J. Bradford DeLong is on sabbatical leave this 2014-2015 academic year, but is eager to talk. He can be reached via email email@example.com, phone 925-708-0467, FaceTime, or Skype
He has taught at MIT, Boston University, and Harvard University as well as Berkeley, and has guest-lectured elsewhere. He is Professor of Economics here at Berkeley, an affiliate of the Institute for New Economic Thinking-funded Berkeley Economic History Laboratory a Research Associate at the National Bureau of Economic Research, a Weblogger at the Washington Center for Equitable Growth, and was Deputy Assistant Secretary of the U.S. Treasury from 1993-1995 and Chair of the Political Economy major here at U.C. Berkeley from 2002-2012.
His home intellectual base is Economic History, with excursions into Macroeconomics, Finance, and both Historical and Contemporary Political Economy.
Alan Moore: Watchmen
Walter Kovacs/Rorschach: I heard joke once:
Man goes to doctor. Says he's depressed, life is harsh and cruel. Says he feels all alone in threatening world.
Doctor says, "Treatment is simple. The great clown Pagliacci is in town. Go see him. That should pick you up."
Man bursts into tears. "But doctor," he says, "I am Pagliacci."
Roll on snare drum.
Rick Perlstein: 40 Years Ago: How Nixon's Resignation Paved The Way For Ronald Reagan: "It seemed that by April 30 Richard Nixon had no choice...
...but to say something about Watergate: six Republican senators said they would not run for reelection unless he did. Young men who last month bestrode Washington like colossi were hiring lawyers under threat of indictment, leaking accusations against colleagues, writing messages on legal pads rather than speaking them aloud—who knew whether their offices, too, were bugged?
(Roughly) the way Cosma Shalizi puts it:
Because "integrating over the posterior distribution is the whole point of Bayesian decision theory", a Bayesian cannot be uncertain about the probability of an observable. Bayesians are uncertain about the values of parameters. Bayesians are uncertain about the truth of hypotheses. But they cannot be uncertain about the probabilities of observables--and thus they cannot be uncertain about whether to take bets or not.
Can a Bayesian come close to being uncertain about the probability of an observable?
NIMBYism taken to extremes with astroturf "neighborhood associations":
April Gilbert: Berkeley restaurant has been approved: Let’s let it open: "I am a homeowner on Russell Street just below College...
and thus an Elmwood resident. A year ago, I heard that the owners of Comal on Shattuck Avenue were proposing a restaurant for the old Wright’s Garage space on Ashby and I was thrilled. It sounded like just the ticket to round out the dining options in our little neighborhood. Finally, we would have an upscale spot with a nice atmosphere and a small bar space--just what I felt had been missing. Then, I heard there was opposition from a group called the “Elmwood Neighborhood Association”(ENA)--strange given that I’d never heard of this organization despite living smack in the middle of Elmwood for eight years.... In all my years in Berkeley, I have never encountered this group. I have not gotten an email, a phone call, or a flyer in my mailbox. ENA is positioning itself as the voice of our neighborhood, which it is not. In contrast, I am quite familiar with CENA, the Claremont-Elmwood Neighborhood Association. CENA has not taken a stand on the proposed new restaurant on Ashby, but when it polled its members, the majority of its Elmwood resident members was enthusiastic about having a good restaurant open and supported the Comal owners’ efforts.
The percentage of uninsured Californians has been cut in half since the federal health law began expanding coverage nine months ago, according to a new national survey. In September of 2013, 22 percent of California adults were uninsured. By last month, that number had fallen to just 11 percent, the biggest drop among the nation’s six largest states. The survey of more than 4,400 people by the Commonwealth Fund, a national healthcare foundation, also found that nationwide, the uninsured rate fell from 20 percent to 15 percent during the same period.... The Commonwealth Fund survey found that 61 percent of those who were newly insured said they felt better off thanks to their new coverage. And nearly four out of five said they were somewhat or very satisfied with their new coverage.
The survey also found that since last year, awareness of the Affordable Care Act has increased significantly, although that awareness still lags among poorer Americans. For example, more than half of the poorest people surveyed still did not know that the federal health law makes subsidies available to help pay for health insurance.
I must say that where the rubber meets the road this thing is doing somewhat better than I expected back at the end of 2009. But the big question will be: what will be the deltas for health and economic security?
Ann Marie Marciarille: Berkeley's Medical Marijuana Dispensaries Required to Engage in Charity Care: "Berkeley California has been agonizing for years...
...about whether to authorize a fourth medical marijuana dispensary within city limits. The City Council's deliberations on this are always interesting, particularly involving the distinction between "coops" and "dispensaries" and the grandfathering in of "certain entities". So, whatever the number and configuration of Berkeley's medical marijuana facilities, more do appear to be in the offing.
Writers with Drinks: An Evening of Oversharing About Money: 7:30 p.m. July 12 :: Make-Out Room :: 3225 22nd St. San Francisco, CA :: Price: $5-$20 http://writerswithdrinks.com: "If time is money, then consider this evening with Charlie Jane Anders, J. Bradford DeLong, Frances Lefkowitz, Farhad Manjoo, and Carol Queen to be a good investment..."
J. Bradford DeLong
A few short years ago we lived, for the school district, in Lafayette. Lafayette is close to here in space and time, but distant in attitude. Lafayette is a place an unkind observer based in and comfortable in San Francisco might describe as an unholy mix of the worst parts of northern and southern California. There we had a neighbor, Bie Bostrom. She had been the oldest Peace Corps volunteer in East Africa. She kept in touch with what had been her town: Ahero, population 10K, in Nyando District, Nyanza Province, Kenya. And there she funds and runs a one-elderly-woman one-town NGO with zero administrative overhead: Grandmothers Raising Grandchildren. That's http://grgahero.org: godzilla-rath of Khan (with an r)-godzilla-alien-hitchhiker-empire strikes back-rath of Khan-omen-dot-omen-rath of Khan-godzilla. No, I'm not going to hit you up--you've been hit up already coming here, at the door.
No sooner do I manage to get my act together to deal with the shortage of high-quality DeLong Smackdowns by starting a close reading of David Graeber's Debt but Cosma Shalizi manages to show up with a high-quality DeLong smackdown. So the reading of the first text page of Graeber's chapter 11--which is, I think, thorough in chapter 11, if not chapter 7--and the first five historical errors he commits must wait until next week.
The eminent Cosma Shalizi writes:
Charlie Jane Anders: Brad DeLong, Carol Queen and Farhad Manjoo at Writers With Drinks!:
We bring you "An Evening of Oversharing About Money"!
When: Saturday, July 12, from 7:30 PM to 9:30 PM, doors open 6:30 PM
Who: J. Bradford DeLong, Carol Queen, Farhad Manjoo, Frances Lefkowitz and Charlie Jane Anders
How much: $5 to $20, all proceeds benefit the Center for Sex and Culture.
Where: The Make Out Room, 3225 22nd. St., San Francisco
Cardiff Garcia: The growth of US student loan debt: causes and consequences: "Both rising tuition and a higher share of students borrowing...
...have contributed just as much as higher student enrollment.... A recent New York Fed report:
Between 2004 and 2012, the number of borrowers increased by 70% from 23 million borrowers to 39 million. In the same period, average debt per borrower also increased by 70%, from about $15,000 to $25,000.
From 2002 to 2012, inflation-adjusted (2012 dollars) college costs—defined as the sum of room, board and “net tuition” (tuition costs after subtracting federal, state, and private [non-loan] aid, as well as any discounts offered by the institution)—rose by 41 percent within public four-year institutions, by 9 percent for private four-year institutions, and actually fell 7 percent for two-year public institutions... average college costs rose by about 16 percent....
Furthermore, there is evidence that many students and households don’t understand what they’re getting themselves into.... That’s the background against which Obama is now proposing a plan to expand the number of borrowers who can cap their loan repayments at 10 per cent of their income, along with endorsing a bill that would allow more students to refinance at lower rates. (The latter is unlikely to get through Congress, as the proposed budgetary offset is the proposed closing of loopholes for the wealthy. Republicans are already pushing back.)
From $350 billion to $1 trillion in student debt in the eight years from 2004-2012 is an extraordinary increase--so large that even though I have checked and re-checked I cannot help but fear that somewhere an apples-and-oranges comparison has crept into the mix.
It also very strongly suggests that the marginal borrowers do not have a handle on what they are doing. If it made no sense for borrowers to take out more than $350 billion in debt in 2004--if the marginal material and psychological benefit of college then was no greater than the marginal burden of debt repayment--then it really makes no sense for borrowers to take out $1 trillion in debt in 2012. Either of them are little borrowers in 2004 we're irrationally scared of taking on student debt loads, or them are total borrowers today are much too blasé about the burdens--and by "marginal", we mean all those holding all the tranches between $350 billion and $1 trillion.
As I have said before, the key questions are: how likely are those taking on the extra debt to actually finish their B.A. degrees in a reasonable amount of time? How quickly can we move from a regime of fixed repayments to one of income-contingent loans (or, as Aaron Edlin points out, a more attractive system of income-contingent grants)? And how then do we manage the borrowing-attending decision when potential students no longer fear landing in permanent debt peonage?
My instinct is that Clark Kerr had it right: that the best compromise is to make education free for those willing to devote the time, but to make students borrow to cover their living expenses. That treats getting educated as having positive externalities broadly understood equal to the cost of education, and my guess is that is the right order of magnitude. But that is only an instinct.
These are not questions that I can answer with clarity and confidence, or even on which I can guess in a relatively informed manner. So: a question for the internet: who should I take as my guides, and whose analyses should I trust on these questions?
Over at Equitable Growth: The extremely wise Robert Skidelsky has an excellent rant against Anglo-Saxon economics departments:
Robert Skidesky: Knocking the scientific halo off mainstream economists' teaching and research: "The growing discontent of economics students...
...with the university curriculum.... Students at the University of Manchester advocated an approach 'that begins with economic phenomena and then gives students a toolkit to evaluate how well different perspectives can explain it'.... Andrew Haldane, Executive Director for Financial Stability at the Bank of England, wrote the introduction.... Students have little awareness of neoclassical theory’s limits, much less alternatives to it.... The deeper message is that mainstream economics is in fact an ideology--the ideology of the free market.... READ MOAR
Ben Handel, Jonathan Kolstad, and Michael Whinston: Compensation or Information?: Understanding the Role of Information Technology in Physician Response to Financial Incentives https://ashecon.confex.com/ashecon/2014/webprogram/Paper1164.html: "Preventive health care services are often under-provided...
...due both to physician incentives and patient behavior regarding such services. We study the impact of physician financial incentives and physician use of information technology on preventive service take up using a unique proprietary data set from a large insurer that covers most of the population for the state of Hawaii. The data contain micro-level information on patient claims, physician financial incentives / payments, and physician logins to an IT platform designed to help them improve their use of preventive services. We leverage these data, together with exogenous variation in the financial incentives and adoption of IT to quantify the impact of these factors on physician preventive care utilization. We study how IT and financial incentives complement each other for this purpose, and use the micro-data to study physician heterogeneity in use of preventive care as a function of these factors. Finally, we study the relationship between patient cost-sharing incentives, physician use of IT, and physician financial incentives.
Final Exam is Tomorrow, Friday at 8 am - 11 am
234 Hearst Gym
Open Book - paper only
Bring: Blue Books, Calculator, writing pen/pencil. If you don't bring a calculator, you'll have to do the calculations without one. There will be a double-sided answer page to hold the "problem" answers, but you must do the work to arrive at the answers in your blue books.
Final Exam is Tomorrow, Friday at 8 am - 11 am
234 Hearst Gym
Open Book--paper only
Bring: Blue Books, Calculator, writing pen/pencil. If you don't bring a calculator, you'll have to do the calculations without one. There will be an "Answer Paper" to fill out your answers at the end of the exam, but you must turn in your Blue Books.
Last minute administrivia:
Please check your bCourse HW set grades to make sure you have the right scores, etc. Everyone should have all grades for all HW sets. We will add your paper grades this weekend. After tomorrow, all grades will stay as they are.
Please pick up your HW sets from both Connie B and M at the end of the exam.
Lastly, it was a pleasure working with all of you. We hope you stay in touch.
We wish you a lot of luck on the exam and hope you have an amazing summer.
Connie B and M
Contact me via: * Skype:braddelong * email:firstname.lastname@example.org
Hearst Mining 390
So I thought when I flew yesterday from Euphoric State University at Avicenna to Tornadoland--excuse me, from Berkeley to Kansas City--that yesterday afternoon I would go hear Stephanie Kelton talk about student debt...
Nope. She was giving the talk in Berkeley at the Haas Institute for a Fair and Inclusive Society.
Back in 2009 University of Chicago Professor and (now) Nobel prize-winner Eugene Fama wrote:
Bailouts and stimulus plans are funded by issuing more government debt.... The added debt absorbs savings that would otherwise go to private investment.... [S]timulus plans do not add to current resources in use. They just move resources from one use to another.... I come back to these fundamental points several times below....
The Sad Logic of a Fiscal Stimulus: In a "fiscal stimulus," the government borrows and spends the money on investment projects or gives it away as transfer payments to people or states. The hope is that government spending will put people to work.... Unfortunately, there is a fly in the ointment.... [G]overnment infrastructure investments must be financed -- more government debt. The new government debt absorbs private and corporate savings, which means private investment goes down by the same amount....
Suppose the stimulus plan takes the form of lower taxes... we can't get something for nothing this way either... lower tax receipts must be financed dollar for dollar by more government borrowing. The government gives with one hand but takes them back with the other, with no net effect on current incomes...
Fama’s argument is that the government cannot increase its total planned expenditure without somebody else decreasing their planned expenditure—that any cash the government spends must be either borrowed from or taxed from private individuals, who then must cut their planned expenditure by as much as the government increases its. This is, it seems to me, the doctrine called “Say’s Law”. Write a 20-minute essay trying to convince Professor Fama he is wrong.
Consider the demand curve:
P = 30 - Q/30000
Suppose that it is December 2018 and you are in charge of forecasting the state of the economy in 2020. You believe that potential output in 2022 will be $20 trillion, with a 2% inflation rate, and your baseline forecast given current policies for output in 2020 is $19.4 trillion. You also believe that the marginal propensity to consume is 2/3, and you are working in the income-expenditure model. Suppose, also, that you believe the aggregate supply curve is strongly kinked with inflation anchored at 2%/year: that whenever potential output is above actual real expenditure the inflation rate is 2%/year, but if expenditure rises above the level consistent with output equal to potential output times the price level at 2% inflation, inflation accelerates and the price level rises to keep actual output from rising above potential.
Suppose that the federal government undertakes an extra $200 billion fiscal stimulus infrastructure construction program for 2020, and the Federal Reserve remains passive. How does this change your forecast of GDP and inflation in 2020?
Suppose that the federal government undertakes an extra $400 billion fiscal stimulus infrastructure construction program for 2020, and the Federal Reserve remains passive. How does this change your forecast of GDP and inflation in 2020?
Suppose that the federal government undertakes an extra $400 billion fiscal stimulus infrastructure construction program for 2020, but the Federal Reserve acts to keep inflation from rising above 2%/year. How does this change your forecast of GDP and inflation in 2020? What components of GDP do you think rise and what components of GDP do you think fall in this scenario?
How would your answer to (1) have been different if potential output were not $20 trillion but $21 trillion?
How would your answer to (2) have been different if potential output were not $20 trillion but $21 trillion?
How would your answer to (3) have been different if potential output were not $20 trillion but $21 trillion?
In the first quarter of 2014 the Commerce Department’s Bureau of Economic Analysis estimated that local, state, and the federal government purchased $716.2 billion worth of goods and services, in a context in which total GDP in that quarter was $3,986.6 billion—government purchases were thus 17.9% of the entire economy. Do you believe that this number is lower than is optimal, about optimal, or too high to be optimal? Why? What things have you learned in this course that have changed or confirmed your view of this question?
This is the first time we have taught Econ 2 since 2007, so we are especially anxious for feedback. Write a four-paragraph essay. Pick one element of the course that you thought worked best, and explain why you thought it worked best. Pick one element of the course that you thought worked badly but needs to be improved, and explain how you think it could be improved. Pick one element of the course that you thought worked badly and should be dropped. and explain why it should be dropped. And pick one topic not covered in the course that you think should be added, and explain why it should be added.
Go back and spend the last twenty minutes of the exam filling in holes in your arguments and answers, and checking your work…
B. Supply and Demand: (20 minutes—if you are not through after 20 minutes, skip to the next question): In the central part of the state of Euphoria there is an enormous suburban sprawl, somewhere in the middle of which is Tall Stick, home of Crony Capitalism University. [Founded by a nineteenth-century Robber Baron who told his British investors that their money was safe in his enterprises because he was not just a financier but also a big wheel in the dominant political party and an ex-governor of the state of Euphoria. Ha, ha! Silly British investors! What they thought would be their profits became instead the core endowment of CCU.] We will look at the daily market for bubble-tea drinks near CCU.
Suppose that the quantity of bubble-tea drinks demanded and the quantity of bubble-tea drinks supplied daily are given by the equations:
where P is the price of a bubble-tea drink in dollars:
C. Natural Monopoly: (20 minutes—if you are not through after 20 minutes, skip to the next question): All of the 10,000 students at Crony Capitalism University are addicted to The Social Network. The Social Network has no costs: the programming has been done, and the maintenance, bandwidth, and cloud-storage costs are negligibly small. The Social Network sells ads at $1/minute per student—thus if every student watches an ad the advertiser pays The Social Network $10,000; if half the students watch an ad the advertiser pays The Social Network $5,000; and if no students watch an ad the advertiser pays The Social Network $0. The students at CCU who do not install ad-blocking software on their browsers see all ads. The students at CCU who do install ad-blocking software on their browsers see no ads. The fraction F of CCU students who install ad-blocking software is given by the following equation:
where Q is the number of minutes of advertisements TSN sells.
A. Identifications (20 minutes—if you are not through after 20 minutes, skip to the next question): Briefly, in one or two sentences, explain the terms set out and how they have been used in the course:
As time passes, I find I want more and more to pretend not to be an illiterate barbarian. I want to be able to say "安史之亂" rather than "that mid-eighth century Civil War that separates Great Tang from Later Tang" and "唐玄宗" and "安祿山" rather than "that silly besotted emperor" and "the rebel Sogdian general".
The problem is that I literally cannot hear the tones and the breathing. So I have no idea how to say "安史之亂", "唐玄宗", or "安祿山" correctly.
Can anything be done?
Briefly, in one or two sentences, explain the terms set out and how they have been used in the course:
In the central part of the state of Euphoria there is a small city, Avicenna, which is the home of Euphoric State University. [“Avicenna” is a corruption of the Arabic Ibn Sina, the byname of the great eleventh-century Iranian Abu Ali al-Husayn ibn Abd Allah ibn Sina: academic administrator, Quran reciter, astronomer, chemist, geologist, psychologist, theologian, mathematician, physicist, physician, poet, and paleontologist.] We will look at the daily market for espresso-based drinks in Avicenna.
Suppose that the quantity of espresso drinks demanded and the quantity of espresso drinks supplied daily are given by the equations:
where P is the price of an espresso-based drink in dollars:
Still in Avicenna—same setup as B—but this time we have different supply and demand curves
Supply: P = 1/54.598 x Q
Externalities can be subtle… Let us move across the bay and 60 miles south from Avicenna to the town of Tall Stick, home of Crony Capitalism University…
The 10,000 students at CCU do two things with their disposable incomes of $5,000/year each:
Utility of each student:
This utility function thus has both envy and spite…
Back in January 2012 Republican presidential candidate Mitt Romney said:
You know, I think it's about envy. I think it's about class warfare. When you have a President encouraging the idea of dividing America based on the 99 per cent versus one percent—and those people who have been most successful will be in the one per cent—you have opened up a whole new wave of approach in this country which is entirely inconsistent with the concept of one nation under God. The American people, I believe in the final analysis, will reject it…
This is an argument that when we do benefit-cost calculations with a utility function like the one in D:
We should count the first two terms and add them up as parts of our social welfare function and throw away the third term.
Write a short essay of three paragraphs: the first paragraph should set out what are, in your estimation, the strongest reasons for rejecting Mitt Romney’s argument; the second paragraph should set out what are, in your estimation, the strongest reasons for Mitt Romney’s argument; and the third paragraph should choose a side and explain why you chose the side you did.