J. Bradford DeLong's Blog, page 301

Dmitry Lubensky and Doug Smith: Learning from Speculating...

Dmitry Lubensky and Doug Smith: Learning from Speculating and the No Trade Theorem: "To overcome the no-trade theorems of Aumann (1976) and others, models of speculative trade have relied on agents that do not maximize expected wealth (noise traders)...

...We develop an overlapping generations model in which rational wealth-maximizing speculators with a common prior trade a common value asset based only on private information. The rationale for trade is experimentation: an agent that trades learns about her type, exiting if it is low and continuing to benefit from future trades if it is high. We demonstrate that the learning motive always overcomes adverse selection, regardless of the rate of learning or the benefit of being a high type, generating a substantial volume of purely speculative trade. In a single period snapshot the no trade theorem would ensue, and observed trade is attributed to younger cohorts who appear as noise traders by entering unprofitable trades...

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Jeremy Nalewaik: Inflation Expectations and the Stabiliza...

Jeremy Nalewaik: Inflation Expectations and the Stabilization of Inflation: Alternative Hypotheses: "This paper examines two candidate hypotheses explaining the stabilization of U.S. inflation since the 1970s and 1980s...

...The first explanation credits the stabilization of inflation expectations, and assumes those expectations have a strong positive causal effect on actual subsequent inflation, while the second explanation credits the disappearance of such a strong positive causal effect. The paper reports statistical tests favorable to both a stabilization of inflation expectations and a marked decline in the effect of the general public���s inflation expectations on subsequent inflation...

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I need to understand China. I do not understand China. Ho...

I need to understand China. I do not understand China. How can I learn to understand China? Martin Wolf is also trying to understand China. Here he sets forth seven propositions that the Chinese elite make to him: Martin Wolf: How the Beijing elite sees the world: "How does the Chinese ruling elite view the world?...

...Here are seven propositions our interlocutors made to us.

China needs strong central rule... [with] the Chinese Communist party, with some 90m members... essential to national unity....

Western models are discredited....

All this has increased confidence in China���s unique model. Yet this does not mean a return to a controlled economy.... "[The] government... creates the framework for the market... promote[s] entrepreneurship and protect[s] the private economy���...

China does not want to run the world....

China is under attack by the US... the South China Sea, Taiwan, the Dalai Lama and now trade���. This then is a systematic attack....

US goals in the trade talks are incomprehensible....

China will survive these attacks.... US business is highly involved with and dependent upon the Chinese economy. The Chinese people, stressed others, are probably better able to bear privation than Americans. They are also highly resistant to being bullied by US power. Indeed, the Chinese leadership could not ignore public opinion in considering concessions...

I find it impossible not to grant (7), (2), and (6)���although if I had been among Martin Wolf's Chinese interlocutors, I would have said not that "US goals in the trade talks are incomprehensible..." but rather "US goals in the trade talks are incoherent where they are not silly..." It will take a generation, at least, of good behavior and strong productivity growth before a North Atlantic and democratic model will have a chance of again looking attractive to China's power elite and political class...

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#china

Cosma Shalizi (2007): Foundational Dismal Science Bloggin...

Cosma Shalizi (2007): Foundational Dismal Science Blogging: "Who knew that Reinhard Selten was the author of a dialogue http://bactra.org/sloth/selten-dialogue.pdf on the foundations of economics?...

...The participants are a Bayesian, an economist, an experimental psychologist, an "adaptationist" (i.e., an evolutionary game theorist), a population geneticist, an ethologist, and a "Chairman" standing in for Selten. The topic, rather than the nature of love or justice, or even the ideal city, is, in the Chairman's words, "What do we know about the structure of human economic behavior?" The ultimate answer is "squat all, but it's not Bayesian; we need lots of experiments" (Prof. Dr. Dr. h.c. mult. Selten phrases this somewhat more elegantly).... On a not-unrelated note, Bowles and Gintis http://tuvalu.santafe.edu/~bowles/2000QJE.pdf are also looking at the foundations, and bringing to mind a pair of contractors who are telling the homeowner that, sadly, sadly, everything will have to be replaced...

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Even though this is written by another member of the Glob...

Even though this is written by another member of the Global J. Bradford Alliance, I am not sure that "when U.S. multinationals are able to import talent or export R&D work, this reinforces US technological leadership". That is not how I read Shenzhen, at least: Lee Branstetter, Britta Glennon, and J. Bradford Jensen: The IT revolution and the globalisation of R&D: "US firms have begun shifting R&D investment towards non-traditional destinations such as China, India, and Israel...

...This is a response to a shortage in software and IT-related human capital within the US. When US multinationals are able to import talent or export R&D work, this reinforces US technological leadership. Conversely, politically engineered constraints on this response will undermine the competitiveness of US-based firms...

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Pablo D. Fajgelbaum, Eduardo Morales, Juan Carlos Su��rez...

Pablo D. Fajgelbaum, Eduardo Morales, Juan Carlos Su��rez Serrato, and Owen M. Zidar: State Taxes and Spatial Misallocation: "We study state taxes as a potential source of spatial misallocation in the United States...

...We build a spatial general equilibrium framework that incorporates salient features of the U.S. state tax system, and use changes in state tax rates between 1980 and 2010 to estimate the model parameters that determine how worker and firm location respond to changes in state taxes. We find that heterogeneity in state tax rates leads to aggregate welfare losses. In terms of consumption equivalent units, harmonizing state taxes increases worker welfare by 0.6 percent if government spending is held constant, and by 1.2 percent if government spending responds endogenously. Harmonization of state taxes within Census regions achieves most of these gains. We also use our model to study the general equilibrium effects of recently implemented and proposed tax reforms...

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The Tulsa Riot: Hoisted from the Archives

Hoisted from the Archives: 1921���six years after the Ku Klux Klan revival sparked by "Birth of a Nation"���the early 20th Century's "Uncle Tom's Cabin" in reverse: 39 officially dead, 800 wounded, more than 35 blocks destroyed, more than 10000 people left homeless: Erik Loomis (2016): Tulsa: "The Tulsa Race Riot is one of the most shameful events in all of American history and as we know, that���s a high bar to meet...

...That event took place 95 years ago today. Amazingly, an account of this event written by the father of the legendary African-American historian John Hope Franklin, who was a leading black lawyer in Tulsa at the time, was recently discovered.

���I could see planes circling in mid-air. They grew in number and hummed, darted and dipped low. I could hear something like hail falling upon the top of my office building. Down East Archer, I saw the old Mid-Way hotel on fire, burning from its top, and then another and another and another building began to burn from their top,��� wrote Buck Colbert Franklin (1879-1960).

The Oklahoma lawyer, father of famed African-American historian John Hope Franklin (1915-2009), was describing the attack by hundreds of whites on the thriving black neighborhood known as Greenwood in the booming oil town. ���Lurid flames roared and belched and licked their forked tongues into the air. Smoke ascended the sky in thick, black volumes and amid it all, the planes���now a dozen or more in number���still hummed and darted here and there with the agility of natural birds of the air.���

Franklin writes that he left his law office, locked the door, and descended to the foot of the steps.

���The side-walks were literally covered with burning turpentine balls. I knew all too well where they came from, and I knew all too well why every burning building first caught from the top,��� he continues. ���I paused and waited for an opportune time to escape. ���Where oh where is our splendid fire department with its half dozen stations?��� I asked myself. ���Is the city in conspiracy with the mob?������

The Tulsa Race Riot needs to be a much more central event to our national history. A national park site would be a good place to start, but given that the city of Tulsa is pretty much unwilling to deal with this event, that���s unlikely to happen soon. The discovery of this manuscript may help.

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Very good to see���Dan Froomkin's original WHW was Politi...

Very good to see���Dan Froomkin's original WHW was Politico before there was Politico, and was, actually, unlike Politico, informative���because Dan worked for his readers, rather than for his sources. One suggestion, Dan���don't say "renewal": there is no "renewal", at least not yet: Dan Froomkin: Dan Froomkin's White House Watch: "Trump welcomes another authoritarian to the White House...

...Struggling to cement a far-right majority on the Supreme Court, Donald Trump on Tuesday welcomes to the White House the president of Poland, whose far-right party has effectively put its formerly independent judiciary under strict political control. Trump is evidently a fan...

Dan Froomkin: White House Watch: "Welcome! The new White House Watch is on a several-weeks-long shakedown cruise. Now is the perfect time to tell me what you like and what you don���t like, and to show your support. Please read About the Site to learn more about what I���m trying to do ��� then help me make it a reality. Please email me your thoughts at froomkin@gmail.com��and/or make a donation...

Dan Froomkin: White House Watch: "Welcome and welcome back. Nine years after the abrupt end of its run at the Washington Post, White House Watch is back as an independent website...

...Despite the abundance of Trump coverage, I see two ways it can add value above the din: by relentlessly putting Trump���s incremental actions in their proper, alarming context as an ongoing, corrupt assault on pluralism, shared truths, and core liberal democratic values; and by convening an ongoing online dialogue about what we need to do once Trump is gone,��with an emphasis on strengthening our democracy and curbing executive branch powers that have grown unchecked. We can���t allow this to become the new normal. So how do we restore pre-Trump expectations? And having learned some very painful lessons, how do we apply them to rebalance and reenergize our democracy?

I don���t have the answers, but I���m excited about asking the questions and reporting what I hear.

In addition to multiple postings��using the latest news as a point of departure, I���ll do my own reporting and interviews. I���ll talk to experts about the weakening of the checks and balances intended to protect us from tyranny, and how to strengthen them. I���ll review literature on key topics, especially related to the violation and restoration of norms. I���ll experiment with online annotation of articles, essays and white papers. Depending on the site���s budget, there could be podcasts and even teach-ins.

I���m also intent on offering a megaphone to the growing community of groups and individuals already focused on the work of restoring and protecting democratic principles. The endless scandals, outrages and distractions of the Trump era have robbed them of the national attention they deserve. White House Watch will work with them on internet time to inject their important perspective into the daily political discourse.

The original��White House Watch resonated more strongly with readers than anything I���ve done since.

To do it again, though, I���m going to need your help...

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Friedrich Engels (1843): Outlines of a Critique of Political Economy: Hoisted from the Archives

Hoisted from the Archives: Friedrich Engels (1843): Outlines of a Critique of Political Economy: "According to the economists, the production costs of a commodity consist of three elements: the rent for the piece of land required to produce the raw material; the capital with its profit, and the wages for the labour required for production and manufacture...

...But [of the]... two sides���the natural, objective side, land; and the human, subjective side, labour, which includes capital and, besides capital, a third factor which the economist does not think about���I mean the mental element of invention, of thought, alongside the physical element of sheer labour. What has the economist to do with inventiveness? Have not all inventions fallen into his lap without any effort on his part? Has one of them cost him anything? Why then should he bother about them in the calculation of production costs? Land, capital and labour are for him the conditions of wealth, and he requires nothing else. Science is no concern of his.

What does it matter to him that he has received its gifts through Berthollet, Davy, Liebig, Watt, Cartwright, etc.���gifts which have benefited him and his production immeasurably? He does not know how to calculate such things; the advances of science go beyond his figures. But in a rational order which has gone beyond the division of interests as it is found with the economist, the mental element certainly belongs among the elements of production and will find its place, too, in economics among the costs of production. And here it is certainly gratifying to know that the promotion of science also brings its material reward; to know that a single achievement of science like James Watt���s steam-engine has brought in more for the world in the first fifty years of its existence than the world has spent on the promotion of science since the beginning of time.

We have, then, two elements of production in operation ��� nature and man, with man again active physically and mentally, and can now return to the economist and his production costs....

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Sandra Newman: One More Thing on Kavanaugh: "One more thi...

Sandra Newman: One More Thing on Kavanaugh: "One more thing on Kavanaugh before I go and do my laundry. I've written about false rape accusations before, and I know they do occur. I spent months researching this article, and I'm very familiar with the territory...

...Ford's accusation has none of the characteristics of a false accusation. False accusations tend to paint the attacker as extraordinarily evil and deliberately cruel, not as a kid who is doing something really awful and stupid while black-out drunk. There is also a grand guignol quality to a lot of false accusations. If you read the UVA accuser's story, or the Duke accuser's story, you can see this. They're involve bizarre forms of violence that aren't even strictly physically possible. A thing you will not get in a false accusation is an element of slapstick, as in Ford's account of the second boy in the room jumping on top & tumbling Kavanaugh loose so she could get free. A person seeking to harm someone doesn't add comic relief.

False accusers do NOT, contrary to popular belief, have a pattern of reporting a rape thirty years after the fact. This could happen, but it's not a thing that crops up over and over. In fact, in my research, I found no proven instance of this ever happening. False accusers are typically either stressed teens or people with a specific kind of serious mental illness. Not successful adults just going about their business who suddenly decide to do one really crazy pernicious thing that will ruin their life.

This story is nothing like the typical false rape accusation. It is, however, exactly like millions of attempted rapes. It is such a common story that it is certain that it's happening to many people as I type this sentence. Just want to add, to be clear: this doesn't mean teens and people with severe mental illness should be treated with suspicion when they report a rape. They are actually more likely to be targeted for rape. In these cases, there are features police can look for to tell whether they should treat a case with suspicion. E.g. a history of false reports or extreme fabrications, a situation where a teen was caught having sex by a strict parent. These cases can turn into a quagmire, but with an adult professional who has no history of extreme fabrications, there are no such difficulties...

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