J. Bradford DeLong's Blog, page 306

Gary B. Gorton (2016): The History and Economics of Safe ...

Gary B. Gorton (2016): The History and Economics of Safe Assets: "Safe assets play a critical role in an(y) economy...

...A ���safe asset��� is an asset that is (almost always) valued at face value without expensive and prolonged analysis. That is, by design there is no benefit to producing (private) information about its value. And this is common knowledge. Consequently, agents need not fear adverse selection when buying or selling safe assets. Safe assets can easily be used to exchange for goods or services or to exchange for another asset. These short-term safe assets are money or money-like. A long-term safe asset can store value over time or be used as collateral. Human history can be written in terms of the search for and production of safe assets. But, the most prevalent, privately-produced short-term safe assets���bank debt, are subject to runs and this has important implications for macroeconomics and for monetary policy...."

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Patrick Karl O���Brien: The Contributions of Warfare with...

Patrick Karl O���Brien: The Contributions of Warfare with Revolutionary and Napoleonic France to the Consolidation and Progress of the British Industrial Revolution: "A traditional and unresolved debate on economic connexions between the French and Industrial Revolutions.... The costs flowing from the reallocation of labour, capital and technical knowledge to wage warfare from 1793- 1815 have been overstated in relation to a range of benefits...

...crowding out a potential invasion by Napoleon���s armies; improvements to the skills and discipline of the workforce; the integration of Ireland into a national market; the accelerated diffusion of technologies associated with coal and iron; the circumvention of diminishing returns to agriculture and above all from a victory that provided the economy with a more efficient State, Navy and Merchant Marine that, for a century, retained most of the gains from trade and servicing the international economy obtained at the expense of rivals during these long wars with France. My conclusion is that the costs and benefits (derived from participation in a global war from 1793 to 1815, that was integral to the era���s geopolitical and mercantilist international economic order) cannot be measured. But in the context and history of that order it is difficult to represent their outcome as anything other than positive and significant for the consolidation and progress of Britain���s famous transition to become Europe���s First Industrial Nation...

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Comment of the Day: John Howard Brown: Talking Points on ...

Comment of the Day: John Howard Brown: Talking Points on Trump: "I came of age in 1973. However, I grew up in a manufacturing city in Northeast Ohio. I can assure you that everyone growing up in that time and place was very aware of the impact of immigration...

...Eastern and Southern European families far outnumbered long settled WHITE ANGLO-SAXON PROTESTANTS like my family. I remember the scandal in my parent's church when a member refused to let his son into the house with his Italian girlfriend. I also remember that the virulently racist family down the block considered it ridiculous. BTW, my family was entirely cool with my own Italian-Hungarian American High School girlfriend. I have a grade school friend (or ex-friend) of Romanian heritage, who had a banner on her Facebook page proclaiming: "Every day that I wake up and Barack Obama is President is a bad day." I assume that she is proTrump now. I have no reason to be in touch now...

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Paul Krugman: "Maybe it's worth laying out the incoherenc...

Paul Krugman: "Maybe it's worth laying out the incoherence of Trump's trade war a bit more, um, coherently...

...There are three issues that seem to be flashpoints:

Chinese bad behavior on intellectual property
China's overall trade surplus
China's bilateral surplus with the US 1/

Of these, (1) is a real issue���but should be addressed by a coalition of advanced countries, except that Trump is stirring up trade war with our allies too. And Trump has offered no specifics on what China should do. Meanwhile, (2) is far less important in, say, 2010: the Chinese surplus is smaller relative to GDP, and the U.S. is no longer at the zero lower bound with high unemployment, so demand drag from foreign surpluses is less of an issue. Still, there is some case for shift in Chinese macro policy.

But (3) is just stupid: China would have a large bilateral surplus even with balanced trade, because it's the Great Assembler of goods whose value added comes largely from other countries. Yet (3) seems to be what Trump mainly focuses on. So what are the Chinese supposed to deliver? They don't even know what concessions might satisfy Trump, and have good reason to believe that nothing would do the trick���after all, Canada is also in the crosshairs, and does nothing important wrong. So the only policy that makes sense for China is retaliation���make this as painful as possible for Trump, and hope that this pushes him into either backing down or at least making comprehensible demands. Not saying they're good guys; but Trump is not offering any useful options...

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Alexandra Erin: Fear, and Fear of Witches: "There's fear,...

Alexandra Erin: Fear, and Fear of Witches: "There's fear, and then there's fear of witches...

...Fear is what motivates you to act in self-preservation. Not always wisely or efficiently. That is it is purpose. Fear of witches is different. The human brain is not a rational organism so much as it is a rationalizing one. It does what it wants, mostly���we do what we want���and then our instincts turn to justifying it....

Fear motivates you towards self-preservation. Fear of witches motivates you towards... anything. Whatever you want to do anyway. Seize land, drive people out, get elected president, set people on fire. Whatever. The woman who called the cops on another woman who was waiting for a rideshare is claiming it's not racism that motivated her, but autism. She has an extreme fearful reaction to strangers outside her house. If this were fear���real fear, not witch-fear���then she would have been relieved when the other woman's ride showed up and she left. But she wasn't. She tried to cajole her into staying to face the cops, telling her it was a crime if she left. Witch-fear. She did not want to escape a threat, she wanted to inflict consequences on someone...

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Jeet Heer: McCain's Funeral: "McCain's funeral was very m...

Jeet Heer: McCain's Funeral: "McCain's funeral was very moving and appropriately political (as befits the funeral of a major political figure)...

....But it also reflected the weakness of a certain type of politics, Decency Resistance or Ancien R��gime Resistance. To say the funeral was political is not to insult it���I'd argue the funeral of any major political figure is inescapably political, an occasion for staking out a legacy and laying claim to a heritage. McCain himself designed it that way. The overriding message of the funeral was to contrast, by barely disguised subtweets, McCain's decency & patriotism with Trump's squalor, selfishness & bigotry. The problem with the staging of the funeral is that it was designed to draw a contrast between the old establishment (bipartisanly embodied by Bush & Obama) with the off-stage Trump.

But that's false dichotomy. That old establishment created Trump. As I've been arguing for the last 3 years, Trump wasn't created out of an immaculate conception but is the true heir to generations of bad politics, notably GOP "Southern Strategy" of race-baiting. McCain himself illustrates the true complex dichotomy here: yes, he stood up to Trump & offered an alternative nationalism. But McCain, by picking Palin & also fostering conspiracy theories about ACORN, helped pave the way for Trump.

Beyond the Southern Strategy & Palin, think of all the other elite choices that led to Trump: the lies of the Iraq war, the mainstreaming of Islamophobia, the casino economics that led to the 2008 meltdown, Obama's failure to prosecute bankers. We've had decades of elite failure, elite impunity, and elite coddling of racism, elite promotion of anti-intellectualism (think of climate denial). Are we surprised that the end result is President Trump? And also elite tolerance of corruption. Figures like Paul Manafort skirted the law for decades and were welcome by the likes of Reagan and Dole. Any surprise they would take the next step & elect, with foreign help, Trump?

The message of the funeral was "The American establishment has a bipartisan contempt for Trump." What was missing was any sense of responsibility by that establishment for creating Trump. The failure of the elite to come to terms with its own responsibility vitiates everything at the funeral���Meghan McCain's righteous anger, Obama's eloquent thoughtfulness, Bush's cutesy candy-sharing. The message of the funeral was "once we get rid of Trump, the grown-ups can take over again." Sorry, won't work. You had your chance and you muffed it. "If the rule you followed brought you to this, of what use was the rule?"���Anton Chigurh. That's the question we have to ask the establishment. The rules they followed brought us here, and now they want us to return to those rules.

The American elite really thinks they can subtweet their way out of a fascist crisis. It's not so easy, my friends. John McCain was admirably blunt & forthright. We owe it to his memory to be no less honest in our appraisal of him. His complex legacy is that he both helped create Trump & resisted him...

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2018 Hurricane Season: Florence, Isaac, Helene:

2018 Hurricane Season: Florence, Isaac, Helene:

Globalization: Some Fairly-Recent Must- and Should-Reads

In my view, successful economic communication of facts in a useful way starts with an anecdote���about, say, Cosette���which is then followed by "Cosette's experiences are typical", and then the numbers. But that is not how we economists talk. So even the best of us do not... get the mindshare that our ideas and our expertise deserve: Stefanie Stantcheva: The Fog of Immigration: "Surveyed 22,500 native-born respondents from France, Germany, Italy, Sweden, the UK, and the US. We concluded that much of the political debate about immigration takes place in a world of misinformation...

Doug Irwin: Trump���s Trade Policy Is An Exercise In Futility: "Yet for all the Sturm und Drang of his trade policy, the president is likely to end up being terribly disappointed by the results of his efforts...

It is also possible that harmonization, labor standards, investment measures, investor-state dispute settlement procedures, etc. will not empower but rather disempower "a different set of rent-seeking interests and politically well-connected firms". Certainly putting the US in the same basket as the EU as far as food health and safety is concerned would strengthen the left's hand inside the United States���and the Naderites frothing denunciations of the Codex Alimentarius were in bad faith. Rodrik's presumption that regulatory barriers are produced by good social democracy rather than bad rent-seeking has always seemed to me highly questionable: Dani Rodrik: What Do Trade Agreements Really Do?: "New (and often problematic) beyond-the-border features of current trade agreements... regulatory rules and harmonization...

Dan Drezner: Robert Gilpin, R.I.P.: "I never met Gilpin in person���in contrast to many colleagues, once he retired, he left the field for good. It���s my loss. I became enamored with his ideas while in graduate school... an excellent intellectual history of how realists thought about the politics of the world economy...

Brad Setser: Can Anyone Other than the U.S. Fund a Current Account Deficit These Days?: "To exaggerate a bit, the world may soon only have one borrower...

Barry Eichengreen and Poonam Gupta (2016): Managing Sudden Stops: "The recent reversal of capital flows to emerging markets has pointed up the continuing relevance of the sudden stop problem...

David Pilling: African economy: the limits of ���leapfrogging���: "The rapid spread of technology has raised hopes for Africa, but digital services cannot take the place of good governance...

An interesting paper saying that Glick and Rose's findings are not robust. I am generally pro-customs unions. I was taught when I was knee-high to a grasshopper that the Zollverein was a big deal. And I have always been impressed by the scale of cross-state trade in the U.S., which dwarfs cross-nation trade within Europe. But I may have to rethink���and I believe I certainly have to revise up my beliefs about how precisely these effects can be estimated: Douglas L. Campbell and Aleksandr Chentsov: Breaking Badly: The Currency Union Effect on Trade: "A key policy question is how much currency unions (CUs) affect trade...

Santiago Levy Algazi: Under-Rewarded Efforts: The Elusive Quest for Prosperity in Mexico: "Why has an economy that has done so many things right failed to grow fast?...

Encyclopedia of Chicago (1899): Mr. Dooley Explains Our "Common Hurtage": "In the late 1890s, Finley Peter Dunne's newspaper columns in Irish dialect brought to life a fictional Bridgeport bartender, Mr. Dooley...

Assessing the "China Shock": I enter into a conversation between Noah nd Larry to give my views:...

Caroline Roullier, Laure Benoit, Doyle B. McKey, and Vincent Lebot: Historical collections reveal patterns of diffusion of sweet potato in Oceania obscured by modern plant movements and recombination: "The history of sweet potato in the Pacific has long been an enigma...

Alberto Alesina, Armando Miano, and Stefanie Stantcheva: Misperceptions about Immigration and Support for Redistribution: "The debate on immigration is often based on misperceptions about the number and character of immigrants...

How, again, is Donald Trump supposed to win a breath-holding contest with an authoritarian r��gime that both controls its media and sees little downside in redirecting resources to cushion the impact on potentially noisy losers?: Paul Krugman: How to Lose a Trade War: "Trump���s declaration that 'trade wars are good, and easy to win' is an instant classic, right up there with Herbert Hoover���s 'prosperity is just around the corner'

But are we sure that our debts are in dollars? Would we know it if the big New York banks had been trying to boost their earnings by selling unhedged dollar puts, in the (probably correct) belief that if they all do this together they do not have a problem, the rest of us have a problem?: Paul Krugman: Opinion | Partying Like It���s 1998 - The New York Times: "Those of us who devoted a lot of time to understanding the Asian financial crisis two decades ago were wondering whether Turkey was going to stage a re-enactment. Sure enough...

In my view, successful economic communication of facts in...

In my view, successful economic communication of facts in a useful way starts with an anecdote���about, say, Cosette���which is then followed by "Cosette's experiences are typical", and then the numbers. But that is not how we economists talk. So even the best of us do not... get the mindshare that our ideas and our expertise deserve: Stefanie Stantcheva: The Fog of Immigration: "Surveyed 22,500 native-born respondents from France, Germany, Italy, Sweden, the UK, and the US. We concluded that much of the political debate about immigration takes place in a world of misinformation...

...On average, the survey respondents in the study believed that there are between two and three times as many immigrants in their respective countries as there actually are. US natives think that legal immigrants make up 36% of the population, yet the real share is just... 13.5%.... In Germany, France, Italy, and the UK... the actual share of immigrants ranges from 10-15%, but respondents��� estimations averaged around 30%.... Respondents... also had a false sense of where most immigrants come from, what religion they follow, and how much they contribute to the economy.... In the US, native-born respondents tend to think that Muslims constitute 23% of the immigrant population while Christians make up just 40%. In reality, 61% of immigrants in the US are Christian, and 10% are Muslim.... Immigrants are believed to be poorer, less educated, more likely to be unemployed, and more reliant on government transfers than is actually the case.... US respondents thought that 37% of the poor are immigrants, though just 12% are....

For the US, the Hamilton Project finds that, ���Taxes paid by immigrants and their children���both legal and unauthorized���exceed the costs of the services they use.��� This makes sense, given that the US receives a large share of highly skilled immigrants.... Added dynamism from immigration is not new.... Immigrants... constituted a disproportionately large share of inventors during America���s ���Golden Age��� of innovation....

Most people tend to be mistaken about immigration. But it is worth noting that some are far more misinformed than others. Generally speaking, non-college-educated citizens, supporters of right-wing political parties, or those with lower levels of educational attainment who work in immigration-intensive sectors have a greater negative bias in their perceptions of immigrants. On the other hand, people who are acquainted or friends with an immigrant have both more positive and more accurate perceptions.... The widespread confusion about immigration across Western democracies has real-world consequences....

We found that giving respondents the facts about the number and origins of immigrants did not increase their support for redistribution, but that showing them just the anecdote of a hard-working immigrant did. This indicates that attitudes toward redistribution are strongly influenced by one���s views about the perceived ���deservingness��� of the poor....

Integrating immigrants into labor markets and creating peaceful, functioning multi-ethnic societies is ultimately the job of politics. But for our politics to work, we first must make sure that we are all working with the facts���not myths and misperceptions.

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Monday Smackdown/Hoisted: Remember Richard Cheney?