Things to Read on the Morning of May 21, 2014

Should-Reads:

1. Mark Thoma: 4 Reasons the Fed Should Not Raise Interest Rates: “No rule… can anticipate all contingencies, and when the economy is experiencing conditions a rule could not have foreseen… deviations from the rule are necessary…. Any benefit from the reduction in uncertainty would be small and would not compensate for the negative effect that higher interest rates would have…. Some have argued that we need to raise interest rates to help savers. But when the economy is experiencing a severe recession, the demand for investment is low, so low that even at zero interest rates there can be an excess of saving over investment… [and good policy] reduce[s] saving and increase[s] investment until equilibrium is restored…. There have been many calls to raise interest rates to reduce the risk of inflation, but there is no sign whatsoever of problematic inflation anywhere on the horizon. End of story…. Some economists have argued that when policymakers hold the nominal interest rate at the zero bound, it is deflationary…. Even if this does work in the long-run, in the short-run it would be a disaster…”

2. Eric Michael Johnson: On the Origin of White Power: “A Troublesome Inheritance has been roundly criticized by scientists and journalists alike. Biologists such as H. Allen Orr and Jerry Coyne…. Statistician and political scientist Andrew Gelman… anthropologist Agustin Fuentes observed, ‘Wade ignores the majority of data and conclusions from anthropology, population genetics, human biology and evolutionary biology’. Even Wade’s former newspaper, the New York Times, carried a review panning the book. Unfortunately, readers lacking a background in science or journalism may not so easily spot Wade’s many errors. This could lead to even more troublesome issues given the excitement the book has generated among those predisposed to accept its conclusions. ‘Wade says in this book many of the things I’ve been saying for the last 40 years of my life’, said David Duke, the white nationalist politician and former Grand Wizard of the Knights of the Ku Klux Klan, on his radio program…”

3. Lloyd Grove: New York Times publisher Arthur Ochs Sulzberger Jr. has just suffered a miserable week nursing a PR black eye after his May 14 firing of executive editor Jill Abramson…. Things seemed to deteriorate as the week unfolded, culminating in… Sulzberger’s ill-advised decision to sit down on Sunday with Vanity Fair for his first press interview since Abramson’s sacking…. Sulzberger’s VF interview… was very off-message…. He elaborated on Abramson’s alleged flaws as a manager, blamed her for the unseemly public manner of her defenestration, defended himself against charges of sexism regarding Abramson’s compensation, expressed implied regret that back in 2011, he had chosen Abramson over Dean Baquet (who has the job now), and resisted taking responsibility for his own errors in judgment…. Abramson, reached by The Daily Beast, declined to comment… she has displayed the sort of restraint that has so far eluded Sulzberger…. Auletta’s stories have provoked Sulzberger, who initially vowed not to discuss Abramson’s dismissal further, to write several stunning staff memos concerning her compensation and alleged managerial failings. His VF interview ‘was a disaster’, said a prominent public relations executive who, not wishing to alienate the publisher/chairman of The New York Times Co., spoke on condition of anonymity. ‘I can’t understand what possessed him to sit down with her’—a reference to the magazine’s ace media correspondent, Sarah Ellison. ‘My sympathy for him arises from the fact that her contempt for him was so palpable… I suspect most readers will take the piece at face value and come away persuaded that Abramson was unfairly ditched by a sexist, privileged dilettante who doesn’t know what he’s doing.’… Ellison told The Daily Beast: ‘I’ll let the piece speak for itself’. Eileen Murphy, the Times Co.’s vice president of corporate communications, likewise declined to address the interview…”

Should Be Aware of:

• Dylan Matthews: The case for raising chickens in virtual reality
• Matthew Yglesias: The plot to use Fannie Mae and Freddie Mac to steal billions from the taxpayer
• Charles Cao et al: Hedge fund holdings and stock market efficiency
• Arthur Okun (1975): Equality and Efficiency: The Big Tradeoff
• Tim Geithner (2004): Change and Challenges Facing the U.S. Financial System
• Anat Admati and Martin Hellwig: If Not Now, When?: Financial Reform Must Not Await Another Crisis
• Arindrajit Dube, T. William Lester, and Michael Reich (2013): Minimum Wage Shocks, Employment Flows and Labor Market Frictions
• Andrej Svorencik: Towards a Prosopography of the MIT Economics Department
• Rachel Feltman: The complete guide to fighting jet lag
• Teaching economics as if the last three decades had happened
• Bryce Covert: No, Taking Away Unemployment Benefits Doesn’t Make People Get Jobs
• Joe Romm: Biggest Loser: Thawing Greenland Competes with Collapsing Antarctic for Fastest Ice Loss

And:

1. Jonathan Chait: Climate Politics Are Worse Than Obamacare’s: “The scientific consensus is stronger and more urgent than ever, while the political consensus is weaker than ever. Republicans are not even considering the notion of asking Americans to spend money to mitigate climate change, and are increasingly uncertain about the notion of even saving money to mitigate climate change. And into this simmering pot of reflexive opposition and anti-empiricism Obama will plop a highly ambitious and not very cuddly scheme to clean up the power-plant sector…. As recently as a few months ago, it was preposterous to imagine that the midterm elections would revolve around anything but Obamacare. But the law… has… bounded out of bed…. The sudden renewal of the conservative Benghazi obsession arises, in part, from party leaders’ needing a new outrage to cover a quiet retreat from the Obamacare jihad. But the issue sits too far from everyday voter concerns to carry the party through to November. Obama’s new regulations can fill that vacuum once occupied by health care. As right-wing hate fodder, it may even exceed it…. Republicans are likely to have the better of the debate politically. Support for regulating carbon emissions may be broad, but it’s tissue-thin…”

2. Dan McCrum: The sun also rises. Bond yields, not so much: “Some broad thoughts on the economic and market cycle arrive from Nikolaos Panigirtzoglou and team at JPMorgan…. ‘Despite range trading and low market volatility, active investors feel extremely uncertain about markets. Very few have beaten their benchmarks and our model portfolio also is barely in the black YTD.’… Why, five years into a US expansion, have bonds not sold off more? Part of the reason, think the JPMorgan strategists, is the experience of the crisis…. ‘For God’s sake lets not lose that much money again, etc.’ Another is that while central banks have monetary policy set as loose as can be, the new regulatory framework is all about reining in the banks. ‘For God’s sake don’t let them lose that much money again, etc.’… ‘Our view is that the main driver of all asset prices is the return on cash (carry) and the amount of risk (uncertainty). Bonds tend to have a hard time selling off if central banks are not tightening. The steadily lower growth rates over the last 3 recoveries have induced steadily lower policy rates, which in turn have created faster and a greater number of asset bubbles that have been imploding before inflation has a chance to accelerate and central banks can move into a tight stance.’…. As JPMorgan warns, expecting bond prices to collapse may require more patience…”

Already-Noted Must-Reads:

1. Ezra Klein: The Green Lantern Theory of the Presidency, explained: “Presidents consistently overpromise and underdeliver…. You would think voters in general and professional media pundits in particular would, by now, be wise to this pattern. But they’re not…. The criticism is always the same: why can’t the president be more like the Green Lantern?… The Green Lantern Theory of the Presidency is ‘the belief that the president can achieve any political or policy objective if only he tries hard enough or uses the right tactics.’… The Reagan version, he says, holds that ‘if you only communicate well enough the public will rally to your side’. The LBJ version says that ‘if the president only tried harder to win over congress they would vote through his legislative agenda’. In both cases, Nyhan argues, ‘we’ve been sold a false bill of goods’…

2. Paul Krugman: That 80s Show: “The pivotal role of the 1980s in the development of economic thought…. The 70s have taken on mythical status, and are constantly invoked by inflation worriers, while the 80s get mentioned, if at all, as somehow proving the truth of supply-side economics. But what really happened in the early 80s…. Chicago’s Robert Lucas made an extremely influential case against any kind of activist policy… [because] only unanticipated changes in monetary policy had real effects. As soon as people understood that… the central bank had targeted a lower rate of inflation, prices and wages would adjust, without the need for sustained high unemployment. What actually happened in the 80s… was that… inflation did indeed come down–eventually. But along the way there were deep recessions and soaring unemployment, which went on much longer than you could justify with any plausible story about the monetary shock being unanticipated. This was very much a vindication of more or less Keynesian views about the economy…. But many economists had already dug themselves in too deep…. Unable to backtrack, they went even deeper, insisting despite all appearances that monetary policy had no real effects whatsoever, that it was all technological shocks…. For the rest of us the 80s were just as important as the 70s in setting attitudes toward policy…. The 70s showed the limits of policy, but the 80s showed that there were limits to those limits–that monetary policy (and fiscal policy, under some conditions) remained powerful…. And that insight has stood the test of time…”