Month: September 2014

Must- and Shall-Reads:

• Sarah Cohen: The State of Data Journalism: What Reporters Need to Know
• Dani Rodrik (2011): The Future of Economic Convergence
• Matthew Yglesias: We don’t know which countries have the hardest workers

1. Cardiff Garcia: Slacking to Stand Still: “A paper released last week by [Stephanie Aaronson et al.]… concludes that most of the decline in the labour force participation rate since the recession has been structural…. ‘Our cohort-based model suggests that cyclical weakness was depressing the participation rate by about ¼ percentage point in 2014:Q2’…. The wider issue is that trends thought to be structural aren’t necessarily irreversible…. The dovish argument, to which we still subscribe, is that the only way to know is for the Fed to aggressively pursue [expansion until]… the labour market becomes so tight that employers feel they have no choice but to make work more attractive…. Year-on-year headline PCE inflation is 1.6 per cent through July, the last available reading–which also happens to be its average rate since the recession. That’s not only an extended period of undershooting 2 per cent, but also a staggering demand fail given what happened to labour markets in that period…. To further make incoming data, rather than time, the clear contingency on which to base monetary policy would be perfectly sensible…

2. Amanda Kowalski: The Early Impact of the Affordable Care Act State-By-State: “In the individual health insurance market… at least 13.2 million people were covered in the second quarter of 2014, representing an increase of at least 4.2 million increase beyond pre-ACA state-level trends…. Market participants in ‘direct enforcement; states that ceded all enforcement of the ACA to the federal government are worse off by approximately $245 per participant on an annualized basis relative to participants in all other states…. Market participants in the six states that had severe exchange glitches are worse off by approximately $750 per participant on an annualized basis relative to participants in other states with their own exchanges…”

3. Lucia Foster, Cheryl Grim, and John Haltiwanger: Reallocation in the Great Recession: Cleansing or Not?: “The high pace of reallocation across producers is pervasive in the U.S. economy. Evidence shows this high pace of reallocation is closely linked to productivity. While these patterns hold on average, the extent to which the reallocation dynamics in recessions are “cleansing” is an open question. We find downturns prior to the Great Recession are periods of accelerated reallocation even more productivity enhancing than reallocation in normal times. In the Great Recession, we find the intensity of reallocation fell rather than rose and the reallocation that did occur was less productivity enhancing than in prior recessions.”

4. Matthew Weinzerl: Seesaws and Social Security Benefits Indexing: “The indexation of Social Security benefit payments may seem like an issue about which only an economist could get excited, but it has emerged in recent years as a áashpoint of debate in the United States. In his 2014 budget, President Obama proposed changing the price index with which retiree benefits are adjusted for inflation. In brief, the change was expected to lower the growth rate of benefits for all retirees, though at advanced ages that change would have been offset by progressive “benefit enhancements.” Because it was not tied to an increase in the starting level of those benefits, the Presidentís proposal was expected to reduce the total present value of benefits. The President’s proposal was explicitly intended to appeal to Congressional Republicans eager to reduce future spending on Social Security, but it was deeply unpopular with many of his fellow Democrats. When negotiations on more general fiscal policy challenges yielded little progress over the subsequent year, the President removed the proposal from his 2015 budget. His spokesperson made clear, however, that changes to indexation were still on the table if included in broader budget deals…”

5. Stephanie Aaronson et al. (2006) The Recent Decline in the Labor Force Participation Rate and Its Implications for Potential Labor Supply: “Increases in the participation rate of adult women likely stem from numerous structural factors…. It seems likely that new generations internalized many of these changes more easily than did mature cohorts, who had already made “sticky” choices…. Much of the change in the aggregate female participation rate appears to have resulted from progressively higher average participation rates of successive cohorts….. The participation rate for men in their prime working years… held steady during the strong labor market of the mid- to late-1990s. After turning down again during the 2001 recession, it has been fairly flat since 2002…”

6. Tony Yates: A Mauling Minsky Moment: Comment on Martin Wolf: “Minsky’s reading of economic systems was a stroke of creative, imaginative but informal genius.  But it’s highly conjectural.  It may be part of the story of the financial collapse that financial system stability is inherently destabilising, or it may not.  Just because intermediation was cheap and plentiful before it became expensive and scarce does not validate Minsky.  There are plenty of other preceding and coincident events which don’t fit…. Besides, as a theoretical conjecture, it needs working through. Before we accept Minsky’s verbal conjecture, what would an artificial economy do if you peopled it with agents with imperfect apprehensions of risk? Would such artificial systems be characterised by a ‘stability is destabilising’ dynamic?… If you follow Paul Krugman’s reasoning, the financial crisis, at least as manifest in spreads, is over and done with.  And it’s lasting consequences for demand and inflation are down to insufficiently stabilising fiscal policy.  There’s no room for a ‘stability is destabilising’ dynamic here.  The future would be bright if Governments simply spent more money raising the natural rate. But suppose we accept the idea at face value. One reading of it suggests that we restricting bank leverage as Martin Wolf urges won’t work by itself.  A long period of stability breeding complacency would presumably erode the support for these restrictions…”

Should Be Aware of:

• Naomi Hern: What’s Right with Hermione

1. Data Science!

2. Robert Shiller: Parallels to 1937: “The depression that followed the stock-market crash of 1929 took a turn for the worse eight years later, and recovery came only with the enormous economic stimulus provided by World War II, a conflict that cost more than 60 million lives. By the time recovery finally arrived, much of Europe and Asia lay in ruins.
   The current world situation is not nearly so dire, but there are parallels, particularly to 1937. Now, as then, people have been disappointed for a long time, and many are despairing. They are becoming more fearful for their long-term economic future. And such fears can have severe consequences.”

3. The Housing Super-Bust

Matthew Weinzerl: Seesaws and Social Security Benefits Indexing: “The indexation of Social Security benefit payments…

…may seem like an issue about which only an economist could get excited, but it has emerged in recent years as a áashpoint of debate in the United States. In his 2014 budget, President Obama proposed changing the price index with which retiree benefits are adjusted for inflation. In brief, the change was expected to lower the growth rate of benefits for all retirees, though at advanced ages that change would have been offset by progressive “benefit enhancements.” Because it was not tied to an increase in the starting level of those benefits, the Presidentís proposal was expected to reduce the total present value of benefits. The President’s proposal was explicitly intended to appeal to Congressional Republicans eager to reduce future spending on Social Security, but it was deeply unpopular with many of his fellow Democrats. When negotiations on more general fiscal policy challenges yielded little progress over the subsequent year, the President removed the proposal from his 2015 budget. His spokesperson made clear, however, that changes to indexation were still on the table if included in broader budget deals…

First:

Let me try to widen the scope of this discussion…

When I think about vehicles to provide retirement-income security…

1. I think that encouraging people to invest in 401(k)s leads them, because of poor financial education, to pay a 2%/year tax on their asset accumulations to Wall Street–a transfer that is 100% a dissipative minus for any utilitarian societal welfare calculation given how rich the princes of Wall Street already are.

2. I think that having firms provide defined-benefit pensions hasn’t worked out that well in the long run: firms do not survive long enough, and if they do along comes Bain Capital to exploit the legal gap between the cash-flow and the control rights of future pension beneficiaries and put the scraps of the mostly-expropriated pension assets to the PBGC.

3. I think that Social Security indexed to prevailing wages provides an extraordinarily efficient way of providing a form of retirement savings that–given the enormous risk premia we see in financial markets–value extremely high. If we were to ask, say, Citicorp here how much it would charge to write a contract matching the return on your Social Security benefits, it would be astronomical. The only major drawback of relying more on Social Security that gives me pause is Marty Feldstein’s long-time worries about the effect of Social Security on national capital accumulation and thus on the level of economy-wide real wages.

Given that the first rule of market economics is that you should do less of what dissipates wealth and more of what creates wealth, I am–as I have long been–somewhat puzzled by the focus here…

And:

When back in 1994 Joe Stiglitz came up with the bright or perhaps not-so-bright idea of proposing changes in the Social Security benefits indexation formula, the key piece was tying changes in Social Security benefits indexation to changes in tax bracket breakpoints. This was both because it made sense to view the social-insurance system as a whole–both taxes and benefits–and as a way to assemble a proposal that would make it past the multiple veto points of our eighteenth-century mechanistic orrery of a governmental system and also increase utilitarian societal welfare. So if I may channel Joe Stiglitz, I think he would say that there ought, somewhere, to be a wealth tax component to this proposal somewhere. If there were, what would it be?

Matthew Weinzerl: Seesaws and Social Security Benefits Indexing: “The indexation of Social Security benefit payments…

…may seem like an issue about which only an economist could get excited, but it has emerged in recent years as a áashpoint of debate in the United States. In his 2014 budget, President Obama proposed changing the price index with which retiree benefits are adjusted for inflation. In brief, the change was expected to lower the growth rate of benefits for all retirees, though at advanced ages that change would have been offset by progressive “benefit enhancements.” Because it was not tied to an increase in the starting level of those benefits, the Presidentís proposal was expected to reduce the total present value of benefits. The President’s proposal was explicitly intended to appeal to Congressional Republicans eager to reduce future spending on Social Security, but it was deeply unpopular with many of his fellow Democrats. When negotiations on more general fiscal policy challenges yielded little progress over the subsequent year, the President removed the proposal from his 2015 budget. His spokesperson made clear, however, that changes to indexation were still on the table if included in broader budget deals…

Lucia Foster, Cheryl Grim, and John Haltiwanger: Reallocation in the Great Recession: Cleansing or Not?: “The high pace of reallocation…

…across producers is pervasive in the U.S. economy. Evidence shows this high pace of reallocation is closely linked to productivity. While these patterns hold on average, the extent to which the reallocation dynamics in recessions are “cleansing” is an open question. We find downturns prior to the Great Recession are periods of accelerated reallocation even more productivity enhancing than reallocation in normal times. In the Great Recession, we find the intensity of reallocation fell rather than rose and the reallocation that did occur was less productivity enhancing than in prior recessions.

When I looked at this, it seemed to me that it made a lot of difference whether your unit of observation was the firm or the worker. The average existing firm did indeed become more productive in a recession, in part through “shooting the wounded” and in part because the fear of being hanged tomorrow concentrates a person’s mind remarkably. But the average worker and the average unit of capital became less productive: after all, can you think of something worse for overall economic efficiency than shifting workers into the “unemployed” sector and shifting capital into the “idle” sector?

And, no, I do not have an explanation of why the financial crisis Great Recession **Lesser Depression** was destructive of average productivity at the firm level…

John Mearsheimer is only one of a surprising number claiming that the current crisis in Ukraine is predominantly the U.S.’s, and NATO’s, and the Ukraine’s fault:

John Mearsheimer: How the West Caused the Ukraine Crisis: Why the Ukraine Crisis Is the West’s Fault: “The United States and its European allies share most of the responsibility…

…The taproot of the trouble is NATO enlargement…. For Putin, the illegal overthrow of Ukraine’s democratically elected and pro-Russian president–which he rightly labeled a “coup”–was the final straw…. Realpolitik remains relevant–and states that ignore it do so at their own peril. U.S. and European leaders blundered in attempting to turn Ukraine into a Western stronghold on Russia’s border….

Soviet leaders… and their Russian successors did not want NATO to grow any larger and assumed that Western diplomats understood their concerns. The Clinton administration evidently thought otherwise…. The first round of enlargement… 1999… the Czech Republic, Hungary, and Poland. The second… 2004… Bulgaria, Estonia, Latvia, Lithuania, Romania, Slovakia, and Slovenia. Moscow complained bitterly…. The alliance considered admitting Georgia and Ukraine…. Putin maintained that admitting those two countries to NATO would represent a “direct threat” to Russia….

The West’s triple package of policies–NATO enlargement, EU expansion, and democracy promotion–added fuel to a fire waiting to ignite…. On February 21, the government and the opposition struck a deal…. But it immediately fell apart, and Yanukovych fled to Russia the next day. The new government in Kiev was pro-Western and anti-Russian to the core, and it contained four high-ranking members who could legitimately be labeled neofascists. Although the full extent of U.S. involvement has not yet come to light, it is clear that Washington backed the coup…. For Putin, the time to act against Ukraine and the West had arrived….

Ukraine serves as a buffer state of enormous strategic importanc…. No Russian leader would tolerate a military alliance that was Moscow’s mortal enemy until recently moving into Ukraine. Nor would any Russian leader stand idly by while the West helped install a government there that was determined to integrate Ukraine into the West…. This is Geopolitics 101: great powers are always sensitive to potential threats near their home territory….

There is a solution to the crisis in Ukraine, however–although it would require the West to think about the country in a fundamentally new way…. Western leaders should acknowledge that Ukraine matters so much to Putin that they cannot support an anti-Russian regime there…. The United States and its allies should publicly rule out NATO’s expansion… considerably limit its social-engineering efforts inside Ukraine. It is time to put an end to Western support for another Orange Revolution…. Even if one… believes that Ukraine has the right to petition to join the EU and NATO, the fact remains that the United States and its European allies have the right to reject these requests…. Indulging the dreams of some Ukrainians is not worth the animosity and strife it will cause, especially for the Ukrainian people…

Mearsheimer appears to believe:

1. There is a thinking entity called “Russia” which has preferences and interests, and which has rights to have its preferences satisfied and its interests accommodated.
2. “Russia” has an interest in and prefers to have Kiev ruled by a corrupt thug pleasing to whatever corrupt thug currently rules in Moscow.
3. The United States should not say “boo” to this: it should not seek to extend its security umbrella over Kiev, it should not seek greater economic integration with Kiev, it should not encourage the growth of a civil society and democratic polity in Kiev that would object to be ruled by a corrupt thug pleasing to Moscow.
4. The rest of NATO and the European Union should also not say “boo” to this: they should not seek to extend its security umbrella over Kiev, they should not seek greater economic integration with Kiev, they should not encourage the growth of a civil society and democratic polity in Kiev that would object to be ruled by a corrupt thug pleasing to Moscow.

Needless to say, if Mearsheimer were to attempt to explain his reasoning to an intelligence from outer space–vast or not, cool or warm, sympathetic or unsympathetic–he would be met with vast incomprehension. It would see not Russia but Russians. It would see that many of those Russians believe that they and their ancestors belonged to various imagined communities in the past–the Tsarist Empire, the Union of Soviet Socialist Republics–but it would not see “Russia” as having interests in preferences. It would see Russians as such–and it would see Russians aggregating up their individual preferences into those of the community that they imagine they belong to and wish to belong to.

And the Russians have always–well, since Dmitri Donskoi–oscillated between seeking to and believing they belong to three different imagined communities, which have themselves changed over time. Think of each of these three in terms of its notional geographic center: Kiev, Novgorod, and Moscow.

The imagined community that is Kievan ‘Rus is the east most outpost of a Mediterranean and European-oriented civilization. It saw itself as in the sphere of influence of the Byzantine Empire ruled from Constantinople. And then, after the fall of Constantinople, it sought a place as a European marshland oriented toward Vilnius or Warsaw on which it relied to try to protect it from the steppe nomads–the Mongols and the Turks. capital of the Byzantine Empire-that-was, that is–and Warsaw.

Old Kiev, the city of Oleg and his Rurikid descendants, was oriented toward Constantinople, and via its Slavonic Orthodox church and Byzantine culture Kieven ‘Rus has retained a strong degree of orientation toward the rest of the Greek-orthodox world. But old Kiev’s residents were all slaughtered and the city razed in 1240 by Batu Khan’s Mongols. We see a rebuilt Kiev in 1262. It was ruled by Lithuanian princes. At first it owes allegiance and tribute to the militarily-stronger Khanate of the Golden Horde. After 1362 it is part of the Grand Duchy of Lithuania. After 1569 it is part of the Kingdom of Poland. In 1648 the Dneipr Cossacks allied with Muscovy to establish the Hetmanate. The hetmanate is first independent, then autonomous and self-governing but owing allegiance to the Muscovite Tsar in Moscow, and after 1775 neither independent nor autonomous nor self-governing. From 1775 until the fall of the Tsarist empire in 1918 Kiev was ruled from Moscow–but much of Kievan ‘Rus, what we now call the western Ukraine, was ruled from Vienna, with its major city of Lviv called Lemburg. After the 1918-1922 Russian Civil War Kiev was, again, ruled from Moscow until 1991–but it was a strange sort of rule, in which schoolchildren were taught that they were one of fifteen equal and autonomous union republics in the Union of Soviet Socialist Republics, of their own nationality, with their own language, traditions, history, and heritage; while behind the scenes all the shots were called in Moscow.

The imagined community that was the ‘Rus of Novgorod the Great has always been oriented toward the Baltic and the North Sea beyond: Sweden, Germany, the Hanseatic League, Holland, international trade. Peter the Great, the Romanov Czar of Muscovy, built St. Petersburg precisely because he wished his empire to imagine itself not so much Muscovite as Novgorodian. Peter saw Saint Petersberg as providing his Moscow-centered realm with “a window on the west” that was maritime Europe. But the Baltic littoral and as far inland as you could navigate a barge in summer did not need a window on the west: Novgorod (and Riga) were cities as European as Helsinki or Stockholm or Danzig.

And then there is the imagined community of Muscovy ‘Rus. Far enough north in the forests that the Mongols could not easily and permanently dominate it. Far enough east that western Europeans could not easily control it–as Karl XII Vasa discovered at Poltava in 1709, as Napoleon I Bonaparte discovered at Kaluga in 1812, and as Adolf Hitler discovered at Stalingrad in 1942. Muscovy ‘Rus is the civilization of the Third Rome, the heart of Slavonic Orthodoxy: neither western European, Middle-Eastern, nor steppe-Mongol. Muscovy ‘Rus is the civilization of the very strong leader–the vozhd–desperate for geographic buffers against invaders from the east, from the south, and most recently from the west. Moscow, after all, was sacked in 1238, 1382, 1571, 1610, and 1812, and what Hitler and the Nazi Germans did to Russia in 1941-1944 was worse by far than a mere sack.

The polity of the Tsars came to dominate the lands of all the Russians in a long slow process of fits and starts, and carried along with it a collective decision imposed by persuasion, force, and fraud that the Russians were to imagine that their community was Muscovy ‘Rus–not Kievan ‘Rus oriented toward Constantinople, Vienna, and Warsaw; not Novgorod ‘Rus oriented toward Stockholm, Copenhagen, and Hamburg. At least some of the Tsars who did the most to advance the political project of the Muscovite empire–Peter the Great, Catherine the Great, and Alexander I with his French-speaking aristocracy come immediately to mind–had at least mixed thoughts about this. They, it was clear, would have greatly preferred that the empire they were building has its heart in Novgorod ‘Rus rather than Muscovy ‘Rus. Consider: Peter I Romanov’s daughter Elizbeth I Romanov married a Russian. But afterwards Russian blood ran scarce in the family of the Tsar: Elizabeth brought her half-German nephew Peter von Holstein-Gottorp to Moscow and married him to Sophia von Askanien–who became Catherine the Great. Their son Paul I Romanov married Sophia Dorothea von Beutelsbach. Their son Nicholas I Romanov married Charlotte von Hohenzollern. Their son Alexander II Romanov married Marie von Hesse und zu Rhein. Their son Alexander III Romanov married Princess Dagmar of Denmark. And their son Nicholas II Romanov married Alix von Hesse und zu Rhein.

The ambivalent attitude of the rulers of ‘Rus toward their Muscovy power base came to a sharp end in 1917 with the accession to power of Vladimir Ilyich Ulyanov–Lenin. Lenin believed that he was a bit player in the great socialist revolution of the early twentieth century. It was his job, he believed to make the socialist revolution for the nationality of the Moscow-centered Great Russians. Other nationalities–Finnish, German, Estonian, Polish, Ukrainian, Georgian, Kazakh, and so forth–would make their own socialist revolutions. He would help to the extent that he could. But to take over was not his job. He did not aspire to rule the empire of the Tsars: he did not want to be the jailer of the prison-house of nationalities that the Romanovs had assembled under their rule. He sought, rather, to lead the Russian people–in comradely and brotherly alliance with their neighbors–into Karl Marx’s classless utopia. This made Lenin both an anti-nationalist and a cosmopolitan nationalist. He was an anti-nationalist in that–unlike nearly everyone else of his followers–he did not particularly care about the terms on which his Bolshevik Russia made its peace with Germany and withdrew from World War I. The German socialist revolution was imminent, after all, and after it took place borders would be adjusted and treaties rewritten in mutual brotherhood. He did not think that Russia should be great. He thought that peoples should be free–and socialist, and therefore allied.

Lenin’s successor Stalin would have none of this. He wanted the empire of the Tsars, and more. Local autonomy and local nationality were useful illusions with which to beguile, but power needed to be centralized in Moscow, in the Kremlin, and in Stalin. However, a strange thing happened. The formal structure of the USSR remained that of fifteen union republics. And the educational system of the Soviet Union taught everyone that their ethnicity was an honorable nationality of its own. And over seventy years people came to believe this: come 1991 the Estonians were more Estonian, the Ukrainians more Ukrainian, the Georgian more Georgian, and the Kazakhs and Tadjiks more Kazakh and Tadjik than they had been eighty years before.

Come the fall of the Soviet Union in 1991, therefore, we find that we have five overlapping and inconsistent lines of division/poles of attraction:

1. The continued attraction of the peoples of all the Russias to the three different imagined communities–Orthodox/pan-Slavic/Polish Kievan ‘Rus, autonomous and separate Muscovite ‘Rus, and cosmopolitan-European Novgorod ‘Rus.

2. 70 years of cultural and psychological nation-building of a separate nation in each union republic and, within the union republics, each autonomous region.

3. A greater degree of ethno-linguistic fragmentation within the boundaries of the Soviet Union’s successor states than had been seen elsewhere in Europe since the 1920s–for with notably rare exceptions (cough, Crimean Tartars, cough, and others) Stalin’s terror was equal-opportunity (if with an anti-semitic bias) and did little to alter the ethno-linguistic balance of a region.

4. Combined and uneven economic and political development in the successor states of the USSR.

5. Historical memories of Muscovite domination from the Kremlin–cough, holodomor,cough–that do not make people who do not identify themselves as belonging to the Great Russian ethnos eager for another round…

And everyone involved is now all trying to work all of this out.

But where in all of this, an alien intelligence would ask, is it written in stone that whoever rules in the Kremlin speaks for Russia–or, at least, speaks for Muscovy ‘Rus–and his the right to install a corrupt thug of this choice in Kiev, or to veto any Kievan government he does not like?

If John Mearsheimer were a smarter man, he would, I think, be speaking not to Obama but to Putin. He would not be telling Obama to cool it on “social engineering” in–i.e., the economic development and democratization of–the Ukraine. He would be telling Putin that the imposition of Soviet puppet regimes in Poland, Czechoslovakia, East Germany, and Hungary produced an enormous running sore and was a long-term source of great weakness for the Soviet apparatchicks who ruled in the Kremlin. And he would be telling Putin that pulling the Crimea, Donetsk, and Luhansk away from Kiev will do more than anything else could to ensure that those who rule in Kiev will offer him and his successors in the Kremlin as little as possible. And that going beyond that to install and maintain a puppet regime in Kiev will do more damage to the security of Muscovy ‘Rus than almost anything else one could imagine.

Comment on: Janice Eberly and Arvind Krishnamurthy: Efficient Credit Policies in a Housing Debt Crisis:

The banks got at lot of money very cheaply–5%/year preferred-stock money giving up neither equity nor debt control rights at a time when Warren Buffett, front-running the Treasury, was able to extract 10%/year plus enormous option kickers for the money he committed to bank rescue. The auto companies–they got money, but the unions took a substantial hit, and the top executives lost their jobs. The homeowners got…

It still is a mystery to me why we did not offer all underwater and above water homeowners a conforming-loan refi with equity kickers depending on how far underwater the homeowner was. We didn’t do that. We got rid of the debt overhang via foreclosures and (some) case-by-case renegotiations, and as Paul Willen says it was brutal and ugly.

But right now… we built, during the housing bubble, about 1 million single-family houses above trend. Since 2007 we have built between 500 and 600 thousand houses per year when long-run trend used to be 1.2 million a year. Netting out the 1 million extra houses built, we are now 4 million single-family houses short–4 million families who in a normal economy would be in their own homes are now living in their sisters’ basements, with little sign that the by-now enormous underhang relative to 1948-2008 housing trends is exerting any pressure for a single-family housing construction recovery.

SO why is this? Are potential homeowners unwilling to take on the types of risk they routinely took on? Is it lenders who are unwilling to take on the types of risk they routinely took on? Of course it is both. But what is clear is we haven’t unclogged the single-family housing credit channel. And the question is: is this an enormous social loss? Or should we never have established the previous housing-finance pattern in the first place?

Amanda Kowalski: The Early Impact of the Affordable Care Act State-By-State: “In the individual health insurance market…

…at least 13.2 million people were covered in the second quarter of 2014, representing an increase of at least 4.2 million increase beyond pre-ACA state-level trends…. Market participants in ‘direct enforcement; states that ceded all enforcement of the ACA to the federal government are worse off by approximately $245 per participant on an annualized basis relative to participants in all other states…. Market participants in the six states that had severe exchange glitches are worse off by approximately $750 per participant on an annualized basis relative to participants in other states with their own exchanges…

Cardiff Garcia: Slacking to Stand Still: “A paper released last week by [Stephanie Aaronson et al.]… concludes that most of the decline in the labour force participation rate since the recession has been structural…. ‘Our cohort-based model suggests that cyclical weakness was depressing the participation rate by about ¼ percentage point in 2014:Q2’…

As I said before, this smells to me like overfitting: I want a reconciliation with Moffitt et al. (2012) and also a much better reconciliation with the behavior of the prime-aged participation rate as well:

To quote Aaronson et al. (2006):

Increases in the participation rate of adult women likely stem from numerous structural factors…. It seems likely that new generations internalized many of these changes more easily than did mature cohorts, who had already made “sticky” choices…. Much of the change in the aggregate female participation rate appears to have resulted from progressively higher average participation rates of successive cohorts….. The participation rate for men in their prime working years… held steady during the strong labor market of the mid- to late-1990s. After turning down again during the 2001 recession, it has been fairly flat since 2002.

That is not the lead-in that would lead us to expect a conclusion that the 2.5%-point decline in prime-age participation since 2007 is “structural”…

Cardiff goes on:

The wider issue is that trends thought to be structural aren’t necessarily irreversible…. The dovish argument, to which we still subscribe, is that the only way to know is for the Fed to aggressively pursue [expansion until]… the labour market becomes so tight that employers feel they have no choice but to make work more attractive…. Year-on-year headline PCE inflation is 1.6 per cent through July, the last available reading–which also happens to be its average rate since the recession. That’s not only an extended period of undershooting 2 per cent, but also a staggering demand fail given what happened to labour markets in that period…. To further make incoming data, rather than time, the clear contingency on which to base monetary policy would be perfectly sensible…