J. Bradford DeLong's Blog, page 266

The dirty little secret is that serious legal arguments a...

The dirty little secret is that serious legal arguments are those that lawyers pretend to take seriously. If enough Republican hacks decide to pretend that Judge Reed O'Connor is serious, he becomes serious. My forecast? The Fifth Circuit narrowly upholds O'Connor, and then it goes down 8-1 in the Supreme Court���unless one of the Democratic justices dies or retires before the decision is announced, it which case O'Connor is upheld 5-3.

Jack Balkin wants to maintain two positions at once:

"The lesson of Sebelius is that if you give enough very smart lawyers enough time to work on a legal problem, they can come up with creditable arguments for many (but not all) legal positions, even if, when the task started, the position seemed hopeless..."

"I am most certainly not saying that legal argument and legal craft are mere disguises for political ideology or that they have no independent significance. I have been trained as a lawyer and I express opinions about the quality of legal arguments all the time. It is my job to do so. Thus, whether lawyers are willing to support a given claim depends on their perception of the quality of the legal reasoning and the quality of the legal arguments that can be advanced for it..."

The second means almost nothing if "creditable" arguments can be constructed for nearly everything, and the task of law professors is then to retrospectively justify whatever the judges pick. The first means little if the legal community does have strong standards for what is a strong argument. How to resolve this? By noting that whatever gets five votes on the Supreme Court is retrospectively turned into the strongest arguments. And Supreme Court justices are very good at convincing themselves that what upholds their ideology and partisan position is in fact the best-argued and best-crafted.

Jack Balkin: Texas v. U.S: Off the Wall and On the Wall in the Age of Trump: "The judge's arguments are not even close to being persuasive given existing legal precedents. Does that mean that the position is 'off-the-wall'?... Asking whether a legal claim is 'off-the-wall' is a question of whether it is a reasonable claim, or at least one on which reasonable minds can differ.... But the perceived quality of legal reasoning and legal arguments are not exogenous from social influence...

...What moves arguments from off-the-wall to on-the-wall depends a great deal on who is willing to put their reputation and authority behind the arguments and stand up for them.... A federal judge and the President of the United States support the result in Texas v. U.S.... Much depends on whether other people will decide to add their institutional authority and influence.... The Republican Party almost immediately closed ranks in the first two Obamacare suits: NFIB v. Sebelius and King v. Burwell, and did so early on in the litigation. That meant that Republican politicians made speeches trumpeting the legal claims, the party's affiliated legal intellectuals engaged in serious intellectual work buttressing and strengthening the legal arguments, and the media organizations affiliated with the Republican Party and the conservative movement repeated and broadcast the claims. Because so many powerful and influential people made these arguments, mainstream media felt compelled to treat them as serious legal claims and this also helped support their reasonableness....

In Sebelius, the first district court decision striking down Obamacare came only after the party had already closed ranks... [But] when Republicans sought to repeal Obamacare in 2017, they discovered that there was strong public support for Medicaid and especially for protection of preexisting conditions. As a result, many Republicans ran in the 2018 elections.... If Republicans support the result in Texas v. U.S.���a case in which the Trump Administration sought to get rid of Obamacare's preexisting conditions protections, and the judge wiped out the entire bill���they will have do some fancy rhetorical footwork.... I don't doubt that they can do it.... I only question whether Republican politicians as a group will decide that this is the best approach.�� We will soon find out whether some Republican politicians, instead of offering full-throated support for the litigation (as they did in Sebelius), prefer to hem and haw, change the subject, argue that the process should be left to the courts, and bide their time.

The political context is also different in another respect.... Sebelius and King became something of a crusade against the overreaching nanny state and the tyrannical Barack Obama. By contrast, Texas v. U.S. occurs when the Republicans are no longer in opposition and are faced with the problems of governance.... Likewise, the conservative movement's legal intellectuals put enormous effort into sharpening and refining the arguments in Sebelius and King.... The lesson of Sebelius is that if you give enough very smart lawyers enough time to work on a legal problem, they can come up with creditable arguments for many (but not all) legal positions, even if, when the task started, the position seemed hopeless....

It will be very important to see what Republican politicians, affiliated legal intellectuals and media do in response to this decision...

#shouldread #orangehairedbaboons #judicialreview

Aleksandar Hemon: Fascism is Not an Idea to Be Debated, I...

Aleksandar Hemon: Fascism is Not an Idea to Be Debated, It's a Set of Actions to Fight: "It is frightening to think we could be entering the civil war mode, wherein none of the differences and disagreements can be hashed out in discussion. It is quite possible that there is no resolution to the present situation until one side is thoroughly destroyed as an ideological power and political entity. If that is the case, the inescapable struggle requires that anti-fascist forces clearly identify the enemy and commit to defeating them, whoever they are, whatever it takes. The time of conversations with fascists is over, even if they might be your best friend from high school...

#shouldread #neofascism #orangehairedbaboons

Fascism is Not an Idea to Be Debated, It's a Set of Actions to Fight

Aleksandar Hemon: Fascism is Not an Idea to Be Debated, It's a Set of Actions to Fight: "It is frightening to think we could be entering the civil war mode, wherein none of the differences and disagreements can be hashed out in discussion. It is quite possible that there is no resolution to the present situation until one side is thoroughly destroyed as an ideological power and political entity. If that is the case, the inescapable struggle requires that anti-fascist forces clearly identify the enemy and commit to defeating them, whoever they are, whatever it takes. The time of conversations with fascists is over, even if they might be your best friend from high school...

#shouldread #neofascism #orangehairedbaboons

DeLong's Principles Of Neoliberalism: Thanks to Miniver Cheevy for Formatting: Hoisted from the Archives from 1999

Attempting to pass the crown of Chief Neoliberal Shill on to me, Noah Smith has an excellent Twitter thread that cites me: Noah Smith: "Here is a thread about neoliberalism. At the beginning of this year I was elected "Chief Neoliberal Shill", but the true Chief Neoliberal Shill has always been Brad @delong. In 1999, he wrote the following neoliberal manifesto: https://t.co/QQCBFHjgYR. DeLong's case for neoliberalism is basically: It's not about YOU, rich-country person. It's about people in poor countries. Neoliberalism, he says, is the best (only?) way for the world to recover from the inequalities generated by colonialism and unequal industrialization.... Obviously, lots of people toss around the word 'neoliberalism', using it to mean anything from Obama-style centrism to Ayn Rand-style feudalist libertarianism. But I like DeLong's version best. Neoliberalism as the most expeditious antidote to colonialism.

The "neoliberalism" I was talking about then is a relatively distant cousin (but was a cousin) of what people are calling "neoliberalism" today...

And Miniver Cheevy has formatted my argument of 1999:

Miniver Cheevy: : DeLong's Principles Of Neoliberalism: "Neoliberalism is many things. It is:

a counsel of despair with respect to the possibility of social democracy today (outside of the global economy���s industrial core).
a counsel of hope with respect to the prospects for rapid market-generated economic development outside the global economy���s industrial core���if governments adopt market-conforming policies.
a bet that improvements in transportation and communication���the shrinking world������globalization������gives us today an extraordinary opportunity to rapidly reduce global inequality by incorporating more and more people and more and more more regions into the global economy.
the only live utopian program in the world today...

...A counsel of despair���

After World War II in Latin America, and at the achievement of independence elsewhere outside the global economy���s core, there were high hopes that social democracy (or something further to the left) could be successfully instituted. And there were high hopes that such social democratic or socialist regimes would enable peoples living outside the core to cut a generation or more off of what had been a lengthy, bloody, and cruel three- or four-generation process of industrialization and democratization in northwest Europe and its settler colonies.

Social democratic or socialist governments would from the beginning establish strong redistributive social insurance states to severely reduce the income and wealth inequalities that had been characteristic of Bismarckian Germany or the Gilded Age United States. They would put into place the physical infrastructure to reduce infant mortality and disease that the aristocracies and bourgeoisies of northwest Europe had not thought profitable. They would spend money like water on education.
Moreover, they would use Keynesian policies to make sure that growth was free of the recessions and depressions that characterized industrialization in the industrial core. They would carefully manage their connections with the global economy���choosing the level of the real exchange rate, controlling imports so that imported goods were those of high social utility, preventing artificial drives for export success from raising the prices of necessities to the people, and establishing national independence from imperial capital.

They would nationalize at least the monopolistic commanding heights of the economy (if social democratic) or nationalize far more of the economy (if socialist) in order to take full advantage of the massive economies of scale in industry, and to make sure that investments in capacity and productivity that made sense from the social point of view were made ��� as they would not be if large-scale industry remained private, and if it proved difficult for the private monopolists to make a profit off of such investments. And all these economic decisions would be made by democratically-elected governments responsible to an electorate that had learned by exercising power what the trade-offs were and how to choose the best path forward that led by the quickest way to utopia.

By the end of the 1970s, however, it was clear to all except blindered ideologues that something had gone very wrong with social democracy at the periphery. (And that even more had gone wrong with really-existing socialism at the periphery.)

Stable political democracy proved far more to be the exception than the rule. Authoritarian rule by traditional elites, dictatorship by impatient army officers, and charismatic populist politicians ruling by virtue of carefully-prepared and carefully-staged plebiscites were much more common than were stable parliamentary or separation-of-powers democracies. Those aspects of social insurance that were installed seemed to do more to redistribute income from (poor) rural peasants to (richer) urban workers and (rich) urban civil servants than to moderate income and wealth inequalities. With some exceptions (many of them among really-existing-socialist countries) high government spending on education and on physical infrastructure seemed to produced less in the way of actual education or infrastructure���and more in the way of sweetheart contracts to the Minister of Regional Development���s nephew���s cement factory���than one would have hoped.

The nationalized commanding heights of the economy turned out more often than not to become employment bureaus for the politically well-connected: under Juan Peron in Argentina the number of employees of the (newly nationalized) Argentinian railroad system close to tripled, while the number of trains and the volume of goods carried fell. It seemed that while the state was superior as an instrument of social evolution, it was not very good as a bank, or as a stock exchange, or as a nursery for inefficient enterprises.

Too-great a reliance on Keynesian policies of demand stimulation turned out to generate high- and hyper-inflation, with the recessions that came with the crash of the monetary system proving arguably larger than the booms-and-busts Keynesian policies were supposed to avoid. Import restrictions turned out to limit imports not to those of social utility, but to those profitable to the import companies owned by the son-in-law of the Vice Minister of Finance ��� and to the Vice Minister himself. High real exchange rates turned out to do less to amplify the purchasing power of the country abroad than to artificially shrink exports, and to divert employment and investment away from sectors of comparative advantage.

There were exceptions: places outside the core where the social-democratic program was a stunning success.

Southern Europe alone managed to ���converge��� to the industrial core of northwest Europe, its ex-settler colonies, and Japan.
East Asia managed to limit corruption and maximize investment in infrastructure and export capacity, achieving the fastest economic growth rates ever seen in world history (albeit with disappointingly slow progress toward political democracy, and civilian blood on the hands of the military in massacres ranging from the thousands (in South Korea) to the tens of thousands (in Taiwan) to the hundreds of thousands (in Indonesia).
India managed to hang on to political democracy (albeit with disappointing economic growth).
In Brazil rapid growth in measured GDP was associated with the most hideous income distribution ever seen.

It seemed that the key was political democracy. With stable political democracy���in France, in Italy, even in Spain after the fall of Franco���social democracy could work and achieve great successes. Without political democracy it seemed that the chances of success were low (unless somehow the poorly-understood foundations of East Asia���s low corruption could be duplicated). And it also seemed that the prospects for achieving stable political democracy on the periphery were rather low. After all, France experienced its first democratic revolution until 1789, yet depending on who you talk to it was not until 1871 or 1958 or 1981 that France truly achieved stable democracy.

Hence neoliberalism as a counsel of despair.

As Marx wrote, the executive branchy of the modern state is nothing but a committee for managing the affairs of the ruling class���meaning, among other things, that a democratically-elected legislative branch turns the state into something better. But the prospects for stable political democracy in the periphery are slim. And thus the government becomes the tool of the ruling class���a ruling class that may be made up of army officers, or landlords, or urban elites, or those who profit as middlemen from the traditional channels of trade and exchange���who are not terribly interested in the success of social democracy or in rapid broad-based economic growth.

Hence the policy advice of neoliberalism as a counsel of despair: get the state���s nose out of the economy as much as possible. When the state is neither an instrument of positive redistribution nor an instrument of growth-boosting investment, its interventions in the economy are likely to go strongly awry. And to the extent that a reduction in the economic role of an elite-controlled state can be required as a price for rapid incorporation of an area into the global economy, such a reduction should be required.

 

A counsel of hope���

Yet neoliberalism is not just a counsel of despair, it is a counsel of hope. The hope is that the prospects for rapid market-generated economic development outside the global economy���s industrial core are very bright.

The prospects for rapid market-generated economic development are very bright for three reasons.

First, the productivity gap between the periphery and the industrial core has never been larger.
Second, governments now have a large number of positive examples to copy (as well as negative examples to avoid) in planning market-conforming development strategies.
Third, investors in the industrial core now have the confidence and the resources to materially assist in peripheral development.

First, because the productivity gap between the periphery and the industrial core has never been larger, what Alexander Gerschenkron called the ���advantages of backwardness��� are now uniquely great. In 1870 an Indian or a Chinese textile-making entrepreneur could perhaps quadruple labor productivity by importing the modern capital goods of the British industrial revolution. Today any entrepreneur on the periphery has the prospect of being able to amplify labor productivity tenfold or more by investing in latest-generation or latest-but-on-generation capital equipment and factory organization. The stunning multiplication of productivity in Mexican automobile manufacture gives a clue to how quickly productivity can be amplified���if the capital is there to do so.

Second, all governments everywhere are now aware���from the examples of northern Europe, southern Europe, and East Asia���of those government interventions and policies that appear to be powerful boosters of growth. They are aware of the centrality of education (especially female secondary education) in accelerating the demographic transition. They are aware of the importance of making it easy for domestic producers to acquire industrial core technology (embodied in capital goods or not). They are aware of the importance of administrative simplicity and transparency. They are aware of the value of the transportation and communications infrastructure that only the government can provide. In those areas in which the government���s nose should and must stay deeply embedded in the economy, even those states controlled by elites that have only a limited interest in growth and development now have many positive models to imitate.

Third, improvements in communications and transportation have made investors in the industrial core more willing than ever before to consider placing their capital in the periphery. The pre-World War I wave of international investment was largely limited to regions in which there were lots of white guys���guys who could play polo (never mind that polo in its original form was a sport played by central Asian nomads using a goat carcass as a ball)���plus the French geostrategic commitment to Russia as an ally against the Second Reich. The U.S. benefited enormously from Britain���s willingness to lend capital to industrializing America in the years before 1900. The inflow of capital cut a decade or two off of the time it took the U.S. to industrialize (and crony capitalists like Jay Gould, Colis Huntington, Charles Crocker, and Leland Stanford took British investors to the cleaners as well).

Now that investors in the industrial core are willing to commit their money to regions in which there are not lots of white guys, an opportunity to speed industrialization that used to be limited to a relatively narrow part of the non-European world is now open to many more���if their governments undertake the steps needed to reassure industrial-core investors, and if those who make economic policy in the G-7 can limit the destructive effects of the financial crises generated by the manic-depressive swings of opinion in Manhattan, London, Frankfurt, and Tokyo.

 

A bet on globalization���

And this is where the neoliberal view of the world is weakest: in its bet on globalization ��� its bet that a tightly-integrated global economy, with large flows of capital and goods (and, to the extent industrial core governments permit, of labor) is a richer and faster-growing global economy. John Maynard Keynes and Harry Dexter White would disagree with the proposition that large flows of capital are good: they would call them too dangerous to be risked.

Nevertheless, neoliberals today are more impressed with the gains from capital flows than the risks. The quadrupling of real wages in Indonesia from 1965 to 1997 would have been significantly lower without capital inflows which carried technology and enabled higher domestic investment (even though real wages in Indonesia have fallen by at least a quarter since 1997). Lowered transportation and communications costs have amplified the gains from expanded international trade by an order of magnitude over the past generation. And it is next to impossible to have large international flows of goods while excluding the possibility of large international flows of capital as well. Small changes in the timing of payments and in the extension of trade credit add up to large swings in the capital account.

Thus neoliberalism is not only a bet that increasing economic integration is a good thing���that an integrated global economy will see much more levelling-up than levelling-down���but that successful stabilization policy can be pursued by the G-7 on a global level. It is thus a claim about the economic environment (that the gains from globalization are large) and about the state capacity of the G-7 (that they can successfully carry out global-level stabilization policies).

 

The only live utopian program���

Perhaps not all of the principles of neoliberalism are correct.

Successful development in East Asia suggests that the counsels of despair are perhaps somewhat overstated: East Asia is an example if not of successful social democracy at least of a successful developmental state. On the other hand, as Lant Pritchett has observed, there is nothing worse than state-led development led by an anti-developmental state. And pending a better understanding of what has gone right in East Asia or much greater success in institutionalizing political democracy, the risks of a government turning away from the neoliberal path and attempting to duplicate East Asian developmental states appear very high.

The belief that the opportunities for market-conforming development are now uniquely great appears to be almost certainly correct. But the jury is still out on whether the free-capital-flow part of ���globalization��� is a good thing: the odds are 80% that the G-7 do have the state capacity to successfully manage a world economy with large-scale capital flows, but there is a 20% chance that they do not.

Nevertheless, the neoliberal program is the only live utopian program in the world today.

Opposition to neoliberalism on the left seems to call for a return to effective autarchy. But if there is one lesson from economic history over the past hundred years, it is that there has been one decade���the 1930s���when economic autarchy was the road to relative prosperity, while there have been nine decades in which the more open to trade a country���s economic policy, the faster has been economic growth.

Opposition to neoliberalism on the left seems to call for a return to state control of the economy���to the pattern of Peronism or of the PRI���in the hope that this time the state will be not the tool of elites with little concern for development and growth but instead the faithful servant of the interests of the masses. That is not very likely. The state can be the servant of the people only if political democracy is well-established, and not always then. To place one���s chips on the maximization of the power of a not-very-democratic and not-very-developmental state does not seem a promising path for either democratization or successful industrialization. It seems to embody a remarkable unwillingness to learn from world history since the end of World War I, and an ideological-blinded refusal to ever mark one���s beliefs to market.

Opposition to neoliberalism on the right seems based on a fear that neoliberalism will bring with it a breakdown of social order: peasants will no longer fear landlords, workers will no longer be the clients of bosses or of the leaders of government-sponsored puppet unions, and voters will no longer respect the views of notables.

All the rest of us certainly hope that the right-wing opponents of neoliberalism are correct, and that neoliberalism this generation will begin structural transformations that will make social democracy on the periphery possible next generation.

#shouldread #economicgrowth #politicaleconomy #economicdevelopment #globalization #neoliberalism

Weekend Reading: Paul Krugman (2011): Mr Keynes and the Moderns

Paul Krugman's distinction between Chapter 12er and Book 13 Keynesians is, I think, dead on:

Paul Krugman (2011): Mr Keynes and the Moderns: "I���d divide Keynes readers into two types: Chapter 12ers and Book 1ers. Chapter 12 is, of course, the wonderful, brilliant chapter on long-term expectations, with its acute observations on investor psychology.... Its essential message is that investment decisions must be made in the face of radical uncertainty to which there is no rational answer, and that the conventions men use to pretend that they know what they are doing are subject to occasional drastic revisions, giving rise to economic instability.... Chapter 12ers insist is that this is the real message of Keynes...

...Part 1ers, by contrast, see Keynesian economics as being essentially about the refutation of Say���s Law���the possibility of a general shortfall in demand. And they generally find it easiest to think about demand failures in terms of quasi-equilibrium models in which some things, including wages and the state of long-term expectations in Keynes���s sense, are held fixed while others adjust toward a conditional equilibrium of sorts.... So who���s right?... Keynes... in his 1937 QJE article (Keynes 1937)... declared himself a Chapter12er. But so what?... Our goal now is not to be faithful to his original intentions, but rather to enlist his help in dealing with the world.... For what it���s worth, I���m basically a Part 1er, with a lot of Chapters 13 and 14 in there too, of which more shortly....

What I���m always looking for in economics is ���intuition pumps������ways to think about an economic situation that let you get beyond wordplay and prejudice, that seem to grant some deeper insight. And quasi-equilibrium stories are powerful intuition pumps, in a way that deep thoughts about fundamental uncertainty are not. The trick, always, is not to take your equilibrium stories too seriously, to understand that they���re aids to insight, not Truths; given that, I don���t believe that there���s anything wrong with using equilibrium analysis. And as it turns out, Keynes-as-equilibrium-theorist... has a lot to teach us to this day. The struggle to liberate ourselves from Say���s Law, to refute the ���Treasury view��� and all that, may have seemed like ancient history not long ago, but now that we���re faced with an economic scene reminiscent of the 1930s and we���re having to fight those intellectual battles all over again....

Keynes���s critique of the classical economists was that they had failed to grasp how everything changes when you allow for the fact that output may be demand-constrained. They mistook accounting identities for causal relationships, believing in particular that because spending must equal income, supply creates its own demand and desired savings are automatically invested. And they had a theory of interest that thought solely in terms of the supply and demand for funds, failing to realise that savings in particular depend on the level of income, and that once you take this into account you need something else���liquidity preference���to complete the story.... There���s dispute about whether Keynes was fair in characterizing the classical economists in this way. But I���m inclined to believe that he was right. Why? Because you can see modern economists and economic commentators who don���t know their Keynes falling into the very same fallacies.

There���s no way for me to make this point without citing specific examples, which means naming names. So, on the first point, here���s Chicago���s John Cochrane (2009): ���First, if money is not going to be printed, it has to come from somewhere. If the government borrows a dollar from you, that is a dollar that you do not spend, or that you do not lend to a company to spend on new investment. Every dollar of increased government spending must correspond to one less dollar of private spending. Jobs created by stimulus spending are offset by jobs lost from the decline in private spending. We can build roads instead of factories, but fiscal stimulus can���t help us to build more of both. This is just accounting, and does not need a complex argument about 'crowding out'.��� That���s precisely the position Keynes attributed to classical economists... All it takes to dispel this fallacy is the hoary old Samuelson cross.... The argument that deficit spending by the government cannot raise income also implies that a decision by a private business to spend more must crowd out an equal amount of spending elsewhere in the economy. Needless to say, in the political debate this point isn���t appreciated; conservatives tend to insist both that fiscal policy can���t work and that improving business confidence is crucial. But that���s politics....

Keynes���s discussion of interest rate determination in Chapter 13 and 14 of the General Theory is much more profound than, I think, most readers realise.... The proof of its profundity lies in the way so many people ��� including highly reputable economists���keep falling into the fallacies Keynes laid out, both in discussions of fiscal policy and in discussions of international capital flows.... Again, I need to name names to assure you that I���m not inventing straw men. So here���s Niall Ferguson (in Soros et al 2009): ���Now we���re in the therapy phase. And what therapy are we using? Well, it���s very interesting because we���re using two quite contradictory courses of therapy. One is the prescription of Dr Friedman���Friedman, that is���which is being administered by the Federal Reserve: massive injections of liquidity to avert the kind of banking crisis that caused the Great Depression of the early 1930s. I���m fine with that. That���s the right thing to do. But there is another course of therapy that is simultaneously being administered, which is the therapy prescribed by Dr Keynes���John Maynard Keynes���and that therapy involves the running of massive fiscal deficits in excess of 12% of gross domestic product this year, and the issuance therefore of vast quantities of freshly minted bonds.... You can���t be a monetarist and a Keynesian simultaneously���at least I can���t see how you can, because if the aim of the monetarist policy is to keep interest rates down, to keep liquidity high, the effect of the Keynesian policy must be to drive interest rates up..."

What���s wrong with this line of reasoning?... As Hicks told us���and as Keynes himself says in Chapter 14���what the supply and demand for funds really give us is a schedule telling us what the level of income will be for a given rate of interest.... This tells us where the central bank must set the interest rate so as to achieve a given level of output and employment...

#weeekendreading #johnmaynardkeynes #macro #economicsgonewrong

David Brooks remembers the Weekly Standard���how fun it w...

David Brooks remembers the Weekly Standard���how fun it was to convince people Saddam Hussein and Osama bin Laden were close allies, and so trigger the Iraq War! They have their separate lives now, but they will always have Baghdad...: David Brooks: "This was the most concentrated collection of talent I���ve been around. And the most fun. Read the whole list...

#shouldread #orangehairedbaboons #journamalism

Abe ���Bastard Keith��� Goldfarb: "Phase One: 'Mexico wil...

Abe ���Bastard Keith��� Goldfarb: "Phase One: 'Mexico will pay for the wall!'!

Phase Two: 'Mexico will eventually pay through tariffs for the wall!'

Phase Three: 'The US will pay for the wall!'

Phase Four: 'We will shut down the government if American taxpayers don���t pay for the wall!'

#shouldread

Fairly Recently: Must- and Should-Reads, and Writings... (December 12, 2018)

The Great American Tax Heist Turns One: Live at Project Syndicate: Time has passed: a year's worth of water under the bridge. But I have not become less angry at and disappointed with how the Republican economists behaved in what my Project Syndicate editors call the Great American Tax Heist of last December...

Comment of the Day (January 19, 2009): Robert Waldmann: Fama's Fallacy V: Are There Ever Any Wrong Answers in Economics?: "I'm not surprised that Fama is making a fool of himself. He has made similarly nonsensical arguments in his own field of expertise. He has been a tenured head of a school of thought for a long time, and has probably forgotten what it was like to make arguments which weren't accorded respect just because he made them...

For the Weekend: Let's Have Another Cup Of Coffee (1932): "Irving Berlin and Waring's Pennsylvanians (1932): Let's Have Another Cup Of Coffee...

Note to Self: Feeling sad Berkeley is not giving me access to: The Tocqueville Review: Vol 39, No 2: "Thinking with Raymond Aron and Stanley Hoffmann...

David Blanchflower: 'Much More Global Slowing' by End of 2019

Jonathan Stearns: EU, Japan Clinch Record Trade Accord in Shadow of Protectionism: "The European Parliament approved a draft free-trade agreement with Japan, removing the last political hurdle to the entry into force of Europe���s biggest market-opening accord. The European Union assembly���s green light on Wednesday paves the way for the pact to take provisional effect on Feb. 1. Already endorsed by EU governments and the Japanese parliament, the agreement will eliminate virtually all tariffs between the two partners, expand markets for services and public procurement, and bolster regulatory cooperation...

The blockchain grifters have driven Nouriel Roubini into a state in which he is no longer his normal calm reasoned self: Nouriel Roubini*: The Big Blockchain Lie: "In cases where distributed-ledger technologies ��� so-called enterprise DLT ��� are actually being used, they have nothing to do with blockchain. They are private, centralized, and recorded on just a few controlled ledgers. They require permission for access...

Simon Wren-Lewis: Helping the Left Behind: Its (Economic) Geography, Stupid: "Martin Sandbu points us to a report from the Brookings Institution.... 'For much of the 20th century, market forces had reduced job, wage, investment, and business formation disparities between more- and less-developed regions. By closing the divides between regions, the economy ensured a welcome convergence among the nation���s communities.' But from the 1980s onwards, they argue that digital technologies increased the reward to talent-laden clusters of skills and firms...

This is a strange article by Joe Stiglitz. The first sentence is right. The second sentence is wrong: Joseph E. Stiglitz: The Myth of Secular Stagnation: "There are many lessons to be learned as we reflect on the 2008 crisis, but the most important is that the challenge was���and remains���political, not economic: there is nothing that inherently prevents our economy from being run in a way that ensures full employment and shared prosperity. Secular stagnation was just an excuse for flawed economic policies..." Larry Summers, I think, gets it 100% right here: Lawrence Summers: Setting the Record Straight on Secular Stagnation: "Echoing conservatives like John Taylor, the Nobel laureate economist Joseph Stiglitz recently suggested that the concept of secular stagnation was a fatalistic doctrine invented to provide an excuse for poor economic performance during the Obama years. This is simply not right...

I keep saying that Equitable Growth should cozy up to these people: they are our mirror image���and not in an evil-Mr.-Spock-with-a-beard way: Brink Lindsey, Will Wilkinson, Steven Teles, and Samuel Hammond: The Center Can Hold: Public Policy for an Age of Extremes: "We need both greater reliance on market competition and expanded, more robust, and better-crafted social insurance... government activism to enhance opportunity... less corrupt and more law-like governance... a new ideological lens: one that sees government and market not as either-or antagonists, but as necessary complements... #moralphilosophy

Josh Micah Marshall: Trump���s Telling Us Something (In Spite of Himself): "For going on two years I���ve been explaining that Michael Cohen was less a lawyer for Trump than a conduit for money from Russian and Ukrainian emigres and from those regions of the world. Yes, he was a fixer too. But there are lots of fixers. The channel of money came from the Brighton Beach emigre world Cohen grew up in and through the family he married into and the contacts that brought. A key player is Cohen���s father-in-law Fima Shusterman who federal law enforcement, a man who federal law enforcement apparently believed Trump had been in business with long before Michael Cohen came into the picture. All of this is known as far as it goes and we���ve discussed it... #orangehairedbaboons

Tim Barker: "As an intellectual historian, I've found it puzzling that no one has scanned Ross Douthat's writings from the Harvard Salient, 1998-2002. So I checked out as much of it as I could and there's some pretty good stuff...

Murray Waas: Mueller investigation news: Paul Manafort advised White House on how to attack investigation of Trump and Russia: "We now have details as to how the indicted former campaign manager worked with the president to undermine federal law enforcement...

As the Weekly Standard closes, let us remember that it���like everything Bush-Chene-Rumsfeld���is a lying trash sheet staffed by lying liars: Spencer Ackerman: Fast and Loose With the Facts: "'The danger', said President George W. Bush on Sept. 25, 2002, 'is that Al Qaeda becomes an extension of Saddam���s madness and his hatred and his capacity to extend weapons of mass destruction around the world'. He proceeded to build on a lie.... 'The war on terror', Bush said, 'you can���t distinguish between Al Qaeda and Saddam when you talk about the war on terror'. Only if you���re a liar...

John Authers: "The Tax Cuts and Jobs Act has so far displayed none of the magical revenue-increasing properties that some of its supporters claimed for it... #orangehairedbaboons #fiscalpolicy

Larry Mishel: Bonuses Are Up $0.02 Since the Gop Tax Cuts Passed: "the GOP���s Tax Cuts and Jobs Act... tax cutters claimed that their bill would raise the wages of rank-and-file workers.... The Trump administration���s chair of the Council of Economic Advisers��argued in April��that we were already seeing the positive wage impact of the tax cuts: 'A flurry of corporate announcements provide further evidence of tax reform���s positive impact on wages. As of April 8, nearly 500 American employers have announced bonuses or pay increases, affecting more than 5.5 million American workers.'... New data allows us to examine nonproduction bonuses.... The $0.02 per hour (inflation-adjusted) bump in bonuses between December 2017 and September 2018 is very small.... The White House contention that corporate tax cut-inspired widespread provision of bonuses that led to greater paychecks through bonuses or wage increases for workers is not supported...

It is not three Trump policies weighing on the stock market: it is four. Add to Barry's list: having your sole policy accomplishment be a tax cut tuned not to boost growth: Barry Ritholtz: Donald Trump Owns This Stock Market: "I assumed that Trump���s aggressive style, economic ignorance and personal peccadilloes wouldn���t leave a lasting mark on either stocks or bonds.... The chaos surrounding this presidency proves that was wishful thinking.... Consider three distinct policies of this administration, and how they are hurting the economy and markets.... Higher interest rates.... Powell���s leanings were well known... #orangehairedbaboon #finance

It is not three Trump policies weighing on the stock mark...

It is not three Trump policies weighing on the stock market: it is four. Add to Barry's list: having your sole policy accomplishment be a tax cut tuned not to boost growth: Barry Ritholtz: Donald Trump Owns This Stock Market: "I assumed that Trump���s aggressive style, economic ignorance and personal peccadilloes wouldn���t leave a lasting mark on either stocks or bonds.... The chaos surrounding this presidency proves that was wishful thinking.... Consider three distinct policies of this administration, and how they are hurting the economy and markets.... Higher interest rates.... Powell���s leanings were well known...

...This self-inflicted error is perplexing: When Trump was running for office, he berated Yellen, saying she ���should be ashamed that rates were so low.��� We have since found out that he did not re-appoint Yellen because he felt that, at 5-foot, 3-inches, she was ���too short��� to run the central bank. This has to be one of the great unforced mistakes��in the postwar history of U.S. monetary policy.... Rising rates have helped push the yield curve toward inversion.... Now, we see broader signs that global growth is slowing ... Yet another self-inflicted wound seems to have taken place in the aftermath of the G-20 summit in Argentina.... The truce turned out to be nonexistent. Bloomberg News showed a side-by-side comparison of statements by Trump and by the Chinese government on the supposed deal, which was never reduced to writing. It isn���t just that Trump overstated the terms of the agreement;��there was no deal.... The president sandbagged Wall Street. Despite his well-known casual relationship with the truth, traders naively assumed the president wouldn���t mislead about something as crucial as the resolution of an expanding trade war. By the time the president declared ���I am a Tariff Man,��� he had lost the trust of traders....

We are nearing the halfway mark of Trump���s presidency. Those waiting for that pivot toward his being presidential have been disappointed. Instead, they are now extrapolating his policy errors forward, and finding a significant and negative affect on the U.S. economy and stock markets. I���m not in the business of making forecasts, so I will pose a question: Does anyone think it gets better from here?

#shouldread #orangehairedbaboon #finance

Comment of the Day (January 19, 2009): Robert Waldmann:...

Comment of the Day (January 19, 2009): Robert Waldmann: Fama's Fallacy V: Are There Ever Any Wrong Answers in Economics?: "'economic science' is a phrase like 'military intelligence.' Out of respect for my fellow economists and the DIA I won't name that class of phrases. However, 'economic theory' is a sub branch of mathematics. Within economic theory there are definitely false statements���such as those made by Mankiw and Fama. I'm not surprised that Fama is making a fool of himself. He has made similarly nonsensical arguments in his own field of expertise. He has been a tenured head of a school of thought for a long time, and has probably forgotten what it was like to make arguments which weren't accorded respect just because he made them...

...I don't know what Mankiw thinks he's doing. For one thing, he knows you and can't hope that you will let the matter drop. I can only infer that he knows much more about the sociology of economists than I do and understands that, to be a mainstream economist in good standing, he has to take a hit for the team and claim not to have noticed Fama's howler.

To me the odd thing is the extent to which the economics profession can hide our embarrassing secrets. Not wanting to get Harvard graduates in trouble, I'd be inclined to take a poll of the general public to find out how many people understand that Nobel prizes have been awarded for working out detailed implications of the efficient markets hypothesis, for stating the rational expectations hypothesis (and not to Cournot or even Nash but to Lucas and if you doubt it check the citation) or uhm to Ed Prescott. Sauce for the goose is sauce for the gander, and, I note, that you claimed on this blog to think it was reasonable to award the Noble prize to Prescott and elsewhere described an argument which basically quoted something written under his name as failing the Turing test.

I suspect that the jig is up. Some fresh water economists are feeling compelled to write or say something about the economic crisis. All of them are being pressed for their advice. If they give it, then non-economists will find out how crazy they are. If they don't, non-economists will decide that they have nothing useful to say about economics.

It's an ill wind which blows nobody any good....

 

Mike "There is hope. The Chicago-school types who have Nobel prizes or of otherwise great stature got their reputations by publishing research that did adhere to modern scientific principles."

I don't agree. I would consider "modern scientific principles" to include the view that something is only discovered when it has strong empirical support���when it has explained a pattern in the data which long resisted explanation and when it made a non-obvious prediction which was confirmed. This is the standard for deciding that something is a "discovery" in the natural sciences and is required for the award of a Nobel prize.

In economics, that is just not true at all. Prizes can be awarded for economic theory without any reference to data at all.

I absolutely agree with the conclusion of your comment, but I think that the Nobel prizes in question were awarded for status in the profession and perfectly decent mathematics and not for anything that a natural scientist would consider a scientific discovery.

On the origin of the modern approach to science, I object to your list. For one thing, where is Pierce? For another, and more to the point, where is Carnap?

What exactly did Popper contribute to the philosophy of science ? I think his contribution was rename "verificationism", "falsificationism", that it was purely rhetorical and based on the argument that the meaning of a word "verificationism" is determined by the etymology of its first syllable.

Did he write anything about the philosophy of science that wasn't already in the literature, nonsense or both? I am willing to be convinced, but nothing comes to my mind...

 

I assume that you are expecting no assistance from journalists. However, I hold to my hope. When the Bush administration made nonsensical claims, journalists covered the debate on the shape of the Earth. Bush was re-elected. Reality bit and bit hard. The public had to face facts -- and did.

I don't expect any opinion leaders to call out Fama. However, I don't think that public opinion always has to be lead...

#hoisted #commentoftheday #economicsgonewrong #orangehairedbaboons