Things to Read on the Evening of December 5, 2013

Must-Reads:

1. Alan Blinder (1994): Overview: Reducing Unemployment: Current Issues and Policy Options: “The answer to the question is no. There is no correlation… between how much inflation fell [over 1980-93] and the legal charge of the central bank. The lower panel shows that there was some correlation… between the rise in unemployment and the central bank’s objective… unemployment rose in every one of these countries, essentially; and it rose more in the countries whose central banks were more single-minded…. But the difference is not tremendously significant. The message, I think, may be that the significance of the central banks’ charge may be more apparent than real. But I wouldn’t dismiss it entirely. Now, there is a two-handed answer for you!”

2. Menzie Chinn: Some Observations on the Efficacy of Monetary and Fiscal Policy: “Based on these observations, a reasonable conclusion is that expansionary monetary and fiscal policy work, even in a highly indebted country such as Japan. Whether these policies ultimately lead to a durable recovery depends on a number of factors, not the least is the strength of the world economy. (Deployment of the “third arrow”, structural reform, isn’t seen as critical by Roubini, for instance.) Further monetary stimulus is being considered; additional action is likely if next year’s sales tax hike noticeably slows growth…”

Should-Reads:

1. Mark Thoma: God Didn’t Make Little Green Arrows: “The issue is the stability of the deflation[ary] steady state [in which expanding the supply of liquid assets generates deflation]. This is precisely the issue George [Evans] studied… with E. Guse and S. Honkapohja… for inflation and consumption expectations under adaptive learning (in the New Keynesian model both consumption or output expectations and inflation expectations are central). The… deflation steady state… is not locally stable and there are nearby divergent paths with falling inflation and falling output…. The full EER reference is Evans, George; Guse, Eran and Honkapohja, Seppo, ‘Liquidity Traps, Learning and Stagnation’, European Economic Review, Vol. 52, 2008, 1438 – 1463.”

2. Paul Krugman: The Trouble With Economics Is Economists: “That’s in large part what Simon Wren-Lewis is saying in this post defending mainstream economics. And I largely agree. It is deeply unfair to blame textbook economics either for the crisis or for the poor response…. The mania for financial deregulation… flew in the face of the canonical model of banking crises, Diamond-Dybvig…. Efficient markets theory arguably deserves more blame for the failure of too many economists to recognize the housing bubble, but textbook economics always presented EMT as a baseline, not a revealed truth. As for the crisis response, the remarkable thing has been the determination of policy makers to do the opposite of what textbook macroeconomics said they should have been doing….. The problem, of course, is that this wasn’t just a case of ignorant or bull-headed political appointees ignoring economic wisdom: many prestigious economists were all too eager to turn their backs on standard macro, even when it was working very well, on behalf of their political leanings. And that, I think, says that there is something wrong with the structure of the economics profession. We don’t seem to need different economics as much as we need different economists…”

3. Matthew Yglesias: Elizabeth Warren vs Third Way: Legislative subtweeting at its finest: “Elizabeth Warren sent a letter today asking major banks to disclose what money they’re giving to D.C. think tanks…. The context… Jon Cowan and Jim Kessler of Third Way… banal and contentless op-ed in the Wall Street Journal… arguing… Elizabeth Warren… is bad…. They offered a made-up criticism of ‘the populists’ staunch refusal to address the coming Medicare crisis’. That one’s particularly odd since one of the two populists they’re critiquing was Bill de Blasio, who, as mayor of New York City, has nothing whatsoever to do with Medicare. As for Warren, it is simply false—as in, ignorant or dishonest—to say that Democrats have done nothing to reduce Medicare costs or that they have no further proposals to do so…. Third Way’s board is jam-packed with finance guys…. So the general suspicion… is that… the ‘think tank’ is just acting as a kind of hatchet operation for the financial sector…. Warren wants to smoke them out…. So good for Warren.”

Should Be Aware of:

1. Jonathan Chait: 12 Years a Slave and the Obama Era: “To identify 12 Years a Slave as merely a story about slavery is to miss what makes race the furious and often pathological subtext of American politics in the Obama era…. To make a person a slave requires making them complicit in their own subservience, through rituals of degradation…. It was precisely Northup’s calm, dignified competence in the scene that so enraged his oppressor…. That context was fresh in my mind when I read this column in National Review by Quin Hillyer… [who] unleashes this: ‘Every time decent people think the scandals and embarrassments circling Barack Obama will sink this presidency, we look up and see Obama still there…. The man has no shame, no self-doubt, not a shred of humility, no sense that anybody else has legitimate reason to question him or hold any other point of view.’… Why would Hillyer believe such a factually bizarre thing?

   “One answer is that, by the evidence of this column, Hillyer believes all sorts of factually bizarre things. But most African-Americans, and many liberal whites, would read Hillyer’s rant as the cultural heir to Northup’s overseer: a southern white reactionary enraged that a calm, dignified, educated black man has failed to prostrate himself…. Conservatives see racism as a series of discrete acts of overt oppression. After slavery had disappeared, but before legal segregation had, conservatives considered it preposterous to claim that blacks suffered any systematic disadvantage in American life. (For an lengthy but fascinating expression of the conservative view, watch William F. Buckley in 1965 sneering his way through a debate over race relations with James Baldwin.)

   “Today, conservatives retroactively agree that legal segregation may have been unfair, but now things run on an even footing. Republicans, by a 60-40 margin, now believe discrimination against whites has grown to be a larger problem than discrimination against minorities…. Conservatives have made endless jokes based on the strange premise that Obama is unable to express coherent thoughts unless reading from a teleprompter, defined health-care reform as ‘reparations’, imagined a Reagan-era program to subsidize telephone use for the indigent is actually ‘Obamaphones’, or complained when black entertainers or athletes socialize with the First Family…”

2. Joe Conason: Why Republicans Can’t Address Rising Inequality: “Congress could begin to address the income gap…. Raising the minimum wage…. Rebuilding the nation’s infrastructure and school systems…. Removing obstacles to unionization would begin to level the gross disparities in economic power between the 1 percent and the rest of us. Now the president has vowed to fight inequality for the rest of his days in office. He is taking that fight directly to the Republicans who have frustrated so many of his initiatives. He will have to cast aside the last illusions of bipartisanship. No matter what he does or says, he may not be able to win a higher minimum wage or a serious jobs program or universal pre-school with the other party controlling Congress. But if he consistently challenges us–and his adversaries–to restore an American dream that includes everyone, he may yet fashion a legacy worthy of his transformative ambitions.”

3. Erick, Son of Erick: The Fix Is in: “John Boehner has hired Rebecca Tallent… [who] worked for the left-of-center “Bipartisan Policy Center,” and is a serious amnesty advocate… helped John McCain and Ted Kennedy…. Boehner will wait until 2014… [then] get all these Republicans talking out of both sides of their mouths and the Democrats together for a bipartisan immigration reform push. The threat of primary challenges well passed, they’ll get their amnesty deal done. The only way conservatives can stop this from happening now is to line up primary challenges early…. If conservatives do not find credible, quality challengers ASAP, we’ll see amnesty steam roll through once the threat of the primaries is passed. The Republicans are so convinced you will turn out and vote for them in 2014 to spite Obama, they are perfectly happy to screw you over in this fight knowing how cheap a date the conservative movement has become. BOHICA kids, BOHICA.”

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