Miles Kimball sends us to this-morning’s must-watch: Larry Summers on the danger that the U.S. and Europe are turning Japanese, i.e., about to repeat Japan’s ongoing post-1991 episode of secular stagnation:
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It is not over until it is over…. We may well need, in the years ahead, to think about how we manage an economy in which the zero nominal interest rate is a chronic and systemic inhibitor of economic activity, holding our economies back, below their potential…
Attention Conservation Notice: 2600 words reiterating the points made by Reinhart and Tashiro (and also by others like Raghu Rajan) that the East Asian financial crisis of 1997-98 appears to have triggered a permanent downward trend break in economic growth on the Asian Pacific Rim.
November 3-5, 2013: Federal Reserve Bank of San Francisco Asia Economic Policy Conference 2013
Let me second what Alan Taylor said. This, by Carmen Reinhart and Takeshi Tashiro, is another high-quality paper. And it shares the four standard high-quality characteristics of Carmen Reinhart papers:
1. It takes data that we have not looked at before or that we have not looked at in this way before.
2. It presents the data in a very interesting and thoughtful manner that makes us think very hard about important questions.
3. It does not focus on either the trend or the cycle exclusively, but looks hard at the interrelationships between them–interrelationships between the cycle and the trend that are traditionally ruled out, or at least not at the forefront of, our back-of-our-envelope first-cut.
4. It does not bow to current theoretical perceptions, but attempts to focus our attention on what the important and interesting features of the economy are.
Things You Must Read:
Things You Should Read:
Things You Should Be Aware of:
Riding down 15th St., on the way to Caribou Coffee after the three hour WCEG launch event, we pass the Washington Post:
Problems with Obamacare test loyalty of Democrats…
the scrolling chyron reads.
But, instead: “…test loyalty of Democrats…”
Continue reading “Reuters’ Counterparties: We Have a Better Press Corps Weblogging”
Over at The Economist: Unconventional monetary policy: More than the sum of its parts:
On November 14th the McKinsey Global Institute published a report assessing the distributional effects of unconventional monetary policy. We are hosting a round-table discussion on the report and related issues. Richard Dobbs and Susan Lund, Joseph Gagnon, Stephen King, and Scott Sumner previously contributed. Up next is Brad DeLong, professor of economics at the University of California, Berkeley…
RICHARD DOBBS and Susan Lund are trying to gauge what the effects of the by now $5 trillion liquidity tsunami with which the Big Four central banks have hit the world economy since 2007 have been. They have six candidates:
Continue reading “What Is Quantitative Easing Doing? Is It Doing Anything?: Friday Focus”
WHO AND WHAT WE FUND… researchers affiliated with U.S. universities, including graduate students, post-doctoral researchers, and professors… [with] a university to act as a fiscal agent….
HOW TO APPLY: After reviewing WCEG’s grant program description and information on who and what we fund, researchers interested in applying for a WCEG grant should submit a letter of inquiry (LOI) no longer than three pages… includ[ing] the WCEG cover sheet with their application….
REVIEW PROCESS: Letters of inquiry will be reviewed by WCEG staff economists. Full proposals will be reviewed by WCEG staff economists, external reviewers when necessary, and the WCEG steering committee.
If you are interested in serving as an external reviewer for future solicitations, please email grants@equitablegrowth.org.
The Economist’s Democracy in America has this morning’s policy must-read: Health care in America: An insider-outsider problem:
THE hopeless, hapless launch of Obamacare…. There is a lot that can be said (and is being said) about the president’s management skills, and how the administration did not see this coming…. Obamacare was always going to be a hard sell because it is an attempt to fix an insider-outsider problem. At root, its supporters do not think it right for a country as rich as America to be home to tens of millions of people who do not have health coverage, or who have such skimpy insurance that they risk financial ruin if they fall gravely ill….
The United States economy has undergone dramatic changes in the last three decades. Arguably, none of these changes has been so well documented as the rise in income inequality.
From 1979 to 2007, the top 1 percent of households saw their incomes skyrocket by 275 percent, while incomes for the bottom fifth of earners increased by less than 20 percent. Last year, the top 10 percent of earners took home more than 50 percent of national income, a higher share than in the 1920s. And today, the wealthiest one percent of households possess more than a third of U.S. total net wealth; the average CEO makes $14 million a year, while the average worker makes $51,200.
Inequality in the United States has worsened to levels that more closely resemble a developing country than many other OECD nations. Yet economists don’t know yet what that means for economic growth and stability in a country as economically complex as ours. Just last month, after winning the Nobel Prize in economics, Robert Shiller singled out worsening income inequality as America’s biggest problem.
We agree. That’s why we are launching the Washington Center for Equitable Growth, a new research and grantmaking institution focused on accelerating our ability to discover evidence-based, policy-relevant answers to the many questions surrounding inequality’s effect on economic growth and stability. This year, WCEG will support independent academic research through a competitive, externally-reviewed grant program. Our goal is to construct a portfolio of policy-relevant research projects that furthers our understanding of why and how inequality has increased and illuminates the ways in which inequality may affect economic growth and stability.
Conventional wisdom among many policymakers and pundits says that, while we may not like inequality, while it may insult our sense of fairness, it’s an inevitable byproduct of a competitive market economy. And if we aren’t careful, trying to curb inequality might hurt growth.
This perspective sounds serious and pragmatic. It’s tough love. It works in support of a visionof the economy in which growth is driven by wealthy investors, who, if they have enough cash on hand, will build businesses and make investments that create jobs. To best support growth, policymakers should stay out of the way, acting mostly to remove so-called hurdles like high taxes or burdensome regulations.
It’s a tidy story, but one that we believe is far too narrow a way to understand how an economy like ours actually functions—and, moreover, it’s a story that is largely unsupported by available evidence. For example, a recent IMF study found that countries with more equitable income distributions have longer periods of stable economic growth. Other studies point to the importance of issues ranging from investing in human capital to encouraging political inclusion to support long-term economic growth and stability. But evidence remains thin on how worsening inequality affects these economic components: how it may alter demand for goods and services, or hinder entrepreneurialism, or undermine our political or economic systems.
To begin finding answers, we are enlisting some of the most brilliant minds from economics—ranging from Nobel Laureate Robert M. Solow to John Bates Clark medal winners Emmanuel Saez and Raj Chetty—to guide our effort. We’re also convening a diverse, interdisciplinary group of advisers whose members study inequality from social, political, financial, behavioral, and psychological perspectives. To help ensure new research finds its way into the policy debate, we will also work to strengthen the lines of communication between the academic experts who study the economy and the policymakers in Washington who work to shape it.
This will be a long-term effort. We won’t have answers tomorrow. But hopefully by the time we do, we’ll have a political debate in Washington that is rational enough to consider the evidence and to implement solutions that produce strong growth while addressing one of America’s biggest challenges.