The other two witnesses--Larry Kotlikoff from Boston University, and Heather Pfitzenmaier from Heritage--did not seem to me to do very well at all...
Worth Watching: Bruce Bartlett: The Coming Crisis: America's Dangerous Debt...
I want to label something that I see "cognitive capture", and think about it.
The vir illustris Ron Rosenbaum, however, disagrees. Rosenbaum is writing about David Corn's story that Bill O'Reilly was not in fact in a "war zone" in 1982, and about how O'Reilly is responding by saying: "you can tell that I am a truth-teller because the liberals attack me so much". And he thinks that "cognitive capture" is not a useful concept. We should pretend it does not exist. We should instead just tell the truth day by day as if we were having a reasoned discussion. And we should hope that eventually, with enough truth-telling, the chips will fall where they should:
Some Hoisted from the Archives from Six Years Ago, Most Newer...: Speaking of people who had not done their homework, were spreading lots of wrong information, and who lack the ovaries to have ever marked their beliefs to market or apologize for their purveying misinformation, we have Allan Meltzer starting in February 2009 as the Paul Revere of the coming upward breakout of inflation.
It is a real clown show.
Must- and Shall-Reads:
And Over Here:
If there were a thousand people all anxious to feed their families who had little in the way of alternative job prospects who could demonstrate that they could do my job well--well, then, it would be very difficult for my job to be a "decent" one, would it? It would still be a very interesting job. But it would also be a very low-paying job, unless I could figure out some way to extract a large share of the increasing-returns joint-production common pool and attach it to me in some durable way. And that requires that I figure out some way to block the others on my increasing-returns productive team from figuring out how to drive my wage down to the reservation wage of the unemployed guy now in Kerala who could do my job almost as well as I can.
David Howell is going to try to figure this out:
Over at Equitable Growth: I have always been impressed by vir illustris Mark Hoekstra's regression-discontinuity story of the value of being admitted to U.T. Austin. As the very sharp Jordan Weissman reports:
...AM I DOOMED? Actually, yeah. You might be.... Mark Hoekstra... compared the earnings of white, male students who had barely missed the admissions cut-off for an unnamed public flagship university to those of students who had barely been accepted.... Enrolling at the flagship increased wages by 20 percent... READ MOAR
One of the things that was supposed to get done in January but didn't was a revision of this piece--it is now three years out-of-date, after all, and while it is still useful it is less useful than it was, or would be were I to properly review and update it. But it did not get done in January. It is not going to get done in February. So I am putting it up both as a useful (albeit somewhat out of date) resource, but primarily as a reproach to myself to get cracking on the revision in my copious spare time...
FEBRUARY 2012 VERSION: Budgeting and Macroeconomic Policy: A Primer
by J. Bradford DeLong
Budgeting and Macroeconomic Policy: A Primer
Wikipedia: 299 BC:
Mediterranean: The Samnites, seizing their chance when Rome is engaged on the Lombard plain, start the third Samnite War with a collection of mercenaries from Gaul, Sabine, and Etruscan allies to help them.
China: The state of Qin attacks eight cities of the state of Chu. Chu then sends an envoy to ask the King of Huai to go to Qin to negotiate peace. Qu Yuan risks his life to go up to the court to persuade the King of Huai not to go to the negotiation. King Wuling of Zhao abdicates the throne of Zhao to his son.
Socialism has demonstrated its right to victory, not on the pages of Das Kapital, but in an industrial arena comprising a sixth part of the earths surface--not in the language of dialectics, but in the language of steel, cement and electricity. Even if the Soviet Union, as a result of internal difficulties, external blows and the mistakes of leadership, were to collapse--which we firmly hope will not happen--there would remain an earnest of the future this indestructible fact, that thanks solely to a proletarian revolution a backward country has achieved in less than 10 years successes unexampled in history.
I spent August 2005 getting ready to reach intermediate macroeconomics:
watching the corruption--no other word for it--of the Washington Village's "elite" press corps:
Over at Equitable Growth: OK: Now that I am awake and coherent and caffeinated, we may resume...
I draw somewhat different conclusions from the wavering track of potential GDP since 1990 than do the viri illustres Steve Cecchetti and Kermit Schoenholtz:
First, I think that monetary policymakers should not be looking at potential output and the output gap at all. They should be looking at the labor market. You can determine whether monetary policy is such as to accord with people's previous expectations and thus balance supply and demand in the labor market much more easily than you can track whether actual production and demand are above or below what your retrospective estimate of potential output will turn out to be.
Must- and Shall-Reads:
And Over Here:
Adolf Hitler: 25 Years of Naziism:
The consciousness of my duty and my work does not allow me to leave headquarters at the moment when, for the twenty-fifth time, that date is being commemorated on which the fundamental program of our movement was proclaimed and approved in Munich.
The evening of the twenty-fourth of February was, under the auspices of prudence, a development the significance of which probably only today becomes clear to us in its terrible meaning. An irreconcilable enemy was already at that time united in a common struggle against the German people, in the same manner as it is today. The unnatural alliance between exploiting capitalism and destructive bolshevism that threatens to strangle the entire world today has been the enemy to which we threw down the gauntlet on Feb. 24, 1920, in order to safeguard the existence of our nation. The same as in these years, the apparently contradictory factor in the cooperation of such extreme forces was only the expression of a unique desire of a common instigator and profiteer. International Jewry has long used both forms for the annihilation of the liberty and social welfare of nations.
Can we finally all admit that even though the defined-benefit pension system was inadequate the 401(k) system is worse? And that we need not a smaller but a larger Social Security system?
...on... participation.... The participation rate among working-age households... was close to 80 percent between 1989 and 2007. But... has dropped to... 75 percent.... [And] younger workers’ participation rate has fallen below the level of previous generations of young workers—today’s young workers aren’t saving as much younger workers in years past... [with] the biggest decline... among workers in the bottom half...
I draw somewhat different conclusions from the wavering track of potential GDP than do the vires illustres Steve Cecchetti and Kermit Schoenholtz. But let me reserve that until some moment later on in the day when I am more awake...
...who claims to be able to forecast trend growth accurately and reliably. Even after the fact, it takes some time to discern the underlying trend. As a result, we need to build decision frameworks--for businesses and for policymakers--that are robust to the sorts of forecast errors we have seen in the past. Consider that approach the economist’s version of Keats’ negative capability. Second, our inability to get a precise fix on the output gap presents significant challenges for monetary policy, as this is commonly used as a prime indicator of inflationary pressures in the economy. If central bankers are unsure of the size of the output gap (or even its sign), then the likelihood of policy errors rises substantially. That reinforces the view of monetary policy setting as a problem of risk management in which policymakers must balance the hazards and costs associated with potentially large errors.
Sixteen years ago I was told that I really needed to consult and hire a "web designer". Eight years ago I was told I needed to consult and hire a "web content management system wrangler".
Now I am being told I need to consult and hire a "web content strategist".
What is a "web content strategist"?
Over at Equitable Growth: There are the different agendas at different time frames--say two years, ten years, and fifty years. The smart young whippersnapper Marshall Steinbaum reports on the growing consensus that dealing with the Rise of the Robots is on our fifty-year agenda, and not on our two-year or our ten-year agenda. On the two-year and ten-year agendas, he says, are dealing with and reversing the enormous upward redistribution that has taken place with the rise in the social, political, and economic power of the Overclass. That is:
Underlying this position is a belief, perhaps, that so much of what is produced is so close to a joint Leontief product that something like the marginal product theory of distribution is profoundly unhelpful, and that questions of distribution are overwhelmingly resolved by economic bargaining power conditioned by social mores and politically-chosen institutions. Perhaps there used to be three sources of bargaining power, and thus three sources of durable advantage:
And then, perhaps, over the past generation the third has dropped away, with the coming of globalization and the successful war against private sector unions. The rest are now themselves in flux. And perhaps they have been joined as a source of rent-extraction by those with the ability to tap into the savings produced in this age of the Global Savings Glut...
But I think that the sources of this enormous upward redistribution have not yet been properly sorted-out.
...when it comes to the consequences of rapid technological change on the U.S. workforce... techno-optimist[s].. [and] the pessimistic view that better technology substitutes for workers and... harms them. A debate between the two... was probably what the organizers intended for an event last week hosted by The Brookings Institution’s Hamilton Project entitled ‘The Future of Work in the Age of the Machine.’... Yet the debate last week actually highlighted a third position. If either the techno-optimists or the techno-pessimists are right, then we should see a major positive impact on worker productivity. But it just isn’t there... [even though] we definitely see worker displacement, stagnant earnings, a failing job ladder, rising inequality at the top, ‘over-education’ (workers taking jobs for which they’re historically overqualified), and declining rates of employment-to-population and household and small business formation.... Former Treasury Secretary Larry Summers made this point forcefully....
So if not technology, what explains labor displacement?... Market practices and public policies that favor managers over workers, and those who make their living by owning capital over those who make their living by earning wages. That choice lurks behind the decline in full employment as a priority... a shift in the legal standards, mores, and incentives of corporate management in favor of the interests of [equity] owners over other stakeholders... the abandonment of long-term productive investment as a priority in public budgeting.... In 1988, Summers wrote an article fleshing out the idea that the division of rents between corporate stakeholders is what drives rising inequality. More than a quarter century later, he could not have been more prescient. The good news is that if such a profound shift played out over only three or four decades, then it’s reversible. That wouldn’t be true if it were the result of the technological trends detailed in [Brynjolffson and McAfee's] ‘The Second Machine Age.’... We know what needs to be done and how to do it, because we’ve done it before...
...grow along with profits and productivity. There is no silver bullet, but the key is... to reverse decades of decisions that have undercut wage growth. We need to start with monetary policy.... The most important decisions... are those of the Federal Reserve Board.... Before raising rates, it is essential we achieve a robust recovery, with roughly 3.5 to 4 percent annual [nominal] wage growth.... Another short- to medium-term policy decision affecting wage growth is to avoid trade deals, such as the proposed Trans-Pacific Partnership, that would further erode Americans’ wages and send jobs overseas. And... bolster... labor standards and institutions... [by] raising the minimum wage... rais[ing] the salary threshold for overtime.... Protecting and expanding workers’ right to unionize... moderniz[ing] our New Deal-era labor standards to include earned sick leave and paid family leave... stronger laws and enforcement to deter and remedy wage theft.... Wage stagnation is... a result of a policy regime that has undercut the individual and collective bargaining power of most workers. Because wage stagnation was caused by policy, it can be reversed by policy, too.
I remember how back in 2007 and 2008 I would say that one reason Barack Obama might be a better candidate than Hillary Rodham Clinton was simply that America was now less racist than it was sexist--that the conservative quarter of the country would not be motivated to throw the filth at Barack Obama that they had and that they would throw at Hillary Rodham Clinton.
I was wrong.
Ezra Klein muses on the racist origins of Obama Derangement Syndrome:
[argued] average wage growth should be at least 3.5 percent a year.... Wen does wage growth cross above this threshold?... Not until the employment rate for workers ages 25 to 54 crosses 79 percent.... As of January 2015, this prime-age employment to population ratio was 77.2 percent. The ratio has been on the rise, but it still has a ways to go before it hits 79 percent. Growing at its current rate, that rate won’t hit 79 percent until 2017 at the earliest.... With inflation below its target, worries about stalled or slowing economic growth abroad, a strengthening dollar, and an incomplete labor market recovery, the Federal Open Markets Committee should consider the consequences of raising interest rates too soon. Perhaps the best move is to do nothing and simply wait...
Wikipedia: Raising the Flag on Iwo Jima:
Raising the Flag on Iwo Jima is a historic photograph taken on February 23, 1945, by Joe Rosenthal. It depicts five United States Marines and a United States Navy corpsman raising a U.S. flag atop Mount Suribachi, during the Battle of Iwo Jima in World War II.
The photograph was extremely popular, being reprinted in thousands of publications. Later, it became the only photograph to win the Pulitzer Prize for Photography in the same year as its publication, and came to be regarded in the United States as one of the most significant and recognizable images of the war, and possibly the most reproduced photograph of all time.
Three Marines depicted in the photograph, Harlon Block, Franklin Sousley, and Michael Strank, were killed in action over the next few days. The three surviving flag-raisers were Marines Rene Gagnon, Ira Hayes, and sailor John Bradley. The latter three became celebrities after their identifications in the photograph. The image was later used by Felix de Weldon to sculpt the Marine Corps War Memorial which was dedicated in 1954 to all Marines who died for their country past and present, and is located adjacent to Arlington National Cemetery just outside Washington, D.C. The original mold is located on the Marine Military Academy grounds, a private college preparatory academy located in Harlingen, Texas.
Must- and Shall-Reads:
And Over Here:
...pushes against Fed tightening.... 2) In their just released minutes, the Fed board clearly identified with the asymmetric risk.... 3) Some recent reports suggest a tension among FOMC members as to whether they should be data driven or just basically assume that inflationary pressures lurk around the next corner.... 4) Remember, nobody knows what the “natural rate of unemployment” is.... There you have four factors pointing towards holding rates steady at zero for the near term. Which factors point the other way? There’s the tightening job market, for sure, but see #4...
... from a ‘normal’ capitalist recession, of the type that is overcome through a wage squeeze which helps restore profitability. This secular, long-term slide toward asymmetrical depression and monetary disintegration puts radicals in a terrible dilemma: Should we use this once-in-a-century capitalist crisis as an opportunity to campaign for the dismantling of the European Union, given the latter’s enthusiastic acquiescence to the neoliberal policies and creed? Or should we accept that the Left is not ready for radical change and campaign instead for stabilising European capitalism? This paper argues that, however unappetising the latter proposition may sound in the ears of the radical thinker, it is the Left’s historical duty, at this particular juncture, to stabilise capitalism; to save European capitalism from itself and from the inane handlers of the Eurozone’s inevitable crisis. Drawing on personal experiences and his own intellectual journey, the author explains why Marx must remain central to our analysis of capitalism but also why we should remain ‘erratic’ in our Marxism. Furthermore, the paper explains why a Marxist analysis of both European capitalism and of the Left’s current condition compels us to work towards a broad coalition, even with right-wingers, the purpose of which ought to be the resolution of the Eurozone crisis and the stabilisation of the European Union. In short, the paper suggests that radicals should, in the context of Europe’s unfolding calamity, work toward minimising the human toil, reinforcing Europe’s public institutions and, therefore, buying time and space in which to develop a genuinely humanist alternative.
I assure you that I have found some high-quality DeLong smackdowns on the internet, and they are in the pipeline.
Nevertheless, this past week I managed to man-up and read another page of chapter 11 of David Graeber's Debt: The First 5000 Mistakes (The backstory).
I am hoping that there will come a day on which the first new kindle screen from Graeber I read does not have egregious errors of fact or analysis on it.
I pray that there may come such a day.
But today is not that day:
There is only one single error on this kindle screen.
But it is rather a big one...
Peter Temin's "Two Views of the Industrial Revolution" is a very good paper.
Crafts, Harley, and by now many others--most recently the scarily-smart Robert Allen--have argued that technological change during the British Industrial Revolution was largely confined to the leading sectors. They are opposed by Ashton, Landes, and many, many others--most recently the truly-scarily-smart Joel Mokyr--arguing that the British Industrial Revolution was a broad-based sea-change in economy and society as a whole. The stakes are rather large.
What is one supposed to do when confronted by arguments that seem to me--and to everybody else who has been right about the evolution of the North Atlantic economy since 2008--so unprofessional as this piece in Vox? Simon Wren-Lewis begins the needed labor of Hercules here:
...[had] government deficits [that] were too high, and... economies [that] had become uncompetitive.... The deficits needed to be reduced. Under flexible exchange rates this could have been done with relatively little cost.... In a monetary union, this cannot happen, so a period of unemployment is inevitable to restore competitiveness. The key macroeconomic question is how quick adjustment should be.... Slow is much more efficient. So it makes sense for some institution like the IMF to provide loans to the government to allow it to eliminate deficits gradually.... When it came to Greece, the Eurozone made three key mistakes. 1) Too much austerity too quickly, violating the logic.... 2) There was only partial (and delayed) default on Greek government debt.... 3) Adjustment... required in an environment of Eurozone recession and deflation, caused by needless fiscal austerity in the non-periphery countries.... This Vox piece [by Lars P Feld, Christoph M Schmidt, Isabel Schnabel, Benjamin Weigert, Volker Wieland]... displays so much that is wrong with macro arguments coming out of the Eurozone at the moment... ignores the basic macro... denial of the importance of wage and price rigidities... the speed of adjustment matters, and... the article makes no attempt to address this central issue... a complete collapse in GDP, where over half of young people are unemployed... [was not] just par for the course, [but] rather than a function of the amount of austerity imposed... lenders are demanding Greece run significant primary surpluses now, and they need not make this demand. I could go on and on..."
On 21 February, Saratoga was detached with an escort of three destroyers [USS McGowan (DD-678), USS McNair (DD-679) and USS Melvin (DD-680)] to join the amphibious forces and carry out night patrols over Iwo Jima and night heckler missions over nearby Chi-chi Jima. However, as she approached her operating area at 1700 on the 21st, an air attack developed, and taking advantage of low cloud cover and Saratoga's insufficient escort, six Japanese planes scored five hits on the carrier in three minutes.
Saratoga's flight deck forward was wrecked, her starboard side was holed twice and large fires were started in her hangar deck, while she lost 123 of her crew dead or missing. Another attack at 1900 scored an additional bomb hit. By 2015, the fires were under control and the carrier was able to recover aircraft, but she was ordered to Eniwetok and then to the west coast for repairs, and arrived at Bremerton on 16 March.
...hysteria surrounding the idea is that a huge wave of automation, technology and skills have lead to a huge structural change in the economy since 2010. The implicit argument here is that robots and machines have both made traditional demand-side policies irrelevant or naïve, and been a major driver of wage stagnation and inequality. Though not the most pernicious story that gained prominence as the recovery remained sluggish in 2010 to 2011, it gained important foothold among elite discussion.
ABSTRACT: There are two views of the British Industrial Revolution in the literature today. The more traditional description sees the Industrial Revolution as a broad change in the British economy and society. This broad view of the Industrial Revolution has been challenged by Crafts and Harley who see the Industrial Revolution as the result of technical change in only a few industries. This article presents a test of these views using the Ricardian model of international trade with many goods. British trade data are used to implement the test and discriminate between the two views of the Industrial Revolution.
Right now, the financial markets are telling us that for the next 20 years at least they expect not a surplus but rather a shortage of federal debt.
The interest rates at which investors are willing to hold federal debt now and expect to hold federal debt in the future tell us that it is an extraordinary valuable asset
Those interest rates tell us that investors at least think the world economy would be better off with more federal debt than with less. READ MOAR
Must- and Shall-Reads:
And Over Here:
Over at Equitable Growth: I see that the femina spectabilis Diane Lim is a very unhappy camper:
...‘Critical investments’ and ‘shared prosperity’ are ‘in.’ Deficits are down to an economically sustainable range.... Our policymakers are no doubt relieved to take a break from having to talk about the hard stuff (spending cuts and tax increases) and getting to focus on the nice-sounding stuff (spending increases and tax cuts).... Dismissing fiscal responsibility as a socially irresponsible idea is irresponsible.... READ MOAR
We can no longer say "the structure of the King plaintiffs argument..." for it is not clear that there are any King vs. Burwell plaintiffs, or that if there are any King plaintiffs they agree with any of the arguments that the lawyers from Jones, Day are making on their behalf. This is a huge black eye for Jones, Day, and is certainly making everyone reconsider what they thought they knew about the quality of their work. But I digress...
Scott Lemieux warms up by observing:
- The fact that former Cato interns wanted no part of the troofer lawsuit;
- The title implying that Politico hacked into Cannon’s email, rather than the massively more likely possibility that the email was provided by one of the recipients, or *Cannon complaining about the Cato institute being described as ‘right-leaning.’
Before taking the stage for the main event:
Over at Value Added:
...issues with both the growth rate of productivity and the supply of labor... John Fernald... on the lack of new advancements in information technology... Stephen G. Cecchetti... and Enisse Kharroubi... [on the] over-bloated financial sector... Equitable Growth’s Robert Lynch... [on] educational inequality.... Supply and demand aren’t... easily untangled.... With the lack of acceleration of wage growth, the labor market appears to still have some slack.... Short-term considerations can help alleviate our long-run problems.... We can’t forget about the supply-side problems that lurk further downstream. Our future prosperity depends on it.
...There are many Americans who love their country in pretty much the way the president does... special, often an enormous force for good in the world, but also fallible.... You don’t have to be black to see things that way.... There’s the guy who described one of our foreign wars as ‘the most unjust ever waged by a stronger against a weaker nation’... Ulysses S. Grant... [on] the Mexican-American War.... We are becoming... more sophisticated... people do understand that... [those] shouting ‘USA! USA!’... are often less patriotic than the people they’re trying to shout down.... We really are an exceptional country... that has played a special role... [and] always stood for some of humanity’s highest ideals. We are not... about tribalism--which is what makes all the shouting about American exceptionalism so ironic, because it is... an attempt to tribalize...
...surrounding the idea is that a huge wave of automation, technology and skills have lead to a huge structural change in the economy since 2010. The implicit argument here is that robots and machines have both made traditional demand-side policies irrelevant or naïve, and been a major driver of wage stagnation and inequality. Though not the most pernicious story that gained prominence as the recovery remained sluggish in 2010 to 2011, it gained important foothold among elite discussion...
Morning Must-Watch: Larry Summers and Friends: The Future of Work
On the diagnosis, I want to make a confession of ignorance, make an observation, and express a worry.
...to voluntarily announce a raise for all of its lowest-paid employees.... Aetna raised all of its employees’ wages to at least $16 an hour.... It is possible to profit from paying your employees well.... For decades, labour economists have gathered evidence on... [how] higher wages can motivate employees to work harder, to treat customers better, make them more reluctant to leave their jobs and help them to bring fewer worries and distractions to work. That can increase productivity and reduce an employer’s costs.... All jobs can be done better or worse, and that lower-paid workers respond to incentives other than just fear of losing their job. This is not just a relative wage story.... This is also not just a minimum wage story.... Efficiency wage increases will not solve all current economic problems. Fordist fantasies that paying a higher wage would meaningfully stimulate increased purchases, for example, have to be left aside.... Nor will such initiatives take the place of needed training to make sure workers have the proficiencies.... The shortfall of long-term investment in the US, public and private, cannot be made up for with low-skilled labour...
World War II Today quotes from:
Breslau, the beleaguered German city in the east, now declared by Hitler to be Festung Breslau, Fortress Breslau, was completely surrounded by Soviet troops, some only two miles from the city centre. Nazi propaganda would make much of a Hitler Youth Battle Group counter-attack carried out the city’s southern park, in which 120 boys beat back the Red Army and supposedly left 170 Soviet soldiers dead. The most severe penalties were being imposed on any comments that might be interpreted as defeatism or subversion, so there was no mercy for any act of desertion:
These death sentences should serve as a warning to every soldier and at the same time give decent soldiers — and the entire fortress as well — the satisfaction that cowardly traitors face a merciless, shameful end. The summary execution of cowards and shirkers not only eradicates them, it also brings down shame upon their families by wiping out their honour and condemns them to poverty, depriving them of all beneﬁts.
And Over Here:
Must- and Shall-Reads: