Month: June 2014

The need to extend emergency unemployment insurance

Posted on by Nick Bunker

There are two key actions Congress should take to promote more equitable economic growth before they depart Washington to campaign for the November elections. The first is passing commonsense immigration reform. The second is to extend emergency unemployment insurance.

During the Great Recession of 2007-2009, Congress extended unemployment insurance several times as the damage to the labor market became apparent. Unemployment eventually came down and Congress allowed these time-limited extensions to expire. At the end of 2013, emergency unemployment benefits for long-term unemployed workers expired. These workers, who lost their jobs through no fault of their own and after months of looking for work and having no luck, were left to fend for themselves.

Isn’t this how our labor market should work when the economy is recovering? After all, the unemployment rate has come down considerably since the height of the crisis and economic growth is consistent, if tepid. Could it be that emergency benefits are actually be harmful to workers, reducing the incentive to search for a job? The reduction of these benefits might spur those workers to find work.

But this view doesn’t conform to the record. A recent Equitable Growth issue brief by University of California, Berkeley economist Jesse Rothstein highlights the importance of extending unemployment insurance benefits.  By looking at the differences in the extension of unemployment benefits among states, Rothstein found that extended benefits keep long-term unemployed workers from dropping out of the labor force. This means that unemployment benefits give workers the added income boost that keeps them searching for a good job match.

Because unemployment benefits keep unemployed workers in the labor supply, this means that the share of workers without a job in the labor force is larger than if those workers simply dropped out. Preventing these workers from dropping out would stop a decline in the potential growth rate of the economy as more individuals are available to work and produce output. And in the short term, extending these benefits would provide a consumption boost to the economy.

Rothstein also points to resent research he has done with Rob Valletta of the Federal Reserve Bank of San Francisco on the effect of unemployment insurance on family incomes. They tracked the incomes of workers as they lost their jobs, received unemployment insurance benefits and then lost the benefits. Rothstein and Valletta found that there’s a large income drop after losing a job and that, on average, unemployment insurance benefits only fill half that gap. After the expiration of benefits, the average family only retains 70 percent of its pre-job loss income.

In short, many families end up with starkly lower incomes after their unemployment insurance benefits are exhausted.

Rothstein’s brief makes a powerful argument for the extension of unemployment benefits as a pro-equitable growth policy. Extension would make sure that workers don’t drop out of the labor force and remain part of the economic potential of the U.S economy. Extended benefits would also prevent a large decline in household incomes that would devastate families and increase income inequality.

Reviving a crisis-era program may seem misplaced when the labor market appears to be on the mend. But the research shows the importance of extending this program. To not do so would harm the economic future of millions of households and of our country’s long-term economic growth.

Nighttime Must-Read: John Aloysius Farrell: Yes, Nixon Scuttled the 1968 Vietnam Peace Talks

Posted on by Brad DeLong

John Aloysius Farrell: Yes, Nixon Scuttled the Vietnam Peace Talks: “Did Richard Nixon’s campaign conspire to scuttle the Vietnam War peace talks on the eve of the 1968 election to capture him the presidency?

Absolutely, says Tom Charles Huston, the author of a comprehensive, still-secret report he prepared as a White House aide to Nixon. In one of 10 oral histories conducted by the National Archives and opened last week, Huston says “there is no question” that Nixon campaign aides sent a message to the South Vietnamese government, promising better terms if it obstructed the talks, and helped Nixon get elected. Nixon’s campaign manager, John Mitchell, “was directly involved,” Huston tells interviewer Timothy Naftali. And while “there is no evidence that I found” that Nixon participated, it is “inconceivable to me,” says Huston, that Mitchell “acted on his own initiative”…

Depreciation Rates on Wealth in Thomas Piketty’s Database: Monday Focus: June 9, 2014

Posted on by Brad DeLong

Thomas Piketty emails:

We do provide long run series on capital depreciation in the “Capital is back” paper with Gabriel [Zucman] (see http://piketty.pse.ens.fr/capitalisback, appendix country tables US.8, JP.8, etc.). The series are imperfect and incomplete, but they show that in pretty much every country capital depreciation has risen from 5-8% of GDP in the 19th century and early 20th century to 10-13% of GDP in the late 20th and early 21st centuries, i.e. from about 1%[/year] of capital stock to about 2%[/year].

Of course there are huge variations across industries and across assets, and depreciation rates could be a lot higher in some sectors. Same thing for capital intensity.

The problem with taking away the housing sector (a particularly capital-intensive sector) from the aggregate capital stock is that once you start to do that it’s not clear where to stop (e.g., energy is another capital intensive sector). So we prefer to start from an aggregate macro perspective (including housing). Here it is clear that 10% or 5% depreciation rates do not make sense.

No, James Hamilton, it is not the case that the fact that “rates of 10-20%[/year] are quite common for most forms of producers’ machinery and equipment” means that 10%/year is a reasonable depreciation rate for the economy as a whole–and especially not for Piketty’s concept of wealth, which is much broader than simply produced means of production.

No, Pers Krusell and Anthony Smith, the fact that “we conducted a quick survey among macroeconomists at the London School of Economics, where Tony and I happen to be right now, and the average answer was 7%[/year” for “the” depreciation rate does not mean that you have any business using a 10%/year economy-wide depreciation rate in trying to assess how the net savings share would respond to increases in Piketty’s wealth-to-annual-net-income ratio.

Who are these London School of Economics economists who think that 7%/year is a reasonable depreciation rate for a wealth concept that attains a pre-World War I level of 7 times a year’s net national income? I cannot imagine any of the LSE economists signing on to the claim that back before WWI capital consumption in northwest European economies was equal to 50% of net income–that depreciation was a third of gross economic product…

Evening Must-Read: Steve Randy Waldmann: Welfare Economics: an Introduction

Posted on by Brad DeLong

Steve Randy Waldmann: Welfare Economics: an Introduction: “Whenever a claim about ‘welfare’ is asserted…

…assumptions regarding ethical value are necessarily invoked as well. If you believe otherwise, you have been swindled. If claims about welfare can’t be asserted in a value-neutral way, then neither can claims of ‘efficiency’. Greg Mankiw teaches that ‘[under] free markets…[transactors] are together led by an invisible hand to an equilibrium that maximizes total benefit to buyers and sellers’. That assertion becomes completely insupportable. Even the narrow and technical notion of Pareto efficiency… is rendered problematic, as nonmarket allocations can also be Pareto efficient…. Market efficiency, deadweight loss, tax incidence, price discrimination, international trade–all of these topics are diagrammed and understood in terms of what happens to the area between supply and demand curves. If we cannot redeem those diagrams, all of that becomes little more than propaganda…. If the best ‘scientific’ economics can do is say nothing about interpersonal welfare comparison, that is neither evidence for nor evidence against policies which, like all nontrivial policies, benefit some and harm others, including policies of outright redistribution…

Evening Must-Read: Ben Wolcott: Austerity and the Employment Rate

Posted on by Brad DeLong
Austerity and the Employment Rate CEPR Blog

Ben Wolcott: Austerity and the Employment Rate: “In 2010, after an initial round of coordinated stimulus…

…from both wealthy and developing countries, deficit hawks around the world regrouped. Pointing to growing deficits and debt, they demanded that countries reverse course and begin moving toward balanced budgets. The deficit hawks argued that deficit reduction could be accomplished without impairing growth because of the effect it would have in boosting confidence among businesses and consumers. Many economists argued against this drive towards austerity at the time. They noted and rigorously explained the fallacious logic in the idea that deficit reduction could be expansionary. They also pointed out how fiscal policy had already saved the economy from a second depression and that more stimulus would likely be necessary. However, now we have more than three years of data, so we no longer have to speculate. A simple picture can be worth a thousand words (or in this case, billions)…

Noted for the Afternoon of June 9, 2014

Posted on by Brad DeLong

Should-Reads:

  1. Kenneth Rogoff: Two ways to beat the zero bound on nominal interest rates: “There is no longer any reason to let the zero bound on nominal interest rates continue to hamper monetary policy. A simple and elegant solution is to phase in a switchover to a fully electronic currency, where paying interest, positive or negative, requires only the push of a button. And with paper money – particularly large-denomination notes – arguably doing more harm than good, currency modernization is long overdue. Using an electronic currency, central banks could continue to stabilize inflation exactly as they do now. (Citigroup’s chief economist, Willem Buiter, has suggested numerous ways to address the constraint of paper currency, but eliminating it is the easiest.)
    A second, less elegant idea is to have central banks simply raise their target inflation rates from today’s norm of 2% to a higher but still moderate level of 4%…”

  2. David Cutler: Sometimes less health care is better health care: “Nobody denies that there’s a lot of waste. Estimates range from 15 to 20 percent on the low end to 50 percent at the high end. There are a few different categories of waste. One is clinical waste, things that are done that don’t need to be done…. We pay much more for medical services than is necessary…. The third kind of waste is administrative cost. What we spend on administrative expenses in the US is twice what we spend on heart disease and three times what we spend on cancer. That’s just absurd…. The fourth broad area is fraud and abuse…. Between all that, you get to enormous amounts of money…. The single hardest challenge… is to figure out how to make the system work better so that our goal is not cutting costs; our goal is improving value…. If you look at the poster children for bad care, like preventable readmissions, infections, and other hospital errors, there are very protocols that can be put in place. Hospitals have had enormous success with these…. There’s enough low-hanging fruit that we can make huge progress…. Fixing the supply-side problem is really about payment reform…. Right now we have one foot on the dock and one foot in the boat. The dock is the old fee-for-service system and the boat is a new, alternative payment system that is much more quality-based. It’s untenable to try to do both. The dock wasn’t working; we were basically destroying ourselves. We’ve got to jump in the boat — let’s just do it.”

  3. Emily Becker: Details on the June 2014 ENSO discussion: “Today, the Climate Prediction Center (CPC) released the June ENSO Diagnostic Discussion. Chances that an El Niño will occur by summer are above 70%, and reach 80% by the fall…. Tropical rainfall across Indonesia and the Pacific remain close to average, but forecasters are confident that the atmosphere will begin to respond to the ocean and El Niño will develop, likely in the next few months…. However, right now, forecasters are not favoring a strong event (while not at all ruling it out) and believe a moderate event (ONI 1.0 – 1.5) is slightly more likely, sometime during the fall/winter…”

  4. Rafael La Porta and Andrei Shleifer: Five Facts About Informal Economies: “First, it is huge, reaching about half of the total in the poorest countries. Second, it has extremely low productivity compared to the formal economy: informal firms are typically small, inefficient, and run by poorly educated entrepreneurs. Third, although avoidance of taxes and regulations is an important reason for informality, the productivity of informal firms is too low for them to thrive in the formal sector. Lowering registration costs neither brings many informal firms into the formal sector, nor unleashes economic growth. Fourth, the informal economy is largely disconnected from the formal economy. Informal firms rarely transition to formality, and continue their existence, often for years or even decades, without much growth or improvement. Fifth, as countries grow and develop, the informal economy eventually shrinks, and the formal economy comes to dominate economic life.”

  5. Paul Krugman: Interests, Ideology And Climate: “The real obstacle, as we try to confront global warming, is economic ideology reinforced by hostility to science. In some ways this makes the task easier: we do not, in fact, have to force people to accept large monetary losses. But we do have to overcome pride and willful ignorance, which is hard indeed.”

Should Be Aware of:

And:

  1. Daniel Andrei, Bruce Carlin, and Michael Hasler: Model Disagreement and Economic Outlook: “We study the impact of model disagreement on the dynamics of asset prices, return volatility, and trade in the market. In our continuous-time framework, two investors have homogeneous preferences and equal access to information, but disagree about the length of the business cycle. We show that model disagreement amplifies return volatility and trading volume by inducing agents to have different economic outlooks, which generates a term structure of disagreement. Different economic outlooks imply that investors will trade even if they do not disagree about the current value of fundamentals. Also, we find that while the absolute level of return volatility is driven by long-run risk, the variation and persistence of volatility (i.e., volatility clustering) is driven by disagreement. Compared to previous studies that consider model uncertainty with a representative agent or those that study heterogeneous beliefs with no model disagreement, our paper offers a theoretical foundation for the GARCH-like behavior of stock returns.”

  2. Violet Blue: Thanks for nothing, jerkface: “One month after creator and leader of Google+, Vic Gundotra, quietly quit, Google chief Sergey Brin told a conference audience last week that involvement in Google+ was ‘a mistake’. He made the exact opposite statement in 2011…. In the background, Google+ began ‘unifying’ people’s identities (combining its background matching of users names and profiles) in Android address books…. Google’s problems with Google+ identity control malfeasance became pop culture fodder. Android apps got similarly screwed by Google+ in 2012 when Google changed its Play Store to only allow comments from Google+ accounts…. Google Search is no longer the clean, high-performance tool we once relied on and admired — now it’s a fetid stew of Google+-littered, screwed up mystery-mechanics, running under the misguided assumption that anyone and everyone only wants more of their own location, their connections, Google’s clumsily guessed interests, and Google+ favoritism in the results served back to them…”

  3. Martin Longman: The Right’s Turn Away from Representative Government: “Part of this is explained by the fact that the GOP has a lot of rotten people in it, but I understand that if you are socially or fiscally conservative you want to have your views prevail, and if your views aren’t prevailing you’ll begin to devalue other objectives like determining the true will of the people. If everything I cared about was at risk because my party couldn’t win elections, I might start to waver on this whole democracy thing, too…. They don’t want to moderate their positions on gay marriage or abortion or immigration, and as those positions become giant liabilities they feel that their only option is to turn against individual voters and try to keep them from casting their votes. This is related to all the calls for secession, for example, in the rural areas of Colorado and California…. It really begins to resemble fascism, because it’s nationalistic, race-based, often pro-corporate (although it has populist anti-corporate elements, too), anti-immigrant, and basically revolutionary in its opposition to the central government. Add in the attraction to pseudoscience and ‘creating their own facts’, its basic anti-intellectualism… and you begin to see too many parallels with the… fascism of Franco or Mussolini…”

Already-Noted Must-Reads:

  1. Ashok Rao: Stress-Testing Stress Test: “Geithner certainly has history on his side when noting that far more benign banking crises have caused far more pain when confidence is missing. And, indeed, expectations are everything – putting cash in the window makes depositors less worried about taking it out now. The really damning part of Stress Test is its total disregard for monetary policy. In the sprawling seven hundred pages, there wasn’t even one fully devoted to understanding the importance of the Fed…. Geithner admits that Obama almost always heeded his advice, which makes Geithner’s own apathy towards the economics, not just finance, of the Fed that much more astonishing. The long unfilled vacancies and a bias towards bubble-bursters rather than economy-growers really redoubles the view that the Obama administration neither knew nor cared about monetary policy beyond as an immediate bandaid for Wall Street. I’m not sure what the lesson here is, but I think it militates in favor of more academic expertise within high politics…. The Federal Reserve’s goal goes beyond financial stability, and no one in the administration seemed to realize this…. Geithner is unable to provide a theoretical justification behind his policy actions…”

  2. David Beckworth: Macro and Other Market Musings: Abenomics as a Fulfillment of Milton Friedman’s Policy Prescriptions: “Abenomics is largely a fulfillment of the policy prescriptions he outlined for Japan 13 years ago…. Friedman was calling for large scale asset purchases (LSAPs) long before it was vogue and understood that for the purchases to help the economy there must be a sufficiently large and permanent expansion of the monetary base…. Friedman knew that even though the monetary base and treasuries may be near perfect substitutes in a zero lower bound environment, they would not be in the future. And since investors make decisions on what they think will happen in the future, a monetary base injection that is expected to be permanent and greater than the demand for the it in the future is likely to affect spending today.  The importance of the public believing the monetary base expansion will be permanent can be illustrated by looking back to the early part of the Great Depression…. The key, then, to making monetary policy expansions work in a slump is to create the expectation that at least some part of the monetary base expansion will be permanent. Japan’s first try at quantitative easing in the early-to-mid 2000s failed on this front…. Well that was then and this is now…. It is too early to know for sure whether Abenomics is working, but the evidence so far suggest it is making a difference…. I think Milton Friedman would be happy to see Abenomics if he were alive. Happy Birthday Milton Friedman…. P.S. Whether one increases the monetary base through open market operations or through helicopter drops, the point that the increase remain permanent holds. See Willem Buiter for more this point.”

Afternoon Must-Read: Ashok Rao: Stress-Testing Stress Test

Posted on by Brad DeLong

Ashok Rao: Stress-Testing Stress Test: “Geithner certainly has history on his side…

…when noting that far more benign banking crises have caused far more pain when confidence is missing. And, indeed, expectations are everything – putting cash in the window makes depositors less worried about taking it out now. The really damning part of Stress Test is its total disregard for monetary policy. In the sprawling seven hundred pages, there wasn’t even one fully devoted to understanding the importance of the Fed…. Geithner admits that Obama almost always heeded his advice, which makes Geithner’s own apathy towards the economics, not just finance, of the Fed that much more astonishing. The long unfilled vacancies and a bias towards bubble-bursters rather than economy-growers really redoubles the view that the Obama administration neither knew nor cared about monetary policy beyond as an immediate bandaid for Wall Street. I’m not sure what the lesson here is, but I think it militates in favor of more academic expertise within high politics…. The Federal Reserve’s goal goes beyond financial stability, and no one in the administration seemed to realize this…. Geithner is unable to provide a theoretical justification behind his policy actio…

Immigration reform is pro-growth and pro-equity

Posted on by Nick Bunker

Congress returns to Washington this week with a long list of issues to work through. Because this is an election year, the window for any real action will close soon and won’t open again until Congress returns after the November elections. That’s why Members of Congress need to focus on the potential of legislation that’s already passed the Senate and has bipartisan support in the House—commonsense immigration reform—to help promote sustainable and equitable growth.

Immigration reform would in all likelihood boost wages for the approximately 11 million undocumented workers currently in the United States. These workers, now in the shadows, would be better able to avail themselves of legal protection. Research from the last time undocumented workers were given legal status found these workers experienced a significant increase in their wages.

Of course, a major debate surrounding immigrants and wages is their effect on the wages of U.S. citizens, particularly on the bottom rungs of the income ladder. But research shows that immigrant workers would not replace American workers, but rather complement native-born workers. For example, an immigrant who works as a certified nursing assistant would complement a native-born nurse.

The simple interactions of supply and demand suggests that an increased supply of workers would drive down wages. Harvard University economist George Borjas, a proponent of this view, has even titled a paper “The Labor Demand Curve is Downward Sloping.”

However, research shows that immigrants are on a different set of supply and demand curves than native born-workers. Employers see immigrants as a different set of workers than native-born workers, even if both are low-skilled. So increases in the pool of low-skilled immigrants doesn’t mean more competition for low-skilled American workers.

Economists Gianmarco Ottaviano of the Universita’ di Bologna and Giovanni Peri of the University of California, Davis took this consideration into account in a 2012 paper. They found that the wages of U.S. citizens, even those with less than a high school education, actually increased because of immigrant labor. Instead of replacing native-born workers, immigrants were complementary workers that boosted productivity. In economics jargon, immigrants are complements rather than substitutes.

The benefits of productivity gains due to immigration aren’t limited to boosting U.S. wages. Immigrants can also increase the overall productivity of the economy and spur long-run economic growth. A 2010 paper by Peri looked at state economies in the United States and found that immigration had a strong positive association with total factor productivity, or how efficiently an economy uses labor and capital to produce outputs. Peri isn’t alone in this estimation. When the non-partisan Congressional Budget Office evaluated the Senate-passed immigration bill, they found that total factor productivity would grow if the bill were to become law. And because productivity growth is the heart of long-term growth, the long-run growth prospects of the U.S. economy would improve as well.

Passing commonsense immigration reform in 2014 is certainly a long-shot. But members of the House of Representatives and the general public should be aware of this shrinking window of opportunity.

Lunchtime Must-Read: David Beckworth: Abenomics as a Fulfillment of Milton Friedman’s Policy Prescriptions

Posted on by Brad DeLong

David Beckworth: Macro and Other Market Musings: Abenomics as a Fulfillment of Milton Friedman’s Policy Prescriptions: “Abenomics is largely a fulfillment of the policy prescriptions…

…he outlined for Japan 13 years ago…. Friedman was calling for large scale asset purchases (LSAPs) long before it was vogue and understood that for the purchases to help the economy there must be a sufficiently large and permanent expansion of the monetary base…. Friedman knew that even though the monetary base and treasuries may be near perfect substitutes in a zero lower bound environment, they would not be in the future. And since investors make decisions on what they think will happen in the future, a monetary base injection that is expected to be permanent and greater than the demand for the it in the future is likely to affect spending today.  The importance of the public believing the monetary base expansion will be permanent can be illustrated by looking back to the early part of the Great Depression…. The key, then, to making monetary policy expansions work in a slump is to create the expectation that at least some part of the monetary base expansion will be permanent. Japan’s first try at quantitative easing in the early-to-mid 2000s failed on this front…. Well that was then and this is now…. It is too early to know for sure whether Abenomics is working, but the evidence so far suggest it is making a difference…. I think Milton Friedman would be happy to see Abenomics if he were alive. Happy Birthday Milton Friedman…. P.S. Whether one increases the monetary base through open market operations or through helicopter drops, the point that the increase remain permanent holds. See Willem Buiter for more this point.

Things to Read on the Night of June 8, 2014

Posted on by Brad DeLong

Should-Reads:

  1. Jonathan Chait: Obama Has Now Fulfilled His 4 Big Promises: “On January 20, 2009, when Obama delivered his inaugural address as president, he outlined his coming domestic agenda… economic recovery measures, health-care reform, a response to climate change, and education reform. (To the justifiable dismay of immigration advocates, Obama did not call for immigration reform at the time, and immigration reform is now the only possible remaining area for significant domestic reform.) With the announcement of the largest piece of his environmental program last Monday, Obama has now accomplished major policy responses on all these things. There is enormous room left to debate whether Obama’s agenda in all these areas qualifies as good or bad, but ‘ineffectual’ seems as though it should be ruled out at this point…”

  2. Gavyn Davies: Can the Great Recession ever be repaired?: “The case for believing that the trendlines can indeed be re-attained is that this has always happened after recessions in the past, at least in the US, though it has sometimes taken many years… none of the growth fundamentals in the system – the state of technological knowledge, the available labour force, and the amount of fixed investment that is profitable to deploy – has been permanently destroyed by the Great Recession. Therefore, they say, it is incumbent upon policy makers to try to re-attain the trendlines…. Lawrence Ball’s most interesting result is that there is a very strong association between the actual loss of output since 2007, and the loss in potential output…. Ball concludes that ‘hysteresis effects’ have been at work…. Can anything be now done to reverse these losses in capacity? It is becoming increasingly clear that monetary policy alone will not work…. Those in charge of fiscal and monetary policy are barely, if at all, addressing these problems in their public pronouncements. In fact, a de facto consensus appears to be developing that the losses in potential GDP should be accepted as an unfortunate fact of life. It is a recipe for too easily accepting the second best.”

Should Be Aware of:

And:

  1. Will Bunch: America…what the hell is wrong with us?: “A politician who’s in a tough re-election fight deleted a Twitter posting earlier today because he thought would offend voters in his home state. I know, I know, these days “politician-deletes-thoughtless-tweet” articles are the dog-bites-man stories of American journalism. So let’s see what outrageous and offensive thing Sen. Thad Cochran wanted to hide from the world…. Yikes! Welcoming home an American soldier after five years of captivity? No wonder Cochran is on the brink of getting the boot from the good people of Mississippi. Nor was he alone. Other politicians have been scrambling to hide the fact that they briefly thought an American gaining his freedom after a terrorist kidnapping in Afghanistan was a cause for celebration…”

  2. Private Jobs Have Recovered Government Jobs Still Lag NYTimes com David Leonhardt: Private Jobs Have Recovered. Government Jobs Still Lag

  3. Dan Li and Geng Li: Are Household Investors Noise Traders? Evidence from Belief Dispersion and Stock Trading Volume: “We document a robust positive relationship between the belief dispersion about macroeconomic conditions among household investors and the stock market trading volume, using more than 30 years of household survey data and a novel approach to measuring belief dispersions. Notably, such a relationship prevails even after various series of professional analysts’ belief dispersions are controlled for. Consistent with a causal effect, such a relationship is most pronounced for belief dispersion among individuals who are most likely to own stocks and for trading volume of stocks that are most visible to household investors. Finally, we present suggestive evidence that the dispersion of changes in belief is also positively associated with the stock trading volume. On balance, our analysis implies that household investors, frequently believed to trade randomly as noise traders, appear to trade on their beliefs.”

Already-Noted Must-Reads:

  1. Alex Tabarrok: Depreciating Capital: “There are no contradictions [in Piketty] but many a slip ‘twixt the cup and the lip. Namely, will [n+]g fall? If [n+]g does fall, will K/Y increase? If K/Y increases will capital’s share of income increase? My answers: Will [n+]g fall? Uncertain. Piketty’s forecast is as good as anyone’s…. If g does fall, will K/Y increase? Yes, but probably less than Piketty estimates and more in line with Solow. If K/Y increases will capital’s share of income increase? Uncertain but more likely no than yes. It depends on the elasticity of substitution between K and L and as Rognlie and Summers argue, the elasticity that Piketty needs is higher than current estimates suggest is the case…”

  2. Nouriel Roubini: The Great Backlash: “In the immediate aftermath of… 2008… policymakers’ success in preventing… into Great Depression II held in check demands for protectionist and inward-looking measures. But now the backlash against globalization… has arrived. This new nationalism… trade barriers, asset protection, reaction against foreign direct investment, policies favoring domestic workers and firms, anti-immigration measures, state capitalism, and resource nationalism… populist, anti-globalization, anti-immigration… outright racist and anti-Semitic parties…. The main causes of these trends are clear. Anemic economic recovery has provided an opening for populist parties, promoting protectionist policies, to blame foreign trade and foreign workers for the prolonged malaise. Add to this the rise in income and wealth inequality in most countries, and it is no wonder that the perception of a winner-take-all economy that benefits only elites and distorts the political system has become widespread…”

  3. The War on Coal Already Happened NYTimes com Paul Krugman: The War on Coal Already Happened: “I’m trying to pull together some thoughts about interests and ideology in the fight over climate policies, and found myself wondering what exactly is at stake in the supposed “war on coal”…. There used to be a lot of coal miners, but not any more…. It’s a job that was destroyed by technology long ago…. So what is this fight about?… Capital invested in coal and coal-related stuff, hiding behind the pretense of caring about the workers. And there’s also ideology…. But the war on coal already happened, it had nothing to do with liberals and environmentalists, and coal lost…”

  4. Matthew Yglesias: The deafening silence of “reform conservatives” on climate change: “With climate change policy in the news this week, I thought I might take the time to broaden my horizons by checking out the energy policy ideas contained in a recent policy book Room to Grow published by the YG Network… widely hailed as representing the best, freshest conservative thinking… “evidence that conservatism may be experiencing an intellectual resurgence as well as a political one.” On climate, as it happens, it has nothing to say. They don’t mount an argument that the scientific consensus on anthropogenic global warming is mistaken. They don’t mount an argument that despite the scientific consensus, inaction is nonetheless the right policy. They don’t mention it at all. Not even as something their political opponents wrongly care about…”