Month: December 2013

I am going to have to unplug from the internet or I am never going to get through cracking Reifschneider, Wascher, and Wilcox…

Now I am once again distracted by Paul Krugman…

Paul Krugman: Inequality As A Defining Challenge:

Inequality is finally surfacing as a significant unifying issue… and there… [are] a couple of backlashes. One comes from groups like Third Way; Josh Marshall… characterized that kind of position best….

A fossilized throwback to a period in the late 20th century when there was a market for groups trying to pull the Democrats ‘back to the center and away from the ideological extreme’ in an era when Democrats are the fairly non-ideological party and have a pretty decent record of winning elections in which most people vote.

But there’s also an intellectual backlash…

Continue reading “The Washington Center for Equitable Growth Needs a New Chair, Paul…” →

Chang-Tai Hsieh et al.: The Allocation of Talent and U.S. Economic Growth:

In 1960, 94 percent of doctors and lawyers were white men. By 2008, the fraction was just 62 percent. Similar changes in other highly-skilled occupations have occurred throughout the U.S. economy during the last fifty years. Given that innate talent for these professions is unlikely to differ across groups, the occupational distribution in 1960 suggests that a substantial pool of innately talented black men, black women, and white women were not pursuing their comparative advantage. This paper measures the macroeconomic consequences of the remarkable convergence in the occupational distribution between 1960 and 2008 through the prism of a Roy model. We find that 15 to 20 percent of growth in aggregate output per worker over this period may be explained by the improved allocation of talent.

Kevin Drum: Being Smart Isn’t Always Enough to Make it in America:

Via James Pethokoukis, here’s an interesting tidbit of income mobility data from a new Brookings report by Richard Reeves and Kerry Searle Grannis…. If you have high cognitive ability, you have a 24 percent chance of becoming a high earner as an adult. That’s not too bad. But if you come from a high-income family, you have a 45 percent chance of becoming a high earner as an adult. Same smarts, different outcome…. Better schools, more extracurricular opportunities, different skin color, bigger networks of connected friends, higher odds of going to college, and the simple ability to get in the door all give richer kids a huge leg up…

And, of course, this has significant costs not just for those whose upward mobility is blocked but for everybody else as well. Chang-Tai Hsieh et al. find that between one-fifth and one-sixth of all American economic growth since 1960 is driven by the fact that the race- and sex-discrimination gates keeping the right people from getting the jobs were reduced.

I click the “publish” button at . I go out to mail Christmas presents and buy a panettone. I return to find that it only took 98 minutes for Paul Krugman to write the needed critique of DeLong, 2000 vintage:

Paul Krugman: The Neo-paleo-Keynesian Counter-counter-counterrevolution:

OK, I can’t resist this one — and I think it’s actually important.

Brad DeLong reacts to Binyamin Appelbaum’s piece on Young Frankenstein Stan Fischer by quoting from his own 2000 piece on New Keynesian ideas in macroeconomics, a piece in which he argued that New Keynesian thought was, in important respects, a descendant of old-fashioned monetarism. There’s a lot to that view.

But…

Continue reading “Brad DeLong (2000 Vintage) Smackdown Watch: History of Macroeconomics Weblogging” →

From http://calculatedrisk.org:

Kling on the future: "my joke is that the ideal occupation will be a yoga instructor working in an old-age home" http://t.co/vgcVzhNIMl

— Modeled Behavior (@ModeledBehavior) December 14, 2013

But it really is not a joke at all. It is the truth…

I think that the intelligent and thoughtful Binyamin Applebaum gets it somewhat wrong here:

Binyamin Applebaum: Young Stanley Fischer and the Keynesian Counterrevolution:

Consider the 1977 paper for which [Stanley Fischer] is most famous. It helped to transform the practice of monetary policy, creating the world in which Ben S. Bernanke has operated, but its opening lines sound like conventional wisdom, which now it is…. Central banks, in other words, have the power to stimulate economic activity. Monetary policy can help countries to recover from recessions…. You’re underwhelmed. I can tell. But this really was a big deal. And the key part is those last three words: “Rational expectations notwithstanding.”… During the 1970s, it gradually became orthodox among economists to regard governments as impotent in the face of recessions. The field was dominated by proponents of the view that people behaved rationally, or close enough. People could not be fooled by policies that effectively let them eat today and pay tomorrow. Rational people would only eat as much as they could afford to pay tomorrow…. “By about 1980, it was hard to find an American academic macroeconomist under the age of 40 who professed to be a Keynesian,” the Princeton economist Alan S. Blinder has written. “By 1980 or so, the adage ‘there are no Keynesians under the age of 40’ was part of the folklore of the economics profession.”

But in truth, by 1980, the counterrevolution was well underway…

Continue reading “The Keynesian Revolution, the Monetarist Counterrevolution, the New Classical Purge, the Neo-Keynesian Restoration: Saturday Focus (December 14, 2013)” →

Must-Reads:

1. Paul Krugman: The Biggest Losers: “The pundit consensus seems to be that Republicans lost in the just-concluded budget deal…. But… the unemployed lost even more… 1.3 million workers will be cut off at the end of this month, and many more… in the months that follow. And if you take a longer perspective… what you see is a triumph of anti-government ideology that has had enormously destructive effects… we’ve been living through an era of unprecedented government downsizing…. What has been cut?… Education, infrastructure, research, and conservation. While the Recovery Act (the Obama stimulus) was in effect, the federal government provided significant aid to state and local education. Then the aid went away…. Meanwhile, public investment fell sharply…. These harsh cuts… were unnecessary. The Washington establishment may have hyperventilated about debt and deficits, but markets have never shown any concern at all…. The cuts did huge short-term economic damage… [and] cut… investing in the future…”

2. Cardiff Garcia: Stanley Fisher’s views on monetary policy: “He does believe in the efficacy of asset purchases when rates have hit the zero lower bound… “by the provision of liquidity… by changing interest rates other than the central bank’s interest rates…”. But he does add that asset purchases are imperfect: their benefits simply outweigh the costs…. He appeared to favour a tapering…. have raised questions about whether he would support the Fed’s use of forward guidance…. Fischer said he tried, on becoming governor of the Bank of Israel in 2005, to give signals to the market – but quickly gave up as he realized it restricted the bank’s future actions when circumstances changed…”

3. Christopher Wimer et al.: Trends in Poverty with an Anchored Supplemental Poverty Measure: “Poverty measures set a poverty line or threshold and then evaluate resources against that threshold. The official poverty measure is flawed… it uses thresholds that are outdated and are not adjusted appropriately… and it uses an incomplete measure of resources which fails to take into account the full range of income and expenses that individuals and households have…. In recent work, we have produced SPM-like estimates for the period 1967-2012…. In this report we apply an alternative poverty measure which differs from the SPM in only one respect. Instead of having a threshold that is re-calculated over time, we use today’s threshold and carry it back historically by adjusting it for inflation using the CPI-U-RS. Because this alternative measure is anchored with today’s SPM threshold, we refer to as an anchored supplemental poverty measure or anchored SPM for short…. Another advantage of an anchored SPM (or any absolute poverty measure, for that matter) is that poverty trends resulting from such a measure can be explained by changes in income and net transfer payments (cash or in kind)…”

4. Kevin Drum: Repeat After Me: There’s No Such Thing as Socialsecurityandmedicare: “You may see some headlines today that report on a new study showing that boomer retirees will receive way more in Social Security and Medicare benefits than they pay in taxes. But be careful. Technically, that’s true, but it’s like saying the combined population of China and Vietnam is 1.4 billion. It’s true, but all the heavy lifting is being done by China. In this case, all the heavy lifting is being done by Medicare…”

Continue reading “Things to Read on the Morning of December 14, 2013” →

The extraordinarily capable and thoughtful Ezra Klein thinks that the [Washington Center for Economic Growth]() is wrongheaded–indeed, that the entire American left is now wrongheaded. And a number of us wish to register our dissent from his theses:

Ezra Klein: Inequality isn’t ‘the defining challenge of our time’:

The organizing economic concern of the American left is–or is becoming–income inequality… Zucotti Park… Bill DeBlasio… President Obama…. Income inequality is easy to worry about. It offend…. Those who aren’t unnerved by the datum that the income share of the top one percent has shot from about 10 percent in 1980 to more than 20 percent today can worry instead about inequality’s attendant consequence: declining social mobility…. But is inequality really the country’s most pressing problem?…

Continue reading “Is the American Left Wrongheaded? And Is the WCEG Part of the Problem?: Ezra Klein vs. Ashok Rao and Brad DeLong and **UPDATE** Steve Randy Waldmann: Friday Focus (December 13, 2013)” →

Woolworth’s Parkview, Johannesberg: