Things to Read on the Morning of September 12, 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