- Evidence of a Toxic Environment for Women in Economics - NYTimes
- A public plea to my male senior colleagues in economics – Jeffrey R. Brown
- A better centrism - Stumbling and Mumbling
- GSEs' Conservatorships: Not a Time to Celebrate - Cecchetti & Schoenholtz
- ‘Metrics Monday: Regression and Causality for Dummies - Marc Bellemare
- Brexit remains an exercise in deception - mainly macro
- Debts and Disasters - American Economic Association
- The new spring of artificial intelligence: A few early economics - VoxEU
- The Political Failure of Trickle-Down Economics - Paul Krugman
- Ahem! Stanley Fischer for the Fed? - Economic Principals
- The impact of demographics on long-term discount rates - VoxEU
- On zero-sum thinking - Stumbling and Mumbling
- The Low Misery Dilemma - Carola Binder
- Whither Trumpism? - Paul Krugman
- Blockchain: New Frontiers - Tim Taylor
- Japan and the burden of government debt - mainly macro
Monday, August 21, 2017
"So is the Trump agenda dead? Not necessarily":
What Will Trump Do to American Workers?, by Paul Krugman, NY Times: ...Donald Trump’s promise to be a populist fighting for ordinary workers was worth about as much as any other Trump promise — that is, nothing. His agenda, such as it is, amounts to reverse Robin Hood with extra racism — the conventional Republican strategy of taking from struggling families to give to the rich, while distracting lower-income whites by attacking Those People, with the only difference being just how blatantly he plays the race card.
At first sight, however, the Trump version of this strategy doesn’t seem to be going very well. ...
So is the Trump agenda dead? Not necessarily, because trickle-down has never been the whole story of the Republican assault on workers. Or to put it another way: Don’t just watch Congress, keep your eyes on what federal agencies are doing.
When you step back and take the long view on trickle-down policies, what you realize is that Trump’s legislative failure is more the rule than the exception. The election of Ronald Reagan was supposed to have set America on a path toward lower taxes and smaller government — and it did, for a while. But those changes have largely been reversed. ...
But here’s the thing: While the rich still pay taxes and the safety net has in some ways gotten stronger, the decades since Reagan have nonetheless been marked by vastly increased inequality, with stagnating wages for most, but soaring incomes for a tiny elite. How did that happen?
Yes, globalization probably played some role, as did technology. But other wealthy countries, just as exposed to the winds of global change, haven’t seen anything like America’s headlong rush into a new Gilded Age. To understand what happened to us..., you need to look at policy — and especially the kind of policy that often flies under the media’s radar. ...
Which brings us back to Trump and the effect he’ll have on America’s working class. Right now it looks as if he may have much less impact on taxing and spending than most people expected. But other policies, often made administratively by federal agencies rather than via legislation, can matter a lot. ...
The point is that progressives shouldn’t celebrate too much over Trump’s legislative failures. As long as he’s in office, he retains a lot of power to betray the working people who supported him. And in case you haven’t noticed, betraying those who trust him is a Trump specialty.
Friday, August 18, 2017
- Trump’s CEOs resigned. His staff should do the same. - Larry Summers
- Alfred Crosby Deserves a Nobel Prize in Economics - Douglas Campbell
- Fed Confronts New Reality: Low Inflation and Low Unemployment - NYTimes
- FOMC Minutes: Balance Sheet Normalization "Relatively soon" - Calculated Risk
- I Agree With Robert E Lee - EconoSpeak
- Online exports and the wage gap - VoxEU
- Centrism: the problem, not the solution - Stumbling and Mumbling
- The Lost Lesson of the Financial Crisis - Mohamed A. El-Erian
- Foreign-owned firms and productivity - Bank Underground
- "Theory vs. Data" in statistics too - Noahpinion
- Public choice and market failure - Notes On Liberty
- The Jobs Most Segregated by Gender and Race - Justin Fox
- The Imaginary Debt Crisis Is Here to Stay - Barry Ritholtz
"The Worst President Ever™":
Trump Makes Caligula Look Pretty Good, by Paul Krugman, NY Times: Even before the media obsession with Hillary Clinton’s email server put The Worst President Ever™ in the White House, historians were comparing Donald Trump to Caligula, the cruel, depraved Roman emperor who delighted in humiliating others, especially members of the empire’s elite. But seven months into the Trump administration, we can see that this comparison was unfair.
For one thing, Caligula did not, as far as we know, foment ethnic violence within the empire. For another ... Rome’s government continued to function reasonably well despite his antics...
Finally, when his behavior became truly intolerable, Rome’s elite did what the party now controlling Congress seems unable even to contemplate: It found a way to get rid of him.
Anyone with eyes — eyes not glued to Fox News, anyway — has long realized that Trump is utterly incapable, morally and intellectually, of filling the office he holds. But in the past few days things seem to have reached a critical mass. ...
Everyone in Washington now knows that we have a president who never meant it when he swore to defend the Constitution. He violates that oath just about every day and is never going to get any better.
The good news is that the founding fathers contemplated that possibility and offered a constitutional remedy: Unlike the senators of ancient Rome, who had to conspire with the Praetorian Guard to get Caligula assassinated, the U.S. Congress has the ability to remove a rogue president.
But ... all we get from the vast majority of elected Republicans are off-the-record expressions of “dismay” or denunciations of bigotry that somehow fail to name the bigot in chief. ...
The fact is that white supremacists have long been a key if unacknowledged part of the G.O.P. coalition, and Republicans need those votes to win general elections. Given the profiles in cowardice they’ve presented so far, it’s hard to imagine anything — up to and including evidence of collusion with a foreign power — that would make them risk losing those voters’ support.
So the odds are that we’re stuck with a malevolent, incompetent president... If so, we have to hope that our country somehow stumbles through the next year and a half without catastrophe, and that the midterm elections transform the political calculus and make the Constitution great again.
If that doesn’t happen, all one can say is God save America. Because all indications are that the Republicans won’t.
Wednesday, August 16, 2017
- Why don’t all CEOs quit Trump’s advisory councils? - Larry Summers
- Nearly All US Trade Deals Were Negotiated by Republicans - PIIE
- How Donald Trump Is Driving Up Health Insurance Premiums - NYTimes
- Adam Smith: The Impartial Spectator in Times of Faction - Tim Taylor
- More Credit Cards, Higher Limits, and an Uptick in Delinquency - Liberty Street
- Job polarization - Stumbling and Mumbling
- What does respecting the referendum result mean? - mainly macro
- Why Is The Fed Raising Interest Rates As Fast As It Is? - EconoSpeak
- Missing growth - VoxEU
- Current Account Deficits and Safe Assets - Capital Ebbs and Flows
- Autonomous Cars: Altering One in Nine Jobs - Tim Taylor
- The behavioural economics paradox - Chris Dillow
- Old Ideas About Foreign Trade Are Being Retired - Noah Smith
- Counterparty and Collateral Policies of Central Banks - Liberty Street
- Car finance: what’s new? - Bank Underground
- The Counterfactual and the Factual - Notes On Liberty
- Why Trump’s protectionist trade agenda will fail - VoxEU
Tuesday, August 15, 2017
Retail Sales, Dudley, Wages, by Tim Duy: Some quick thoughts for the day.
First, New York Federal Reserve President William Dudley gave an extended interview to the Associate Press. Definitely worth the time to read. Some highlights:
1.) Dudley never put a Trump bump in his forecast, so his forecast is essentially unchanged:
I think we’re still on the same trajectory we’ve been on for several years. Above trend growth, gradually tightening labor market, inflation -- somewhat below our objective -- but we do expect as the labor market continues to tighten, to see firmer wage gains and that will ultimately filter into inflation moving up towards our 2% objective.
2.) He expects inflation numbers to improve. He wants us to ignore the year-over-year numbers (of course, recent month-over-month numbers are not great):
Well, the reason why inflation won’t get up to 2% very quickly on a year-over-year basis is because we’ve had these very low inflation readings over the last 4 or 5 months. So it’s going to take time for those to sort of drop out of the year-over-year calculation.
3.) Assuming the forecast continues as he expects, he believes the Fed will hike rates again:
I think it depends on how the economic forecast evolves. If it evolves in line with my expectations, I would expect -- I would be in favor of doing another rate hike later this year.
4.) Bubble? What bubble?
My own view is that -- I’m not particularly concerned about where our asset prices are today for a couple of reasons. The main one is that I think that the asset prices are pretty consistent with what we’re seeing in terms of the actual performance of the economy.
5.) But - and I think this is important - financial conditions continue to easy despite rate hikes:
Now the reason why I think you’d want to continue to gradually remove monetary policy accommodation, even with inflation somewhat below target, is that 1) monetary policy is still accommodative, so the level of short-term rates is pretty low, and 2) and this is probably even more important, financial conditions have been easing rather than tightening. So despite the fact that we’ve raised short-term interest rates, financial conditions are easier today than they were a year ago.The stock market’s up, credit spreads have narrowed, the dollar has weakened, and those have more than offset the effects of somewhat higher short-term rates and the very modest increases that we’ve seen in longer-term yields.
6.) Balance sheet normalization is coming:
Well, we obviously have to have the FOMC meeting to make that decision at the next FOMC meeting. But, I don’t think the expectations of market participants are unreasonable. In June, following the June FOMC meeting, we laid out a plan in terms of how we would actually do our balance sheet normalization. How we would allow Treasury and agency mortgage-backed securities to gradually run off our portfolio over time.And so the plan is out there. It’s been I think generally well-received, and fully anticipated. People expect it to take place. In the last FOMC statement, we said that we expected this to happen relatively soon. So, I expect it to happen relatively soon.
7.) At the end of the day, the balance sheet reduction might amount to very little:
My own view is, if I had to say today, we’re probably going to see a balance sheet five years from now that’s probably in the order of 2-1/2 to 3-1/2 trillion rather than the 4-1/2 trillion dollar balance sheet.
Overall, Dudley continues to adhere to what amounts to the Fed's median forecast, and that means he thinks another rate hike this year is solidly in play.
Separately, retail sales for July were up:
The monthly data is noisy, so be wary that it reflects the true state of spending. The three-month and twelve-month changes (for core sales) are similar at 3.2% and 3.6% respectively and more likely reflect the underlying trend. Basically, the consumer continues to press forward at a modest pace. Stop worrying about consumer spending. It isn't an imminent threat to the outlook.
And why should it be a threat? Like, job growth, wage growth is actually fairly solid. The headline weakness in wage growth is all about demographic shift, at least according to new research from Mary Daly of the Federal Reserve Bank of San Francisco. Via Bloomberg:
Fresh research from the San Francisco Fed provides an explanation: baby boomers. As they retire in droves, their exit from the workforce is distorting the data for average earnings, according to a blog post published Monday on the bank’s website.“Wage growth isn’t as disappointing as it looks,” Mary Daly, director of economic research at the San Francisco Fed, said in an interview. “Wage growth, when cleaned up, looks consistent with other measures seen in the labor market.”
The implication is that the labor market low wage growth does not necessarily imply the labor market is weak. It is an artifact of demographic change. That change has been fairly persistent, but at the end of the note Daly holds out some hope that it may be changing:
Overall, these factors have combined to hold down growth in the median weekly earnings measure by a little under 2 percentage points (Figure 2), a sizable effect relative to the normal expected gains.Most recently, the effect from flows into and out of full-time work has started to tick upward and might be a sign of stronger growth ahead.
We will see.
Fed Shouldn't View Productivity as an Exogenous Factor: The Federal Reserve has an opportunity to test a hypothesis critical to the health of the U.S. economy: Can persistently loose monetary policy boost the pace of productivity growth? Sadly, for now, an adherence to a strict Phillips curve framework for the economy and fear of financial instability will prevent the Fed from venturing down this path. ...[Continued at Bloomberg Prophets]...
Do Low Interest Rates Punish Savers?: This is the second of my posts on the conference: Applications of Behavioural Economics, and Multiple Equilibrium Models to Macroeconomic Policy, held at the Bank of England on July 3rd and 4th. I feature two papers written by officials from the Federal Reserve System. James Bullard, President of the Federal Reserve Bank of St. Louis, discusses the implications of his recent research for low interest rates. And Kevin Lansing, a Research Advisor at the Federal Reserve Bank of San Francisco, discusses his work on multiple equilibria. ...
- Why the Federal Reserve’s job will get harder - Larry Summers
- The Case for Regulating Before Harms Occur - The Regulatory Review
- The Natural Rate of Unemployment over the Past 100 Years - FRBSF
- Misallocation and Productivity: International Perspective - Tim Taylor
- The social mobility lie - Stumbling and Mumbling
- The Rise of Market Power and the Decline of Labor’s Share - ProMarket
- How did the UK austerity mistake happen - mainly macro
- Analyzing Terabytes of Economic Data - No Hesitations
- Adverse Selection: A Primer - Cecchetti & Schoenholtz
- Don’t blame the global financial cycle - VoxEU
- Financial globalisation and market volatility - VoxEU
- North Korea Is an Economic Problem - Economic Principals
- Thinking about Costs and Benefits of Immigration - Nick Rowe
- The Bees Are Better, But They're Not All Right - Justin Fox
- Moral progress and critical realism - Understanding Society
- The Economic Outlook - FRBSF
Monday, August 14, 2017
I have a new column:
The Republican Retreat From Market-Based Regulation: During the debate over the repeal of Obamacare, Republicans made frequent reference to their desire for a “free market” for health care. This is consistent with the GOP’s long-standing support of deregulation and free market principles.
But all well-functioning markets are regulated to one degree or another. ...
Don't Add To The Fire: Vox has an article out this morning with the title "The real "deep state" sabotage is happening at the Fed." It begins:
Trump administration officials are notorious for their suspicion that a “deep state” of career military, intelligence, diplomatic, or civil service professionals is seeking to sabotage their work. But for a clearer example of sabotage — albeit without much in the way of a conspiracy — Trump would do well to cast his gaze at the Federal Reserve, which, dating back to before his inauguration, has been waging war on an inflationary menace that appears not to exist.
I have no qualms with the criticism that the Fed's is excessively focused on inflation or, more accurately, possibly working with a broken model of inflation. That's fair game.
What I find disturbing and quite frankly irresponsible is the use of "deep state" language to describe the Fed. This is the language used by the far right to discredit and undermine faith in our government institutions. For the left to adopt the same language adds to the fire already burning.
Take this language into consideration with the rage already directed against the Federal Reserve. This, for instance:
A Sayre man has been arrested in connection with what authorities says is a foiled plot to blow up a bank building in Downtown Oklahoma City with a truck filled with fake explosives.Jerry Drake Varnell, 23, of Sayre, initially wanted to blow up the Federal Reserve Building in Washington, D.C., but settled on attempting to detonate a bomb at the BancFirst building at 101 N Broadway in downtown Oklahoma City, according to court documents.An undercover FBI agent posed as someone who could help Varnell to blow up the building, according to a complaint filed Sunday in U.S. District Court for the Western District of Oklahoma. Varnell allegedly told an FBI informant that he wanted to blow up the Federal Reserve Building in Washington, D.C., with a device similar to the one used in the 1995 Oklahoma City bombing because he was upset with the government.
I am honestly just simply disappointed that Vox chose to add to the hate directed at the Fed by using the inflammatory language of the far right. I have had plenty of criticisms of the Fed over the years. I am concerned that their model of inflation isn't working, and that their estimate of the natural rate of interest is too high. But that type of criticism is a far cry from describing the institution as the "deep state." We have seen time and time again that fomenting that kind of thought only leads to bloodshed. The last thing we need is the left helping to incite another Oklahoma City bombing on Constitution Ave. - or anywhere for that matter.
Saturday, August 12, 2017
- Micro Needs macro - Brad DeLong
- The Financial Crisis Tenth Anniversary - EconoSpeak
- What economists study: A guide for the curious - VoxEU
- Inequality and Property in Russia - Novokmet, Thomas Piketty, Zucman
- Gender quotas and the crisis of the mediocre man - Microeconomic Insights
- Measuring the True Impact of Job Loss on Future Earnings - FRB Cleveland
- Warehousing A Historical Lesson in central bank independence - FRB Cleveland
- Why income inequality is so much worse in the U.S. - The Washington Post
- Honduras experiments with charter cities - The Economist
- NAFTA in a Multipolar World Economy - Tim Taylor
- Entrepreneurial Marxism - Stumbling and Mumbling
- What is Keynesian Search Theory? - Roger E. A. Farmer
- Why subsidize protectionism motivated foreign investors? - Ken Thomas
- Trilemma redux: Evidence from emerging market economies - VoxEU
- The politics of lying - mainly macro
- Migration and terror - VoxEU
Friday, August 11, 2017
"Where does climate denial come from?":
The Axis of Climate Evil, by Paul Krugman, NY Times: ...At this point the evidence for human-caused global warming just keeps getting more overwhelming, and the plausible scenarios for the future — extreme weather events, rising sea levels, drought, and more — just keep getting scarier.
In a rational world urgent action to limit climate change would be the overwhelming policy priority for governments everywhere.
But the U.S. government is, of course, now controlled by a party within which climate denial — rejecting not just scientific evidence but also obvious lived experience, and fiercely opposing any effort to slow the trend — has become a defining marker of tribal identity. ...
So where does climate denial come from? ... The answer, I’d argue, is that there are actually three groups involved — a sort of axis of climate evil.
First, and most obvious, there’s the fossil fuel industry — think the Koch brothers — which has an obvious financial stake in continuing to sell dirty energy. And the industry ... has systematically showered money on think tanks and scientists willing to express skepticism about climate change. ...
Still, the mercenary interests of fossil fuel companies aren’t the whole story here. There’s also ideology.
An influential part of the U.S. political spectrum — think the Wall Street Journal editorial page — is opposed to any and all forms of government economic regulation; it’s committed to Reagan’s doctrine that government is always the problem, never the solution. ...
Some conservatives ... support market-friendly intervention to limit greenhouse gas emissions. But all too many prefer simply to deny the existence of the issue — if facts conflict with their ideology, they deny the facts.
Finally, there are a few public intellectuals — less important than the plutocrats and ideologues, but if you ask me even more shameful — who adopt a pose of climate skepticism out of sheer ego. In effect, they say: “Look at me! I’m smart! I’m contrarian! I’ll show you how clever I am by denying the scientific consensus!” And for the sake of this posturing, they’re willing to nudge us further down the road to catastrophe.
Which brings me back to the current political situation. Right now progressives are feeling better than they expected to a few months ago: Donald Trump and his frenemies in Congress are accomplishing a lot less than they hoped, and their opponents feared. But that doesn’t change the reality that the axis of climate evil is now firmly in control of U.S. policy, and the world may never recover.
Thursday, August 10, 2017
- The Search for New Assumptions - Benjamin Friedman
- Revenge of the Experts - Barry Eichengreen
- Markets Don't Work for Everything - Noah Smith
- A well-argued smackdown from the smart Dean Baker - Brad DeLong
- Occupational Licenses and the Prison-to-Poverty Pipeline - Regulatory Review
- The portfolio rebalancing effects of the ECB's asset purchase programme - VoxEU
- Avik Roy Claims Reagan Embraced Universal Health Care Coverage - EconoSpeak
Wednesday, August 09, 2017
- Ranking Academic Economic Journals by Speed - Douglas Campbell
- Real wages are mainly a macro issue - mainly macro
- My socialism - Stumbling and Mumbling
- Investing in roads versus schools - VoxEU
- Regulation of the Chinese Equity Crowdfunding Market - Regulatory Review
- Interview: Prof. Peter Temin, MIT Economics - Acemaxx-Analytics
- Time for a critical-realist epistemology - Understanding Society
- Stabilizing the System of Mortgage Finance in the US - Unassuming Economist
Multiple Jobholders Are Not A Weak Spot In The Employment Report, by Tim Duy: Along with every decent employment report comes the efforts to debunk that report. I see that an article from Pedro Nicolaci Da Costa at Business Insider is making the rounds tonight. In it Da Costa directs us to this in particular from Komal Sri-Kumar:
The plight of low-income workers is underlined by yet another statistic. According to BLS numbers, 7.6 million workers held multiple jobs last month, up 2% from 7.4 million in July 2016. The principal reason workers hold more than one position is that no single job provides a sufficient income. In a robust economic recovery, the number of full-time workers should be rising, and the number of workers employed part-time or holding multiple jobs, should decline. The rise in the number of multiple job holders is troubling, and is yet another signal that there is still slack in the labor market. Are we there yet? No, we are still far from full employment.
Let's look at a picture of this one:
Sri-Kumar claims that in a robust economic expansion, the number of multiple job holders should be declining. In other words, multiple job holders should be a countercyclical indicator. But even the most cursory look at the data tells you that the number of multiple job holders is a procyclical indicator. It should rise as the economy gains steam and there is more opportunity for those who need or want second jobs to find such employment.
The trend of multiple job holders is very clearly not a sign of weakness in the economy, but a sign of strength.
It is also worth noting that as a percentage of the employed, the number of multiple job holders has been in a two decade decline:
Note that the job market of the late 1990's is considered one of the best, yet at the same time the percentage of multiple job holders was rising and high. A decline in the number of multiple job holders, both in absolute and percentage terms, was actually a leading indicator of recession. In other words, if you are concerned about opportunities for those who need or want multiple jobs, you should be hoping these metrics move higher, not lower.
Bottom Line: The rise in the number of multiple job holders is a sign of economic strength, not weakness. Regardless of what the bears might say, the July employment report was solid. Get over it. Worry about the inability of this Administration to deal with a crisis like North Korea instead.
Continuing with recent posts on models with multiple equilibria, this is by Luis C. Corchón (link is to a draft)
A Malthus-Swan Model of Economic Growth, by Luis C. Corchón Departmento de Economía Universidad Carlos III de Madrid Calle Madrid, Journal of Dynamics and Games, July 2016: [Open link to working paper]: Abstract. In this paper we introduce in the Solow-Swan growth model a labor supply based on Malthusian ideas. We show that this model may yield several steady states and that an increase in total factor productivity might decrease the capital-labor ratio in a stable equilibrium.
“Why has it taken economists so long to learn that demography influences growth?” Jeff Williamson (1998)
1. Introduction. In this note we propose a model which combines the classical Solow (1956) and Swan (1956) model with ideas about population growth that are borrowed from Malthus (1798). We will refer to our model as a Malthus- Swan-Solow (MSS) model. Our model has no technical progress, no institutional change, no human capital and no land.
We assume that the rate of growth of population depends on the real wage in a continuous way. This function is a generalization of one used by Hansen and Prescott (2002).
We find that, as in the classical Solow-Swan model, there exist a steady state value of capital-labor ratio, see Proposition 1. However this steady state is not necessarily unique: Proposition 2 and Example 3 show that there might be an odd number of steady state capital-labor ratios. And only the smaller and the larger values of these capital-labor ratio are locally stable, see Proposition 4. This implies that there might be two, very different values of per capita income in the steady state: one with a small and another with a large value of per capita income. Finally we find that an increase in total factor productivity may increase or decrease the capital-labor ratio in a stable steady state (Proposition 5) but it always increases per capita income (Proposition 6).
Summing up, the consideration of endogenous population in the Solow-Swan model brings new insights with respect to the standard model regarding the number, stability and comparative static properties of steady states. ...
Tuesday, August 08, 2017
- The Financial Crisis Began 10 Years Ago This Week - Cecchetti & Schoenholtz
- How Bad Will It Be If We Hit The Debt Ceiling? - Paul Krugman
- The Danger From Low-Skilled Immigrants: Not Having Them - NYTimes
- Negative Interest Rates: Evidence and Practicalities - Tim Taylor
- Britain’s early efforts to finance the First World War - Bank Underground
- The media cannot reform itself until it acknowledges its power - mainly macro
- The Dead Weight Loss of a Consumption Tax with Externalities - Econbrowser
- The New Socialism of Fools - J. Bradford DeLong
- Brexit and the balance of bulls*** - Jonathan Portes
- Antifragility and justice - Magic, maths and money
- Free Banking and the Friedman Rule - Josh Hendrickson
- Maybe Central Banks Are Too Independent - Narayana Kockerlakota
- Merger Control in the Banking Sector - FRB Cleveland
- Post-crisis regulation and CEO bonuses - VoxEU
- Politics vs. Commerce - Economic Principals
The Marriage of Psychology with Multiple Equilibria in Economics: This is the first of a new weekly blog series, Monday’s Macro Memo with Roger Farmer, which will discuss a wide range of economic issues of the day. The blog will appear on both the NIESR site and on Roger Farmer’s Economic Window and in the first few weeks, I will be posting a series of videos, recorded at a conference held at the Bank England on July 3rd and 4th of 2017. The conference was titled "Applications of Behavioural Economics and Multiple Equilibrium Models to Macroeconomic Policy"...
I had been planning, for some time, to run a conference on the topic of multiple equilibria sponsored by Warwick University. Andy Haldane and Sujit Kapadia had been talking with Alan Taylor of U.C. Davis about organizing a conference on the topic of behavioural economics. After talking with Andy, Sujit and Alan, we decided it would be ideal to combine our plans into a single conference that would highlight the promise of studying the marriage of psychology with multiple equilibria in economics. The video ... explains why this is a fruitful idea.
Roger goes on to discuss how "psychology enters the picture," and why the Robert Lucas idea that "the expectations of market participants are determined by economic fundamentals ... makes little or no sense in models ... where there are multiple equilibria." Also:
In addition to the introductory video, linked above, we also recorded videos from many of the conference presenters and discussants. I will be releasing these videos in a series of posts in the coming weeks and I will discuss the research associated with the accompanying topic. You can find links to the original papers on the conference website linked here. Stay tuned.
Monday, August 07, 2017
There's more than one way to get to universal coverage:
What’s Next for Progressives?, by Paul Krugman, NY Times: ...If Democrats regain control of Congress and the White House, what will they do with the opportunity?
Well, some progressives — by and large people who supported Bernie Sanders... — are already trying to revive one of his signature proposals: expanding Medicare to cover everyone. Some even want to make support for single-payer a litmus test for Democratic candidates.
So it’s time for a little pushback. ...
Look at the latest report by the nonpartisan Commonwealth Fund, comparing health care performance among advanced nations. America is at the bottom; the top three performers are Britain, Australia, and the Netherlands. And the thing is, these three leaders have very different systems.
Britain has true socialized medicine: The government provides health care directly through the National Health Service. Australia has a single-payer system, basically Medicare for All... But the Dutch have what we might call Obamacare done right: individuals are required to buy coverage from regulated private insurers, with subsidies to help them afford the premiums.
And the Dutch system works, which suggests that a lot could be accomplished via incremental improvements in the A.C.A...
Meanwhile, the political logic that led to Obamacare rather than Medicare for all still applies. ... The ... 156 million people who currently get insurance through their employer ... are largely satisfied with their coverage. Moving to single-payer would mean taking away this coverage and imposing new taxes;... you’d have to convince most of these people both that they would save more in premiums than they pay in additional taxes, and that their new coverage would be just as good...
This might in fact be true, but it would be one heck of a hard sell. Is this really where progressives want to spend their political capital?
What would I do instead? I’d enhance the A.C.A., not replace it, although I would strongly support reintroducing some form of public option ... that could eventually lead to single-payer.
Meanwhile, progressives should move beyond health care and focus on other holes in the U.S. safety net.
When you compare the U.S. social welfare system with those of other wealthy countries, what really stands out now is our neglect of children. ...
I have nothing against single-payer; it’s what I’d support if we were starting fresh. But we aren’t: Getting there from here would be very hard... Even idealists need to set priorities, and Medicare-for-all shouldn’t be at the top of the list.
July Employment Recap, by Tim Duy: The July employment report came in on the high side of expectations and sufficiently strong to keep the Fed's policy plans for this year and next intact despite low inflation. On average central bankers will have a hard time backing down from rate hike plans with job growth still in excess of that necessary to hold unemployment stable. They may believe the economy is not yet at full employment, but they don't want to be too far below their estimate of the neutral interest rate before they hit full employment. And they don't think that point can be very far off.
The pace of job growth is easing, but only gradually. The 12-month average was 180k, compared to 205k in July of last year. The unemployment rate edged down to 4.3%, back to the level of June. The labor force participation rate rose, but remains in the range it has enjoyed since 2016:
The Fed will take note that job growth remains in excess of labor force growth. That difference generally drives unemployment lower:
The big labor force gains occurred at the beginning of 2016, which helped stabilize the unemployment rate. The current dynamic will almost certainly push unemployment lower and past the Fed's comfort levels, probably sooner than later.
The Fed will see hopeful signs in the wage numbers. Average wages grew at a 4.19% annualized rate in July, giving credence to the theory that the slowdown in wage growth earlier this year was temporary:
To be sure though, one month does not a trend make. But the Fed will not be making a decision on one month of data. Balance sheet normalization will almost certainly begin in September (barring a disruptive debt ceiling battle), leaving December for a potential rate hike. If wage data continues to come in closer to July's number than June's, the Fed will feel more confident that they a.) have the correct estimate of the natural rate of unemployment and b.) that inflation will return to their 2% target over the medium run. Hence, the December rate hike remains in play.
Solid job growth seems likely to continue. That at least is the story told by temporary help payrolls:
We are well past the flattening out of early last year. For those looking for an imminent recession, this isn't showing one. And for those looking for a market crash, look at the similar behavior of this indicator in 1995. As is now well known, that market crash was still a long ways off.
Bottom Line: A solid report that suggests further declines in the unemployment rate in the months ahead. The Fed will want to stay preemptive in this environment. I don't foresee them backing off their rate forecast for this year and next very easily.
Sunday, August 06, 2017
- Commodity Connectedness - No Hesitations
- A monetary-fiscal theory of inflation - MacroMania
- Benefits and Costs of Local Food Policies - Jayson Lusk
- Choice in economics - Stumbling and Mumbling
- Globalisation and US labour markets - VoxEU
- The Guardian drops the ball ... - Understanding Society
- Fighting Colony Collapse Disorder: How to Make More Bees - Tim Taylor
A new paper by Mordecai Kurz of Stanford University:
On the Formation of Capital and Wealth Draft: Abstract We show modern information technology (in short IT) is the cause of rising income and wealth inequality since the 1970's and has contributed to slow growth of wages and decline in the natural rate. We first study all US firms whose securities trade on public exchanges. Surplus wealth of a firm is the difference between wealth created (equity and debt) and its capital. We show (i) aggregate surplus wealth rose from -$0.59 Trillion in 1974 to $24 Trillion which is 79% of total market value in 2015 and reflects rising monopoly power. The added wealth was created mostly in sectors transformed by IT. Declining or slow growing firms with broadly distributed ownership have been replaced by IT based firms with highly concentrated ownership. Rising fraction of capital has been financed by debt, reaching 78% in 2015. We explain why IT innovations enable and accelerate the erection of barriers to entry and once erected, IT facilitates maintenance of restraints on competition. These innovations also explain rising size of firms. We next develop a model where firms have monopoly power. Monopoly surplus is unobservable and we deduce it with three methods, based on surplus wealth, share of labor or share of profits. Share of monopoly surplus rose from zero in early 1980's to 23% in 2015. This last result is, remarkably, deduced by all three methods. Share of monopoly surplus was also positive during the first, hardware, phase of the IT revolution. It was zero in 1950-1962, reaching 7.3% in 1965 before falling back to zero in 1970. Standard TFP computation is shown to be biased when firms have monopoly power.
We study connectedness among the major commodity markets, summarizing and visualizing the results using tools from network science.
Among other things, the results reveal clear clustering of commodities into groups closely related to the traditional industry taxonomy, but with some notable differences.
Adam Bee and Joshua W. Mitchell of the Census Bureau
Do Older Americans Have More Income Than We Think?, July 25, 2017 Working Paper Number: SEHSD-WP2017-39: Introduction The Current Population Survey Annual Social and Economic Supplement (CPS ASEC) is the source of the nation’s official household income and poverty statistics. In 2012, the CPS ASEC showed that median household income was $33,800 for householders aged 65 and over and the poverty rate was 9.1 percent for persons aged 65 and over. When we instead use an extensive array of administrative income records linked to the same CPS ASEC sample, we find that median household income was $44,400 (30 percent higher) and the poverty rate was just 6.9 percent. We demonstrate that large differences between survey and administrative record estimates are present within most demographic subgroups and are not easily explained by survey design features or processes such as imputation. Further, we show that the discrepancy is mainly attributable to underreporting of retirement income from defined benefit pensions and retirement account withdrawals. Using archived survey and administrative record data, we extend our analysis back to 1990 and provide evidence of underreporting from an earlier period. We also document a growing divergence over time between the two measures of median income which is in turn driven by the growth in retirement income underreporting. Turning to synthetic cohort analysis, we show that in recent years, most households do not experience substantial declines in total incomes upon retirement or any increases in poverty rates. Our results have important implications for assessing the relative value of different sources of income available to older Americans, including income from the nation’s largest retirement program, Social Security. We caution, however, that our findings apply to the population aged 65 and over in 2012 and cannot easily be extrapolated to future retirees.
Saturday, August 05, 2017
- Fewer Immigrants Mean More Jobs? Not So, Economists Say - NYTimes
- Structural Unemployment: Yes, It Was Humbug - Paul Krugman
- Trimmed Mean PCE Inflation Rate - Dallasfed.org
- US Public Firm Agonistes - Tim Taylor
- Job Growth Strong Again in July - Dean Baker
- The price is not always right - American Economic Association
- How much does a hurricane cost? - American Economic Association
- A Closer Look at the Fed’s Balance Sheet Accounting - Liberty Street
- How Brexit will constrain a future Labour government - mainly macro
- Reviving investment in Europe - VoxEU
- Monetary Policy’s Role in Fostering Sustainable Growth - John Williams
- Japan Buries Our Most-Cherished Economic Ideas - Noah Smith
The Transformation of the ‘American Dream’: “The American Dream is back.” President Trump made that claim in a speech in January.
They are ringing words, but what do they mean? Language is important, but it can be slippery. Consider that the phrase, the American Dream, has changed radically through the years.
Mr. Trump and Ben Carson, the secretary of housing and urban development, have suggested it involves owning a beautiful home and a roaring business, but it wasn’t always so. Instead, in the 1930s, it meant freedom, mutual respect and equality of opportunity. It had more to do with morality than material success.
This drift in meaning is significant...
Emily Badger and Alan Blinder:
How Air-Conditioning Conquered America (Even the Pacific Northwest): Air-conditioning has been remarkably good at creating demand for itself.
It enabled the sweeping postwar development of the South... In automobiles, it made the commutes between air-conditioned homes and air-conditioned offices possible. In the Southwest, its arrival facilitated new methods of rapid construction, replacing traditional building designs that once naturally withstood the region’s desert climate.
By doing all of this, air-conditioning has contributed to the intensive energy demand that worsens climate change that, well, forces us to rely on air-conditioning, a feedback loop environmentalists fear.
And so here we are, in 2017, with temperatures racing past 100 degrees in the Pacific Northwest, the region of the country that has historically relied the least on air-conditioning. And now more people, even there, are installing the technology. ...
Friday, August 04, 2017
"What was Obamacare rage about?":
Obamacare Rage in Retrospect, by Paul Krugman, NY Times: I guess it ain’t over until the portly golfer sings, but it does look as if Obamacare will survive. ...
It’s true that the tweeter in chief retains considerable ability to sabotage care, but Republicans are basically begging him to stop, believing — correctly — that the public will blame them for any future deterioration in coverage.
Why did Obamacare survive? The shocking answer: It’s still here because it does so much good. ...
Which raises a big question: Why did the prospect of health reform produce so much popular rage in 2009 and 2010?
I’m not talking about the rage of G.O.P. apparatchiks, who hated and feared the A.C.A., not because they thought it would fail, but because they were afraid it would work. (It has.) Nor am I talking about the rage of some wealthy people furious that their taxes were going up to pay for lesser mortals’ care.
No, I’m talking about the people who screamed at their congressional representatives in town halls... What was Obamacare rage about?
Much of it was orchestrated by pressure groups like Freedom Works, and it’s a good guess that some of the “ordinary citizens” who appeared at town halls were actually right-wing activists. Still, there was plenty of genuine popular rage, stoked by misinformation and outright lies from the usual suspects: Fox News, talk radio and so on. ...
The question then becomes why so many people believed these lies. The answer, I believe, comes down to a combination of identity politics and affinity fraud.
Whenever I see someone castigating liberals for engaging in identity politics, I wonder what such people imagine the right has been doing all these years. For generations, conservatives have conditioned many Americans to believe that safety-net programs are all about taking things away from white people and giving stuff to minorities.
And those who stoked Obamacare rage were believed because they seemed to some Americans like their kind of people — that is, white people defending them against you-know-who.
So what’s the moral of this story? ...
It’s certainly not encouraging to realize how easily many Americans were duped by right-wing lies, pushed into screaming rage against a reform that would actually improve their lives.
On the other hand, the truth did eventually prevail, and Republicans’ inability to handle that truth is turning into a real political liability. And in the meantime, Obamacare has made America a better place.
Thursday, August 03, 2017
Why These Job Numbers Matter to the Fed: Even though the Federal Reserve is poised to start shrinking its $4.5 trillion balance sheet, the outlook for continued rate increases is very much in doubt following the recent slowdown in inflation. That makes the monthly jobs report on Friday even more important than usual as investors and analysts try to figure out whether the central bank will continue to take its cues from labor market strength rather than inflation weakness as it charts a course for monetary policy. ...[Continued at Bloomberg Prophets]...
- How the very rich legally avoid paying taxes - Richard Green
- Understanding the Surge in Commercial Real Estate Lending - FRB Richmond
- Hysteresis vs Full Recovery by creating a Boom? - Nick Rowe
- Where's the inflation? - MacroMania
- Digitization of Media Industries: Quantity and Quality - Tim Taylor
- Fiscal policy with a flat Phillips curve - Stumbling and Mumbling
- The Output Gap per the Gerald Friedman Defenders - EconoSpeak
- First generation anti-positivism: Wellmer - Understanding Society
- Competition between government money and cryptocurrencies - VoxEU
Wednesday, August 02, 2017
- The Neglected Lessons of a Lost Decade - Narayana Kocherlakota
- Is a flexible labour market a problem for central bankers? - mainly macro
- Were Banks Ever ‘Boring’? - Liberty Street Economics
- Bust Up America's Monopolies Before They Do More Harm - Noah Smith
- Protectionism Will Not Protect Jobs Anywhere - Kenneth Rogoff
- Constraining the SEC’s Enforcement Options - The Regulatory Review
- Firm heterogeneity in consumption baskets - VoxEU
- The Tax Reform America Needs (and Probably Won’t Get) - NYTimes
- Kindleberger: International Use of the Dollar and English - Tim Taylor
- All Hands on Deck: Confronting the Challenges of Capital Flows - IMF Blog
- Still Learning From Milton Friedman: Version 3.0 - John Taylor
- Tories vs the 21st century - Stumbling and Mumbling
- Avoiding the Resource Curse - Justin Fox
- Economic conditions and ECB interest rate increases - VoxEU
Tuesday, August 01, 2017
- Supply-Siders Still Push What Doesn't Work - Noah Smith
- Contra Randal Quarles - Miles Kimball
- Environmental Economics – A Personal Perspective - Robert Stavins
- Forecasting Interest Rates with Macro Trends - FRBSF
- A stalled stimulus - American Economic Association
- The U.S. Is the Sick Man of the Developed World - Justin Fox
- An Overly Confident (Future) Nobel Laureate - Dave Giles
- Intermittent attention, poor memory shape perceptions of inflation - MIT News
- Were Banks ‘Boring’ before the Repeal of Glass-Steagall? - Liberty Street
- Behind the Increase in Prime-Age Labor Force Participation - macroblog
- Dissecting Long-Run International Productivity Patterns - Tim Taylor
- The Bank of Japan’s monetary easing and portfolio rebalancing channel - VoxEU
- Reinventing the wheel - Stumbling and Mumbling
- Brexit and Democracy - mainly macro
- A widening disconnect? - FRED Blog
- The Low Level of Global Real Interest Rates - Stanley Fischer
- A radical alternative to macro policy? - croaking cassandra
- Modernizing the U.S. Payments System - Cecchetti & Schoenholtz
- Restricting Race-Conscious Redistricting - Regulatory Review
Monday, July 31, 2017
"Where did this zombie horde come from?":
Who Ate Republicans’ Brains?, by Paul Krugman, NY Times: When the tweeter-in-chief castigated Senate Republicans as “total quitters” for failing to repeal the Affordable Care Act, he couldn’t have been more wrong. In fact, they showed zombie-like relentlessness in their determination to take health care away from millions of Americans, shambling forward despite devastating analyses by the Congressional Budget Office, denunciations of their plans by every major medical group, and overwhelming public disapproval.
Put it this way: Senator Lindsey Graham was entirely correct when he described the final effort at repeal as “terrible policy and horrible politics,” a “disaster” and a “fraud.” He voted for it anyway — and so did 48 of his colleagues.
So where did this zombie horde come from? Who ate Republicans’ brains? ...
The Republican health care debacle was the culmination of a process of intellectual and moral deterioration that began four decades ago...
A key moment came in the 1970s, when Irving Kristol, the godfather of neoconservatism, embraced supply-side economics — the claim, refuted by all available evidence and experience, that tax cuts pay for themselves by boosting economic growth. Writing years later, he actually boasted about valuing political expediency over intellectual integrity: “I was not certain of its economic merits but quickly saw its political possibilities.” In another essay, he cheerfully conceded to having had a “cavalier attitude toward the budget deficit,” because it was all about creating a Republican majority — so “political effectiveness was the priority, not the accounting deficiencies of government.”
The problem is that once you accept the principle that it’s O.K. to lie if it helps you win elections, it gets ever harder to limit the extent of the lying — or even to remember what it’s like to seek the truth. ...
Given this history, the Republican health care disaster was entirely predictable. You can’t expect good or even coherent policy proposals from a party that has spent decades embracing politically useful lies and denigrating expertise. ...
Now what? Maybe, just maybe, Republicans will work with Democrats to make the health system work better — after all, polls suggest that voters will, rightly, blame them for any future problems. But it wouldn’t be easy for them to face reality even if their president wasn’t a bloviating bully.
And it’s hard to imagine anything good happening on other policy fronts, either. Republicans have spent decades losing their ability to think straight, and they’re not going to get it back anytime soon.
Sunday, July 30, 2017
- Heritage On Health, 1989 - Paul Krugman
- Currency Unions and Trade - Doug Campbell
- Using Ireland – Kevin O'Rourke
- Post-Keynesians and New-Keynesians - Roger E. A. Farmer
- Foxconn cashes in for $3 billion plus - analysis - Ken Thomas
- Regression Discontinuity and Event Studies in Time Series - No Hesitations
- What’s Wrong with the Price-Specie-Flow Mechanism, Part III - Uneasy Money
- Renegotiating NAFTA: The role of global supply chains - VoxEU
- Dear Homesteaders, Self-Reliance Is A Delusion - Adam Ozimek
- Dynamics of medieval cities - Understanding Society
- Excess saving and low interest rates: Theory and evidence - VoxEU
- Another Look at Residual Seasonality in GDP - Fed Notes
Friday, July 28, 2017
- Are some places "More Malthusian" than other? - growthecon
- The Obesity Code and Economists as General Practitioners - Carola Binder
- BEA: Real GDP increased at 2.6% Annualized Rate in Q2 - Calculated Risk
- The UK slowdown is a result of Brexit and austerity - mainly macro
- Economics With a Humanities Face - Morson and Schapiro - Project Syndicate
- Why Health Care Policy Is So Hard - Greg Mankiw
- Trump’s Growth Charade - Simon Johnson
- Price Dispersement and Bargain Hunting - Tim Taylor
- The high costs of being poor in a rich land - VoxEU
- Contingency and explanation - Understanding Society
- Where Friedman Was Wrong - ProMarket
"The hypocrisy sweepstakes":
The Sanctimony and Sin of G.O.P. ‘Moderates’, by Paul Krugman, NY Times: ...When we look at the degeneration of American politics, it’s natural to blame the naked partisans — people like Mitch McConnell, with his principle-free will to power, or Ted Cruz, with his ideological rigidity. And Trump has, of course, done more to degrade his office than any previous occupant of the White House.
But none of what is happening right now would be possible without the acquiescence of politicians who pretend to be open-minded, decry partisanship, tut-tut about incivility and act as enablers for the extremists again and again.
I started with McCain because so many journalists still fall for his pose as an independent-minded maverick, ignoring the reality that he has almost always been a reliable partisan yes-man whenever it matters. ...
But he has rivals in the hypocrisy sweepstakes. Consider, for example, Senator Shelley Moore Capito of West Virginia — whose state has benefited enormously from the Affordable Care Act. “I didn’t come here to hurt people,” she declared not long ago — then voted for a bill that would quadruple the number of uninsured in West Virginia.
Or consider Rob Portman of Ohio, who cultivates an image as a moderate, praises Medicaid and talked big about the defects of Republican health plans — but also voted for that bill. Hey, in Ohio the number of uninsured would only triple. Let’s add Dean Heller of Nevada, who has lauded his state’s federally financed Medicaid expansion, but voted along with McCain to let debate proceed on an unknown bill, very much putting that expansion at risk.
Credit where credit is due: two senators, Lisa Murkowski of Alaska and Susan Collins of Maine, have stood up against the effort to betray every promise Republicans have made — and McCain did something right in the end. But every other supposed moderate in the Senate has offered a profile in cowardice.
And let’s be clear: This story didn’t start in the last few weeks, or the past few months. Republicans have been denouncing Obamacare and pledging to repeal and replace it for seven years, only to be caught flat-footed when given the chance to come up with an alternative. ...
So will the Senate pass something awful? If it does, will the House pass it, too, or try to use it as a Trojan horse for something even worse? I don’t know. But whatever happens, every Senate Republican besides Collins and Murkowski should be deeply ashamed.
Thursday, July 27, 2017
The Federal Reserve completed its July meeting with statement that pretty much everyone anticipated in advance. Interest rates were left unchanged and the Fed opened the door to begin balance sheet reduction "relatively soon." That means September. There was no reason to believe that the Fed does not still expect a third rate hike for this year which, if it comes, will be in December. That hike is of course data dependent.
A couple of quick notes. Regarding balance sheet reduction, I think this via Bloomberg is correct:
“September is the most likely outcome” for the launch of the balance-sheet drawdown, said Lou Crandall, chief economist at Wrightson ICAP LLC in Jersey City, New Jersey. “But I can’t rule out the idea that they would wait until November if the debt ceiling really looks messy.”
Clearly, the Fed will stand pat if certain policymakers in Congress and the White House (you know who you are) insist on sending the US economy down the path of debt default (I can't believe I even have to consider such insanity).
On inflation, some I think interpreted this as dovish:
On a 12-month basis, overall inflation and the measure excluding food and energy prices have declined and are running below 2 percent. Market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations are little changed, on balance.
First, this is simply a factual statement, an acknowledgement of what everyone and their brother already knows. Second, what is important is the forecast, and that remains unchanged:
Inflation on a 12-month basis is expected to remain somewhat below 2 percent in the near term but to stabilize around the Committee's 2 percent objective over the medium term. Near-term risks to the economic outlook appear roughly balanced, but the Committee is monitoring inflation developments closely.
And third, pay attention to the "12-month" language that first appeared in the May statement. Pay close attention. They Fed is telling us to stop paying attention to all those year-over-year inflation charts we like to make. They have accepted that level effects from inflation shortfalls in the first half of this year will live in the year-over-year numbers until next year. Pay attention to the path of the month-over-month numbers (blue bars):
If those numbers climb back up toward 2 percent this year, the Fed will feel vindicated even if the year-over-year numbers remain below target. Not just vindicated, but also inclined to raise rates as expected.
Bottom Line: Fed remains on its existing policy path.
Macroeconomists Can't Keep Ignoring Race and Gender: The models that researchers build to understand the economy tend to be blind to race and gender, as if macroeconomic policies typically affect blacks the same as whites and women the same as men. Increasingly, that's looking like the wrong way to go about it. ...
Gender has figured in some work, but is typically ignored. To my knowledge, no work within this research program has focused explicitly on race.
Two recent papers cast significant doubt on the wisdom of assuming a raceless and genderless society...
- Why Tax Cuts for the Rich Solve Nothing - Joseph E. Stiglitz
- Have they really fixed financial instability? - Gavyn Davies
- In defence of regulatory complexity - Bank Underground
- Inequality and Long-term Growth - Unassuming Economist
- New road infrastructure: The effects on firms - VoxEU
- Puerto Rico’s “Voluntary” Restructuring of GDB Bonds - Brad Setser
- Why mathematics has not been effective in economics - Tim Johnson
- John Maynard Keynes and Effective Macroeconomic Policy - EconoMonitor
- Trade deal? Yawn - Stumbling and Mumbling
Wednesday, July 26, 2017
Tim Taylor (click through for links to the papers):
Summer 2017 Journal of Economic Perspectives Available Online I was hired back in 1986 to be the Managing Editor for a new academic economics journal, at the time unnamed, but which soon was launched as the Journal of Economic Perspectives. The JEP is published by the American Economic Association, which back in 2011 decided--to my delight--that it would be freely available on-line, from the current issue back to the first issue. Here, I'll start with Table of Contents for the just-released Summer 2017 issue, which in the Taylor household is sometimes known as issue #121. Below that are abstracts and direct links for all of the papers. I will almost certainly blog about some of the individual papers in the next week or two, as well.
Tuesday, July 25, 2017
Easier Financial Conditions Will Keep the Fed on Track: The path laid out by the Federal Reserve at the beginning of the year for three interest-rate increases plus the start of reducing its $4.5 trillion balance sheet looks shaky due to the slowdown in inflation. There’s no question that the Fed is nervous about the persistent inflation shortfall. Chair Janet Yellen made note of the issue during her congressional testimony earlier this month. ...[Continued at Bloomberg Prophets.]...
Monday, July 24, 2017
- Multi-party kleptocracies rather than illiberal democracies - globalinequality
- U.S. Inflation Remains Low, and That’s a Problem - The New York Times
- Mobility Report Cards: The Role of Colleges in Intergenerational Mobility - NBER
- Achieving Statistical Significance with Covariates (Updated) - Marc Bellemare
- The Other Trilemma: Governing Global Finance - Cecchetti & Schoenholtz
- Shopping costs and one-stop shoppers intensify competition - VoxEU
- On the Origin of "Frequentist" Statistics - No Hesitations
- Agglomeration benefits versus firm selection - VoxEU
- Hayek, Deflation and Nihilism - Uneasy Money
- A Firming Recovery - Maurice Obstfeld
- The Marathon Game - Cheap Talk
- Norwegian Tax Law - EconoSpeak
- Lexit - mainly macro
"The latest round of falsehoods about health care, combined with the defamation of the C.B.O., may be gaining some political traction":
Health Care Is Still in Danger, by Paul Krugman, NY Times: Will Senate Republicans try to destroy health care under cover of a constitutional crisis? That’s a serious question, based in part on what happened in the House...
As you may remember, back in March attempts to repeal and replace the Affordable Care Act seemed dead after the Congressional Budget Office released a devastating assessment..., the House Republican bill would lead to 23 million more uninsured Americans. Faced with intense media scrutiny and an outpouring of public opposition, House leaders pulled their bill, and the debate seemed over.
But then media attention moved on to presidential tweets and other outrages — and with the spotlight off, House leaders bullied and bribed enough holdouts to narrowly pass a bill after all.
Could something similar happen in the Senate? A few days ago the Senate’s equally awful version of repeal and replace ... seemed dead. And media attention has visibly shifted off the subject, focusing on juicier topics like the Russia-Trump story. ...
One particular concern is that the latest round of falsehoods about health care, combined with the defamation of the C.B.O., may be gaining some political traction. ... In particular, the claim is that its prediction of huge losses in coverage is outlandish, and that to the extent that fewer people would be covered, it would be due to their voluntary choices.
In reality, those C.B.O. predictions of coverage losses are totally reasonable, given the ... drastic cuts to Medicaid...
And on those claims that it’s O.K. if people drop coverage, because that would be their own choice... Current law provides enough in subsidies that an individual with an income of $26,500 can afford a plan covering 70 percent of medical expenses, which ... implies an $800 deductible. The Senate bill reduces that standard of coverage to 58 percent, which would raise the implied deductible to $13,000, making the insurance effectively useless. Would deciding not to buy that useless insurance really be a “choice”? ...
In short, the Senate bill is every bit as cruel and grotesque as its critics say. But we need to keep reminding wavering senators and their constituents of that fact, lest they be snowed by a blizzard of lies. ...
And while ordinary citizens can’t yet do much about the looming constitutional crisis, their calls, letters, and protests can still make all the difference on health care. Don’t let the bad guys in the Senate do terrible things because you weren’t paying attention!
Saturday, July 22, 2017
- Some Pundit Meta On Our Twin Crises - Paul Krugman
- Fake News With Reporting on Disability - Dean Baker
- The ideology of "the market" - Stumbling and Mumbling
- The untapped potential of humanitarian economics - VoxEU
- Is Productivity Growth Becoming Irrelevant? - Adair Turner
- A new model of organization? - Understanding Society
- Refugees have little effect on native worker wages - VoxEU
- Markets Opened as Guild Monopolies Declined in the 16th Century - ProMarket
- Cronyism, & the demand for redistribution - Stumbling and Mumbling
- Can the Fed and ECB Work Together To Reduce Imbalances? - Brad Setser
Friday, July 21, 2017
"It’s basically about spite":
Health Care in a Time of Sabotage, by Paul Krugman, NY Times: Is Trumpcare finally dead? Even now, it’s hard to be sure, especially given Republican moderates’ long track record of caving in to extremists at crucial moments. But it does look as if the frontal assault on the Affordable Care Act has failed.
And let’s be clear: The reason this assault failed wasn’t that Donald Trump did a poor selling job, or that Mitch McConnell mishandled the legislative strategy. Obamacare survived because it has worked — because it brought about a dramatic reduction in the number of Americans without health insurance, and voters ... don’t want to lose those gains.
Unfortunately, some of those gains will probably be lost all the same: The number of uninsured Americans is likely to tick up over the next few years. So it’s important to say clearly, in advance, why this is about to happen. It won’t be because the Affordable Care Act is failing..., when Trump threatens to “let Obamacare fail,” what he’s really threatening is to make it fail.
On Wednesday The Times reported on three ways the Trump administration is, in effect, sabotaging the A.C.A.... First, the administration is weakening enforcement of the requirement that healthy people buy coverage. Second, it’s letting states impose onerous rules like work requirements on people seeking Medicaid. Third, it has backed off on advertising and outreach designed to let people know about options for coverage. ...
And there may be worse to come: Insurance companies, which are required by law to limit out-of-pocket expenses of low-income customers, are already raising premiums sharply because they’re worried about a possible cutoff of the crucial federal “cost-sharing reduction” subsidies that help them meet that requirement.
The truly amazing thing about these sabotage efforts is that they don’t serve any obvious purpose. They won’t save money — in fact, cutting off those subsidies ... would probably end up costing taxpayers more money than keeping them. They’re unlikely to revive Trumpcare’s political prospects.
So this isn’t about policy, or even politics in the normal sense. It’s basically about spite: Trump and his allies may have suffered a humiliating political defeat, but at least they can make millions of other people suffer.
Can anything be done to protect Americans from this temper tantrum? In some cases, I believe, state governments can insulate their citizens from malfeasance at H.H.S. But the most important thing, surely, is to place the blame where it belongs. No, Mr. Trump, Obamacare isn’t failing; you are.
Thursday, July 20, 2017
- Minimum Wage and Job Loss: Seattle Study Is Not the Last Word - NYTimes
- The Problem With Trump's Steel Tariffs - Annie Lowrey
- Buyer beware - American Economic Association
- In Conversation: Robert Solow - Equitable Growth
- Asymmetric policies - Stumbling and Mumbling
- Yes, Financial Crises Do Bring Hangovers - Justin Fox
- Modelling the Macroprudential Balancing Act - Bank Underground
- Capital accumulation, private property, and inequality in China - VoxEU
- The Cycles of Cities - Tim Taylor
- Redlining Never Went Away - Noah Smith
- Growth and volatility before and after the Global Crisis - VoxEU
This ridiculous Republican propaganda is exactly why we need the CBO: Tuesday I wrote about the GOP’s systematic efforts to discredit and disempower any independent voice — media, the Congressional Budget Office, the Office of Government Ethics — that tries to hold government accountable.
Today we have a great example of the ridiculous propaganda that Republicans expect the public to swallow in the absence of such independent critics and scorekeepers.
The Washington Examiner has gotten its hands on a Trump administration “analysis” (I use that word loosely) of the Consumer Freedom Amendment, a proposal from Sen. Ted Cruz (R-Tex.). ...
Talk to literally any economist, including conservative ones, and you’ll learn that this idea would lead to adverse selection, a huge spike in premiums for sick people..., a proliferation of mini-med junk plans that cover virtually nothing..., and a possible death spiral. A more detailed explanation of this phenomenon is here. ...
Contrary to the predictions of economists everywhere, the HHS propaganda document claims that the Cruz amendment would cause insurance coverage to go up and premiums to fall. Astoundingly, even premiums for people in the Obamacare-compliant plans — which, again, economic theory suggests would get stuck with only the very sickest, most expensive Americans — would allegedly decline relative to current law. ...
This is garbage, and exactly why we need nonpartisan scorekeepers like the CBO. ...
Wednesday, July 19, 2017
- The Healthcare Debacle: The Roles of Ignorance and Evil - Paul Krugman
- The economics of BBC pay - Stumbling and Mumbling
- Should Labour triangulate over Brexit? - mainly macro
- How will households react to the real income squeeze? - Bank Underground
- Japan's ‘glass ceiling’ and ‘sticky floor’ - VoxEU
- Global Value Chains and Productivity - Tim Taylor
- Facts, frictions & "mainstream" economics - Stumbling and Mumbling
- Credit misallocation during the European financial crisis - VoxEU
- The Economic Constraints on China’s Geostrategic Ambitions - Brad Setser
Tuesday, July 18, 2017
This Expansion Will End in a Fizzle, Not a Bang: The Fed is growing increasingly concerned that this expansion will end like the last two, with a collapse in asset prices that brings down the economy. That concern will lead the central bank down the path of excessive tightening. Worse, that logic misses a key point. In both of the last two cycles, there was a sizable imbalance in the economy that extended beyond financial assets themselves. So far, the current environment lacks such an imbalance. That suggests the expansion ends with more of a fizzle than a bang. ...[Continued at Bloomberg Prophets]...