Things to Read on the Morning of July 8, 2014

Should-Reads:

1. Tim Duy: Inflation Hysteria Redux: “The Fed doesn’t target core inflation. They target headline inflation. But they also believe that headline inflation will revert to core, and as such tend to be more concerned with core inflation in excess of 2%. Consider the history of core inflation since 1985…. For the last twenty years, core measures of inflation have more often than not been at or below the the upper range of the Fed’s error band, especially for core-PCE…. It is simply difficult for me to become too worried about inflation given the history of the past twenty years…. Underlying inflation simply has not been a problem… because the Federal Reserve tightened policy multiple times to preempt inflation. Expect the same during this cycle as well…”

2. Jonathan Kirshner: The Neoliberal Bailout: “The System Worked: How the World Stopped Another Great Depression, [by] Daniel W. Drezner… is a smart, thoughtful, and important book that I largely disagree with…. The argument is neatly summed up by the book’s title, and on its first page: ‘The punch line of this book is that the conventional wisdom is wrong. In response to the 2008 financial crisis… global economic governance responded in an effective and nimble fashion. In short, the system worked.’ There is much to agree with in this claim: however bitter the experience of our lingering economic malaise—the ‘great recession’—the world did indeed avoid another Great Depression. Another such cataclysmic meltdown could have easily taken place in the wake of the financial crisis, as many analysts at the time feared….Drezner is right: the roof did not fall in, global economic performance stabilized, and, in many quarters, bounced back. But Drezner glances away from an elephant in the room: the system worked much better for some than for others…”

3. Thers: “I’m sort of hesitant to say this because it sounds too much like a standup comedy line, but what I want to know is, as a heterosexual male, how the hell is women having universal access to quality contraception bad? I mean, speaking from the perspective of a man who is sexually attracted to women… HOW THE HELL IS WOMEN HAVING AS MUCH ACCESS AS POSSIBLE TO HAVING CHEAP CONTRACEPTION EVEN REMOTELY A BAD THING, FROM A MALE HETEROSEXUAL POINT OF VIEW?… Contraception is very much a men’s issue, if you define it in terms of how–based upon my Objective Reporting as an Adult Straight Male–having sex with a woman you find alluring and companionable is kind of terrific, and if you’re not worrying about producing any small humans, that’s a great relief! Here is a Crazy Hunch–some subset of powerful men just may be more invested in controlling women than in being friends and lovers with women…. I’m not saying it’s inexplicable, but I am saying it’s marvelous, how these five weirdo ancient Catholic judges of the Supreme Court are now somehow the Lords…”

4. Kory Kroft et al.: Long-Term Unemployment and the Great Recession: The Role of Composition, Duration Dependence, and Non-Participation: “During the Great Recession… compositional shifts in demographics, occupation, industry, region, and the reason for unemployment jointly account for very little of the observed increase in LTU….We calibrate a matching model that allows for duration dependence…. The calibrated model can account for almost all of the increase in the incidence of LTU and much of the observed outward shift in the Beveridge curve between 2008 and 2013. Both negative duration dependence in the job-finding rate for the unemployed and transitions to and from non-participation contribute significantly to the ability of the model to match the data after 2008…”

5. Frances Coppola: Scott Sumner on Thomas Piketty: “So having completely misunderstood one paragraph from Piketty–though admittedly a complex one–Sumner then turns his attention to Piketty on labour markets. But his analysis doesn’t improve…. It is Sumner’s description of this paragraph from Piketty that makes me want to weep: ‘We are free to imagine an ideal society in which all other tasks are almost totally automated and each individual has as much freedom as possible to pursue the goods of education, culture, and health for the benefit of herself and others. Everyone would be by turns teacher or student, writer or reader, actor or spectator, doctor or patient.’ Sumner calls this ‘dystopia’ for ‘most men’. But Piketty has merely described the future of work. Sumner’s ‘dystopia’ is already being created, and the forces driving it are too powerful to resist…”

Should Be Aware of:

• Brad DeLong: The Triumph of Monetarism?
• Nick Bunker: Being the reserve currency has its privileges and costs
• Alberto Galasso and Mark Schankerman: “Patent protections encourage further innovation in the pharmaceutical, chemical and mechanical industries, but discourage it in computers, electronics and medical instruments…”
• Linda Geddes: Anaesthesia
• Michael Ruane: President Harding’s steamy love letters with Carrie Phillips to go on display
• Rachel Aaron: ‘You’re doing what?’–Why I Decided to Self-Publish My Next Series

And:

1. David Atkins: For whom are Boehner’s crocodile tears intended?: “The politics of immigration are mostly clear at this point. Republicans have become abjectly terrified of their own base, particularly after Eric Cantor’s defeat. Democrats are furious at the lack of action on the border in pure policy terms, but from a nakedly electoral standpoint every cycle that Republicans continue to make themselves the party of ‘get the hell out’ is another cycle in which the vast majority of Hispanics may not be thrilled with Democrats, but certainly refuse to even consider voting for the Republicans…”

2. Thomas Palley: Milton Friedman’s Economics and Political Economy: An Old Keynesian Critique: “Milton Friedman’s influence on the economics profession has been enormous. In part, his success was due to political forces that have made neoliberalism the dominant global ideology, but Friedman also rode those forces and contributed to them. Friedman’s professional triumph is testament to the weak intellectual foundations of the economics profession which accepted ideas that are conceptually and empirically flawed. His success has taken economics back in a pre-Keynesian direction and squeezed Keynesianism out of the academy. Friedman’s thinking also frames so-called new Keynesian economics which is simply new classical macroeconomics with the addition of imperfect competition and nominal rigidities. By enabling the claim that macroeconomics is fully characterized by a divide between new Keynesian and new classical macroeconomics, new Keynesianism closes the pincer that excludes old Keynesianism. As long as that pincer holds, economics will remain under Friedman’s shadow…”

3. Martin Longman: Inhaling Their Own Disinformation: “Speaker of the House John Boehner of Ohio has penned an editorial for CNN explaining why he feels compelled to sue the president in an effort to get him to uphold the law. But, if you were looking for specific complaints, you’ll be disappointed. This is as close as he came to naming anything the president has done wrong: ‘In the end, the Constitution makes it clear that the President’s job is to faithfully execute the laws. And, in my view, the President has not faithfully executed the laws when it comes to a range of issues, including his health care law, energy regulations, foreign policy and education.’ I guess we are supposed to know what the hell John Boehner is talking about, but since most of us don’t watch Fox News or listen to hate radio, we’re left clueless as to what the president has done that is inconsistent with the law….”

Already-Noted Must-Reads:

1. David Wessel: Central Bankers Line Up their Defense: “At the beginning of the week, the… Bank for International Settlements warned loudly of the risks of moving ‘too slowly and too late’ to raise interest rates back toward normal. As it did before the global financial crisis, the BIS emphasized the need to act early to avoid the booms-and-busts in financial markets and offered all sorts of reasons why today’s very low inflation shouldn’t be the primary concern of central bankers. Central bankers appear to have agreed on a common response… have used the same phrases to say: Fuggedaboutit! With price and wage inflation not a concern right now, we aren’t going to raise interest rates and throw at lot of people out of work to avoid excesses in financial markets or to head off possible asset bubbles, they said. There may come a day when our worries about financial stability will prompt us to hike interest rates, but rates are ‘the last line of defense’. Not now. The ‘first line of defense’ is making the financial system more resilient so it can better withstand shocks and using our supervisory and regulatory ‘macroprudential tools’ to rein in excesses, as we are doing now…”

2. Paul de Grauwe:: Revisiting the pain in Spain: “There has been a stark contrast between the experiences of Spain and the UK since the Global Crisis….The ECB’s Outright Monetary Transactions policy has been instrumental in reducing Spanish government bond yields, [but] it has not made the Spanish fiscal position sustainable. Although the UK has implemented less austerity than Spain since the start of the crisis, a large currency depreciation has helped to reduce its debt-to-GDP ratio…”

3. German Lopez: Colorado offered free birth control — and teen births fell by 40 percent: “A program that provides contraceptives to low-income women contributed to a 40-percent drop in Colorado’s teen birth rate over five years, according to state officials. The… Colorado Family Planning Initiative, provides intrauterine devices (IUDs) or implants at little to no cost for low-income women at 68 family planning clinics…. The teen abortion rate dropped by 35 percent from 2009 to 2012 in counties served by the program…. Young women served by the family planning clinics also accounted for about three-fourths of the overall decline in Colorado’s teen birth rate during the same time period. And the infant caseload for Colorado WIC, a nutrition program for low-income women and their babies, fell by 23 percent from 2008 to 2013…”

4. Paul Krugman: Knutty Asset Prices: “Although I hear the phrase ‘artificially low’ all the time, I don’t think many people who use it have thought through what they mean. What would a non-artificial interest rate be?… Wicksell… [said] an unnatural [interest] rate… would be… an interest… [at which] the economy overheats… [with] accelerating inflation. But that hasn’t been happening…. So what are the people complaining about artificially low rates talking about?… They are low by historical standards–but there are enough changes… from deleveraging to demography that this isn’t a convincing argument…. Once you accept the possibility that rates belong where they are, or even a bit lower, to correspond to the Wicksellian natural rate, you also conclude that asset prices might make sense; and once you concede that asset prices might make sense, you lose the supposed evidence that rates are all wrong…. Where is the wild exuberance that we associate with dangerous bubbles? I don’t see popular TV shows about house-flipping, and CNBC viewership is plumbing new lows…”