J. Bradford DeLong's Blog, page 36

"The Market Was Made for Man, Not Man for the Market": Time to Ramp Up Direct Cash Payments

The need for large redirections of financial flows to avoid large increase in poverty during this coronavirus plague is large. The need for substantial top-ups to spending flows in view of the large jump in savings rates triggered by the arrival of coronavirus is large. The U.S. government continues to be able to borrow at unbelievable terms���terms so unbelievable that, when the accounting is done correctly, a larger national debt is not a drag on the funds the government has available for its other missions but rather a source of current cash flow.

(Why? Because in real population-adjusted terms, people are not charging the government interest on its debt but are instead paying the government to keep their money safe, but that is a discussion for another time.)

Moreover, a plan to have the government top off spending flows by whatever large amount is necessary to immediately return to full employment is moderately conservative, and the only effective way to give American businesses their proper chance to adjust and survive the coronavirus plague. It is, as John Maynard Keynes wrote back in 1936:

moderately conservative... [to] enlarge... the functions of government... [to include] the task of adjusting to one another the propensity to consume and the inducement to invest.... [It is] the condition of the successful functioning of individual [entrepreneurial] initiative. For if effective demand is deficient, not only is the public scandal of wasted resources intolerable, but the individual enterpriser who seeks to bring these resources into action is operating with the odds loaded against him. The game of hazard which he plays is furnished with many zeros, so that the players as a whole will lose if they have the energy and hope to deal all the cards.... [Success then requires] courage and initiative... supplemented by exceptional skill or unusual good fortune. But if effective demand is adequate, average skill and average good fortune will be enough... [thus] preserving [both] efficiency and freedom...

Our financial flows and property orders are a societal accounting system to guide and manage our collective societal division of labor. If dotting the i's and crossing the t's in this societal accounting system produces mass unemployment, the right response is to adjust it to produce full employment and then reconcile the accounting entries, not to watch employment fall and then sit around with our thumbs up our butts wondering what to do.

After all, the market was made for man, not man for the market���wasn't it?:

 

Olugbenga Ajilore,��� Mark Blyth,��� J. Bradford DeLong,��� Susan Dynarski,��� Jason Furman,��� Indivar Dutta-Gupta,��� Teresa Ghilarducci,��� Robert Gordon, ���Samuel Hammond, Darrick Hamilton,��� Damon Jones, ���Elaine Maag, Ioana Marinescu,��� Manuel Pastor,��� Robert Pollin,��� Claudia Sahm, & al.: Open Letter from economists on Automatic Triggers for Cash Stimulus Payments https://www.economicsecurityproject.org/wp-content/uploads/2020/07/emp_economists_letter.pdf: We urge policymakers to use all the tools at their disposal to avoid further preventable harm to people and the economy, including��� ���recurring direct stimulus payments, lasting until the economy recovers. The widespread uncertainty created by the COVID-19 pandemic and recession calls for a multifaceted response��� ���that includes automatic, ongoing programs and policies including more direct cash payments to families; extended and enhanced unemployment benefits; substantial aid to state and local governments; stronger SNAP benefits; robust child care funding and more. These programs and policies will hasten the economic recovery far more effectively if they stay in place until economic conditions warrant their phaseout. ���Direct cash payments are an essential tool that will boost economic security, drive consumer spending, hasten the recovery, and promote certainty at all levels of government and the economy���for as long as necessary���

The economic pain is widespread and the need for immediate, bold action is clear. ���The pain from this crisis is undeniable. The unemployment rate is already ���dwarfing��� peak levels from the Great Recession, with ���higher levels��� of unemployment for Black and Latinx workers; GDP is expected to shrink by ���11 percent��� during the second quarter of this year; and ���27 million��� Americans have likely lost their health insurance along with their jobs. Much is still unknown, but it is clear at this point this recession will require significant and sustained stimulus policies that are responsive to the health of the economy. We agree with economists from ���across��� the ���political spectrum��� that concerns about debt and deficit should not get in the way��� of taking appropriately strong measures to stem the downturn now.

Regular, lasting direct stimulus payments will boost consumer spending, driving the economic recovery and shortening the recession. ���Right now, most Americans are just trying to keep their heads above water. The first round of economic impact payments were a lifeline that helped some get by for a few weeks������early research��� shows that people are spending the stimulus checks quickly and on essentials���but the worst is not over. Consumer spending accounts for about two-thirds of GDP, so reviving the economy will require sustained efforts to strengthen it. Even after businesses start to re-open and jobs begin to come back, there will be ���significant economic fallout���, and demand will continue to lag if people don���t have money to spend. Regular direct stimulus payments tied to economic indicators will help families stay afloat and drive economic activity.

Automatic stabilizers ensure relief for as long as it is needed, promoting a strong recovery and efficient government. ���Many economists believe our response to the Great Recession was ���too small��� and ���too brief���, slowing the recovery and causing preventable harm particularly to low-income people. Cash assistance is an important element of economic aid, injecting resources through direct stimulus payments and ���refundable tax credits��� into low- and middle-income households that need help and are ���likely��� to spend it. That will start a chain reaction to boost local businesses and increase economic activity. Continuing recurring payments until there is reliable evidence of an economic recovery���such as low and declining unemployment���will promote certainty for all sectors of the economy and for state and local governments and federal agencies.
With many unknowns, it is critical to enact policies that will help promote a robust, sustained, racially equitable recovery and will stay in place until Americans are back on their feet.

.#coronavirus #equitablegrowth #highlighted #macro #publichealth #2020-07-07


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Carroll: Boltzmann's Anthropic Brain���Noted

Sean Carroll: Boltzmann's Anthropic Brain https://www.discovermagazine.com/the-sciences/boltzmanns-anthropic-brain: ���The process of "remembering" involves establishing correlations that inevitably increase the entropy, so the direction of time that we remember [and therefore label "the past"] is always... lower-entropy.... The real puzzle is... why are conditions at one end of time so dramatically different from those at the other? If we do not assume temporal asymmetry a priori, it is impossible in principle to answer this question by suggesting why a certain initial condition is "natural"���without temporal asymmetry, the same condition would be equally natural at late times...

...On the one hand, Boltzmann's fluctuations of entropy around equilibrium allow for the existence of dynamical regions, where the entropy is (just by chance) in the midst of evolving to or from a low-entropy minimum. And we could certainly live in one of those regions.... oltzmann's goal is perfectly reasonable: to describe a history of the universe on ultra-large scales that is on the one hand perfectly natural and not finely-tuned, and on the other features patches that look just like what we see. But, having taken a bite of the apple, we have no choice but to swallow....

The most basic problem has been colorfully labeled "Boltzmann's Brain" by Albrecht and Sorbo. Remember that the low-entropy fluctuations we are talking about are incredibly rare, and the lower the entropy goes, the rarer they are.... If we are explaining our low-entropy universe by appealing to the anthropic criterion that it must be possible for intelligent life to exist, quite a strong prediction follows: we should find ourselves in the minimum possible entropy fluctuation consistent with life's existence. And that minimum fluctuation would be "Boltzmann's Brain."

Out of the background thermal equilibrium, a fluctuation randomly appears that collects some degrees of freedom into the form of a conscious brain, with just enough sensory apparatus to look around and say "Hey! I exist!", before dissolving back into the equilibrated ooze. You might object that such a fluctuation is very rare, and indeed it is. But... the momentary decrease in entropy required to produce such a brain is fantastically less than that required to make our whole universe....

This is the general thrust of argument with which many anthropic claims run into trouble. Our observed universe has something like a hundred billion galaxies with something like a hundred billion stars each. That's an extremely expansive and profligate universe, if its features are constrained solely by the demand that we exist.... Anthropic arguments would be more persuasive if our universe was minimally constructed to allow for our existence; e.g. if the vacuum energy were small enough to allow for a single galaxy to arise out of a really rare density fluctuation. Instead we have a hundred billion such galaxies, not to count all of those outside our Hubble radius....

But, returning to Boltzmann, it gets worse, in an interesting and profound way.... Assuming that we got to this macrostate via some fluctuation out of thermal equilibrium, what kind of trajectory is likely to have gotten us here?... If we ask "What kind of early universe tends to naturally evolve into what we see?", the answer is the ordinary smooth and low-entropy Big Bang. But here we are asking "What do most of the states that could possibly evolve into our current universe look like?", and the answer there is a chaotic high-entropy mess. Of course, nobody in their right minds believes that we really did pop out of a chaotic mess into a finely-tuned state with false memories about the Big Bang....

Price's conclusion from all this (pdf) is that we should take seriously the Gold universe, in which there is a low-entropy future collapsing state that mirrors our low-entropy Big Bang in the past. It's an uncomfortable answer, as nobody knows any reason why there should be low-entropy boundary conditions in both the past and the future, which would involve an absurd amount of fine-tuning of our particular microstate at every instant of time. (Not to mention that the universe shows no sign of wanting to recollapse)....

Explaining the difference in entropy between the past and future is at least as fundamental, if not more so, as explaining the horizon and flatness problems with which cosmologists are so enamored. If we're going to presume to talk sensibly and scientifically about the entire history of the universe, we have to take Boltzmann's legacy seriously���

.#noted #2020-07-06

Howes: Observing the Occident���Noted

Anton Howes: Observing the Occident https://antonhowes.substack.com/p/age-of-invention-observing-the-occident: ���As for Europe���s Indian observers, one of the earliest full accounts is that of Mirza Shaikh Ictisam al-Din, sent to Britain by the Mughal emperor in the late 1760s.... Britain was already gaining a reputation for wealth and invention.... Ictisam al-Din noted that the poor French people he saw at Nantes and at Calais rarely wore any leather boots or shoes. They went in either wooden clogs or barefoot. As for the English, however, they were clearly better-fed, and he rarely saw any of them without shoes or boots... the wealth disparity was already obvious.... Ictisam al-Din had a chance to see a lot of Britain. He visited Scotland, perceiving that ���the towns are daily augmenting and there is also an increment in the wealth���. It was a region on the make��� .#noted #2020-07-06

Mitrovitch���America Remains Poised for Greatness���Noted with a "WTF!?!?"

WTF?!?! This seems simply bonkers to me. In 1920, a century ago, Britain did not have "intrinsic strength... [that] enabled it to retain dominance". In 1920, a century ago, Britain was in the middle of its extraordinarily rapid relative decline from 1900-1940 that took it from being the world's only global hyper power in 1900 to at best fourth in potential strength���well behind Germany, the United States, and the Soviet Union���in 1900. . Get the history right, Greg!: Gregory Mitrovich: Beware Declinism: America Remains Poised for Greatness https://nationalinterest.org/feature/beware-declinism-america-remains-poised-greatness-163810?page=0%2C1: ���There can be no doubting that America���s international standing has been undermined by ill-considered wars and the deadly failures of Trump���s pandemic response. However, the intrinsic strength of the United States will, like that of Britain a century ago, enable America to retain its dominance. Like Britain, it will require a far more dramatic series of shocks than what it has recently experienced for Washington to lose its central position in the international system��� .#noted #2020-07-06

Blanchard: Reopening the Economy���Noted

Olivier Blanchard: Reopening the Economy https://www.youtube.com/watch?v=rrFIFWgDXuk&feature=youtu.be: 'Where we are depends on whether you're in Europe or not and where in Europe you are. But there are, I think, commonalities.... The stop was a policy decision based on very good health policy reasons. So the worst was at the beginning. From then on, it just goes up. The question is: at what speed? There I see three phases:

In the very short run you end lockdown and allow firms to start again, even if not at full speed.... You are then going to make up part of the fall.... My sense is in most european countries where the virus is more or less under control
you can make up about two-thirds of the fall. In the U.S. where things are not so good and people are... scared... then it could be that we only make up half....

In the period between the end of this first one and the vaccine���the time when... we can stop physical distancing, restaurants can go back to the normal way they do business, people take planes without thinking too hard, and so on���recovery is going to be much slower because many sectors are still going to be affected... in a fairly strong way.... This would be a very tough period for a large number of firms and a large number of workers....

Then the vaccine comes, hopefully sometime next year, and then we have... the long-run changes and reallocations. We don't have a good sense of whether... it is going to be the type of relocation we always see, or something much worse... structural unemployment for quite a while....

I am worried that people are going to see the numbers in the short
run and think "Oh! Things are just fine."... Yes, for a while we're going to
go up fairly fast.... IN the short run things are going to go better than
people fear.... And in the medium run things might go worse than people hope.... I am slightly worried about optimism leading people and maybe governments not to do the right thing.... It starts like a "V" but very quickly it turns into something much more horizontal.... If we are not careful the horizontal portion could be long and bad....

In retrospect... with information we now have... maybe the lockdown was too strong. Maybe there was a way of doing it with slightly less economic cost. Now that's not a criticism of what was done because the precautionary principle is obvious... But it may be that it turned out to be more costly���economically, psychologically, and maybe politically���than we anticipated....

One thing that does seem possible in the long run is that machines don't get the virus, making robotization and all such trends accelerating even more....

We're facing two types of shocks looking forward: (1) shocks due to the presence of a virus at some fairly high level of intensity, [and] these will likely go away when the vaccine is here (think of restaurants)... (2) the hysteretic effects... when we've learned to do things differently... learned about different risks���telecommuting and all its implications is the quintessential example...

.#coronavirus #macro #noted #publichealth #2020-07-05

Scalzi: Back Into Quarantine���Noted

John Scalzi: Back Into Quarantine https://whatever.scalzi.com/2020/07/05/back-into-quarantine/: ���We could have managed this thing���like nearly every other country has���if we had political leadership that wasn���t inept and happy to use the greatest public health crisis in decades as political leverage for��� well, who knows? Most of the areas being hit hardest now���places like Florida, Arizona, and Texas���are deep red states; there is no political advantage to be had by having them hit by infection and death and economic uncertainty four months before a national election...

...The fact that Joe Biden is currently in a statistical tie with Trump in Texas voter polls should terrify the GOP. I don���t expect Biden to get Texas��� electoral votes in November, but honestly it shouldn���t even be this close now. And the thing is, things are almost certainly going to get worse in Texas before they get better.

In April and May I had held out some hope that the second half of 2020 might be salvageable, and that it would be safe, or at least safer, to do the things we normally might have done with the year. Now that we���re in the second half of the year, it���s pretty clear that 2020 is going to be unsafe all the way through. It didn���t have to be this way. If we are going to have to live with it (and hopefully not precisely in the ���fuck it, I guess some of you are just gonna have to die��� way that the GOP wants us to), we should admit to precisely whose fault it is. The GOP needs to be punished in November for a number of reasons, and this is certainly qualifies as a major reason. I will leave my house to vote, if I need to.

In the meantime: wear your masks, practice social distancing, and stay home if you can. As my friend Ashley Clements put it: "For anyone who feels like they ���wasted��� quarantine because they didn���t write a novel or learn a new language or get shredded, I have good news: Quarantine ain���t over get back inside." She���s right. Alas.���

.#coronavirus #moralresponsibility #noted #orangehairedbaboons #publichealth #2020-07-05

What Is Going on in AZ, FL, SC, TX?���Note to Self; Coronavirus

Note to Self: Would someone please tell me how to translate (a) testing frequency and (b) share of tests that are positive into total true caseloads? If you test at random, you divide confirmed cases by testing frequency to get true cases. If you target your tests perfectly, then true cases are confirmed cases. But where in the middle are we today?

COVID Tracking Project https://twitter.com/COVID19Tracking/status/1279544164187693056: ���Arizona, Florida, and South Carolina remain the three states with the most troubling data:

.#coronavirus #notetoself #publichealth #2020-07-05

Holbo: TransPrincess of Mars���Noted

John Holbo: _ 'I'm retooling my science fiction and philosophy syllabus_ https://twitter.com/jholbo1/status/1279623923613614080 and looking for fun examples of classic sf short stories, preferably by 'major' writers (but I'm flexible), that are gender-themed but weirdly boldly-go yet not-go-there about it. Examples are easy to come by. It's harder to find non-examples. Namely, interesting SF that is about gender yet doesn't boldly re-imagine it. (Why would you bother?) But, equally, most classic SF now seems almost comically conventional about gender roles, in retrospect. I'm going to start in 1915, with "Herland" and "Princess of Mars". A feminist utopia. A nostalgic tale of a Confederate former officer, living his best life on Mars. Dejah Thoris is an egg-laying alien. Of course, she's also one hot chick. If it's ok for a dude to have sex with an egg-laying alien, it's a bit hard to see why certain other stuff wouldn't also be ok. Obviously Edgar Rice Burroughs doesn't go there. (That's not the nostalgic fantasy here.)...

So you are saying that APoM is a bold statement that the essence of identity as a woman transcends biological reproductive organs? HeliumWomen are women?

John Holbo: 'You have certainly guessed my riddle! But I hadn't worked out the slogan yet. "HeliumWomen are women!" That is awesome! But, yeah: you frame it one way and 'sex organs don't matter', only gender roles matter, seems like the natural conservative default���

.#noted #sciencefiction #2020-07-05

Racism & the University of Chicago's Stigler Center���Twitter

Twitter: Two great economics papers on COVID-19 https://threadreaderapp.com/thread/1271125083029819392.html! However, the series is being conducted under the auspices of the University of Chicago's Stigler Center for the Study of the Economy and the State, which puts itself forward as:

The Stigler Center aims to promote and disseminate research on regulatory capture, crony capitalism, and the various distortions that special interest groups impose on capitalism���

A naive alien coming to this world from outer space, a ���stranger to human nature��� as Adam Smith put it, might suppose that chief among those ���various distortions��� imposed by ���special interest groups��� is the long and sorry tale of American slavery-Jim Crow-disenfranchisement-massive resistance to integration-scared police shooting and not-scared police beating up people. Yet such a naive alien would be wrong.

Although a stranger to human nature might assume grappling with such issues would be one of the principal focuses of the Stigler Center, it is absolutely nowheresville.

I think that some of the historical deep roots of the Stigler Center���s lack of concern for such issues, issues that an alien would think solidly 5/
within its wheelhouse, are made visible in an essay that crossed my desk again last week, an essay that George Stigler penned back in 1965. In it, he denounced African-American ���demonstrations growing in size and in insolence������and, remember, back in 1965 the "demonstrations" consisted of people like John Robert Lewis in a suit and tie sitting down at a ���whites-only��� lunch counter and then getting beaten up���and of those demonstrations��� ���approv[al] or at least tolerat[ance] by the political, intellectual, and religious leaders of the nation������i.e., that there was vocal disapproval from at least some powerful white people when the police were turned loose with billy clubs and dogs to break up such demonstrations.

As they say, read the whole thing: https://github.com/braddelong/public-files/blob/master/readings/article-stigler-negro-1962.pdf

When will we see the announcement of a major reorientation of the funding, resources, endowment, and office space of the Stigler Center toward investigating and addressing possible cures for the regulatory capture of the American state by white supremacists, the crony capitalism that has suppressed African-American and other minority wages for all of American history, and the related distortions that special interest groups that earn psychic or material income from racial hierarchy have imposed on American capitalism?

.#economicsgonewrong #highlighted #racism

Negishi Prices & Social Welfare���Twitter

Twitter: _I remember back in the... spring of 1981, I think it was https://threadreaderapp.com/thread/1271237461272715267.html. I asked my professor, William Thomson, visiting from Rochester, roughly this: "The utilitarian social welfare function is �� = U(1) + U(2) + U(3)... The competitive market economy maximizes a market social welfare function ��m = ��(1)U(1) + ��(2)U(2) + ��(3)U(3)..., where the ��(i)s are Negishi weights that are increasing functions of your lifetime wealth W(i)���indeed, if lifetime utility is log wealth, then ��(i)=W(i).

Market failures drive wedges between what the economy achieves and what it could achieve. Why isn't the unequal distribution of ex ante lifetime income���inequality of opportunity���conceptualized by us economists as the greatest of all market failures? And why isn't the distribution of political power that creates & preserves a property order of unequal wealth seen as the greatest of all "regulatory capture by a special interest group" flaws in the working of society, economy, and the state?"

Thomson did not have a good answer.

My other teacher Joe Kalt, however, did. "These Chicago Boys are all right-wing Marxists," he said. "They buy the Marxian proposition that the state is an executive committee for rigging the economy in the interest of the ruling class. But they think that that is a good thing as long as the ruling class is based on wealth, however previously acquired. All their objections are to those who use some form of societal power other than wealth to try to rig the economy in their interest. And while there is an argument that a wealth-based ruling class is in general best, it is a weak argument."

(& do remember that I learned much of my political economy from Richard Musgrave and his TA Manuel Trajtenberg, who expicitly conceptualized public finance as having 3 branches: (1) repairing Pigovian externalities, (2) fiscal policy for full employment, (3) redistribution to shrink all the Negishi weights in the market's SWF toward one.

The Chicago School underwent an enormous change between the Midwestern Populist days of Henry Simons, for whom private monopoly was the big foe and large inequalities an enormous menace, & the monopoly-tolerant fundraising paradise that Stigler & co. created.

I put it that this transformation from Simons to Stigler was possible only by "othering" the non-rich by every means possible, so that their low weight in the market's Negishi-weighted SWF could be dismissed as deserved. & I put it to you that taking the Rothbard Road in race relations���trying to bring to life their anti-New Deal monopoly-tolerant union-busting economic policy agenda by white racism & supremacy, as Frankenstein's monster was brought to life by the lightning���was a very important part and remains a very important part of that shift away from economics understood as a policy science that attempts to implement a Benthamite or a Millian utilitiarianism that seeks the greatest good of the greatest number.

.#economicsgonewrong #equitablegrowth #highlighted #historyofeconomicthought #2020-07-04