Live from Evans Hall: If this is the kind of thing you like, you will like this thing very much--you will, in fact, think that this is the best thing on the internet so far this year:
With Bill Clinton, or Bill Bradley, or Al Gore, or Barack Obama, or Lloyd Bentsen, or Hillary Rodham Clinton--you listen to them, or you talk to them, and you know there is a mind back there deeply knowledgeable about and wrestling with substantive issues of societal welfare and technocratic policy.
J. Bradford DeLong on February 08, 2016 at 07:36 AM in Economics: Information, Information: Better Press Corps/Journamalism, Philosophy: Moral, Political Economy, Politics, Science: Cognitive, Streams: (Monday) Smackdown Watch, Streams: Cycle, Streams: Economics, Streams: Equitable Growth, Streams: Highlighted | Permalink | Comments (7)
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Perhaps starting a broader conversation...
Paul Krugman: In Defense of Funny Diagrams: "Brad DeLong asks a question about which of the various funny diagrams economists love...
...should be taught in Econ 101. I say production possibilities yes, Edgeworth box no--which, strange to say, is how we deal with this issue in Krugman/Wells. But students who go on to major in economics should be exposed to the box--and those who go on to grad school really, really need to have seen it, and in general need more simple general-equilibrium analysis than, as far as I can tell, many of them get these days. There was, clearly, a time when economics had too many pictures. But now, I suspect, it doesn’t have enough....
J. Bradford DeLong (1998): Robber Barons:
First draft October 13, 1997; second draft January 1, 1998.
'Robber Barons': that was what U.S. political and economic commentator Matthew Josephson (1934) called the economic princes of his own day. Today we call them 'billionaires.' Our capitalist economy--any capitalist economy--throws up such enormous concentrations of wealth: those lucky enough to be in the right place at the right time, driven and smart enough to see particular economic opportunities and seize them, foresighted enough to have gathered a large share of the equity of a highly-profitable enterprise into their hands, and well-connected enough to fend off political attempts to curb their wealth (or well-connected enough to make political favors the foundation of their wealth).
J. Bradford DeLong on February 06, 2016 at 08:16 AM in Economics: Growth, Economics: History, Economics: Inequality, Long Form, Philosophy: Moral, Political Economy, Politics, Streams: (BiWeekly) Honest Broker, Streams: (Tuesday) Hoisted from Archives, Streams: Across the Wide Missouri, Streams: Economics, Streams: Equitable Growth, Streams: Highlighted | Permalink | Comments (10)
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The wise Mark Thoma sends us to the newly-unmuzzled and very sharp Narayana Kocherlakota: Dovish Actions Require Dovish Talk (To Be Effective): "The Federal Open Market Committee (FOMC)...
...has bought a lot of assets and kept interest rates extraordinarily low for the past eight years. Yet, all of this stimulus has accomplished surprisingly little (for example, inflation and inflation expectations remain below target and are expected to do so for years to come). Does that experience mean that we should give up on monetary policy as a useful way to stimulate aggregate demand?
Agathon: 'Professor! Good to see you. Getting coffee?'
Glaukon: 'Yes. I'm teaching. I find that teaching is always and everywhere a caffeine phenomenon.'
Agathon: 'I tend to find that teaching is usually a bagel phenomenon myself. What are you going to teach them?'
J. Bradford DeLong on February 05, 2016 at 02:19 PM in Berkeley, Economics: Inequality, Economics: Information, Moral Responsibility, Philosophy: Moral, Political Economy, Politics, Streams: (Tuesday) Hoisted from Archives, Streams: Cycle, Streams: Economics, Streams: Equitable Growth, Streams: Highlighted | Permalink | Comments (5)
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Attention conservation notice: Over 7800 words about optimal planning for a socialist economy and its intersection with computational complexity theory. This is about as relevant to the world around us as debating whether a devotee of the Olympian gods should approve of transgenic organisms. (Or: centaurs, yes or no?) Contains mathematical symbols (uglified and rendered slightly inexact by HTML) but no actual math, and uses Red Plenty mostly as a launching point for a tangent.
There’s lots to say about Red Plenty as a work of literature; I won’t do so. It’s basically a work of speculative fiction, where one of the primary pleasures is having a strange world unfold in the reader’s mind. More than that, it’s a work of science fiction, where the strangeness of the world comes from its being reshaped by technology and scientific ideas—- here, mathematical and economic ideas.
Live from Evans Hall: Edgeworth Boxes and Production Possibility Frontiers
Edgeworth Boxes and Production Possibility Frontiers are two tools to help people grasp the excellences of a market economy in equilibrium. The Edgeworth box shows the possible gains from trade—and how a free market leads the economy to one of the possible allocations that exhausts those gains. The PPF shows how creating a price mechanism drives production to a Pareto-efficient point—and, in fact, to that particular Pareto-efficient point on the Pareto frontier that maximizes the value of output at the equilibrium price vector.
Question: Are either of these worth covering in an Econ 1 course?
I have, before, done the Edgeworth Box, and I have concluded that it is not worth covering (even though Rick Ericsson spent a bunch of time on it when I took Econ 1).
This year I did the PPF because Frank, Bernanke, Antonovics, and Heffetz do it. And I am concluding that it, too, is really not worth it.
It is better, I think, to: Start, on the supply side, with the idea that there are resources and property rights and people have capabilities and options. Then go through opportunity cost to the supply curve. And it is better, I think, to: Start, on the demand side, with preferences and incomes. Then go through willingness-to-pay to the demand curve. After that, back-and-fill and get to the value of the market system via consumer and producer surplus.
That, at least, is my current view…
I missed this six months ago:
Julie Verhage: The Two Big Economic Policy Failures That John Maynard Keynes Would Be Disappointed by Today: "The famous economist isn't around for us to ask him...
...but here is probably the next best thing. Robert Skidelsky... said... Keynes would have found two things upsetting. First, he would be frustrated with the lack of precautions taken to prevent a huge financial crash like the one we saw in 2008. Secondly, Lord Skidelsky believes Keynes... would have wanted a more 'buoyant response,' he said. Specifically, he doesn't think Keynes would have liked the Federal Reserve's quantitative easing....
Paul Krugman (1999): Thinking about the liquidity trap:
We live in the Age of the Central Banker - an era in which Greenspan, Duisenberg, and Hayami are household words, in which monetary policy is generally believed to be so effective that it cannot safely be left in the hands of politicians who might use it to their advantage. Through much of the world, quasi-independent central banks are now entrusted with the job of steering economies between the rocks of inflation and the whirlpool of deflation. Their judgement is often questioned, but their power is not.
I really, truly am obsessing about this to excess, am I not?
But it's overwhelmingly weird: conclusions that seem to me obvious and inescapable, nailed-down and air-tight, ironclad and titanium do not seem to have any force with the deciding members of the FOMC:
Jo Walton (2015): The Just City (New York: Tor Books: 9780765332660) http://amzn.to/1WQi0cn
John Holbo: Walton’s Republic: What is Athene’s motive in dragging all those robots from the future to help build this thing?...
Brad DeLong: Re: ‘What is Athene’s motive in dragging all those robots from the future to help build this thing?’ Aristoteles son of Nikomakhos of Stagira:
Myself, I would translate ‘Alles Ständische und Stehende verdampft’ as "All the established estates and orders of society are steamed away"...
Richard J. Evans (2013): Review of ‘Karl Marx’ by Jonathan Sperber: "Marx v. The Rest.... Previous accounts of Marx’s life have gone one of two ways...
...Either he is seen as a prophet... or... a misguided and misguiding ideologue.... This book aims to scrape away the patina of retrospective polemic to reveal Marx in the context of his own times.... Sperber provides a new translation of the much discussed sentence in the Manifesto, ‘Alles Ständische und Stehende verdampft’: ‘All that is solid melts into air’ in the standard English version but rendered by Sperber as ‘Everything that firmly exists and all the elements of the society of orders evaporate.’ What Marx had in mind was not some mystical process of transformation, but the dissolution of hierarchical Prussian society by the steam-power of industry. Political revolution leading to a communist regime... would be achieved on the lines of the French Revolution’s... Jacobin phase, from 1792 to 1794....
Must-Read: Mark Thoma: Why GDP Fails as a Measure of Well-Being: "Catherine Rampell provides a nice summary of the alternative measures that have been proposed...
Over at Project Syndicate: It is now more than two years since I first heard that Thomas Piketty had an amazing book coming out.
Over at Project Syndicate: Economics in the Age of Abundance: 250 years ago in the richest society that was then or ever had been--Imperial Augustan-Age Britain--the adolescents sent to sea by the Marine Society to be officers' servants were half a foot--15 cm--shorter than their counterpart gentry's sons whose heights were recorded as they entered the army as officers. 150 years ago the working class of the United States--the richest working class that was then or ever had been--was still spending roughly 2/5 of extra income at the margin simply on more calories. Pre-Industrial Agrarian-Age human populations, even Mid-Industrial populations, and a third of the world today were and are under what nutritionists and public-health experts see as severe and damaging nutritional biomedical stress. READ MOAR
Jeff Weintraub (20130: Adam Smith's conceptual sleight-of-hand on exchange, cooperation, and the foundations of social order: "This was a response to one section of a post by Brad DeLong containing Snippets: Smith, Marx, Solow: Shoebox...
...The first snippet in this compilation.. posed the question 'Exchange and its vicissitudes as fundamental to human psychology and society?' and followed that with a justly famous quotation from Adam Smith's Wealth of Nations.... Brad's question zeroed in on some crucial issues. I was provoked to start writing a message... I thought would run a few lines... but it turned out to be a little longer, so I might as well share it.
Charles Gaba: Ted Cruz and the Case of the Vanishing Health Plan: "GOP Senator Ted Cruz, the guy who hates Obamacare so much he shut the entire federal government...
...down just to prevent it from being implemented... told his campaign supporters that he and his family:
- had lost their Blue Cross Blue Shield of Texas PPO insurance policy at the end of December;
- that the ACA was the ‘cause’ of their policy being cancelled;
- that he and his family are therefore no longer currently insured; and
- that the new policy which he’s (belatedly) decided to replace it with is going to cost 50 percent more than the old one[:]...
Must-Read: Marc Dordal i Carreras: U.S. Banking Panics and the Credit Channel: Evidence from 1870-1904: "The empirical study of the effect of banking panics on the economy...
...has traditionally been difficult due to the lack of adequate data on output during the major part of the 19th and early 20th centuries. This paper proposes an alternative approach by looking at the business activity of the banking sector. Using a newly digitized dataset on National Banks resources and liabilities, I argue that distortions to the normal activity of the banking sector are a good proxy for the impact of panics on the economy. Additionally, I propose a novel Instrumental Variables approach for identifying the effects of banking panics through the exogenous drops in deposits induced by bank runs. The results show a temporary but large effect of panics on lending activity of approximately 10 p.p. (on impact) and an average duration of one year.
William McChesney Martin (1955): Punchbowl Speech (October 19, 1955): "In framing the Federal Reserve Act great care was taken to safeguard...
Notes for My Comment at the URPE-AEA Session: Causes of the Great Recession and the Prospects for Recovery
J. Bradford DeLong on January 18, 2016 at 08:14 PM in Economics: History, Economics: Inequality, Economics: Macro, History, Long Form, Philosophy: Moral, Political Economy, Politics, Streams: (BiWeekly) Honest Broker, Streams: Economics, Streams: Equitable Growth, Streams: Highlighted | Permalink | Comments (1)
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Munk School Trans-Pacific Partnership Conference: Geopolitics Panel
Revised and Extended: I could now talk about the risks of the Trans-Pacific Partnership. You have already heard a lot about the risks in the previous session here. You have heard about dispute resolution and about intellectual property. You have heard about instituting largely-untested dispute resolution procedures in such a way that they will be very difficult indeed to amend or suspend or replace or adjust in the future.
We all know very well the eurozone’s ongoing experience. We remember that the euro single currency is in its origins a geopolitical project. We remember the origins of the eurozone at Maastricht—the decision of the great and good of Europe that something needed to be done to bind Europe more closely together in the wake of the absorption into the Bundesrepublik of the German East and the collapse of the Soviet Empire. The creation of a single currency was clearly something.
J. Bradford DeLong on January 16, 2016 at 11:28 AM in Economics: Growth, Economics: History, History, Long Form, Moral Responsibility, Obama Administration, Philosophy: Moral, Political Economy, Politics, Strategy, Streams: (BiWeekly) Honest Broker, Streams: Economics, Streams: Equitable Growth, Streams: Highlighted | Permalink | Comments (14)
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Nick Rowe: Interest Rate Pegs with a Finite Horizon Omega Point: "This is what I used to think about what would happen if the central bank tried to peg the nominal interest rate forever (and I'm pretty sure most macroeconomists thought the same):
Today's Economic History: Wikipedia: Takahashi Korekiyo: "Viscount Takahashi Korekiyo (高橋 是清?, 27 July 1854 – 26 February 1936)...
...was a Japanese politician who served as a member of the House of Peers, as the 20th Prime Minister of Japan from 13 November 1921 to 12 June 1922, and as the head of the Bank of Japan and Ministry of Finance.
Partha Dasgupta (2007): Economics: A Very Short Introduction (Oxford: Oxford University Press: 0192853457).
Becky, who is 10 years old, lives with her parents and an older brother Sam in a suburban town in America's Midwest. Becky's father works in a firm specializing in property law. Depending on the firm's profits, his annual income varies somewhat, but is rarely below 145,000 US dollars ($145,000). Becky's parents met at college. For a few years her mother worked in publishing, but when Sam was born she decided to concentrate on raising a family. Now that both Becky and Sam attend school, she does voluntary work in local education. The family live in a two-storey house. It has four bedrooms, two bathrooms upstairs and a toilet downstairs, a large drawing-cum-dining room, a modern kitchen, and a family room in the basement. There is a plot of land at the rear - the backyard - which the family use for leisure activities.
Live from Toronto: The Trans Pacific Partnership: Options for Canada and the World: "In partnership with Global Affairs Canada’s Ministry of International Trade...
Are these the right five papers for first-year Ph.D. students in Economics to read for their week spent thinking about unfree labor--slavery, serfdom, debt peonage, etc.? If not these, what are the right papers?
Richard J. Evans (2012): Reviewing ‘Walther Rathenau’ by Shulamit Volkov: "On the morning of 24 June 1922, Walther Rathenau, the German foreign minister, set off for work from his villa in the Berlin suburb of Grunewald....
Jefferson to Adams 11 January 1816:
I agree with you… on the 18th century. It certainly witnessed the sciences and arts, manners and morals, advanced to a higher degree than the world had ever before seen.…
Hoisted from Others' Archives from Two Years Ago: Paul Krugman (2014): The Zombie Confidence Fairy: "First up: Brad DeLong is bothered by Robert Rubin’s latest deficit-hawk op-ed...
Are these the right papers for first-year Ph.D. students in Economics to read for their week spent thinking about accounting for economic growth? If not these, what are the right papers?
Must-Read: Jared Bernstein: 2015 Was Solid Year for Job Growth: "Payrolls were up 292,000 in December and the unemployment rate held steady at a low rate of 5%...
Over at Huffington World Post: Future Economists Will Probably Call This Decade the 'Longest Depression': Posted: 01/08/2016 9:28 am EST Updated: 49 minutes ago: Economist Joe Stiglitz warned back in 2010 that the world risked sliding into a 'Great Malaise.' This week, he followed up on that grim prediction, saying, 'We didn't do what was needed, and we have ended up precisely where I feared we would.' READ MOAR
Live from Zachary's-Oakland: Keynes Pizza Dinner at Zachary's-Oakland: Inflation is under 5%. The United States has not turned into "Greece". The United States has not turned into "Argentina". Orthodox monetarism and the fiscal theory of the price level both fell before the mighty power of the IS-LM liquidity-trap model. And so Noah Smith owes me a pizza...
Stéphane Becuwe, Bertrand Blancheton, and Christopher M. Meissner: Stages of Diversification: France, 1836-1938: "A large literature has documented an association between economic growth and export diversification...
Hoisted from 2012/Live from Zachary's: Is the U.S. at Immediate Risk of Rapidly Becoming "Argentina" as a Result of Expansionary Counter-Cyclical Policies?: The Bet with Noah Smith: Noah Bravely Takes the Cochrane-Argentina Side…: The bet:
If, at any time between 7/28/2012 and 7/28/2015, core consumer prices, as recorded in the FRED database series CPILFESL, are up more than 5% in the preceding 12 months, and if over the same 1-year period monthly U3 unemployment (as recorded in FRED database series UNRATE) has not averaged below 6%, then Brad DeLong agrees to buy Noah Smith one dinner at Zachary's Pizza and to pay Noah 99 times the cost--including tax but excluding tip--of Noah's meal at Zachary's in Federal Reserve notes, or in alternative means of payment accepted by Zachary's should Zachary's Pizza no longer be accepting Federal Reserve notes at the date of the dinner. This cost will be assessed as the total cost of the dinner to all, divided by the number of people present, regardless of how much pizza is consumed by or how much alcohol is drunk by specific individuals.
J. Bradford DeLong on January 06, 2016 at 12:00 PM in Economics: Finance, Economics: Macro, Moral Responsibility, Obama Administration, Streams: (Tuesday) Hoisted from Archives, Streams: Across the Wide Missouri, Streams: Cycle, Streams: Economics, Streams: Equitable Growth, Streams: Highlighted | Permalink | Comments (9)
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When and why does the Confidence Fairy appear? The very sharp-witted Karl Smith has long had a genuinely-different way of looking at the national income identity. I think his approach can shed much light on this question. And it can also shed light on the closely related question of when and whether governments seeking full employment should greatly concern themselves with "confidence".
How Much Did Larry Summers Fear the Invisible Bond Market Vigilantes in December 2008?: The Obama Economic Policy Memo: My conclusion is that he did not fear them much, if at all.
Are these the right five papers for first-year Ph.D. students in Economics to read for their week spent thinking about the pre-1800 absence, the 1800-2050 presence, and the possible post-2015 end of what Simon Kuznets termed "modern economic growth"? If not these, what are the right papers?
Are these the right papers for first-year Ph.D. students in Economics to read for their week spent thinking about the pre-1800 absence, the 1800-2050 presence, and the possible post-2015 end of what Simon Kuznets termed "modern economic growth"? If not these, what are the right papers?
Are these the right papers for first-year Ph.D. students in Economics to read for their week spent thinking about the Malthusian Economy? If not these, what are the right papers?
An interview with Jan Hatzius I did last fall:
Brad DeLong is a professor of economics at UC Berkeley, where his research focuses on financial crises and 20th century macroeconomics, as well as the political economy of monetary and fiscal policy. He has taught at Harvard University and served as Deputy Assistant Secretary of the Treasury for Economic Policy under the Clinton Administration. Below, he and Goldman Sachs Chief Economist Jan Hatzius discuss risks around liftoff and the structural downshift in rates.
This is the single must-must-read from the archives: John Taylor vs. John Aziz, Tim Geithner, Ben Bernanke, Larry Summers, Paul Krugman, Me, and a Cast of Thousands Weblogging. This is a critique of a piece from Stanford's John Taylor. In it we find, among other errors:
Residential investment picked up more than two years ago, so the "weak housing market" excuse is gone...
J. Bradford DeLong on January 04, 2016 at 09:12 AM in Economics: Macro, Moral Responsibility, Obama Administration, Political Economy, Politics, Streams: (Tuesday) Hoisted from Archives, Streams: Across the Wide Missouri, Streams: Economics, Streams: Equitable Growth | Permalink | Comments (2)
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Sokrates: You remember how I used to say that only active dialogue--questions-and-answers, objections-and-replies--could convey true knowledge? That a flat wax tablet covered by written words could only convey an inadequate and pale simulacrum of education?
Aristoteles: Yes. And you remember how I showed you that you were wrong? That conversation is ephemeral, and very quickly becomes too confused to be a proper educational tool? That only something like an organized and coherent lecture can teach? And only something like the textbooks compiled by my lecture notes can make that teaching durable?
Aristokles: But, my Aristoteles, you never mastered my "dialogue" form. My "dialogue" form has all the advantages of permanence and organization of your textbooks, and all the advantages of real dialectic of Sokrates's conversation.
Larry Summers presents as an example of his contention that we know more than is in our models--that our models are more a filing system, and more a way of efficiently conveying part of what we know, than they are an idea-generating mechanism--Paul Krugman's Mundell-Fleming lecture, and its contention that floating exchange-rate countries that can borrow in their own currency should not fear capital flight in a liquidity trap. He points to Olivier Blanchard et al.'s empirical finding that capital outflows do indeed appear to be not expansionary but contractionary: