Karl Polanyi's The Great Transformation is certainly the right place to start in thinking about "neoliberalism" and its global spread. But you are right to notice and do need to keep thinking that Polanyi is talking about pre-World War II classical liberalism, and that modern post-1980 neoliberalism is somewhat different.
First, as I, at least, see it, there are three strands of thought that together make up the current of ideas and policies that people call "neoliberalism":
Scott Lemieux: "And, In Conclusion, KU's Teams Will Now Be Known As the Kansas Reagans": "Shorter Sam Brownback:
My crazy Democratic opponent thinks that raising taxes is a way to solve the disastrous fiscal meltdown caused by the tax cuts I favored. But everyone knows this solution is insufficiently Reagan because Reagan, and in addition Reagan.
Note: this “Reagan” bears no resemblance to the actual Reagan...
Over at Equitable Growth: Lawrence Summers: Advantages the Rich Have That Money Cannot Buy: "The primary reason for concern about inequality is that lower- and middle-income workers have too little...
...not that the rich have too much... the criterion should be... [the] impact... on the middle class and the poor.... Important aspects of inequality are unlikely to be transformed just by limited income redistribution. Consider... health and... opportunity for children. Barry Bosworth and his colleagues... [the] cohort[s]... born in 1920 and... 1940.... The richest men gained roughly six years in life expectancy... the lowest... two years... lifestyle and variations in diet and stress [rather] than the ability to afford medical care.... READ MOAR
NIMBYism taken to extremes with astroturf "neighborhood associations":
April Gilbert: Berkeley restaurant has been approved: Let’s let it open: "I am a homeowner on Russell Street just below College...
and thus an Elmwood resident. A year ago, I heard that the owners of Comal on Shattuck Avenue were proposing a restaurant for the old Wright’s Garage space on Ashby and I was thrilled. It sounded like just the ticket to round out the dining options in our little neighborhood. Finally, we would have an upscale spot with a nice atmosphere and a small bar space--just what I felt had been missing. Then, I heard there was opposition from a group called the “Elmwood Neighborhood Association”(ENA)--strange given that I’d never heard of this organization despite living smack in the middle of Elmwood for eight years.... In all my years in Berkeley, I have never encountered this group. I have not gotten an email, a phone call, or a flyer in my mailbox. ENA is positioning itself as the voice of our neighborhood, which it is not. In contrast, I am quite familiar with CENA, the Claremont-Elmwood Neighborhood Association. CENA has not taken a stand on the proposed new restaurant on Ashby, but when it polled its members, the majority of its Elmwood resident members was enthusiastic about having a good restaurant open and supported the Comal owners’ efforts.
Sarah Kliff: Separate circuit court rules in favor of Obamacare subsidies: "The Fourth Circuit Court of Appeals...
ruled Tuesday afternoon that Obamacare subsidies could be offered through federally-run insurance marketplaces.
It is... clear that widely available tax credits are essential to fulfilling the Act’s primary goals and that Congress was aware of their importance when drafting the bill," the Fourth Circuit Court ruled.
We'll have more coverage soon...."
Over at Equitable Growth The estimable Neil Irwin and Tyler Cowen get, I think, things wrong here.
First, Tyler, commenting on Neil:
Tyler Cowen: Facts about non-residential investment: "One simple hypothesis is that it’s not worth spending more on American workers at current wage levels. As workers, while Americans are quite good, they are just not that much better than a variety of high-IQ individuals in cheaper countries, many of whom now have acceptable infrastructure to work with. READ MOAR
Over at Equitable Growth: Nicholas Bagley: ObamaCare and Halbig: What Does This Morning's Decision Mean?: "In a major setback for the Affordable Care Act...
...the D.C. Circuit just released a fractured opinion invalidating the IRS’s rule extending tax credits to federally facilitated exchanges.... About two-thirds of the states... declined to establish exchanges. In those states, the federal government stepped in and established the exchanges on the states’ behalf. In today’s opinion, the D.C. Circuit held that a federally facilitated exchange isn’t “established by the State under 1311.” As a result, the IRS can’t offer tax credits to those who purchase plans on such exchanges... the average estimated tax credit in 2014 is $4,700.... READ MOAR
Robert Waldmann: Anchored Perceived Inflation, or How Fox News Helped Obama: "A huge recession, sluggish recovery and gigantic persistent output gap....
...Core PCE inflation... fell from sticking close to 2% to fluctuating in the range of 1% to 2%. The standard lowbrow backward-looking forecasting equation... completely failed.... There are two candidate explanations for this surprising behavior of inflation. One is that there is strong downward nominal rigidity.... Another quite different explanation is that expected future inflation has a very important role in wage and price setting and that inflation expectations are anchored.... The median respondent in the Michigan University/IPSOS Reuters survey persistently expected future inflation of almost exactly 3% in almost all surveys since mid 2009... in period after period a majority of survey participants have been surprised by actual inflation lower than their forecast. This is a new phenomenon.... [Perhaps,] like inflation expectations, inflation perceptions have delinked from reality.... I give the credit to Fox news.... People... [who] rely on Fox News... are out of touch with reality--their expectations and perceptions are what Roger Ailes wants them to be.... Fox News convinces people that inflation has been and will be high.... [Thus] actual inflation is low but positive. It fits the facts which I reported. You decide.
The percentage of uninsured Californians has been cut in half since the federal health law began expanding coverage nine months ago, according to a new national survey. In September of 2013, 22 percent of California adults were uninsured. By last month, that number had fallen to just 11 percent, the biggest drop among the nation’s six largest states. The survey of more than 4,400 people by the Commonwealth Fund, a national healthcare foundation, also found that nationwide, the uninsured rate fell from 20 percent to 15 percent during the same period.... The Commonwealth Fund survey found that 61 percent of those who were newly insured said they felt better off thanks to their new coverage. And nearly four out of five said they were somewhat or very satisfied with their new coverage.
The survey also found that since last year, awareness of the Affordable Care Act has increased significantly, although that awareness still lags among poorer Americans. For example, more than half of the poorest people surveyed still did not know that the federal health law makes subsidies available to help pay for health insurance.
I must say that where the rubber meets the road this thing is doing somewhat better than I expected back at the end of 2009. But the big question will be: what will be the deltas for health and economic security?
Robert Waldmann: Comment on Intellectual Origins of Reagan-Thatchernomics: "That is a long and interesting list...
...Somewhere the crime wave seems to have fallen between to stools (between 17 and 18). I think that, to be fair to both, especially Feldstein, you should number separately.
Huntington's willingness to criticize democracy and praise deference to superiors is amazingly frank...
Trying to be quicker on (18)-(30) which I will ascribe to "Mad Dog" (to avoid an concerns about context)
On (18) ["the democratic surge of the 1960s raised again in dramatic fashion the issue of whether the pendulum had swung too far..."]: His courage amazes me. Even George Will doesn't question Democracy so bluntly any more.
On (19) ["the vigor of democracy in the United States in the 1960s thus contributed to a democratic distemper... the expansion of governmental activity... and the reduction of governmental authority..."]: The word "distemper" is pejorative. Think of trying to tell a Tea Partier that a reduction in "government authority" is "distemper". I think they would lose their tempers. Again amazing frankness (I refer to Mad Dog, who may or may not have anything to do with a Harvard prof.)
Over at Equitable Growth: The intelligent Lars P. Syll depresses me by reminding me of some of the many economists of note and reputation who simply have not done their homework--or, rather, either they or I have not done our homework, and I am pretty confident it is not me--by linking to Robert Lucas:
Robert Lucas: Modern Macroeconomics: "I was convinced by Friedman and Schwartz...
...that the 1929-33 down turn was induced by monetary factors (declined is money and velocity both) I concluded that a good starting point for theory would be the working hypothesis that all depressions are mainly monetary in origin.... As I have written elsewhere, I now believe that the evidence on post-war recessions (up to but not including the one we are now in) overwhelmingly supports the dominant importance of real shocks... READ MOAR
From John Maynard Keynes's 1926 pamphlet The End of Laissez-Faire13: "The economists... furnished the scientific doctrine...
by which the practical man could solve the contradiction between egoism and socialism which emerged out of the philosophising of the eighteenth century and the decay of revealed religion. But... I hasten to qualify it. This is what the economists are supposed to have said. No such doctrine is really to be found in the writings of the greatest authorities. It is what the popularisers and the vulgarisers said.... The language of the economists lent itself to the laissez-faire interpretation. But the popularity of the doctrine must be laid at the door of the political philosophers of the day, whom it happened to suit, rather than of the political economists.
Over at Equitable Growth: I have always understood expected-utility decision theory to be normative, not positive: it is how people ought to behave if they want to achieve their goals in risky environments, not how people do behave. One of the chief purposes of teaching expected-utility decision theory is in fact to make people aware that they really should be risk neutral over small gambles where they do know the probabilities--that they will be happier and achieve more of their goals in the long run if they in fact do so. READ MOAR
Over at the Equitablog: John Fernald: Productivity and Potential Output Before, During, and After the Great Recession: "U.S. labor and total-factor productivity growth...
...slowed prior to the Great Recession. The timing rules out explanations that focus on disruptions during or since the recession, and industry and state data rule out “bubble economy” stories related to housing or finance. The slowdown is located in industries that produce information technology (IT) or that use IT intensively, consistent with a return to normal productivity growth after nearly a decade of exceptional IT-fueled gains. A calibrated growth model suggests trend productivity growth has returned close to its 1973-1995 pace. Slower underlying productivity growth implies less economic slack than recently estimated by the Congressional Budget Office. As of 2013, about 3⁄4 of the shortfall of actual output from (overly optimistic) pre-recession trends reflects a reduction in the level of potential.
But when I look at this graph:
The policies that enabled the creation of our Second Gilded Age were born at the end of the 1970s out of a particular reading of the political economy of that moment.
Were the ideologues and the intellectuals of the right correct back when they claimed in the late 1970s that the economic problems of the 1970s were the result of "too much government" or of "an excess of democracy"? I think not. But in order to evaluate the argument we need to remember what it was.
Over at Department of "WTF?!" Chris House on Traditional Macroeconomic Models and the Great Recession,: Someone Who Remembers 1997-8 writes in comments:
I was more struck by this:
Chris House: Traditional Macroeconomic Models and the Great Recession:
Macroeconomists were caught completely off-guard by the financial crisis. None of the models we were accustomed to use provided insights or policy recommendations.... Neither the New Keynesian model nor its paleo-Keynesian antecedent feature a meaningful role for financial market failures. As a result, the policy response to the crisis was largely improvised. This is not to say that the improvised policy actions were bad. Improvisation guided by Ben Bernanke was about as good as we could hope for. Nevertheless, for the most part, the models we were accustomed to use to deal with business cycle fluctuations were simply incapable of making sense of what was going on.... While I typically do not grant much credence to heterodox economists, in this instance Professor Wray’s diagnosis is completely correct...
Has Chris House:
never heard of Walter Bagehot, Hyman Minsky, or Charlie Kindleberger?
not think that they were macroeconomists?
unaware of the debates and discussions and modeling exercises carried out around the 1997-98 East Asian financial crisis and the 1994-5 Mexican crisis?
unaware of all the credit-channel work on the Great Depression?
It is a great mystery...
Over at Equitable Growth: Most of American discussion about equitable growth these days revolves around rapidly growing inequality: that the rising tide has been lifting the big boats much more than the others, that trickle-down economics has not been trickling down, that enormous plutocratic wealth explosions at the top have been accompanied by stagnant wages in the middle and the bottom. But that is not the entire story. Equally important--at least I think it is equally important--is that the American economy has underperformed in real GDP growth since the end of the Social Democratic Era back in 1979.
If you go to Sam Williamson and company's Measuring Worth website--http://measuringworth.com--and look at the numbers he has scrubbed and put together, you can learn an enormous amount--or at least learn an enormous amount about what our current guesses as to the long-run shape of economic growth are... READ MOAR
Over at Equitable Growth: Chris Blattman: Links to Reviews of James Scott's "Seeing Like a State": "Daron Acemoglu and James Robinson...
￼￼“It is up to us to make the right choice - the human choice - and live in a place where working Missourians get a fair shake. A place where someone who works two jobs can afford to see a doctor when they are sick. A place where everyone lives longer, healthier, fuller lives...” – Governor Jay Nixon
What is Medicaid?
Medicaid provides health care services to low-income Missourians, their children and people with disabilities. About 829,000 Missourians receive Medicaid services, including 503,000 children; 158,000 people with disabilities; 75,000 seniors; 72,000 low income adults; and 21,000 pregnant women. Currently, Medicaid is funded through a combination of 63% federal funds and 37% state funds.
Over at Equitable Growth: Paul Krugman admonishes me for thinking I should try to work out what model underlies the Bank for International Settlements' 84th Annual Report. It is, he says, not so much a macroeconomic model or an analytical framework. Rather, he says, it is a mood: the rhetorical stance of austerity a outrance:
Paul Krugman: Liquidationism in the 21st Century: "The BIS position... [is] that of 1930s liquidationists like Schumpeter...
...who warned against any 'artificial stimulus' that might leave the 'work of depressions undone'. And in 2010-2011 it had an intellectually coherent--actually wrong, but coherent--story... that mass unemployment was the result of structural mismatch... [and] easy money would lead to a rapid rise in inflation.... it didn’t happen. So... it... look[ed] for new justifications for the same [policy] prescriptions... playing up the supposed damage low rates do to financial stability.... That over-indebtedness on the part of part of the private sector is exerting a persistent drag on the economy... is a reasonable story.... But the BIS... doesn’t understand that model... as if they were equivalent to... real structural problems... [which] makes a compelling case for... fiscal deficits to support demand while the private sector gets its balance sheets in order, for monetary policy to support the fiscal policy, for a rise in inflation targets both to encourage whoever isn’t debt-constrained to spend more and to erode the real value of the debt. The BIS, however, wants governments as well as households to retrench... and--in a clear sign that it isn’t being coherent--it includes a box declaring that deflation isn’t so bad, after all. Irving Fisher wept....
Are the BIS’s methods unsound? I don’t see any method at all. Instead, I see an attitude, looking for justification... READ MOAR
As an emergency measure, given the continued shortage of high-quality DeLong smackdowns on the internet, on to the next Kindle screen of chapter 11 of David Graeber's Debt: The First 5000 Years:
This, too, is double-plus unhood, as Winston Smith might say...
Claudio Borio (2012): The Financial Cycle and Macroeconomics: What Have We Learnt? "[']The financial cycle[']... denote[s] self-reinforcing interactions between perceptions of value and risk...
...attitudes towards risk and financing constraints, which translate into booms followed by busts... [that] amplify economic fluctuations and possibly lead to serious financial distress and economic dislocations.... Equity prices can be a distraction.... Interest rates, volatilities, risk premia, default rates, non-performing loans, and so on.... Combining credit and property prices appears to be the most parsimonious way to capture the core features....
Over at Equitable Growth: Can anyone put forward a credible explanation for this?
Chris House (July 13, 2014): Traditional Macroeconomic Models and the Great Recession: "Commentators like Paul Krugman...
...should also own up to the mounting evidence that the older models (even the paleo-Keynesian models that some prefer) clearly failed.... They made clear predictions about inflation that were supposedly at the center of the New Keynesian mechanism--predictions that never materialized.
Paul Krugman (April 13, 2013): The Missing Deflation: "Keynesians.... One area where things haven’t worked out as [we] expected...
...however, is on the deflation front. Inflation has stayed very subdued; but coming in to the crisis I certainly thought that actual Japanese-style deflation was a real possibility. That hasn’t materialized (and for that matter, even Japan never had more than very gradual deflation). Why? READ MOAR
Writers with Drinks: An Evening of Oversharing About Money: 7:30 p.m. July 12 :: Make-Out Room :: 3225 22nd St. San Francisco, CA :: Price: $5-$20 http://writerswithdrinks.com: "If time is money, then consider this evening with Charlie Jane Anders, J. Bradford DeLong, Frances Lefkowitz, Farhad Manjoo, and Carol Queen to be a good investment..."
J. Bradford DeLong
A few short years ago we lived, for the school district, in Lafayette. Lafayette is close to here in space and time, but distant in attitude. Lafayette is a place an unkind observer based in and comfortable in San Francisco might describe as an unholy mix of the worst parts of northern and southern California. There we had a neighbor, Bie Bostrom. She had been the oldest Peace Corps volunteer in East Africa. She kept in touch with what had been her town: Ahero, population 10K, in Nyando District, Nyanza Province, Kenya. And there she funds and runs a one-elderly-woman one-town NGO with zero administrative overhead: Grandmothers Raising Grandchildren. That's http://grgahero.org: godzilla-rath of Khan (with an r)-godzilla-alien-hitchhiker-empire strikes back-rath of Khan-omen-dot-omen-rath of Khan-godzilla. No, I'm not going to hit you up--you've been hit up already coming here, at the door.
Jonathan Chait vs. Peter Suderman on ObamaCare:
Jonathan Chait: Libertarian Accidentally Shows Obamacare Success: "The Commonwealth Fund has a new survey...
...showing that the proportion of adults lacking health insurance has fallen by a quarter, from 20 percent of the population to 15 percent. (Most respondents, including 74 percent of newly insured Republicans, report liking their plan.) Also, this week, the Congressional Budget Office again revised down its cost estimates for Medicare, which now spends $50 billion a year less than it was projected to before Obamacare passed. Also, the New England Journal of Medicine recently estimated that 20 million Americans gained insurance under the new law.
The latter study comes in for criticism by Peter Suderman, Reason’s indefatigable health-care analyst.
Over at Equitable Growth: I confess that I do not understand the recent BIS Annual Report. I have tried--I have tried very hard--to wrap my mind around just what the BIS position is. But I have failed.
So let me try to lay out how I see it--where I think we are, and what I think the three live macroeconomic-policy positions are:
First, where we are:
We had in the late-1990s a high-pressure full-employment low-inflation tight-fiscal equilibrium. It was, however, unsustainable: based on exaggerated beliefs not about the utility but the profitability of companies based on the high-tech computer and communications technologies of the 1990s. When expectations adjusted to the reality of profitability, the high investment part of the 1990s boom went away, and the economy fell into the minor recession of the early 2000s. READ MOAR:
John Quiggin thinks about search models, and points out that they--Diamond, Mortenson, and Pissarides and company--are not a good and promising path for modeling cyclical unemployment. Moreover, he questions whether they are a good and promising path for modeling frictional unemployment. Where is the decline in frictional unemployment that ought to have accompanied the rise of the internet, after all. Margins and search costs and inventories have tightened elsewhere in the economy. So why not in the labor market?
Over at Equitable Growth: Let us focus on the macroeconomic costs of not expanding Medicaid. That is, let us leave to one side the question of exactly how much good getting people on Medicaid does for them. We know that it makes safety-net hospitals Financial stress level lower--there is less uncompensated care, and that flows through to corners that do not need to be cut. We know that it increases incomes of nurses and doctors somewhat. We know that patients on Medicaid go to the doctor more than the uninsured, and that by American standards at least the uninsured do not go to the doctor enough and do not take enough medicine. We know that the ex-uninsured are much happier, less stressed, and non-bankrupt. READ MOAR
Over at Equitable Growth: Nick Bunker: What the Beveridge Curve may tell us about the U.S. labor market: "[Murat Tasci and John Lindner] at the Federal Reserve Bank of Cleveland used historical data...
...on printed job advertisements to create a jobs opening rate for years prior to 2000. And if you look at their Beveridge Curve for economic recoveries going back over 60 years, you see the current shift is actually quite typical. The curve appears to shift quite a bit (up and over to the right) after large recessions and shifts back (down and over to the left) after the labor market recovers from the large shock...
Over at Equitable Growth: Note that when Adam Smith says "seems at first sight", he is not signaling that he is about engaging in pointless contrarianism and about to reverse field and explain that a prosperous working class is an inconvenience rather than an advantage to society. It was an age of lower irony in which often things are as they seem: he is saying, rather, that you do not need to take more than a first glance for the answer to be "abundantly clear":
Adam Smith: Smith: Wealth of Nations, Book I, Chapter 8: "Is this improvement in the circumstances of the lower ranks of the people...
...to be regarded as an advantage or as an inconveniency to the society? The answer seems at first sight abundantly plain. Servants, labourers and workmen of different kinds, make up the far greater part of every great political society. But what improves the circumstances of the greater part can never be regarded as an inconveniency to the whole. No society can surely be flourishing and happy, of which the far greater part of the members are poor and miserable. It is but equity, besides, that they who feed, cloath and lodge the whole body of the people, should have such a share of the produce of their own labour as to be themselves tolerably well fed, cloathed and lodged. READ MOAR
In the absence of worthwhile DeLong smackdowns, continuing my reading of chapter 11 of David Graeber's Debt to see if it is in as bad shape from the viewpoint of simple accuracy of fact and coherence of argument as his chapter 12 was. The answer is "yes": chapter 11 is definitely in Chapter 11, if not Chapter 7:
I just have time to make two points today about this kindle screen:
Inaugural Michel Camdessus Central Banking Lecture on Financial Stability’, at the IMF
CHRISTINE LAGARDE: Oh, my goodness. Madam Chairman, you have impressed us enormously with a rich, dense, very informative and very candid read — your read of the current situation and how monetary and macroprudential — monetary policy and macroprudential tools could be used in sequence, in parallel, in different circumstances. And I would like to, maybe following the Stradivarius analogy of Michel, to stay loyal to (our man ?) today, what would you say? Would you say that macroprudential tools are second fiddle to the main Stradivarius of monetary policy? Or would you say that, depending on circumstances, macroprudential tools become the premier violon and have to deal with the issues as a first line of defense?
Over at Equitable Growth: Back in the 1920s the Progressive-Republican founder of The 20th Century Fund--now The Century Foundation—-Edward Filene argued that America did not need any flavor of "socialism". What it needed instead, he argued, was "welfare capitalism".
Socialism imposed heavy taxes and used the resulting revenue to provide for social welfare. In so doing it incurred all the efficiency losses of bureaucracy. It added to those the losses from coalition-building political logrolling. It added on to those the efficiency losses that ensued from decisions made by politicians responsible to voters who were by and large not the entrepreneurial job creators. More important, in his view, the redistributive part of the social insurance state was simply not necessary. The efficiencies of scale of modern mass production would guarantee that even an unequal society would be a society of general abundance and prosperity. READ MOAR
David Card et al.: Bargaining, Sorting, and the Gender Wage Gap http://eml.berkeley.edu/~pkline/papers/cck-june20.pdf
Theories of gender wage inequality:
Robert Peston: Peston's Picks: Merrill's Mess: All weekend, wave after wave of schadenfreude has been crashing on the head of Stan O’Neal...
...the chairman of Merrill Lynch. After Merrill announced those colossal losses on inventories of sub-prime loans reprocessed into noxious collateralised debt obligations, O’Neal could not survive.
The point is that Merrill’s historic strengths have been as an agent, a broker, not a risk-taker. So its veterans launched into the “I-told-you-so” dance when “new Merrill” came a cropper from putting its capital at risk in the manufacture of securities out of loans to US homeowners with poor credit histories.
Betsey Stevenson et al.: The Council of Economic Advisers: Missed Opportunities: The Consequences of State Decisions Not to Expand Medicaid: "24 States have not yet expanded Medicaid...
...including many of the States that would benefit most.... The Urban Institute estimate[s] that... 5.7 million people will be deprived of health insurance coverage in 2016. Meanwhile, these States will forgo billions in Federal dollars that could boost their economies.... If the States that have not yet expanded Medicaid did so: 1.4 million more people would have a usual source of clinic care.... States that have already expanded Medicaid... 1.0 million.... 651,000 more people would receive all care they feel they need in a typical year..... States that have already expanded Medicaid will achieve this outcome for 494,000 people.... 829,000 people would receive cholesterol‐level screenings once expanded coverage was fully in effect. States that have already expanded... 630,000.... 214,000 women between the ages of 50 and 64 would receive mammograms.... States that have already expanded... 161,000 women.... 345,000 women would receive pap smears.... States that have already expanded... for 261,000 women.... 15.4 million physician office visits.... States that have already expanded... 11.7 million....255,000 fewer people will face catastrophic out‐of‐pocket medical costs in a typical year.... States that have already expanded... 194,000.... 810,000 fewer people will have trouble paying other bills due to the burden of medical.... States that have already expanded... 348,000.... 757,000 additional people would report being in excellent, very good, or good health... States that have already expanded... 575,000 people....
$88 billion in Federal support through calendar year 2016. States that have already expanded... $84 billion.... Boosted employment by 85,000 jobs in 2014, 184,000 jobs in 2015, and a total of 379,000 job‐years through 2017. States that have already expanded... 356,000 job‐years.... $66 billion in total economic activity through 2017. States that have already expanded... $62 billion...
A Note: Prolegomenon to Any Useful Discussion of Modern American Finance (Brad DeLong's Grasping Reality...): In a standard economic transaction...
...it is no mystery where the value to both sides comes from. When I buy a double espresso from Café Nefeli for $2.25, the coffee is more valuabe to me then $2.25 is. Were I to consider only the experience and not worry about fairness consideration--that is, if I did not worry about thinking that I was turning into a chump--I would pay $5.00 for a double espresso (if Café Nefeli were the only possible place I could get one and if that is what they charged) and count myself happy. And sometimes $10.00.
Over at Project Syndicate: [The Federal Reserve Needs to Fulfill Its Proper Global Role:]
No sooner do I manage to get my act together to deal with the shortage of high-quality DeLong Smackdowns by starting a close reading of David Graeber's Debt but Cosma Shalizi manages to show up with a high-quality DeLong smackdown. So the reading of the first text page of Graeber's chapter 11--which is, I think, thorough in chapter 11, if not chapter 7--and the first five historical errors he commits must wait until next week.
The eminent Cosma Shalizi writes:
Charlie Jane Anders: Brad DeLong, Carol Queen and Farhad Manjoo at Writers With Drinks!:
We bring you "An Evening of Oversharing About Money"!
When: Saturday, July 12, from 7:30 PM to 9:30 PM, doors open 6:30 PM
Who: J. Bradford DeLong, Carol Queen, Farhad Manjoo, Frances Lefkowitz and Charlie Jane Anders
How much: $5 to $20, all proceeds benefit the Center for Sex and Culture.
Where: The Make Out Room, 3225 22nd. St., San Francisco
Adam Smith: Smith: Wealth of Nations, Book I, Chapter 8: "The liberal reward of labour...
...as it encourages the propagation, so it increases the industry of the common people.... A plentiful subsistence increases the bodily strength of the labourer, and the comfortable hope of bettering his condition, and of ending his days perhaps in ease and plenty, animates him to exert that strength to the utmost. Where wages are high, accordingly, we shall always find the workmen more active, diligent, and expeditious, than where they are low; in England, for example, than in Scotland; in the neighbourhood of great towns, than in remote country places. Some workmen, indeed, when they can earn in four days what will maintain them through the week, will be idle the other three. This, however, is by no means the case with the greater part.
Alfred Marshall (1885): Cambridge Inaugural Lecture: The Present Position of Economics "It is commonly said that those who set the tone of economic thought...
...in England in the earlier part of the century were theorists who neglected the study of fact, and that this was specially an English fault. Such a charge seems to be baseless. Most of them were practical man with a wide and direct personal knowledge of business affairs. They wrote economic histories that are in their way at least equal to anything that has been done since. They brought about the collection of statistics by public and private agencies and that admirable series of parliamentary inquiries, which have been a model for all other countries, and have inspired the modern German historic school with many of their best thoughts.
As the W/Ynet ratio rises the net rate of profit is likely to fall, and so it is highly unreasonable to imagine that the net savings rate out of income snet will not fall rapidly and substantially and so greatly attenuate any rise in W/Ynet. Thus substantially rising W/Y is not a problem that we should expect to see.
Should the W/Ynet ratio rise substantially, the net rate of profit is likely to fall, and so the share of income earned from wealth will rise only slightly--and may not rise at all. This is not a problem: this is wealthholders providing workers with lots of capital services at a cut-rate price. Thus rising W/Y is likely to rather than lowers working-class incomes and is unlikely to worsen the income distribution, and so the prospect is not a problem.
Even should the W/Ynet ratio rise substantially and even should the net rate of profit not fall, wealth is unlikely to become or remain highly concentrated. A high W/Y and a high r x W/Y is a big problem only if wealth becomes and remains highly concentrated, and that we are unlikely to see.
Even should the W/Ynet ratio rise substantially and even should the net rate of profit not fall and even should wealth become and remain highly concentrated, plutocrats are highly likely to get into status games of spend-my-money-to-change-the-world, and so we are unlikely not have a world in which heirs and heiresses exercise undo influence over our priorities. Even should the distribution of wealth and of income become markedly more unequal, it is unlikely to distort society's choices and lead to a grossly unequal distribution of utility. READ MOAR:
Over at Equitable Growth: In relatively short order after John Paulson and company figured out how to sell mortgage finance short--howto collect the money from selling MBS to addled investors without having to first finance the construction of five-bedroom houses with swimming pools in the desert between Los Angeles and Albuquerque--the housing bubble reached its peak.
It seems at least plausible that if Paulson and company had been in business in 2004 the bad bets of MBS buyers would have gone into the pockets of short sellers rather than being wasted financing the construction of houses people really do not want to live it. And it seems at least plausible that if the supply of MBS had not been limited by housing construction, the price peaks would have been lower, the losses when MBS prices returned to fundamentals would have been less, and that even with all of the portfolio and risk-management dysfunction in the too-big-to-fail money-center banks and all the regulatory dysfunction at the Federal Reserve the bubble collapse would not have taken down our too-big-to-fail money-center banks, and we would not be in our current mess. READ MOAR
Whether it is highway money, Defense Department money, agricultural subsidy money, or whatever, the governments of the states have long been eager and enthusiastic to do whatever they can to attract their share and more of what the federal government is offering to spend. Even where it is worthless for our general welfare--as much of Defense Department spending programs have been worthless for our general welfare--states have actively and aggressively competed for federal dollars.
Except for Medicaid money.
Over at Equitable Growth: I am on the hop from event to event right now, so I do not have time to give the keen-witted Greg a full and comprehensive answer to his question--nevertheless, the question does deserve a full, comprehensive, yet short answer. So may we crowdsource this?
On Wed, Jun 25, 2014 at 8:58 AM, Greg Ip wrote:
... 2) Separate but related, I am trying to describe the origins of stabilization policy. Keynes created a world in which such policy was needed; I assume it displaced a classical view of the business cycle which contained no role for government intervention. Can you point me to an article, by you or anyone else, that describes the classical view of the business cycle - and how Keynes displaced it?
2) You know, that is a remarkably hard question. There are really, three different 'classical' theories of the business cycle: READ MOAR
I remember that I found this, by Amartya Sen, totally convincing when I first read it 32 years ago. And I still find it totally convincing today:
Amartya Sen: Just Deserts: "This book... a collection of [P.T.] Bauer’s essays...
...gives an excellent account of his main theses on development policy and international relations. It also presents his approach to economic equality and inequality in general, and places his discussions of development against the background of some of the broadest issues of political economy.... I shall argue that Bauer’s approach—in spite of its power and appeal—is fundamentally flawed, and that his analysis cannot bear the weight of the conclusions that he rests on it.