(1) Thoughts on Case, Shiller, and Thompson: I would argue for use of the time machine to go back to 2000 and add more questions to the past decade's surveys. What we want to see are not the expectations of the average home buyer, but of the marginal buyer and the marginal non-buyer. In interpreting the surveys, I find myself trying to mark down the trimmed-mean of the survey to the expectations of the marginal buyer, and wondering how that markdown changes over time.One thing this paper has made me think is that I should place greater weight on credit standards in understanding the bubble. There will always be people who are overoptimistic.
And even if you are not overoptimistic, radical uncertainty about the long-run has powerful implications for how people should invest in long-duration assets like housing. In a non-recourse state like California, the optimal housing strategy is obvious: (i) build good relationships with your children so that you trust them with your assets, (ii) buy the largest house possible, (iii) mortgage it to the gills, (iv) pass all your assets--including claims to future earning power--down to your children, and (v) sit back and wait, and either be rich or live off your children. (In recourse states things are more complicated.)
This means that credit standards--especially when combined with the fact that the professionals in the housing business are all neither agents of the buyer nor agents of the seller but rather agents of the deal--seem to be even more important than I thought they were before I looked at this paper.
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(2) Thoughts on Meyer and Sullivan: Let me agree with and expand on Marty Feldstein's first point.When Mollie Orshansky started this business, taking the cost of an Ag Department barebones nutrition budget, tripling it, and watching how the number of people with incomes below that threshold changed from one year to the next was a very reasonable thing to do in order to get your hands on changes in what people in the early 1960s regarded as material deprivation--of changes in the number of people who couldn't have nice things.
But as time passes relative prices change, standards change, and the boundaries of the market change. I think, and I find it striking, that within two decades, unless I have just made a bunch of big arithmetic mistakes, food stamps, Social Security, Medicare, and Medicaid--at least in states that take up the ACA Medicaid expansion--will provide every person in America food and pharmaceuticals and doctors' visits whatever reasonable discount you apply for non-fungibility worth more in real terms than the Orshansky measure.
That will, in some sense, be a great victory: we will be able to say that the war on the Orshansky poverty line has been won. In another sense, our successors two decades hence will not be satisfied with any claim that there is no poverty in America.
So I think it is time to call for a rebasing of the question: I want to see a sensible Meyer-Sullivan poverty measure--an absolute poverty measure, there is value in an absolute poverty measure--calibrated to cover 1/5 of the population in 2012, and then track that forwards into the future and as far back as it makes sense to do so...----
(3) Thoughts on Robert Mofitt: First, is it likely that the measured real wage is a sufficient statistic for what people regard as their labor market opportunities? Let me agree with Davis in his strong belief that it is not: the 1999-2007 wage differences do not capture the shift in what people regarded as their labor market opportunities. Yes, I know that this is an unhelpful comment, for it would be ridiculous put the unemployment rate on the right-hand side when employment/population is on the left of the regression.Second, let me agree with and underscore Valerie Ramey's comment that relatives taking care of the over-75 is something we need to start paying much more attention to. Last, it is worth especially underscoring that Moffitt finds no drivers of reduced employment from 1999-2007 that thereafter accelerated, and could possibly account for any material proportion of the reduction in employment from 2007-12.----
(4) When we say "policies to restore growth in Europe" we mean "policies that raise wage and price levels in northern Europe rather than southern Europe by 30% in the next five years". My sense is that no politicians or central bankers understand that that is what "policies to restore growth in Europe" means. Perhaps we need to start being more explicit?----
(5) I think somebody should point out that David Laibson would have nailed his process if only he had estimated an IMA(50).It is, in fact, not as hard to see the long-run mean reversion as David Laibson thinks--not as hard unless you for some a priori reason adopt a low-order ARIMA modeling strategy. It was John Cochrane who taught us 20 years ago that if you want to estimate the long-run persistence of a shock, you regress the long-run change on the shock and then sit down--you don't estimate a low-order ARIMA and then smuggle information from the first few autocorrelations into the long-run properties. This point is largely orthogonal to Case, Shiller, and Thompson's paper, but it is a very true and a very important point.----
(6) Wow! The Fed did it! Open-ended bond purchases. $40 billion a month until the labor market improves.
(7) Comment on Jacob Jensen, Ethan Kaplan, Suresh Naidu, and Laurence Wilse-Samson, "The Dynamics of Political Language":
I think this paper does an excellent job of documenting and helping us understand ideological polarization.
I think this paper does not do a good job of understanding partisan polarization.
Theodore Roosevelt in 1896 was a Republican attack dog, denouncing Democratic Presidential candidate William Jennings Bryan as a mere puppet of the Alien Communist Anarchist John Peter Altgeld. Bryan, Roosevelt said, "would be as clay in the hands of the potter under the astute control of the ambitious and unscrupulous Illinois communist... free coinage of silver... but a step towards the general socialism which is the fundamental doctrine of his political belief... He seeks to overturn the... essential policies which have controlled the government since its foundation..."
Theodore Roosevelt, however, was very happy to make deals with Democrats--to put himself at the head not just of the Republican Party but of the bipartisan Progressive coalition, and try to either yoke them together or tack back and forth to achieve legislative and policy goals.
By contrast, Obama--and Clinton before him--have not been able to get people like Collins, Snowe, Voinovich, McCain to vote for their own campaign finance and climate change policies. He has not been able to get Mitt Romney to endorse his own health care plan, or Paul Ryan to endorse his own IPAB Medicare cost-control proposal. Why not? Because their party leaders have told them not to. That partisan polarization seems to me to be very different from the ideological polarization, which is what we saw in the New Deal 1930s and the Progressive Era 1900s.
