Brad DeLong

“Unknown Unknowns”: High Public Debt Levels and Other Sources of Risk in Today’s Macroeconomic Environment

Robert Skidelsky Certainly Does Not Think There Is Only a Dime's Worth of Difference Between Cameron and Obama

Robert Skidelsky:

Austere Illusions: The doctrine of imposing present pain for future benefit has a long history – stretching all the way back to Adam Smith and his praise of “parsimony.” It is particularly vociferous in “hard times.” In 1930, US President Herbert Hoover was advised by his treasury secretary, Andrew Mellon:

Liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate. It will purge the rottenness out of the system...People will...live a more moral life...and enterprising people will pick up the wrecks from less competent people.

To “liquidationists” of Mellon’s ilk, the pre-2008 economy was full of cancerous growths – in banking, in housing, in equities – which need to be cut out before health can be restored. Their position is clear: the state is a parasite, sucking the lifeblood of free enterprise. Economies gravitate naturally to a full-employment equilibrium, and, after a shock, do so fairly quickly if not impeded by misguided government action. This is why they are fierce opponents of Keynesian interventionism.

U.S. Second-Quarter Growth Now Looks Likely to Be at a Pace That Puts Downward Pressure on the Employment-to-Adult-Population Ratio...

Not too Late for the Social Credit Helicopters!

Duncan Black:

Eschaton: Not Too Late For The Helicopters: A big tragedy of the last few years is the failure to recognize that being in a low inflation world at the zero lower bound was a tremendous opportunity to massively enhance human welfare in this country. Mailing out 10 grand checks to everyone would have been an egalitarian massive boost to the economic well-being of huge numbers of people. Instead, the Fed has goosed asset prices, mostly benefiting the rich. Trickle down through another means, but still trickle down. Better than doing nothing, probably, but there were other ways.

How can you oppose a social-democratic economic policy that had the endorsement of Robert A. Heinlein?

Brad DeLong (Summer 2010): It Is Far too Soon to End Expansion: Wednesday Hoisted from Three Years Ago

Brad DeLong: It is far too soon to end expansion:

It was in 1829 that John Stuart Mill made the key intellectual leap in figuring out how to fight what he called “general gluts”: he saw that what had happened was an enormous excess demand for particular financial assets was driving an enormous excess supply of goods and services – and if you relieved the excess demand in finance you would cure the excess supply of labour. When the government relieves an excess demand for liquid money by printing up cash and swapping it out for government bonds, we call that expansionary monetary policy. When the government relieves an excess demand for bonds by printing up more Treasuries and selling them to finance its own purchases of goods and services, we call that expansionary fiscal policy. And when it prints up cash and bonds and swaps them for risky private financial assets, or when it guarantees private assets and so raises the supply of high-quality and reduces the supply of low-quality bonds, we call that banking policy. 

Exchequer Chancellor Osborne Braced for IMF Verdict

An Article IV consultation for a reserve-currency sovereign that might actually matter:

Rachel Cooper:

Osborne braced for IMF verdict on UK economy: George Osborne is braced for the International Monetary Fund's verdict on Britain's economic prospects amid speculation it will urge him to change course. On Wednesday, the IMF presents its annual healthcheck on the UK and the international body is expected to suggest that deficit reduction should be slowed amid anaemic growth. The “Article IV” report is expected to recommend Mr Osborne change his plans and borrow more to invest in infrastructure or cut taxes. Previously, the IMF was among the strongest backers of the Chancellor's economic strategy, but has gradually changed its tone in response to dwindling growth forecasts.

Department of "Huh?!": Apple Computer Valuation Edition

If I have the right numbers in my head (which I may not), Apple currently makes $40 billion a year in profits, has $150 billion in free cash, and has a market value of $500 billion. That's a (price-cash)/earnings ratio of 7.75.

In what way is that divorced from fundamentals? Sounds like the market thinks that Apple has a very good franchise with a half-life of seven years, which seems about right to me. But if you told me the franchise was twelve years, I would not be surprised. And if you told me Apple was going to pull a Microsoft or a GM and burn all of its cash and its future earnings in a vain attempt to preserve a franchise beyond its natural life, I would not be surprised either. Apple's fundamentals are uncertain, but it does not seem to me that its market price is or was disconnected from them…

Muhammed El-Erian writes:

We should listen to what gold is really telling us: Like Apple, valuation has become divorced from fundamentals….

Martha L. Olney and Aaron Pacitti: More Services Means Longer Recoveries

Martha L. Olney and Aaron Pacitti:

More services means longer recoveries: The four longest recoveries in recent history, as measured by the number of months it took until the economy recovered all of the jobs lost during the recession, also have been the four most recent recoveries—those that followed the recessions of 1981, 1990, 2001, and 2007…. The shift from being a goods-producing, manufacturing-based economy to a service economy… is causing the pace of economic recoveries to slow…. Because services can’t be inventoried nor, for the most part, exported, services are only produced when domestic demand exists.

Goods-producing businesses… can produce in anticipation of increasing demand or in response to increased external demand. Either way, domestic demand need not increase before goods production increases. Service producers are not so lucky. A restaurant won’t produce a meal before you are in the booth. And your dentist can’t produce and inventory a teeth cleaning. You have to be in the dentist’s chair. So service producers must wait…. The greater the share of services in the economy, the greater the share of businesses that must wait for domestic demand to actually pick up…

Ezra Klein: Medicaid in Oregon

Ezra Klein:

Is the future of American health care in Oregon?: Two weeks ago, the group reported… that Medicaid coverage increased the amount of health care people used, offered almost total protection against catastrophic health expenses and reduced depression by 30 percent, but it didn’t show a statistically significant effect on blood pressure, cholesterol or blood sugar…. The sample of sick people was too small to show statistically significant improvements in those measures…. It’s a critique that Katherine Baicker, a Harvard health economist who was one of the principle authors of the study, partially accepts:

Our power to detect changes in health was limited by the relatively small numbers of patients with these conditions. Indeed, the only condition in which we detected improvements was depression, which was by far the most prevalent of the four conditions examined.

She also noted that the diabetes results were consistent with the improvements one would expect from the clinical literature but the number of people with diabetes was too small to establish significance. However, she said the sample size was large enough to rule out large improvements in blood pressure and cholesterol, at least over the first two years.

Jeffrey Frankel: "[It Is] Alberto Alesina [Who] Has Not Been Receiving His 'Fair Share of Abuse'”

Jeff Frankel:

On Whose Research is the Case for Austerity Mistakenly Based?: Several of my colleagues on the Harvard faculty have recently been casualties in the cross-fire between fiscal austerians and stimulators…. Carmen Reinhart and Ken Rogoff… the statistical relationship between debt and growth…. Niall Ferguson… “suggested that Keynes was perhaps indifferent to the long run because he had no children, and that he had no children because he was gay.”

Understanding the Roberts Court's Health-Care Decision: Monday DeLong Smackdown by Jonathan Adler

The extremely smart Jonathan Adler delivers the smackdown:

For some reason I just saw this now. The Eldred point is interesting, but it’s missing important context. Lessig abandoned the Lopez-style argument against the CTEA. A conservative group had filed an amicus brief in the D.C. Circuit making a Lopez-influenced textual argument, Lessig failed to adopt it as an alternative argument, and the D.C. Circuit held that the argument was waived (a point on which the judge for whom I was clerking at the time – David Sentelle – dissented). As a consequence, the textualist argument against Eldred was never really in play in the Supreme Court.

As for your hippie-punching theory, that does more to explain the voting pattern of Justice Kennedy – who joined the majority In Raich, and tends to vote against criminal defendants in close drug cases – than Scalia or Thomas. See, e,g., Kyllo v. U.S.

Ryan Avent: "Mr Cowen's posts, and many other like them by other authors, sometimes look like elaborate efforts to avoid concluding that German inflation-phobia, while totally understandable and rational, looks like a grave moral error in the current econ

Ryan Avent watches Karl Smith remind Tyler Cowen that people respond to market prices, and piles on himself:

The euro crisis: Der Elefant im Raum: TYLER COWEN writes on the euro-zone economy:

Would the new helicopter drop money be kept in periphery banks and lent out to stimulate business investment? Or does the new money flee say Portugal because Portuguese banks are not safe enough, Portuguese loans are not lucrative and safe enough, and Portuguese mattresses are too cumbersome? The former scenario implies that monetary policy should be potent. The latter scenario implies that the helicopter drop will be for naught and the fiscal policy multiplier also will be low, on the upside at the very least (fiscal cuts still might cause a lot of damage on the downside). I call this the liquidity leak, rather than the liquidity trap.

Karl Smith gives the correct response:

What Tyler calls a liquidity leak, I call markets at work. The ECB provides enough stimulus to get all of the Eurozone going but it all leaks to Germany. Fine. The German market heats up. German wages and rents rise. Retired German doctors start considering the virtues of a flat in Lisbon overlooking the harbor. German consultancies hold seminars on “How to make your Mediterranean town competitive in the new German Outsourcing Model.” This is the way things are supposed to work. The idea that a more competitive and efficient Germany should not command higher wages and rents is bizarre; and is only called inflation because the Eurozone, in its heart-of-hearts, doesn’t actually believe its one monetary union where the richer parts are distinguished principally by the fact that they have more money.

Department of "WTF?!?!": Education Gap Weblogging

Why oh why can't we have a better press corps?

For at least half a generation, liberals--at least liberals that I know--have been hammering on the fact that the stepping-away from the commitment to universal free or nearly-free education has been a long-run disaster for America. With Claudia Goldin and Larry Katz's The Race Between Education and Technology serving as its analytical spearhead, the liberals I know spend lots of time talking about how the pace of technological progress requires a more-educated and thus more-skilled workforce, and about how the rise in college costs starting around 1970 stopped the normal American pattern by which each generation gets much more education in its tracks--with rising income inequality between the 80th and the 20th percentile being a big consequences:

Solutions proposed vary from having your college costs be an income-contingent grant recaptured from those who earn much in life by a surcharge on your form 1040 to a mammoth federal commitment to universal access to broadband and to free provision of the highest-quality education online.

Some liberals (e.g., Larry Mishel of EPI) go further, and say that rising 80/20 inequality is the result not just of our losing the race between education and technology but also the collapse of labor unions. The Goldin-Katz alliance (or which I am a part) tends to see the collapse of the union movement as a consequence of the loss of the race.

Now comes Timothy Noah to tell me that none of this focus that I see among the liberals I talk to ever happened:

The 1 Percent Are Only Half the Problem: Most recent discussion about economic inequality in the United States has focused on the top 1 percent… that if we would just put a tight enough choke chain on the 1 percent, then we’d solve the problem of income inequality. But alas, that isn’t true, because it wouldn’t address the other half of the story: the rise of the educated class. Since 1979 the income gap between people with college or graduate degrees and people whose education ended in high school has grown….

Conservatives don’t typically like to talk about income inequality. It stirs up uncomfortable questions about economic fairness….

Liberals resist talking about the skills-based gap because they don’t want to tell the working classes that they’re losing ground because they didn’t study hard enough. Liberals prefer to focus on the 1 percent-based gap. Conceiving of inequality as something caused by the very richest people has obvious political appeal…

And it is at this point that I say: "WTF?!?!"

Now let me say that Timothy Noah is one of the very best of mainstream American journalists--he isn't an opinions-of-shape-of-earth-differ-both-liberals-and-conservatives-have-a-point clown uninterested in policy substance who covers our nation from a celebrity-gossip perspective.

But here we have, I think, another example of the Michael Kinsley-Clive Crook disorder: Noah provides no links to and no quotes from "liberals" who "resist talking about the skills-based gap because they don’t want to tell the working classes that they’re losing ground because they didn’t study hard enough". So he winds up just making stuff up--and the New York Times editorial process is sufficiently jelly-like that nobody asks him "who are you talking about?". This produces bad thought.

Indeed, read further down in the article and you find, near the end, links to Larry Mishel definitely not being resistant to talking about the decline of unions, to Josh Bivens not being resistant to talking about workers' reduced bargaining power and the 80/20 wage gap, Barack Obama and his staff worrying about the rising costs of college--in a story reported by Timothy Noah himself.

Are these people not liberals?

Paul Krugman: One of Michael Kinsley's Problem Is That He Is Not Living in the Real 1970s

Paul Krugman:

The Mythical 70s: It’s actually even worse than Matt [O'Brien] says. For the 1970s such people remember as a cautionary tale bears little resemblance to the 1970s that actually happened. In elite mythology, the origins of the crisis of the 70s, like the supposed origins of our current crisis, lay in excess: too much debt, too much coddling of those slovenly proles via a strong welfare state. The suffering of 1979-82 was necessary payback. None of that is remotely true. There was no deficit problem: government debt was low and stable or falling as a share of GDP during the 70s… a runaway welfare state more broadly just wasn’t an issue — hey, these days right-wingers complaining about a nation of takers tend to use the low-dependency 70s as a baseline.

What we did have was a wage-price spiral… exacerbated by big oil shocks… a case of self-fulfilling expectations, and the problem was to break the cycle.

So why did we need a terrible recession? Not to pay for our past sins, but simply as a way to cool the action…. Was there a better way? Ideally, we should have been able to get all the relevant parties in a room and say, look, this inflation has to stop; you workers, reduce your wage demands, you businesses, cancel your price increases, and for our part, we agree to stop printing money so the whole thing is over. That way, you’d get price stability without the recession. And in some small, cohesive countries that is more or less what happened. (Check out the Israeli stabilization of 1985). But America wasn’t like that, and the decision was made to do it the hard, brutal way. This was not a policy triumph! It was, in a way, a confession of despair….

No, America didn’t return to vigorous productivity growth — that didn’t happen until the mid-1990s. 60-year-old men should remember that a decade after the Volcker disinflation we were still very much in a national funk; remember the old joke that the Cold War was over, and Japan won? So it would be bad enough if we were basing policy today on lessons from the 70s. It’s even worse that we’re basing policy today on a mythical 70s that never was.

One thing going on is that the 1980s did see (a) a reduction in the progressively of taxation and (b) the start of the huge surge in overclass income. For overclass people--or people who are now part of the overclass and who then identified with the overclass like Michael Kinsley--the 1980s were pretty good (as, by the way, were the 2000s up until 2007).

Thursday Underrated Economists Weblogging

The Ten Top Economic Weblogs, According to Technorati:

• Paul Krugman
• Economix
• Felix Salmon
• Wonkblog
• Grasping Reality
• Marginal Revolution
• Economist's View
• Calculated Risk
• EconLog
• Project Syndicate

Now who else do people think would, in a just world, be on this list?

Economic Possibilities for Our Grandchildren

'"Well, is it art?" "I do not know," said Mordel. "It may be. Perhaps randomicity is the principle behind artistic technique. I cannot judge this work because I do not understand it. I must therefore go deeper, and inquire into what lies behind it, rather than merely considering the technique whereby it was produced. I know that human artists never set out to create art, as such," he said, "but rather to portray with their techniquest some features of objects and their functions which they deemed significant." "'Significant'? In what sense of the word?" "In the only sense of the word possible under the circumstances: significant in relation to the human condition, and worth of accentuation because of the manner in which they touched upon it." "In what manner?" "Obviously, it must be in a manner knowable only to one who has experience of the human condition." "There is a flaw somewhere in your logic, Mordel, and I shall find it." "I will wait." "If your major premise is correct," said Frost after awhile, "then I do not comprehend art."' -- Roger Zelazny, "For a Breath I Tarry"

Kevin Drum:

Why the Digital Revolution Won't be a Rerun of the Industrial Revolution: Whenever you talk about smart machines taking all our jobs, the usual pushback is that you're being a Luddite—an argument that's especially appropriate this year since it's the 200th anniversary of the end of the Luddite movement… all those skilled weavers in 1813 thought that power looms would put them out of jobs, but they were right only in the most limited way…. But the Digital Revolution won't be a rerun of the Industrial Revolution…. Karl Smith… [has a] take:

Creating things is a matter of rearranging atoms. Broadly speaking, you need two things to do this — a power system to overcome the gravitational and electromagnetic forces that tend to hold atoms in their relative positions and a control system to guarantee that atoms wind up in the right place. The industrial revolution was about one thing — more power! But, more power means the need for more control. Hence, the Industrial Revolution meant a rapid increase in the demand for human brains, not decrease. Smart machines provide both the power system and the control system in one convenient package. You can still argue that displaced humans will end up doing something else—we just don't know what yet—but it's a tough argument to win. If you agree that artificial intelligence will be real someday soon, then by definition smart machines will be able to do just about anything that humans can do. The answer to "Humans will do X," for any value of X, is "But robots can do that too." That wasn't true of the Industrial Revolution.

If you don't believe that AI is around the corner, then there's no argument to have here (aside from why you think AI is so far off). But if you do, then we have some serious questions to ponder about the future of work, the future of money, and the future of democracy. That's what my piece is mainly about.

More Economic Possibilities for Our Grandchildren…

Ashok Rao:

The Future and its Critics: This post is dedicated to the brilliant John Stuart Mill…. Every now and then, it seems, the blogosphere plunges into deep introspection of all that we think to be holy: technology, growth, and even utopian prosperity. Kevin Drum at Mother Jones has a piece about “Robot Overlords” and the more-optimistic Matt Yglesias can’t help but go long on beachfront property. A while back, I wrote about technology at the end of history, and I think I got one thing absolutely right:

Yet, when reading Fukuyama’s gripping essay years ago, I had one big qualification, a fleeting hope for the end of history. Ideological struggle is romantic for those of us who sit in comfort and liberty. For the scholars who write in the dimmed halls of Harvard. For the man of letters in Lamont Library; or better the Bodleian. For the precocious high schoolers who fawn on every dripping word from their history teacher. But for the many who are in the throes of historical struggle, there is nothing poetic. For the Russians who were slave to the Gulag, the romanticism of Wilson’s To the Finland Station, is but a Western concoction of reality, beautifully written for the scholar…. For the small actors in history, the girls murdered by Taliban and the dissidents silenced by Communists, the real victory would be a textbook of history blank after today….

Ken Rogoff (1998) on Optimal Policy in a Liquidity Trap

Ken Rogoff: Comment on Paul Krugman: "It's Baaack: Japan's Slump and the Returnof the LiquidityTrap":

Kenneth Rogoff: This is a truly inspired paper on Japan's ongoing "Great Recession," although I have to keep pinching myself to ask if its main thesis can really be true. Is the equilibrium (full-employment) medium-term real interest rate for Japan actually negative, so that un- less the Bank of Japan (BOJ) resigns itself to sustained inflation, the zero bound on nominal interest rates will present serious problems? Has the BOJ so thoroughly convinced the public of its anti-inflation credibility that it has lost the power to rekindle inflation now that Japan needs it?

The Oregon Medicaid Lottery New England Journal of Medicine Baicker et. al Study Power Calculations

Austin Frakt has done the heavy lifting, and presents the power calculations that, in an ideal world, should have been done and archived ex ante as part of the experimental design of Baicker et al.: The Oregon Experiment — Effects of Medicaid on Clinical Outcomes. Needless to say, he may have made an error: this is the moral equivalent of rocket science. But with enough eyes all bugs are shallow, hopefully…

Until somebody improve and refines his calculations, I believe that the right bottom line is his:

Updated power calculation: Thestudy was underpowered for the change in proportion with elevated glycated hemoglobin (GH) by a factor of 23. Yes, twenty-three…. Let me now state where we are. With respect to the statistically insignificant physical health measures in the study… the sample was too small even for much larger effects. This renders them… uninformative about whether or how much Medicaid improves physical health. Uninformative means just that. No new information. No resetting of priors is justified… We also know, from the authors’ discussion and from Aaron’s posts, that the results include [point estimate] changes in blood sugar and blood pressure that are not unreasonable to have expected clinically [if Medicaid were effective]…. Again, no resetting of priors is warranted.

Given this, for the physical health measures only, I don’t understand the rush I’ve noticed in people updating what they expected Medicaid could do…. I think it is time for people to take another look at what this study is saying…. What I think we’re seeing is a re-expression of everyone’s priors. This study is an opportunity to do that, but it doesn’t and shouldn’t change what [priors] are. The claims that people should be changing sides from pro- to/from anti-Medicaid expansion just make no sense based on the physical health measures in this study.

On the other hand, it is perfectly acceptable--in fact, I think it is morally and scientifically required--to update your priors and shift them in a pro-Medicaid direction from the findings on emotional health and financial stress.

Nick Clegg Is a Wizard! He Makes Economic Recovery Disappear!

Jeff Weintraub:

Nick Cohen (and Andrew Adonis) explains how Britain's Liberal Democrats sold their birthright and didn't even get a mess of pottage for it:

Martin Wolf vs. Roger Altman: No, the Bond Vigilantes Are Not Here

Martin Wolf:

A response to Roger Altman: Roger Altman of Evercore partners is a friend of mine, a distinguished public servant and a respected financial expert. But his column “Blame bond markets, not politicians, for austerity” is, in my view, gravely mistaken. Let me quote the first two paragraphs, since they go to the heart of the matter:

Criticism of austerity has reached ferocious levels in Europe. Increasingly, it carries a moral tone, portraying the stronger north, especially Germany, as forcing harsh policies on to weaker nations. Opponents of austerity argue that the north is demanding fiscal tightening and labour market reforms from these stricken states in exchange for vital lending from entities such as the European Central Bank. They see it as kicking economies when they’re down.

This is an important debate, but critics are forgetting a key point. It was not Angela Merkel, chancellor of Germany, or other political leaders who pushed austerity onto Italy, Spain, Greece and the others. It was private lenders, beginning in the autumn of 2011, who declined to finance further borrowing by those countries. Then they stopped financing portions of their banking systems. In other words, markets triggered the Eurozone crisis, not politicians. The fiscal and banking restructuring that followed was the price of rebuilding market confidence.

Brad DeLong Commenting on Myself: Price of Haut Brion Monday Hoisted from Comments Weblogging

Brad DeLong : Selections from Samuel Pepys Diary for April 1663: Thursday History Weblogging: John Locke reports that he could get Haut Brion at the vineyard gate in barrels for about 2 shillings a bottle. 2 shillings would get you an unfurnished room in central London for 2 weeks (with fireplace), or about 10 one-pound loaves of bread…

---

A day's unskilled work would buy perhaps 5 one-pound loaves of bread...

Today you can get a loaf of bread for, say, $1. And a day's unskilled work will buy you 80 of them. And a bottle of Haut Brion will run you $1000 for a good year (admittedly, not at vineyard gate).

So back then you could get a bottle of Haut Brion with one day's unskilled work. Today it would take 12.5 days…

Nick Crafts: George Osborne Badly Needs to Study the Macroeconomic Leadership Secrets of Neville Chamberlain…

Nick Crafts:

Escaping liquidity traps: Lessons from the UK’s 1930s escape: The UK escaped a liquidity trap in the 1930s and enjoyed a strong economic recovery. This column argues that what drove this recovery was ‘unconventional’ monetary policy implemented not by the Bank of England but by the Treasury. Thus, Neville Chamberlain was an early proponent of ‘Abenomics’. This raises the question: is inflation targeting by an independent central bank appropriate at a time of very low nominal-interest rates?

Bernanke-Haters at the Sohn Conference

Stanley Druckenmiller:

Druckenmiller noted everyone is saying, "love the market long term, looking for a correction." He believes the opposite, loves market short-term, but hates it long term. Strongly disagrees with quantitative easing by Bernanke now. Only agreed with the first QE. "His bond buying is controlling the most important price in the US economy." Says it will end badly, despite money-printing being beneficial to financial assets currently. When Fed slightly tightens, that will hurt things he says. Bernanke completely ignored strong economic data in January and February, but with slightly soft data later, he printed even more money. Expects a "melt-up" in the short-term, due to Fed's current policy…. Bernanke is “running the most inappropriate monetary policy in history.”

Moby Ben, or, The Washington Super-Whale: Hedge Fundies, the Federal Reserve, and Bernanke-Hatred

In February 2012, a number of hedge fund traders noted one particular index--CDX IG 9--that seemed to be underpriced. It seemed to be cheaper to buy credit default protection on the 125 companies that made the index by buying the index than by buying protection on the 125 companies one by one. This was an obvious short-term moneymaking opportunity: Buy the index, sell its component short, in short order either the index will rise or the components will fall in value, and then you will be able to quickly close out your position with a large profit.

Mary Carson and Jordan Rau: A Patient’s View on the Oregon Medicaid Experiment

A patient’s view on the Oregon Medicaid experiment:

Jordan Rau, KHN:

A study of Oregonians who won Medicaid benefits in a 2008 state lottery has sparked an intense debate about the value of expanding health care to the poor — and the value of health benefits in general. Mary Carson is, in a way, at the center of that debate. The 55-year-old Oregon woman was accepted into the Oregon Health Plan, the state Medicaid program, in 2011. She and her partner live with her three children. They earn about $1,000 a month by making and selling replicas of historic battle knives used in the Civil War and the two World Wars, doing odd jobs and providing respite care for people with cancer.

Does Anybody Understand Why Clive Crook Thinks Krugman Believes in MMT and Is Lying When He Says He Worries About the Long-Run Deficit?

Clive Crook:

Krugman, DeLong and Radical Centrism - Bloomberg: Krugman proposed raising taxes on all Americans while the recovery was still very weak. He recognized this as a fiscal tightening that would put people out of work. He advocated it because the alternative of retaining the Bush tax cuts would have handed the Republicans a victory, and because -- get this -- he was worried about the long-term deficit implications. There you have it: Krugman the apolitical Keynesian.

I mean, this is damned weird.

Ryan Cooper Tries to Guide Clive Crook Back to Reality

Why oh why can't we have a better press corps?

Ryan Cooper:

Clive Crook Doesn’t Understand Paul Krugman or Liberals Generally: Crook… made the quite specific claim that Krugman was using the 2009 stimulus for partisan ends….

Krugman and his admirers were at the forefront in casting discussion of the stimulus in left vs. right terms. For many Democrats, the top priority in the fiscal-policy discussion was not, in fact, to make the stimulus bigger but to reverse the Bush high-income tax cuts and to make sure that the composition of the stimulus, whatever its size, as far as possible favored higher spending over lower taxes.

Today, Crook is back… moving the goalposts. He conveniently forgets the stimulus debate, around which all his previous claims were centered, and digs up a Krugman column from December 2010, almost two years later…. What is unquestionably clear is that Crook’s earlier claim that “Krugman and his admirers were at the forefront in casting discussion of the stimulus in left vs. right terms” is completely bogus, and he clearly knows it….

David Glasner vs. Martin Feldstein on Appropriate Federal Reserve Policy

David Glasner:

Martin Feldstein writes:

Quantitative easing… is supposed to stimulate the economy by increasing share prices, leading to higher household wealth and therefore to increased consumer spending. Fed Chairman Ben Bernanke has described this as the “portfolio-balance” effect of the Fed’s purchase of long-term government securities instead of the traditional open-market operations that were restricted to buying and selling short-term government obligations. Here’s how it is supposed to work. When the Fed buys long-term government bonds and mortgage-backed securities, private investors are no longer able to buy those long-term assets. Investors who want long-term securities therefore have to buy equities. That drives up the price of equities, leading to more consumer spending….

Fed’s Evans: Low Inflation to Persist for Years

Fed’s Evans: Low Inflation to Persist for Years - Real Time Economics

Josh Barro: Boehner Accidentally Explains Why His Deficit Position Is Phony

Josh Barro:

Boehner Accidentally Explains Why His Deficit Position Is Phony: Yesterday, in an interview with Bloomberg Television, House Speaker John Boehner warned that the U.S. government must balance its budget. After all, he said:

We have spent more than what we have brought into this government for 55 of the last 60 years. There’s no business in America that could survive like this. No household in America that could do this. And this government can’t do this.

Department of "Huh!?": George Borjas Says Richard Zeckhauser Chaired Jason Richwine's Thesis Committee?

Jennifer Rubin:

What the anti-immigrant movement really believes: I received the following e-mail attack from Borjas, who, keep in mind, is a Harvard professor:

Someone copied me on an email that contained your column trashing Jason Richwine’s dissertation work, and along the way you decided to trash me as well. Just for your info, the dissertation committee was formed of Richard Zeckhauser (who, by the way, was the chair of the committee), Christopher (Sandy) Jencks, a very influential sociologist whose lifetime work on inequality you may perhaps be familiar with, and myself. Perhaps next time around before you decide to trash anyone who disagrees with your ideological musings you may want to do some background reporting. I know that this request will fall on deaf ears, since it is not part of the modus operandi of people like yourself, but I would hope you correct the record in print. (I actually know you won’t since once the membership of the committee of faculty who advised Jason on his dissertation is well known you can no longer employ the by-association method of character assassination).

LOLCat Sez: When Ur Inflation Below and Ur Unemployment Consistently Above Target, Ur Doin It Wrong

In this case, "you" is the Federal Reserve, and "it" is monetary policy.

Has Clive Crook Recovered His Orientation? Perhaps...

My comment on: http://www.bloomberg.com/news/2013-05-09/krugman-delong-and-radical-centrism.html

Now that is infinitely better!

But do note you are no longer claiming that Paul Krugman trying to radicalize the Obama administration's position on "the stimulus" in the winter of 2008-2009. You are, instead, making a different argument: an argument that Krugman's position at the end of 2010, after the largely-Republican politicization of everything, was not centrist enough.

And do note that the rest of Krugman's column--the part you do not quote--undermines your new argument pretty completely.

Robert Skidelsky vs. Niall Ferguson: John Maynard Keynes Is Not Ke$ha (Also, the U.S. Is Not Greece, and 2013 Is Not 1923)

Ke$ha:

And Robert Skidelsky explains what John Maynard "We'll Keep Dancing 'Till We Die" Keynes really meant by "In the long run we are all dead":

I Say We Start a Kickstarter to "Persuade" David Glasner to Write 38 Posts--One for Each Chapter--on Keynes's "Treatise on Money"

Niall Ferguson Is Wrong to Say That He Is Doubly Stupid: Why Did Keynes Write "In the Long Run We Are All Dead"? Weblogging

Niall Ferguson:

An Open Letter to the Harvard Community: Last week I said something stupid about John Maynard Keynes.  Asked to comment on Keynes’ famous observation “In the long run we are all dead,” I suggested that Keynes was perhaps indifferent to the long run because he had no children, and that he had no children because he was gay. This was doubly stupid. First, it is obvious that people who do not have children also care about future generations. Second, I had forgotten that Keynes’ wife Lydia miscarried.

Niall is wrong. His suggestion was not doubly stupid. There is more.

Niall speaks of Keynes's "In the long run we are all dead" as if it is a carpe diem argument--a "seize the day" argument, analogous to Marvell's "To His Coy Mistress" or Herrick's "To the Virgins"--and Ferguson sees his task as that of explaining why Keynes adopted this be-a-grasshopper-not-an-ant "party like we're gonna die young!" form of economics, or perhaps form of morality.

But that is not it at all.

Eric Rauchway: Adam Smithian "Sympathy" and the Sources of Keynes’s Critique of the 1919 Treaty of Versailles: Niall Ferguson Carl-Melchior-Was-Really-Hot Smackdown Watch

Eric Rauchway:

Apropos nothing at all I thought I might address the suggestion, sometimes raised, that John Maynard Keynes’s “love” for Carl Melchior, German representative at Versailles, might substantively have influenced Keynes’s position on what reparations the Germans ought to pay. Keynes made early calculations for what Germany should pay in reparations in October, 1918. In “Notes on an Indemnity,” he presented two sets of figures – one “without crushing Germany” and one “with crushing Germany”.

My John Maynard Keynes Lecture

Little more than quotes from Skidelsky's three-volume Keynes biography strung together, with a little commentary and occasional quibbling…

---

John Maynard Keynes

J. Bradford DeLong Professor of Economics, U.C. Berkeley

Econ 115 Lecture

September 29, 2009

http://delong.typepad.com/files/20090929-115-lecture-9.pdf

5,562 words: September 29, 2009

Who Are the Right-Wing Republicans Whom Clive Crook Thinks Are "Thoughtful [and] Public-Spirited… [with] Vews… Worthy of Respect"?: Tuesday Crickets Weblogging

Paul Krugman observes:

Not Everything Is Political: Clive Crook demands that I engage respectfully with reasonable people on the other side, but somehow fails to offer even one example of such a person. Not long ago Crook was offering Paul Ryan as an exemplar of serious, honest conservatism, while I was shrilly declaring Ryan a con man. But I suspect that even Crook now admits, at least to himself, that Ryan is indeed a con man…

Brad DeLong (1997): The Corporation as a Command Economy: Wednesday Hoisted from The Archives from 17 Years Ago Weblogging

Introduction:

Most of us spend more than one-third of our waking lives working for large, modern corporations: organizations where we do not know personally either those at the top or the bulk of those at the bottom of the organization's administrative hierarchy. This is a striking change from two centuries ago, when a productive organization of more than thirty was unusual, and one of more than three hundred an extreme oddity.

Why do so many of us work for large modern corporations? And what impact does working for large modern corporations have on our lives? The second is much too broad a question, and is moreover a question that I--a narrow-minded professional economist--feel unqualified to address. So I am going to focus on the economic side of the modern corporation. I am not going discuss the political or sociological or ethical implications of large modern corporations. I am not going to discuss their historical development, or the contrasts between different countries' styles of corporate life.

"This Is a Nightmare"

John Maynard Keynes:

The Great Slump of 1930: This is a nightmare, which will pass away with the morning. For the resources of nature and men's devices are just as fertile and productive as they were. The rate of our progress towards solving the material problems of life is not less rapid. We are as capable as before of affording for everyone a high standard of life… and will soon learn to afford a standard higher still. We were not previously deceived.

But to-day we have involved ourselves in a colossal muddle, having blundered in the control of a delicate machine, the working of which we do not understand. The result is that our possibilities of wealth may run to waste for a time — perhaps for a long time…

John Maynard Keynes (1923), "A Tract on Monetary Reform", pp. 80-82

Keynes (1923):

[T]he [Quantity] Theory [of Money] has often been expounded on the further assumption that a mere change in the quantity of the currency cannot affect k, r, and k',--that is to say, in mathematical parlance, that n is an independent variable in relation to these quantities. It would follow from this that an arbitrary doubling of n, since this in itself is assumed not to affect k, r, and k', must have the effect of raising p to double what it would have been otherwise. The Quantity Theory is often stated in this, or a similar, form.

Now "in the long run" this is probably true. If, after the American Civil War, that American dollar had been stabilized and defined by law at 10 per cent below its present value, it would be safe to assume that n and p would now be just 10 per cent greater than they actually are and that the present values of k, r, and k' would be entirely unaffected. But this long run is a misleading guide to current affairs. In the long run we are all dead. Economists set themselves too easy, too useless a task if in tempestuous seasons they can only tell us that when the storm is long past the ocean will be flat again.

Austin Frakt: Power Calculations for Diabetes in the NEJM Oregon Medicaid Study

Austin Frakt:

Power calculations for the Oregon Medicaid study: Kevin Drum:

Let’s do the math. In the Oregon study, 5.1 percent of the people in the control group had elevated GH [glycated hemoglobin, aka A1C, or colloquially, blood sugar] levels. Now let’s take a look at the treatment group. It started out with about 6,000 people who were offered Medicaid. Of that, 1,500 actually signed up. If you figure that 5.1 percent of them started out with elevated GH levels, that’s about 80 people. A 20 percent reduction would be 16 people.

Somebody Has to Be the Pontifex Who Decides What "Keynesian Economics" Is: And I Elect Mark Thoma to Be That Bridge-Builder

Mark Thoma:

Seven Myths about Keynesian Economics: The claim that Keynesians are indifferent to the long-run is one of many myths about Keynesian economics…. This has it backwards. Conservatives who oppose Keynesian economics are not concerned enough about short-run economic problems, particularly unemployment, and failing to address our short-run problems can bring long-run harm…. Keynesians care very much about the long run, but they do not go along with the idea that neglecting short-run issues is the best way to solve our long-run problems.

Tim Duy on Abenomics

Mark Thoma sends us to Tim Duy:

14,000 - Tim Duy's Fed Watch: Seems like just yesterday Japanese policymakers were looking to push the Nikkie to 13,000.  It even seemed like a overreaching at the time…. Today the Nikkei pushed past 14,000. Note too that the 10-year Japanese government bond holds well below 1 percent - fears that aggressive policy would cause rates to skyrocket are once again proved unfounded.

So far, so good for Abenomics.  Now the question is will policymakers back off soon after seeing such positive results?  We have seen such stop-go policy in Japan in the past when attention turns back toward the size of the deficit.  Are Japanese policymakers in it for the long-haul?  

Keynesian Economics: The Gay Science?

Niall Ferguson certainly thought so in 1995. Donald Markwell, author of Donald Markwell (2006), "John Maynard Keynes and International Relations: Economic Paths to War and Peace", emails me a copy of Niall Ferguson's 1995 Spectator article, with its claim that Keynes's belief in "the ideas contained in The Economic Consequences of the Peace" "owed as much to his homosexuality as to his Germanophilia…" for "there is no question that the attraction Keynes felt for [Carl Melchior] strongly influenced his judgment…"

But that is not what he says today:

My disagreements with Keynes’s economic philosophy have never had anything to do with his sexual orientation. It is simply false to suggest, as I did, that his approach to economic policy was inspired by any aspect of his personal life.

I Confess Clive Crook Is Getting to Me: Bloomberg Has Some House-Cleaning to Do Weblogging

Why oh why can't we have a better press corps?

Clive Crook is back again, writing:

Krugman… concede[s] (somewhat to my surprise)… stunningly disingenuous of Krugman…. Krugman… at the forefront in casting discussion of the stimulus in left vs. right terms… not to make the stimulus bigger but to reverse the Bush high-income tax cuts… higher spending over lower taxes… [placed] divisive value judgements about the size and scope of government at the center… the stimulus debate was as political as it gets… thanks to Krugman.

It's the absence of quotation marks in his columns that is doing it to me.

There are, I am starting to think, three kinds of columnists: those who quote people in order to show that they have properly construed the arguments they are praising or criticizing, those who quote people out of context in order to misconstrue their arguments, and those who don't quote anybody at all.

So here's the comment I left on Crook's column:

Did John Roberts and Nino Scalia Kill the Republican Party with Citizens United?

My view is: perhaps they did. The argument is that the Koch Brothers and others of their ilk now think that they bought and paid for the Republican Party--and in the primaries they are largely right. But money is much less influential in presidential elections, and so the minus effect on candidate quality in the primaries outweighs the positive effects of more money in the general election.

Ezra Klein:

We got way too excited over money in the 2012 elections: This time last year, I was working with three political scientists — John Sides, Lynn Vavreck, and Seth Hill — to build a really, really simple model for predicting the election…. The model kept telling us that President Obama was likely to win… under circumstances where I didn’t think he was likely to win. That model offended my gut. And so I spent a lot of time coming up with things the model might be missing.

Laura D'Andrea Tyson: Lessons on Fiscal Policy Since the Recession

Laura D'Andrea Tyson:

Lessons on Fiscal Policy Since the Recession: In late 2008, the United States economy was caught in the midst of what proved to be its longest and deepest recession since the end of World War II. Frightened by steep and self-reinforcing declines in output and employment, both the Federal Reserve and the federal government responded quickly and boldly. The Federal Reserve dropped the federal funds rate to near zero, where it remains today, and began its controversial “quantitative easing” purchases of long-term government securities to contain long-term interest rates. Fueled by the 2009 federal stimulus package, discretionary fiscal policy was also expansionary in 2009-10, adding to growth during the first year of the recovery at roughly the same pace that fiscal policy had achieved during previous recoveries. Then, in a sharp break with history, fiscal policy became a drag on growth in the second year of recovery, and since then the drag has intensified.