Things to Read on the Afternoon of May 17, 2014

Should-Reads:

1. Felix Salmon: The most expensive lottery ticket in the world: “Founding a Silicon Valley startup, then, is a deeply irrational thing to do: it’s a decision to throw away a large chunk of your precious youth at a venture which is almost certain to fail. Meanwhile, the Silicon Valley ecosystem as a whole will happily eat you up, consuming your desperate and massively underpaid labor, and converting it into a few obscenely large paychecks for a handful of extraordinarily lucky individuals. On its face, the winners, here, are the people with the big successful exits. But after reading No Exit, a different conclusion presents itself. The real winners are the happy and well-paid engineers, enjoying their lives and their youth while working for great companies like Google. In the world of startups, the only winning move is not to play.”

Should Be Aware of:

1. Paul Krugman: Interest Rates and Inflation and Evidence: “Just a brief belated note on the ‘neo-Fisherite’ view that lower interest rates lead to lower inflation… why doesn’t this debate emphasize the large empirical literature on the effects of monetary shocks?… We have a lot more evidence than just historical correlations… multiple studies… that use either statistical techniques or a narrative approach (or a mix of the two) to identify innovations in monetary policy…. And we know what happens after a positive shock to policy interest rates: output and inflation both fall. I mean, this is largely what Chris Sims got his prize for. It’s about as close to a fully established empirical result as we have in economics. So why are people busy trying to come up with stories in which the opposite happens? Yes, if you work hard enough at it you can produce a model for perverse outcomes (that’s pretty close to a theorem). But what empirical motivation is there for doing all of this? What I think happened here was actually that some economists said something silly, not out of deep conviction, but because they weren’t really thinking about what their equations meant; and that rather than back off, they have now spent the past few years trying to justify their initial claims. But there’s no reason to take this stuff seriously…”

2. Josh Marshall: Two Points on Abramson: “In Ken Auletta’s second dispatch on Abramson’s dismissal, Times spokesperson Eileen Murphy, appears to concede explicitly a fairly clear case of wrongful termination…. As you see, since I started writing this post, Murphy tried to get Auletta to issue a correction. And for good reason. If someone alleges employment discrimination and then retains a lawyer and you fire them for doing so, that’s big, big trouble. Basically wrongful termination on its face. And compounded if the initial claim is judged valid. Either Murphy or the Times lawyers must have realized this as soon as they saw the piece. And how big a problem it was. Thus the failed attempt to secure a retraction…. This is basically the first thing the lawyer tells a manager or employer in a case like this. You simply can’t do that…”

And:

• Danielle Kurtzleben: Businesses say they can’t find qualified workers. Are they right?
• Leonid Bershidsky: Russia Is Turning Elon Musk into Tony Stark
• JONATHAN SPICER AND SVEA HERBST-BAYLISS: At big-ticket dinners, a blunt Bernanke sounds theme of low rates
• Scott Lemieux: Can the Supreme Court be rescued from politics?
• American Academy of Actuaries: Drivers of 2015 Health Insurance Premium Changes
• Roger E. Alcaly: The Right Way to Control the Banks: “The Bankers’ New Clothes: What’s Wrong with Banking and What to Do About It” by Anat Admati and Martin Hellwig
• Elira Karaja

Already-Noted Must-Reads:

1. Colin Lewis: Larry Summers gets it wrong on Piketty and Robots: “Summers gets much right, especially with respect to how many people are unemployed…. He… [thinks] robotics will have a major impact… [and that] Thomas Piketty does not emphasize the threat of robotics… enough…. ‘I am not sure that Piketty’s theory emphasizes the right aspects. Looking to the future, my guess is that the main story connecting capital accumulation and inequality will not be Piketty’s tale of amassing fortunes. It will be the devastating consequences of robots, 3-D printing, artificial intelligence, and the like for those who perform routine tasks. Already there are more American men on disability insurance than doing production work in manufacturing. And the trends are all in the wrong direction, particularly for the less skilled, as the capacity of capital embodying artificial intelligence to replace white-collar as well as blue-collar work will increase rapidly in the years ahead.’… [But] Piketty does look to the future… [his] extreme example is a society where robots produce the entire output… and [the] factoral income distribution would be 100% capital, 0% labor…. We should take the threat of robots and potential mass unemployment seriously, as Summers says… but more importantly we should consider Piketty’s warning on who owns the robots…”

2. Ryan Avent: Secular Stagnation: Glut Busters: “A particular view about the macroeconomics of the pre-crisis period seems to be coalescing…. Since we haven’t solved the underlying savings glut, the American economy now has three options, according to this view: 1. Suffer through the same low growth (“secular stagnation”) that was characteristic of the early 2000s. 2. Use monetary policy to raise demand through higher asset prices and credit growth, restoring decent growth but creating a risk of new bubbles. 3. Use deficit-financed fiscal policy to absorb excess savings and boost demand, without relying on rapid growth in private credit. Certainly, parts of this story are correct. But is this really the best way to describe what was taking place?… One might… argue that the problem in the 2000s was not that the Fed haplessly created a bubble in order get the economy going again…. The problem was that it… ought to have done… was intervene aggressively in foreign-exchange markets to dampen the dollar’s rapid appreciation…. Doug Campbell… [and] Ju Hyun Pyun…. Now obviously, direct intervention in foreign-exchange markets is not the sort of thing America is supposed to do…. But this is a taboo that needs rethinking. Depreciations have historically been the most effective way to lift expectations for growth and inflation…. The Fed will not do any of the above autonomously. The decision to change the global monetary system will be political, just as it was in 1933 and in 1971, when American presidents made the necessary policy shift. Such decisions only tend to be made when the status quo is clearly untenable or when large political majorities demand a different course. Unfortunately, America’s secular stagnation mess does not seem likely to test either limit for some time to come.”