## Morning Must-Read: Free Exchange: Germany's Hyperinflation-Phobia

Free Exchange: Germany's Hyperinflation-Phobia: "John Maynard Keynes, as early as 1919...

...recognised the threat inflation posed to modern capitalist societies:

Lenin is said to have declared that the best way to destroy the capitalist system was to debauch the currency… [he] was certainly right. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.

The German public, it seems, is particularly fearful of letting inflation getting out of control. This is, in part, due to the legacy of the German hyperinflation of 1922-3.... Present discomfort within Germany with policies designed to reflate the euro-zone economy has been stoked by the assertion of a linkage between hyperinflation and the rise to power of the Nazis.... Yet academics paint a very different picture... than the story... in the German press. The Nazi party did not become a popular political force until long after the hyperinflation period ended. The Nazis only won 32 Reichstag seats in the election of May 1924, and just 12 in 1928. As Paul Krugman has pointed out, 'the 1923 hyperinflation didn’t bring Hitler to power; it was the Brüning deflation' of the early-1930s....

The hyperinflation of 1923 created winners and losers among the middle classes.... Middle-class votes subsequently splintered between several different parties.... Yet virtually all classes lost out when Brüning’s government reacted to a projected fiscal deficit and gold outflows in 1930 with deflationary policies.... The experience of deflation made Hitler’s promises to conquer unemployment and stabilise prices by any means necessary attractive to a wide range of groups.... Deflation is now a greater risk than inflation in Europe.... A selective memory of the past may prove worse than no memory at all....

[See:] T. Balderston (2002): Economics and Politics in the Weimar Republic... A. Fergusson (1975): When Money Dies: The Nightmare of the Weimar Hyper-Inflation... J. M. Keynes (1919): The Economic Consequences of the Peace... A. Tooze (2006): *The Wages of Destruction: The Making and Breaking of the Nazi Economy... F. Taylor, (2013): The Downfall of Money: Germany’s Hyperinflation and the Destruction of the Middle Class"

## Weekend Reading: Over at Jacobin: Christian Parenti: Reading Hamilton From the Left

Over at Jacobin: Christian Parenti: Reading Hamilton From the Left: R"The Left has always favored Thomas Jefferson over Alexander Hamilton...

...But not only was Hamilton more progressive for his time, he has lessons for our response to climate change. Two hundred years ago, Alexander Hamilton was mortally wounded by then Vice President Aaron Burr in a duel at Weehawken, New Jersey. Their conflict, stemming from essays Hamilton had penned against Burr, was an episode in a larger clash between two political ideologies: that of Thomas Jefferson and the anti-Federalists, who argued for an agrarian economy and a weak central government, versus that of Hamilton and the Federalists, who championed a strong central state and an industrial economy.

## Noted for Your Afternoon Procrastination for August 29, 2014

Over at Equitable Growth--The Equitablog

Plus:

1. Lawrence Mishel: Broadening Agreement That Job Polarization Wasn’t Present in the United States In 2000s: "The 'job polarization hypotheses'... claim[s] that computerization leads to the 'simultaneous growth of high-education, high-wage and low-education, low-wages jobs at the expense of middle-wage, middle education jobs'.... It is noteworthy, therefore, that MIT Professor David Autor, the leading intellectual architect of the job polarization hypothesis, has presented a paper at the Federal Reserve Bank of Kansas City’s economic policy symposium in Jackson Hole, Wyo., which finds that job polarization did not occur in the 2000s and that, in any case, job polarization is not necessarily connected to wage polarization. This confirms the findings of others, such as Beaudry, Green, and Sand and my own research with Heidi Shierholz and John Schmitt. One can only applaud Autor for updating his analysis of employment and wage trends, and acknowledging the lack of occupational job polarization in the 2000s and its failure to be able to explain wage trends.... In the new paper, Autor directly acknowledges the failure of occupational employment patterns to predict wage patterns, something he did not do in his earlier work, writing that 'while computerization has strongly contributed to employment polarization, we would not generally expect these employment changes to culminate in wage polarization except in tight labor markets.'... In the end, changes in occupational employment patterns are a dim flashlight indeed for shining light on key wage patterns..."

2. Olivier Blanchard: Where Danger Lurks: "Until the 2008 global financial crisis, mainstream U.S. macroeconomics had taken an increasingly benign view of economic fluctuations in output and employment. The crisis has made it clear that this view was wrong.... The techniques we use affect our thinking in deep and not always conscious ways.... The techniques were best suited to a worldview in which economic fluctuations occurred but were regular, and essentially self-correcting. The problem is that we came to believe that this was indeed the way the world worked..."

3. Rob Weiner: Overruled: A (Third) Response To Professor Adler: "In the hopes of capping the increasingly tedious (not to mention snarky) contretemps with Professor Jonathan Adler, I think it worth reviewing a few of the instances where his responses to my blog posts on Halbig have ignored, elided, or misconstrued my points.... So, let’s return to substance.... None of Adler’s assertions, including his pointless quibble over the definition of 'definition', undermine the statutory arguments in my posts or in the judicial opinions rejecting his position. Adler’s theory requires reading the words, 'established by the State' in isolation, and saddling them with an interpretation that vitiates other pertinent provisions of the Act, sabotages the Exchanges that Congress took such pains to create, and denies low income families the subsidies needed to meet the objective proclaimed repeatedly in the statutory text, in the legislative debates, and, indeed, in the very name of the Act--extending affordable healthcare to all Americans..."

4. Alicia Munnell: Dueling Data Muddies Social Security Debate: "The most recent missile is Andrew Biggs’ Wall Street Journal op-ed, 'Liberals for Social Security Insolvency'. Biggs notes that 75-year Social Security deficit projections by the Congressional Budget Office (CBO) have nearly quadrupled between 2008 and 2014... to argue that it is foolish to put forth proposals to expand the program. The angle that I find the most disturbing is the suggestion that Social Security costs bounce around, that we don’t really know what’s going on, and that six years from now they could quadruple once again. Nothing could be further from the truth..."

5. Menzie Chinn: Wisconsin Forecasted to Lag Further Behind Minnesota, and Kansas travels its own path. Bruce Bartlett brings my attention to this article noting Minnesota’s economic performance. This reminded me to check on the Philadelphia Fed’s forecast.... The cumulative growth gap between Minnesota and Wisconsin (relative to 2011M01) is forecasted to grow--rather than shrink--over the past six months.... The cumulative growth gap between Kansas and the Nation is also forecasted to rise, from the current gap of 2.7%, to 3.2%, in just the next six months..."

6. Greg Robb: 5 things you won’t learn from reading Geithner’s book: "Key discussions redacted: After becoming president of the New York Fed from October 2003, Geithner assembled an all-star board of directors... [that] met every two weeks throughout the run-up to the crisis.... In his book, Geithner mentions the all-star board, but none of the specifics of their discussions. What did the New York Fed know about Bear Stearns and when did they know it?... Where in the world was Barack Obama?... Too big to jail?... The extent to which Treasury officials were warning the Justice Department not to be too aggressive and upset the recovery of the fragile banking system.... What went wrong? While Geithner portrays himself as a first responder to the crisis, experts said they were struck by the lack of discussion of what went wrong in the first place. 'If you read the book and didn’t know anything about the crisis, you’d have no idea what caused it', said Gerding of the University of Colorado..."

And Over Here:

Continue reading "Noted for Your Afternoon Procrastination for August 29, 2014" »

## Afternoon Must-Read: Menzie Chinn: Wisconsin Forecasted to Lag Further Behind Minnesota

Menzie Chinn: Wisconsin Forecasted to Lag Further Behind Minnesota, and Kansas travels its own path...

...Bruce Bartlett brings my attention to this article noting Minnesota’s economic performance. This reminded me to check on the Philadelphia Fed’s forecast.... The cumulative growth gap between Minnesota and Wisconsin (relative to 2011M01) is forecasted to grow--rather than shrink--over the past six months.... The cumulative growth gap between Kansas and the Nation is also forecasted to rise, from the current gap of 2.7%, to 3.2%, in just the next six months...

## Afternoon Must-Read: Alicia Munnell: Dueling Data Muddies Social Security Debate

Alicia Munnell: Dueling Data Muddies Social Security Debate: "The most recent missile is Andrew Biggs’ Wall Street Journal op-ed...

...'Liberals for Social Security Insolvency'. Biggs notes that 75-year Social Security deficit projections by the Congressional Budget Office (CBO) have nearly quadrupled between 2008 and 2014... to argue that it is foolish to put forth proposals to expand the program. The angle that I find the most disturbing is the suggestion that Social Security costs bounce around, that we don’t really know what’s going on, and that six years from now they could quadruple once again. Nothing could be further from the truth...

## Afternoon Must-Read: Rob Weiner: Overruled: A (Third) Response To Professor Adler on Halbig

Rob Weiner: Overruled: A (Third) Response To Professor Adler: "In the hopes of capping the increasingly tedious (not to mention snarky) contretemps with Professor Jonathan Adler...

...I think it worth reviewing a few of the instances where his responses to my blog posts on Halbig have ignored, elided, or misconstrued my points.... I observed that a threat... must be communicated and understood.... Among the evidence I cited that Section 36B was not perceived as a threat were the initial characterizations of the disputed language by Adler and others as a 'glitch' and the consequences, as 'perhaps unintended'.  Adler’s response re-imagines the word 'glitch'.... But in Volokh on September 9, 2011, Adler recounted the theory of some observers that 'Congress meant to provide tax credits for any exchange-purchased insurance, because Congress wanted lower-income individuals to be able to purchase health insurance (and comply with the mandate)'.... Adler conceded that, 'it is certainly plausible--perhaps even likely--that many in Congress wanted tax credits for the purchase of health insurance to be broadly available.' 'Congress may have wanted to make tax credits more widely available', Adler also wrote, 'but that is not what Congress did'. It is highly unlikely that Congress’s intent to coerce states was clear in 2010 when the ACA was enacted, but became retroactively cloudy over the next 18 months....

No legislator offered Professor Adler’s interpretation of the provision in Section 36B during the debates.... Adler responds that no legislator specifically said tax credits were available in states with federally-facilitated exchanges.  And in fact, they did not specifically say that.  Instead, they repeatedly used the word 'all' in describing who... would receive assistance.... 'All' is a fairly inclusive word. But those statements don’t count, Adler claims, because 'PPACA supporters believed all fifty states would create their own exchanges, the legislators assumed that every state would establish its own exchange, as many repeatedly said'. Are those 'many' the same ones who used the word 'all'?  And when legislators made statements about the broad availability of tax credits and subsidies, did they say it was because all fifty states would establish exchanges?...

Adler relied extensively on a 1987 opinion by Judge Edwards espousing a very limited compass for en banc review. I pointed out in my last post that this decision, as well as others cited by the Halbig plaintiffs, predated the amendment of Federal Rule of Appellate Procedure 35 highlighting inter-circuit conflict as an express basis for en banc review.... Rather than addressing his and the Halbig plaintiffs’ reliance on precedents superseded (essentially overruled) by changes in the relevant rule, Professor Adler repeatedly returns to the peripheral question whether the DC Circuit regularly issues orders staying its mandate until the time for rehearing expires.... The key point... is that this is not the point. It does not affect at all the conclusion that the Halbig decision was aberrant and that the full Court of Appeals is unlikely to let it linger....

So, let’s return to substance.... None of Adler’s assertions, including his pointless quibble over the definition of 'definition', undermine the statutory arguments in my posts or in the judicial opinions rejecting his position. Adler’s theory requires reading the words, 'established by the State' in isolation, and saddling them with an interpretation that vitiates other pertinent provisions of the Act, sabotages the Exchanges that Congress took such pains to create, and denies low income families the subsidies needed to meet the objective proclaimed repeatedly in the statutory text, in the legislative debates, and, indeed, in the very name of the Act--extending affordable healthcare to all Americans.  And that, I hope, is my final word on why I believe the D.C. Circuit will grant en banc review and overturn the panel decision adopting Adler’s theory.

## Morning Must-Read: Olivier Blanchard: Where Danger Lurks

Olivier Blanchard: Where Danger Lurks: "Until the 2008 global financial crisis...

...mainstream U.S. macroeconomics had taken an increasingly benign view of economic fluctuations in output and employment. The crisis has made it clear that this view was wrong.... The techniques we use affect our thinking in deep and not always conscious ways.... The techniques were best suited to a worldview in which economic fluctuations occurred but were regular, and essentially self-correcting. The problem is that we came to believe that this was indeed the way the world worked...

## Morning Must-Read: Larry Mishel: Broadening Agreement That Job Polarization Wasn’t Present in the United States In 2000s

Lawrence Mishel: Broadening Agreement That Job Polarization Wasn’t Present in the United States In 2000s: "The 'job polarization hypotheses'...

claim[s] that computerization leads to the 'simultaneous growth of high-education, high-wage and low-education, low-wages jobs at the expense of middle-wage, middle education jobs'.... It is noteworthy, therefore, that MIT Professor David Autor, the leading intellectual architect of the job polarization hypothesis, has presented a paper at the Federal Reserve Bank of Kansas City’s economic policy symposium in Jackson Hole, Wyo., which finds that job polarization did not occur in the 2000s and that, in any case, job polarization is not necessarily connected to wage polarization. This confirms the findings of others, such as Beaudry, Green, and Sand and my own research with Heidi Shierholz and John Schmitt. One can only applaud Autor for updating his analysis of employment and wage trends, and acknowledging the lack of occupational job polarization in the 2000s and its failure to be able to explain wage trends.... In the new paper, Autor directly acknowledges the failure of occupational employment patterns to predict wage patterns, something he did not do in his earlier work, writing that 'while computerization has strongly contributed to employment polarization, we would not generally expect these employment changes to culminate in wage polarization except in tight labor markets.'... In the end, changes in occupational employment patterns are a dim flashlight indeed for shining light on key wage patterns...

## Liveblogging World War II: August 29, 1944: Antwerp

From Richard Atkinson: The Guns at Last Light:

No liberated city in Europe was more important to the Allied cause than Antwerp. By the mid-sixteenth century it had become the richest town on the Continent, surpassing even Venice and Genoa, with a hundred or more ships at anchor every day, carrying spices from Portugal, grain from the Baltic, silk embroideries from Italy. The Inquisition, a Spanish pillage, and the rise of Holland cost the city its prosperity; not until the nineteenth century did Antwerp ascend again to become a bustling hive of diamond-cutting, cigar-rolling, sugar-refining, and beer-brewing. By the 1930s it ranked with Hamburg, New York, and Rotterdam among the world’s finest ports, handling a thousand ships each month, with twenty-nine miles of quays, more than six hundred cranes, nine hundred warehouses, and a vast rail yard.

Continue reading "Liveblogging World War II: August 29, 1944: Antwerp" »

## Mitch McConnell at the Koch Brothers Donor Summit: Live from La Farine CCCXIX: August 29, 2014

Cleaned-up transcript:

Mitch McConnell: At the Koch Brothers Donor Summit: "Is this working?...

...I know it’s been a long day, but also a very inspiring day. And I want to start by thanking you, Charles and David, for the important work you’re doing. I don’t know where we’d be without you, and I want to thank you all for rallying to the cause. What I’m going to do--we’re at the end of the day, I hope this won’t be just a monologue, and if you’re interested in interjecting, please feel free. What I’m talking about with you today is the one freedom without which we can’t do anything.

Continue reading "Mitch McConnell at the Koch Brothers Donor Summit: Live from La Farine CCCXIX: August 29, 2014" »

## Over at Equitable Growth: A Note on the Core PCE Inflation Phillips Curve: The Honest Broker for the Week of August 30, 2014

### A Note on the Core PCE Inflation Phillips Curve

#### The Honest Broker for the Week of August 30, 2014

Over at Equitable Growth:

David Beckworth notes that in the Bernanke-Yellen era the FOMC gets uncomfortable and decides that it has to loosen policy and steps up its interventions when PCE inflation falls below 1.5%/year and gets uneasy and decides that it has to tighten policy when PCE inflation rises above 2%/year:

[This] reduced-form relationship... is highly suggestive and consistent with my claim... that... there is a 2% ceiling to an inflation target corridor...

Continue reading "Over at Equitable Growth: A Note on the Core PCE Inflation Phillips Curve: The Honest Broker for the Week of August 30, 2014" »

## 2014-2015 Academic Biography: Live from Espresso Roma CCCXVIII: August 28, 2014

J. Bradford DeLong is on sabbatical leave this 2014-2015 academic year, but is eager to talk. He can be reached via email brad.delong@gmail.com, phone 925-708-0467, FaceTime, or Skype , but SMS etc. not so much. And this year you are more likely to find him at Espresso Roma at Ashby and College than in his office of 691A Evans Hall.

He has taught at MIT, Boston University, and Harvard University as well as Berkeley, and has guest-lectured elsewhere. He is Professor of Economics here at Berkeley, an affiliate of the Institute for New Economic Thinking-funded Berkeley Economic History Laboratory a Research Associate at the National Bureau of Economic Research, a Weblogger at the Washington Center for Equitable Growth, and was Deputy Assistant Secretary of the U.S. Treasury from 1993-1995 and Chair of the Political Economy major here at U.C. Berkeley from 2002-2012.

His home intellectual base is Economic History, with excursions into Macroeconomics, Finance, and both Historical and Contemporary Political Economy.

More than you probably want to know can be found at: http://equitablegrowth.org/blog | http://delong.typepad.com | http://www.j-bradford-delong.net

Continue reading "2014-2015 Academic Biography: Live from Espresso Roma CCCXVIII: August 28, 2014" »

## Liveblogging World War II: August 28, 1944: Eleanor Roosevelt

HYDE PARK, Sunday—A very kind gentleman sent me a letter from a friend of his, Ensign Henry Swain, of Washington, New Jersey, who was on board an LST as part of the landing force in Normandy. We have all read with the greatest admiration, I know, the wonderful story in Ernie Pyle's columns of the past few days about the courageous British airman. I think this letter from one of our young Americans breathes the same kind of "never give up" spirit which wins battles and keeps a world free. There is too much to put into one column, yet I cannot bear not to let you have it all, so there will be two installments.

Continue reading "Liveblogging World War II: August 28, 1944: Eleanor Roosevelt" »

## "A Committee of Eight, About Three of Whom Were Aware That What They Were Supporting Was Completely Insupportable": Hoisted from the Internet from Ten Years Ago: Another Keeper from Daniel Davies:

Brad DeLong: Brad DeLong's Semi-Daily Journal: A Weblog: A Committee of Eight, Three of Whom... Daniel Davies writes:

The Economist editorial on GWB was about as readable as a Socialist Workers' Party caucus statement, and presumably for exactly the same reason; it was drafted by a commitee of about eight, about three of whom were aware that what they were supporting was unsupportable. Clive Crook's response absolutely confirms me in this view...

Indeed!

Continue reading ""A Committee of Eight, About Three of Whom Were Aware That What They Were Supporting Was Completely Insupportable": Hoisted from the Internet from Ten Years Ago: Another Keeper from Daniel Davies:" »

## Noted for Your Afternoon Procrastination for August 27, 2014

Over at Equitable Growth--The Equitablog

Plus:

1. Greg Sargent: GOP’s Obamacare repeal follies continue: "One of the most amusing subplots of the 2014 elections has been the endless and frequently comic struggles of GOP Senate candidates to articulate their position on Medicaid.... Iowa Senate candidate Joni Ernst... says people on Medicaid should should be allowed to keep it.... And yet she proudly touted her vote against Iowa’s Medicaid expansion and continues to be a gung-ho advocate for repealing Obamacare, which would roll back funding for the expansion.... Ernst’s repeal stance would mean all those people lose their coverage. Does she no longer think that should happen?.... Tom Cotton in Arkansas once again refused to say this week whether his repeal stance means he would roll back his state’s version of the Medicaid expansion.... Terri Lynn Land in Michigan has also refused to clarify her position on this.... Commentators are not telling the full story of how the politics of Obamacare are really playing out.... At this point [candidates] are largely attacking the word 'Obamacare' while reassuring swing voters they support its general goals, without saying how they would accomplish those goals..."

2. David Kotok: Deflation Fears: "1. United States 10-Year Treasury Yield, 2.4% 2. Germany 10-Yield Bund Yield, under 1%. 3. Japanese 10-Year JGB Yield, under 0.5%. 4. France 10-Year Government Bond Yield, 1.3%. 5. Canada 10-Year Government Bond Yield, 2%. 6. United Kingdom 10-Year Government Bond Yield, 2.5%. 7. Mexico 10-Year Government Bond Yield, 3.2%. 8. Italy 10-Year Government Bond Yield, 2.4%..."

3. Jonathan Chait: Dreamers Have Destroyed GOP Immigration Strategy: "After the 2012 election, Marco Rubio tried to craft himself as the leader of a pro-immigration-reform Republican Party. That effort has capsized, pulling Rubio’s standing with conservatives down along with it. Now Rubio is refashioning himself as the leader of a restrictionist Republican Party.... The newest iteration of Rubio is the opposite of the figure he and party leaders envisioned last year. The transformation ought to terrify them.... Of course, the 2016 campaign has hardly begun.... The trouble for Republicans is that the political theater created by the Dreamers is not going to stop. They can try their best to control officially sanctioned media debates, but the Dreamers are staging debates without permission, endlessly highlighting the cruelty of the Republican stance. It is a strategy for which the Republicans so far have no answer. The symbolic denouement of Rubio’s immigration debacle may well be an angry old man brandishing his cane at young Dreamers.

4. Matthew Klein: This time is different, long-term unemployment edition: "Jae Song and Till von Wachter... the impact of the most recent recession on long-term unemployment was not actually that unusual given the number of jobs lost at the outset. The paper also presents some encouraging evidence that many of those who appear to have given up hope of finding a job could rejoin the labour force if the economy keeps expanding, as well as sobering demonstrations of the permanent costs of being laid off.... Long-term non-employment in the immediate aftermath of the Great Recession was not much worse than it was in the early 1980s for most cohorts, with the notable exception of young men.... As the paper puts it: 'There is no evidence that the rate of exit from long term nonemployment has slowed during the Great Recession compared to the patterns in all episodes since the 1990s.' But this is not all good news... 'five to ten years after the Great Recession the employment population ratio would be predicted to be 1 to 2 percentage points lower than it was before the recession.'..."

5. Daniel Kuehn: Yes, Acemoglu and Robinson's review of Piketty is very strange: "I just happened to get to one of the parts in Piketty that Acemoglu and Robinson quote to show that Piketty doesn't think institutions matter (from page 365): 'The fundamental inequality r > g can explain the very high level of capital inequality observed in the nineteenth century, and thus in a sense the failure of the French revolution.... The formal nature of the regime was of little moment compared with the inequality r > g.' So what is in that ellipses? [Piketty] explains that the revolution didn't change the course of inequality (relative to monarchical Britain) because the new institutions that were established were much closer to Britain than popular perception in France at the time suggested! It was NOT a big change in institutions, which was why the French revolution did not shift the parameters.... Immediately after this he goes on to discuss changes in institutions in the 20th century that WERE substantial enough to impact inequality.... In other words, the real point of this section is that institutions matter a lot.... And not only did A&R get that wrong--they deliberately removed the portion of the quote where he made the point.... All of the explanations for the empirical changes in the distribution over time are either (1) institutions, or (2) shocks.... Apparently it's not just Acemoglu and Robinson that missed this memo.... Piketty without institutions in the capital share of income section could probably survive. Piketty without institutions in the inequality section of the book simply wouldn't exist any more.... This is like saying Milton Friedman wasn't all that concerned with money!"

6. John Cole: Bitter Irony: "Here’s the facebook page of Charles Vacca, the range instructor who was killed by a 9 year old with an UZI that we mentioned earlier. Here are some of the pictures he posted to Facebook..."

Continue reading "Noted for Your Afternoon Procrastination for August 27, 2014" »

## Afternoon Must-Read: Daniel Kuehn: Yes, Acemoglu and Robinson's Piketty Review Is Strange

Daniel Kuehn: Yes, Acemoglu and Robinson's review of Piketty is very strange: "I just happened to get to one of the parts in Piketty that Acemoglu and Robinson quote...

...to show that Piketty doesn't think institutions matter (from page 365):

The fundamental inequality r > g can explain the very high level of capital inequality observed in the nineteenth century, and thus in a sense the failure of the French revolution.... The formal nature of the regime was of little moment compared with the inequality r > g.

So what is in that ellipses? [Piketty] explains that the revolution didn't change the course of inequality (relative to monarchical Britain) because the new institutions that were established were much closer to Britain than popular perception in France at the time suggested! It was NOT a big change in institutions, which was why the French revolution did not shift the parameters.... Immediately after this he goes on to discuss changes in institutions in the 20th century that WERE substantial enough to impact inequality.... In other words, the real point of this section is that institutions matter a lot.... And not only did A&R get that wrong--they deliberately removed the portion of the quote where he made the point.... All of the explanations for the empirical changes in the distribution over time are either (1) institutions, or (2) shocks.... Apparently it's not just Acemoglu and Robinson that missed this memo.... Piketty without institutions in the capital share of income section could probably survive. Piketty without institutions in the inequality section of the book simply wouldn't exist any more.... This is like saying Milton Friedman wasn't all that concerned with money!

## Afternoon Must Read: Matthew Klein: Jae Song and Till von Wachter on Long-Term Unemployment and Hysteresis

Matthew Klein: This time is different, long-term unemployment edition: "Jae Song and Till von Wachter...

...the impact of the most recent recession on long-term unemployment was not actually that unusual given the number of jobs lost at the outset. The paper also presents some encouraging evidence that many of those who appear to have given up hope of finding a job could rejoin the labour force if the economy keeps expanding, as well as sobering demonstrations of the permanent costs of being laid off.... Long-term non-employment in the immediate aftermath of the Great Recession was not much worse than it was in the early 1980s for most cohorts, with the notable exception of young men.... As the paper puts it: 'There is no evidence that the rate of exit from long term nonemployment has slowed during the Great Recession compared to the patterns in all episodes since the 1990s.' But this is not all good news... 'five to ten years after the Great Recession the employment population ratio would be predicted to be 1 to 2 percentage points lower than it was before the recession'...

## Lunchtime Must-Read: Jonathan Chait: Dreamers Have Destroyed GOP Immigration Strategy

Jonathan Chait: Dreamers Have Destroyed GOP Immigration Strategy: "After the 2012 election, Marco Rubio tried to craft himself...

...as the leader of a pro-immigration-reform Republican Party. That effort has capsized, pulling Rubio’s standing with conservatives down along with it. Now Rubio is refashioning himself as the leader of a restrictionist Republican Party.... The newest iteration of Rubio is the opposite of the figure he and party leaders envisioned last year. The transformation ought to terrify them.... Of course, the 2016 campaign has hardly begun.... The trouble for Republicans is that the political theater created by the Dreamers is not going to stop. They can try their best to control officially sanctioned media debates, but the Dreamers are staging debates without permission, endlessly highlighting the cruelty of the Republican stance. It is a strategy for which the Republicans so far have no answer. The symbolic denouement of Rubio’s immigration debacle may well be an angry old man brandishing his cane at young Dreamers.

## The Taper, Nick Rowe, Quantitative Easing, and Intellectual Coordination Failures: Over at Equitable Growth: Wednesday Focus for August 27, 2014/The (Not So) Honest Broker for the Week of August 30, 2014

Over at Equitable Growth: Nick Rowe begs for North Atlantic central banks to do what he (and I) regard as their proper job, and whimpers:

Nick Rowe: Money, Prices, and Coordination Failures "The more interesting cases are...

...where a non-monetary coordination failure has spillover effects, and causes a monetary coordination failure. A worsening of asymmetric information problems in financial markets, which is a coordination problem in its own right, also causes an increased demand for money and a monetary coordination problem. Should we say that the problem in financial markets is the "root cause" of the recession, and one that should be addressed directly, if possible, by something other than monetary policy? No. Monetary policy should take the world as it is, warts and all, and do what it can do. And what it can do is eliminate that excess demand for money, even if it cannot eliminate that original problem that initially caused the excess demand for money. It does not matter, for the monetary authority, whether that increased demand for money was caused by some natural event like the weather, which nobody can change, or whether it was caused by some other problem, which the fiscal authority can and should fix. READ MOAR

Continue reading "The Taper, Nick Rowe, Quantitative Easing, and Intellectual Coordination Failures: Over at Equitable Growth: Wednesday Focus for August 27, 2014/The (Not So) Honest Broker for the Week of August 30, 2014" »

## Hoisted from the Non-Internet of 70 Years Ago: George Orwell: Confessions of a Book Reviewer

George Orwell: Confessions of a Book Reviewer: "In a cold but stuffy bed-sitting room...

...littered with cigarette ends and half-empty cups of tea, a man in a moth-eaten dressing-gown sits at a rickety table, trying to find room for his typewriter among the piles of dusty papers that surround it. He cannot throw the papers away because the wastepaper basket is already overflowing, and besides, somewhere among the unanswered letters and unpaid bills it is possible that there is a cheque for two guineas which he is nearly certain he forgot to pay into the bank. There are also letters with addresses which ought to be entered in his address book. He has lost his address book, and the thought of looking for it, or indeed of looking for anything, afflicts him with acute suicidal impulses.

Continue reading "Hoisted from the Non-Internet of 70 Years Ago: George Orwell: Confessions of a Book Reviewer" »

$423 billion over the next decade if the red states continue to reject Medicaid expansion. This won't be enough of a cash shortfall to send the red states into a near-permanent recession or stagnation--it's only 0.5% or so of gross economic product over the next decade. But it will hurt, and hurt a lot: the right multiplier to apply here is the Moretti long-run geographic multiplier of 6, which means that economic activity in red states in a decade will be 3% less and in blue states 1.5% more than in the baseline. Richard Mayhew: Rejecting free money is expensive: "Forbes Magazine is using little words to explain to its readers... ...that hospitals in states that are rejecting Medicaid Expansion are hurting: Continue reading "Rejecting Free Money Is Really Expensive: Live from The Roasterie CCCXVII: August 27, 2014" » ## Evening Must-Read: David Kotok: Deflation Fears David Kotok: Deflation Fears: "1. United States 10-Year Treasury Yield... ...2.4% 2. Germany 10-Yield Bund Yield, under 1%. 3. Japanese 10-Year JGB Yield, under 0.5%. 4. France 10-Year Government Bond Yield, 1.3%. 5. Canada 10-Year Government Bond Yield, 2%. 6. United Kingdom 10-Year Government Bond Yield, 2.5%. 7. Mexico 10-Year Government Bond Yield, 3.2%. 8. Italy 10-Year Government Bond Yield, 2.4%... ## Tuesday Declaration of Summer Book Review Bankruptcy At the start of summer I put a large pile of books on my desk. "I will write reviews of these this summer", I thought. "They all deserve to be reviewed, and it will be quick and easy to do". Not going to happen. I therefore declare book-review bankruptcy and formally and permanently disavow all intention of ever writing reviews of: ## Morning Must-Read: Greg Sargent: GOP’s Obamacare Repeal Follies Continue Greg Sargent: GOP’s Obamacare repeal follies continue: "One of the most amusing subplots of the 2014 elections... ...has been the endless and frequently comic struggles of GOP Senate candidates to articulate their position on Medicaid.... Iowa Senate candidate Joni Ernst... says people on Medicaid should should be allowed to keep it.... And yet she proudly touted her vote against Iowa’s Medicaid expansion and continues to be a gung-ho advocate for repealing Obamacare, which would roll back funding for the expansion.... Ernst’s repeal stance would mean all those people lose their coverage. Does she no longer think that should happen?.... Tom Cotton in Arkansas once again refused to say this week whether his repeal stance means he would roll back his state’s version of the Medicaid expansion.... Terri Lynn Land in Michigan has also refused to clarify her position on this.... Commentators are not telling the full story of how the politics of Obamacare are really playing out.... At this point [candidates] are largely attacking the word 'Obamacare' while reassuring swing voters they support its general goals, without saying how they would accomplish those goals... ## An Interesting Ad-Lib from ECB Head Mario Draghi's Jackson Hole Speech: Morning Comment Joe Weisenthal notes Lorcan Roche Kelly of Agenda Research on an extended ad-lib in Mario Draghi's Jackson Hole speech. Ad lib emphasized; things in the text not mentioned struck through: Inflation has been on a downward path from around 2.5% in the summer of 2012 to 0.4% most recently. Continue reading "An Interesting Ad-Lib from ECB Head Mario Draghi's Jackson Hole Speech: Morning Comment" » ## Liveblogging World War I: August 26, 1914: The Flames of Louvain From Barbara Tuchman, The Guns of August: On August 25 the burning of Louvain began. The medieval city on the road from Liège to Brussels was renowned for its University and incomparable Library, founded in 1426 when Berlin was a clump of wooden huts. Housed in the fourteenth century Clothworkers’ Hall, the Library included among its 230,000 volumes a unique collection of 750 medieval manuscripts and over a thousand incunabula. The façade of the Town Hall, called a “jewel of Gothic art,” was a stone tapestry of carved knights and saints and ladies, lavish even of its kind. In the church of St. Pierre were altar panels by Dierik Bouts and other Flemish masters. The burning and sack of Louvain, accompanied by the invariable shooting of civilians, lasted six days before it was called off as abruptly as it began. Continue reading "Liveblogging World War I: August 26, 1914: The Flames of Louvain" » ## An 1862 Extraordinary Rendition in Morocco by my Great^6 Grandfather James DeLong: Live from The Roasterie CCCXVI: August 26, 2014 My Great^6 Grandfather James DeLong left his bones in Wichita, but only after carrying out the first-ever extraordinary rendition on the past of the U.S. government and then getting fired by Abraham Lincoln for being too aggressive in waging the Civil War on all possible fronts... Morocco–United States Relations--Wikipedia: "During the American Civil War... ...Morocco reaffirmed its diplomatic alliance with the United States. Morocco also became the scene of a colorful foreign relations and political warfare episode involving the Kingdom of Morocco, the United States of America, the Confederate States of America, France, and Great Britain. In 1862 Confederate diplomats Henry Myers and Tom Tate Tunstall were arrested outside the American Consulate in Tangier after making disparaging remarks about the United States and its flag. American consul, James De Long overheard their jeers and asked Moroccan police to seize the men. When word reached Confederate Admiral Raphael Semmes who was acting as the Confederate diplomat in the area, he sent out dispatches to as many neutral diplomats as he had contact with, including the British Consul to Morocco, John Drummond Hay. Semmes asked Hay to get involved and encourage Morocco to release the prisoners, to which Hay responded that he could only convey the message but not offer any recommendation for actions, as offering a recommendation would violate Britain's terms of neutrality. Semmes tried a similar tactic with the French consul, but without success. Continue reading "An 1862 Extraordinary Rendition in Morocco by my Great^6 Grandfather James DeLong: Live from The Roasterie CCCXVI: August 26, 2014" » ## Tykhe's Nonexistent Urn and Senate Election Probabilities: Over at Equitable Growth: Philosophy of Probability III: the Philosophizing: Tuesday Focus for August 26, 2014 Over at Equitable Growth: Apropos of: Thrasymakhos: Today we discover that Sam Wang does not seem to be a Bayesian: Sam Wang: Why you’re wrong to get excited about “60%”: Some people are excited... Nate Silver... [gives] a probability of a GOP [Senate] takeover at 60%. To cut to the chase: I do not think that number means what you think it does... Thomas Bayes: It is simple. It means that Nate Silver stands ready to bet on Senate control next January at odds of 3-2. Thrasymakhos: "Stands ready"? READ MOAR Continue reading "Tykhe's Nonexistent Urn and Senate Election Probabilities: Over at Equitable Growth: Philosophy of Probability III: the Philosophizing: Tuesday Focus for August 26, 2014" » ## Noted for Your Afternoon Procrastination for August 25, 2014 Over at Equitable Growth--The Equitablog Plus: Must- and Shall-Reads: 1. Jared Bernstein: Chair Yellen Looks Under New Rocks, Finds Same Thing that’s Under Old Rocks: "I yield to no one in my admiration for... Janet Yellen. So I was taken aback a bit by a section in her... speech... where she gave a number of reasons why the absence of wage pressures may not, paradoxically, be signaling that considerable slack remains in the job market.... I don’t think that’s the case at all here.... Each of her three reasons look like additional reasons not to slow the economy and preempt wage growth by tightening too soon.... Nominal wage rigidity... implies that until inflation erodes real wages enough to generate more employment demand (i.e., moving down the demand curve), or until there’s enough labor demand to necessitate hiring at current real wage levels (i.e., the demand curve moves out), there’s no reason to tighten.... Structural... forces... reducing labor’s share... [are a reason to promote] very tight labor markets to rebalance 'factor income shares'.... Depressed labor force participation... might lead to wage pressures in the near term, but as labor demand strengthened, those sideliners would get pulled back in which would then dampen those pressures.... Even more so than the other two reasons, this one especially calls for extended monetary support of the job market..." 2. **Jason Furman and John Podesta: The Cost of Delaying Action to Stem Climate Change: "The report... written under the leadership of Jim Stock.... Immediate action substantially reduces the cost of achieving climate targets. Taking meaningful steps now sends a signal to the market that reduces long-run costs of meeting the target.... The least-cost mitigation path to achieve a given climate target typically starts with a relatively low price of carbon to send these signals to the market, and subsequently increases as new low-carbon technologies are developed and deployed... net mitigation costs increase, on average, by approximately 40 percent for each decade of delay.... If delayed action causes the mean global temperature increase to stabilize at 3° Celsius above preindustrial levels, instead of 2°, that delay will induce annual additional damages of 0.9 percent of global output.... The possibility of abrupt, large-scale, catastrophic changes in our climate increases the need to act.... Enacting meaningful change in climate policy is analogous to purchasing climate insurance..." 3. Paul Krugman: The Rent Is too Damned High: "It’s true that Texas has had faster job growth.... So have other Sunbelt states with conservative governments.... The answer from the right is, of course, that it’s all about avoiding regulations.... But... there are big problems with this story quite aside from the habit economists pushing this line have of getting their facts wrong.... Wages in the places within the United States attracting the most migrants are typically lower than in the places those migrants come from, suggesting that the places Americans are leaving actually have higher productivity and more job opportunities.... So why are people moving to these relatively low-wage areas? Because living there is cheaper, basically because of housing.... Americans are being pushed out of the Northeast (and, more recently, California) by high housing costs.... Conservative complaints about excess regulation and intrusive government aren’t entirely wrong, but the secret of Sunbelt growth isn’t being nice to corporations and the 1 percent; it’s not getting in the way of middle- and working-class housing supply.... It would be great to see the real key--affordable housing--become a national issue. But I don’t think Democrats are willing to nominate Mayor Bill de Blasio for president just yet." 4. David Autor: Skills, education, and the rise of earnings inequality among the “other 99 percent”: "The singular focus of public debate on the 'top 1 percent' of households overlooks the component of earnings inequality that is arguably most consequential for the 'other 99 percent' of citizens: the dramatic growth in the wage premium associated with higher education and cognitive ability. This Review documents the central role of both the supply and demand for skills in shaping inequality, discusses why skill demands have persistently risen in industrialized countries, and considers the economic value of inequality alongside its potential social costs. I conclude by highlighting the constructive role for public policy in fostering skills formation and preserving economic mobility..." 5. Branko Milanovic: My Take on the Acemoglu-Robinson Critique of Piketty: "My brief reaction.... 1) 'Piketty totally neglects institutions.' This is hard to understand since Piketty's explanation for a large part of changes in inequality in the US, France and elsewhere are precisely institutional.... So I really fail to see any validity... the critique is fundamentally dishonest.... First, Acemoglu and Robinson establish the equation Piketty=Marx. Then then criticize Marx for ignoring institutions.... Then, since they have already decided that Piketty is really Marx, they barely give one or two examples of Piketty’s lack of concern with institutions.... 2) 'Lots of inequality increase is due to higher inequality of labor incomes.' This is true especially for the United States and no one disputes it; neither does Piketty. He actually mentions it repeatedly.... 3) Panel regressions... test[ing] whether r-g is correlated with increase in inequality.... They find that the sign of the coefficient is in most cases negative.... The right-hand side variable is not r-g but simply 'g'. This approach is surely wrong.... Only the second set... makes sense. But there, the results are inconclusive. Moreover, there are no controls at all except for the country and year dummies..." 6. Jérémie Cohen-Setton: Is this a European U-turn?: "Mario Draghi is recognizing that the recovery in the euro area remains uniformly weak and that the euro area fiscal stance was not helping the ECB do its job.... French leaders also reintroduced over the weekend the notion of aggregate demand, a concept they had noticeably moved away from with the 'Pacte de responsabilite'.... Inflation, he noted, has been on a downward path from around 2.5% in the summer of 2012 to 0.4% most recently.... The big news is that Draghi does not (at least now) believe in balanced-budget fundamentalism.... Richard Portes and Philippe Weil write European citizens must hope that their policy makers will recognize that the acute, pressing problem is aggregate demand. Repairing the credit system, implementing serious reforms of state expenditure and taxation, creating more flexible labor markets, finally opening the services market to cross-border competition--all are indeed very important. But they will not liberate the eurozone from stagnation..." 7. Laura Tyson: The economic and fiscal case for higher US infrastructure spending: "Investment in public infrastructure in the US has plunged to less than 2% of GDP, its lowest level since the federal government started tracking these data in 1992. The American Society of Civil Engineers (ASCE) gives a grade of D+ to infrastructure in the United States.... 42% of urban roads are congested, costing the economy an estimated$101 billion a year in wasted time and fuel consumption. Deficient and deteriorating transit systems impose another $90 billion in annual economic costs.... In lieu of raising the gas tax, Obama has proposed a four-year$302 billion plan to close the existing HTF funding gap, and boost HTF spending by \$20 billion a year above current levels. His plan, which relies on using transitional corporate tax revenues raised in conjunction with corporate tax reform, has virtually no chance of becoming law.... Nor does his oft-repeated proposal for a federal infrastructure bank to attract more private funds for infrastructure projects. Confronted with implacable Republican opposition, Obama is relying on what the administration calls a “pen and phone” strategy..."

8. Eric Maskin and Inequality: Learn, and Be Less Unequal: "Maskin argues that skilled workers in developing countries are coveted by multinational companies and see wage rises. Unskilled workers are ignored.... One recommendation stands out. Unskilled workers in developing countries need better education. 38% of African adults are illiterate.... Some economists (like Mr Maskin) rule out the possibility of unskilled workers paying for their own education, for the simple reason that they cannot afford it... governments and donors should take responsibility..."

9. Sam Wang: In Swing States, Is Obamacare an Asset?: "Republican governors who bucked their party’s stance and accepted the policy are faring better with voters—in these races, an average of 8.5 percentage points better.... Think of the Medicaid expansion as a 'proxy variable... predictive of stands on many other issues.... If you’re too hard-core or offensive, some of your constituents can get turned off.... Martinez... Kasich... and... Snyder... look as strong as... when they were... elected. All... accepted the Affordable Care Act.... Obamacare is not the political liability it was once thought to be.... To the extent that governors hold on to their offices in close races, it may be because they have focussed on issues that are important to the voters in their states rather than the core views of their party."

Continue reading "Noted for Your Afternoon Procrastination for August 25, 2014" »

## Afternoon Must-Read: Sam Wang: In Swing States, Is Obamacare an Asset? Yes

Sam Wang: In Swing States, Is Obamacare an Asset?: "Republican governors who bucked their party’s stance...

...and accepted the policy are faring better with voters—in these races, an average of 8.5 percentage points better.... Think of the Medicaid expansion as a 'proxy variable... predictive of stands on many other issues.... If you’re too hard-core or offensive, some of your constituents can get turned off.... Martinez... Kasich... and... Snyder... look as strong as... when they were... elected. All... accepted the Affordable Care Act.... Obamacare is not the political liability it was once thought to be.... To the extent that governors hold on to their offices in close races, it may be because they have focussed on issues that are important to the voters in their states rather than the core views of their party.

## In Which I Go Around, Over and Over Again, in Circles as I Try to Understand What Is Going on in Europe: Over at Equitable Growth: Monday Focus for August 25, 2014

Over at Equitable Growth: Over in Yurp:

Paul de Grauewe: "[European policymakers] are doing everything they can...

...to stop recovery taking off, so they should not be surprised if there is in fact no take-off. It is balanced-budget fundamentalism, and it has become religious. We know from the 1930s that if everybody is trying to pay off debt and the government then deleverages at the same time, the result is a downward spiral. The rigidities in the European economy have been there for ages. They have absolutely nothing to do with the problem we face today...

Mario Draghi said differently at Jackson Hole last weekend. READ MOAR

Continue reading "In Which I Go Around, Over and Over Again, in Circles as I Try to Understand What Is Going on in Europe: Over at Equitable Growth: Monday Focus for August 25, 2014" »

## Morning Must-Read: Jason Furman and John Podesta: The Cost of Delaying Action to Stem Climate Change

**Jason Furman and John Podesta: The Cost of Delaying Action to Stem Climate Change: "The report... written under the leadership of Jim Stock...

...Immediate action substantially reduces the cost of achieving climate targets. Taking meaningful steps now sends a signal to the market that reduces long-run costs of meeting the target.... The least-cost mitigation path to achieve a given climate target typically starts with a relatively low price of carbon to send these signals to the market, and subsequently increases as new low-carbon technologies are developed and deployed... net mitigation costs increase, on average, by approximately 40 percent for each decade of delay.... If delayed action causes the mean global temperature increase to stabilize at 3° Celsius above preindustrial levels, instead of 2°, that delay will induce annual additional damages of 0.9 percent of global output.... The possibility of abrupt, large-scale, catastrophic changes in our climate increases the need to act.... Enacting meaningful change in climate policy is analogous to purchasing climate insurance..."

## Morning Must-Read: Jared Bernstein: Chair Yellen Looks Under New Rocks, Finds Same Thing that’s Under Old Rocks

Jared Bernstein: Chair Yellen Looks Under New Rocks, Finds Same Thing that’s Under Old Rocks: "I yield to no one in my admiration for... Janet Yellen...

...So I was taken aback a bit by a section in her... speech... where she gave a number of reasons why the absence of wage pressures may not, paradoxically, be signaling that considerable slack remains in the job market.... I don’t think that’s the case at all here.... Each of her three reasons look like additional reasons not to slow the economy and preempt wage growth by tightening too soon....

Nominal wage rigidity... implies that until inflation erodes real wages enough to generate more employment demand (i.e., moving down the demand curve), or until there’s enough labor demand to necessitate hiring at current real wage levels (i.e., the demand curve moves out), there’s no reason to tighten....

Structural... forces... reducing labor’s share... [are a reason to promote] very tight labor markets to rebalance 'factor income shares'.... Depressed labor force participation... might lead to wage pressures in the near term, but as labor demand strengthened, those sideliners would get pulled back in which would then dampen those pressures.... Even more so than the other two reasons, this one especially calls for extended monetary support of the job market...

## Liveblogging World War I: August 25, 1914: Samsonov

From Barbara Tuchman, The Guns of August:*

On August 23, the day Ludendorff and Hindenburg arrived in the East, the Russian VIth and XIIIth corps on the right of General Martos captured more villages; General Scholtz, still alone except for some support from the Vistula garrison behind him, backed up a little farther. Ignoring Rennenkampf’s inactivity in the north, Jilinsky continued to rain orders on Samsonov. The Germans on his front were hastily retreating, he told Samsonov, “leaving only insignificant forces facing you. You are therefore to execute a most energetic offensive.… You are to attack and intercept the enemy retiring before General Rennenkampf’s army in order to cut off his retreat from the Vistula.”

Continue reading "Liveblogging World War I: August 25, 1914: Samsonov" »

## Monday Rand Paul Self-Smackdown: Rand Paul Explains Why He Would Have Voted Against the Civil Rights Act: Live from the Roasterie CCCXV: August 25, 2014

Your freedom, you see, to exclude people of a race you do not like from a public accommodation--a hotel, a restaurant, a bus service, a retail store--is more freedom than their freedom to spend their money to participate in our societal division of labor just like most people. In fact, their claim that that is a freedom is false--it is not really a freedom at all...

Rand Paul:

The hard part--and this is the hard part about believing in freedom--is that if you believe in the first amendment, for example, you have to, for example, most believers in the first amendment will believe in abhorrent groups standing up and saying awful things. We're here at the bastion of newspaperdom. I'm sure you believe in the first amendment. You understand that people can say bad things. It's the same way with other behaviors. In a free society we will tolerate boorish people who have abhorrent behavior, but if we are civilized people we publicly criticize that and don't belong to those groups or don't associate with those people...

## Morning Must-Read: Paul Krugman: The Rent Is too Damned High

Paul Krugman: The Rent Is too Damned High: "It’s true that Texas has had faster job growth...

...So have other Sunbelt states with conservative governments.... The answer from the right is, of course, that it’s all about avoiding regulations.... But... there are big problems with this story quite aside from the habit economists pushing this line have of getting their facts wrong.... Wages in the places within the United States attracting the most migrants are typically lower than in the places those migrants come from, suggesting that the places Americans are leaving actually have higher productivity and more job opportunities.... So why are people moving to these relatively low-wage areas? Because living there is cheaper, basically because of housing.... Americans are being pushed out of the Northeast (and, more recently, California) by high housing costs.... Conservative complaints about excess regulation and intrusive government aren’t entirely wrong, but the secret of Sunbelt growth isn’t being nice to corporations and the 1 percent; it’s not getting in the way of middle- and working-class housing supply.... It would be great to see the real key--affordable housing--become a national issue. But I don’t think Democrats are willing to nominate Mayor Bill de Blasio for president just yet.

## Morning Must-Read: Branko Milanovic: My take on the Acemoglu-Robinson critique of Piketty

Branko Milanovic: My Take on the Acemoglu-Robinson Critique of Piketty: "My brief reaction...

...1) 'Piketty totally neglects institutions.' This is hard to understand since Piketty's explanation for a large part of changes in inequality in the US, France and elsewhere are precisely institutional.... So I really fail to see any validity... the critique is fundamentally dishonest.... First, Acemoglu and Robinson establish the equation Piketty=Marx. Then then criticize Marx for ignoring institutions.... Then, since they have already decided that Piketty is really Marx, they barely give one or two examples of Piketty’s lack of concern with institutions.... 2) 'Lots of inequality increase is due to higher inequality of labor incomes.' This is true especially for the United States and no one disputes it; neither does Piketty. He actually mentions it repeatedly.... 3) Panel regressions... test[ing] whether r-g is correlated with increase in inequality.... They find that the sign of the coefficient is in most cases negative.... The right-hand side variable is not r-g but simply 'g'. This approach is surely wrong.... Only the second set... makes sense. But there, the results are inconclusive. Moreover, there are no controls at all except for the country and year dummies...

## Morning Must-Read: David Autor: Skills, education, and the rise of earnings inequality among the “other 99 percent”

Owen Zidar sends us to David Autor: Skills, education, and the rise of earnings inequality among the “other 99 percent”: "The singular focus of public debate on the 'top 1 percent'...

...of households overlooks the component of earnings inequality that is arguably most consequential for the 'other 99 percent' of citizens: the dramatic growth in the wage premium associated with higher education and cognitive ability. This Review documents the central role of both the supply and demand for skills in shaping inequality, discusses why skill demands have persistently risen in industrialized countries, and considers the economic value of inequality alongside its potential social costs. I conclude by highlighting the constructive role for public policy in fostering skills formation and preserving economic mobility...

## Morning Must-Read: Jérémie Cohen-Setton: Is this a European U-turn?

Jérémie Cohen-Setton: Is this a European U-turn?: "Mario Draghi is recognizing that the recovery in the euro area...

...remains uniformly weak and that the euro area fiscal stance was not helping the ECB do its job.... French leaders also reintroduced over the weekend the notion of aggregate demand, a concept they had noticeably moved away from with the 'Pacte de responsabilite'.... Inflation, he noted, has been on a downward path from around 2.5% in the summer of 2012 to 0.4% most recently.... The big news is that Draghi does not (at least now) believe in balanced-budget fundamentalism.... Richard Portes and Philippe Weil write European citizens must hope that their policy makers will recognize that the acute, pressing problem is aggregate demand. Repairing the credit system, implementing serious reforms of state expenditure and taxation, creating more flexible labor markets, finally opening the services market to cross-border competition--all are indeed very important. But they will not liberate the eurozone from stagnation...

## Noted for Your Evening Procrastination for August 24, 2014

Over at Equitable Growth--The Equitablog

Plus:

1. Kevin Drum: Welfare Reform and the Great Recession "CBPP.... Welfare reform... in its first few years... seemed like a great success... but it was a bubbly economy that made the biggest difference. So how would welfare reform fare when it got hit with a real test? Answer: not so well. In late 2007 the Great Recession started, creating an extra 1.5 million families with children in poverty. TANF, however, barely responded at all. There was no room in strapped state budgets for more TANF funds.... This is why conservatives are so enamored of block grants. It's not because they truly believe that states are better able to manage programs for the poor than the federal government. That's frankly laughable. The reason they like block grants is because they know perfectly well that they'll erode over time. That's how you eventually drown the federal government in a bathtub. If Paul Ryan ever seriously proposes—and wins Republican support for—a welfare reform plan that includes block grants which (a) grow with inflation and (b) adjust automatically when recessions hit, I'll pay attention. Until then, they're just a Trojan Horse.... After all, those tax cuts for the rich won't fund themselves, will they?"

2. Anne VanderMey: Joe Blasi's Easier Solution to Wealth Inequality?: "Joseph Blasi... along with... Richard Freeman and Douglas Kruse, wrote... The Citizen’s Share: Reducing Inequality in the 21st Century... corporate profit-sharing, employee stock ownership, and stock option plans.... The idea is rooted, he says, in the Founding Fathers’ original vision of widespread land ownership.... 'Why isn’t our plan radical?' Blasi asks. 'Because the founders of the American revolution had this view. That broad-based capital ownership was necessary for the republic to exist.'... 'We have to find a way for citizens to have some ownership of the technologies of the future.... We could have a future where technology creates a low feudal serf class—people with low wages or flat wages or high structural unemployment... or... a future where we have a smaller workweek and citizens broadly have more capital ownership.'"

3. James Pethokoukis: Does the GOP have a policy problem or a messaging problem? Both, it seems "Byron York.... 'The reformers face resistance not just from the corners of the conservative world that disagree with them on taxes, immigration, and other, perhaps lesser issues. They are also under attack from those in the Republican establishment who see no need to reevaluate GOP policies. According to this faction, the party doesn’t have a policy problem; it has a messaging problem.' Obviously I think the GOP has a policy problem. But that aside, Rs should not underestimate just how bad their messaging problem is.... GlobalStrategyGroup.... While voters by a huge margin prefer candidates focused on 'more economic growth' versus 'less income inequality', voters also think... raising the minimum wage and guaranteeing a minimum wage--are better for growth than  business tax cuts or reducing top marginal income tax rates.... And... voters seem to have a much broader view of what policies qualify as 'pro-growth'. Whatever the economic argument the GOP is making, the party does not seem to be making it very well."

4. Binyamin Applebaum: On the Decline in Labor Force Participation: "Davis and Haltiwanger attribute... to the aging of the work force as people get older, they tend to change jobs less frequently. The decline in the creation of new companies is also playing a role. In effect, companies are getting older, too. This has been particularly pronounced in the retail sector, where giants like Walmart and McDonald’s offer relatively stable employment.... The cost of training workers has increased, partly because the share of all workers who require government licenses has grown by one estimate from about 5 percent in the 1950s to 29 percent in 2008. This discourages hiring. So do legal changes that have made it more difficult to fire employees.... It also mentions health insurance as a reason that employees may stay put. In the view of Mr. Davis and Mr. Haltiwanger, the recession just made a bad situation worse.... But economists and policy makers will have to reconcile the assertion that these trends were the dominant factors with the reality that the employment rate rose in the years before the recession, then dropped sharply during the recession. The new paper, like others of its genre, basically requires belief in a big coincidence: that a short-term catastrophe happened to coincide with the intensification of long-term trends — that the economy crashed at the moment that it was already beginning a gradual descent."

5. Paul Krugman: Core Success: "Cecchetti and Schoenholtz on core inflation reminds me that this concept, too, has been a huge success.... Those of us who looked at core inflation came in for a lot of abuse during the 'debasing the dollar' period of 2010-2011, when right-wingers were writing to Ben Bernanke to attack his policies and Paul Ryan was warning that rising commodity prices were the harbinger of runaway inflation. Assertions that fundamental inflation hadn’t gone up were met with ridicule and insults. But sure enough, the commodity price effect on inflation was a blip, and went away. And the inflation hawks learned their lesson, and revised their models. Hahahaha--just kidding."

6. Barry Ritholtz: Your Weekend Reading on the CAPE: "When CAPE measures are less than 10, future 10-year returns are outstanding. Over the long run, returns fall the higher CAPE rises. However, in the short run, it is anyone’s guess. As Kitces has noted, CAPE is terrible as a market-timing tool, but it does add value for long-term retirement planning.... What CAPE does well: 1) Expected Returns: CAPE is good at providing expected 10-year equity returns.... 2) Market Peaks: When readings of CAPE are at very high (typically top quintile) it can signal a market top.... 3) Market Bottoms: When CAPE measures are at extreme lows, it generates an excellent long-term entry point into equities.... The measure of CAPE is simple, clean, easy to understand, and has a century-long track record. Thanks to Shiller, it was well-conceived and objective.... There are numerous criticisms of CAPE:1) Financial-Crisis-Distorted Earnings.... 2) Changes in Accounting.... 3) Low Interest Rates: With less competition from fixed income assets, stock markets end up with a higher P/E ratio than they otherwise would.... 4) Track record: Perhaps the biggest criticism is that since 1990, CAPE has spent 98 percent of the time above its historical average. The metric’s failure to mean-revert over the last 23 years raises questions about its long-term utility..."

7. Tim Harford: Why inflation remains best way to avoid stagnation: "Normally, when an economy slips into recession the standard response is to cut interest rates. This encourages us to spend, rather than save, giving the economy an immediate boost. Things become more difficult if nominal interest rates are already low.... There is a simple alternative, albeit one that carries risks. Central bank targets for inflation should be raised to 4 per cent. A credible higher inflation target would provide immediate stimulus (who wants to squirrel away money that is eroding at 4 per cent a year?) and would give central banks more leeway to cut real rates in future.... An inflation target of 4 per cent... will not happen.... What practical policy options remain? That is easy to see. We must cross our fingers and hope that Prof Summers is mistaken."

And Over Here:

Continue reading "Noted for Your Evening Procrastination for August 24, 2014" »

## Liveblogging World War II: August 24, 1944: Liberation of Paris

From: World War II Today: Matthew Cobb: Eleven Days in August: The Liberation of Paris in 1944:

Matthew Halton was a Canadian reporter travelling with General Le Clerc’s tanks that were approaching Paris. During the day he was to broadcast:

Wherever we drive, in the areas west and south-west of the capital, people shout: “Look, they are going to Paris! ” But then we run into pockets of resistance here or there and are forced to turn back. It’s clear that we are seeing the disintegration of the German Army — but we never know when we are going to be shot at.

Continue reading "Liveblogging World War II: August 24, 1944: Liberation of Paris" »

## Long-Run Warranted Stock Valuations and Expected Returns: What Does the Shiller Data Tell Us?

### August 24, 2014 :: J. Bradford DeLong

Moving the (corrected) calculations for last weekend's http://delong.typepad.com/sdj/2014/08/under-what-circumstances-should-you-worry-that-the-stock-market-is-too-high-the-honest-broker-for-the-week-of-august-16.html and http://delong.typepad.com/sdj/2014/08/under-what-circumstances-should-you-worry-that-the-stock-market-is-too-high-the-honest-broker-for-the-week-of-august-16.html over to R, as only people who really, really, really want to make bad mistakes do things in the un-debuggable Excel (or Numbers)...

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## Weekend Reading: Robots and Jobs

From David Leonhardt's The Upshot:

Claire Cain Miller: Will You Lose Your Job to a Robot? Silicon Valley Is Split: Following are a sampling of the points of view expressed in the Pew report.

Most utopian: “How unhappy are you that your dishwasher has replaced washing dishes by hand, your washing machine has displaced washing clothes by hand or your vacuum cleaner has replaced hand cleaning? My guess is this ‘job displacement’ has been very welcome, as will the ‘job displacement’ that will occur over the next 10 years. This is a good thing. Everyone wants more jobs and less work.” — Hal Varian, chief economist at Google

## Weekend Reading: John Maynard Keynes (1926): The End of Laissez-Faire

John Maynard Keynes (1926): The End of Laissez-Faire } "Panarchy - Panarchie - Panarchia - Panarquia - Παναρχία - 泛无政府主义: I The disposition towards public affairs...

...which we conveniently sum up as individualism and laissez-faire, drew its sustenance from many different rivulets of thought and springs of feeling. For more than a hundred years our philosophers ruled us because, by a miracle, they nearly all agreed or seem to agree on this one thing. We do not dance even yet to a new tune. But a change is in the air. We hear but indistinctly what were once the clearest and most distinguishable voices which have ever instructed political mankind. The orchestra of diverse instruments, the chorus of articulate sound, is receding at last into the distance.

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## Liveblogging World War I: August 23, 1914: Mons

From Barbara Tuchman's The Guns of August:

Kluck moved wrathfully on Mons. His orders for August 23 were to cross the canal, occupy the ground to the south, and force the enemy back into Maubeuge while cutting off his retreat from the west.... Kluck was keeping as far to the west as he could, and thus Haig’s corps was not attacked in the fighting of August 23 that was to become known to history and to legend as the Battle of Mons. Sir John French’s headquarters were at Le Cateau, 30 miles south of Mons. The 5 divisions he had to direct over a front of 25 miles—in contrast to Lanrezac’s 13 divisions over a front of 50 miles—hardly required him to be that far back. Sir John’s hesitant frame of mind may have dictated the choice....

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