links for 2010-01-31
Boldly Going Where No One Has Gone Before...

Ten Economics Pieces Worth Reading: January 31, 2010

1) via Calculated Risk: Lawrence Summers:

What we see in the United States and some other economies is a statistical recovery and a human recession.

2) Fraser Speirs: Future Shock: the iPad:

I'm often saddened by the infantilising effect of high technology on adults. From being in control of their world, they're thrust back to a childish, mediaeval world in which gremlins appear to torment them and disappear at will and against which magic, spells, and the local witch doctor are their only refuges. With the iPhone OS as incarnated in the iPad, Apple proposes to do something about this, and I mean really do something about it instead of just talking about doing something about it, and the world is going mental.

Not the entire world, though. The people whose backs have been broken under the weight of technological complexity and failure immediately understand what's happening here. Those of us who patiently, day after day, explain to a child or colleague that the reason there's no Print item in the File menu is because, although the Pages document is filling the screen, Finder is actually the frontmost application and it doesn't have any windows open, understand what's happening here....

People talk about Steve Jobs' reality distortion field, and I don't disagree that the man has a quasi-hypnotic ability to convince. There's another reality distortion field at work, though, and everyone that makes a living from the tech industry is within its tractor-beam. That RDF tells us that computers are awesome, they work great and only those too stupid to live can't work them.... The Real Work is not formatting the margins, installing the printer driver, uploading the document, finishing the PowerPoint slides, running the software update or reinstalling the OS. The Real Work is teaching the child, healing the patient, selling the house, logging the road defects, fixing the car at the roadside, capturing the table's order, designing the house and organising the party.... If the iPad and its successor devices free these people to focus on what they do best, it will dramatically change people's perceptions of computing from something to fear to something to engage enthusiastically with. I find it hard to believe that the loss of background processing isn't a price worth paying to have a computer that isn't frightening anymore.

In the meantime, Adobe and Microsoft will continue to stamp their feet and whine.

3) Kurt Andersen:

Watching AAPL's share price live: the moment Jobs announced the iPad's base price ($499), Apple's market cap increased by $5 billion.

4) Duncan Black:

Human Recession: Perhaps someone should consider doing something about this? Unemployment data comes out on Friday. I'm hoping it's a really horrible one, not because I want things to be worse but if we get an official measurement of things that's really bad maybe someone will consider doing something about it.

Of course I'm so old I can remember when 10% unemployment was "really bad."

5) Mark Thoma on Education Online:

I’ve been videotaping all my undergraduate courses and putting them on YouTube for a couple of years now (I have an old Director’s account which does not have a 10 minute time limit, and Google still honors the old designations even though individuals can’t get them anymore). I would argue adamantly that [lecture and vido] are complements, not substitutes. People who rely upon the videos [exclusively] do not do as well. There’s something about meeting as a group, listening (as though it were a story around the campfire that captures attention?), writing notes, etc. that doesn’t work as well when you try to [watch the video] individually.... I’ve also found that you have to explicitly tell students that they are complements, help them to learn to use the new technology optimally, and then it enhances rather than detracts from the course (and [lecture] attendance won’t fall as much as you might fear).

Students with language issues get the most out of the videos – they watch and rewatch segments until they finally understand – and if you explain to classes that the videos are best used to fill in holes left from lecture (by scrolling the video to find the segments you want), much as people with language issues use them, it works best. The number of views – hundreds for each video for a 70 person class with spikes near homewo9rk and exams – tells me that many students are finding them useful.

There is also a segment of the class who wouldn’t come anyway, and now they are doing better.... I’m not sure if I should enable this, but they aren’t coming anyway and if my goal is to maximize learning, I shouldn’t much care.

But when someone is telling stories around the campfire live, it seems to capture the group’s attention in a way that a video cannot duplicate. The students always agree with this, but can never quite put their finger on why, though they do mention that there’s no roommates, no TV in the background, no refrigerator calling out to you, and so on.

6) Peter R. Orszag: Facing the Fiscal Facts:

A Wall Street Journal op-ed today by the prior Administration’s CEA Chair, Edward Lazear, observes that the ratio of federal spending-to-GDP has risen by 14 percent since 2008—and that the transition from 2008 to 2009 saw the greatest annual increase in spending in the last 30 years. Ed is right about the numbers—but let’s look at the facts. On January 7, 2009, the Congressional Budget Office issued its Economic and Budget Outlook for Fiscal Years 2009-2019.  In that document, CBO projected that government spending would rise from 20.9 percent of GDP in fiscal year 2008 to 24.9 percent of GDP in fiscal year 2009.  (Just for the record, that CBO projection was issued 2 weeks before the current Administration took office.) This week, CBO issued its updated Economic and Budget Outlook for Fiscal Years 2010-2020.  That document shows that government spending in fiscal year 2009 turned out to be 24.7 percent.... It is thus correct that federal spending rose by roughly 4 percentage points of GDP between 2008 and 2009 -- and it is also the case that the increase in spending has helped to stabilize the economy -- but it is wrong to attribute that increase primarily to Administration actions since it took office.  The increase was already on the books when we arrived.

7) VISUAL OF THE DAY: Ta-Nehisi Coates"I Just Remembered Chris Matthews Was White" sends us to John Stewart and Wyatt Cenac on the Atrocious Horror that Is Chris Matthews:

The Daily Show With Jon StewartMon - Thurs 11p / 10c
Speech Therapy - Post-Racial
Daily Show
Full Episodes
Political HumorHealth Care Crisis

8) BEST NON-ECONOMICS THING I HAVE READ TODAY: Paul Krugman: Cossack Rahm Works For The Czar:

Ezra Klein finds Rahm Emanuel’s apparent willingness to let health reform slide into the indefinite future very depressing. So do I. And it’s not just health reform that will die under this approach — it’s the road to a caretaker presidency. It’s all very well to say “we’re going to focus on job creation”. But what does that mean? At this point, no major economic programs have any chance of getting passed. Think of it this way: a year ago the question was whether the stimulus would be $700 billion or $1.2 trillion, now we’re talking about $30 billion jobs tax credits.

Maybe financial reform will happen, or at least set up a “teachable moment” battle with the GOP. But by letting health reform slide, the administration is abandoning one really big policy initiative that is just inches from happening. Let this go, and there’s likely to be no achievements worth remembering.

But don’t blame Rahm Emanuel; this is about the president. After Massachusetts, Democrats were looking for leadership; they didn’t get it. Ten days later, nobody is sure what Obama intends to do, and his aides are giving conflicting readings. It’s as if Obama checked out.... What’s now in question isn’t his ability to talk, it’s his ability to lead.

9) STUPIDEST MAN I HAVE READ TODAY: Stanford's Eddie Lazear. Outsourced to Matt Yglesias: That’s How Budgeting Works:

One of the most memorable parts of the State of the Union was when the President had to remind certain jeering members of congress that taking budgetary steps this fiscal year that don’t take effect until next fiscal year is “how budgeting works.” It looks to me like Ed Lazaer could use a tutorial in this point: "Since 2008, the ratio of federal spending-to-GDP has risen by about 14%. From 2008 to 2009 we saw the greatest annual increase in spending in the last 30 years. In the name of stimulating job growth, the share of federal spending is now 24% of the economy, up from 21% in the last year of the Bush administration." As Peter Orszag observes, the Obama administration wasn’t in power when most of the relevant decisions were made....

[W]hat’s particularly weird is that Ed Lazaer was chairman of the Council of Economic Advisors from 2006 up until Barack Obama’s inauguration in 2009. He knows perfectly well that the Fiscal Year 2009 Budget Proposal was written by the Bush administration. You can even download the 2009 Economic Report of the President (PDF) and see that it has Lazaer’s signature on it and everything. It’s right there on page 11. The Cato Institute’s Daniel Mitchell did a good piece on this flim-flam back in December. You have to ask yourself what it says about the tea party crowd that they didn’t seem even slightly bothered by federal spending or large deficits until Obama took office.

10) HOISTED FROM THE ARCHIVES: DeLong (2001): The Keynesian Nature of the Monetarist Counterrevolution:

Last year I published an essay (DeLong, 2000) arguing that modern Keynesians are really monetarists. Even if they--we--do not really like to admit it, most of the key elements in how modern "new Keynesian" economists view the world are derived from or heavily influenced by the work of Milton Friedman. But that essay... was only half of the story. Just as modern Keynesians are (in many respects) monetarists, so modern monetarists are really Keynesians--even though they like to admit it even less. They ... have the same profound and deep distrust in the laissez-faire market economy's ability to deliver macroeconomic stability. Moreover, they share the confidence John Maynard Keynes had that limited and strategic government interventions and policies could produce macroeconomic stability while still leaving enormous space for the operation of the market.

Thus there are no believers in true laissez-faire left, at least not as far as academic macroeconomics is concerned. The rhetoric of post-World War II monetarism held that it was a return to laissez-faire in macroeconomics. All the government had to do was to get out of the way and leave monetary policy in "neutral," and macroeconomic stabilization would be successfully achieved. But on closer inspection the "neutral" monetary policy advocated in works like Friedman and Schwartz (1963) turns out to be a policy that pre-Keynesian generations would have called extraordinarily activist.... The laissez-faire rhetoric obscures the extraordinarily broad common ground that Milton Friedman shares with John Maynard Keynes.

This recognition has important implications for understanding the meaning and effect of the monetarist counterrevolution.... [Harry] Johnson saw the monetarist counterrevolution as a true intellectual revolution--one that renders the previous literature obsolete, irrelevant, and uninteresting.... Johnson also--relatively cynically--saw the monetarist counterrevolution as the triumph not of new evidence (or a reevalution of old evidence) but as the triumph of misleading rhetoric.... Johnson saw the counterrevolution as a genuine counterrevolution that would--if successful--return economists' thinking to its previous state.

I want to argue that, underneath its laissez-faire rhetoric about a non-activist, neutral monetary policy, the monetarism of the monetarist counterrevolution had been thoroughly infected by the Keynesian virus. It carried with it a way of thinking about macroeconomic policy that was as "activist" in its own way as John Maynard Keynes could have ever wished...