The Need for More Expansionary Policies--Fiscal, Monetary, Banking, Whatever: Graph of the Day for April 6, 2010
New Republic FAIL

Nineteen Things Wiorth Reading, Mostly Economics, for April 6, 2010

  • Engst: "The iPad is different in a subtle and special way. It's still a general purpose computer in a way that superficially similar devices like the Kindle are not. It can perform... nearly anything that has occurred to any competent programmer with a Mac and $99 for the iPhone Developer Program.... The Kindle is a fancy piece of paper (and one that lacks man... while the iPad is a computer.... So what's the difference between a Mac and an iPad? It's that blank slate thing... the keyboard and mouse and window-based operating system make it impossible to ignore the fact that you're using a Mac.... In contrast, the iPad becomes the app you're using. That's part of the magic.... I believe the physical existence of the iPad... will help our imaginations learn to cope with its possibilities, and as more people grow accustomed to the idea, it will be easy to justify the purchase..."
  • Bartlett: " see that former Senator Alan Simpson, co-chair of the deficit reduction commission, is angry with anti-tax fanatics for saying that he supported tax increases while in the Senate. Without checking his voting record, I think it's reasonable to assume that Simpson, like almost all Republicans in the Senate in the 1980s, probably voted for the many tax increases supported and signed into law by Ronald Reagan, which eventually took back half of the 1981 tax cut (see below). It may come as a surprise to some people that once upon a time in the not-too-distant past Republicans actually cared enough about budget deficits that they thought raising taxes was necessary to bring them down. Today, Republicans believe that deficits are nothing more than something to ignore when they are in power and to bludgeon Democrats with when they are out of power."
  • Ed: "There are, however, a number of metropolitan areas — New York, San Jose, San Francisco, Boston — where prices have risen more steadily over time.... “Superstar Cities.”... Places like Boston, New York, San Francisco and San Jose experienced exploding housing prices between 1980 and 2000 because they had both space-specific factors that increased housing demand and increasingly draconian limits on housing supply. In the Northeast and California, high demand was created by economic vitality, which in turn reflects that magic that results when smart people work together in close geographic areas. The California cities also benefited from their comfortable Mediterranean climate. High prices occur when rising demand collides with restricted supply of land and housing permits.... But the long-run price growth in these areas is more anomaly than norm. The cautious home buyer should reflect on the fact that few places have the two preconditions..."
  • Cochrane: "There are two equilibrium conditions in every monetary model; the valuation equation for government debt, and the money demand function.... My goal in this essay is to think through the current situation and outlook guided by these two simple equations, in they style of Sargent and Wallace’s famous “Unpleasant Monetarist Arithmetic.” Obviously, this is the beginning, not the end. More complex and more realistic models and effects layer on top of these. However, we should start at the beginning, and these two basic equations let us sort through many controversies..."
  • Nimark: "If long maturity bonds are traded frequently and traders have non-nested information sets, speculative behavior in the sense of Harrison and Kreps (1978) arises. Using a term structure model displaying such speculative behavior, this paper proposes an empirically plausible reinterpretation of predictable excess returns that is not based on the value traders attach to a marginal increase of wealth in different states of the world.... The model is estimated using monthly data on US short to medium term Treasuries from 1964 to 2007 and it provides a very good fit of the data. Speculative dynamics are found to be quantitatively important, accounting for a substantial fraction of the variation of bond yields and is more important at long maturities. We also show that a three factor no-arbitrage factor model would find overwhelming but misleading evidence in favor of time-varying risk premia if the world is characterized by the model presented here."
  • Heer: "Once upon a time, Norman Podhoretz admired intelligence... Making It, is a non-fiction bildungsroman, the story of how an uncouth Brooklyn boy learned to love literature and high culture.... Here is Podhoretz’s account of his first visit to the home of Lionel Trilling: “Everything there was easy and informal – even, I thought, rather surprisingly bohemian – and no one seemed to care whether my tie was on or off. It was an atmosphere in which I could loosen up, and after a swim and several martinis, I began talking my head off….Yes, of course, he [Trilling] said... and proceeded – with a witchlike precision which the hesitant style of his speech and the diffidently soft quality of his voice left one unprepared for and somehow surprised by... – to tell me what it was I had been trying to say.” Since his much-advertised move to the political right, Podhoretz has re-thought many issues, not least the importance of education and learning..."
  • Heer: " To his credit, he hasn't burned a cross in years..."
  • Bartlett: "Why conservatives should have supported Hillary for president."
  • Ackerman: "For centuries, peoples in the midst of crisis or comfort have found solace in fearing, hating, punishing and murdering the Jews. Jews are hated for what their co-Tribespeople are alleged to have done or not to have done, for what they have advocated or failed to advocate, for what the societies in which they live have suffered or avoided.... It’s human nature to hate the Other. It’s cruel social history to hate the Jews. This is our fate. Hated because we’ve been hated. Meanwhile, some people — overwhelmingly Catholics — are criticizing the Catholic Church for turning a blind eye to the sexual abuse of children. And so the pre-Easter Mass from the Vatican’s Rev. Raniero Cantalamessa says: “The use of stereotypes, the passing from personal responsibility and guilt to a collective guilt, remind me of the more shameful aspects of anti-Semitism.” Yes, this is a responsible parallel."
  • AGS: "Americans average 25.1 working hours per person in working age per week, but the Germans average 18.6 hours. The average American works 46.2 weeks per year, while the French average 40 weeks per year. Why do western Europeans work so much less than Americans? Recent work argues that these differences result from higher European tax rates, but the vast empirical labor supply literature suggests that tax rates can explain only a small amount of the differences in hours between the U.S. and Europe... we argue that European labor market regulations, advocated by unions in declining European industries who argued "work less, work all" explain the bulk of the difference between the U.S. and Europe. These policies do not seem to have increased employment, but they may have had a more society-wide influence on leisure patterns because of a social multiplier where the returns to leisure increase as more people are taking longer vacations."
  • Dynan: "These short-term swings in income have occurred against a backdrop of equally notable long-term trends. A growing literature has explored longer-term trends in household income fluctuations, and although not every study agrees, many suggest that U.S. households have seen a significant rise in income volatility over the past several decades. For the most part, this increase occurred even as the volatility of aggregate economic activity appeared to be moderating."
  • Salmon: "Basel III is the world’s best hope for fundamentally reforming the amount of systemic risk that can be buried inside the global financial system. But whether it’s ever going to get implemented by regulators around the world in anything like its present form is very far from clear."
  • Luce and Dombey: "Mr Obama has no big foreign policy strategist. Even insiders give different answers when asked to whom he turns for advice on the big international questions. But almost all agree with the following observation. “The truth is that President Obama is his own Henry Kissinger – no one else plays that role,” says a senior official. “Every administration reflects the personality of the president. This president wants all the trains routed through the Oval Office.” Fifteen months after he took office, the character and structure of Mr Obama’s foreign policy machinery is still evolving. But from interviews with dozens of insiders and outsiders, including senior officials both authorised and unauthorised to speak, and three former national security advisers, it is clear the buck not only stops with, but often floats for quite a long time around, Mr Obama himself..."
  • Waldmann: "One doesn't have to go all the way back to snowball earth to know that the Lindzen is full of it. Ice ages come and go with, evidently, very subtle forcing due to the Earth's wobble. I don't see how anyone can doubt that there is strong positive feedback around the current temperature..."
  • I have long thought that the fact that there have been a bunch of ice ages recently when the world was significantly colder than it is now is evidence that there are powerful multiplier mechanisms in our climate on the downward side: as I think I understand it, small solar forcings produced by the evolution of the earth's orbit are powerfully amplified by changes in albedo and thus produce much larger swings in temperature. I had, however, thought that this was not true on the upside: that the absence of recent episodes in which the earth was a bunch warmer than it is now tells us that positive-feedback multiplier amplification on the warming side is limited. There is growing evidence that I am wrong. Matthew Yglesias tells us... 't’s a good thing this is all part of some giant conspiracy, because if I thought scientists at the University of Alaska were undertaking good-faith scientific research I’d be really worried...'"
  • Frankel: "The recession is over. The last piece has fallen into place, with the BLS announcement that employment rose in March. Identifying the beginnings and ends of recessions has been difficult in recent decades because the two most important indicators, output and employment, have sometimes behaved differently from each other. Most notoriously, in the recovery that began in November 2001, employment lagged far behind economic growth. If one had gone by the labor market, one might have called it a three year recession. But if one had gone by GDP, one might have wondered whether there was a recession at all. This time around, the difficulty is not so great. True, the magnitude of job loss after December 2007 was unparalleled since the 1930s. It was severe even relative to the loss of GDP. But contrary to some impressions, the labor market in this recovery has not lagged unusually far behind the rest of the economy."
  • Hilsenrath: "The Federal Reserve's decisions to keep interest rates near zero and to flood the financial system with credit are sparking fears of an eventual outbreak of inflation. But inside the Fed, an influential band of policy makers is fretting over the opposite: that the already-low rate of inflation is slowing further. The heated debate at the Federal Reserve over whether if, and by how much, inflation is slowing will determine when the Fed decides to raise rates, Jon Hilsenrath reports. The presidents of the New York and San Francisco regional Fed banks, William Dudley and Janet Yellen, see the abating inflation rate as convincing evidence the economy still is burdened by excess capacity and needs to be sustained by the Fed..."
  • Leonard: "In the world of Web-based news aggregators, the competition for the title of lowest bottom-feeder is a ferocious sight to behold. But few would deny that Michael Wolff's Newser must be placed squarely in the middle of the conversation. A look at Newser's home page on Monday morning... two Sandra Bullock stories, "Bullock Fears Murder But Will File for Divorce," and "There's a Sex Tape ... Starring Sandra ... And It's Ultra Nasty," mixed in with your run-of-the-mill Pope sex scandal update... latest Michael Steele imbroglio... much more. But what takes Newser beyond countless other similar sites is a truly precious degree of shamelessness. All of the above stories -- even the slide shows -- are repackaged, rewritten and abbreviated versions of content originated by other publications. When your pursuit of traffic leads you to the point of ripping off a Fox News Lindsay Lohan/Britney slide show, you have stooped so low you can't even reach up to the lowest common denominator."

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