J. Bradford DeLong's Blog, page 86

Robert Barro appears unhappy that the economy possesses m...

Robert Barro appears unhappy that the economy possesses multiple expectational equilibria, and seeks for a model of inflation that does have this property. This is, frankly, a weird thing to do: models are supposed to represent the salient features of the world, not ignore them. And that economies often have multiple expectational equilibria and sometimes shift rapidly from one to another has been a live position now for... nearly two centuries, since John Stuart Mill and Jean-Baptiste Say analyzed the British financial crisis of 1825. And it was made hegemonic by... John Maynard Keynes more than 80 years ago in his General Theory. But unhappiness with a theory is not a reason to reject it: Robert J. Barro: Mysteries of Monetary Policy: "The puzzle is how the Fed can keep inflation steady at 1.5���2% per year by relying on a policy tool that seems to have only weak and delayed effects.... [Perhaps] the credible threat of extreme responses from the Fed has meant that it does not actually have to repeat the Volcker-era policy.... Frankly, I am unhappy with this explanation. It is like saying that the inflation rate is subdued because it just is.... This suggests that the monetary policy behind today���s low and stable actual and expected inflation will keep working until, suddenly, it doesn���t. This makes me wish that I had a better understanding of monetary policy and inflation. It also makes me wish that the people responsible for monetary policy had a better understanding than I have. Many readers, no doubt, would say that my second wish has already been granted....

#noted #2019-12-06

This is absolutely fascinating. The rich in the American ...

This is absolutely fascinating. The rich in the American South are much poorer a generation after the Civil War then they had been before: sharecropping and Jim Crow are less effective at extracting wealth from African-Americans. But Phil Ager and company find no signs that those fractions of the elite who were direct slaveholders lost more than those members of the elite who were indirect slaveholders. I am going to have to think very hard about this: Philipp Ager, Leah Platt Boustan, and Katherine Eriksson: The Intergenerational Effects of a Large Wealth Shock: White Southerners After the Civil War: "The nullification of slave-based wealth after the US Civil War (1861-65) was one of the largest episodes of wealth compression in history. We document that white southern households with more slave assets lost substantially more wealth by 1870 relative to households with otherwise similar pre-War wealth levels. Yet, the sons of these slaveholders recovered in income and wealth proxies by 1880, in part by shifting into white collar positions and marrying into higher status families. Their pattern of recovery is most consistent with the importance of social networks in facilitating employment opportunities and access to credit...

#noted #2019-12-06

Plutarch: Life of Lysander http://penelope.uchicago.edu/T...

Plutarch: Life of Lysander http://penelope.uchicago.edu/Thayer/E/Roman/Texts/Plutarch/Lives/Lysander*.html: 'So then, after the Athenians had yielded in all points, Lysander sent for many flute-girls from the city, and assembled all those who were already in the camp, and then tore down the walls, and burned up the triremes, to the sound of the flute, while the allies crowned themselves with garlands and made merry together, counting that day as the beginning of their freedom.��Then, without delay, he also made changes in the form of government, establishing thirty rulers in the city and ten in Piraeus. Further, he put a garrison into the acropolis, and made Callibius, a Spartan, its harmost. He it was who once lifted his staff to smite Autolycus, the athlete, whom Xenophon makes the chief character in his "Symposium"; and when Autolycus seized him by the legs and threw him down, Lysander did not side with Callibius in his vexation, but actually joined in censuring him, saying that he did not understand how to govern freemen. But the Thirty, to gratify Callibius, soon afterwards put Autolycus to death...

#noted #2019-12-06

Marx's Capital: Part VIII: Primitive Accumulation Proper

4.4) Part VIII: Primitive Accumulation: At the end of Part VII, Marx had completed his analysis of how the purpose of capitalism-as-a-system was simply capital accumulation, which produced ever more productivity, wealth, and misery, all three growing together, and all three growing together at an ever-increasing pace. The natural next step in Marx���s argument would be for him to lay out what he forecasts will bring this mad sorcerers-apprentice process to an end.

That, however is not what we get. We turn to the next page, and its title of ���Part VIII: Primitive Accumulation��� tells us that Marx is now jumping back to the historical beginnings of the process of capitalist capital accumulation.

He needed an editor.

Fortunately, this part is misnamed. ���Primitive��� accumulation is supposed to be about how the juggernaut of capitalism initially gets rolling. This part starts out being about that. But it then moves on, and is in its later stages also about much, much more.

4.4.1) ���Primitive Accumulation��� Proper: Part VIII does start out with its expressed topic. It hammers home the difference between the myth that the capitalist tell themselves and others, and the reality with which the system came into being. The myth is as follows, as Marx brings the snark:

Its origin is supposed to be.��� In times long gone by there were two sorts of people; one, the diligent, intelligent, and, above all, frugal elite; the other, lazy rascals���. Thus it came to pass that the former sort accumulated wealth, and the latter sort had at last nothing to sell except their own skins. And from this original sin dates the poverty of the great majority that, despite all its labour, has up to now nothing to sell but itself, and the wealth of the few that increases constantly although they have long ceased to work. Such insipid childishness is every day preached to us in the defence of property���

The reality is very very different:

The process which creates the capital-relation can be nothing other than the process which divorces the worker from the ownership of the conditions of his own labour; it is a process which operates two transformations, whereby the social means of subsistence and production are turned into capital, and the immediate producers are turned into wage-labourers. So-called primitive accumulation, therefore, is nothing else than the historical process of divorcing the producer from the means of production. It appears as ���primitive��� because it forms the pre-history of capital, and of the mode of production corresponding to capital���

And it is not just that history happened this way in some ethically neutral way. Great crimes were committed. And great was the role played by political corruption. Marx reviews British history starting in 1500, running from Henry VIII Tudor to William III Orange, and beyond:

The spoliation of the Church���s property, the fraudulent alienation of the state domains, the theft of the common lands, the usurpation of feudal and clan property and its transformation into modern private property under circumstances of ruthless terrorism, all these things were just so many idyllic methods of primitive accumulation. They conquered the field for capitalist agriculture, incorporated the soil into capital [a very interesting phrase], and created for the urban industries the necessary supplies of free and rightless proletarians���

The Glorious Revolution... brought into power, along with William of Orange, the landed and capitalist profit-grubbers. They inaugurated the new era by practising on a colossal scale the thefts of state lands which had hitherto been managed more modestly. These estates were given away, sold at ridiculous prices, or even annexed to private estates by direct seizure ��� The Crown lands thus fraudulently appropriated, together with the stolen Church estates, ��� form the basis of the present princely domains of the English oligarchy���

Employ the power of the state, the concentrated and organized force of society, to hasten, as in a hothouse, the process of transformation of the feudal mode of production into the capitalist mode, and to shorten the transition. Force is the midwife of every old society which is pregnant with a new one. It is itself an economic power���

Not just market buying-and-selling bring capitalism into being. Brutality and force are the ���midwife��� of every transformation from one kind of society to another���here the origins of society based on the capitalist mode of production born from the womb of the previous pattern of society based on the feudal mode of production:

Unleash[ing] the ���eternal natural laws��� of the capitalist mode of production, to complete the process of separation between the workers and the conditions of their labour, to transform, at one pole, the social means of production and subsistence into capital, and at the opposite pole, the mass of the population into wage-labourers, into the free ���labouring poor���, that artificial product of modern history.... [Feudalism] has to be annihilated; it is annihilated. Its annihilation, the transformation of the individualized and scattered means of production into socially concentrated means of production, the transformation, therefore, of the dwarf-like property of the many into the giant property of the few, and the expropriation of the great mass of the people from the soil, from the means of subsistence and from the instruments of labour, this terrible and arduously accomplished expropriation of the mass of the people forms the pre-history of capital���

Here the full files are���unfinished: https://www.icloud.com/pages/0howtV7CndvjkSCCLmtjmq_SA

And the course slides:

https://www.icloud.com/keynote/0osOOsPvSrTaiK4__D5MghPVA

#books #highlighted #history #historyofeconomicthought #moralphilosophy #politicaleconomy #2019-12-06

Five years ago our steering committee member here at Equi...

Five years ago our steering committee member here at Equitable Growth Janet Yellen gave a very good talk on building blocks of opportunity in America: Janet Yellen: Perspectives on Inequality and Opportunity from the Survey of Consumer Finances https://www.federalreserve.gov/newsevents/speech/yellen20141017a.htm: "[I] identify and discuss four sources of economic opportunity in America--think of them as "building blocks" for the gains in income and wealth that most Americans hope are within reach of those who strive for them. The first two are widely recognized as important sources of opportunity: resources available for children and affordable higher education. The second two may come as more of a surprise: business ownership and inheritances. Like most sources of wealth, family ownership of businesses and inheritances are concentrated among households at the top of the distribution. But both of these are less concentrated and more broadly distributed than other forms of wealth, and there is some basis for thinking that they may also play a role in providing economic opportunities to a considerable number of families below the top...

#noted #2019-12-04

There are many proposals to revamp education in economics...

There are many proposals to revamp education in economics, and to get economists to their right place in the public sphere���whatever that "right place" might turn out to be. The highly estimable Martin Wolf is here on the side of those who think that economics ought to focus on basic principles, arresting stories, and big data as a way of figuring out which store are in fact representative of broader trends. He is critic of over-mathematization and, more so, of over-theorization���I, at least, am reminded of Larry Meyer's take on Robert Lucas's brand of economics: "In our firm, we always thanked Robert Lucas for giving us a virtual monopoly. Because of Lucas and others, for two decades no graduate students are trained who were capable of competing with us by building econometric models that had a hope of explaining short-run output and price dynamics. [Academic economics Ph.D. programs] educated a lot of macroeconomists who were trained to do only two things--teach macroeconomics to graduate students, and publish in the journals...":

Martin Wolf: Expertise: "Michael Gove was wrong, in my view, about expertise applied in the Brexit debate. But he was not altogether wrong about the expertise of economists. If we were more humble and more honest, we might be better recognized as experts able to contribute to public debate.... At bottom, economics is a field of inquiry and a way of thinking. Among its valuable core concepts are: opportunity cost, marginal cost, rent, sunk costs, externalities, and effective demand. Economics also allows people to make at least some sense of debates on growth, taxation, monetary policy, economic development, inequality, and so forth. It is unnecessary to possess a vast technical apparatus to understand these ideas. Indeed the technical apparatus can get in the way.... The teaching of economics to undergraduates must focus on core ideas, essential questions, and actual realities. Such a curriculum might not be the best way to produce candidates for PhD programs. So be it. The study of economics at university must not be seen through so narrow a lens. Its purpose is to produce people with a broad economic enlightenment. That is what the public debate needs. It is what education has to provide...

#noted #2019-12-04

Joseph Stiglitz, Martine Durand, and Jean-Paul Fitoussi: ...

Joseph Stiglitz, Martine Durand, and Jean-Paul Fitoussi: Who Are You Going to Believe, Me or the Evidence of Your Own Eyes?: "We need to develop datasets and tools to examine the factors that determine what matters for people and the places in which they live. Having the right set of indicators, and anchoring them in policy, will help close the gap between experts and ordinary people that are at the root of today���s political crisis.... The Stiglitz-Sen-Fitoussi Commission... final report was published in 2009.... The production of goods and services in the market economy���something which GDP does try to capture���is of course a major influence, but even in the limited domain of the market, GDP doesn���t reflect much that is important.����The most used economic indicators concentrate on averages, and give little or no information on well-being at a more detailed level, for instance how income is distributed.... Economic insecurity today is only one of the risks individuals face.... The Group considered how to better measure the resources needed to ensure economic, environmental and social sustainability...

#noted #2019-12-04

Liz Hipple: Public Policy Implications of the Millennial ...

Liz Hipple: Public Policy Implications of the Millennial Wealth Gap https://equitablegrowth.org/public-policy-implications-of-the-millennial-wealth-gap/: 'Wealth may shape the behavioral choices of the next generation, thereby shaping opportunity by providing some with a soft cushion for a slip down the economic ladder and others with no cushion at all.... The ability to live with one���s parents allows young people to search longer for jobs that have better prospects for future earnings growth, increasing their chances of upward mobility and of successfully beginning to build wealth of their own. Another roadblock to Millennials��� ability to fully deploy their human potential is the structural changes in the labor market over the past 30 years, which have depressed wages and thereby delayed wealth building. For example, young adults who replicate their parents��� educational and occupational backgrounds and end up in the same type of work and in the same relative place in the economic distribution earn less in inflation-adjusted terms than their parents did a generation ago...

#noted #2019-12-04

Worthy Reads from November 29, 2018

Worthy Reads from Equitable Growth:

An excellent paper: On the key role of the minimum-wage extensions of the 1960s in reducing inequality, and doing so along a pronounced racial as well as class dimension, as a result of the racial skew of employment categories. It was not just that African-Americans were in predominately low-wage jobs, but that the categories of jobs they were in had previously been exempt from the minimum-wage. From two of our Equitable Growth grant recipients: Claire Montialoux and Ellora Derenoncourt: Minimum Wages and Racial Inequality: ���The earnings difference between black and white workers fell dramatically in the United States in the late 1960s and early 1970s... the extension of the minimum wage played a critical role...

American do want inheritances to be taxed. They are much more ambivalent about taxing savings���perhaps because savings are seen as uniquely virtuous sources of income. A working paper that Equitable Growth issued last year, but that did not get the attention and resonance that I think it deserves: Raymond Fisma, Keith Gladstone, Ilyana Kuziemko, and Suresh Naidu (2017): Do Americans Want to Tax Capital? Evidence from Online Surveys: "Via a survey on Amazon���s Mechanical Turk... provide subjects with a set of hypothetical individuals��� incomes and wealth and elicit subjects��� preferred (absolute) tax billl... unobtrusively map[ping] both income earned and accumulated wealth into desired tax levels. Our regression results yield roughly linear desired tax rates on income of about 14 percent... positive desired wealth taxation... three percent when the source of wealth is inheritance, far higher than the 0.8 percent rate when wealth is from savings...

Another of our Equitable Growth working papers from last year that, I think, did not get the exposure in notice it deserved. Even though the unemployment rate is gratifyingly low and even the employment the population ratio is not that distressingly port right now, it is still the case that the Great Recession of 2008 2010 cast a huge shadow, reducing the economy ' potential output. We can still see its affects today, and they are powerful. And we cannot confidently look forward to a time when does affect will have dissipated. The failure to make rapid employment recovery job one in 2009-2010 was a catastrophe. Danny Yagan (2017): Employment Hysteresis from The Great Recession: ���This paper uses U.S. local areas as a laboratory to test whether the Great Recession depressed 2015 employment... exposure to a 1-percentage-point-larger 2007-2009 local unemployment shock caused working-age individuals to be 0.4 percentage points less likely to be employed at all in 2015, likely via labor force exit. These shocks also increased 2015 income inequality...

Another piece from the past that, I think, did not get the notice and exposure it deserved. Equitable Growth's Jesse Rothstein with a different interpretation than Chetty et al. of the great American sociological deserts out of which upward mobility is nearly unthinkable. Chetty et al. focus on school���perhaps because pouring at resources into schools is something we can do and would in all likelihood be somewhat effective. But how effective? Our schools the key link, or just one of many factors? Jesse Rothstein believes the second, and I think he is right: Jesse Rothstein (2017): Inequality of Educational Ppportunity? Schools as Mediators of the Intergenerational Transmission of Income: ���I use data from several national surveys to investigate whether children���s educational outcomes (educational attainment, test scores, and non-cognitive skills) mediate the relationship between parental and child income.... There is... little evidence that differences in the quality of K-12 schooling are a key mechanism driving variation in intergenerational mobility...

And another piece from grant recipient Ellora Derenoncourt. This is, I think, the best piece I have read in the past week. It is also the most horrifyingly depressing case I have read in the past week. Derenoncourt'a thesis is that the Great Migration of African-Americans from the south to the urban north set in motion political-economic and sociological changes in local power structures that made those migration destinations poor places, and dangerous places, to raise young black men: Ellora Derenoncourt: Can You Move to Opportunity? Evidence from the Great Migration: ���The northern United States long served as a land of opportunity for black Americans, but today the region���s racial gap in intergenerational mobility rivals that of the South. I show that racial composition changes during the peak of the Great Migration (1940-1970) reduced upward mobility in northern cities in the long run, with the largest effects on black men...

 

Worthy Reads Elsewhere:

I do not understand why there are people claiming US economy is at full employment. Full employment is defined as that level at which nominal and real wage growth visibly accelerates. They have not yet started to do so. Maybe the US economy will be at full employment next year. But the real and nominal wage series would look different if the US economy were at full employment right now: Ernie Tedeschi: Unemployment Looks Like 2000 Again. But Wage Growth Doesn���t: ���Trying to solve an economic mystery: This is, to put it mildly, a mystery. If workers are as scarce as the unemployment rate and many other measures suggest, employers should be raising wages to compete for them...

Like wood fires and nuclear fusion, ideology is a very bad master. But also, like wood fire in nuclear fusion, it is a most excellent servant. Therefore I cannot sign-on for Jerry Taylor���s decision to abandon ���ideology���. The task, I think, is to make ideologies useful by making them self reflective. After all, if a libertarian founder like John Stuart Mill can say that Positive Liberty is essential���that the British working class of his day was "imprisoned" in spite of all their negative liberty by Malthusian poverty, there is ample space for a libertarianism that keeps its good focus on human choice, potential, and opportunity without blinding itselftop a grear deal of reality: Jerry Taylor: The Alternative to Ideology: ���When we launched the Niskanen Center in January 2015, we happily identified ourselves as libertarians... heterodox libertarians... left-libertarianism concerned with social justice (a libertarian perspective that I���ve defended in debates with more orthodox libertarians here and here)...

And another piece from the Niskanen Center. Brink Lindsey on the importance of the vote: Brink Lindsey: "Another election, another round of libertarians' dumping on the right to vote. I used to just find this inane and self-defeating, but now I think it's bad citizenship and affirmatively harmful...

The world is becoming richer, and dire poverty is becoming rarer, but is the world becoming more equal? Smart thoughts from Houston: Dietz Vollrath: New Evidence on Convergence: "Dev Patel, Justin Sandefur, and Arvind Subramanian posted the other day some new evidence on cross-country convergence... poor countries grow faster than rich ones, on average...

America in the 1980s and 1990s suffered from a crime wave, yes, but it was primarily a concentrated urban crime wave. Thus I think that even back then racial fear ought to have been a harder sell to the American electorate than it was: Paul Krugman (November 1, 2018): A Party Defined by Its Lies: "Selling racial fear was easier in the 1980s and early 1990s, when America really was suffering from high levels of inner-city crime. Since then, violent crime has plunged. What���s a fearmonger to do? The answer is: lie. The lies have come nonstop since Trump���s inauguration address, which conveyed a false vision of 'American carnage'...

Is it correct to view the symbolic right-wing success that was the passage of Proposition 187 in 1994 as the key link in the decline of the California Republican Party? Perhaps: Jane Coaston: How California Conservatives Became the Intellectual Engine of Trumpism: "The California GOP got wiped out in the midterms. But the heart of California-style conservatism is stronger than ever.... 'They keep coming': The story of conservative fears over demographic change in California began long before Trump. Take Proposition 187, a ballot initiative passed by voters in November 1994 that would have cut off undocumented Californians from public education and health care services and require teachers and health care providers to turn over the names of undocumented people to authorities (it was known as the ���Save Our State��� initiative), and to efforts to end bilingual education and establish ���three strikes��� laws. (A court ultimately found the initiative un-Constitutional.)...

A piece heading more over into political sociology than I am comfortable assessing, but I trust Sandy Darity as a very thoughtful economist: Sandy Darity (2016): The Latino Flight to Whiteness: "Hispanics collectively are unlikely to share common cause with Black Americans over a common racial identity.... If a coalition ever forms... it will not be on the basis of linked fate or fictive kinship anchored on race..

The argument that things like the Donald Trump administration are freak events rooted in American pecularities runs up against the problem that similar things are happening in Teresa May's administration in Britain: Rafael Behr: The Brexit wreckers Are Slinking Away from the Rancid Mess They���ve Made: "Dominic Raab and Esther McVey have resigned because they know Brexit is intrinsically dysfunctional.... There is now no Brexit true believer prepared to take an author���s credit on the deal that is about to come before parliament.... The whole leave prospectus... was a fantasy.... It is easier to be on the team that accuses the prime minister of failing to deliver majestic herds of unicorns than it is to be stuck with a portfolio that requires expertise in unicorn-breeding...

I would find the wise and public-spirited Ricardo Haussmann more convincing here if he'd had an explanation for why mandated wage compression by John Dunlop in the U.S. during World War II was not a huge success: Ricardo Hausmann: How Not to Fight Income Inequality: "Trying to combat income inequality through mandated wage compression is not just an odd preference. It is a mistake, as Mexico's president-elect, Andr��s Manuel L��pez Obrador, will find out in a few years, after much damage has been done...

I have never understood this argument���that raising and then lowering interest rate does more good to fight recession than does not raising them in the first place. And���to my knowledge���there is no underlying model behind it at all. What is the mechanism by which raising interest rates now so you can lower them later beats keeping interest rates the same now and then lowering them later if both ultimately wind up at the same place?: Martin Feldstein: Raise Rates Today to Fight a Recession Tomorrow: "As I have argued in these pages since 2013, the Fed should have begun raising the fed-funds rate several years earlier. Doing so would have prevented the recent sharp increases in the prices of equities and other assets, which will collapse when long-term interest rates rise...

Why invite people onto the TV just so that they can tell ...

Why invite people onto the TV just so that they can tell lies? I do not understand American journalism today: Zachary Basu: Trump Trade Adviser Peter Navarro: Tariffs Aren't Hurting Anyone in the U.S.: "White House trade adviser Peter Navarro said on CNN's 'State of the Union' Sunday that tariffs on Chinese goods are not hurting consumers in the United States, despite reports to the contrary from researchers at Harvard, the University of Chicago, the International Monetary Fund, the Federal Reserve of Boston and more...

#noted #2019-12-04