J. Bradford DeLong's Blog, page 336

Marco Cipriani and Gabriele La Spada: The Premium for Mon...

Marco Cipriani and Gabriele La Spada: The Premium for Money-Like Assets: "We estimate such premium using a quasi-natural experiment, the recent reform of the money market fund (MMF) industry...

...Prime MMFs were forced to adopt a system of gates and fees; moreover, prime MMFs catering to institutional investors were forced to float their net asset values. In contrast, government MMFs were unaffected by the new regulation.... Before the SEC reform, MMF shares were the typical example of a money���like asset: they were callable, redeemable at par, and had very little (at least, in investors��� perception) credit risk. This applied equally to government funds, which can only invest in Treasuries, agency debt, and repos collateralized by these securities, and to prime funds, which can also invest in high-quality, privately-issued unsecured debt.... In the months before the reform went into effect, the prime-government net-yield spread widened from 7 basis points in November 2015 to 24 basis points in October 2016.... The widening spread can be interpreted as a measure of the convenience yield investors are willing to pay to keep the money-like feature of their MMF shares...

#shouldread

David Brooks explicitly practicing identity politics. Wha...

David Brooks explicitly practicing identity politics. What's odd is that Jews are almost always first on the block to be excluded from "Western Europe" whenever someone embarks on the journey that leads to ultimately saying that the only true civilization bearers are the Anglo-Saxons (or the Saxon-Saxons, depending), with the wogs starting at either Calais or Liege, depending. Does he even know that the only sovereigns who made significant outreach to rescue the Sephardim expelled from Spain was named Bayezid II Osmanli?: Yastreblyansky: Identity politics with David Brooks: The wolves are in the henhouse: "David Brooks's hot take on the Trump-Putin summit ('The Murder-Suicide of the West') was that it was like when C.S. Lewis's mother died, not that he was there, it was in 1908, but he's read about it, and it's pretty sad...

...she had cancer and the kid was only ten, and they shipped him off to a boarding school with a psychotic headmaster afterwards, so that it may not sound exactly like the Trump-Putin summit to you, but the thing is Trump has broken up with Europe, and Europe is our mother, as Americans, the source of democracy, universities, good manners, luxury hotels, and public parks!... I'm barely kidding....

But then it turns out it wasn't even Trump's fault. It's the liberals who did it, starting out by referring to Aristotle, Shakespeare, and Mozart as dead white males, and ultimately, under Obama,��pivoting, which I think means Obama noticed that the Pacific Ocean and its farther shores from New Zealand and Japan to Malaysia and Indonesia had real places with people in them, and culture, parks, luxury hotels, the whole lot, and before you knew it we'd completely lost track with Europe.... And Europe itself is to blame, come to think of it, with its post-nationalist top-down technocratic administration (it's fun to realize that Brooks was in Brussels working for the Wall Street Journal at the same time as young Boris Johnson was covering it for The Telegraph, and may have gotten all his clich��s about the sclerotic European Union from the famously mendacious stories Boris wrote about the horrors of EU regulation....

Brooks doesn't even notice what he did, but gets back to the lament:

His embrace of Putin Monday was a victory dance on the Euro-American tomb.... We���ve lost the bonds that might enable us to fight them together. Worse, the wolves are not only in the henhouse; they are in the Executive Mansion...

It's foxes that move into henhouses, you know. I don't know about executive mansions. Hope the wolves don't eat Jared! At least not before he testifies.

What is really intriguing here is the spectacle of David Brooks practicing some of that identity politics. We are America because we come from approximately three countries. Britain, Germany, and France. With a bit of Italy and Greece but that was a very long time ago. If you call attention to the fact that our culture heroes are all dead white males, you will destroy us. Do not look at Asia and Africa as treacherous Obama did. Even Russia worries him a bit, maybe just because it has Putin in it, but I think he may be wondering if it's really in Europe? And he keeps taxing us with tribalism...

#shouldread

The rise of neo-fascism: Martin Wolf: How we lost America...

The rise of neo-fascism: Martin Wolf: How we lost America to greed and envy | Financial Times: "Mr Trump is the logical outcome of a politics that serves the interests of the plutocracy...

...He gives the rich what they desire, while offering the nationalism and protectionism wanted by the Republican base. It is a brilliant (albeit unplanned) combination, embodied in a charismatic personality that offers validation to his most passionate supporters. Will Trump���s protectionism do many in his base any good? No. But, in their eyes, he is a real leader, at last. Who lost ���our��� America? The American elite, especially the Republican elite. Mr Trump is the price of tax cuts for billionaires. They sowed the wind; the world is reaping the whirlwind. Should we expect the old America back? Not until someone finds a more politically successful way of meeting the needs and anxieties of ordinary people.

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Steven L. Hall: "From a counterintelligence perspective, ...

Steven L. Hall: "From a counterintelligence perspective, something is going on behind the scenes. Before Helsinki I was less sure; post Helsinki, I feel sick..."

#shouldread

Yes. It is long past time for 25th Amendment remedies. Wh...

Yes. It is long past time for 25th Amendment remedies. Why do you ask?: David Frum: What Hold Does Putin Have on Trump?: "We still do not know what hold Vladimir Putin has on Donald Trump, but the whole world has now witnessed the power of its grip...

...Russia helped Donald Trump into the presidency, as Robert Mueller���s indictment vividly details. Putin, in his own voice, has confirmed that he wanted Trump elected. Standing alongside his benefactor, Trump denounced the special counsel investigating Russian intervention in the U.S. election���and even repudiated his own intelligence appointees. This is an unprecedented situation, but not an uncontemplated one. At the 1787 convention in Philadelphia, the authors of the Constitution worried a great deal about foreign potentates corrupting the American presidency.... Founders imagined corruption taking the form of some princely emolument that would enable an ex-president to emigrate and... ���live in greater splendor in another country than his own.��� Yet they understood that even the most developed countries were not immune to the suborning of their leaders. As Morris said, "One would think the King of England well secured [against] bribery��� Yet Charles II was bribed by Louis XIV.���

The reasons for Trump���s striking behavior���whether he was bribed or blackmailed or something else���remain to be ascertained. That he has publicly refused to defend his country���s independent electoral process���and did so jointly with the foreign dictator who perverted that process���is video-recorded fact. And it���s a fact that has to be seen in the larger context of his actions in office: denouncing the European Union as a ���foe,��� threatening to break up nato, wrecking the U.S.-led world trading system, intervening in both U.K. and German politics in support of extremist and pro-Russian forces, and continually refusing to act to protect the integrity of U.S. voting systems���it all adds up to a political indictment, whether or not it quite qualifies as a criminal one.... Confronting the country in the wake of Helsinki is this question: Can it afford to wait to ascertain why Trump has subordinated himself to Putin after the president has so abjectly demonstrated that he has subordinated himself? Robert Mueller is leading a legal process. The United States faces a national-security emergency.

#shouldread

Economic Growth: Some Fairly Recent Should- and Must-Reads

Economic Growth:

The answer is: probably in the late 1960s: Joe McMahon: When was the last time all the computing power in the world equaled one iPhone?: "When was the last time all the computing power in the world equaled one iPhone?..

We may not believe Bob Allen's provocative economic history of Soviet Russia, however. I think that Russia is enough of a "European" country that an "Asian" or "Latin American" baseline is not appropriate. Aside from the value to the world of a heavy industrial complex in Magnitogorsk in 1939 (a big aside), the Stalinist road to industrial society was not only genocidal and long-run counterproductive but medium-run stupid. But why Mehmet Ali Pasha was unable to make Egypt a cotton-spinning and -weaving center remains a fascinating question: Tom Westland: Russia vs Egypt: "In both 19th century Egypt and 20th century Russia, the path to industrial growth was blocked by a formidable swamp: subsistence agriculture...

Lawrence Summers (1994): Foreign Aid: Why Do It? And What Works?: "When the history of the final twenty years of the twentieth century is written, there will be two big stories: the end of the cold war and the transformation of the developing nations...

Necessities become things that are beneath our notice. Conveniences become necessities. Luxuries become conveniences. And then we invent new luxuries���like feeling put upon yesterday because a new 2 terabyte backup disk cost $70 and took 8 hours to get delivered to my door so I couldn't get all of my backups done last night: Jeff Bezos: Divine Discontent: Disruption���s Antidote: "One thing I love about customers is that they are divinely discontent...

This is true. This makes the sharp slowdown in measured productivity growth since 2007 a great puzzle���and is one important thing making me believe it is a depression related "hysteresis" phenomenon: Jeff Desjardins: A brief history of technology: "The rate at which newly commercialized technologies get adopted by consumers is also getting faster.... Through increased connectivity, instant communication, and established infrastructure systems, new ideas and products can spread at speeds never seen before ��� and this enables a new product to get in the hands of consumers in the blink of an eye..."

Alex Bell et al.: Who becomes an inventor in America? The importance of exposure to innovation: "Using deidentified data on 1.2 million inventors from patent records linked to tax records...

Post-1500 Ottoman retardation and chronic plague?: Ulysse Colonna: Infectious, elegant and maybe wrong: sketch for an explanation of the Long Divergence: "Three different but linked literatures... blissfully ignoring each other...

Mary Daly: Raising the Speed Limit on Future Growth: "Why aren���t American workers working?

Craig Palsson: Small Farms, Large Transaction Costs: Incomplete Property Rights and Structural Change in Haiti

Paul Krugman: Tax Cuts and Wages Redux: "After Republicans rammed through their big tax cut, there were a rash of stories about corporations using the tax break to give their workers bonuses...

Simon Wren-Lewis: mainly macro: The Output Gap is no longer a sufficient statistic for inflationary pressure: "From 1955 to 2007 prosperity grew at an average rate of almost two and a quarter percent each year...

Highlighted: A Question I Asked a Much Shorter Version of...: I agree... that it would be wonderful if we had strong nonpartisan analytical institutions. But... how can we get there when we see such egregious behavior not just from "economists" who serve political masters and do not know how to do analyses that get the incidence right, but from economists who know well how to do analyses that get the incidence right?...

A Question About the Future of Work...: I have no sense of what kinds of things the masses of displaced workers will do in the future at the level of "microprocessor", "robot", "accounting software 'bot"...

Lant Pritchett: Alleviating Global Poverty: Labor Mobility, Direct Assistance, and Economic Growth

J. Vernon Henderson, Adam Storeygard, Tim L. Squires, and David N. Weil: The Global Spatial Distribution of Economic Activity: Nature, History, and the Role of Trade: "We study the distribution of economic activity, as proxied by lights at night, across 250,000 grid cells of average area 560 square kilometers...

Noah Smith: How Universities Make Cities Great: "Abel and Deitz find that university research expenditures have a strong effect on the number of educated people in a region���over four times as strong as the effect of degree production...

Barry Ritholtz: Inflation: Price Changes 1997 to 2017: "It is notable that the two big outliers to the upside are health care (hospital, medical care, prescription drugs) and college (tuition, textbooks, etc.)...

Dean Baker: Doesn't Anyone Care If the Trump Tax Cuts Are Working?: "Capital goods orders for January...

Ernest Liu (2016): INDUSTRIAL POLICIES IN PRODUCTION NETWORKS: "Many developing countries adopt industrial policies that push resources towards selected economic sectors...

Michael Kremer (1993): The O-Ring Theory of Economic Development: "This paper proposes a production function describing processes subject to mistakes in any of several tasks...

Kevin is, I think, wrong here. Radiologists are not (yet)...

Kevin is, I think, wrong here. Radiologists are not (yet) in trouble. Radiologists as image-reading 'bots are in trouble: Kevin Drum: Puny Humans Crushed By Machines Yet Again: "Radiologists are already in trouble, and if a robot can pass a medical licensing exam summa cum laude then how much longer can it be before robots are making house calls? Everybody thinks of truck drivers and retail clerks as the first victims of the coming robot revolution, but that isn���t necessarily the case. Jobs that require no tricky physical proficiency but very deep analytical skills are going to be some of the first to put people permanently out of work. In a sense, though, this is a good thing, since it means the challenge ahead will finally get some serious attention...."

#shouldread

There are two ways this could go���extending "whiteness" ...

There are two ways this could go���extending "whiteness" or permanent Republican minority status. In the past, "whiteness" has always been expanded so that it includes a vast majority of the American population���and so now we have people named Mark Krikorian denouncing the threat of a Hispanic wave that will pollute America: Kevin Drum: White Party, Brown Party: "I don���t think that our political system will literally become the White Party vs. the Brown Party, but it���s already closer to this than any of us would like to admit. What���s worse, it���s all but impossible to imagine how Republicans can turn things around in their party. They���re keenly aware of the need to address their demographic challenges, but the short-term pain of reaching out to non-whites is simply too great for them to ever take the plunge. Democrats aren���t in quite such a tough spot, but their issues with the white working class are pretty well known, and don���t look likely to turn around anytime soon either.

During the early George Bush era I thought this racial dynamic between the parties was starting to lose air, and that one way or another it would plateau and then start to fade. But then came voter ID and the ignored Romney postmorten and the effective end of the Civil Rights Act and rising immigration paranoia and Steve Bannon and Donald Trump and Charlottesville. How far will this go? I don���t know any more than you do, but it���s as toxic a division as a country can have. We are headed into a very deep and very ugly abyss if we don���t figure out a way to grab onto a fingerhold and start climbing our collective way out...."

#shouldread

A point with which I strongly agree: Webpages should be w...

A point with which I strongly agree: Webpages should be webpages, and not other things: David Copeland: Brutalist Web Design: "Brutalist Web Design is honest about what a website is and what it isn't...

...A website is not a magazine, though it might have magazine-like articles. A website is not an application, although you might use it to purchase products or interact with other people. A website is not a database, although it might be driven by one. A website is about giving visitors content to enjoy and ways to interact with you. The design guidelines... are in the service of making websites more of what they are and less of what they aren't. These aren't restrictive rules to produce boring, minimalist websites. Rather these are a set of priorities that put the visitor to your site���the entire reason your website exists���front and center in all things....

Content is readable on all reasonable screens and devices....
Only hyperlinks and buttons respond to clicks....
Hyperlinks are underlined and buttons look like buttons....
The back button works as expected....
View content by scrolling....
Decoration when needed and no unrelated content....
Performance is a feature....

Embrace Brutalist Web Design: How much better would the web be if every site embraced Brutalist Web Design? How amazing would it be to have readable text, clearly-marked interaction points, unobtrusive advertising, all wrapped up in a fast-loading site you could consume using the native tools of your chosen device? A friend gave me design advice once. He said to start with left-aligned black text on a white background, and to apply styling only to solve a specific problem. This is good advice. Embrace this, and you embrace Brutalist Web Design. Focus on your content and your visitors will enjoy you and your website. Focus on decoration or tricking your visitors into clicking ads, and your content will suffer, along with your visitors...

#shouldread

The Circa-1870 Disjunction Between Production and Distribution: A Possible Outtake from "Slouching Towards Utopia?: An Economic History of the Long 20th Century"

Do I have space for this in the ms.? Or do I need to go into kill-my-darlings mode?

3.1: The ca.-1870 Disjunction Between Production and Distribution

In the world as it stood in 1870 there was seen to be a huge disjunction between the growing effective economic power of the human race and the proper distribution of this potential wealth to create a prosperous and happy society. That science, technology, and organization could wreak miracles had become commonplaces. Best friends Karl Marx and Friedrich Engels probably put it best in 1848:

The business class, during��� scarce 100 years, has created more massive and more colossal productive forces than have all preceding generations together. Subjection of Nature���s forces to [hu]man[ity], machinery, application of chemistry to industry and agriculture, steam-navigation, railways, electric telegraphs, clearing of whole continents for cultivation, canalisation of rivers, whole populations conjured out of the ground���what earlier century had even a presentiment that such productive forces slumbered in the lap of social labour?���

However, the benefits of greater human power to harvest fruits from nature and organize persons did not trickle down.

There were, broadly speaking, as of 1870 three views about why it did not trickle down and what, if anything, ought to be done about it:

We have already noted John Stuart Mill���s view: The problem was the Malthusian one���that people, especially ���the unproductive���, had too much freedom to have children and to draw on the public for support. The solution was to ���the increase of mankind shall be under the deliberate guidance of judicious fore sight���. The state... provid[ing] that no person shall be born without its consent������ and to provide unemployed workers��� prisons for those bankrupt and broke: ���support��� accompanied with��� restraints on their freedom... restricted indulgence, and enforced rigidity of discipline������

Opposed to this was Karl Marx���s view: that the problem late not in human nature but in human societal arrangements. What was needed was to realize the German-style idealist philosophical understanding of human liberation that would be attainable with the broad prosperity from a society run on British-style classical-political economy Ricardian-socialist lines brought into being by a French-style political revolutionary overthrow of the old r��gime. And, Marx believed, the Logic of History would get us there. First, the market economy run for the interest of a business class that also controlled the levers of normal politics would see the economy become more productive and productive capital grow, and:

extends the division of labour���the application of machinery��� the more do��� wages shrink���. Small businessmen and��� people living upon��� interest��� [are] precipitated into the��� working class.��� Thus the forest of outstretched arms begging for work, grows ever thicker and thicker, while the arms themselves grow ever leaner and leaner���

And this would, Marx believed, inevitably trigger a political-societal reaction:

Further socialisation of labour��� takes a new form���. One capitalist always kills many. Hand in hand with this��� develop��� the cooperative��� labour process, the conscious technical application of science, the methodical cultivation of the soil, the transformation of the instruments of labour into instruments of labour only usable in common���. Along with the constantly diminishing number of the magnates of capital��� grows��� misery, oppression, slavery, degradation, exploitation; but with this too grows the revolt of the working class��� disciplined, united, organised by��� capitalist production itself���. Centralisation of capital and socialisation of labour��� become incompatible with their capitalist exterior shell. This shell is burst asunder. The knell of capitalist private property sounds. The expropriators are expropriated���

There was a third view, however: the view that there was nothing wrong with human society as it stood toward the end of the 19th century. This was the view of, say, Herbert Spencer and his Social Statics���that what appeared to be the defects of society has it then stood were actually necessary forms of social discipline in order to guide the upward evolution of the human race. Andrew Carnegie���by then no longer the hungry child of a penniless handloom weaver but a plutocratic steelmaster���put it in a nutshell in 1889:

What were��� luxuries have become��� necessaries of life. The laborer has now more comforts than the landlord had���. The landlord has books and pictures rarer, and appointments more artistic, than the King could then obtain. The price we pay for this��� is, no doubt, great���. The employer of thousands is forced into the strictest economies��� [in] the rates paid to labor��� friction between the employer and the employed, between capital and labor, between rich and poor���. The law of competition��� is here; we cannot evade it; no substitutes for it have been found; and while the law may be sometimes hard for the individual, it is best for the race, because it insures the survival of the fittest in every department���

The theorists of the 18th Century Enlightenment had rejected justifications of inequality based on the inheritance of caste���fictionalized descent from the Norman knights who had conquered England for William the Bastard or the Frankish warriors who had conquered Gaul for King Clovis the supposed grandson of Merovech���for the equality of all before the law, and careers open to the talented. 19th Century utilitarians had argued that the distribution of even property should be calculated by a benevolent government so as to produce the maximum sum of utility���achieve the greatest good of the greatest number. And they rejected the idea that property rights and equality under the law were in any sense sacred inasmuch as ���the majestic equality of the law forbids rich and poor alike to sleep under bridges, beg in the streets and steal loaves of bread������

But then the pendulum swung back again. The social darwinists came up with new justifications of inequality, based on privation and poverty as Lamarckian and Darwinian sorting mechanisms that were necessary to drive the upward evolution of the human race. Hence all was for the best in this the best of all possible worlds���and the more it appeared in the surface to be not the best, the more it was.

Few social darwinists indeed were ever willing to take their logic to the end of the streetcar line. Few were willing to conclude, with Andrew Carnegie, that although the privation of the unfit poor was useful, the luxury and the dissipation of the rich were not: once one had demonstrated one���s fitness by becoming rich the only appropriate use of wealth was to give it away to advance the public good rather than to either consume it or bequeath it, for ���he who dies rich dies disgraced���. For most the justifications were another cycle in the ideological justification that those who are rich should hold what they have: what John Kenneth Galbraith described as ���the search for a superior moral justification for selfishness���.

The contest between these three views���and diluted and blended variants of them���is a principal part of the history of political economy and economic policy. Marx���s belief that History would bring a superior social system and allow the productivity made possible by the advance of knowledge and investment to be distributed to create a truly human world is no longer credible. Mill���s fear that humanity would be unable to organize itself to master its destiny because of resource scarcity proved false with respect to population, but may prove true with respect to energy use and global warming. And there are still many���or at least a few with very loud voices���who hold that if the world of today has a problem, it is that distribution is not unequal enough.