Links (7/22/19)

• Why Critics of a More Relaxed Attitude on Public Debt Are Wrong - Blanchard and Ubide
  Both of us have recently developed arguments for a more relaxed attitude toward public debt and deficits (for example, this address by Blanchard at the European Central Bank Policy Forum, this joint discussion at PIIE, and this essay by Ubide on Vox). Not surprisingly, several counterarguments have arisen, some of which we accept, some of which we don’t. This blog addresses two arguments that we reject.
• Acknowledging and pricing macroeconomic uncertainties - Hansen and Sargent
  False pretences of knowledge about complicated economic situations have become all too common in public policy debates. This column argues that policymakers should take into account what they don’t know in their decision making. It describes a tractable approach for acknowledging, characterising, and responding to different forms of uncertainty, by using theories and statistical methods available at any particular moment.
• Costs of recession - Stumbling and Mumbling
  The Resolution Foundation’s James Smith has written a nice paper on the likelihood of recession and the fact that, with monetary less able to support the economy, we need to think about alternative ways of tackling recessions. I just want to amplify what he says in two ways.
• State and Local Taxes Are Worsening Inequality - The New York Times
  Most states lean heavily on lower-income families. An Illinois referendum is a step toward correcting the problem.
• The Great Crypto Heist - Nouriel Roubini
  Cryptocurrencies have given rise to an entire new criminal industry, comprising unregulated offshore exchanges, paid propagandists, and an army of scammers looking to fleece retail investors. Yet, despite the overwhelming evidence of rampant fraud and abuse, financial regulators and law-enforcement agencies remain asleep at the wheel.
• Trade wars may ‘bloc up’ world trade - VoxEU
  Against the backdrop of new tariffs imposed by the Trump administration and retaliation from targeted countries, notably China, the trade wars of the 1930s have received renewed attention. This column argues that they mainly served to intensify a pre-existing trend towards the formation of trade blocs. The trade wars of the present day may therefore serve a similar purpose as those in the 1930s, that is, the intensification of China- and US-centric trade blocs.
• Paid family leave and breastfeeding - VoxEU
  Mothers in the US breastfeed their infants at higher rates today than at any point in documented history, but low-income mothers have become less likely to do so. A leading reason for mothers to stop breastfeeding is the need to return to work. This column uses data on over 270,000 mother-child pairs in California, which implemented paid family leave in 2004, to examine the relationship between paid family leave and breastfeeding. It finds that paid family leave significantly increases overall breastfeeding duration, suggesting that paid family leave may lead to longer-term health improvements for children and mothers, particularly among disadvantaged families.
• Modern money theory and its challenges - VoxEU
  Modern monetary theory (MMT) has recently gained prominence in light of doubts about the effectiveness of monetary policy in addressing economic shortfalls. This column assesses the implications of implementing the theory’s policy prescriptions, and the challenges it presents in the case of Japan – an economy that some have argued has already been subject to such policy. Japan’s labour shortages and low inflation mean modern monetary theory’s fiscal stimulus suggestions may be harder to implement than they initially seem.
• Win or lose: Rigged card game sheds light on inequality, fairness - EurekAlert
  After noticing that card game winners attributed the game's outcome to skill and losers blamed their defeat on the rules, doctoral students Mario Molina and Mauricio Bucca decided to conduct an experiment. Working with Michael Macy, the Goldwin Smith Professor of Arts and Sciences and director of the Social Dynamics Laboratory, they adapted their idea into the Swap Game, a simple card game they rigged to favor either winners or losers, in a study designed to measure perceptions of inequality. They found that winners were far more likely to believe the game's outcome was fair, even when it was heavily tilted in their favor
• Understanding the Average Impact of Microcredit - Microeconomic Insights
  The global microloan portfolio is now worth over 102 billion dollars and is growing yearly. This research estimates the impact of the policy and the extent to which this impact is different across different contexts. It finds that overall, the best existing evidence suggests that the average impact of these loans is small and that in the future, it may be beneficial to seek alternative approaches to improve the lives of poor households in the developing world.
• Interview: Enrico Moretti - Federal Reserve Bank of Richmond
  Moretti's interest in American geographical sorting began during his days as a Ph.D. student at Berkeley, where he arrived after his undergraduate education in his native Milan. At first, he just wanted to fill in some blanks in his knowledge of America. "I started looking at data from the U.S. census," he says. "Just out of curiosity, wanting to know more about this country, I started looking at the different city averages of whatever the census could measure — earnings, level of education of the workforce, the type of industry. I suspected there were big differences, but I didn't know how large the differences were." He went on to write his Ph.D. dissertation on the benefits in terms of higher earnings that less-educated workers obtain from being in a city with a large share of workers with college degrees.
• Global Perspective on Markets for Sand - Tim Taylor
  Trivia question: If measuring by volume, what mined product is the largest? The answer is "sand and gravel," sometimes known in the geology business as "aggregates." In particular, aggregates are used for concrete and asphalt, and demand for these products from China and other emerging markets has skyrocketed. Sand is also used as part of hydraulic fracturing, so in the United States demand from that source has surged as well. And sand and gravel are also widely used for purposes ranging from land reclamation and water treatment to industrial production of electronics, cosmetics and glass.