Links - Catching Up (Part 2)

• Democracy on a Knife-Edge - Dani Rodrik 
  The failure to protect minority rights is a readily understood consequence of the political logic behind the emergence of democracy. What requires explanation is not the relative rarity of liberal democracy, but its existence.
• Economic Incentives Don’t Always Do What We Want Them To - Duflo and Banerjee 
  On their own, markets can’t deliver outcomes that are just, acceptable — or even efficient.
• The Phillips curve: Dead or alive - VoxEU 
  The apparent flattening of the Phillips curve has led some to claim that it is dead. The column uses data from US states and metropolitan areas to suggest a steeper slope, with non-linearities in tight labour markets. We have been here before – in the 1960s, similar low and stable inflation expectations led to the great inflation of the 1970s.
• Towards a circular economy – Thomas Piketty 
  The idea of the circular economy frequently brings to mind issues of recycling waste and materials and making moderate use of natural resources. But if a new system is to emerge which is sustainable and equitable the whole economic model will have to be re-thought. With the differences in wealth which exist at the moment, no ecological ambition is possible. Energy saving can only come from economic and social restraint and not from excessive fortunes and life-styles. We will have to construct new norms of social, educational, fiscal and climate justice through democratic discussion. These norms will have to say no to the present hyper concentration of economic power. On the contrary, the economy of the 21st century must be based on the permanent circulation of power, wealth and knowledge.
• Inequality, Populism, and Redistribution - IGM Forum
  Question A: Rising inequality is straining the health of liberal democracy.
• Monetary Policy Operations Redux - Money, Banking and Financial Markets 
  What led to this sudden disruption in short-term funding markets that had been relatively calm in recent years? Had the Fed lost control? The financial press was full of speculation. Many people noted upcoming large quarterly corporate tax payments as a source of heightened demand for funds. Others suggested that liquidity regulations were making banks’ demand for reserves overly rigid, so that they would be unwilling to lend in the repo market, even when it appeared profitable.
• Yield Curve Responses to Introducing Negative Policy Rates - FRBSF 
  Given the low level of interest rates in many developed economies, negative interest rates could become an important policy tool for fighting future economic downturns. Because of this, it’s important to carefully examine evidence from economies whose central banks have already deployed such policies. Analyzing financial market reactions to the introduction of negative interest rates shows that the entire yield curve for government bonds in those economies tends to shift lower. This suggests that negative rates may be an effective monetary policy tool to help ease financial conditions.
• On Drawing the Wrong Lessons from Theory: The Natural Rate of Unemployment - The Everyday Economist 
  Economic theory is important. Theory provides discipline. Economists write down a set of assumptions and follow those assumptions to their logical conclusions. The validity of a particular theory is then tested against observed data. Modern economic theory is often mathematical, but theory comes in a variety of forms. Sometimes theory is used to develop and test specific empirical predictions. Other times, economic theory acts as a type of sophisticated thought experiment. These thought experiments generate broader empirical predictions. In fact, some of these sophisticated thought experiments contain important lessons for monetary policy.
• How different technologies affect different workers- VoxEU
  Since the early 1980s, technology has reduced the demand for low and medium-skill workers, the young, and women, especially in manufacturing industries. The column investigates which technologies have had the largest effect, and on which types of worker. It finds that robots and software raised the demand for high-skill workers, older workers, and men, especially in service industries.