Things to Read at Lunchtime on February 15, 2014

Must-Reads:

1. Paul Krugman: Stupidity in Economic Discourse: “Jonathan Gruber is mad as hell… is not going to take it anymore… is annoyed at Casey Mulligan’s latest, which misrepresents Gruber’s views; mine too. Gruber is right to be mad: that was a disgraceful, deceptive column. But I think you also want to put it into a larger picture: the enduring myth of the stupid progressive economist…. As Gruber documents, [Mulligan] pulls multiple fast ones, asserting things that he says are conclusions of the CBO report when they aren’t–they’re his own views, pulled out of, um, thin air, or maybe someplace else, which he is projecting onto the budget office…. Mulligan tells his readers that both Gruber and I are too dumb or craven to admit that the disincentives to work created by some aspects of the Affordable Care Act impose economic costs. One suspects that Mulligan didn’t actually read either of the pieces he links to. If he had, he would have found this from Gruber: ‘But the likelihood of voluntary reductions in work is not the only issue. The CBO also projects work reduction by individuals who cut back on hours or avoid moving up the job ladder because they don’t want to lose Medicaid eligibility, or because they don’t want to make so much in wages that they would lose tax credits to help pay insurance premiums. Unlike voluntary job leaving, this second kind of work reduction would entail real economic distortions and be a cost, not a benefit.'”

2. Anya Schiffrin: The French way of cancer treatment: “When my father, the editor and writer Andre Schiffrin, was diagnosed with stage four pancreatic cancer last spring, my family assumed we would care for him in New York. But my parents always spent part of each year in Paris…. I… didn’t know what… French healthcare… would be like. I… assumed… better access for the poor and strong primary care. Not better cancer specialists. How could a public hospital in Paris possibly improve on Sloan Kettering?… My parents flew to Paris… found an English-speaking pancreatic cancer specialist and my dad resumed his weekly gemcitabine infusions…. In New York, my father, my mother and I would go to Sloan Kettering every Tuesday around 9:30 a.m. and wind up spending the entire day. They’d take my dad’s blood…. The doctor always ran late… so we’d sit in the waiting room and, well, wait… rush across the street, get takeout and come back to the waiting room… bring books to read… use the Wi-Fi and eat the graham crackers… talk to each other and to the other patients and families… Eventually, we’d see the doctor for a few minutes and my dad would get his chemo. Then, after fighting New York crowds for a cab at rush hour, as my dad stood on the corner of Lexington Avenue feeling woozy, we’d get home by about 5:30 p.m. So imagine my surprise when my parents reported from Paris…. A nurse would come to the house two days before my dad’s treatment day to take his blood. When my dad appeared at the hospital, they were ready… often someone else in the next bed but, most important, there was no waiting. Total time at the Paris hospital each week: 90 minutes.”

3. Doug Irwin: Who Anticipated the Great Depression? Gustav Cassel versus Keynes and Hayek on the Interwar Gold Standard: “The intellectual response to the Great Depression is often portrayed as a battle between the ideas of Friedrich Hayek and John Maynard Keynes. Yet both the Austrian and the Keynesian interpretations of the Depression were incomplete. Austrians could explain how a country might get into a depression (bust following a credit-fueled investment boom) but not how to get out of one (liquidation). Keynesians could explain how a country might get out of a depression (government spending on public works) but not how it got into one (animal spirits). By contrast, the monetary approach of Gustav Cassel has been ignored. As early as 1920, Cassel warned that mismanagement of the gold standard could lead to a severe depression. Cassel not only explained how this could occur, but his explanation anticipates the way that scholars today describe how the Great Depression actually occurred. Unlike Keynes or Hayek, Cassel analyzed both how a country could get into a depression (deflation due to tight monetary policies) and how it could get out of one (monetary expansion).”

4. Zack Beauchamp: Three Things Conservatives Wrote This Week That Are Really Good : “Today, we’re launching a new TP Ideas feature…. The goal is… to find the most interesting exemplars of a distinctively right-of-center worldview…. 1) ‘The End Of Sex’ — Kevin Williamson, National Review…. Williamson’s concern is that the pitiless market logic on display during the Adult Video News is having a corrosive effect on human sexuality…. Williamson’s dispatch is not a jeremiad…. Rather, in the best conservative spirit, Williamson offers evidence of progressive change’s unintended consequences and invites its champions to reckon with what they have wrought. 2) ‘Why Is Janet Yellen So Concerned And Disturbed About Income Inequality?’ — Jim Pethokoukis, AEI Ideas…. Janet Yellen believes inequality is ‘one of the most disturbing trends facing the nation at the present time’. Pethokoukis thinks that’s rubbish…. 3) ‘Everything Is Politics to the Right, Even Philip Seymour Hoffman’s Death’ — James Poulos, The Daily Beast…. Poulos’ piece is… an attempt to defend a distinctively conservative approach to mass culture…. Where conservative journalism once stood athwart the impulse to analyze everything first as politics, invoking the primacy of philosophy and religion, today we see analysts on the right confidently assaulting ‘liberal culture’ on reflexively ideological grounds—casting aside their most, and perhaps only, legitimate way of viewing the world. The results are not just ugly or incorrect; they lead conservatives astray from the kind of ennobling wisdom that once kept them, and humanity, afloat. The resulting argument — which also includes an extended discussion of The Lego Movie‘s ideology — is a very smart way of showing that the conservative veneration of tradition need not be a nostalgia for oppressive social orders lost, but a source of insight into our shared social present.”

Should-Reads:

• Lawrence Summers on the U.S. Economy

• Felix Salmon: Content economics: Understanding the digital landscape for journalism

• Andrea Pescatori, Damiano Sandri, and John Simon: Debt and Growth: Is There a Magic Threshold?: “Using a novel empirical approach and an extensive dataset developed by the Fiscal Affairs Department of the IMF, we find no evidence of any particular debt threshold above which medium-term growth prospects are dramatically compromised. Furthermore, we find the debt trajectory can be as important as the debt level in understanding future growth prospects, since countries with high but declining debt appear to grow equally as fast as countries with lower debt. Notwithstanding this, we find some evidence that higher debt is associated with a higher degree of output volatility.”

• Donald Kuehn: Caplan on the college premium: “The earnings advantage of college students has been substantial, but graduation rates have barely moved. Why? Bryan offers evidence that these earnings are highly conditional on graduation, and that since expected graduation rates vary many students with low expected graduation rates are not going to be enticed by the premium. I think this is a great example of differentiating between marginal behavior properly understood and naive assumptions about what the outcomes of marginal behavior should be…. The law of one price is great, but if you really expect to see an elimination of all human capital premiums you need to assume a homogeneous population, and that is unrealistic. If all you needed to do to succeed in the STEM labor market was walk into and out of a brick building covered with ivy and filled with microscopes for four consecutive years, then there would be no problem…. But that’s not the world we live in…. It is harder to bring a STEM worker online than it is to bring a cashier online. So you observe… occupational labor markets that are responsive to price signals, and potentially big wage differentials, particularly after demand shocks…. We don’t do particularly well at producing ‘middle skill’ workers (which has consequences for the college labor market insofar as middle skill workers are substitutes for college educated workers).”

• Izabella Kaminska: Information asymmetry, bad incentives and Taibbi: “Alert, alert! Matt Taibbi of Vampire Squid fame has discovered contango… it’s a terribly nauseating read for anyone following the story since 2008…. Taibbi turns out to be a dependable repackager of other people’s stories… borrowed and twisted until they fit his own version of reality (often without citation or attribution). Case in point, the ‘vampire squid’ description is surprisingly similar to popular writer ‘Coin’ Harvey’s 1894 description of the Rothschild bank as a black octopus…. True, Taibbi never claimed to have come up with the term himself…. Now, we’ve covered the ‘contango’ trade and physical loophole story ad nauseum, and can probably be accused of sensationalism ourselves. But we’d argue there is a difference in our coverage. We have never for one minute suggested that these trades represent illegal activity. Our focus was not to denounce crooks, but rather to inform the market… breakdown the information asymmetry which ends up favouring some parties over others…. The point is to help outsiders… make wiser decisions and realise the information disadvantage they’re up against…. It’s entirely farcical to suggest, however, that those who operate in physical markets should either give up all their information to the public voluntarily (as per equity insider trading rules) or construct Chinese walls that separate physical asset management from marketing and hedging. Protecting your economic edge/advantage is capitalism. Given their fiduciary duties, banks are potentially a different story. And Taibbi’s biggest focus is on the conflict presented by banks that own physical assets. But none of that changes the fact that neither Goldman Sachs or Morgan Stanley broke any rules or laws when they bought up physical assets in the last decade or so…”

Antonio Fatas: The permanent scars of economic pessimism | Sarah Kliff: When squirrels attack! There’s a medical code for that | Chris Blattman: Experimentation and Empowerment | Ben Olinsky and Asher Mayerson: Trickle-Down Economics and Broken Promises | Alisa Odenheimer and James Nash: Israel Desalination Shows California Not to Fear Drought – Bloomberg | Matt O’Brein: The Crushingly Expensive Mistake Killing Your Retirement: 401(k) fees are costing you hundreds of thousands of dollars over your lifetime |

Should Be Aware of:

1. Tom Kludt: House Republicans: Cruz Killed Immigration Reform: “The San Antonio Express News reported this week that Cruz may have once again demonstrated his clout… to quash immigration reform. House Republicans who supported the ‘principles’ of immigration reform floated by Speaker John Boehner, R-Ohio, late last month grumbled Tuesday that the plan was dead on arrival because Cruz blasted it as ‘amnesty’, spurring a blizzard of negative phone calls to House Republicans. ‘After that it was “We’ll get back to you on immigration reform”‘, said one Republican congressman who declined to be identified…. Boehner… backed off his principles… claimed… [it] was really President Obama’s fault.”

2. Byron York: Angry at Ted Cruz, Republicans should remember what he represents: “Second-term mid-terms are nearly always unlucky for the White House. Given that, why is there so much division, backbiting, and bad blood among some Senate Republicans?… Sen. Ted Cruz… has at times goaded his party to dysfunction, embarrassment, and defeat. (Not quite singlehandedly; others, like Sens. Mike Lee and Rand Paul, have also been done their bit.) Many in the GOP believe Cruz is just out for himself. But even if that’s true, they have to remember that he represents more than just Ted Cruz. There are a lot of Republicans–it’s not clear how many, but a significant portion of the party’s base–that cheers Cruz on when he battles with Senate Majority Leader Mitch McConnell…. It is that conviction that is really behind the party’s problems…. Cruz stood up and said there was no way in the world he would stand by and allow a debt ceiling increase to be passed with just 51 votes. Cruz insisted on a 60-vote threshold…. It would be an understatement to say that many of Cruz’s GOP colleagues were righteously ticked off at him. Nobody wanted to vote to raise the debt limit, but many believed strongly that a losing fight over spending would damage the party. Besides, Cruz didn’t even have a plan for what to do had his Republican colleagues improbably decided to go along with him…. In the end, the gambit accomplished nothing for Senate Republicans. Some GOP lawmakers who already disliked Cruz now dislike him even more. But the episode did remind the Republican leadership, as if it needs any reminding, that there are conservatives around the country who are deeply frustrated by the GOP and want it to show some fight. To them, Cruz represents that fight. Maybe they’ve been misled. Maybe they’re living in a fantasy land. But that’s what they believe. Republican leaders have to keep them in mind as November approaches.”

3. Greg Sargent: Morning Plum: Mitch McConnell wrestles monster he helped create: “Mitch McConnell is now taking truly withering fire from the right… an interesting glimpse into an amusing 2014 subplot: The ongoing efforts by GOP leaders to wrestle to the ground the monster they spent years creating. McConnell voted to break Ted Cruz’s debt limit filibuster, helping avert a crisis that could have badly damaged the GOP for 2014. Now the Courier-Journal of Kentucky reports that this has become a major issue in the primary…. Camp McConnell is defending his conservative bona fides by citing his final vote to allow default as a responsible way of controlling spending, while simultaneously citing his vote to break the GOP filibuster of the debt ceiling hike as a responsible move to prevent default from unleashing economic disaster…. This comical level of contortion is what you need to resort to when dealing with a base that has been misled and had its expectations falsely inflated…. GOP leaders have worked diligently to create an alternate reality in which the Next Big Confrontation With Obama is perpetually the one that will finally produce a glorious, epic victory over out-of-control Obummer-Job-Crushing-Big-Gummit, whether it’s the health law or federal spending. In this alternate reality, those things remain the single greatest threats to the country’s future — even though Obamacare is based on Republican ideas for patching up the safety net, and Republicans have largely won the battle over austerity…. Republican leaders themselves repeatedly defined raising the debt limit — which requires no concessions from either side — as unilateral ‘surrender’ by the GOP. So McConnell, who has done more to thwart Obama than anyone on the face of the planet, is under intense fire for failing to embrace tactics that would unleash widespread destruction in service of expectations that are completely unhinged from reality.”

And:

Buce: Not Your Mother’s Israel | Chad Stone: Janet Yellen Is Right: The Fed Must Continue to Fight Unemployment | Andrew J Oswald: Money makes people right-wing and inegalitarian
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