J. Bradford DeLong's Blog, page 288

I endorse Steve Teles here���except that I have a hard ti...

I endorse Steve Teles here���except that I have a hard time calling any book that I learned as much as I learned from MacLean's Democracy in Chains "very poor". MacLean should engage Teles and Farrell on the merits. And she can: When Farrell and Teles rule out-of-order James Buchanan's memos on the grounds that "correspondence with... donors... is inherently problematic... as a guide to underlying intent..." they are guilty of strongly motivated reasoning. Perhaps your claims to donors that you are in the business of trying to create an ideological, extremist, and partisan movement to roll back the New Deal and destroy the "Labor Monopoly Movement" are "problematic". Perhaps your claims to liberal scholars that you are in the business of honest intellectual inquiry are "problematic". MacLean ignores the second. Teles and Farrell ignore the first. IMHO, MacLean is closer to right on this point. But MacLean's unwillingness to engage the substance here and elsewhere is, I think, characterized as simply stupid at best: Steve Teles: A Response to Nancy MacLean: "Wearing my scholar���s hat, I came to the same impression as Professors Berman, Farrell and Burns���that Prof. MacLean had written a very poor piece of scholarship...

...regardless of my agreement with some of her positions. She can disagree with that, but she should do so as a scholar, responding to the specific criticisms that have been made of her book. My original pieces with Henry Farrell are here and here. I would hope that she would finally address them substantively, along with the other work cited above, and cease hurling slander at her critics as a way of avoiding responsibility for the scholarly merits of her work...

#shouldread

Martin Wolf: How To Avoid the Next Financial Crisis: "The...

Martin Wolf: How To Avoid the Next Financial Crisis: "The proximate explanations for the huge shortfalls in output were collapses in investment.... This weak investment must also help explain low rates of innovation, which is particularly visible in directly-hit countries. New technology is often embodied in new equipment...

...Countries that experienced banking crises suffered a four percentage point bigger loss in output by 2011-13 than ones that did not. Those with large pre-crisis macroeconomic imbalances, notably unsustainable current account deficits, also suffered relatively large losses. So did those with relatively inflexible labour markets. Again, those whose exports were more exposed to crisis-hit markets were hit harder. Countries that were more exposed to the global financial system also suffered larger losses. Lack of fiscal policy space proved costly, as well, as did a lack of exchange rate flexibility. The last is certainly an explanation, albeit not the only one, for the terribly poor performance of the eurozone.

The monetary actions taken by the high-income countries in the aftermath of the crisis have been controversial in many emerging markets. Many in high-income countries have also argued that the dramatic monetary easing was a mistake. Yet the evidence that output shortfalls are cumulative destroys the argument against strong and sustained policy support. However, stronger fiscal policy responses would have reduced the need for so long a period of unconventional monetary policies. Equally controversial were the capital injections and guarantees provided to the financial sector in the crisis. Maybe, ways could have been found to rescue banks without rescuing bankers. But the greater the support for the damaged financial sector, argues the WEO, the stronger the rebound. This evidence gives no support to ���liquidationism���....

Three tasks and a lesson.��

The first task is that of monetary policy normalisation in a world that has so much debt. Higher US policy rates have already revealed the vulnerability of a number of emerging economies. More turbulence seems highly likely.

A second task is how to respond to another big recession, when the policy space is so diminished.

The final task is coping with the political aftermath of the crisis. The decline in western credibility and relative power and the rise of demagogic forces are real, powerful and dangerous.

The lesson... big financial crises... once they have happened, it is too late. The analysis of regulation in the October��Global Financial Stability Report suggests that we must ignore bankers��� bleating against regulation: above all we must keep capital requirements up.��Recoveries could have been stronger with sustained fiscal and financial action, notably in the eurozone. But the costs of crisis would still have been high. ���Never again��� must be the watchword...

#shouldread
#greatrecession
#finance

A search model that (a) produces the right cyclical elast...

A search model that (a) produces the right cyclical elasticity of wages but (b) does not produce the right cyclical volatility of employment has the wrong microfoundations. It is producing the right cyclical elasticity of wages because it is producing the wrong cyclical volatility of employment. Thus I think this approach is pretty much tapped out: Christopher A Pissarides: The Unemployment Volatility Puzzle: Is Wage Stickiness the Answer?: "An equilibrium search model... focus on the model���s failure to match the observed cyclical volatility of unemployment...

...Job creation in the model is influenced by wages in new matches. I summarize microeconometric evidence on wages in new matches and show that the key model elasticities are consistent with the evidence. Therefore explanations of the unemployment volatility puzzle have to preserve the cyclical volatility of wages. I discuss some extensions of the model that can increase cyclical unemployment volatility through mechanisms other than wage stickiness...

#shouldread
#labormarket
#monetaryeconomics

Matt O'Brien: Inequality is worse than we know. The super...

Matt O'Brien: Inequality is worse than we know. The super-rich really do avoid a lot of taxes: "On the legal end of the spectrum... companies shift their profits to show up in low-tax jurisdictions.... According to Berkeley economist Gabriel Zucman and his co-researchers... as much as 40 percent of all multinational profits and 50 percent of U.S. ones...

...U.S. companies report more profits in Ireland, the top tax-avoidance destination in the world, than they do in China, Japan, Germany, France and Mexico combined.... Because a lot of that money is often invested in things such as U.S. Treasury and corporate bonds despite being listed in other countries for accounting purposes ��� they still have to pay taxes on it here, so we can keep track of how much they have.

That isn���t the case, though, when it comes to the... outright evading of taxes... by its very nature... not the kind of thing we can begin to quantify. People, after all, don���t exactly fill out forms telling us how much of their taxes they���re not paying. But it turns out that we don���t need them to. That���s because the Bank for International Settlements has begun publishing statistics on the banking relationships between different countries that allow us to stitch together a picture of how much wealth is being held offshore. And it���s a lot. Zucman and his team estimate that around 10 percent of global GDP is being held inside all the different tax havens. It���s not as bad for the United States as it is for a lot of other countries���about half of Russia���s wealth, for example, has been moved out of the country���but it���s enough to increase the top 0.01 percent���s share of household wealth from about 7 percent to almost 8 percent. That���s over $1 trillion hiding overseas.

But rather than do anything about this, President Trump���s administration and the Republican Party as a whole have continued to starve the IRS of the money it would need to pursue these kinds of investigations...

#shouldread
#inequality
#equitablegrowth

Scott Jaschik: Author discusses his new book on anti-inte...

Scott Jaschik: Author discusses his new book on anti-intellectualism and fascism: "A country that is not fascist may still experience fascist politics... efforts to divide society and demonize groups.... How Fascism Works by Jason Stanley...

...Stanley identifies 10 "pillars" of fascist politics, among them "the mythic past," propaganda and appeals to the heartland. One of the pillars is anti-intellectualism...

#shouldread
#books
#neofascism

Vijay Govindarajan, Shivaram Rajgopal, and Anup Srivastav...

Vijay Govindarajan, Shivaram Rajgopal, and Anup Srivastava: Why We Need to Update Financial Reporting for the Digital Era: "The market caps of just four companies, Apple, Alphabet, Amazon, and Microsoft, now exceed $3 trillion...

...Their combined assets of $944 billion are an order of magnitude lower than the combined assets of $7,700 billion of the largest 3,177 companies in 1986, when the aggregate market capitalization reached $3 trillion for the first time.... We interviewed several chief financial officers (CFOs) of leading technology companies and senior analysts of investment banks who follow technology companies. We asked: (i) what makes the valuation of digital companies more challenging?; and (ii) ��how can digital firms improve their financial reports to communicate sources of value creation in their businesses? We distilled seven key insights from those discussions.�� Some of these ideas contradict traditional financial thinking whereas others seem highly controversial or pessimistic...

As digital technology becomes more pervasive, more and more companies will present this sort of valuation challenge. Given that even sophisticated investors cannot estimate the value of these companies, CFOs question the ability of a day trader to value a digital company. Therefore, companies see little value in disclosing the details of their current and planned projects in their financial disclosures, even if those disclosures can reduce the information asymmetry between investors and managers.... The time has come for investor bodies and companies to rethink the financial reporting model from scratch...

#shouldread
#finance

Suresh Naidu, Eric A. Posner, and E. Glen Weyl: Antitrust...

Suresh Naidu, Eric A. Posner, and E. Glen Weyl: Antitrust Remedies for Labor Market Power: "Labor market power has contributed to wage inequality and economic stagnation...

...Although the antitrust laws prohibit firms from restricting competition in labor markets like in product markets, the government does little to address the labor market problem and private litigation has been rare and mostly unsuccessful. The reason is that the analytic methods for evaluating labor market power in antitrust contexts are primitive, far less sophisticated than the legal rules used to judge product market power. To remedy this asymmetry, we propose methods for judging the effects of mergers on labor markets. We also extend our approach to other forms of anticompetitive practices undertaken by employers against workers. We highlight some arguments and evidence indicating that market power may be even more important in labor than in product markets...

#shouldread
#monopoly

Lisa D. Cook is worried that the quantity of Big Data can...

Lisa D. Cook is worried that the quantity of Big Data cannot compensate for its low quality. Statistics gives us lots of power with representative random samples. Nothing can give us power without the tools to do what representativeness does: Lisa D. Cook: @drlisadcook: "'Without taking data quality into account, population inferences with Big Data are subject to a Big Data Paradox...

...the more the data, the surer we fool ourselves." Well said, Xiao-Li Meng. My talk at NBER AI mtg: poor data quality -> flawed inference -> bias in ML predictions...

#shouldread
#statistics
#riseoftherobots

Wikipedia: Aztec Myth: "Ometeotl gave birth to four child...

Wikipedia: Aztec Myth: "Ometeotl gave birth to four children, the four Tezcatlipocas, who each preside over one of the four cardinal directions.[citation needed] Over the West presides the White Tezcatlipoca, Quetzalcoatl, the god of light, mercy and wind. Over the South presides the Blue Tezcatlipoca, Huitzilopochtli, the god of war. Over the East presides the Red Tezcatlipoca, Xipe Totec, the god of gold, farming and Spring time. And over the North presides the Black Tezcatlipoca, also called simply Tezcatlipoca, the god of judgment, night, deceit, sorcery and the Earth...

security

Big plans for his country. Involving bonesaws. torture. M...

Big plans for his country. Involving bonesaws. torture. Murder. Dismemberment. Is there any intellectual and moral crime against journalism a New York Times employee can commit that will get him bounced? It appears not: Tom Friedman: Saudi Arabia���s Arab Spring, at Last: "The most significant reform process underway anywhere in the Middle East today is in Saudi Arabia... its own Arab Spring... led from the top down by the country���s 32-year-old crown prince, Mohammed bin Salman.... If it succeeds, it will not only change the character of Saudi Arabia but the tone and tenor of Islam across the globe. Only a fool would predict its success���but only a fool would not root for it...

#shouldread
#journamalism
#orangehairedbaboons