J. Bradford DeLong's Blog, page 439

For the Weekend: Stephen Vincent Benet: The Devil and Daniel Webster X

For the Weekend: Stephen Vincent Benet: The Devil and Daniel Webster X http://gutenberg.net.au/ebooks06/0602901h.html: "Then the trial began, and, as you might expect, it didn't look anyways good for the defense...

...And Jabez Stone didn't make much of a witness in his own behalf. He took one look at Simon Girty and screeched, and they had to put him back in his corner in a kind of swoon.

It didn't halt the trial, though; the trial went on, as trials do. Dan'l Webster had faced some hard juries and hanging judges in his time, but this was the hardest he'd ever faced, and he knew it. They sat there with a kind of glitter in their eyes, and the stranger's smooth voice went on and on. Every time he'd raise an objection, it'd be "Objection sustained," but whenever Dan'l objected, it'd be "Objection denied." Well, you couldn't expect fair play from a fellow like this Mr. Scratch.

It got to Dan'l in the end, and he began to heat, like iron in the forge. When he got up to speak he was going to flay that stranger with every trick known to the law, and the judge and jury too. He didn't care if it was contempt of court or what would happen to him for it. He didn't care any more what happened to Jabez Stone. He just got madder and madder, thinking of what he'd say. And yet, curiously enough, the more he thought about it, the less he was able to arrange his speech in his mind. Till, finally, it was time for him to get up on his feet, and he did so, all ready to bust out with lightnings and denunciations. But before he started he looked over the judge and jury for a moment, such being his custom. And he noticed the glitter in their eyes was twice as strong as before, and they all leaned forward. Like hounds just before they get the fox, they looked, and the blue mist of evil in the room thickened as he watched them. Then he saw what he'd been about to do, and he wiped his forehead, as a man might who's just escaped falling into a pit in the dark.

For it was him they'd come for, not only Jabez Stone. He read it in the glitter of their eyes and in the way the stranger hid his mouth with one hand. And if he fought them with their own weapons, he'd fall into their power; he knew that, though he couldn't have told you how. It was his own anger and horror that burned in their eyes; and he'd have to wipe that out or the case was lost. He stood there for a moment, his black eyes burning like anthracite. And then he began to speak.

Should-Read: Mark Thoma: Federal Reserve Independence: "A...

Should-Read: Mark Thoma: Federal Reserve Independence: "After the FOMC cut interest rates to almost nil during the Great Recession, the committee took advantage of its independence to boldly go where no Fed had gone before...

...With its ���quantitative easing��� program, the Fed purchased vast quantities of securities other than Treasury bonds, flooding banks with loanable deposits. President Obama respected the Fed���s independence, probably because it was pursuing policies that his advisers found appealing in light of their own frustrations with being unable to use more fiscal stimulus to speed the recovery. But the reaction from Republicans in Congress was a familiar one: threats to intervene.

This was partly inspired by genuine fears that the magnitude of the quantitative easing initiative would unleash inflation, and partly by a partisan inclination to attack an institution seen as allied with the Obama administration. It���s hard to know the extent to which pressure from Congress constrained the Fed���s actions. But the threats to audit the Fed, monitor policy decisions and strip it of its regulatory powers, combined with the public���s anger at policies that served the interests of Wall Street, certainly motivated Bernanke to mount an unusually public campaign defending the Fed���s independence...

Should-Read: Elhanan Helpman, Oleg Itskhoki, Marc-Andreas...

Should-Read: Elhanan Helpman, Oleg Itskhoki, Marc-Andreas Muendler, and Stephen J. Redding: From Theory to Estimation: "Trade and Inequality: While neoclassical theory emphasizes the impact of trade on wage inequality between occupations and sectors...

...more recent theories of firm heterogeneity point to the impact of trade on wage dispersion within occupations and sectors.... [In] Brazil... much... overall wage inequality arises within sector���occupations and for workers with similar observable characteristics; this within component is driven by wage dispersion between firms; and wage dispersion between firms is related to firm employment size and trade participation. We then extend the heterogenous-firm model
of trade and inequality from Helpman et al. (2010) and estimate it with Brazilian data. We show that the
estimated model provides a close approximation to the observed distribution of wages and employment.
We use the estimated m...

"Stockmanism" or "Magic Asteriskism" Is Bad Economics. Period

I find myself extremely annoyed this morning with the good-hearted and usually reliable Jim Pethokoukis on Twitter:

@jimpethokoukis: Reminder: Consensus economics view is that lowering corporate income taxes would increase the wages of workers. That isn't Laffer-ism.

@de1ong: Lowering corporate income taxes and replacing the lost revenue with lump-sum taxes would raise average wages. not what you said...

If you require that the government's budget constraint be met in your model, consensus economics says "it depends". Given that raising worker standards of living is not a terribly high priority goal in the Repub House caucus, the way to bet is that when you add in whatever policies they would enact to meet the government budget constraint, the Republican House bill, if enacted, would not raise wages at all.

Saying that replacing a distortionary with a distortionary-free revenue source will (probably) raise some category of income is not "Lafferism". But it is something not good. What name would you suggest for an analysis that is badly flawed by its inclusion of magic asterisks and its neglect of the government budget constraint?

I would suggest "Stockmanism", after Reagan's budget director, known most famously for saying "none of us understand what is going on with these numbers".

Should-Read: Paul Krugman: Paul Ryan Is Choking On His Ow...

Should-Read: Paul Krugman: Paul Ryan Is Choking On His Own Mystery Meat: "A cynic might have expected Republicans to go for full-on cynicism...

...���What, you took it seriously when we talked about fiscal responsibility? The joke���s one you! Ha ha ha!��� And to a certain extent that is what they���ve done: after all the deficit-hawk posturing, they���re openly admitting that their intention is to increase the deficit by $1.5 trillion.

But they apparently didn���t feel free to cut completely loose: they did set a deficit target, and as I understand the mechanics of reconciliation, the budgets passed by the House and Senate, while they don���t actually set policy, kind of leave them stuck with an upper limit on just how much they can blow up the deficit.

And they have no idea how to get there. Try to cut one set of deductions, and the homebuilders get mad at you. Try to cut another, and upper-middle-class suburbanites in blue states who still vote GOP get mad. And so on.

The point is that these problems were always predictable, which is why the Ryan budgets were always obviously fraudulent. Ryan���s fakery may have fooled his naive constituents ��� by which I mean practically the whole Beltway pundit class ��� but never fooled anyone who could do the math.

So will the GOP pass something? Probably ��� but it���s more likely to be a miniature Christmas tree of handouts to the wealthy than the grand tax reform they���ve been promising.

?And let���s hope that whatever happens gets reported as the failure it is. Ryan and company promised big stuff, but never had any way to deliver. When it comes to big lies, Donald Trump is actually a very good, very normal Republican...

Should-Read: Robert Post: There is no 1st Amendment right...

Should-Read: Robert Post: There is no 1st Amendment right to speak on a college campus: "Members of the university... enjoy special freedoms... academic freedom, not First Amendment freedom of speech...

...Academic freedom is defined in terms of the twin missions of the university; it encompasses freedom of research and freedom of teaching. Academic freedom does not entail the equality of ideas. To the contrary, it is defined as the freedom to engage in professionally competent teaching and research.

By contrast, because First Amendment rights protect the right of each and every person to participate in the magnificent process of self-governance, it forbids the state from evaluating the competence of opinions. Citizens are not students under the tutelage of the state; the state is rather the servant of the people. Students are, however, under the tutelage of the university, which is an arena of education, not of political self-governance.

The situation becomes somewhat more complex when speakers from outside the university, with only tenuous connections to the community, are invited to talk. Sometime such invitations raise questions of academic freedom...

Must-Read: Martin Wolf: The challenge of Xi Jinping���s L...

Must-Read: Martin Wolf: The challenge of Xi Jinping���s Leninist autocracy: "Xi Jinping['s]... claims... are bold: 'Socialism with Chinese characteristics has crossed the threshold into a new era,'...

...'It offers a new option for other countries and nations who want to speed up their development while preserving their independence'. The Leninist political system is... yet again, a model.... Yet how has the system that failed in Moscow succeeded in Beijing?... Deng Xiaoping... freeing the economy... maintain[ing] party control.... Whether the Soviet Union could have followed such a path is open to debate. But it did not. As a result, today���s Russia does not know how to mark the October revolution.... Xi is... an autocrat... but... also an heir to the Leninist tradition. His legitimacy rests on the party���s....

China has indeed learnt from the west in economics. But it rejects modern western politics.... China has an ostensibly modern template for its ancient system of imperial sovereignty and meritocratic bureaucracy. But the party is now emperor.... Will this combination of Leninist politics with market economics go on working?... We do not know.... The system has worked spectacularly so far. Yet... the party... always above the law... makes power ultimately lawless... corruption... sap[ping] economic dynamism... as the economy and... education advance, the desire for a say in politics will become overwhelming....

All this is for the long run. The immediate position is quite clear. China is emerging as an economic superpower under a Leninist autocracy, controlled by one man. The rest of the world has no choice but to co-operate peacefully.... Those of us who believe in liberal democracy... need to recognise that China not only is, but sees itself, as a significant ideological rival. First, the west has to keep a margin of technological and economic superiority, without developing an unduly adversarial relationship with Mr Xi���s China. China is our partner. It is not our friend. Second and far more important, the west (fragile as it is today) has to recognise���and learn from���the fact that management of its economy and politics has been unsatisfactory for years, if not decades... financial crisis... under-invested in its future... yawning gulf... between economic winners and the losers... let lies and hatred consume its politics.... The west needs rejuvenation, too.... Autocracy is the age-old human norm. It must not have the last word.

Should-Read: Paul De Grauwe and Yuemei Ji: Behavioural ec...

Should-Read: Paul De Grauwe and Yuemei Ji: Behavioural economics is also useful in macroeconomics: "Concepts from behavioural economics... [help] develop macroeconomic models with endogenous business cycle fluctuations...

*>...Application of the models highlights how the trade-off between output and inflation is moderated by the flexibility of the economy... [and] help to explain... international transmission.... Assuming that agents experience cognitive limitations... [and] use simple forecasting rules (heuristics) and evaluate the forecasting performances of these rules ex post. This evaluation leads them to switch to the rules that perform best.... This adaptive learning assumption... produces endogenous waves of optimism and pessimism (animal spirits) that drive the business cycle in a self-fulfilling way. This also leads to a two-way causality. That is, optimism (pessimism) leads to an increase (decline) in output, and the increase (decline) in output in term intensifies optimism (pessimism). An important feature of this dynamics of animal spirits is that the movements of the output gap are characterised by periods of tranquility alternating in an unpredictable way with periods of intense movements reflecting booms and busts...

Live from the MCP Bunker: The Epicurean Dealmaker writes:...

Live from the MCP Bunker: The Epicurean Dealmaker writes:

@EpicureanDeal: TED on Twitter: "If it can happen at NPR, it can happen anywhere, folks...

...NPR���s senior management was aware of multiple harassment complaints by women against its top newsroom executive during the past two years but took no action to remove him from his job until news reports about his conduct appeared on Tuesday...

The number of these assholes stuns me. But I guess that is exactly the point. As a straight white male I was never a target. I���ve said it before, and I���ll say it again: I apologize for my gender, ladies.

@delong: Past time for zero tolerance? "If you think you might have seen something, say something". Like: "How big a dick are/is you/he being?"?

@EpicureanDeal: Completely agree. If only���selfishly���for self preservation, if not for moral rectitude...

Well then: On the Net of a Million Lies, one story cannot mean very much at all. But three independent stories from seriously pissed-off women rises to the level of clear and convincing evidence.

In the past 24 hours, I have heard stories about:

Don Hazen
China Mieville

If you have heard stories about either of these two also, drop me a private email at brad.delong@gmail.com...

Live from the Orange-Haired Baboon Cage: Karl Marx really...

Live from the Orange-Haired Baboon Cage: Karl Marx really loathed social classes that deviated from their proper societal role: Karl Marx on Napoleon III and his lumpenproletariat, from the 18th Brumaire: Napoleon III was his own Breitbart:

On these processions... Bonaparte... was constantly accompanied by persons affiliated with the Society of December 10.... The lumpenproletariat of Paris had been organized into secret sections, each section led by Bonapartist agents, with a Bonapartist general at the head of the whole.

Alongside decayed rou��s with dubious means of subsistence and of dubious origin, alongside ruined and adventurous offshoots of the bourgeoisie, were vagabonds, discharged soldiers, discharged jailbirds, escaped galley slaves, swindlers, mountebanks, lazzaroni, pickpockets, tricksters, gamblers, maquereaux, brothel keepers, porters, literati, organ grinders, ragpickers, knife grinders, tinkers, beggars���in short, the whole indefinite, disintegrated mass, thrown hither and thither, which the French call la boh��me; from this kindred element Bonaparte formed the core of the Society of December 10. A "benevolent society"-insofar as, like Bonaparte, all its members felt the need of benefiting themselves at the expense of the laboring nation.

This Bonaparte, who constitutes himself chief of the lumpenproletariat, who here alone rediscovers in mass form the interests which he personally pursues, who recognizes in this scum, offal, refuse of all classes the only class upon which he can base himself unconditionally, is the real Bonaparte, the Bonaparte sans phrase. An old, crafty rou��, he conceives the historical life of the nations and their performances of state as comedy in the most vulgar sense, as a masquerade in which the grand costumes, words, and postures merely serve to mask the pettiest knavery.

Thus his expedition to Strasbourg, where the trained Swiss vulture played the part of the Napoleonic eagle. For his irruption into Boulogne he puts some London lackeys into French uniforms. They represent the army. In his Society of December 10 he assembles ten thousand rascals who are to play the part of the people as Nick Bottom that of the lion. At a moment when the bourgeoisie itself played the most complete comedy, but in the most serious manner in the world, without infringing any of the pedantic conditions of French dramatic etiquette, and was itself half deceived, half convinced of the solemnity of its own performance of state, the adventurer, who took the comedy as plain comedy, was bound to win.

Only when he has eliminated his solemn opponent, when he himself now takes his imperial role seriously and under the Napoleonic mask imagines he is the real Napoleon, does he become the victim of his own conception of the world, the serious buffoon who no longer takes world history for a comedy but his comedy for world history. What the national ateliers were for the socialist workers, what the Gardes mobile were for the bourgeois republicans, the Society of December 10 was for Bonaparte, the party fighting force peculiar to him.

On his journeys the detachments of this society packing the railways had to improvise a public for him, stage popular enthusiasm, roar "Vive l'Empereur", insult and thrash republicans, under police protection, of course. On his return journeys to Paris they had to form the advance guard, forestall counter-demonstrations or disperse them. The Society of December 10 belonged to him, it was his work, his very own idea. Whatever else he appropriates is put into his hands by the force of circumstances; whatever else he does, the circumstances do for him or he is content to copy from the deeds of others. But Bonaparte with official phrases about order, religion, family, and property in public, before the citizens, and with the secret society of the Schufterles and Spiegelbergs, the society of disorder, prostitution, and theft, behind him���that is Bonaparte himself as the original author, and the history of the Society of December 10 is his own history...

And, from the Communist Manifesto:

The lumpenproletariat, the social scum, that passively rotting mass thrown off by the lowest layers of the old society, may, here and there, be swept into the movement by a proletarian revolution; its conditions of life, however, prepare it far more for the part of a bribed tool of reactionary intrigue...

Does anybody know what Marx is thinking of here?

First time as tragedy; second time as farce; third time as basement-dwelling key-pressing devotees of Japanese Tentacle Porn...