Things to Read on the Morning of September 15, 2014

Must- and Shall-Reads:

• Megan Geuss: Why Apple Pay could succeed where others have had underwhelming results. Not because Apple is a huge and influential company, but because the timing is right
• Lance Taylor: Structuralist Response to Piketty’s Capital in the Twenty-First Century
• Cardiff Garcia: The Fed can take its time, if it wants to
• Wei Gu: Almost Half of Wealthy Chinese Want to Leave, Study Shows

1. Derek Thompson: How the Rich and Poor Spend Money Today—and 30 Years Ago: “The biggest difference between the lowest- and highest-earning Americans is what they spend on housing. Less than 40 percent of the bottom quintile owns a home, compared with 90 percent of Americans at the top. As a result, the top quintile outspends the bottom on housing by $21,000 a year (remember: that gap alone is basically the entire budget of a lower-income family) and $13,000 more on transportation. At just about every income level, we spend about half our income on living and getting around. But after houses and transportation, what are the biggest spending gaps between the top and bottom quintiles today? The poor spend nearly twice as much (as a share of their budget) on food at home and utilities; the rich spend more on entertainment and education.”

2. Daniel Kuehn: Documents on Koch intentions on FSU econ department hiring here. Note, this is an internal memo about the Koch’s expectations. Because of the outrage this caused (even in the absence of these documents) the advisory group was eventually restricted in how much they could impact these decisions. This is really not good for anyone that cares about economics as an objective science and people who receive Koch money (which is not inherently bad at all of course), should be saying that.”

3. Dean Baker: Influencing the Debate from Outside the Mainstream: Keep it Simple: “The route for making progress is to get outside of the profession. For this it is necessary to appeal to people in policy positions, to reporters, to the general public, or to people who might follow economic debates, but don’t have extensive backgrounds in economics. And it is important to recognize what you are asking these people to do. You are asking these people to accept your claims over the claims of the most prominent economists in the profession. This means that you better keep what you have to say simple…. To my mind the gold standard is a chart with two bars, where bar A is bigger than bar B…. The first, and perhaps best, example is the debate over the famous Reinhart-Rogoff 90 percent debt cliff…. President Bush said that he had just gained some political capital and that he intended to now use it. The task at hand was privatizing Social Security…. The big potential attraction to many people who were not especially political was the promise of getting a much higher benefit on average from investing their money in the stock market…. The problem with this assumption is the price to earnings ratios in the stock market were far above their historic average…. Arguing this point directly on its merits required more attention from reporters and people in policy positions than they were prepared to sacrifice; so we… developed the ‘no economist left behind test’… write down decade by decade averages for dividend yields and capital gains that would add up to give their 7.0 percent real return over Social Security’s 75-year forecasting horizon…. Finally Paul Krugman blasted the test into the national debate with a column in early February…”

4. The New Yorker: Briefly Noted: The Teacher Wars, by Dana Goldstein (Doubleday): “This engaging history chronicles a hundred and seventy-five years of educational-reform initiatives, union conflicts, and moral panic, from the nineteenth-century ideal of schoolhouses as “secular churches” to denunciations of the perceived zealotry of Teach for America. Goldstein ably sketches reformers past and present, asserting that the common force behind each new wave of school reforms is evangelical conviction, and that new movements often seem based more on faith than on factual evidence. Thorough and fair-minded, she offers limited proposals for practical improvements, but her ability to illuminate each new wave’s ‘hype-disillusionment cycle’ is a welcome treatment of a fraught subject.”

5. Paul Krugman: How to Get It Wrong: “The enormous intellectual failure of recent years took place at several levels…. In what sense did economics go astray?… The widespread conviction among economists that such a crisis couldn’t happen… an idealized vision of capitalism, in which individuals are always rational and markets always function perfectly…. Assuming away irrationality and market failure meant assuming away the very possibility of the kind of catastrophe that overtook the developed world six years ago. Still, many applied economists retained a more realistic vision of the world, and textbook macroeconomics, while it didn’t predict the crisis, did a pretty good job of predicting how things would play out in the aftermath…. But while economic models didn’t perform all that badly after the crisis, all too many influential economists did–refusing to acknowledge error, letting naked partisanship trump analysis, or both: ‘Hey, I claimed that another depression wasn’t possible, but I wasn’t wrong, it’s all because businesses are reacting to the future failure of Obamacare.’… Would it have mattered if economists had behaved better? Or would people in power have done the same thing regardless?… The big problem with economic policy is not, however, that conventional economics doesn’t tell us what to do. In fact, the world would be in much better shape than it is if real-world policy had reflected the lessons of Econ 101. If we’ve made a hash of things–and we have–the fault lies not in our textbooks, but in ourselves.”

6. Jon Hilsenrath: Fed Chief Yellen Seeks Interest-Rate Consensus: “Chairwoman’s Actions in Her First Six Months Confound View of Her as Strong Advocate of Easy Money…. Her next test is this week. Meeting on Tuesday and Wednesday, Fed officials will discuss whether to shift their guidance on the short-term rate. They also are seeking to complete a new plan for managing the mechanics of future rate changes…. Ms. Yellen spent much of the spring and summer formulating a plan to manage the mechanics of future rate increases…. A new plan, which the Fed could unveil this week, emphasizes two new interest rates. One is a rate paid to banks on money they keep on reserve at the Fed. The other is a rate the Fed will pay money-market funds in trades conducted by the New York Federal Reserve Bank. Shifting these two rates is the planned new mechanism for changing the fed-funds rate. The apparent recent lessening of labor-market progress has eased pressure on the Fed to move relatively quickly toward a higher fed-funds rate. But some officials are pushing, once again, for the Fed to shift its guidance to the public on that rate. Because of the uncertainty on how the job market will play out in the months ahead, more Fed officials want to stop offering assurances the Fed will wait a ‘considerable time’ to move on rates. Ms. Yellen, in her preparations for Tuesday’s meeting, is looking for an approach on which her colleagues can agree.”

Should Be Aware of:

• Nick S.: “Given the recent comments about ogged trolling the blog, I tip my hat to another master of the genre, with Clay Shirky’s defense of Amazon…
• Timothy Ash: Massacre at Ilovaisk proves turning point in Russia’s war against Ukraine
• Josh Brown: Three Reasons the Remainder of 2014 is About Loss Avoidance

1. Ian MacKay: The wind beneath my Ebola virus” “I think it’s a stretch to spend so many words on the chance that an airborne virus will emerge rather than one that causes more bleeding, or less diarrhoea, or more vomiting, or more shedding in sweat, more rash, more hiccups…. Why this really quite complex outcome of air travel, instead of many/any others?… Dr Osterholm did hit some other nails flush with the timber…. West Africa needs fewer promises… more plans that include actual rapid mobilization and on-the-ground experienced leadership… getting beds for sick people… tracing contacts…. Thankfully some promising signs are appearing. The scope of this outbreak has now been guesstimated… 20k-100k…. I list this range rather than extending it to much higher levels because I do still have hope that things will improve and interventions will turn the exponential case growth curves away from the sky and back to the horizon, sooner rather than before entire nations are destroyed. Because that’s what is coming without successful intervention. For now at least, the Ebola virus in 5 countries in and around West Africa has the upper hand. This tiny self-assembling unthinking, thing is totally dependent on our cells to replicate itself–and we are not doing enough to starve it of those cells. It clearly doesn’t ‘need’ to be airborne to spread efficiently.”

2. Justin Cheng et al,: How Community Feedback Shapes User Behavior: “Social media systems rely on user feedback and rating mechanisms for personalization, ranking, and content filtering. However, when users evaluate content contributed by fellow users (e.g., by liking a post or voting on a comment), these evaluations create complex social feedback effects. This paper investigates how ratings on a piece of content affect its author’s future behavior. By studying four large comment-based news communities, we find that negative feedback leads to significant behavioral changes that are detrimental to the community. Not only do authors of negatively-evaluated content contribute more, but also their future posts are of lower quality, and are perceived by the community as such. Moreover, these authors are more likely to subsequently evaluate their fellow users negatively, percolating these effects through the community. In contrast, positive feedback does not carry similar effects, and neither encourages rewarded authors to write more, nor improves the quality of their posts. Interestingly, the authors that receive no feedback are most likely to leave a community. Furthermore, a structural analysis of the voter network reveals that evaluations polarize the community the most when positive and negative votes are equally split.”

4 Scott Lemieux: Since the Beginning of Time, Republicans Have Yearned To Massively Expand Medicaid: “Thomas Frank’s lastest profit-taking Salon column begins with the germ of an interesting argument about the problem of over-reliance on experts. Alas, from there it follows the typical path straight down Pundit’s Fallacy Gulf. Along the way, he makes the usual historical and empirical errors your really don’t need to be a fancy-pants political scientist to identify: ‘In 2010, the two parties repeated the act, with D’s embracing the extremely unpopular Republican bailout strategy (and a more modestly unpopular Republican healthcare program) and R’s pretending to be some kind of ’30s-style protest movement waving signs in the street.’ Omitted: any national Republicans or state-level Republicans not governing alongside massive Democratic supermajorities who supported a massive expansion of Medicaid accompanied by a much more tightly regulated private insurance industry. I also note the implicit argument that the original Medicaid, which left large numbers of poor people ineligible, was ‘real’ liberalism while the ACA’s version, making a significantly superior program available to everyone within 138% of the federal poverty line, was not. Nor do I think there’s anything particularly progressive about letting the entire financial system collapse in 2008. At any rate, the idea that the Democratic Congress in 2009 and 2010 was focused on enacting a ‘Republican’ agenda is simply absurd. This particular howler is the culmination of the anti-history we’re familiar with…”