Things to Read on the Morning of February 25, 2014

Must-Reads:

1. Paul Krugman: The Urge To Tighten: “People are going through the Fed’s 2008 transcripts, and finding that most officials had no idea what was going down…. I’m a bit surprised, but that’s not the most surprising thing. What’s really surprising, and a bit dismaying, is the fact that a number of Fed officials were evidently focused on inflation, and some were eager to raise rates. That is, there were a fair number of people at the Fed — very much not, however, including Janet Yellen –who would, if they could, have echoed the ECB’s big mistake. What’s kind of shocking about this is that official Fed doctrine is to focus on core inflation, not react to short-run fluctuations in commodity prices. And the history of the past decade or so has showed that this is very much the right thing to do — headline inflation has swung widely, while focusing on core inflation has been a much better (though not perfect) guide…. Were Fed officials just not on board with this doctrine? Or was it part of a general urge to tighten, because central bankerly types just really dislike easy money?”

2. Kevin Drum: Walmart’s Core Customer Base Is Doing Poorly: “We may not officially be in a recession any more, but the poor are still hurting pretty badly. And that’s Walmart’s core customer base: ‘Wal-Mart Stores Inc forecast a lower full-year profit than analysts expect, as fewer food stamps, higher taxes and tighter credit erode its sales, news that sent its shares down 1 percent in premarket trading on Thursday…. A major factor in Wal-Mart’s U.S. performance was a “low-single-digit decline” in sales of groceries at stores open at least a year, which generate about half of its sales…. Wal-Mart’s grocery sales have suffered from fewer food-stamp benefits resulting from U.S. federal budget cuts in November. One in five of its shoppers relies on food stamps, according to Cowen analyst Tal Lev.’ I imagine that Walmart is now suffering from the failure to extend unemployment benefits too. And from the slowdown in economic activity and job losses caused by the sequester. And from our failure to increase the minimum wage. But then again, lots of people are suffering from all that. Walmart is just a very large canary in the coal mine.”

3. James Surowiecki: Assessing the American Dream: “As the economist Joseph P. Ferrie has shown, in the late nineteenth century U.S. society was far more mobile than Great Britain’s…. Andrew Carnegie [could] start as a bobbin boy in a cotton factory at a dollar-twenty a week and end up one of the world’s richest men. This legacy left a deep imprint on American culture…. That feeling has persisted: Americans are less concerned than Europeans about inequality and more confident that society is meritocratic. The problem is that, over time, the American dream has become increasingly untethered from American reality…. Salt Lake City and San Jose, have mobility rates as high as anywhere else in the developed world. There are also places in the U.S., like Mississippi, where mobility is lower than anywhere else in the developed world. So if you could figure out exactly what Salt Lake City is doing right, and apply that lesson elsewhere, you might be able to get people movin’ on up again. Increasing economic opportunity is a noble goal, and worth investing in. But we shouldn’t delude ourselves into thinking that more social mobility will cure what ails the U.S. economy…. Sweden has one of the highest rates of social mobility in the world, but a 2012 study found that the top of the income spectrum is dominated by people whose parents were rich…. More important… most people are… middle and working classes; public policy should focus on raising their standard of living, instead of raising their chances of getting rich…”

4. Larry Mishel: Misdirection on Assortative Mating and Income Inequality: “This is a story about misdirection…. The paper… is titled ‘US inequality due to assortative marriages’… by Jeremy Greenwood [et al.]…. The authors conclude that ‘rising assortative mating together with increasing labour-force participation by married women are important’…. So, right out of the gate, a key influence not trumpeted in the headline (rising labour-force participation by married women) is introduced…. The question that should be answered is why income inequality grew a great deal between 1979 and now and was fairly stable before then…. Greenwood et al.’s data show that positive assortative mating declined(!) from 1980 to 2005… positive assortative mating was a force that equalized incomes after 1980. It was in the period from 1960 to 1980 that positive assortative mating lead to more unequal incomes. Consequently, their research in no way lifts up the role of ‘like marrying like’ in generating inequality since 1980: it actually means that economic inequalities overcame an equalizing demographic factor…. The title of the VoxEU piece, ‘US inequality due to assortative marriages’, may seem like it’s answering a relevant question, but it isn’t…”

Should-Reads:

• John Hicks: The Theory of Wages
• Paul Krugman: The Pani

• Robert Gordon: <a href="http://www.brookings.edu/~/media/Projects/BPEA/1975%201/1975abpeagordon.PDF”>Alternative Responses of Policy to External Supply Shocks

• Mark Kleiman: Yanukovich’s media pawns: “In light of this week’s mass killings by thugs working for now-deposed Ukrainian president Viktor Yanukovich, last year’s Buzzfeed story (and its predecessor) about how Ukrainian government cash generated stories on right-wing websites seems even more interesting. Either writers for RedState, Breitbart, and PJ Media wrote stories for money, or they were dumb enough to do it for free. So far, they aren’t saying which. Of course, the oppotunity to trash Hillary Clinton as an anti-Semite for supporting the position of most Ukrainian Jews, and to trash Obama as Putin puppet for opposing Yanukovich (now hoping that Putin will use the Russian Army to return him to power) was too good to pass up. Footnote And what the hell was the Podesta Group doing working for these thugs?”

• Brad DeLong (2008): This Is Brad DeLong’s Grasping Reality…: Question to Self: “A puzzle: how and when, precisely, did I acquire the Hilles Library copy of Arno Mayer’s The Persistence of the Old Regime? It is a great book. It is also an incredibly frustrating book–frustrating because it is grossly under-footnoted and also extraordinarily vague in its lack of definition of the “Old Regime.” The “Old Regime” of 1914–social Darwinist (or, rather, social Lamarckian as Eric Scott Kaufman would correct us), expansionist, imperialist, hierarchical, absorptive–do not regard itself as “persisting” but rather as under mortal threat from democracy, liberalism, and socialism, and was in any case not “old” but rather “new”: Franz Ferdinand von Habsburg and Chancellor Bethman-Hollweg are at least as much precursors of William Kristol, George W. Bush, and Richard Cheney as they are successors of the Earl of Chatham, Henri Quatre, and William the Silent.

• Chris Woodyard: Exxon Mobil CEO: No fracking near my backyard: “Exxon Mobil’s CEO is a plaintiff on a lawsuit that opposes building a water tower near his home. The tower would be used to provide water for fracking, the controversial oil extraction process. Exxon Mobil says it’s Tillerson’s private issue…”

Menzie Chinn: Fed Policy and Emerging Market Economy Vulnerabilities | Richard Milne: Norway’s oil fund: Petter Johnsen, The biggest fund manager you’ve never heard of | Tim Harford: Low inflation can be a disease not a cure | Paul Krugman: “The big takeaway from the 2008 Fed transcripts is that for the most part Fed officials other than Janet Yellen and Eric Rosengren failed to appreciate the danger the economy was in–that many were preoccupied with the supposed threat of inflation even as a once-in-three-generations crisis in demand was building” | Robert Pear: Connecticut Plans to Market Health Exchange Expertise |

Should Be Aware of:

1. Joshua Brown: Tricking Ourselves: “We trick ourselves all the time in order to be able to function in this world… an evolutionary trait that’s enabled our ancestors to get along and pass on their genes. Unfortunately, this survival tool has ancillary effects… that… can be harmful. David McGrane via Maria Popova: ‘Pay attention to when the cart is getting before the horse. Notice when a painful initiation leads to irrational devotion, or when unsatisfying jobs start to seem worthwhile. Remind yourself pledges and promises have power, as do uniforms and parades. Remember in the absence of extrinsic rewards you will seek out or create intrinsic ones. Take into account [that] the higher the price you pay for your decisions the more you value them. See that ambivalence becomes certainty with time. Realize that lukewarm feelings become stronger once you commit to a group, club, or product. Be wary of the roles you play and the acts you put on, because you tend to fulfill the labels you accept. Above all, remember the more harm you cause, the more hate you feel. The more kindness you express, the more you come to love those you help.’ This kind of behavior is evident everywhere you look in the realms of investment and finance. It’s what forces traders and investors of all stripes to suspend rational behavior or to stick behind previously held opinions even as new evidence or a turn of events begins to invalidate them. It causes the clustering of like-minded investors into their own little ghettos of intransigence. It leads to the grouping and teaming up of those who favor a particular asset class, public company’s stock or have a particular predilection for one investing style over another, regardless of whether its pursuit at a given time will be favorable. Popova takes on McGrane’s concept of the way we construct our own reality to make it agree with our belief systems at the link below. It’s amazing the lies we’ll tell ourselves so that we can move forward and get along with our surroundings and tolerate our situation. It’s astonishing the speed with which we’ll join up with a group or a cause or even an entire belief system if it pleases our need to align our inside self with its outward appearance.”

2. Rosie Gray: Exclusive: How Ukraine Wooed Conservative Websites: “Several conservative bloggers repeated talking points given to them by a proxy group for the Ukrainian government–and at least one writer was paid by a representative of the Ukrainian group, according to documents and emails obtained by BuzzFeed…. Articles echoing Ukrainian government talking points appeared on leading conservative online outlets, including RedState, Breitbart, and Pajamas Media…. The emails and documents, which include prepackaged quotes from election officials and talking points that some writers copied nearly word-for-word, offer a glimpse into how foreign governments dodge tight Justice Department regulations on foreign propaganda to covertly lobby in the United States: The payments were routed through a front group in Belgium to an American consultant, who has urged writers not to cooperate with a reporter investigating the campaign.
   The model resembles a recent stealth campaign in which bloggers were paid by the Malaysian government to write favorable stories, though the Ukraine campaign appears to have involved smaller sums of money. One of the writers who participated in the campaign, who spoke on the condition of anonymity and because of lingering qualms about the arrangement, they said, described being offered $500 for a blog post praising Ukraine’s ruling Party of Regions. The payment was arranged by George Scoville, a libertarian media strategist, and Scoville’s name was on the check, the source said…”

3. Ukraine Burning: Ukraine Burning – YouTube: “

4. I am a Ukrainian: I Am a Ukrainian – YouTube: “

5. Justice Harlan: “My brethren say that, when a man has emerged from slavery, and by the aid of beneficent legislation has shaken off the inseparable concomitants of that state, there must be some stage in the progress of his elevation when he takes the rank of a mere citizen, and ceases to be the special favorite of the laws, and when his rights as a citizen or a man are to be protected in the ordinary modes by which other men’s rights are protected. It is, I submit, scarcely just to say that the colored race has been the special favorite of the laws. The statute of 1875, now adjudged to be unconstitutional, is for the benefit of citizens of every race and color. What the nation, through Congress, has sought to accomplish in reference to that race is what had already been done in every State of the Union for the white race — to secure and protect rights belonging to them as freemen and citizens, nothing more.”

And:

• Eric Schlosser: Command and Control: Nuclear Weapons, the Damascus Accident, and the Illusion of Safety | Brendan Nyhan: Third party hype 2005 |

Financial Times: The hour of Kiev and Europe | Brad DeLong (2010): DeLong Smackdown Watch: Walras’ Law and Say’s Law Edition |