In Lieu of a Focus Post: March 2, 2015

While I found things sufficiently intriguing to be worth a focus post today, I have not been able to get one into good enough shape to pass the quality bar imposed by my internal quality censor.

Therefore: In lieu of a focus post: Nick Bunker, Adam Ozimek, and Richard Freeman; Frances Coppola and Olivier Blanchard; Cosma Shalizi; Paul Krugman and Marty Feldstein; Tim Duy; Richard Reeves; and Janet Currie–all of whom are greatly worth paying detailed and careful attention to, and are among those whom one disagrees with at one’s intellectual peril:

My teacher the vir illustris Richard Freeman always said that unions in America surged upwards in tsunamis, and then were gradually eroded over time. Whatever union rank-of-file elected union leaders to do and whatever union leaders did, maximizing the growth opportunities of the firms in which they worked was not among them. And Richard went on to say that the surges were unpredictable save in a negative sense: the economic and the political fundamentals both had to be right for struck sparks to turn into bonfires of organization, and predicting when sparks would be struck was beyond our capacity. This is what Adam Ozimek and Nick Bunker have been discussing: Yes, a more unionized America would be a less unequal America, but minor changes in labor laws are likely only to affect the rate of erosion, and the stars aligning on the politics would require the stars aligning on the economic bargaining power of labor as well. And that seems—to Adam, to Nick, and to me—very difficult to envision, welcome as it would be (to me and Nick, at least).

I also found on the internet a fine rant by the engaged and thoughtful femina spectabilis Frances Coppola attacking another one of my teachers, the vir illustris Olivier Blanchard, saying that his:

call for policymakers to set policy in such a way that linear models will still work should be seen for what it is–the desperate cry of an aging economist who discovers that the foundations upon which he has built his career are made of sand. He is far from alone…

It’s not quite that bad: a more charitable reading of Olivier is that he wants to make the point that heart attacks have little in common with the common cold, and that do get out the defibrillator pads when the patient shows up with the sniffles will probably not end well. Nevertheless, I always thought that the MIT Economics Department made a hideous mistake when it decided not to replace Charlie Kindleberger with another financial-macro institutional historian, and that it then doubled down on that when it refused to pay what people—cough, cough, Anne McCants for example—were worth in order to get them to teach its students the institutionalist and Minskyite history that would have kept so many of its ex-students from being deaf and blind as 2008 approached.

On my own hard disk, I continue to circle around the problem of revising my teaching and lecturing materials on the economics of the government budget, but mostly, I admit, still spinning my wheels. And the kha-khan Cosma Shalizi smacks me down for seeing the Federal Reserve as afflicted by intellectual errors rather than as a prisoner of Gramscian top 0.1% hegemony and the revolving door. He has a point, a definite point. In a good world the Janet Yellens and the Charles Evanses would be the vital center of the Federal Reserve, not its left wing.

In a closely-related piece, Paul Krugman tries to untangle why so many center-right and right-wing economists are so resistant to the elementary logic of Hicks (1937) and the IS-LM model—even those who, like Marty Feldstein, teach the IS-LM model to their students, and teach it very well (after all: he taught it to me). My view is that there is a deeper problem: it made sense for those of my great-great grandfathers who were rich to be hard-money guys. It made no sense for my rich grandfather to be—although he was. And it really makes no sense for my contemporaries to be. Yet an astonishing share of the rich among them are. A great puzzle.

Let me also note the estimable Tim Duy continue to watch a failure to communicate. Financial markets think that the Federal Reserve will either delay the interest-rate liftoff for at least another year or two or, if they do lift-off, find themselves reversing course within eighteenth months to try to restart a stalled economy. The Federal Reserve thinks financial markets have lost their moorings with reality, and that it will soon be appropriate to raise interest rates in a strengthening economy in which secular stagnation considerations are at best third-order.

Richard Reeves harps upon an issue that has long concerned me. Back in the 1970s a top 0.01%er had about four times the income of a top 1%er. Today a top 0.01%er has sixteen times the income of a top 1%er. If you think—as I do—that the principal source of utilitarian satisfaction among the top 1%ers is their sense that they have “made it”, the fact that they now know people whose income bears the same relationship to theirs as their income bears to two-earner households making minimum wage is very unsettling. That was not try forty years ago, when even the top 0.01%ers were for the most part in the same consumption and life-style universe as the top 1%ers, or the top 5%ers for that matter. Our rich today feel poor—and are angry—because the existence of our superrich demonstrates that they really have not “made it” here in America.

Last, Janet Currie points out that the damage from a ruling adverse to the government in the King v. Burwell ObamaCare subsidies case is likely to carry a very heavy cost in terms of societal well-being along private health, public health, and economic growth dimensions. Fifty years ago Ronald Reagan argued against Medicare on the grounds that once we had Medicare we would find it financially unaffordable unless we drafted doctors into a low-wage socialist National Health Corps commanded by the Surgeon General, and that mass labor conscription could not be far behind. Ronald Reagan was, I think it is now generally agreed, overfearful and overwrought. And how you in any way enhance human freedom by causing an adverse-selection meltdown of the health-insurance markets those who do not work for large bureaucracies must buy in remains beyond me…