Over at Project Syndicate: Try Everything

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Over at Project Syndicate: Try Everything: When it became clear in late 2008 that the orgy of deregulation coupled with global imbalances was confronting the global economy with a shock at least as dangerous as the Great Crash that had initiated the Great Depression, I was alarmed but hopeful. We had, after all, seen this before. And we had models from the Great Depression for how to mitigate the damage–basically, try everything that might work to boost demand and production and reduce jobless workers, and reinforce success.

In the United States, for example, after 3 1/2 years during which Herbert Hoover had focused on restoring business confidence via balancing the budget, in 1933 the new President Franklin Delano Roosevelt tried everything: abandoning the gold standard, monetary reflation, deficit spending–at least to the extent of no longer making budget-balance an immediate priority–direct employment by the government, government loan guarantees, corporatist industry-level cartelization, aggressive antitrust policy to break up monopolies, and yet more. These policies sometimes conflicted with each other. A serious chunk of them were counterproductive. But Roosevelt tried everything, and reinforced success, and in the end the United States economy was much healthier than those that had remained with the Gold Bloc.

Thus in late 2008 the correct policy course appeared to me to be obvious: Recapitalize banks? Yes. Guarantee loans? Yes. Use Fannie and Freddie to resolve underwater mortgages? Yes. Drop short-term interest rates to zero? Yes. Engage in quantitative easing? Yes. Deficit spending? Yes. Change the regime of monetary policy-making so that businesses and savers would be confident that their previous expectations would be validated and the economy would not suffer from deflation or lowflation? Yes. And then, as events evolved, reinforce those policies that seemed to be working, and gradually drop those that seemed to be ineffective or counterproductive.

Yet that was not what we did. There was a remarkably large amount of root-and-branch opposition to different possibly-helpful policies: Recapitalizing the banks would simply reward institutions and executives who had caused the problem, and generate moral hazard and more problems with the future (alas, an objection that had a point–even though big bank shareholders lost 80% of their wealth in the crisis). Resolving underwater mortgages would reward feckless borrowers who ought to be punished. Expansionary fiscal policy was, logically, Ineffective by necessity. Expansionary monetary policy could only produce inflation and not recovery. Expansionary fiscal policy would do more harm because higher debts would reduced confidence than good by encouraging spending. Quantitative easing would, somehow, generate a new financial crisis. As near as I can see, all of these arguments could not and cannot be made with a straight face by people who had done their intellectual homework. But they were and are made by many.

But perhaps more damaging and more decisive in producing the grossly inadequate response two 2007-2009 that we have seen were those advocating their favorite stimulative policy at the expense of other policies. “Don’t do deficit spending–resolve underwater mortgages!” “Don’t do expansionary monetary policy–fiscal policy can do the job!” “There’s no need to raise expectations of future inflation–recapitalizing the banks is what is really needed!”

And we saw the latest of these the day after Christmas in the Wall Street Journal, with the extremely sharp Martin Feldstein’s “The Fed’s Needless Flirtation with Danger” http://www.wsj.com/articles/martin-feldstein-the-feds-needless-flirtation-with-danger-1419543510. The demand-stimulative policies advocated–investment tax credits, changing deductions to credits focused on increasing incentives to invest, shifting corporate tax burdens to those with low rather than high marginal propensities to spend–are all promising. They belong in the “try everything” basket.

But then there is the surrounding rhetoric.

It starts with the headline: “The Fed’s Needless Flirtation With Danger”. It continues with claims that the Fed’s policies “increase the risk of financial instability…”; that his recommended policies are a “safe and effective alternative”; that they are not an additional arrow in the quiver but rather replacements for “traditional Keynesian policies… [that] increase… national debt”.

The net effect, in my view at least, is at best a zero. Rather than having the effect intended of pushing us toward more effective demand-stimulus policies, the real-world effect is to diminish support for those demand-stimulus policies we are now undertaking without successfully assembling a coalition that can flick the switch and get us to undertake policies that we are not.

And when I look back at everything I have written since 2008, I find that I am also part of the problem. I find that I, too, have been too cocksure that my favorite policies recommended by my favorite theories have been the ones to push. And I have been insufficiently respectful of the wisdom of Franklin Delano Roosevelt, that:

The country needs and, unless I mistake its temper, the country demands bold, persistent experimentation. It is common sense to take a method and try it: If it fails, admit it frankly and try another. But above all, try something…


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Afternoon Must-Read: Paul Krugman: “I find myself in meetings…

Paul Krugman:
“I find myself in meetings with international financial types…

…It’s all the usual discussions, and they don’t like to talk domestic U.S. politics, but then at some point, somebody says, what if we had another major financial crisis? What if we really needed something like TARP again? What are the chances that something like TARP could actually happen in this political environment? And everybody goes quiet, and looks down at their blotter…

Things to Read on the Afternoon of December 31, 2014

Must- and Shall-Reads:

 

  1. William Barnett, ed.::
    Rational expectations: A Panel Discussion: “Kevin Hoover: ‘Kevin Hoover: Bob, did you want to comment on that? You’re looking unhappy, I thought.’ Robert Lucas: ‘No. I mean, you can’t read Muth’s paper as some recipe for cranking out true theories about everything under the sun…. My paper on expectations and the neutrality of money was an attempt to get a positive theory about what observations we call a Phillips curve. Basically it didn’t work…. I thought my model was going to explain price stickiness, and it didn’t. So we’re still working on it…. I don’t think we have a satisfactory solution… but I don’t think that’s a cloud over Muth’s work. If Jack [Muth] thinks it is, I don’t agree with him. Mike [Lovell] cites some data that Jack [Muth] couldn’t make sense out of using rational expectations…. There’re a lot of bad models out there. I authored my share, and I don’t see how that affects a lot of things we’ve been talking about earlier on about the value of Muth’s contribution…. You know, people had no trouble having financial meltdowns in their economies before all this stuff we’ve been talking about came on board. We didn’t help, though; there’s no question about that. We may have focused attention on the wrong things; I don’t know…'”

  2. Duncan Black:
    Does Anybody Remember MOOCs?:
    “They were all anybody who wrote about education would talk about for awhile. Where did that all go? Apparently administrators finally figured out that a ‘course in a box’ actually costs a lot of money, that it doesn’t scale nearly as well as they hoped, that they are a substitute for ‘learning from a book’ not ‘learning from a person,’ and you can’t charge $50,000 per year tuition simply because your prestigious name will be on the online course degree. I knew all of this because I saw people experimenting with online courses… 15 years ago. The technology, except maybe easy use of video (you could use video, it was just a bit more of a pain), was all there then…”

  3. Paul Krugman:
    Keynesians and the Volcker Disinflation:
    “Right-wing economists like Stephen Moore and John Cochrane–it’s becoming ever harder to tell the difference–have some curious beliefs…. One… is that the experience of disinflation in the 1980s was a huge shock to Keynesians, refuting everything they believed. What makes this belief curious is that it’s the exact opposite of the truth. Keynesians came into the Volcker disinflation… with a standard… model…. And events matched…. Cutting inflation would require a temporary surge in unemployment. Eventually, however, unemployment could come back down to more or less its original level; this temporary surge in unemployment would deliver a permanent reduction in the inflation rate, because it would change expectations…. [That’s] what the Volcker disinflation actually looked like…. It was the other side of the macro divide that was left scrambling for answers. The models Chicago was promoting in the 1970s, based on the work of Robert Lucas and company, said that unemployment should have come down quickly…. Those models were unsustainable in the face of the data. But… most of those guys went into real business cycle theory–basically, denying that the Fed had anything to do with recessions. And from there they just kept digging ever deeper into the rabbit hole…

  4. Laura Tyson and Lenny Mendonca:
    Obamacare and Effective Government:
    “When historians look back on the United States’ Patient Protection and Affordable Care Act… they will not devote much attention to its regulations, its troubled insurance exchanges, or its website’s flawed launch… [but] on how ‘Obamacare’ encouraged a wave of innovation that gradually tamed the spiraling costs of a dysfunctional system, even as millions of previously excluded Americans gained access to health insurance…”

  5. Duncan Black:
    Eschaton: Um Because Even Proponents Never Had Any Explanation For How It Would Work?):
    “1) Destroy demand in the middle of a depression. 2) ??. 3) Cure depression!!! Nowhere have austerity policies been more aggressively tried — and generally failed to live up to results promised by advocates — than in Greece. After more than four years of belt tightening, patience is wearing thin, and tentative signs of improvement have not yet trickled down into the lives of average Greeks. At least US ‘trickle down’ isn’t completely implausible. Give money to rich people and maybe they’ll buy some stuff from the rest of us! I’m not sure how belt tightening is supposed to trickle down. Perhaps we should ask the Wookies on Endor.”

Should Be Aware of:

 

  1. Kaleberg:
    Liveblogging World War II: December 27, 1944: FDR Seizes Montgomery Ward:
    “I live in a former lumber town and the locals are angry that the timber business isn’t what it used to be. At one time, everyone worked cutting down trees and making wood products and was paid enough to buy a house and raise a family. Being a lumber man wasn’t always like that. In the late 19th century lumberjacks were poorly paid and the town was full of bars and whore houses. During WWI, the government seized the lumber business and imposed a labor contract to provide wood and wood products for the war effort. Employers rarely raise wages just because productivity is rising or business is good. It requires united labor action or government intervention, and usually both. P.S. The business is still here, but it is ever more automated. A logging truck with a loader turns two men into a whole crew. It’s also still dangerous. We lose one or two men, usually tree fellers, every year according to the local paper. The pay is still good, but you can’t run a whole town on it anymore.”

  2. Charles Murray (1979):
    Juvenile Corrections and the Chronic Delinquent:
    “The data do point unequivocally, we believe, to this: the grounds for debate about juvenile corrections must be shifted. The rhetoric that has guided national legislation and the policies of the Office of Juvenile Justice and Delinquency Prevention is based on the premise that corrections “only makes kids worse.” That premise mayor may not be true on some dimensions. No one really knows. But in terms of delinquent behavior, corrections does not make kids worse. It makes them better. Much better, from the point of view of the community that must live with them.”

Afternoon Must-Read: William Barnett, ed.: Rational Expectations: A Panel Discussion

You know, before I read this I had not grasped the extent to which, for Robert Lucas and company, rational expectations is not a simplifying modeling assumptions that we hope will be good enough not to betray us retake our models to try to understand the data, but rather the *sine qua non* of any macroeconomic science. To Lucas, if it does not incorporate rational expectations, it can only be what he calls “schlock macroeconomics”. Hence the resort to calibration: rational expectations cannot fail econometric tests, instead it is econometrics that fails the rational expectations test…

William Barnett, ed.::
Rational Expectations: A Panel Discussion: “Kevin Hoover: ‘Kevin Hoover: Bob, did you want to comment on that? You’re looking unhappy, I thought.’

Robert Lucas: ‘No. I mean, you can’t read Muth’s paper as some recipe for cranking out true theories about everything under the sun…. My paper on expectations and the neutrality of money was an attempt to get a positive theory about what observations we call a Phillips curve. Basically it didn’t work…. I thought my model was going to explain price stickiness, and it didn’t. So we’re still working on it…. I don’t think we have a satisfactory solution… but I don’t think that’s a cloud over Muth’s work. If Jack [Muth] thinks it is, I don’t agree with him. Mike [Lovell] cites some data that Jack [Muth] couldn’t make sense out of using rational expectations…. There’re a lot of bad models out there. I authored my share, and I don’t see how that affects a lot of things we’ve been talking about earlier on about the value of Muth’s contribution…. You know, people had no trouble having financial meltdowns in their economies before all this stuff we’ve been talking about came on board. We didn’t help, though; there’s no question about that. We may have focused attention on the wrong things; I don’t know…’


Via Lars Syll:

William Barnett, ed.::
Rational expectations: A Panel Discussion:

Kevin Hoover: In 1986, Mike [Lovell], you… examined the empirical success of… rational expectations… adaptive expectations, structural expectations, and implicit expectations…. Rational expectations does not dominate…. You even cite a paper by Muth, which comes down more or less in favor of implicit expectations….

Michael Lovell: I wish Jack Muth could be here… but… he died just as Hurricane Wilma was zeroing in on his home…. I sent Jack my paper with some trepidation…. He wrote back… in October 1984….

I came up with some conclusions similar to some of yours on the basis of forecasts of business activity compiled by the Bureau of Business Research at Pitt….

Rational expectations model did not pass the empirical test. He went on to say:

It is a little surprising that serious alternatives to rational expectations have never really been proposed. My original paper was largely a reaction against very naıve expectations hypotheses juxtaposed with highly rational decision-making behavior and seems to have been rather widely misinterpreted. Two directions seem to be worth exploring:

  1. Explaining why smoothing rules work and their limitations.
  2. Incorporating well known cognitive biases into expectations theory (Kahneman and Tversky).

It was really incredible that so little has been done along these lines.

Muth also said that his results showed that expectations were not in accordance with the facts about forecasts of demand and production. He then advanced an alternative to rational expectations. That alternative he called an ‘errors-in-the- variables’ model. That is to say, it allowed the expectation error to be correlated with both the realization and the prediction. Muth found that his errors-in-variables model worked better than rational expectations or Mills’ implicit expectations, but it did not entirely pass the tests…. Muth thought that we should not only have rational expectations, but if we’re going to have rational behavioral equations, then consistency requires that our model include rational expectations. But he was also interested in the results of people who do behavioral economics, which at that time was a very undeveloped area.

Hoover: Does anyone else want to comment?…

Robert Shiller: What comes to my mind is that rational expectations models have to assume away the problem of regime change, and that makes them hard to apply….

Kevin Hoover: Bob, did you want to comment on that? You’re looking unhappy, I thought.

Robert Lucas: No. I mean, you can’t read Muth’s paper as some recipe for cranking out true theories about everything under the sun…. My paper on expectations and the neutrality of money was an attempt to get a positive theory about what observations we call a Phillips curve. Basically it didn’t work…. I thought my model was going to explain price stickiness, and it didn’t. So we’re still working on it…. I don’t think we have a satisfactory solution… but I don’t think that’s a cloud over Muth’s work. If Jack [Muth] thinks it is, I don’t agree with him. Mike [Lovell] cites some data that Jack [Muth] couldn’t make sense out of using rational expectations…. There’re a lot of bad models out there. I authored my share, and I don’t see how that affects a lot of things we’ve been talking about earlier on about the value of Muth’s contribution.

Warren Young: Just to wrap up…. Does behavioral economics or psychology in general provide a useful and viable alternative?…

Robert Shiller: Well… the criticism of behavioral economics [is] that it doesn’t provide elegant models…. My opinion is that behavioral economics has to be on the reading list…. Back at the turn of the century—around 1900—when utility-maximizing economic theory was being discovered, it was described as a psychological theory…. I don’t think that there’s a conflict between behavioral economics and classical economics. It’s all something that will evolve responding to each other—psychology and economics.

Robert Lucas: I totally disagree.

Kevin Hoover: The Great Recession and the recent financial crisis have been widely viewed in both popular and professional commentary as a challenge to rational expectations and to efficient markets. I really just want to get your comments on that strain of the popular debate that’s been active over the last couple years…

Robert Lucas: You know, people had no trouble having financial meltdowns in their economies before all this stuff we’ve been talking about came on board. We didn’t help, though; there’s no question about that. We may have focused attention on the wrong things; I don’t know…

Morning Must-Read: Duncan Black: Does Anybody Remember MOOCs?

Duncan Black:
Does Anybody Remember MOOCs?:
“They were all anybody who wrote about education…

…would talk about for awhile. Where did that all go? Apparently administrators finally figured out that a ‘course in a box’ actually costs a lot of money, that it doesn’t scale nearly as well as they hoped, that they are a substitute for ‘learning from a book’ not ‘learning from a person,’ and you can’t charge $50,000 per year tuition simply because your prestigious name will be on the online course degree. I knew all of this because I saw people experimenting with online courses… 15 years ago. The technology, except maybe easy use of video (you could use video, it was just a bit more of a pain), was all there then…

“A substitute for learning from a book” is not quite fair. What we want is an experience machine that is a good enough replica for learning 5-on-1 from a person or, if we cannot get that, a good enough replica of learning from a really good lecturer. For something like 1% of the population–which includes me–a simple book is a good enough replica experience machine. For something like 10% of the population a book is an OK-but-not-good-enough replica. But we now have much better technologies then books at our fingertips, eardrums, and eyeballs, and so we should be able to build experience machines that will push that 1% up to 20% or so and that 10% up to 70% or so. But we are not doing so well so far…

Nighttime Must-Read: Paul Krugman: The Volcker Disinflation

Wingnuts gotta nut. And Krugmans gotta Krug. I score this for Krugman, 6-0, 6-0, 6-0:

Paul Krugman:
Keynesians and the Volcker Disinflation:
“Right-wing economists like Stephen Moore and John Cochrane–it’s becoming ever harder to tell the difference–have some curious beliefs….

… One… is that the experience of disinflation in the 1980s was a huge shock to Keynesians, refuting everything they believed. What makes this belief curious is that it’s the exact opposite of the truth. Keynesians came into the Volcker disinflation… with a standard… model…. And events matched…. Cutting inflation would require a temporary surge in unemployment. Eventually, however, unemployment could come back down to more or less its original level; this temporary surge in unemployment would deliver a permanent reduction in the inflation rate, because it would change expectations…. [That’s] what the Volcker disinflation actually looked like…. It was the other side of the macro divide that was left scrambling for answers. The models Chicago was promoting in the 1970s, based on the work of Robert Lucas and company, said that unemployment should have come down quickly…. Those models were unsustainable in the face of the data. But… most of those guys went into real business cycle theory–basically, denying that the Fed had anything to do with recessions. And from there they just kept digging ever deeper into the rabbit hole…

The lessons everyone serious who does forecasting drew from the Volcker Disinflation were three:

  1. Talk is cheap, and so credibility is hard to establish. Shifting expectations rapidly and substantially requires real policy régime change–which is much more than just announcing: “this time we really are serious!”

  2. As a consequence, expectations in the real world are going to be either anchored or adaptive in the absence of real policy régime change.

  3. The adaptive-expectations Phillips Curve is relatively flat: you need big shifts in unemployment to reliably generate small shifts in current inflation.

Lucas drew a different set of lessons from the Volcker Disinflation et sequelae:

The main finding that emerged from the research of the 1970s is that anticipated changes in money growth… are not associated with the kind of stimulus to employment and production that Hume described…. The importance of this distinction between anticipated and unanticipated monetary changes is an implication of every one of the many different models, all using rational expectations, that were developed during the 1970s to account for short-term trade-offs…. The discovery of the central role of the distinction between anticipated and unanticipated money shocks resulted from the attempts… to formulate mathematically explicit models… addressing the issues raised by Hume. But… none of the specific models… can now be viewed as a satisfactory theory of business cycles…. Much recent research has followed the lead of Kydland and Prescott (1982) and emphasized the effects of purely real forces on employment and production…

Whenever I read this, I can only think that Lucas uses “finding”, “are”, and “discovery” in a manner of which Inigo Montoya would disapprove.

Lucas seems to say that rational-expectations monetary models of the business cycle had their chance, failed, and so it is time to move on to rational-expectations real models of the business cycle in which recessions come about because of engineers’ losses of knowledge how to produce things efficiently–the Great Forgetting theory–of workers’ reduced desire to work–the Great Vacation theory–or of a sudden increase in the depreciation rate on capital–the Great Rusting theory.

Moving backward, and dropping the straitjacket of the rational-expectations representative-agent framework was just not considered.

Morning Must-Read: Laura Tyson and Lenny Mendonca: Obamacare and Effective Government

The piece of the launch of ObamaCare–Blue State ObamaCare, that is, for Red State ObamaCare has not really been launched yet, and the Red States look to be more than $100 billion/year poorer for it–that puzzles me the most is the extraordinary slowdown in the rate of growth of health care costs that accompanied it. None of our standard economic models have channels plausibly large enough to make such a slowdown a conceivable consequence of the ObamaCare launch, get the striking coincidence in time makes it very difficult to believe that ObamaCare is not in some way largely responsible…

Laura Tyson and Lenny Mendonca:
Obamacare and Effective Government:
“When historians look back…

…on the United States’ Patient Protection and Affordable Care Act… they will not devote much attention to its regulations, its troubled insurance exchanges, or its website’s flawed launch… [but] on how ‘Obamacare’ encouraged a wave of innovation that gradually tamed the spiraling costs of a dysfunctional system, even as millions of previously excluded Americans gained access to health insurance…

Musings on 25-54 Employment-to-Population Rates and the Macroeconomy: Daily Focus

FRED Graph FRED St Louis Fed

(1) If the US economy were operating at its productive potential, the share of 25 to 54-year-olds who are employed ought to be what it was at the start of 2000. Back then there were few visible pressures leading to rising inflation in the economy.

Does anybody disagree with that?

(2) Right now, 25 to 54-year-olds–both male and female–are employed at a rate lower by 5%-age points then they were at the start of 2000. That’s 6.5%, or 1/15, more 25-54 labor at work than we have today.

Does anybody disagree with that?

(3) Even if you think–in spite of the absence of accelerating inflation–that employment in 2000 was above the economy’s long-term sustainable potential, there is no reason to believe that a U.S. economy firing on all cylinders would not have 25-54 employment to population rates–both male and female–back at their 2006 levels, a full 3%-age points–and 4%, 1/25–higher than today.

Does anybody disagree with that?

(4) The U.S. economy’s convergence towards its potential is very slow: The 25-54 employment-to-population ratio has only risen by 1%-point over the past two years.

Does anybody disagree with that?

(5) Yet in spite of all these, the Federal Reserve believes that the U.S. economy is now close enough to its productive potential that unless some more things go wrong it is no longer appropriate for it to be buying assets and it will be appropriate for it in a year to start raising interest rates even though inflation is still below its 2%/year target.

The only way to square (1) through (4) with (5) is if the Greater Crash of 2008-2009 and the still-ongoing Lesser Depression really have pushed between 2 and 4%-age points of our 25 to 54-year-olds out of the labor force permanently, so that we can never get them back, or at least never get them back without an economy at such high pressure to produce inflation that the Federal Reserve regards as unacceptable.

This may be true.

But it does raise two questions:

  1. What has made the Federal Reserve so confident that it is true that it is willing to make policy based on it–especially as current inflation is still below the 2%/year target?

  2. If it is true that the missing 2 to 4%-age points of 25 to 54-year-olds now out of the labor force could not be pulled back in without allowing inflation to rise above it’s 2%/year target, isn’t that an argument for raising the 2%/year target rather than accepting the current 77% 25-54 employment to population ratio as the economy’s limit of potential?


Macroeconomics, Labor Force Participation, Federal Reserve, Monetary Policy, Lesser Depression, Greater Crash, Hysteresis

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Things to Read on the Morning of December 30, 2014

Must- and Shall-Reads:

 

  1. Evan Soltas:
    Falling Labor Force Participation Update:
    “The top-line result is that, of the 3.1 percentage-point decline in the participation rate between March 2007 and March 2014, 1.9 p.p (three-fifths) is explained demographic change and 1.2 p.p (two-fifths) of it is unexplained by demographic change. Of the explained portion, almost all of that (1.6 p.p.) is aging…”

  2. Kevin Murphy:
    How Gary Becker saw the scourge of discrimination:
    “The legal remedies sought by the [civil-rights] campaigners played no significant role in his analysis. From an economic perspective, legal remedies have corrected some problems but exacerbated others…. Firms intent on discriminating in their hiring practices can move to locations without significant minority populations…. If people have a tendency to discriminate on the basis of race, legislation cannot eliminate that tendency. Politicians cannot merely legislate a new outcome, or legislate preferences away. They can only change the way discrimination manifests itself…. One obvious question begged by Becker’s work was, who benefits from discrimination? While he did not directly address this, he did suggest that one beneficiary might be labor unions, which have traditionally represented white workers…”

  3. Paul Krugman:
    Mysteries Of Deflation (2010):
    “Since Friedman and Phelps laid out the natural rate hypothesis in the 60s, applied macroeconomics has relied on some kind of inflation-adjusted Phillips curve…. But here’s the thing: the [Friedman-Phelps] inflation-adjusted Phillips curve predicts not just deflation, but accelerating deflation in the face of a really prolonged economic slump…. This doesn’t happen…. So what’s going on? There’s a body of work I’m surprised we haven’t been hearing more about: the downward nominal wage rigidity literature. I learned about the concept from Pierre Fortin; Mr. Janet Yellin, aka George Akerlof, and co-authors wrote quite a lot about it…. It’s important to take account of downward rigidity so as not to get fooled into accepting a persistently depressed economy as normal…. It’s time to start focusing on downward rigidity and what it implies. After all, all indications are that we’re going to be dealing with a depressed economy for a long time to come.”

  4. Matthew Yglesias:
    Lyndon Johnson’s Aides Mad MLK Is Hero of Selma:
    “Selma doesn’t offer a hostile portrayal of Johnson… [but] tell[s] a story in which King and his collaborators are the key actors…. Johnson[‘s]… notion of doing the War on Poverty first and voting rights second isn’t obviously wrongheaded or pernicious, but King doesn’t agree…. Johnson tries a couple of times to talk them out of it… fails… swings around to King’s viewpoint…. Certainly one could image an excellent Lincoln-esque film that primarily highlighted the legislative machinations among white politicians and cast LBJ as the hero (I would watch). But the choice to make a different film that highlights activist demands and casts MLK as the hero isn’t a form of historical inaccuracy or grounds for dismissing the movie. The idea that a film should be ruled out for having the temerity to focus on black people’s agency in securing their own liberation is completely absurd. We’ve had too few such films in American history and everyone could stand to watch some more…”

  5. New York Times:
    Prosecute Torturers and Their Bosses:
    “Obama… has failed to bring to justice anyone responsible for the torture of terrorism suspects…. Obama has said multiple times that ‘we need to look forward as opposed to looking backwards,’ as though the two were incompatible. They are not. The nation cannot move forward in any meaningful way without coming to terms, legally and morally, with the abhorrent acts that were authorized, given a false patina of legality, and committed by American men and women from the highest levels of government on down…. These are, simply, crimes…. No amount of legal pretzel logic can justify the behavior detailed in the report. Indeed, it is impossible to read it and conclude that no one can be held accountable. At the very least, Mr. Obama needs to authorize a full and independent criminal investigation… former Vice President Dick Cheney; Mr. Cheney’s chief of staff, David Addington; the former C.I.A. director George Tenet; and John Yoo and Jay Bybee… Jose Rodriguez Jr., the C.I.A. official who ordered the destruction of the videotapes; the psychologists who devised the torture regimen; and the C.I.A. employees who carried out that regimen…. Republicans… with one notable exception, Senator John McCain, they have either fallen silent or actively defended the indefensible…”

Should Be Aware of:

 

  1. Barkley Rosser:
    EconoSpeak: More Piling On [John] Cochrane: Why He Cannot Go Back To Being Taken Seriously Even About Asset Pricing:
    “Piling on John Cochrane… nearly all his claims are not only laughingly bogus, but seriously unsupported even in his own column…. suggests… Cochrane… should just go back to working on asset pricing…. Even in that arena, he… should also be ignored…. What is his problem?  He… has simply ignored… ‘fat tails’…. The words ‘fat tails’ ‘kurtosis’ and ‘leptokurtosis’ simply do not appear…. Nowhere, nada, not at all…. Campbell, Lo, and MacKinlay… at least talk about this issue…. In 2008, when he was criticized for not talking about fat tails, Cochrane defended himself by noting that Eugene Fama… knew all about fat tails…. Indeed, Fama initially supported Mandelbrot’s argument that variances are asymptotically infinite, but then turned against him… although ignoring evidence that fourth moments (kurtosis) may actually be so…. Cochrane claimed… Fama… knew about asset returns having fat tails and that anybody who studied with him knew this.  Maybe this is so, but there seems to be might little evidence that Cochrane has been passing this on to  his students…. This makes him look pretty pathetic… even in his area of most basic research.”

  2. David Adesnik (2006):
    Oxblog Volunteers to Write for the Old New Republic…: “At this point, the author pulls out a deck of cards and picks one at random. If the card is a ten or lower, the author concludes that the Democrats are right, but not for the reason given by some senator from Massachusetts. If the author draws a face card, he thinks to himself, ‘I must agree with the Republicans for no apparent reason in order to show that I’m open-minded.’ If the author draws an ace, it means that his thirtieth birthday is approaching and it’s time to either go back to grad school or work for McKinsey…”

  3. Julian Sanchez and David Weigel (2007):
    Who Wrote Ron Paul’s Newsletters?:
    “Ron Paul doesn’t seem to know much about his own newsletters… says he was unaware… of the bigoted rhetoric about African Americans and gays that was appearing under his name… has ‘no idea’ who might have written inflammatory comments such as ‘Order was only restored in L.A. when it came time for the blacks to pick up their welfare checks’…. A half-dozen longtime libertarian activists… all named the same man as Paul’s chief ghostwriter: Ludwig von Mises Institute founder Llewellyn Rockwell, Jr….. Rockwell, Paul’s congressional chief of staff from 1978 to 1982, was a vice president of Ron Paul & Associates…. During the period when the most incendiary items appeared… Rockwell and… Murray Rothbard championed an open strategy of exploiting racial and class resentment to build a coalition with populist ‘paleoconservatives,’ producing a flurry of articles and manifestos whose racially charged talking points and vocabulary mirrored the controversial Paul newsletters…. To this day Rockwell remains a friend and advisor to Paul…. Besides Ron Paul and Lew Rockwell, the officers of Ron Paul & Associates included Paul’s wife Carol, Paul’s daughter Lori Pyeatt, Paul staffer Penny Langford-Freeman, and longtime campaign manager Mark Elam…. The publishing operation was lucrative… $940,000 for Ron Paul & Associates…. The tenor of Paul’s newsletters changed over the years. The ones published between Paul’s return to private life after three full terms in congress (1985) and his Libertarian presidential bid (1988) notably lack inflammatory racial or anti-gay comments. The letters published between Paul’s first run for president and his return to Congress in 1996 are another story—replete with claims that Martin Luther King ‘seduced underage girls and boys,’ that black protesters should gather ‘at a food stamp bureau or a crack house’ rather than the Statue of Liberty, and that AIDS sufferers ‘enjoy the attention and pity that comes with being sick.’… Paul’s inner circle learned between his congressional stints that ‘the wilder they got, the more bombastic they got with it, the more the checks came in. You think the newsletters were bad? The fundraising letters were just insane from that period.’ Cato Institute President Ed Crane told reason he recalls a conversation from some time in the late 1980s in which Paul claimed that his best source of congressional campaign donations was the mailing list for The Spotlight, the conspiracy-mongering, anti-Semitic tabloid run by the Holocaust denier Willis Carto until it folded in 2001. The newsletters’ obsession with blacks and gays was of a piece with a conscious political strategy adopted at that same time by Lew Rockwell and Murray Rothbard…”

Morning Must-Read: Evan Soltas: Falling Labor Force Participation Update

Evan Soltas reports one of the smaller estimates of the permanent labor-side hysteresis damage done to the American economy by the Lesser Depression: 1.2/60 = 2% permanent decline in the American labor force relative to the previous trend. Something to make my less pessimistic on New Year’s Eve Eve…

Evan Soltas

Evan Soltas:
Falling Labor Force Participation Update:
“The top-line result is that…

…of the 3.1 percentage-point decline in the participation rate between March 2007 and March 2014, 1.9 p.p (three-fifths) is explained demographic change and 1.2 p.p (two-fifths) of it is unexplained by demographic change. Of the explained portion, almost all of that (1.6 p.p.) is aging…”