Things to Read While Insomniac on the Night on January 4-5, 2014

Must-Reads:

  1. Pedro Nicolaci da Costa: The Fed’s Lopsided Inflation Target: “Is the Federal Reserve being cavalier about consistently undershooting its inflation target?…. Boston Fed President Eric Rosengren, who dissented against the central bank’s decision in December to begin paring back the pace of its bond-buying stimulus by $10 billion to $75 billion per month. ‘I would prefer to wait until the economic improvement that I am forecasting is clearly evident in the data before reducing the size of the asset-purchase program. I think patience remains appropriate at this time’, he said, citing how far the Fed is falling short on both the inflation and employment sides of its dual mandate…. The Fed statement itself cautions that ‘inflation persistently below its 2% objective could pose risks to economic performance’. The Fed has been missing its inflation target for much of the period much since the start of the financial crisis in mid-2007…”

  2. Janelle Nanos: Losing Aaron: Bob Swartz on MIT’s Role in His Son’s Death: “After his son was arrested for downloading files at MIT, Bob Swartz did everything in his power to save him. He couldn’t. Now he wants the institute to own up to its part in Aaron’s death…”

  3. Marc Andreesen: Andreessen: Tech Bubble Believers ‘Don’t Know What They’re Talking About’: “Within three years, I don’t think it’s going to be possible to buy a phone that’s not a smartphone…. the world where everybody has a supercomputer in their pocket and everybody’s connected. And so we’re just starting to see the implications of that…. Apple and Google are both in extraordinarily powerful positions…”

  4. Simon Wren-Lewis: Economic standards: “Imagine you are an academic scientist who is genuinely sceptical about climate change… asked… whether the current spell of cold weather disproves man-made global warming. Perhaps you are tempted to say yes, or ‘yes, although’, because it would encourage scepticism…. I’m almost certain you would instead say ‘of course not’… [and] then give… a little lecture about probabilities, averages, trends… the same answer that a scientist who believes in climate change would give. You do not give the wrong answer just because it is convenient to your overall argument, because you are an academic and a scientist. You have standards.

    “Now imagine (maybe you do not need to) that you are an economist and you are asked… ‘Has George Osborne’s “plan A” [fiscal austerity] been vindicated by the recovery in 2013?’ There is only one correct answer to this question–no. It is the correct answer, even if you believe plan A is the right policy…. It is important to understand that this has nothing to do with whether Plan A was a good or bad policy. What a supporter of Plan A should reply is  ‘No, but I still believe Plan A is the right policy for the following reasons’…. When some economists enter a political arena… they leave their scientific standards behind. Thankfully only two academics answered yes on this occasion, but many more city economists did so. So I should have been braver in my earlier post about the differences between academic and city economists–an explanation I should have added is that some city economists have lower scientific standards. You could say I am naive to expect anything else… economic ideas are influenced by ideology, and it is foolish to pretend otherwise. But our reaction should be to expose these influences and try and reduce them, rather than shrugging our shoulders. What I refuse to accept is that economics cannot be an evidence-based discipline.”

  5. Felix Salmon: Netflix’s dumbed-down algorithms: “One huge difference between TV and movies is that audiences have much lower quality thresholds for the former than they do for the latter. The average American spends 2.83 hours per day watching TV–that’s not much less than the 3.19 hours per day spent working. And while some TV is extremely good, most of it, frankly, isn’t. Television stations learned many years ago the difference between maximizing perceived quality, on the one hand, and maximizing hours spent watching, on the other. Netflix has long since started making the same distinction: it wants to serve up a constant stream of content for you to be able to watch in vast quantities, rather than sending individual precious DVDs where you will be very disappointed if they fall below your expectations…. The original Netflix prediction algorithm–the one which guessed how much you’d like a movie based on your ratings of other movies–was an amazing piece of computer technology, precisely because it managed to find things you didn’t know that you’d love…. Netflix… no longer wants to show me the things I want to watch, and it doesn’t even particularly want to show me the stuff I didn’t know I’d love. Instead, it just wants to feed me more and more and more of the same, drawing mainly from a library of second-tier movies and TV shows, and actually making it surprisingly hard to discover the highest-quality content…. This move is surely great for Netflix’s future profitability…. But there’s something a bit screwy about a world where I find iTunes to be a more useful discovery mechanism for Netflix material than Netflix itself.”

Should Reads:

  1. Mike Konczal: Economists agree: Raising the minimum wage reduces poverty: Some studies… argue that there are no adverse employment effects from small increases in the minimum wage. Other studies… argue there is…. But… all tend to think that raising the minimum wage would reduce poverty. That’s the conclusion of a major new paper by Dube, titled ‘Minimum Wages and the Distribution of Family Incomes’…. Raising the minimum wage to $10.10 an hour, as many Democrats are proposing in 2014, would reduce the number of people living in poverty by 4.6 million. It would also boost the incomes of those at the 10th percentile by $1,700. That’s a significant increase in the quality of life for our worst off that doesn’t require the government to tax and spend a single additional dollar. And, given that this policy is self-enforcing with virtually no administrative costs while challenging the employer’s market power, it is a powerful complement to the rest of the policies the government uses to boost the living standards of the worst off, including the Earned Income Tax Credit, food stamps, Medicaid, etc…. This is the fun part: Dube’s paper finds a remarkable consistency across studies here…. A 2011 paper by minimum-wage opponent David Neumark…. Neumark doesn’t mention this directly in the paper however; Dube is able to back out this conclusion using other variables that are listed…. What should people take away from this? The first is that there are significant benefits, whatever the costs…. Charles Darwin once wrote, ‘If the misery of the poor be caused not by the laws of nature, but by our institutions, great is our sin’. One of the key institutions of the modern economy, the minimum wage, could dramatically reduce the misery of the poor. What would it say if we didn’t take advantage of it?”

  2. Barry Ritholtz: Financial Resolutions You Can Actually Keep: 1. Have a goal-based plan…. Figure out your needs, and pursue that objective…. 2. Invest with a basic asset-allocation model. Don’t try to outguess or beat the market. The odds are greatly against your doing so…. 3. Stop trading. The evidence is overwhelming: You are not a good trader…. For those of you who just cannot quit, try this: Put 5 percent of your investable assets in a trading account. Track how well your trading does vs. what I described above. If after five years you have outperformed your real investments net of fees, taxes and all other expenses, you can pull an additional 15 to 20 percent into this account…. 4. Max out tax-deferred accounts…. 5. Refinance your debt…. Lock in a low rate…. 6. Review your insurance…. 7. Save for college. Set up a 529 plan…. 8. Plan your estate…. 9. Move your banking online…. This will greatly simplify your life. 10. Consolidate. Finally, take all the accounts you have accumulated over the years and consolidate them.”

  3. Steve Coll: A New Memoir by John Rizzo, the C.I.A.’s Lawyer: “Rizzo concludes that [George W.] Bush has lately invented a memory of himself as someone who was well informed and decisively in favor of waterboarding certain Al Qaeda prisoners, when, as far as Rizzo can tell, Bush seems not to have known at the time what the C.I.A. was doing…. Bush might prefer to be recalled as a decisive leader willing to make unpopular decisions in the name of public safety rather than as a novice President who too often ceded control of his first term to Cheney…. A six-thousand-page classified investigative report about C.I.A. interrogations of Al Qaeda prisoners, by the Democratic staff of the Senate Intelligence Committee, is complete… has been awaiting declassification review for more than a year…. There may also be a third unpublished internal C.I.A. investigative report on the subject…”

And:

Should Be Aware of:

  1. Brenda Cronin: Five Takeaways from the American Economic Association meeting taking place this weekend in Philadelphia: “1. Nobody goes to the panels… doctoral candidates are interviewing, professors are recruiting and a range of outfits are staffing booths in the exhibition hall… the real business… is going on behind the scenes, in “serious coffees,” and other sideline chats…. 2. The 2008 financial crisis remains a puzzle…. 3. A new seriousness in the profession…. 4. Finance, finance, finance The job-market papers being discussed by economists just finishing their doctorates are a good bellwether of where the field is moving, said Columbia professor Ricardo Reis. From interviews thus far, it appears many researchers are focusing on crisis-related issues including the “plumbing” of the financial system, such as the repo market, as well as labor markets and unemployment. 5. The more things change… A discussion with female economists indicates that career problems of decades ago are still around: work-life balance and trying to find jobs as an academic couple remain in the forefront…”

  2. John Holbo: We could all get back to nature if it weren’t for these damned hippies, discouraging us with their weed!: “David Brooks really does seem to be getting weirder. Or is it just me?… Suppose the government started applying this Brooksian litmus test to products it pre-clears for sale on the market. ‘Yes, it’s a new sort of iPhone, I see. But does it encourage enjoyment of nature? Will it subtly make its users more temperate and prudent? If so, how so?’ Suppose you couldn’t legally sell something without making a showing, in a government office, that it fosters appreciation of the higher things in life…. Obviously Brooks is proposing no such utopian overturning of the established order. But, since not, what’s the point of picking out weed for failing to pass extraordinary muster, winning the approval of Brooksian would-be Philosopher Kings?… ‘In legalizing weed, citizens of Colorado are, indeed, enhancing individual freedom. But they are also nurturing a moral ecology in which it is a bit harder to be the sort of person most of us want to be. Paul Krugman is off today.’ I like that subtle dig at Krugman! Oh, we know what he’s probably ‘off’ on today!

    “Why is this interesting? I’ve said it before, and this column is a good example. In US politics, the conservative imagination is so loopily half-utopian…. A challenge for our conservatives readers. Can you provide examples of liberal pundits who are as prominent as Brooks, who are as goofy as Brooks? That is, they defend some concrete policy proposal by sort of half-flying off to some vague Cloud Cuckooland, based on principles they would never seriously propose ratifying in the real world, because they obviously don’t even believe those principles?

    “UPDATE: Before someone points out that Brooks is just defending the status quo, I would point out that ‘lesser pleasures’ sort of gives away the game. Marijuana has always been banned on the grounds that it is somehow dangerous and bad, not that it is a merely ‘lesser pleasure’. The idea of organizing society around the banning of lesser pleasures, for the sake of higher pleasures, is a highly radical one.”

  3. DougJ: The subtle touch of authority: “John and many others have done an excellent job of skewering Bobo’s [David Brooks’s] anti-pot [decriminalization] piece. I’d like to focus on the part that bothers me: ‘I’d say that in healthy societies government wants to subtly tip the scale to favor temperate, prudent, self-governing citizenship. In those societies, government subtly encourages the highest pleasures, like enjoying the arts or being in nature, and discourages lesser pleasures, like being stoned.’ Throwing people in jail is just a way of subtly tipping the scales? (And, yes, there are plenty of states where you can be incarcerated for possession of any amount of marijuana.) Perhaps, yes, in a world where bombing countries is a way of subtly tipping the scales. That’s what’s most terrifying about the modern pundit, the fact that their prudent, civil discourse contains so many euphemisms for mass imprisonment and murder.”

And:

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Gavin Kelly: The robots are coming. Will they bring wealth or a divided society? | Ken Thomas: Middle Class Political Economist: Boeing Saga Ends with 51% Favoring Revised Contract | Tim Taylor: The Moral Significance of Economic Life: Aristotle vs. Locke | Elissa Gomez: Millions More Denied Coverage By GOP Refusal To Expand Medicaid Than Obamacare Cancelations | Carola Binder: A Tale of Two Housing Markets | Robert Waldmann: DeLong’s Questions | JMP Vox | Mark Thoma: Looking for (But Not Finding) Shortages of Skilled Labor in the Manufacturing Sector | Ari Phillips: California Researchers Find Drastically Low Snowpack, Spelling Danger For 2014 Water Supplies |

January 4, 2014

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