Over at Equitable Growth: Kenneth Rogoff: Inequality, Immigration, and Hypocrisy: "Europe’s migration crisis exposes a fundamental flaw, if not towering hypocrisy, in the ongoing debate about economic inequality...
And Kenneth Rogoff fakes right:
Wouldn’t a true progressive support equal opportunity for all people on the planet, rather than just for those of us lucky enough to have been born and raised in rich countries? READ MOAR
J. Bradford DeLong on May 20, 2015 at 03:00 PM in Economics: Growth, Economics: Inequality, Economics: Macro, Moral Responsibility, Philosophy: Moral, Political Economy, Politics, Streams: Economics, Streams: Equitable Growth, Streams: Highlighted, Twentieth Century Economic History | Permalink | Comments (16)
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Over at Equitable Growth: I see that over on the Twitter machine Noah Smith is engaging Paul Romer, in an attempt to get Paul to elucidate his "Mathiness" paper. I think Noah Smith misunderstands Paul Romer.
As I see it, Paul Romer believes that George Stigler laid down the methodological principal that one should always assume perfect competition in one's microfoundations, and in so doing Stigler was acting as an ideologue rather than a technocrat, and that this is harmful.
It seems to me that Paul is more right than wrong.
A POLICY AGENDA FOR THE KNOWLEDGE ECONOMY
- Policy debate dominated by discussions of ‘reform’
- Policy agenda set in 1980s >* Irrelevant or counterproductive today
- We need a 21st century policy agenda
- Previous reform era provides a way to think about this.
Over at Equitable Growth]1 Today's best piece I have read on the internet is by the extremely sharp John Quiggin:
John Quiggin: The Last Gasp of (US) [Left-]Neoliberalism: "US neoliberalism is... closer to Blair’s Third Way than to Thatcher....
...[US] neoliberalism maintained and even extended ‘social liberalism’, in the US sense of support for equal marriage, reproductive choice and so on. In economic terms, its central claim was that the goals of the New Deal... could best be pursued through market-friendly policies that would earn the support of the financial sector.... [The] signature issues for US neoliberals were free trade, cuts in ‘entitlement’ spending, and school reform... a ‘grand bargain’, in which Republicans would accept minimal increases in taxation in return for the abandonment of most of the Democratic program. The Clinton administration was explicitly neoliberal.... And, while Obama’s 2008 election campaign was masterfully ambiguous, his first Administration neoliberal through and through.... But developments since then, including the global financial crisis, the failure of school reform and increasing awareness of entrenched inequality have destroyed the appeal of neoliberalism...
I think that John Quiggin is largely correct--if you correct "abandonment" to "reconfiguration". READ MOAR
Live from The Roasterie: Do Americans no longer buy non-Apple laptops? Or is it just that Americans whose jobs allow them to sit in cafes that sell $4 espresso drinks in the morning no longer buy non-Apple laptops?
UPDATE: Oh, excellent! Here is the transcript.
Heather Boushey and Larry Summers posted their prepared thoughts for last week's Brookings-Okumn event. They are very good, and are well worth reading. The others--Wessel, Mankiw, Kearney, Wolfers--alas, did not. I am told that they were very good in the panel discussion. But where am I going to find the hour and a half to listen to it? And there appears to be no transcript. Serious bummer.
Over at Equitable Growth: From last week:
The "free trade because Adam Smith comparative advantage BAM" stuff has got to stop! http://t.co/c5q1Oxkvf7— Noah Smith (@Noahpinion) April 25, 2015
Alma Mater Blogging: Greg Mankiw's desire to move Harvard to someplace better adapted to human life than Massachusetts was triggered by:
Greg Mankiw's Blog: Time for Harvard to Move?: The Wall Street Journal reports one of the most pernicious ideas I have heard of late:
Massachusetts legislators, demonstrating a growing resentment against the wealth of elite universities in tight economic times, are studying a plan to levy a 2.5% annual tax on the portion of college endowments that exceed $1 billion. The effort takes aim at one of the primary economic engines of the state...
Live from Crow’s Coffee: 435 Magazine. I was reading 435 Magazine (offices at 11775 W. 112th Street, Suite 200, Overland Park, KS 66210, ten miles away from here) on the airplane on my way back from California to Kansas City. I found myself getting scared.
The scary thing is that Los Angeles is not that very much larger than Kansas City. And yet it has about nine times the population.
Over at Equitable Growth: The extremely-sharp Dean Baker writes:
E.J. Dionne and Harold Meyerson... interesting columns... suffer from the same major error.... The loss of manufacturing jobs and downward pressure on the wages of non-college educated workers... as... the result of a natural process of globalization. This is wrong. The downward pressure on wages was the deliberate outcome of government policies designed to put U.S. manufacturing workers in direct competition with low-paid workers in the developing world. This was a conscious choice. Our trade deals could have been designed to put our doctors and lawyers in direct competition with much lower paid professionals in the developing world. READ MOAR
Over at Equitable Growth: Nick Bunker is out of the gate with his take on the surprisingly low 0.2%/year first-quarter US real GDP growth rate:
...during the recovery, we should be standing by the alarms but not quite sounding them yet. Personal consumption expenditures... contributed 1.31 percentage points... a deceleration.... Net exports were the biggest drag... 1.25 percentage points... a dramatic decrease in the level of exports.... Gross fixed investment was also a drag... shaving off 0.4 percentage points.... READ MOAR
Over at Equitable Growth The advocates for the TPP and TATIP should be making the following points:
Those are the arguments that should be made--if they can--to command general support for the TPP and the TATIP.
But, as Dean Baker points out, those are not the arguments that are being made: READ MOAR
Live from the Roasterie: And If It Snows That Stretch Down South Won’t Ever Stand the Strain…
I must confess that I had thought that Wichita would have done much better in employment during the oil boom of the past seven years:
Over at Equitable Growth: Ken Rogoff--of whom my standard line is: everything he says is very interesting, and almost everything he says is completely correct--is weighing in: on secular stagnation, the global savings glut, the safe-asset shortage, the balance-sheet recession, whatever you want to call it. His view is that excessive debt issue and overleverage are at the roots of most of our problems. He thus believes that our difficulties will end when deleverage has reduced the overhang of risky and underwater debt to a sustainable level: READ MOAR
Over at Equitable Growth: Trying to get the issues straight in my mind here...
>firstname.lastname@example.org: Dear Mr. Delong: I hope this note finds you well. In light of recent activity in Congress related to the Trade Promotion Authority legislation, I write to invite you to join an off-the-record conference call with XXXXXX senior staff for an update on the current state of play. The call is scheduled for today, Tuesday, April 21 at 3:45 p.m. ET
Dear Mr. White:
Thank you very much for your invitation. I will try. I will have to move a couple of things--and I am not the most important person involved in them...
But if you want to know where my concerns are, let me start by quoting something that I wrote before http://www.bradford-delong.com/2015/03/the-debate-over-the-trans-pacific-partnership.html: READ MOAR
Over at Equitable Growth: This is what Ben Friedman wrote about in the late 1970s:
...Chapter 4, on business investment... weak... [because of] a special problem of lack of business confidence, driven by fiscal worries, failure to make needed structural reforms, and maybe even careless rhetoric... [or] weak because the economy is weak[?]... The IMF comes down strongly for the second view....
But wait, there’s more.... To deal with... reverse causation... it looks for episodes of weak growth... clearly caused by... fiscal consolidation... [and] manages in passing both to refute a very widely held but false belief... that government deficits necessarily ‘crowd out’ investment, so that reducing deficits should free up funds that lead to higher investment. Not so, says the IMF: when governments introduce deficit-reduction measures, investment falls instead of rising. This says that the deficits were crowding investment in, not out... empirical confirmation of the existence of the paradox of thrift! Remarkable stuff. Someone tell Wolfgang Schäuble. READ MOAR
It could have turned out very differently.
It could have been that the money-center universal banks did understand their derivatives books. It could have been that, after the financial crisis, trust in financial intermediaries would rebuild itself quickly. It could have been that the North Atlantic's central banks would have been able to nail market expectations to a rapid return to normalcy, thus providing cash holders with powerful incentives to spend. It could even have been the case that fiscal expansion would have proven ineffective. It was Karl Smith who pointed out to me that in the guts of even the IS-LM model, fiscal policy expands
I+G private spending [satisfied, RJW?] by reducing the perceived average riskiness of and thus getting households to hold more. In the model it is guaranteed that a sovereign that issues more debt thereby necessarily reduces the perceived riskiness of average debt. In the world not. READ MOAR
The Beverly Hilton | 9876 Wilshire Blvd. | Beverly Hills, CA 90210
Tuesday, April 28, 2015 / 3:45 pm - 4:45 pm
Moderator: Josh Barro, Correspondent, New York Times
- Brad DeLong, Professor of Economics, U.C. Berkeley
- Jeremy Howard, CEO, Enlitic
- Gerald Huff, Principal Software Engineer, Tesla Motors
- Amy Webb, Digital Media Futurist; Founder, Webbmedia Group
For centuries, people have worried that new technologies will destroy jobs without creating enough new ones, and every time the doomsayers have been proven wrong. But today, with disruptive advances occurring at dizzying speed, some worry that the time may finally have come when more jobs are destroyed by technology than are created. One 2013 report by Oxford University researchers concluded that 47 percent of U.S. jobs are threatened by automation. Should workers be worried, or is the fear overblown? Is technology--from robots to intelligent digital agents--our friend or a threat? If the latter, what do we need to do to ensure employment by the middle class and others? How can we reorganize our business and economic system to avert more economic turmoil?
Tags: Information Economy, Labor Market, Economic Growth, Inequality, Rise of the Robots, Josh Barro
Over at Equitable Growth: Martin Sandbu has a truly interesting and excellent comment on my first, inital draft of thoughts for next week's Blanchard-Rajan-Rogoff-Summers "Rethinking Macroeconomics" conference.
But I do think he oversimplifies one crucial issue: dynamic efficiency.
Elementary neoclassical growth theory tells us that to the extent that patience and tolerance for intergenerational inequality between the past and the future allows, societies should try to push their accumulation of capital toward the point of the Golden Rule: the point at which the marginal product of capital r has fallen to the economy's labor-force growth rate n plus its labor productivity growth rate g. And it tells us that an economy that has pushed accumulation beyond that point--that has g+n > r--has overdone it. Such an economy is dynamically inefficient, and it should disinvest in its accumulation of capital. READ MOAR
The United States economy today is surely not dynamically inefficient as far as its private capital stock goes. Its accumulated and properly-depreciated capital stock is equal to no more than four times annual net income. The 30% of net output paid as income to capital thus sets an average net product of capital of 7.5% per year. And the marginal product of capital is unlikely to be much lower. As this is a real return, it is to be compared with the sum of the 0.75% per year labor-force growth rate and a current trend labor-productivity growth rate of 1.5% per year. We see a very substantial wedge by which r is greater than n+g, for private capital.
But we as a society and as taxpayers invest not just in private capital wealth but in the wealth of our government as well. Our investments in the wealth of our government produce cash flows through the government's infrastructure and organization. We invest in the wealth of our government by paying taxes used to build up infrastructure and organization and by buying back the debt that the government has previously issued. And it is here, I think, that the neoclassical growth-model dynamic-efficiency framework becomes relevant. The current ten-year TIPS rate for U.S. government debt is zero. Yes, that is: 0. There is no real resource cost to the U.S. government from selling a TIP today, using the money for a decade, and paying it back in 2025. n+g > r.
And n+g > r for a long, long time. Since the start of the twentieth century, only during the Great Depression has the interest on the debt as a share of its face value been more than the smoothed decade-average growth rate of the American economy.
What does this tell us about the value of using our tax money to pay down or even slow the growth rate of the national debt? Nothing good. It tells us that we taxpayers should disinvest our wealth from the government, and keep on doing so until, for claims on the government as well as for claims on the private sector, r > n + g.
But, you may ask, why is there this very wide gap between the marginal return to investments in private capital and the marginal return to investments in government wealth via paying down the government debt? Why a 7.5%/year real return on physical and organizational capital, a 5%/year return on investments in diversified equities, a 2.5%/year real return--4.5%/year nominal--on seasoned Baa corporate bonds, 0%/year real for investments in long-term government securities, and -1%/year at the moment for Treasury bonds purged of duration risk?
That is a great puzzle. It is strongly suggestive of major, major financial market dysfunction. Systematic risk can, we know, account for at most 100 basis points of that 850 basis point spread. But the origins, and the potential cures, of these enormous spreads have no bearing on the Golden Rule lessons--that it strongly looks like we need to invest a lot more in private physical and organizational capital, for the gap between 7.5% and 2.5% is far more than taxes, fees, enterprise, and other middle intermediaries can justify. And it strongly looks like we taxpayers need to invest a lot less in government wealth via being in a hurry to pay down our current debt, for the gap between 2.5% and 0% on that side is wide as well.
Over at Equitable Growth: I forgot to note Ben Zipperer's post on the labor market and the BLS Employment Report last Friday. And if I had, I would have stressed what the employment numbers tell us about how extraordinarily far to go we have before even semi-complete recovery.
Over at Equitable Growth: There have long been a bunch of hypotheses about why the American "middle class" feels "stressed" in spite of constant real incomes and what appears to me increased utility over time as more expenditure shifts toward information goods where consumer surplus is a higher multiple of factor cost:
Americans are used to seeing real incomes improve at 2%/year--doubling every generation--and they have not been getting that. Living little better than your predecessors a generation ago is an unpleasant shock.
The things that have been becoming cheaper are not seen as things key to your "middle class" status, while the things becoming more expensive and difficult to obtain--a detached house in a good neighborhood with a short commute, health insurance, secure pensions, a good education for your children--are things that it used to be taken for granted a middle-class family could get.
The widening gap between the middle class and the upper class.
Now come Emmons and Noeth with a new and very interesting hypothesis. READ MOAR
Over at Equitable Growth: DRAFT For “Rethinking Macroeconomics” Conference Fiscal Policy Panel
Comments, critiques, and suggestions very welcome…
I take my assignment to discuss “fiscal policy in the medium term” to mean that I should assume a régime in which the economy is not at the zero lower bound on safe nominal interest rates. Thus I can assume that monetary policy can adequately handle all of the demand-stabilization role.
With demand stabilization taken off the table, it seems to me that there are three big remaining questions, even if I just confine myself to the North Atlantic: READ MOAR
Over at Medium: I have a different take on Asness and Brown than Mark Buchanan does — largely because I take Asness and Brown’s claim to be just doing “climate-knowledge-free statistics” to be made in bad-faith.
Critics... well, probably better to call them "friends" have pointed out to me that last summer I didn't spend enough time linking to Dan Kervick's and Matt Brunig's contributions to the Piketty debate. I remember reading them at the time. And I cannot figure out why I didn't focus more on them--save probably because both seemed to me to be thinking along the lines I was thinking along, I didn't think that there was much new there. But usually I am anxious to promote people saying things that I think are smart and right, so it is a puzzle...
...The bearing of the foregoing theory on the first of these is obvious. But there are also two important respects in which it is relevant to the second.... The removal of very great disparities of wealth and income... through... direct taxation... [is] deterred by... the fear of making skilful evasions too much worth while... of diminishing unduly the motive towards risk-taking, but mainly, I think, by the belief that the growth of capital depends upon the strength of the motive towards individual saving, and that for a large proportion of this growth we are dependent on the savings of the rich out of their superfluity.
...We women on the farm no longer expect to work as our grandmothers did. With the high prices to be had for all kinds of timber and wood we now do not have to burn wood to save the expense of fuel, but can have our oil stove, which makes the work so much cooler in the summer, so much lighter and cleaner. There need be no carrying in of wood and carrying out of ashes, with the attendant dirt, dust and disorder.
April Fools' Festival, Day XVII: Note that the Insane Clown Posse picture at the top right is not a happy clown. This is an insane clown. And this is a somewhat dangerous clown...
Shorter Thomas Friedman: Because my cell phone company drops calls when I take the Acela, it is very important that Michael Bloomberg run for President in 2012. He should run on the platform of Obama's policies. Thus he should split the vote for those policies between two candidates, and so raise the chances for Mitt Romney--who is running against those policies--to squeak in.
...On average, title-loan borrowers pay $1,200 in fees per year on loans averaging $1,000, according to a report released Wednesday by the Pew Charitable Trusts, an independent nonprofit based in Philadelphia. The findings come as the Consumer Financial Protection Bureau plans a Thursday public hearing on payday loans...
As I have said, the extraordinary number of payday loan and title loan storefronts in Kansas City MO/KS relative to Portland OR takes me aback every time I go from one to the other. READ MOAR
Over at Equitable Growth: Each time I go directly from Kansas City, Missouri-Kansas to Portland, Oregon--or from Portland to Kansas City--I am struck by cognitive dissonance.
There is a very large gulf between what I see around me and what, say, the charts people put up on the screen for relative levels of real cost-of-living adjusted income in Kansas City and Portland. The numbers seem to say that the Kansas City MO/KS metropolitan area is about 10% richer than the Portland OR metropolitan area. But my eyes tell me that Portland is about 20% richer than Kansas City.
There are a number of possible resolutions: READ MOAR
Live from Downtown Portland: Starbucks is now also a wine bar, serving hipster staples like truffle mac & cheese and artichoke-goat cheese flatbread?! I must live in a cave…
It does make sense: having disrupted the coffee shop in the morning and afternoon, why not use the fixed and network assets to disrupt the evening wine bar business next?
I wonder if live music and slam poetry is next?
I steal my title from my esteemed ex-roommate and coauthor Robert Waldmann, who writes:
I wonder why wealthy investors vote for Republicans against their self-interest.
Brad DeLong wonders why they favor tight money and austerity against their self-interest....
Sir Terry Pratchett: April 28, 1948-March 12, 2015:
Terry Pratchett: The Pratchett Quote File v6.0: "You can't make people happy by law. If you said to a bunch of average people two hundred years ago 'Would you be happy in a world where medical care is widely available, houses are clean, the world's music and sights and foods can be brought into your home at small cost, travelling even 100 miles is easy, childbirth is generally not fatal to mother or child, you don't have to die of dental abcesses and you don't have to do what the squire tells you' they'd think you were talking about the New Jerusalem and say 'yes'.
For the record, let me say that the ten or so Terry Pratchett books that I have read have made me happy:
...TPP... will almost certainly have nothing on currency... It will not make it any easier, and could well make it more difficult, for the United States to address the trade deficit that results from having an over-valued dollar....
J. Bradford DeLong on March 12, 2015 at 09:23 AM in Economics: Growth, Economics: Inequality, Economics: Information, Economics: Macro, Obama Administration, Political Economy, Politics, Streams: Across the Wide Missouri, Streams: Economics, Streams: Equitable Growth | Permalink | Comments (27)
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Over at Equitable Growth: It is foolish to debate whether a trade agreement that has not yet been negotiated is a good idea and should be ratified.
Such a debate should properly begin only once there is something to analyze.
But here we are, so...
Robert Allen (2009): Engels's Pause: "Abstract: The paper reviews the macroeconomic data describing the British economy from 1760 to 1913 and shows that it passed through a two stage evolution of inequality...
...In the first half of the 19th century, the real wage stagnated while output per worker expanded. The profit rate doubled and the share of profits in national income expanded at the expense of labour and land. After the middle of the 19th century, real wages began to grow in line with productivity, and the profit rate and factor shares stabilized.... Technical progress was the prime mover behind the industrial revolution. Capital accumulation was a necessary complement. The surge in inequality was intrinsic to the growth process: technical change increased the demand for capital and raised the profit rate and capital’s share. The rise in profits, in turn, sustained the industrial revolution by financing the necessary capital accumulation. After the middle of the 19th century, accumulation had caught up with the requirements of technology and wages rose in line with productivity.
Ah. Crossing my desk today, two intersecting streams. The first is unpacking a stray box and finding in it a copy of NBER Working Paper 12398...
Back in 2004, you see, George W. Bush's Council of Economic Advisers, headed by Greg Mankiw, released its 2004 Economic Report of the President--and immediately found the reporters of Washington enthusiastically throwing a low-tech necktie party, with the Bush CEA as the center of attention. In 2006 Greg and Phil Swagel wrote a good retrospective:
over offshore outsourcing connected with the release of the Economic Report of the President (ERP) in February 2004, examines the differing ways in which economists and non-economists talk about offshore outsourcing, and assesses the empirical evidence on the importance of offshore outsourcing in accounting for the weak labor market from 2001 to 2004...
In their 2004 Economic Report of the President, Greg and company made three points with respect to outsourcing, of which I count two and a half as likely correct:
J. Bradford DeLong on March 10, 2015 at 08:27 AM in Economics: Growth, Economics: Inequality, Information: Better Press Corps/Journamalism, Information: Internet, Moral Responsibility, Obama Administration, Political Economy, Politics, Streams: Across the Wide Missouri, Streams: Economics, Streams: Equitable Growth, Streams: Highlighted, Weblogs | Permalink | Comments (8)
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Over at Equitable Growth: Last week I noted my wife Ann Marie's:
...a poster child for the clear articulation and active supervision standards required to determine whether an anticompetitive policy is indeed the policy of a given state, and entitled to immunity…. North Carolina’s Dental Board functioned more as a trade association with super powers granted to it by the state–apparently with an open-ended portfolio of responsibilities relating to dentistry in the state…. The dissent argues the delegation was valid.... READ MOAR
In their essay last fall on the state of economics, Seth Ackerman and Mike Beggs charged that today’s mainstream is irredeemably captured by conservative ideology. The good news is they’re wrong — Piketty’s work testiﬁes to that.
In the past year, the cyclical employment gap for prime-aged males has shrunk and is now smaller than the structural employment gap:
That is all.
Over at Project Syndicate: If we as a species can avoid nuclear war; curb those among us who are violent because they are God-maddened, state-maddened, or ethnicity-maddened; properly coordinate global action to reduce global warming from its current intolerable projected path to a tolerable one, adapt to the global warming that occurs, and distribute paying for the costs of that adaptation--well, if we can do all of those things, the human race can have a very bright future indeed.