Month: March 2014

I confess that I had forgotten about the existence of Roger Pielke, Jr., when Google sent me off to:

http://fabiusmaximus.com/2014/03/25/nate-silver-climate-pielke-66723/

and I read:

Nate Silver goes from hero to goat, convicted by the Left of apostasy: Pity Nate Silver. Hero of the Left for his successful take-down of GOP’s election forecasts, shooting down their delusions about Romney’s chances of victory. Good Leftists like Brad DeLong and Paul Krugman heaped praises on Silver, catapulting him into a sweet gig at ESPN. The poor guy thought the applause was for his use of numbers in pursuit in truth, when it was purely tribal. Their applause were just tribal grunts — we good, they bad — in effect chanting: “Two legs good. Four legs bad.” Right out of the box at his new venture, ESPN’s FiveThirtyEight, Silver committed apostasy, and the Left reacted with the fury true believers mete out to their betrayers. He posted “Disasters Cost More Than Ever — But Not Because of Climate Change” by Roger Pielke, Jr….

Since, as I said, I had forgotten about the existence of Roger Pielke, Jr., I was somewhat annoyed at being told that my applause for Silver had just been a “tribal grunt”. So I asked:

Continue reading “The Launch of fivethirtyeight.com and Climate Change Disaster Weblogging: (Trying to Be) The Honest Broker for the Week of March 29, 2014” →

Let us start with Gabriel Chodorow-Reich:

Gabriel Chodorow-Reich: Effects of Unconventional Monetary Policy on Financial Institutions: “Abstract: Unconventional monetary policy affects financial institutions through their exposure to real project risk,

the value of their legacy assets, their temptation to reach for yield, and their choice of leverage…. High-frequency event studies… show the introduction of UMP in the winter of 2008-09 had a strong, beneficial impact on banks and especially on life insurance companies…. Subsequent policy announcements had minor effects…. The interaction of low nominal interest rates and administrative costs led money-market funds to waive fees, producing a possible incentive to reach for higher returns…. I find some evidence of high-cost money-market funds reaching for yield in 2009-11, but little thereafter. Private defined-benefit pension funds with worse funding status or shorter liability duration also seem to have reached for higher returns beginning in 2009, but again the evidence suggests such behavior dissipated by 2012. Overall, in the present environment there does not seem to be a trade-off between expansionary policy and the health or stability of the financial institutions studied.

Continue reading “Is There Any Sense in Which Quantitative Easing Might Increase Financial Instability?: The Honest Broker for the Week of March 22, 2014: Friday Focus” →

David Beckworth: Ad Hoc Monetary Policy: “One of the defining features of U.S. monetary policy over the past five years has been its incredibly ad hoc nature…

QE1, QE2, Operation Twist, QE3, and the Evans Rule…. This stop-go approach to monetary policy was politically costly and prevented the Fed from fully utilizing its ability to manage expectations of future nominal growth… the Fed failed to clearly spell out how it would systematically respond to differing states of the future economy…. Now imagine the Fed’s monetary stimulus programs during this time had be done in a more systematic and predictable manner… assume the Fed had announced a NGDP level target from the start and said asset purchases will continue until a certain level target was hit…. FOMC meetings would have been more predictable and consequently less important. We would not be hanging on the every word of our Fed chairs. Fed watchers and bloggers would be far fewer. It is true that implementing something like a NGDP level target would have used up a lot of the Fed’s political capital…. My reply is that it may have politically cheaper for the Fed to do a NGDP level target than it was to do all the impromptu programs it adopted over the past five years…

Must-Reads:

1. Kathy Ruffing: SSI Should Be Strengthened, Not Cut: “House Budget Committee Chairman Paul Ryan’s misleading review of the safety net attacks Supplemental Security Income (SSI) — an important program that provides cash income to seniors, the blind, and people with severe and long-lasting disabilities who have little income and few assets.  This vital program aids some of the poorest and most vulnerable Americans and, rather than attack it, policymakers should strengthen it. In December 2013, 8.4 million people collected SSI:  2.1 million seniors age 65 or older, 4.9 million disabled adults age 18-64, and 1.3 million disabled children under age 18.  Until the deep recession caused a modest uptick, SSI participation had generally been flat or falling as a share of the population since at least the mid-1990s (see graph). SSI benefits alone don’t lift recipients living independently out of poverty; the maximum benefits for individuals ($721 a month) and couples ($1,082, if both spouses qualify) are about three-fourths of the poverty level.  But SSI greatly reduces the number of people in extreme poverty and lessens the burden on other family members…”

2. Steve Randy Waldmann: The Asymmetric Informtion Industries: “Government, health care, education, and finance…. Information asymmetries are unusually difficult to resolve in these industries… even after we have purchased services, we are often unable to evaluate their quality…. Absent reliable markers of quality, we imagine that unreliable self-evaluations are probably better than nothing…. As these are fields in which providers themselves can’t reliably evaluate the quality of the services provided, the rest of us will have a very hard time distinguishing between corrupt practices and natural variability…. We need the “information asymmetry industry”…. But we should acknowledge these are problematic industries for a capitalist economy and a democratic polity…”

3. Ed Glaeser: Raise earnings, but go beyond the minumum wage to do it: “CAN’T AMERICA, and Massachusetts, find a better weapon to combat income inequality than raising the minimum wage? I don’t oppose the efforts of those, including Speaker DeLeo and President Obama, who want to raise the minimum… but I’ll be sad if we once again resort to this hoary policy sledgehammer…. Oceans of ink have been spent disputing the employment effects of the minimum wage…. In my view… no major impact on employment levels is likely…. The good news is that we have had a better way to raise wages for the lowest-paid workers for more than 40 years: the earned income tax credit…. Raising the minimum wage isn’t necessarily wrongheaded. But if we want a better way to reduce inequality and raise earnings for the least fortunate Americans, targeted tax credits and government subsidies are a more creative, fair, and effective course.”

Continue reading “Things to Read on the Morning of March 28, 2014” →

Kathy Ruffing: SSI Should Be Strengthened, Not Cut: “House Budget Committee Chairman Paul Ryan’s misleading review of the safety net

attacks Supplemental Security Income (SSI) — an important program that provides cash income to seniors, the blind, and people with severe and long-lasting disabilities who have little income and few assets.  This vital program aids some of the poorest and most vulnerable Americans and, rather than attack it, policymakers should strengthen it. In December 2013, 8.4 million people collected SSI:  2.1 million seniors age 65 or older, 4.9 million disabled adults age 18-64, and 1.3 million disabled children under age 18.  Until the deep recession caused a modest uptick, SSI participation had generally been flat or falling as a share of the population since at least the mid-1990s (see graph). SSI benefits alone don’t lift recipients living independently out of poverty; the maximum benefits for individuals ($721 a month) and couples ($1,082, if both spouses qualify) are about three-fourths of the poverty level.  But SSI greatly reduces the number of people in extreme poverty and lessens the burden on other family members….

Continue reading “Morning Must-Read: Kathy Ruffing: SSI Should Be Strengthened, Not Cut” →

Ed Glaeser: Raise earnings, but go beyond the minumum wage to do it: “CAN’T AMERICA, and Massachusetts, find a better weapon to combat income inequality than raising the minimum wage?

I don’t oppose the efforts of those, including Speaker DeLeo and President Obama, who want to raise the minimum… but I’ll be sad if we once again resort to this hoary policy sledgehammer…. Oceans of ink have been spent disputing the employment effects of the minimum wage…. In my view… no major impact on employment levels is likely…. The good news is that we have had a better way to raise wages for the lowest-paid workers for more than 40 years: the earned income tax credit…. Raising the minimum wage isn’t necessarily wrongheaded. But if we want a better way to reduce inequality and raise earnings for the least fortunate Americans, targeted tax credits and government subsidies are a more creative, fair, and effective course.

Steve Randy Waldmann: The Asymmetric Informtion Industries: “Government, health care, education, and finance….

Information asymmetries are unusually difficult to resolve in these industries. A substantial fraction of people who buy a low quality house, car, or stereo eventually come to notice that. This makes it possible for new purchasers of these goods to manage their information problem by researching others’ experience and seller reputations. But in the four industries I’ve described, even after we have purchased services, we are often unable to evaluate their quality….

Note that these problems are not just a matter of bad actors. These industries face intrinsically difficult information problems. We can condemn a used car salesman who finesses odometers, but we can’t condemn the surgeon who thinks he is a god…. Absent reliable markers of quality, we imagine that unreliable self-evaluations are probably better than nothing…. As these are fields in which providers themselves can’t reliably evaluate the quality of the services provided, the rest of us will have a very hard time distinguishing between corrupt practices and natural variability….

We need the “information asymmetry industry”…. But we should acknowledge these are problematic industries for a capitalist economy and a democratic polity. Forecasts that they will dominate, or prescriptions that we should specialize in these sectors to exploit alleged comparative advantage, should be greeted unenthusiastically. I hope that Timothy Geithner takes note.

Must-Reads:

1. Tony Atkinson and Salvatore Morelli: The chartbook of economic inequality: “Inequality – long ignored – is now centre stage…. This column introduces the Chartbook of Economic Inequality, a summary of long-run changes in economic inequality for 25 countries over more than 100 years…. Public discourse has started to openly debate the economic implications as well as the legitimacy of increasingly powerful elites seizing a growing share of the national pie year after year. These concerns, led the Managing Director of the IMF, Christine Lagarde to indicate the need for “addressing inequality and building inclusive growth” as one of three ‘milestones’ of the future global economy, in her October 2012 Annual Meetings Speech in Tokyo…. Researchers and scholars have also began to single out inequality as one of the structural causes of the recent financial crisis. This has led us to compile the Chartbook of Economic Inequality…”

2. Paul Krugman: Data as Slogan, Data as Substance: “what would real data-driven reporting look like?… Charles Gaba’s ACASignups.net. Gaba, a website developer, realized that nobody was systematically keeping track of enrollment data for Obamacare, and has turned himself into one-stop shopping…. And he really fills a need: when you read news reports on Obamacare, you can tell right away which reporters have been reading Gaba and know what’s happening and which reporters are relying solely on official announcements–or, worse, dueling political spin. For the record, Gaba’s take on the program so far is fairly optimistic: he projects 6.3 million… by March 31…. The main point is that he’s filling a niche by using a lot more data than the mainstream media. That’s what we thought Nate Silver would be doing, and maybe he eventually will. But for now, Gaba is the model.”

3. Noah Smith: fivethirtyeight.com Needs to Step Up Its Game: “I’m a big Nate Silver fan, but let me join the chorus… looking at his new ‘data-driven’ blog site… it’s barely data-driven at all! For example, take this post about how climate change is not increasing the cost of natural disasters…. Let’s focus on the idea that this post represents ‘data-driven’ journalism at all. It doesn’t. The ‘data’ in the post consists of one annual time series with a sample size of 23. That’s too small to do any sort of statistical analysis on, but then again, the post doesn’t do any statistical analysis. It shows a trendline, and from that trendline it draws broad, sweeping conclusions…. Every newbie blogger and his dog draws a trendline and extrapolates it–and if the blogger is worth his salt, he’ll at least have the common decency to qualify his extrapolation with ‘if this trend continues’, which Pielke does not. Furthermore, Pielke’s analysis is just sloppy. What happens if you strip out earthquakes, tsunamis, volcanoes, etc. from the data? What if you extend the trend back 40 years? How does the recent trend compare with the trend from before climate change started significantly affecting global temperatures?… And the economic theory behind the conclusion is even sloppier… costs of mitigation… variance… people [are] risk-averse…”

4. James Fallows: Another Bloomberg Editor Explains Why He Has Resigned, Over Its China Coverage: “The New York Times… contend[ed] that Bloomberg editors had quashed an investigative report about corruption among leaders in China…. Higher-ups at Bloomberg were worried that the story would hurt the company’s sales of financial terminals—the mainstay of its business—inside China, since the main purchasers would be directly or indirectly subject to government control… Bloomberg was already ‘on probation’ with the Chinese government, because of some very brave and probing official-corruption stories the previous year—including the one on ‘Red Nobility’…. The FT did a similar report… saying that Matthew Winkler, Bloomberg’s editor-in-chief, had ordered the story killed, for fear of ramifications…. Amanda Bennett… promptly resigned as head of Bloomberg’s investigative unit…. Michael Forsythe… joined the NYT staff. Bloomberg continued to deny the allegation of knuckling-under but refused to address any specifics. The story that reportedly was underway has not yet appeared…. I wrote to the man who reportedly gave the spiking order, editor-in-chief Matthew Winkler, and did not hear back…. The latest news… is Ben Richardson’s resignation as a Bloomberg editor…. I wrote to Richardson asking if he would say more about the situation…. Ben Richardson: ‘I was one of the two editors on the story that was spiked last year, and one of three who helmed the 2012 stories on the hidden wealth of China’s Communist Party leaders, so I have a pretty intimate knowledge of what happened. Unfortunately, I am bound by a confidentiality agreement that prevents me from disclosing the details. That said, much has already become a matter of public knowledge. I felt the NYT and FT articles were a fair account…'”

Continue reading “Things to Read on the Afternoon of March 27, 2014” →

Jared Bernstein: A Weird Mo(u)rning re Fiscal Policy: “I spent a few hours testifying yesterday in what has to be one of the strangest places on earth right now:

the US House of Representatives…. Good, earnest, and honest people on both sides trying to figure out how to get out of the terribly damaging morass in which they’re stuck.  But the dysfunction seems Sisyphusian…. The Financial Services Committee[‘s] Republican chair, Rep. Hensarling, had a debt clock running the whole time on a screen…. The witnesses–three R witnesses [David M. Cote, Douglas Holtz-Eakin, and Alice Rivlin] and yours truly–actually agreed on quite a bit. We all thought that:

• the only way to achieve a sustainable budget path is not just through spending cuts but through higher revenues as well.  The other witnesses were all about “lower rates, broader base,” but I was a bit surprised to hear them all endorse revenue needs, much to the chagrin of their hosts.
• faster growth is essential, and there was some consensus–not complete–that premature fiscal tightening has been damaging to the recovery so far.
• there’s been little evidence so far that the elevated debt/GDP ratio is having a negative effect on anything, though one of the witnesses claimed it was a drag on hiring.
  *the path to fiscal sustainability runs through reducing the growth of health care spending, something on which there’s evidence of recent progress….

But then Jared notes a failure to communicate between the Republican witnesses and the Republican members:

It was odd to see general agreement among the witnesses and so much obvious distance between the members.  It gave the whole thing a theatrical, going-through-the-motions flavor….

Continue reading “Jared Bernstein Sees “Green Shoots” That the Technocratic Dialogue on Issues Like Fiscal Policy Is Actually Starting Up Again…: Thursday Focus: March 27, 2014″ →

Tony Atkinson and Salvatore Morelli: The chartbook of economic inequality: “Inequality – long ignored – is now centre stage….

This column introduces the Chartbook of Economic Inequality, a summary of long-run changes in economic inequality for 25 countries over more than 100 years…. Public discourse has started to openly debate the economic implications as well as the legitimacy of increasingly powerful elites seizing a growing share of the national pie year after year. These concerns, led the Managing Director of the IMF, Christine Lagarde to indicate the need for “addressing inequality and building inclusive growth” as one of three ‘milestones’ of the future global economy, in her October 2012 Annual Meetings Speech in Tokyo…. Researchers and scholars have also began to single out inequality as one of the structural causes of the recent financial crisis. This has led us to compile the Chartbook of Economic Inequality…