is inheritance, far higher than the 0.8 percent rate when wealth is from savings. We show these tax rates are consistent with reasonable parameterizations of recent theoretical optimal wealth tax formulae....

#shouldread

Sean Illing: What Is Fascism? Yale Philosopher Jason Stan...

Sean Illing: What Is Fascism? Yale Philosopher Jason Stanley Explains How It Works: "This is probably a good time to pivot to the glittering elephant in the room: Donald Trump. Is he a fascist?" Jason Stanley: "I make the case in my book that he practices fascist politics. Now, that doesn���t mean his government is a fascist government. For one thing, I think it���s very difficult to say what a fascist government is...

...For another thing, I think the current movement of leaders who use these techniques (Vladimir Putin in Russia, Recep Tayyip Erdo��an in Turkey, Viktor Orb��n in Hungary, to name a few) all seek to keep the trappings of democratic institutions, but their goal is to reorient them around their own cult of personality.... Trump is... very clearly using fascist techniques to excite his base and erode liberal democratic institutions, and that���s very troubling. But the blame there is as much on the Republican Party as it is on Trump, because none of this would matter if they were willing to check Trump. So far, they���ve chosen loyalty to Trump over loyalty to rule of law....

We should heed the warning of the poem on the side of the United States Holocaust Memorial Museum, which says, ���First they came for the socialists, and I did not speak out because I was not a socialist. Then they came for the trade unionists, and I did not speak out because I was not a trade unionist. Then they came for the Jews, and I did not speak out because I was not Jewish. Then they came for me and there was no one left to speak for me.��� At a certain point it���s too late. We learned first from that poem who the targets are. The targets are leftists, minorities, labor unions, and anyone or any institution that isn���t glorified in the fascist narrative. And even if you���re not in any of those groups, you have to protect those who are, and you have to protect them from the very beginning. Simple acts of courage early on will save you impossible acts of courage later.

To be clear... We���re not on the brink of some fascist takeover..... We���re fortunate enough to have liberty and equality baked into our founding ideals. We have a long history of people appealing to those ideals and saying, ���We might disagree on a number of things but we agree that truth, liberty, equality are things we stand up for.��� So whatever happens, we have to continually double down on those ideals���that���s what will save us....

#shouldread

Cosma Shalizi (2007): g, a Statistical Myth: "Factor anal...

Cosma Shalizi (2007): g, a Statistical Myth: "Factor analysis is handy for summarizing data, but can't tell us where the correlations came from; it always says that there is a general factor whenever there are only positive correlations. The appearance of g is a trivial reflection of that correlation structure. A clear example, known since 1916, shows that factor analysis can give the appearance of a general factor when there are actually many thousands of completely independent and equally strong causes at work...

...I'm going to show you some cases where you can see that the data don't have a single dominant cause, because I made them up randomly, but they nonetheless give that appearance when viewed through the lens of factor analysis.... It is not an automatic consequence of the algebra that the apparent general factor describes a lot of the variance in the scores. Nonetheless, while less trivial, it is still trivial. Recall that factor analysis works only with the correlations among the measured variables. If I take an arbitrary set of positive correlations, provided there are not too many variables and the individual correlations are not too weak, then the apparent general factor will, typically, seem to describe a large chunk of the variance in the individual scores. To support that statement, I want to show you some evidence from what happens with random, artificial patterns of correlation, where we know where the data came from (my computer), and can repeat the experiment many times to see what is, indeed, typical....

Thomson's original paper ("A Hierarchy without a General Factor", British Journal of Psychology 8 (1916): 271--281), reporting results he obtained in 1914, does not seem to be available electronically, but a follow-up ("On the Cause of Hierarchical Order among the Correlation Coefficients of a Number of Variates Taken in Pairs", Proceedings of the Royal Society of London A 95 (1919): 400-408) is in JSTOR, and worth reading...

#shouldread

Barry Ritholtz: How to Use Behavioral Finance in Asset Ma...

Barry Ritholtz: How to Use Behavioral Finance in Asset Management, Part I: "Annual Mea Culpas: I learned this from Ray Dalio about a decade ago: every year I make a list of what I got wrong and what I learned from the experience.... Acknowledging your mistakes...

...Counterfactuals / inversions: Finally, pulling a page from Charlie Munger at Berkshire Hathaway, we have all taught ourselves to invert. The counter-factual way of thinking avoids a variety of heuristic and psychological errors. It helps with debunking nonsense. It allows us to recognize how the element of chance and randomness plays into large complex systems like the economy and markets; it helps you to consider possible alternative outcomes to different situations. In terms of managing risk, it lets you consider extreme or unusual possibilities that might never have entered your mind without the counter-factual...

#shouldread #finance #behavioral

Fairly Recently: Must- and Should-Reads, and Writings... (December 28b, 2018)

Comment of the Day: Cervantes: There's No Process : "Individual-1 told Mnuchin to do something to talk up the stock market and Mnuchin thinks this will have that effect. So he's an idiot. That's basically all there is to it. Possibly Individual 1 suggested these specific steps, possibly they're Mnuchin's idea. Doesn't matter since they're both idiots anyway...

Vastly superior to Tom Holland���and vastly, vastly superior to the likes of Niall Ferguson���on the decline and fall of the Roman Republic: Edward J. Watts: Mortal Republic: How Rome Fell into Tyranny https://books.google.com/books?isbn=0465093825: "If the early and middle centuries of Rome���s republic show how effective this system could be, the last century of the Roman Republic reveals the tremendous dangers that result when political leaders cynically misuse these consensus-building mechanisms to obstruct a republic���s functions. Like politicians in modern republics, Romans could use vetoes to block votes on laws, they could claim the presence of unfavorable religious conditions to annul votes they disliked, and they could deploy other parliamentary tools to slow down or shut down the political process if it seemed to be moving too quickly toward an outcome they disliked... #books #history

Hyman Minsky: [Stabilizing an Unstable Economy](https://delong.typepad.com/hyman-mins..." title="hyman-minsky-stabilizing-an-unstable-economy-2008.pdf) #books #finance #macro

Aline B��tikofer, Sissel Jensen, and Kjell G. Salvanes: The Role of Parenthood on the Gender Gap Among Top Earners: "A recent literature argues that a ���motherhood penalty��� is a main contributor to the persistent gender wage gap in the upper part of the earnings distribution. Using Norwegian registry data, this column studies the effect of parenthood on the careers of high-achieving women relative to high-achieving men in a set of high-earning professions. It finds that the child earnings penalty is substantially larger for mothers with an MBA or law degree than for mothers with a STEM or medical degree... #gender #equitablegrowth

The Committee for a Responsible Federal Budget is only one of many organizations that bought the snakeoil from Paul Ryan. We have a significantly less responsible federal budget as a consequence: Michael Grunwalde: Paul Ryan's Legacy of Red Ink: "The speaker of the House���s reputation as a budget hawk has somehow survived his actual record... #orangehairedbaboons

Trump Is a Bully, But He Is Your Bully���He is going to bully corporations into giving you good jobs...

Paul Krugman: "Disputes over trade can seem gentlemanly because economists, at least, mostly talk sense. Disputes over macroeconomic policy can't, because they don't. Sad!

Menzie Chin: On Recession: Hassett, Prediction Markets, and Markets: "Council of Economic Advisers Kevin Hassett said he is willing to bet, based on the economy and indicators, that there will not be a recession any time soon.... My first observation is�� that Hassett���s statement regarding current growth rates surprising. Atlanta Fed GDPNow does indicate 2.9% growth SAAR in 2018Q4 (12/18), but as of 12/14 the New York Fed���s nowcast indicates 2.42% growth, while the St. Louis Fed nowcast is 2.65%. Macroeconomic Advisers today nowcasts 2.6%, latest Goldman Sachs is 2.7% (12/17). I don���t know of any nowcasts for over 3% for 2018Q4 Q/Q SAAR.... The second observation is that the prediction market���s odds on a recession over the next year is not as low as suggested by Hassett���s comments.... The current probability of recession using the term spread is in the 15% range, a bit less than the 30% or so from the prediction markets...

Pseudoerasmus: Labour repression & the Indo-Japanese divergence: "I illustrate the relevance of labour relations to economic development through the contrasting fortunes of India���s and Japan���s cotton textile industries in the interwar period, with some glimpses of Lancashire, the USA, interwar Shanghai, etc....

John Maynard Keynes: Essays in Persuasion

John Maynard Keynes: Essays in Biography

John Steinbeck: The 1930s: A Primer: "Except for the field organizers of strikes, who were pretty tough monkeys and devoted, most of the so-called Communists I met were middle-class, middle-aged people playing a game of dreams. I remember a woman in easy circumstances saying to another even more affluent: ���After the revolution even we will have more, won���t we, dear?��� Then there was another lover of proletarians who used to raise hell with Sunday picnickers on her property. I guess the trouble was that we didn���t have any self-admitted proletarians. Everyone was a temporarily embarrassed capitalist. Maybe the Communists so closely questioned by investigation committees were a danger to America, but the ones I knew--at least they claimed to be Communists--couldn���t have disrupted a Sunday-school picnic. Besides they were too busy fighting among themselves...

Robert Feenstra, Hong Ma, Akira Sasahara, Yuan Xu: Reconsidering the ���China Shock��� in Trade: "While previous studies focus on the job-reducing effect of the surging imports from China or other low-wage countries on the US employment, the job-creating effect of exports has receive much less attention. This column employs two approaches���an instrumental variable regression analysis and a global input-output approach���to argue that the negative effects of import competition on US employment are largely balanced out once the country���s job-creating export expansion is taken into account....

This by the very sharp Henry Farrell seems to me to be largely wrong. Farrell thinks that parties, plural, became "unwilling to compete for voters across tricky political issues". I see it as right-wing party, singular, taking the neo-fascist turn to which the system was always vulnerable���winning mass support for policies of plutocracy and kleptocracy by mobilizing fear and hatred of a distinct and sinister internal and external other. Four times in the past hundred yeras have we seen this in the United States. Teddy Rooevelt vs. the Malefactors of Great Wealth, Ike Eisenhower vs. the McCarthyites, and Richard Nixon's Flaws vs. Richard Nixon and Pat Buchanan were three earlier episodes. We won through because of conservative elitss that valued liberty and an open society. We may win through again: Henry Farrell: The Hollowing Out of Democracy: "There are strong similarities between what is happening in the United States, Hungary, the United Kingdom, and France... where democracy is backpedaling rapidly, such as the Philippines. This is the product both of common shocks... and of cross-national reinforcement... the family resemblances are��undeniable. What Davies arguably gets wrong though is the significance of these changes...

Jon Schwarz: The 10 Most Awful Articles in the Weekly Sta...

Jon Schwarz: The 10 Most Awful Articles in the Weekly Standard���s Short Life: "Honorable Mention. Self-Flattering Quote��by��Anonymous Weekly Standard Minion [David Brooks], 2018: This isn���t an article, but deserves to be included here due to its timeless, crystalline beauty: According to a nameless Weekly Standard staffer, the magazine���s original masthead constituted 'one of the greatest collections of writerly talent ever put together outside the New Yorker. What makes this so perfect is that it shows the Weekly Standard training its keen power of observation upon itself.... Tucker Carlson, John Podhoretz��and Charles Krauthammer somehow become James Thurber, Dorothy Parker and E.B. White. No matter the subject, the Weekly Standard assessed it with the exact same��hubris, blindness, and lunatic hyperbole...

#shouldread #journamalism #orangehairedbaboons #moralresponsibility