Brad DeLong

Hoisted from Comments: What Was the Purpose of the Quadrivium, Anyway?: Medieval Curriculum Weblogging

DCA writes:

The Trivium (which did not include history, something regarded as inferior by (eg) Aristotle), was designed to produce advocates in the law courts of Rome. The Quadrivium I'm less sure about: it may have been added as a step on the way to real learning, namely the degree in theology. None of this had anything to do with "landed scions" for whom the relevant training was in jousting, dancing, hawking, hunting, heraldry, and other courtly activities. The claim that the landed aristocracy needed university learning was put forward in the Renaissance by self-interested humanists (see J. H. Hexter's article "The Education of the Aristocracy in the Renaissance". Remember that scholars were not usually gentlemen!

Proposed Panel 2: 2013 Kauffman Foundation Economic Webloggers' Conference #kauffman

DRAFT… DRAFT… DARFT…

9:50 AM: Economic Weblogging, and the Promise and Peril of New Modes and Orders in Education:

• Chair: ???, 9:50-9:52
• Speaker: Clay Shirky, 9:52-10:08
• Discussant: Ben Wildavsky, 10:07-10:15
• General discussion, 10:15-10:40

DRAFT INTRO: Higher education in the west was born at the start of the second millennium, as popes recognized that they needed more theologians and ecclesiastical bureaucrats and emperors recognized that they needed more judges. It was born in an environment in which books were incredibly costly—better to get everybody together in one room so they could take notes while somebody, the lector, read the book aloud in a lecture.

Higher education underwent its first Christiansenian disruption in the fifteenth century with Gutenberg.

The universities changed, and they survived, and they did more than survive--the coming of the printed book did not disintermediate the university but instead gave it and its faculty leverage.

It may well face its second Christensenian disruption today.

As Tyler Cowen, who with Alex Tabarrok is too busy attempting to do the disruption with Marginal Revolution University to join us today, tweeted last January: “Blogs already teach more people economics than Principles of Economics courses do.”

Here with us today to tell us where they think the curve of New Modes and Orders in education will take us--so that we can figure out how to get ahead of it-we have Clay Shirky from New York University, with discussant Ben Wildavsky from here at the Kauffman Foundation.

National Review: Say What You Like About the Tenets of National Socialism. Dude, at Least It's an Ethos!

In "The Big Lebowski" it was a joke. On the pages of National Review it is serious.

Have they no editors? Have they no minds?

The Corner: President Obama issued a statement yesterday to commemorate International Holocaust Remembrance Day. He noted that survivors who bore witness to “the horrors of the cattle cars, ghettos, and concentration camps have witnessed humanity at its very worst and know too well the pain of losing loved ones to senseless violence.”… Nazism… is hardly “senseless.” By the early 1930s, the Nazi party had hundreds of thousands of devoted members and repeatedly attracted a third of the votes in German elections; its political leaders campaigned on a platform comprising 25 non-senseless points…. [M]any sensible Germans were persuaded…. [Obama's] sanitized version of events, both past and present, is surely more comforting. It’s also truly senseless.

Grand Mal Economic Seizures

Project Syndicate: Across the North Atlantic region, central bankers and governments seem, for the most part, helpless in restoring full employment to their economies. Europe has slipped back into recession without ever really recovering from the financial/sovereign-debt crisis that began in 2008. The United States’ economy is currently growing at 1.5% per year (about a full percentage point less than potential), and growth may slow, owing to fiscal contraction this year.

Industrial market economies have been suffering from periodic financial crises, followed by high unemployment, at least since the Panic of 1825 nearly caused the Bank of England to collapse. Such episodes are bad for everybody – workers who lose their jobs, entrepreneurs and equity holders who lose their profits, governments that lose their tax revenue, and bondholders who suffer the consequences of bankruptcy – and we have had nearly two centuries to figure out how to deal with them. So why have governments and central banks failed?

DRAFT… DRAFT… DARFT… Possible Schedule for the Fifth Annual Kauffman Foundation Economics Webloggers Forum 2013: April 12, 2013 #kauffman

DRAFT… DRAFT… DARFT… Fifth Annual Kauffman Foundation Economics Webloggers Forum 2013

Invitation only, alas: our budget and our space is limited…

Is this conference about economic webloggers, about weblogging economists, or about the economics of weblogging? All three, I say…

TIME LIMITS FOR SPEAKERS, DISCUSSANTS, AND PANELISTS WILL BE RUTHLESSLY ENFORCED!!

Questions, comments, and interventions in general discussion periods must be relevant to what has been said on the panel!! (It is assumed and taken as said that all questions, comments, and interventions are preceded by: "You really should go and carefully and comprehensively study my weblog if you are to have a prayer of properly understanding any of this stuff".)

Anticipatory posting of draft remarks; anticipatory posting of possible questions, comments and interventions; live-tweeting during the sessions; live-weblogging during the sessions; and post-conference after-action weblogging of what one really should have said at the conference in accordance with l'esprit de l'escalier is not just permitted, but required…

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THURSDAY, APRIL 11, 2013:

6:15 PM CT: Bus departs hotel for Kauffman Foundation

6:30 PM CT: Drinks and Dinner, Kauffman Foundation Dining Room

8:30 PM- CT: Webcrawling, Kauffman Labs (if demand); or pubcrawling, various locations (if demand)

FRIDAY APRIL 12, 2013:

7:45 AM CT: Bus departs hotel for Kauffman Foundation

8:00 AM CT: Breakfast, Kauffman Foundation Conference Center

8:30 AM CT: Introduction, J. Bradford DeLong

8:40-8:45 AM CT: Straggle-in and caffeination top-off (for sleepyheads)

8:45-9:35 AM CT: Visualizing the Future and Grappling with the Present, Opportunities and Challenges for Webloggers in

• Chair: J. Bradford DeLong, 8:45-8:47
• Speaker: Hal Varian, 8:47-9:02
• Discussant: Joshua Gans, 9:02-9:10
• General discussion, 9:10-9:35

9:35-9:50 Break

9:50-10:40 AM CT: The Potential Forthcoming Disruption of Higher Education, Opportunities and Challenges for Webloggers in

• Chair: ???, 9:50-9:52
• Speaker: Clay Shirky, 9:52-10:07
• Discussant: Ben Wildavsky, 10:07-10:15
• General discussion, 10:15-10:40

10:40-10:55 Break

10:55-11:45 AM CT: The Future Ecology of Financial Journalism, Opportunities and Challenges for Webloggers in

• Chair: ???, 10:55-10:56
• Panelist: Cardiff Garcia, 10:56-11:04
• Panelist: Joe Weisenthal, 11:04-11:12
• Panelist: Alison Schrager, 11:12-11:20
• General discussion, 11:20-11:45

11:45 AM-12:45 PM CT: LUNCH

12:45-1:35 PM CT: The Future Ecology of Mainstream Journalism, Opportunities and Challenges for Webloggers in

• Chair: ???, 12:45-12:46
• Panelist: Bruce Bartlett, 12:46-12:54
• Panelist: Megan McArdle, 12:54-1:02
• Panelist: Josh Barro, 1:02-1:10
• General discussion, 1:10-1:35

1:35-1:50 Break

1:50-2:40 PM CT: The Future Ecology of Thinktanks, Policy Advocacy, the Public Sphere, and Public Policy, Opportunities and Challenges for Webloggers in

• Chair: J. Bradford DeLong, 1:50-1:51
• Panelist: Stan Collender, 1:51-1:59
• Panelist: Robert Litan, 1:59-2:07
• Panelist: Sarah Kliff, 2:07-2:15
• General discussion, 2:15-2:40

2:40-2:55 Break

2:55-3:45 PM CT: The Future Ecology of Standard Ivy-Covered Academia, Opportunities and Challenges for Webloggers in

• Chair: ???, 2:55-2:57
• Speaker: Mark Thoma, 2:57-3:12
• Discussant: Stephanie Kelton, 3:12-3:20
• General discussion, 3:20-3:45

3:45 PM CT: Conclusion, J. Bradford DeLong

4:00 PM CT: Adjournment and (for some) sprint for airport…

6:00 PM CT: Cocktails, dinner, webcrawling, pubcrawling for those remaining…

Hoisted from the Archives: The Safe Asset Shortage and the Current Downturn

In 1829, John Stuart Mill made the key intellectual leap…. Mill saw that excess demand for some particular set of assets in financial markets was mirrored by excess supply of goods and services in product markets, which in turn generated excess supply of workers in labor markets…. If you relieved the excess demand for financial assets, you also cured the… shortfall of aggregate demand….

When the excess demand is for liquid assets used as means of payment – for “money” – the natural response is to have the central bank buy government bonds for cash….

When the excess demand is for longer-term assets – bonds to serve as vehicles for savings that move purchasing power from the present into the future – the natural response is… induce businesses to borrow more and build more capacity, and encourage the government to borrow and spend….

When excess demand is for high-quality assets – places where you can park your wealth and be assured that it will still be there when you come back – the natural response is to have credit-worthy governments guarantee some private assets and buy up others, swapping them out for their own liabilities and thus diminishing the supply of risky assets and increasing the supply of safe assets.

Cosma Shalizi vs. the Fen-Dwelling Bayesians

Cosma Shalizi: When Fen-Dwelling Bayesians Can't Handle the Truth:

Attention conservation notice: Self-promotion of an academic talk, based on a three-year-old paper, on the arcana of how Bayesian methods work from a frequentist perspective.

Because is snowing relentlessly and the occasional bout of merely freezing air is a blessed relief, I will be escaping to a balmier clime next week: Cambridgeshire.

"When Bayesians Can't Handle the Truth", statistics seminar, Cambridge University: Abstract: There are elegant results on the consistency of Bayesian updating for well-specified models facing IID or Markovian data, but both completely correct models and fully observed states are vanishingly rare. In this talk, I give conditions for posterior convergence that hold when the prior excludes the truth, which may have complex dependencies. The key dynamical assumption is the convergence of time-averaged log likelihoods (Shannon-McMillan-Breiman property). The main statistical assumption is a building into the prior a form of capacity control related to the method of sieves. With these, I derive posterior and predictive convergence, and a large deviations principle for the posterior, even in infinite-dimensional hypothesis spaces; and clarify role of the prior and of model averaging as regularization devices. (Paper)

Place and time: 1 February 2013, 4-5 pm in MR 12, CMS

And my views on all this hoisted from archives:

Proposed Panel 1: 2013 Kauffman Foundation Economic Webloggers' Conference: Friday April 12, 2013

9:15 AM: Economic Weblogging and the Future: Speaker: Hal Varian. Discussant: Joshua Gans:

DRAFT PANEL INTRO: In the beginning things were simple. You became a weblogger. Whenever you read something interesting—on or off the internet—you noted it. If it was online, you dropped a link to it.

Then people responded to comments about things you had written about people’s critiques of others’ writings, and you went from a singular voice, crying in the wilderness, as you snacked on your locusts and wild honey, to part of a collective, communal conversation: “the generation’s finest minds meeting on comment threads, battling roving bands of trolls, and holding the great conversations of the age!”

And then there became simply too much to read. We found ourselves reduced from insightful commentators and analysts to frontline aggregators, and then we gave up on aggregating anything outside our own narrow circles.

We know that chunk of the world and of the now that we see, but that is becoming a smaller slice of the Cosmic All with each passing day. How do we perform our role now? And how will be perform our role in the future, and with what tools are available? How will we do our jobs in the future?

Google as a company lives ten to twenty years in our future anyway. And Google does so because it specializes in thinking about how to drink from the information firehose without getting self-waterboarded. So here to introduce our conference and give us a more informed view than we have on both the future and on what tools we should already be using in the present, we have Google’s Chief Economist Hal Varian—with discussion by the University of Toronto’s Josh Gans, one of the proprietors of http://digitopoly.org.

82,413 More Pageviews, and We Hit 100,000,000!

That is all...

Randall Munroe Explains Why There Are No Rich Frequentist Statisticians: New Yorker #fail Vulnerable to a Dutch Book Weblogging

Randall Munroe:

Gary Marcus and Ernest Davis:

Bayesian Statistics and what Nate Silver Gets Wrong: The Bayesian approach is much less helpful when there is no consensus about what the prior probabilities should be…. In actual practice, the method of evaluation most scientists use most of the time is a variant of a technique proposed by the statistician Ronald Fisher in the early 1900s. Roughly speaking, in this approach, a hypothesis is considered validated by data only if the data pass a test that would be failed ninety-five or ninety-nine per cent of the time if the data were generated randomly. The advantage of Fisher’s approach (which is by no means perfect) is that to some degree it sidesteps the problem of estimating priors where no sufficient advance information exists. In the vast majority of scientific papers, Fisher’s statistics (and more sophisticated statistics in that tradition) are used.

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

Those of us economists who grumble about Bayesian statistics don't want us to move backward to Frequentism but forward to (prior probabilities) x (value of being right) -- the decision-theory counterparts of the so-called risk-neutral valuation method in finance...

Those of us economists who do use frequentist statistics know something very important that Marcus and Davis show no sign at all of knowing: that if you fail to reject the null hypothesis at 0.05, you do not conclude (even provisionally) that the null hypothesis is true--instead, you go gather more data and test again until you can either reject the null against the alternative or reject (the interesting) alternative(s) against the null.

That's science!!

Chief Justice Roberts Told Obama to Use Recess Appointments to Fill the NLRB

Think Progress:

Chief Justice Roberts: Why Isn't Obama Making Recess Appointments To The NLRB?: NEAL KATYAL, DEPUTY SOLICITOR GENERAL: They were named in July of last year. They were voted out of committee in October. One of them had a hold and had to be renominated. That renomination took place. There was a failed quorum — a failed cloture vote in February. And so all three nominations are pending. And I think that underscores the general contentious nature of the appointment process with respect to this set of issues.

CHIEF JUSTICE ROBERTS: And the recess appointment power doesn’t work why?

Tobacco Lobbyists Wearing Fire Chief Hats at the Committee for a Responsible Federal Budget!

Paul Blumenthal and Ryan Grim: CRFB Corporate Ties: Budget Watchdog Funded By Big Tobacco In 1990s Health Care Fight

Alan Blinder: How to Worry About the Deficit: (1) Don't; (2) Wait a Few Years; (3) Then Worry About Healthcare Costs

I would say:

1. We should start worrying about health-care costs now--i.e., actually staff up the IPAB, encourage private insurers to start cutting specialists' reimbursement rates, and aggressively assault scope-of-practice restrictions.

2. Right now we should worry that our current deficit this year and next year and even the year after is too small.

But, otherwise, Alan Blinder is 100% correct:

How to Worry About the Deficit: (1) Don't; (2) Wait a Few Years; (3) Then Worry About Healthcare Costs.

Paul Ryan Resorts to Word Salad on Tax Policy

Nobody has any business supporting this branch of Republicans. Nobody at all.

Jonathan Chait:

Paul Ryan Breaks Down Under Wonkterrogation: Ezra Klein then asks what evidence [Paul Ryan] has that taking “another $600 billion or $700 billion out of tax expenditures” would harm the economy. Tax expenditures means eliminating tax deductions for specific things, rather than raising rates. Here’s Ryan’s reply:

I think rates matter. I think the statutory rate matters at the end of the day.

Note that this is not the premise of the question at all. He was asked about reducing tax deductions, leaving rates in place, and stated he wouldn’t do it because he likes low rates.

How Can We Know How Much Government Debt Is too Much? By Looking at Prices as Well as Quantities

The highly intelligent and thoughtful Ken Rogoff writes another column where I simply cannot grasp the force of his argument:

World is right to worry about US debt: The idea that one should just ignore all these problems and apply crude Keynesian stimulus is a dangerous one. It matters a great deal how the government taxes and spends, not just how much. The US debt level is a constraint. A growing number of empirical studies, including my own joint work with Carmen Reinhart, suggest that the US has already reached a debt level that has been associated with slower growth in advanced countries. The fact interest rates are low today does not necessarily mean the US is an exception to this rule – take one look at stagnant Japan’s rates. The dollar’s reserve currency status buys America more room, but how much and for how long? A high debt burden is a problem precisely because it reduces a country’s capacity to deal with future shocks…

Three points:

Nicholas Oulton and María Sebastiá-Barriel Report That Hysteresis Effects of Financial Crises Are Large

Since an average financial crisis is associated with an increase in the output gap of about 5% points of GDP, the Oulton and Sebastia-Barriel finding that each year of ongoing financial crisis leads to a 1% point permanent fall in labor productivity gives us an η coefficient of 0.2 in the model of DeLong and Summers (2012).

The Theorists of the Moocher Class: Veronique de Rugy and Paul Ryan

Now politicians like Paul Ryan who used to say things like:

Right now about 60 percent of the American people get more benefits in dollar value from the federal government than they pay back in taxes. So we're going to a majority of takers versus makers...

are saying, instead:

No one is suggesting that what we call our earned entitlements--entitlements you pay for, like payroll taxes for Medicare and Social Security--are putting you in a 'taker' category. No one would suggest that whatsoever."

How long will it be before the likes of Veronique de Rugy stop denouncing Social Security, Medicare, Unemployment Insurance, etc. as programs that have turned us into "a nation of takers", and stop denouncing these programs beneficiaries as "moochers"?

It is in some ways very odd. It used to be that critics of the welfare state pointed to high net marginal tax rates and argued that they had high deadweight losses. Sometimes they had a point. Then, after bipartisan reforms, we got to a point where there were few high net marginal tax rates large enough to induce large deadweight losses.

And then, in the blink of an eye, the problem became not public-finance deadweight losses but, rather, the moocher class, the nation of takers, etc.

The Genealogy of "A Nation of Takers": Tuesday Morning Wingnut Watch Weblogging

• Brad DeLong : The Right's "47%" Theory Seems Stronger than Ever Among the Wingnuts...

• Brad DeLong : Michael Gerson and Paul Ryan Lie About What Republicans Say to Each Other About the "Takers"

• Brad DeLong : And Ci Devant Confederate Vice-President Alexander Stephens, Grasping at Straws

• Brad DeLong : Hoisted from Comments: Origins of the Right's "47%" Theory in 1970s Science Fiction

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• Brad DeLong : Steve M.: The Theory of the Moocher Class Lives!
• Brad DeLong : By No Means a Nation of "Takers"...
• Brad DeLong : We Are All Welfare Queens Now II
• Brad DeLong : Paul Ryan Also Believes That America Is at Least 47% Welfare Queens
• Brad DeLong : Mitt Romney and "Those People": Reading Ta-Nehisi Coates Weblogging
• Ta-Nehisi Coates: No One Left to Race Bait

Michael Gerson and Paul Ryan Lie About What Republicans Say to Each Other About the "Takers"

Taegan Goddard juxtaposes:

Paul Ryan, Now and Then:

"No one is suggesting that what we call our earned entitlements -- entitlements you pay for, like payroll taxes for Medicare and Social Security -- are putting you in a 'taker' category. No one would suggest that whatsoever."

--Rep. Paul Ryan (R-WI), criticizing President Obama's inaugural speech on Laura Ingraham's radio show today.

"Right now about 60 percent of the American people get more benefits in dollar value from the federal government than they pay back in taxes. So we're going to a majority of takers versus makers."

--Ryan, on Washington Watch in June 2010.

The Right's "47%" Theory Seems Stronger than Ever Among the Wingnuts...

It's important to register that none of the "47%" talk makes sense--but it does seem remarkably powerful...

Last September Mike Konczal gave a good taxonomy:

Four histories of the right's 47 percent theory: The right is splitting over whether or not the 47 percent argument is worth defending…. [T]he distribution of the tax burden isn't what the 47 percent theory is about. The 47 percent theory is all about grand political battles…. [T]here are two distinct parts… first is who creates and sustains the 47 percent as a political agent… second… is that the consequences need to be terrible….

2013 Fifth Annual Kauffman Foundation Economic Webloggers' Conference: Friday April 12, 2013

April 12, 2013: 9:00 AM: DeLong Introduction :: PROPOSED DRAFT: Thirty-five years ago my father bought my family’s first personal computer. Eighteen years ago my former roommate Paul Mende told me: “Hey, this World-Wide-Web thing is revolutionizing scholarly communication in Physics via the http://arxiv.org/ web server. You should check it out.” Fourteen years ago I noticed that both of my mentions in the then-most recent Foreign Affairs had come not from things I had published but from things I had thrown up on my website.

Twelve years ago I decided that somebody should go all-in and attempt to win the intellectual influence game via the strategy of always-putting-something-new-and-interesting-up-on-the-web. And as a guy with tenure at an institution that seemed to me to be the global optimum, I was one of the few people in the world who could do so with no significant possible downside risk.

And today here we all are.

Everybody here has shifted a great deal of their voice out of standard print and standard media into a form that bears at least a close cousinship to "weblogging". Everybody here has at least tried hard to significantly raise the level of the debate on matters economic. Everybody here has, I would argue, succeeded in significantly raising at least their corner of the debate above what it would otherwise have been. Everybody here has managed to do a great deal to disrupt and evade the dumbness filters that surround us and so much impede communication and education.

We all seem to have come remarkably close to maximizing the win, for some value of “maximize” and “win”--at least for ourselves if not for our institutions and our causes.

But the struggle is ongoing. There is still an enormous amount of headroom.

How do we keep maximizing our collective personal win? What are the tools, networks, and communities that we are going to use and deal with in the future? How will we deal with the other communities and modalities of communication on our borders. We, of course, seek total universal domination. Is that realistically attainable? If so, how? If not, for what should we settle and how should we settle for it? And how do we maximize the societal win?

---

So: Is this going to generate the kind of conversation on April 12 that it would be useful to see? What else should I say to open the conference?

Invitation only, alas: our budget and our space is limited...

Contra Raghu Rajan: Economic Stimulus Has Not Failed, It Has Not Been Tried (on a Large Enough Scale)

Perhaps the most fundamental truth of monetary economics that the government can always boost (or reduce) the flow of spending, and in a sticky-price world thus drive the flow of production and employment wherever it wants. As Ben Bernanke said, as a last resort to increase production and employment the government can simply throw money out of helicopters--less picturesquely, cut taxes and print cash to fill the resulting deficit, or to get a little more umph buy extra stuff and thus put some extra unemployed people to work in the process of getting the money out into the economy. Expansionary fiscal and expansionary monetary policy together trigger a rise in the circular flow of nominal spending, and unless price expectations are unanchored and prices flexible enough that 100% of that rise shows up as higher inflation, the greater circular flow puts more people to work making more stuff.

Economists fight over what happens when you do one of the two--when you just do a monetary expansion buying government bonds for cash (because people might not spend their extra cash but hoard it as a savings vehicle), or when you just do a fiscal expansion buying stuff or cutting taxes and paying for it not by printing money but by selling bonds (because purchases of government bonds that crowd-out purchases of private bonds simply shift demand away from private investment). Economists fight over what share of the increase in the nominal circular flow will show up as higher prices as opposed to higher output--over what the natural rate of unemployment is, and how it was affected by the crisis.

But back in 2007 I would have said that every macroeconomist who has done any homework at all believes that coordinated monetary and fiscal expansion together increase at least the flow of nominal GDP.

Now comes the very smart Raghu Rajan to say, apparently, not so:

Ramesh Ponnuru Denies Global Warming Thrice

Ramesh Ponnuru:

Obama's Bogus Journey: The world will little note nor long remember anything President Barack Obama said in his second inaugural…. Obama said that developing “sustainable-energy sources” is “what will lend meaning to the creed our fathers once declared.” Does anyone believe that in a week anyone will find that an arresting and compelling thought? Or credit it for being a thought at all?

And this is a person who is held up as an example of the "decent", "intellectual" right whom one can talk to…

Feh!

Hoisted from the Archives from October 2010: Can I Please Go Back to My Home Timeline Now? Output-Gap Weblogging

Brad DeLong (October 2010): Can I Please Go Back to My Home Timeline Now?:

If you had told me four years ago that come October 2010 I would be forecasting that highly-efficient American steel companies would be operating at only 70% of normal capacity in 2011, that the U.S. Treasury would be able to borrow for 30 years at 1.61%/year real and at 3.71% per year nominal placing all inflation risk on the creditor, and that the last six months' CPI inflation would be 0.1% at an annual rate...

...I would simply not have believed you. I would have said that that could happen in some strange alternate universe in which Spock was evil and had a beard, but not in any real world that could plausibly exist.

...I would have said that, in the real world, with that much excess capacity and those low borrowing rates, 90% of both the Senate and the House would get behind big programs to push taxes off into the future and pull infrastructure and other spending into the present.

How the &^#%^*@! did we get here? And why can't we get out?

Atlantic Monthly President Scott Havens Asks His Reporters to Please Shut Up and Stop Criticizing His Scientology "Sponsored Content" Campaign

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

Atlantic Monthly President Scott Havens Asks His Reporters to Please Shut Up and Stop Criticizing Scientology:

[W]e did not adequately work with the advertiser to create a content program that was in line with our brand… we made some mistakes trying to moderate the commenting thread. The general media climate also played a role…. I made the decision to suspend it pending further review. To be clear, our decision to pull the campaign should not be interpreted as passing judgment on the advertiser as an organization….

One important note for everyone: casting blame on any group or any individual is both unfair and simply not what we do at The Atlantic. And we most certainly should not speak to the press or use social media to attack our organization or our colleagues. We are a team that rises and falls together.

The full memo:

Remember, the Dormouse Says Medicare Is the Best-Working Part of Our Health Care Financing System: Not the Jefferson Airplane Weblogging

Ann Marie Marciarille:

Missouri State of Mind: Go Ask Alice: Alice… a friend… octogenarian… had fallen outside her home, broken her hip, had surgery, and was now in rehab for her Medicare-sanctioned 21 day stay… during Medicare’s open enrollment this past fall, financial exigencies had pressed her to abandon fee-for-service Medicare for a Medicare Managed Care plan. And, you guessed it, the Medicare Managed Care plan kicked in mid-treatment on January 1, 2013….

Disenrolled from fee for service Medicare – and unable to keep the surgical follow-up appointment from a surgeon who takes Medicare assignment but does not participate in Medicare Managed Care – and moved to a Medicare Managed Care rehab funded facility, Alice was advised that this was her problem to unravel. Her new Medicare Managed Care insurance plan vacillated between advising her she was not an enrollee in their plan and advising that, even were she an enrollee, no follow up post-surgical appointment was necessary….

Bear in mind that Medicare is that portion of our health care system that ranks highest in patient satisfaction data.

Not Being Asleep at the Switch: DeLong Self-Smackdown Watch

Paul Krugman:

What Did I Know, And When Did I Know It?: People have been poring over the just-released 2007 Fed transcripts, and the main surprise seems to be how complacent the institution was. Some members of the open market committee, including Janet Yellen and, let’s give credit where due, Tim Geithner, seem to have had a sense of dread; but the overall consensus was that nothing really bad would happen….

It seems to me that the really big determinant of whether you were intellectually ready for this crisis was how much attention you paid to events in the late 1990s — the crisis in emerging Asia, LTCM here, and the Japanese liquidity trap. I paid a lot of attention back then (as did Nouriel Roubini)…. And the result is that I’ve had a pretty good stretch; the only big thing I got wrong, I think, was in underestimating the stickiness of wages, and hence inflation, and therefore overestimating the risks of actual deflation…

I, by contrast, got it more-or-less completely wrong in that I drew the wrong lessons from the 1990s and before:

Joint Speaker John Boehner-Jake Sherman of Politico #FAIL

Jake Sherman:

House Republicans plan debt ceiling vote: House Republicans will vote next week on a bill that would raise the nation’s debt ceiling for three months and stop pay for members of Congress if the Senate doesn’t pass a budget, GOP officials said Friday…. It’s also a shift from House Speaker John Boehner…. But Boehner isn’t retreating on the debt ceiling without conditions; He’s framing this as a way to force Senate Democrats to lay out a budget…

Twenty-seventh Amendment to the United States Constitution:

No law, varying the compensation for the services of the Senators and Representatives, shall take effect, until an election of Representatives shall have intervened.

Everybody in the House and Senate now knows that this Charles Krauthammer-John Boehner "no pay for the Senate unless it passes a Budget Resolution" condition is unconstitutional.

But Jake Sherman does not tell the readers of Politico. Why not?

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

The Future of American Political Economy: Deficits-and-Debts the Very Thoughtful Ezra Klein Gets One Wrong, I Think, Weblogging

Ezra Klein writes:

After ‘the end of big government liberalism’: "Republicans swear to protect Medicare and Social Security, and most recognize they can no longer hope to repeal Barack Obama’s Affordable Care Act. Democrats voted to make the George W. Bush tax rates permanent for almost all Americans. This is not a stable peace. The Democrats have mostly won the debate over what the government should do, while the Republicans have mostly won the debate over how much the government should tax. Sadly, the two sides of that equation don’t come anywhere near to adding up. The war currently raging from cliff to cliff is about bringing taxation and commitments closer to alignment. Still, it seems probable that the conflict will, eventually, resolve largely in the Democrats’ favor. Paul Ryan’s budget and Mitt Romney’s presidential campaign both proved the difficulty Republicans have in advocating fewer government benefits. For all the sound, fury and impassioned promises of huge deficit reduction, in the end both Republican leaders swore that everyone would get their benefits. The savings, we were told, would come from painless mechanisms such as competition or more flexibility for the states. It is difficult to imagine such rhetoric uprooting treasured programs — all the more so after the Republicans lost the election. Democrats aren’t much better on taxes, but they don’t need to be. Historically, it is much easier to raise taxes by a half percentage point of gross domestic product than to kick tens of millions off public health insurance.

This seems to me to get the future dynamic wrong.

Brad Plumer Reads Page 69 of Alan Blinder’s ‘After the Music Stopped’

Alan Blinder’s ‘After the Music Stopped’:

Grab a new book. Open it to page 69. If the passage is compelling…. Today’s edition brings us to Alan Blinder’s “After the Music Stopped”…. On page 69, however, we see him pondering the origins of the subprime housing meltdown:

Consider the sad case of Alberto and Rosa Ramirez, a pair of Mexican American strawberry pickers in California whose annual income was in the $12,000 to $15,000 range and whose English was marginal at best. Egged on and assisted by an unscrupulous real estate agent looking for a big commission, the Ramirezes obtained a $720,000 mortgage from the notorious (and now bankrupt) New Century Financial Corporation to buy a $720,000 house. Yes, you read that right: They didn’t put a penny down, and the mortgage was forty-eight to sixty times their annual income!

The real estate agent apparently recorded their income as $12,000 per month and their occupations as “field technicians.” Slight errors. The Ramirezes moved into their McMansion with another family, and somehow, including receiving financial help from the real estate agent, managed to hang on for a few years before defaulting and losing their home to foreclosure.

Now, here’s a simple test of banking IQ: Should that mortgage have been granted? You may not be an experienced central banker, but your no answer is correct.

Unfortunately, New Century got the answer wrong in 2005 when it actually made this loan and many others like it. Other banks made similarly disgraceful loans. Yes, you are asking the right question: What were these guys smoking? Apparently, the weed was called greed. Make the loan, pocket the commission, pass it downstream, and let someone else worry about the consequences.

“Apparently, the weed was called greed.” Yep, unexpected!

I'm reviewing the book for Foreign Affairs. It's very good…

ROUGH TRANSCRIPT: Stimulus or Stymied?: The Macroeconomics of Recessions

Panel Moderator: J. BRADFORD DELONG (University of California-Berkeley)

Panelists:

• CARLO COTTARELLI (International Monetary Fund)
• PAUL KRUGMAN (Princeton University)
• VALERIE A. RAMEY (University of California-San Diego)
• HARALD UHLIG (University of Chicago)

DELONG: Between 1985 and 2007--the period of the "Great Moderation"--the Federal Reserve and the rest of the U.S. government on the west edge and the central banks and institutions of the European Union on the east edge of the Atlantic Ocean provided a broadly stable macroeconomic environment within which private-sector businesses, workers and investors could make their economic plans. In the U.S., on an annual basis: the rate of nominal GDP growth dropped below 4% for only 3 of those years and rose above 7% for only 2 of those 22 years; the rate of consumer price inflation rose above 5% for only 3 and fell below 2% percent for only 2 of those 22 years; and the civilian adult employment-to-population ratio remained between 60% and 64% for that entire period. And Western Europe experienced a similar "Great Moderation" with low inflation, relatively smooth growth, and diminishing unemployment.

As Robert Lucas put it in those halcyon days: “the problem of depression prevention has been solved”.

Then in 2008-9 the rate of nominal GDP growth in the U.S. crashed to -3%--a major, major downward surprise to anybody expecting and relying on a continuation of "Great Moderation" rates of nominal spending growth--the rate of consumer price inflation on an annual basis bottomed out at -2%, and the employment-to-population ratio dropped from 63% to between 58% and 59%, since when it has flatlined. In Western Europe the initial recession was smaller, but the subsequent labor market performance was even more disappointing, so that now the net fall relative to trend in Western European production and employment exceeds that in the United States.

The problem of depression prevention—and of depression cure—has not been solved.

Revising My Frequent-Reading List: Spring-Cleaning Weblogging

In 2012, the twenty political-economy weblogs that I most often visited were:

• http://www.cepr.net/index.php/blogs/beat-the-press/
• http://economistsview.typepad.com
• http://krugman.blogs.nytimes.com
• http://marginalrevolution.com
• http://blogs.reuters.com/felix-salmon/
• http://www.slate.com/blogs/moneybox.html
• http://noahpinion.blogspot.com
• http://capitalgainsandgames.com
• http://www.economist.com/blogs/freeexchange/
• http://jaredbernsteinblog.com
• http://factsandotherstubbornthings.blogspot.com
• http://www.voxeu.org
• http://ftalphaville.ft.com/
• http://thinkprogress.org/economy/issue/
• http://www.econbrowser.com
• http://nakedcapitalism.com
• http://bonddad.blogspot.com
• http://macroadvisers.blogspot.com
• http://www.samefacts.com
• http://www.washingtonpost.com/blogs/wonkblog/

How should I change this list in 2013?

I went to http://technorati.com and searched for the top weblogs on "economics". After pruning the list of things that I found clearly unsuitable, I found myself with 50 candidates for my frequent-reading list (yes, there is overlap):

• http://www.reason.com/blog
• http://marginalrevolution.com/
• http://crookedtimber.org
• http://www.oilprice.com
• http://delong.typepad.com/
• http://economistsview.typepad.com/
• http://thereformedbroker.com/
• http://www.bigcatcountry.com/
• http://econlog.econlib.org/
• http://theincidentaleconomist.com

---

• http://libertystreeteconomics.newyorkfed.org
• http://blogs.wsj.com/economics/
• http://blog.foreignpolicy.com
• http://tywkiwdbi.blogspot.com
• http://www.taxfoundation.org/blog/
• http://drezner.foreignpolicy.com/
• http://www.coyoteblog.com/coyote_blog/
• http://captaincapitalism.blogspot.com
• http://www.frcblog.com
• http://blog.acton.org

---

• http://mungowitzend.blogspot.com/
• http://dqydj.net
• http://www.econtalk.org
• http://the-classic-liberal.com
• http://skydancingblog.com
• http://capitalgainsandgames.com
• http://www.creditwritedowns.com
• http://www.economicpopulist.org
• http://real-estate-and-urban.blogspot.com
• http://blogs.cgdev.org/globaldevelopment

---

• http://www.azizonomics.com
• http://middleclasspoliticaleconomist.blogspot.com/
• http://orgtheory.wordpress.com
• http://johnquiggin.com
• http://baselinescenario.com
• http://antzinpantz.com/kns
• http://therealrevo.com/blog
• http://blanksslate.blogspot.com
• http://www.ethanzuckerman.com/blog/
• http://www.progressive-economics.ca

---

• http://scottgrannis.blogspot.com
• http://randomroger.blogspot.com
• http://aguanomics.com
• http://dailycapitalist.com
• http://dollarvigilante.com/blog
• http://beerswithdemo.blogspot.com
• http://thinkafricapress.com/
• http://thisiscommoncents.com
• http://epicureandealmaker.blogspot.com
• http://seeingtheforest.com

---

That leaves me with three questions:

• What other political-economy weblogs should I add to my candidates for frequent reading?

• Which of those on my candidate list should I add to my frequent-reading list?

• And what things on my frequent reading list should I drop?

If My RAs Acted as JPMC's Modellers Did… Can't Anybody Play This Game? Weblogging

Lisa Pollack:

A tempest in a spreadsheet: But none of that is the spreadsheet error. This is the spreadsheet error (on the last two pages of the 129-page Report — way to save the best for last?):

…further errors were discovered in the Basel II.5 model, including, most significantly, an operational error in the calculation of the relative changes in hazard rates and correlation estimates. Specifically, after subtracting the old rate from the new rate, the spreadsheet divided by their sum instead of their average, as the modeler had intended. This error likely had the effect of muting volatility by a factor of two….

Did we say “error”? We meant errors:

The West End analytic had two options for calculating hazard rates and correlations: a traditional Gaussian Copula model and a so-called Uniform Rate…. The Model Review Group employee discovered that West End defaulted to running Uniform Rate rather than Gaussian Copula… contrary to the language in the Model Review Group approval….

Now, we’re not exactly big fans of the Gaussian Copula, but it is quite a concern when the spreadsheet doesn’t even do what you think it does. There’s more juicy background to this than you think. It concerns the guy who developed the new VaR model. First, there’s the fact that he was overworked (“join the club”, we hear you think):

The modeler is a London-based quantitative expert, mathematician and model developer…. On a number of occasions, he asked the trader to whom he reported for additional resources to support his work on the VaR model, but he did not receive any… increased operational risk and artificially low volatility numbers:

For example, the model operated through a series of Excel spreadsheets, which had to be completed manually, by a process of copying and pasting data from one spreadsheet to another. In addition, many of the tranches were less liquid, and therefore, the same price was given for those tranches on multiple consecutive days, leading the model to convey a lack of volatility….

These two things (manual entry and artificial lack of volatility) came up in the review of the model. The report says there is “some evidence” that pressure was put on the reviewers to get on with approving the model in January because of the risk limit breaches being incurred with the old model…. Hence the Model Review Group “may have been more willing to overlook the operational flaws apparent during the approval process.”… The Numerix analytic suite had been approved by the Model Review Group. But the modeler, when developing the new VaR model, developed his own suite — called “West End”. This suite was not reviewed in advance of the new VaR model being rolled out, but rather only had a limited amount of backtesting completed on it. All of which makes the little errors (in the sense of single-day fat fingers)…

…a spreadsheet error caused the VaR for April 10 to fail to reflect the day’s $400 million loss in the Synthetic Credit Portfolio. This error was noticed, first by personnel in the Investment Bank…

And the more systemic ones…

…the new CIO VaR model for the Synthetic Credit Portfolio in late January 2012 were flawed, and the model as implemented understated the risks presented by the trades in the first quarter of 2012.

…considerably less surprising.

Wanted: SF w/ 2 Kids < 10 Making ≥$260K/Year Weblogging

@delong [The] CPS March supplement finds 1-3 each year from 2008-2012 [in their random sample], suggesting a couple of thousand [single mothers with two kids under ten making $260K/year or more], out of 16-17 million single mothers

— Evan Roberts (@evanrobertsnz) January 16, 2013

But they all read the Wall Street Journal, and are miserable:

Ann Marie Marciarille: Up In Smoke: ObamaCare's Tobacco Surcharge

Ann Marie Marciarille:

PrawfsBlawg: Up In Smoke: [T]he ACA's much vaunted promise to end both pre-existing condition exclusions and individual underwriting of insurance risk…. There are some exceptions… use of tobacco products…. The ACA permits premiums to vary based on tobacco use by a factor of 1.5.  And the premium supports available to low income individuals are not available for the tobacco use premium band bump. 

What does this really mean for older low income tobacco users?… [I]nsurers could apply a different -- and considerably lower -- surcharge for tobacco use on younger smokers than on older smokers… could knock a substantial number of older smokers into a very familiar kind of uninsurability known as unaffordability… an un-subsidized tobacco premium surcharge of perhaps $4,000 a year…. (Of course, were you an older low income citizen intent on evading the individual mandate you could take up smoking and game yourself into the exceeds 8% of houshold income exemption for the individual mandate.)

All of this makes some actuarial sense…. All of this may not make the most public health sense, however.  If higher unsubsidized premiums are designed to discourage tobacco use, there is little doubt that shorter term tobacco users have a higher success rate at quitting. Older smokers -- say a 57 year old male -- tend to be those with a pretty hard core addiction to nicotine, an addiction intensity not evenly distributed among the smoking population.

Just how many female-headed single-parent families with two children under 10 are there in the United States making $260K/year, anyway?

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

Xenos:

Reading is for Snobs: These Are The People The Wall Street Journal Thinks We Should Have Sympathy For?: The Wall Street Journal had an article providing a fairly thorough breakdown of the new tax policies that will now be in effect due to the "fiscal cliff" agreement…. The article itself wasn't too bad…. However, it did include one little thing…. Yes, in that comic, every single one of those families makes a six figure income, the lowest being $180 thousand, and yet because of the new tax hikes imposed by Obama, they all appear as though he ran over the family dog.

The median household income in the U.S. between 2007-2011 was $52,762, but the American people are all supposed to shed tears for those that make between three to twelve times as much? Seriously, how out of touch do you have to be to think that? Of course, this is the same outfit that supported a guy who thought making $250k qualified as "middle income".

Just how many female-headed single-parent families with two children under 10 are there in the United States making $260K/year, anyway?

Yes, There Are Some Economists Who Are Strongly Ideologically Divided from Reality

A rather obvious statement that 84% of polled economists agree with:

Because all federal spending and taxes must be approved by both houses of Congress and the executive branch, a separate debt ceiling that has to be increased periodically creates unneeded uncertainty and can potentially lead to worse fiscal outcomes.

Luigi Zingales says that he disagrees--presumably he thinks that the separate debt-ceiling vote adds to certainty about future policy and leads to better fiscal outcomes.

In 1787, when the Congress of the United States Under the Articles of Confederation Passed the Northwest Ordinance Forbidding Slavery Between the Ohio and Mississippi...

…only Massachusetts and Vermont were free states, and only Pennsylvania, New Hampshire, Connecticut, and Rhode Island had enacted laws that would someday lead to their becoming free states.

What went on in 1787 to make this happen?

American Agriculture

---

http://www.agcensus.usda.gov/Publications/2007/Online_Highlights/Ag_Atlas_Maps/

Is It Wrong to Contemplate Beginning the Workday with a Quadruple Espresso?

Japanese Convergence and Non-Convergence and the Financial Crisis of the Early 1990s

Suppose that you believed in the Solow long-run growth model—that economies converge over time to steady-state growth paths with a speed of convergence determined by the factor shares in the production function, and that the different steady-state growth paths of developed economies at least have different levels determined by accumulation rates and population growth rates but all have a constant growth rate given by the world’s frontier rate of labor-augmenting technological progress.

What can we say about the long-run consequences of the Japanese financial crisis as viewed through this particular lens?

No, We Don't Really Need Any More Deficit Reduction Until 2020

Leave to one side the fact that policies to reduce the deficit in the short run--before 2016, say--are highly, highly likely to actually increase the long-run burden of the national debt. Even making the unlikely assumption that deficit reduction in the near future would reduce rather than increase the long-run burden of the debt, the fact is that the debt-to-GDP ratio is now stable until at least 2020. A lower debt-to-GDP ratio would be a good thing in the long run, but there is absolutely no urgency. And there is enormous urgency in getting the economy moving again.

In focusing in 2013 on further deficit-reduction deals rather than on policies to boost employment growth and infrastructure investment, President Obama is making yet another hideous economic policy mistake.

Paul Krugman:

The Mostly Solved Deficit Problem: The Center on Budget and Policy Priorities has a graph…. The blue line at the top represents the projected path of that ratio as of early 2011 — that is, before recent agreements on spending cuts and tax increases. This projection showed a rising path for debt as far as the eye could see…. But a lot has happened since then. The orange line shows the effects of those spending cuts and tax hikes: As long as the economy recovers, which is an assumption built into all these projections, the debt ratio will more or less stabilize soon…. True, there are projected problems further down the road, mainly because of the continuing effects of an aging population. But it still comes as something of a shock to realize that at this point reasonable projections do not, repeat do not, show anything resembling the runaway deficit crisis that is a staple of almost everything you hear, including supposedly objective news reporting.

So you heard it here first: while you weren’t looking, and the deficit scolds were doing their scolding, the deficit problem (such as it was) was being mostly solved. Can we now start talking about unemployment?

DeLong Smackdown Watch: Tim Duy Comes to the Defense of and Explains Kansas City Fed President Esther George

Brad DeLong : There Is Something I Do Not Understand About Kansas City Fed President Esther George's Reasoning Here: The Fed's current Quantitative Easing ∞ program involves its buying risky bonds--thus diminishing the pool of risky assets that the private sector can hold. Esther George objects because… it does not make complete sense to me…. Because there is less in the way of risky assets for the private sector to hold--and because that pushes prices of risky assets up and returns on risky assets down--QE ∞ actually makes private-sector portfolios riskier? Is that the argument? It could be--the world is a surprising place, and lots of things can happen. But my first thought would be that a world in which the Federal Reserve takes risk off of private-sector balance sheets and onto the government's balance sheet is one in which the private sector is holding not more-risky but less-risky portfolios…

Tim Duy performs the smackdown:

Safe Assets and the Coordination of Fiscal and Monetary Policy - Tim Duy's Fed Watch: DeLong is looking at a continuum of assets from safe to risky, where cash anchors the safe end of the continuum.  Right next to cash is the somewhat riskier Treasury… by exchanging cash for Treasury securities, you by definition must be removing risk… and thus the public's portfolio is now less riskier. But… this is obviously not how George views the situation…. George… believes that [Fed policies] are in fact making the public's portfolio more, not less, risky…. I think a way you can explain George's position if you consider Treasuries as less risky than cash…. [T]he Treasury bond may be perceived as a safer because it provides some return…. [F]or any given inflation rate, the Treasury bond will thus be a safer store of value [if held to maturity].  If you viewed the world from this perspective, then the Fed is increasing riskiness of the public's portfolio…. George appears to be saying that the Fed is eliminating (more accurately, removing) the safe assets that the public wants to hold.  Suppose that this is true.  Does this mean that the Fed should reverse policy to increase the proportion of safe assets in the public's hands?  Or does it mean that another agency - perhaps a fiscal authority, hint, hint - should take action to increase the proportion of safe assets in the public's hands?  

Once again, we come back to the issue of coordinating monetary and fiscal policy.  If the public has a strong demand for noncash safe assets, monetary policy has something of a secondary role by providing an accommodative environment by which the fiscal authority can issue those assets. If the proportion of safe to risky assets is not "correct", the the fiscal authority should have a role in correcting that imbalance.  In this world, then, it is not really the actions of the monetary authority that is creating the financial sector imbalances that concern George.  It is the lack of action by the fiscal authority that creates those imbalances.  George should be criticizing the fiscal authorities, not the monetary authority.

In other words, if a recession is the result of the public shifting to safe assets, the Fed is trying to respond by taking away the option of safe assets, leaving only risky assets.  Instead, the Fed should view their role creating an environment (making clear that default is not an option) that allows the fiscal authority to issue more safe assets.

All of this, however, suggests that fiscal policy has a much greater role in stabilizing economy activity than conventional wisdom would hold.  I suspect, however, that thinking along these lines is anathema to Federal Reserve officials who maintain that stabilization policy is the domain of monetary policy only.  But if in fact there needs to be greater cooperation, and instead we continue to rely solely on monetary policy, then we will continue to experience less-than-satisfactory economic outcomes which will eventually endanger the cherished independence of central banks.

In short, I don't think you can have a discussion about the influence of monetary policy on the riskiness of the public's portfolio without including some discussion about the role of the issuer of those safe assets, the fiscal authority.

This is, I think, why I want the Fed's QE ∞ policies to take the form of buying genuine long-term risky securities more risky than Treasurys or MBS. If the point is to remove risk from the private sector balance sheet-if the point is to take Vienna--then remove risk from the private sector balance sheet--take Vienna! If the point is to expand the supply of cash to create expectations that interest rates will stay lower for longer, then it is better to buy assets the unwinding of which must by the nature of things be gradual and prolonged rather than buying assets positions in which can be unwound nearly costlessly in the blink of an eye. If the point of QE ∞ is neither to remove risk from the private sector balance sheet nor to back up guidance that interest rates will stay low for a long time, I do not understand what the point of the policy is.

And, of course, he is 100% right that expansionary fiscal policy by credit-worthy governments (or expansionary financial policy via loan guarantees) is the right policy to deal with a shortage of safe nominal assets leading economic agents to try to cut their spending below their income. This is, of course, the reason that I think a proper assessment of Tim Geithner's tenure at the Treasury would be a very harsh one indeed.

Tim's point that for an economic agent with a five-year horizon a five-year Treasury dominates cash is a good one, and I think it points to a flaw in my visualization of the Cosmic All that I do not know how to repair.

"Oderint dum Metuant?" Weblogging: Responsibility of Journalists to Place Quotes in Context Edition

According to Gaius Suetonius Tranquillus, a favorite saying of first-century Roman emperor Gaius Julius Caesar Augustus Germanicus "Caligula"…

Justin Wolfers tweets:

Sympathetic to @davidmwessel's view that Krugman & @delong can be too quick to call him a fool for citing their ideological opponents.

— Justin Wolfers (@justinwolfers) January 5, 2013

I protest. Go to Google, enter "site:delong.typepad.com 'david wessel'" into the search box, press "I'm feeling lucky", and what comes up is:

Brad DeLong : David Wessel's You Are There: Ben Bernanke Five Years Ago Today: David Wessel alone is worth the price of the Wall Street Journal…

Lambert Strether: Blogs: Pure Platinum and Legal Tender: Imminent Death of the Blogs Predicted, Except Not

Lambert Strether:

Imminent Death of the Blogs Predicted, Except Not « naked capitalism: [A] single comment ignited a media and policy explosion* two-and-a-half years later. Does that look like a power curve to you, or what? The chart above is a postage stamp-sized version of the History of the Proof Platinum Coin Concept, 2010-2013 timeline** — each of the tiny black horizontal lines is a link to a piece of content, and the links stack up vertically by date. (There are also larger, post card-sized images of the timeline below, annotated in Skitch.) Now, I should say that the timeline is just a super-duper aggregation or link-fest; there’s very little interpretation or analysis. (For that, see Joe Firestones’s series on How the Proof Platinum Coin Concept was Propagated, especially Chapter 1: “Origin and Early History of Platinum Coin Seigniorage In the Blogosphere”.) Still, we can observe a lot by watching.

Justin Wolfers Asks Whether Any of the Right-Wing Worthies Who Put Their Names to This Tripe 26 Months Ago Have Suffered Any Reputational Consequences...

The answer is "No: reporters somehow never ask them why they got it so wrong in late 2010, and how they have revised their visions of the Cosmic All as a result of getting it wrong. Reporters remain eager to take their quotes down and publish them as the informed views of experts."

And the other real shame--besides the journalistic one of pretending that this embarrassment never happened and continuing to burnish the reputation and media presence of the signers--is that, to my knowledge at least, not a single one of the signatories has gone back and explained (a) why they were so certain that QE was a disaster, (b) why they were wrong, (c ) how they have changed their working model of the economy according to Bayes's Rule, and (d) how their policy recommendations will be different in the future.

The tripe:

An Open Letter to Ben Bernanke | e21 - Economic Policies for the 21st Century:

November 15, 2010

To: Chairman Ben Bernanke
Federal Reserve
Washington, DC

Dear Mr. Chairman:

We believe the Federal Reserve's large-scale asset purchase plan (so-called "quantitative easing") should be reconsidered and discontinued. We do not believe such a plan is necessary or advisable under current circumstances. The planned asset purchases risk currency debasement and inflation, and we do not think they will achieve the Fed's objective of promoting employment.

We subscribe to your statement in The Washington Post on November 4 that "the Federal Reserve cannot solve all the economy's problems on its own." In this case, we think improvements in tax, spending and regulatory policies must take precedence in a national growth program, not further monetary stimulus.

We disagree with the view that inflation needs to be pushed higher, and worry that another round of asset purchases, with interest rates still near zero over a year into the recovery, will distort financial markets and greatly complicate future Fed efforts to normalize monetary policy.

The Fed's purchase program has also met broad opposition from other central banks and we share their concerns that quantitative easing by the Fed is neither warranted nor helpful in addressing either U.S. or global economic problems.

Respectfully,

Cliff Asness, AQR Capital

Michael J. Boskin, Hoover Institution, Stanford University; Former Chairman, President’s Council of Economic Advisors

Richard X. Bove, Rochdale Securities

Charles W. Calomiris, Columbia University Graduate School of Business

Jim Chanos, Kynikos Associates

John F. Cogan, Hoover Institution, Stanford University; Former Associate Director, U.S. Office of Management and Budget

Niall Ferguson, Harvard University; Author, The Ascent of Money: A Financial History of the World

Nicole Gelinas, Manhattan Institute & e21, Author, After the Fall: Saving Capitalism from Wall Street—and Washington

James Grant, Grant's Interest Rate Observer

Kevin A. Hassett, American Enterprise Institute; Former Senior Economist, Board of Governors of the Federal Reserve

Roger Hertog, Hertog Foundation

Gregory Hess, Claremont McKenna College

Douglas Holtz-Eakin, Former Director, Congressional Budget Office

Seth Klarman, Baupost Group

William Kristol, Editor, The Weekly Standard

David Malpass, GrowPac, Encima Global; Former Deputy Assistant Treasury Secretary

Ronald I. McKinnon, Stanford University

Joshua Rosner, Graham Fisher & Co., Inc.

Dan Senor, Council on Foreign Relations; Co-Author, Start-Up Nation: The Story of Israel's Economic Miracle

Amity Shlaes, Council on Foreign Relations; Author, The Forgotten Man: A New History of the Great Depression

Paul E. Singer, Elliott Management Corporation

John B. Taylor Hoover Institution, Stanford University; Former Undersecretary of Treasury for International Affairs

Peter J. Wallison, American Enterprise Institute; Former Treasury and White House Counsel

Geoffrey Wood, Cass Business School at City University London

On the Meaning of "Tax Cuts Must (Usually) Be Paid For"

L. Randall Wray writes:

[M]y inquiring mind wants to know why Brad is worrying about “funding” tax cuts…. Here I only examine the notion that you must “pay for” tax cuts by either higher taxes or lower spending…. No analogy is perfect…. Economists often use a bathtub analogy to explain stocks and flows: water runs into the bathtub from the faucet (in-flow) that fills the tub (stock), so long as the water running out of the drain (out-flow) is less than the water running into the tub. If we plug the drain, the water stops running out—so the in-flow fills the tub. Brad wonders how do we “fund” the reduced outflow? I think that is a nonsensical question. Now, he might instead have wondered: what do we do when the tub is full? Would it then make sense to open the drain, or to slow the flow from the faucet? Sure. But how is that “funding” the previously reduced outflow during the period in which we closed the drain?

The answer, IMHO, is that reducing the outflow--lowering tax collections--means that that date is closer at which the tub is full and we have to either open the drain (i.e., raise taxes) or slow the flow from the faucet (cut spending).

No, the U.S. Is Not Greece, But...

Stephanie Kelton writes:

Brad DeLong is worried. And now I’m worried. He’s worried about “unfunded tax cuts,” which, he says, are “bad juju” in the long run. I don’t mean to pooh-pooh his juju, but what the heck is an “unfunded tax cut”?… Tax cuts leave taxpayers with more money to spend, but they don’t compromise the government’s ability to spend later. Nor is the debt ratio a binding constraint…. Can’t we just admit that the U.S. dollar comes from the U.S. government? That the i$$uer of the currency can never “run out” of money or be forced into bankruptcy…. Until people like us help awaken the population to the way modern money works, the deficit scolds will have the upper hand and the American people will suffer needlessly as Democrats and Republicans alike continue to hide behind the time-honored ”how will we pay for it?”

As I understand it, Stephanie’s hope is that the U.S. government can borrow and spend and that investors will always value U.S. government debt so highly as a safe store of value that, even without high inflation, the real interest rate on the debt will be on balance lower than the real growth rate of the American economy. If so, then the issuing of debt by the U.S. government is a very profitable business indeed: it makes something—safe nominal assets—that investors love and are willing to pay for through the nose, and we can finance whatever we want our government to spend on from the profits of this very profitable debt-issuing business.

If not, then while it is certainly true that the U.S. government cannot be forced into bankruptcy or “run out of money”, it would be imprudent not to take steps now to guard against the possibility of monetary and financial disruption—not now, not five years from now, but thirty or fifty years from now—when we can no longer refinance our debt on easy terms but instead need to retire our outstanding government debt via high taxes or very rapid rates of money creation.

As I have said, repeatedly, austerity now—and probably for the next five years—is counterproductive. But it is not the case that austerity is always and everywhere unneeded.

UPDATE: Stimulus or Stymied? The Macroeconomics of Recessions: 10:15 AM-12:PM, January 6, 2013, San Diego, CA, Manchester Grand Hyatt, Elizabeth Ballroom F

Panel Moderator: J. BRADFORD DELONG (University of California-Berkeley)

Panelists:

• CARLO COTTARELLI (International Monetary Fund)
• PAUL KRUGMAN (Princeton University)
• VALERIE A. RAMEY (University of California-San Diego)
• HARALD UHLIG (University of Chicago)

Between 1985 and 2007--the period of the "Great Moderation"--the Federal Reserve and the rest of the U.S. government on the west edge and the central banks and institutions of the European Union on the east edge of the Atlantic Ocean provided a broadly stable macroeconomic environment within which private-sector businesses, workers and investors could make their economic plans. In the U.S., on an annual basis: the rate of nominal GDP growth dropped below 4% for only 3 of those years and rose above 7% for only 2 of those 22 years; the rate of consumer price inflation rose above 5% for only 3 and fell below 2% percent for only 2 of those 22 years; and the civilian adult employment-to-population ratio remained between 60% and 64% for that entire period. And Western Europe experienced a similar "Great Moderation" with low inflation, relatively smooth growth, and diminishing unemployment.

Then in 2008-9 the rate of nominal GDP growth in the U.S. crashed to -3%--a major, major downward surprise to anybody expecting and relying on a continuation of "Great Moderation" rates of nominal spending growth--the rate of consumer price inflation on an annual basis bottomed out at -2%, and the employment-to-population ratio dropped from 63% to between 58% and 59%, since when it has flatlined. In Western Europe the initial recession was smaller, but the subsequent labor market performance was even more disappointing, so that now the net fall relative to trend in Western European productio and employment exceeds that in the United States.

In this context, we are here to explore four questions:

1. Are their policies that the Federal Reserve and the rest of the U.S. government on the west edge and the ECB and the governments of the European Union on the east edge of the Atlantic Ocean could adopt that would quickly move the civilian adult employment-to-population ratio back toward what from 1985-2007 we thought of as "normal"--that could produce in the next couple of years rates of employment growth that are, say, within shouting distance of those the U.S. economy experienced over the Reagan boom of 1982-1989?

2. If so, what are those policies?

3. If so, are those policies desirable ones that the Federal Reserve and the rest of the government should adopt?

4. How is your view on questions (1) through (3) different today than it was six years ago?

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Alas! I failed in my task as moderator: communication among the panelists was by and large not achieved…

Valerie Ramey brought bad news for multipliers--but left a glimmer of hope in that there is still no evidence or argument that the multiplier at the ZLB would not be much greater than the normal-time monetary-offset multiplier. She talked about the need for comprehensive cost-saving health-care reform, an argument would have applied just as well to 2007 or 2017 as to today.

Carlo Cottarelli presented the IMF’s new, revised view on the multiplier. He did not promise that there were policies that could lead to a rapid recovery to full employment or criticize government.

Paul Krugman ably presented his view, which is my view, that governments should borrow and spend more to boost employment and production and that the limits to fiscal policy for credit-worthy governments are so far beyond the bounds of the politically-feasible that there is no point in talking about them.

Harald Uhlig… I am going to have to listen to Harald’s presentation again. It is clear that Harald Uhlig agrees with Valerie Ramey that there are no policies “that the Federal Reserve and the rest of the U.S. government on the west edge and the ECB and the governments of the European Union on the east edge of the Atlantic Ocean could adopt that would quickly move the civilian adult employment-to-population ratio back toward what from 1985-2007 we thought of as ‘normal’”. But it is not at all clear to me why he believes this…

Work and Search in Recessions: Theory, History and Measurement: Elizabeth Ballroom F: Manchester Grand Hyatt

Jan 06, 2013 8:00 am, Hyatt, Elizabeth Ballroom F American Economic Association

Presiding: VALERIE RAMEY (University of California-San Diego)

• Cyclical Variation in Labor Hours and Productivity Using the ATUS MICHAEL C. BURDA (Humboldt University Berlin) DANIEL S. HAMERMESH (University of Texas-Austin) JAY STEWART (Bureau of Labor Statistics)

• Hours and Work Sharing during the Great Depression: Comparisons and Contracts with Other Downturns in the 20th Century PRICE FISHBACK (University of Arizona) TODD NEUMANN (University of California-Merced) JASON TAYLOR (Central Michigan University)

• Job Search Theory and Unemployed Job Search over the Lifecycle MARK AGUIAR (Princeton University) ERIK HURST (University of Chicago) LOUKAS KARABARBOUNIS (University of Chicago)

Discussants:

• VALERIE A. RAMEY (University of California-San Diego)
• BRADFORD DE LONG (University of California-Berkeley)
• DALE MORTENSEN (Northwestern University)