Owen Zidar sends us back to the Wall Street Journal of twenty years ago, reminding us why Berkeley Economics has punched so much above the fundamental weight of the relative resources allowed us by the university over the past generation, and will continue to punch well above its fundamental weight in the future: a ruthless focus on what is important, a profound attention to what works, and an enthusiasm for marking our beliefs to market very rarely found as a guiding ethos in other economics departments:
Owen Zidar: Back to the World: Berkeley’s Economists Attack Policy Issues With Unusual Gusto: "Berkeley is having prospective PhD students visit the economics department today, so I wanted to share an old gem on Berkeley’s “real world economics”
WALL STREET JOURNAL (J) 12/01/95 Copyright (c) 1995 Dow Jones & Company, Inc. By Thomas T. Vogel Jr. Staff Reporter of The Wall Street Journal BERKELEY, Calif.: Activists have taken over at Berkeley, again. The school that was synonymous with 1960s tie-dyed radicalism is once more in the vanguard. This time it’s shaking up the economics profession, and the rebels are on the faculty, the 42 Ph.D.s in the Department of Economics at this University of California campus.
Their battle cry is “real-world economics,” and they talk and write about today’s hot-button issues, such as jobs and wages, immigration policy, the dollar and currency markets, business cycles and technology’s role in economic growth. While intellectually rigorous, many of their pursuits are a sharp departure from the esoteric realms of many academic economists, who churn out papers strewn with Greek- letter formulas understood by few and interesting to even fewer.
[Spoilers]. In Vernor Vinge (1999), A Deepness in the Sky (New York: Tor: 0812536355). On pp. 699-700, a brief paragraph completely reverses your understanding of the progress of the book's main plot:
Sherkaner Underhill didn't seem to notice. He moved his head back and forth under the [game] helmet's light show. 'There has to be reconnect. There has to be.' His hands twitched at the game controls. Seconds passed. 'It's all messed up now,' he sobbed."
When you finish that paragraph, your picture of what is going on in the story is turned upside down.
Dean Baker: Are Investors Less Confused About Real and Nominal Interest Rates Than They Were 40 Years Ago?: "Brad DeLong picks up on Paul Krugman's column...
...and questions whether the top one percent of the income distribution (or top 0.01 percent) really have much to fear from higher inflation. Brad concludes that they don't, but that they think they do. He says:
The top 0.01% were impoverished by the 1970s as a whole. But they have not been enriched by the post 2008 era. What they have gained via a higher capitalization via low safe interest rates has been offset by what they have lost as a result of depressed profits, depressed by a low level of economic activity, a depression which has not been completely offset by downward pressure on wages. The top 0.01% would not be poorer absolutely (although they would be poorer relatively) in a high-pressure higher-inflation economy. But they think they would be…"
I'm not sure about Brad's story here.
Harold Pollack: Reports of ACA demise: greatly exaggerated: "For this edition...
...I Skyped with Dr. Jonathan Gruber, who is the Ford Professor of Economics at the Massachusetts Institute of Technology and director of the health care program at the National Bureau of Economic Research. He is also the most famous health economist in the United States. He has won numerous awards, and written countless papers and academic articles. He has even written a graphic novel about health reform.
Janet Yellen: What the Federal Reserve Is Doing to Promote a Stronger Job Market: "I am here today to talk about what the Federal Reserve is doing to help our nation recover from the financial crisis and the Great Recession,
the effects of which were particularly severe for the people and the communities you serve.
Brad DeLong (2008) This Is Brad DeLong's Grasping Reality...: Do the Cossacks Work for the Czar?: There is an awful lot in this post by Timothy Burke: John Lewis Gaddis, The Cold War: A New History. But let me, for now, focus on one issue and one issue only. Tim writes:
Easily Distracted » Blog Archive » One-A-Day: John Lewis Gaddis, The Cold War: A New History: [I]n Zimbabwe... there is first a disconnect between what imperial leaders did and what actors on the colonial periphery did, and that the actions of the latter sometimes drove the former, and that decisions made at either (or both) levels often were internally contradictory, improvisational as well as pre-determined, based on fragmentary or patchwork kinds of knowledge, and frequently opaque to the actors themselves....
Economics 101 usually paints a highly stylized, unrealistic view of the world in which free markets always produce optimal outcomes.... Most people in the world who have taken any economics have only taken first-year economics, and so they never learned that, from a practical perspective, just about everything in Economics 101 is wrong. (Complete information? Rational actors? Perfectly competitive markets?) This produces a nation of people like Paul Ryan... journalists who repeat what Paul Ryan says, and ordinary people who nod their heads.... The problem is... the way it is taught to first-year students....
Two pieces on Thomas Piketty that I do not like so much.
The first is the almost always reliable and very sharp James K. Galbraith, who--for some reason I don't understand--thinks that Piketty intends his Capital to be a book about production rather than about distribution. And as a result I think his review goes awry: James K. Galbraith
Considerably worse is James Pethokoukis, who seems to have no arguments at all. It appears to be an attempt to shore up his wingnut street-cred by throwing some red meat to the base, and to shore up his pop-culture street-cred via gratuitous Galaxy Quest references. I cannot speak to how well the first works. The second, however, is an absolute flop: he reveals that he does not remember Galaxy Quest very well, and does not talk to any friends he may have who do: James Pethokoukis
The problem with stories like this is that the author reveals himself to be either a clueless dork or an unreliable narrator by virtue of assuming the authorial persona of someone who did not realize what life was really like for typical Americans until he fell out of the bubble and it affected him personally.
But if you can look past that... very good:
Joseph Williams: My Life as a Retail Worker: Nasty, Brutish, and Cheap: "My plunge into poverty happened in an instant. I never saw it coming.
Then again, there was no reason to feel particularly vulnerable. Two years ago, I was a political reporter at Politico, and I spent my days covering the back-and-forth of presidential politics. I had access to the White House because of my reporting beat, and I was a regular commentator on MSNBC. My career had been on an upward trajectory for 30 years, and at age 50 I still anticipated a long career.
You could make some big bucks, play with nice grownups and even stand chance to score with the ladies (as we then called them, if memory serves). I remember one of them being featured in a commercial for Scotch
Calum Marsh: Errol Morris, on Donald Rumsfeld and His New Documentary, The Unknown Known: "About midway through Errol Morris’s new film The Unknown Known...
...his feature-length conversation with former U.S. secretary of defense Donald Rumsfeld, Morris asks Rumsfeld point-blank how 9/11 was allowed to happen. “Isn’t it amazing?” Morris wonders, given the safeguards in place, the countermeasures and intelligence and defense mechanisms designed to protect us. Rumsfeld cracks his trademark smile—more of a smirk, really. You can tell he’s got this one covered. “Everything seems amazing in retrospect,” he says.
James Narron and David Skeie: Crisis Chronicles: The Credit and Commercial Crisis of 1772 - Liberty Street Economics: "During the decade prior to 1772, Britain made the most of an expansion in colonial lands that required significant capital investment across the East and West Indies and North America.
As commodities like tobacco flowed from colonial lands to Britain, merchandise and basic supplies flowed back to the colonies. With capital scarce in the American colonies, colonial planters were eager to borrow cheap capital from British creditors. But because planters often maintained open lines of credit through multiple trade channels, creditors had no way of knowing a particular planter’s indebtedness. So when two banks in London failed, contagion spread and the credit boom suddenly ended. In this edition of Crisis Chronicles, we learn the perils of private indebtedness and offer an inverse comparison of today’s “originate-to-distribute” mortgage market.
Dirk Hanson: Drowning in Light: "William D. Nordhaus calculated that the average citizen of Babylon would have had to work a total of 41 hours to buy enough lamp oil to equal a 75-watt light bulb burning for one hour.
At the time of the American Revolution, a colonial would have been able to purchase the same amount of light, in the form of candles, for about five hour’s worth of work. And by 1992, the average American, using compact fluorescents, could earn the same amount of light in less than one second. That sounds like a great deal.
who for the past few years has been working on a book about the origins of modern Russian corruption, focussing particularly on the links between the ex-KGB, business and organised crime in St Petersburg in the early 1990s. I’ve read the manuscript (provisionally sub-titled: "How, why and when did Putin decide to build a Kleptocratic and Authoritarian Regime in Russia and what is its Future?" Without giving away the specific sizzling scoops it contains, I can say I found it admirable: lucid, incisive and devastating. In the light of the news from Ukraine, and the resulting sanctions recently imposed on some of what America now officially calls Vladimir Putin's "cronies" (details here), it could hardly be more timely and important.
But Mrs Dawisha’s publisher has got cold feet. She has just received this letter (posted in full below) from Cambridge University Press, saying that the legal risk of publishing the book is too great:
Zac Estrada: CBS Says It Made 'Audio Editing Error' With Tesla On 60 Minutes: "Anyone watching 60 Minutes' interview with Elon Musk? They keep dubbing motor noises over driving footage of the Model S....
You know that Tesla Model S on 60 Minutes on Sunday that was unusually vocal? CBS is now admitting there were some noises accompanying footage of that car being driven that should not have been there.... A CBS spokesperson gave a statement to Fox News today about the problem:
Our video editor made an audio editing error in our report about Elon Musk and Tesla last night. We regret the error and it is being corrected online.
Why 60 Minutes thought the electric Model S needed more engine and transmission noises is beyond me...
Someone who sends me ill sends me a piece from John Cochrane for April Fools day. It convinces me that he does not know what a credit crunch is:
[P]eople want to hold more of both money and government debt--and don’t particularly care which. Trying to get it, we are trying to buy less of both consumption and investment goods…. What do to? In this analysis, monetary policy is impotent, but not for the usual reason that interest rates are nearly zero. The Fed can arbitrarily exchange Treasury debt for money, and increase the money supply as much as we like. But nobody cares if it does so, since the “flight to liquidity” is equally towards all forms of Government debt. If we want more fruit and less cheese, putting more apples and less oranges in the fruit basket won’t help.
The first paragraph is remarkable.
The first two sentences of the second paragraph are correct.
But the rest of the second paragraph is wrong.
The conventional explanation of how expansionary monetary policy works is that buying government debt for cash makes money--held for transactions motives--abundant, and so people raise their spending to try to get rid of abundant money. The conventional explanation is that monetary policy is impotent when interest rates are near zero because then people are holding money for both transactions- and savings-vehicle motives. Because buying bonds for cash does not shrink the supply of safe savings vehicles it does not make money abundant--and so people have no reason to raise their spending. To say:
the 'flight to liquidity' is equally towards all forms of Government debt. If we want more fruit and less cheese, putting more apples and less oranges in the fruit basket won’t help...
is not to provide an alternative to but rather to repeat the usual explanation for why conventional monetary police is impotent at the zero nominal lower bound.
Again and again, whenever I read John Cochrane, I find myself forced to choose between two alternatives:
Cochrane simply has not done his homework, and does not understand what he is writing. We have yet another example right here: Cochrane's twin claims that a credit crunch is a supply shock which raises prices, or that he has an alternative to the usual reason for the ineffectiveness of monetary policy at the ZLB.
Conchrane knows damned well that what he calls his "alternative"--that CMP at the ZLB does not affect spending decisions because it involves swapping two assets with an infinite elasticity of substitution--is the same as the "usual reason"--that CMB at the ZLB does not affect spending decisions because it cannot lower interest rates further. But, for political reasons, Cochrane wants to make his readers believe that his adversaries think something different than they do and do not know what they are talking about.
Is there a tertium quid here? If there is, please tell me what it could be...
Please help me out here.
Dean Baker: Krugman and DeLong on Avoiding Secular Stagnation: "Brad DeLong and Paul Krugman are having some back and forth on the problem of secular stagnation and what it would have taken to avoid a prolonged period of high unemployment.
I thought I would weigh in quickly since I have a better track record on this stuff than either of them.
The basic story going into the crash was that we had an economy that was being driven by the housing bubble... residential construction... $8 trillion of bubble generated housing equity.... Consumption also predictably plummeted. This is known as the housing wealth effect.... When the $8 trillion in bubble generated equity disappeared so did the consumption that it was driving. You can't borrow against equity that isn't there. This cost the economy between $400 billion and $600 billion (@ 3-4 percent of GDP) in annual consumption expenditures.... Some of this gap would be filled as excess inventory of housing gradually faded and the vacancy rates came back to more normal levels. We're getting there, but still have some way to go. Some would be filled by a drop in the trade deficit, which now sits at around 3 percent of GDP, compared to a level of almost 6 percent of GDP before the crisis. The government could fill the remaining gap with additional spending, but our cult of low-deficit politicians is insisting that they would rather keep people from getting jobs, so this ain't going to happen....
The other part of the demand story would be to make more progress on the trade deficit....
There are always things that can be done. The key point is to first understand where we are. And the most important take away is that millions are suffering now not because we are too poor, but we are too rich. We don't need all the workers we have. This provides enormous opportunities for making people's lives better, if we just had the political will.
NYU sophomores, the ones with Jansport backpacks in full makeup at 9 a.m., stuttered their orders and shyly complimented me on my nose ring. I semi-patiently listened to innumerable Wikipedia-style monologues about the music I was playing from men in their twenties trying to render their business attire invisible with cultural know-how. I was given zines, mixtape-party fliers, home-recorded chillwave demos.
Eric Laermans: The Launch of fivethirtyeight.com and Climate Change Disaster Weblogging: (Trying to Be) The Honest Broker for the Week of March 29, 2014: "I can't help but wonder why nobody is pointing out...
...that including costs incurred from natural disasters completely unrelated to climate change (e.g. earthquakes or volcano eruptions) also is a deadly sin against correct data-driven analysis. These non-climate-related disasters add a lot of noise to the data and make it needlessly harder to identify the impact of climate change on the global cost due to natural disasters, unless of course it was the author's intent to muddle the analysis.
In fact, when you look at the data Pielke uses to establish his claim that costs of natural disasters are (a) growing over time but (b) not growing faster than one would expect given growing wealth, you wonder why Nate Silver or somebody else didn't bounce the article immediately.
The big enchilada in Pielke's 1990-2013 graph is the 2011 Honshu Earthquake:
Conditional on the Honshu Earthquake happening in his sample, it is just pure chance that the Honshu Earthquake happened at the end rather than at the beginning. And if the Honshu Earthquake had happened in, say, 1991, it would have done more damage: the Japanese economy has not grown materially since 1990, and Japanese earthquake safety standards have materially improved.
When the shape of one's quantitative argument about the costs of global warming hinges on a huge and damaging earthquake occurring at the end rather than near the beginning of one's sample, one can be said to be doing many things--but not data science...
Brad DeLong (January 26, 2008): New York Times Death Spiral Watch: David Leonhardt Needs His Own Weblog: "January 26, 2008
This morning, David Leonhardt gets a story about John McCain on page A1--and buries the lead in paragraph 23:
The real lead in paragraph 23:
McCain’s Fiscal Mantra Becomes Less Is More: On several occasions over the last year, Mr. McCain has said that tax cuts can reduce the deficit by spurring additional activity that, in turn, leads to more taxes being paid. But numerous studies have found that not to be the case.... During his campaign, Mr. McCain has focused much more on spending [cuts] than on taxes. He has called for the end of earmarks.... They are “a very small part of the budget,” he said, “but so symbolic.”... McCain would consider cutting the programs that the White House has identified as ineffective... has not specified which ones it would cut. In addition to Amtrak, the list includes various programs dealing with Defense Department communications, veterans’ disability and low-income heating assistance...
Mallory Ortberg: The Case For Making Columbo America’s Doctor Who: "'I worry. I mean, little things bother me. I’m a worrier. I mean, little insignificant details — I lose my appetite. I can’t eat. My wife, she says to me, “You know, you can really be a pain.”' - Lt. Columbo, Ransom For A Dead Man
“Behold, I am sending you out as sheep among wolves; be therefore as cunning as serpents and as harmless as doves.” - Matthew 10:16
I have a specific axe to grind; I will not attempt to disguise my motives. It is my belief that we live in an era of entirely too many Sherlock Holmes adaptations and not nearly enough Columbo adaptations. Moreover, I believe that this modern proliferation of Sherlocks — the BBC’s Sherlock, of course, but also the recent Robert Downey, Jr. films and Elementary – is the reason we have no Columbo film franchises, no new Columbo TV series, no Columbo-Cons. If you will pardon the colloquialism, it is the Cumberbitches who are holding down the Columbros. I say this as someone who still enjoys a good trip to Baker Street every now and again: we must love Sherlock a little less, that we might love Columbo a little more....
Federation Council members, State Duma deputies, good afternoon. Representatives of the Republic of Crimea and Sevastopol are here among us, citizens of Russia, residents of Crimea and Sevastopol!
Dear friends, we have gathered here today in connection with an issue that is of vital, historic significance to all of us. A referendum was held in Crimea on March 16 in full compliance with democratic procedures and international norms. More than 82 percent of the electorate took part in the vote. Over 96 percent of them spoke out in favour of reuniting with Russia. These numbers speak for themselves.
Ezekiel Emanuel is Vice Provost for Global Initiatives and chair of the Department of Medical Ethics and Health Policy at the University of Pennsylvania. A breast oncologist with a doctorate in political philosophy, he served for many years as chair of the Department of Bioethics at The Clinical Center of the National Institutes of Health. From 2009 to 2011, he helped to craft the Affordable Care Act (ACA) as a special advisor for health policy to the director of the White House Office of Management and Budget. While serving in that role, Emanuel was the target of one of the most unfounded political attacks I have witnessed in health policy.
If you could only read one book about the American health system and ACA’s valuable (albeit imperfect) contribution to improving that system, his new book Reinventing American Health Care: How the Affordable Care Act will Improve our Terribly Complex, Blatantly Unjust, Outrageously Expensive, Grossly Inefficient, Error Prone System might be the best one.
: Letter from Niccolo Machiavelli to Francesco Vettori: "10 December 1513: Magnificent Ambassador: 'Never late were favors divine.'
I say this because I seemed to have lost--no, rather mislaid--your good will; you had not written to me for a long time, and I was wondering what the reason could be. And of all those that came into my mind I took little account, except of one only, when I feared that you had stopped writing because somebody had written to you that I was not a good guardian of your letters, and I knew that, except Filippo and Pagolo, nobody by my doing had seen them. I have found it again through your last letter of the twenty-third of the past month, from which I learn with pleasure how regularly and quietly you carry on this public office, and I encourage you to continue so, because he who gives up his own convenience for the convenience of others, only loses his own and from them gets no gratitude.
May 2003: Tom Friedman explains the Iraq War to us:
Steve M.: No, Leon, Those Issues Aren't too Lofty to Be Reduced to Data: "I was going to ignore Leon Wieseltier's get-off-my-lawn attack on young whippersnapper Nate Silver's preference for data-driven journalism, but this jumped out at me:
Many of the issues that we debate are not issues of fact but issues of value. There is no numerical answer to the question of whether men should be allowed to marry men, and the question of whether the government should help the weak, and the question of whether we should intervene against genocide. And so the intimidation by quantification practiced by Silver and the other data mullahs must be resisted.
But there is very much a "numerical answer to the question of whether men should be allowed to marry men".... Opponents... say that children suffer harm from not having two opposite-sex parents.... We can look at the lives of children raised by gay couples and compare their well-being to that of children raised by married heterosexuals. If gay marriage were harming the children of gay couples, we'd know it, but it isn't. And it's good that we have studies showing a lack of harm, because if we were high-mided and Wieseltierian and chose to remain above the tawdry collection of data on this subject, the anti-gay right would generate all sorts of anti-gay-marriage data and drive the debate with it.... There is also very much a "numerical answer" to "the question of whether the government should help the weak".... We're not discussing this on the basis of morality, as Wieseltier airily suggests; we don't simply assume that government has a responsibility to help the weak because the right incessantly argues that it can demonstrate the failure of any such efforts -- with data.
And as for genocide: Does Wieseltier seriously believe that we regard intervention as an unquestioned duty? If so, how does he explain the fact that we intervene in some genocides and not others? Why does he suppose that is? I'd argue that our leaders consider morality, but also calculate the potential cost in blood and treasure, while pondering poll numbers for or against intervention. I don't what the hell Wieseltier's explanation would be.
And I am really, really sad that I will never understand this. I mean, I have derived the precession of the perihelion of Mercury and calculated the energy states of a particle trapped in a box. But with this stuff I am lost...
San Carroll: Gravitational Waves in the Cosmic Microwave Background: "You’ve heard the rumor:
the BICEP2 experiment has purportedly detected signs of gravitational waves in the polarization of the cosmic microwave background radiation. If it’s true (and the result holds up), it will be an enormously important clue about what happened at the very earliest moments of the Big Bang....
I haven’t read Rachel Maddow’s new book, Drift. That is because, unlike The New Republic's Leon Wieseltier, I am not a book critic. I am a national security professional. This means that – also unlike Wieseltier – I spend my days immersed in the thinking and writing of defense experts and policymakers – in the U.S. government, in the military, in other nations, in the non-governmental sector. Wieseltier has written a review of Drift in which he takes issue with, well, a lot of things – the fact that Maddow has a TV show among them. But his core problem seems to be her suggestion that we might have a societal problem with “the artificial primacy of defense among our national priorities.” He really ought to spend more time with defense intellectuals. Since they tend to be men, many of them with chests of medals, and few of them given to open mockery, he might prefer them to Maddow, whose style he objects to as “perky” and “absurdist.” (Irrelevant question: there is a great literary and indeed political tradition of absurdism – has any of it ever before been described as “perky?”)
It appears that Wieseltier would be rather surprised to hear some of the things these serious folk have to say about the state of our society – and the extent to which we fetishize defense above all else to our peril.
Amina Khan: Gravitational waves from just after Big Bang show how universe grew: "Nearly 14 billion years ago, in a tiny fraction of a second after the Big Bang,
the universe suddenly expanded from smaller than an atom to 100 trillion trillion times its original size, faster than the speed of light. This mysterious period, known as cosmic inflation, had been theorized but never confirmed. But now, scientists using telescopes at the South Pole say they have discovered the first direct evidence for this incredible growth, in the signature of gravitational waves. “It’s amazing,” said experimental cosmologist John Carlstrom of the University of Chicago, who leads the competing South Pole Telescope project. “Everyone in my field, what we’re thinking of doing in the future, we have to all rethink. This is an amazing milestone."...
Mike Konczal: Adolph Reed's Harpers Essay About Obama is Naive: "A Democratic president’s economic agenda is a failure, lost to business class acquiescence, the embrace of austerity, and an overall lack of vision.
This was the conclusion of The New Republic, summarizing Franklin Delano Roosevelt and the New Deal in May 1940.... Though the magazine believed the New Deal did more for the general welfare than any other administration, and even helped shift the ideological space against laissez-faire conservatism, they weren’t sure whether they could say they supported it. “If the New Deal is to deserve our support in the future, it must not rest on what it has already done, great as that is, but tell us how it is going to finish the task.” In other words, being disappointed in Democratic presidents is what opinion editors refer to as “evergreen” content....
Piketty’s Triumph: Three expert takes on Capital in the Twenty-First Century, French economist Thomas Piketty's data-driven magnum opus on inequality....
Jacob S. Hacker and Paul Pierson: "A Tocqueville for Today: "When Alexis de Tocqueville visited America in the early 1830s, the aspect of the new republic that most stimulated him was its remarkable social equality.
“America, then, exhibits in her social state an extraordinary phenomenon,” Tocqueville marveled. “Men are there seen on a greater equality in point of fortune and intellect … than in any other country of the world, or in any age of which history has preserved the remembrance.”
Stats superstar Nate Silver hates the term “data-driven.” He also hates the work of just about every popular columnist at all of the major newspapers, including his former employer, the New York Times. But he loves burritos. On March 17, Silver will deliver his fix — yes, it’s data-driven — for the world of journalism in the form of a new FiveThirtyEight, now owned and operated by ESPN (and its parent company, Disney-ABC). Along with covering his signature topics of sports and politics, Silver’s staff aims to apply an accessible, quantitative approach to economics, science, and the catch-all topic “lifestyle.” Also, Mexican food. Ahead of the launch, he talked to Daily Intelligencer about learning how to be a manager, his problem with “hedgehogs,” and how hard it is to hire women.
Dianne Feinstein: "Over the past week, there have been numerous press articles written about the Intelligence Committee’s oversight review of the Detention and Interrogation Program of the CIA,
specifically press attention has focused on the CIA’s intrusion and search of the Senate Select Committee’s computers as well as the committee’s acquisition of a certain internal CIA document known as the Panetta Review.
I rise today to set the record straight and to provide a full accounting of the facts and history.
Chris Hayes and Ezra Klein watch the toddlers on the bus--the American campaign press corps. The only solution I see is simply to shut them all down: the modern style of campaign coverage started by Teddy White in 1960 with his The Making of the President is pernicious and harmful. Its practitioners should all be sent to do something more useful. Proofreading Google Books comes to mind.
We are facing the most serious combination of macroeconomic and financial stresses that the United States has faced in at least a generation.... I believe the right policy presumption is that the US economy will be judged to currently be in recession.... It is a matter of arithmetic to calculate the number of mortgages that will be on homes with negative equity... over $3 trillion dollars.... Estimates of losses are a little bit like weathermen’s estimates of snowfall as a storm comes. Revisions tend to be highly persistent. And they have been revised upwards many times in the last six months. Current estimates of mortgage losses are $400 billion dollars. And, having reviewed them carefully, I believe there is every reason to believe that those estimates are substantially optimistic....
The essential policy problem is to manage a combination of what some would call positive feedback mechanisms--what others would call vicious cycles--that threaten to magnify instability:
The first is the traditional Keynesian vicious cycle.... A second mechanism is probably more serious in the current instance. It is what I would call the Liquidation vicious cycle.... The third vicious cycle... [is] the Credit Accelerator vicious cycle that comes from the interaction of these two cycles.... All three of these mechanisms are now operating strongly in the US economy....
First, it is a grave mistake to believe in the self-equilibrating properties of the economy or markets in the face of large shocks.... The second lesson of experience is... that... the problem in the United States eighteen months ago was too much greed and too little fear. The problem today is too much fear and too little opportunistic buying.... Third, confidence is essential and confidence depends on a perception of transparency and a perception of credibility. Confidence will not return in any environment where there is an expectation that heavy, but unknown, shoes will drop....
I have talked – and I suspect we will talk later in this conference – of these issues as an abstraction. As a Recession. As a Cyclical Down-Turn. As Declining Asset Values. Make no mistake, there will be millions of people who have never heard of a CDO or a CLO and who think triple A refers to the American Automobile Association, whose lives will be very much affected by the wisdom with which macroeconomic financial policy is made in the weeks and months ahead. The individuals for whom this will be the difference between staying in a home and the humiliation of a Bailiff removing one’s kids from one’s home. The individuals for whom this will be the difference between having a job and not having a job. Between being able to afford to borrow and not being able to afford to borrow. The stakes are not small.
The whole thing below the fold:
So I was going back through my archives for January 2008, looking at what I was thinking about the state of the macroeconomy at the time, and I cannot help but republish this piece on how awful the New York Times's political coverage is--there is a reason that the only thing people paid attention to in 2012 was Nate Silver, there is a reason for the New York Times to immediately and drastically downsize the rest of its national news staff and let David Leonhardt's operation grow, there is a reason why all of you should henceforth only buy products advertised on Vox: Understand the News:
Hoisted from the Archives for January 4, 2008: Why Oh Why Can't We Have a Better Press Corps?: John M. Broder and Adam Nagourney: "Obama and Huckabee Win in Iowa Vote"...
Notice: we are three paragraphs into the story and not a single piece of news except that Obama and Huckabee "won".
I would call this "horse-race journalism," but the first words out of any horse-race journalist's mouth are always something like:
War Admiral by two lengths over Scintillator at five furlongs.
I won't insult horse-race journalists.
From Forbes and MGI Research: The Future of Venture Capital, Tech Valuations and the Fate of Tech Incumbents: Conversation with Bill Janeway:
Igor Stenmark: Let us focus a bit on the venture capital industry. Do you think the venture industry today is innovative enough? What needs to happen so that this industry keeps its momentum and relevance?
Bill Janeway: First of all, the venture capital industry as an industry is contracting. The capital under management by venture capital firms, and the number of venture capital firms, are both declining from the absurd and unsupportable spike of the end of dot.com bubble. Then the amount of money committed to venture capital firms went from order of magnitude of $10 billion in 1995 to a $105 billion in the year 2000 – that’s a $140 billion in today’s terms.
Truly a remarkable crop:
January 2, 2008: Did Bob Reich Assassinate Tony Judt's Cat?: I was surprised to read:
'Supercapitalism': An Exchange: Tony Judt: I am surprised that Robert Reich resents my "use" of his book for the expression of some general thoughts on its topic. Taken for itself, after all, Supercapitalism would have merited at best a short notice. However, Reich's letter is welcome all the same. It helpfully reasserts the book's argument; and by its resort to invective—"jeremiad," "screeds," "emotionally gratifying," "capitalist hobgoblins," etc.—-his letter offers an instructive insight into Reich's own thought processes... his critics (me, on this occasion) are dismissed as "denigrators" of economic growth, enemies of capitalist globalization who pave the way for nativism: in short, prole-worshipping nostalgics.... If the Professor of Public Policy at UC Berkeley really thinks that we can improve upon the "cacophony" that passes for public debate with talk of "citizen values" and "leaders who inspire us" and that anything else is "brainless neo-Ludditism," then he is himself a depressing illustration of the problem he purports to address.
This visual evidence of derangement surprised me, because I remembered Tony Judt's Postwar as being rather good--and his books on the post-WWII French intellectuals, Sartre and his circle, as being excellent. And I, at least, quite liked Supercapitalism. Clearly I am going to have to go back and read Judt's review of Reich...
The New York Times > Washington > Social Security, Growth and Stock Returns: In barnstorming the country over Social Security, administration officials predict that American economic growth will slow to an anemic rate of 1.9 percent as baby boomers reach retirement. Yet as they extol the rewards of letting people invest some of their payroll taxes in personal retirement accounts, President Bush and his allies assume that stock returns will be almost as high as ever, about 6.5 percent a year after inflation.
George Gordon, Lord Byron: Debate on the 1812 Frame Breaking Act: "My Lords...
The subject now submitted to your Lordships, for the first time, though new to the House, is, by no means, new to the country. I believe it had occupied the serious thoughts of all descriptions of persons long before its introduction to the notice of that Legislature whose interference alone could be of real service. As a person in some degree connected with the suffering county, though a stranger, not only to this House in general, but to almost every individual whose attention I presume to solicit, I must claim some portion of your Lordships' indulgence, whilst I offer a few observations on a question in which I confess myself deeply interested.