Things to Read on the Evening of January 6, 2015

Must- and Shall-Reads:

• Paul Krugman:
  “One thing is not a risk, because it has already happened: the euro area has entered a Japan-style deflationary trap… not literally deflation at an EA-wide level, but… slightly positive and slightly negative inflation with interest rates already at the zero lower bound are essentially the same. Furthermore, southern Europe still needs substantial amounts of ‘internal devaluation’…. And if you look at the implied market forecast, it’s truly disastrous…”
• Daron Acemoglu:
  Democracy Does Cause Growth
  http://www.nber.org/papers/w20004.pdf
  
• Naomi Oreskes:
  Playing Dumb on Climate Change
• Martin Wolf:
  “How far are Koo’s analysis and recommendations right? The diagnosis of ‘debt trauma’ is persuasive… exceptional policies… are likely to endure for many years…. Read Koo. He has a hammer, even if everything is not a nail.”
• Nick Bunker:
  Reference points, loss aversion, and redistribution

1. Henry Farrell:
   Social democrats in the twin-peaked world — Crooked Timber:
   “There’s plausibly a structural story behind the inability of conventional leftwing parties to challenge conventional orthodoxies…. They haven’t really relied on this constituency for a long time. Peter Mair’s Ruling the Void hasn’t gotten nearly the attention that it deserves…. Mair… makes a strong case that leftwing parties in Europe today have become profoundly disassociated from their voters… ordinary people withdrawing from political parties… elites of parties don’t rely on mass membership to provide resources…. European political parties rather than representing their constituents to the state, tend to represent the state and its imperatives to their constituents. This helps explain the extraordinary haplessness of mainstream leftwing parties faced with the politics of austerity…”
   

2. Anonymous and Miles Kimball:
   How Big Is Economics’s Sexism Problem? This Article’s Co-Author Is Anonymous Because of It:
   “One indication of the career challenges women face in economics is the fact that one of us felt the need to remain anonymous…. Many male economists underestimate the headwinds women face in economics… at every stage of a woman’s career… many forces both large and small that add up to a huge overall damper on the number of women who make it to the higher ranks…. And even when women do reach these higher levels—despite the difficulty of getting their work published in male-dominated journals and in getting promoted even when they do get their work published—their wages remain lower…. Sendhil Mullainathan argues that discrimination often operates at an unconscious level…. Here are a few of the issues women in economics face that their male colleagues might not be aware of…”
   

3. Joe Romm:
   2014 Was Hottest Year On Record Globally By Far, Reports Japan Meteorological Agency:
   “The Japan Meteorological Agency (JMA) has announced that 2014 was the hottest year… by far… [with] no ‘hiatus’ or ‘pause’ in warming. In fact, there has not even been a slowdown…. 1998 is in (a distant) second place–but 1998 was an outlier… boosted above the trendline by an unusual super-El Niño…. If you were wondering how 2014 could be the hottest year on record when it wasn’t particularly hot in the United States (if we ignore California and Alaska)… there’s like a whole planet out there…. Europe was the hottest it’s been in 500 years…. California had record-smashing heat, which helped create its ‘most severe drought in the last 1200 years.’ Australia broke heat records across the continent (for the second year running)…. Much of Siberia ‘defrosted in spring and early summer under temperatures more than 9°F (5°C) above its 1981 to 2010 average’… the second exceptionally hot summer in a row for the region…. The permafrost (soon to be renamed the permamelt) contains twice as much carbon as the entire atmosphere. If we don’t reverse emissions trends sharply and soon, then the carbon released from it this century alone could boost global warming as much as 1.5°F…”
   

4. Paul Krugman:
   Not Invented Here Macroeconomics:
   “[Richard] Koo had a big and important idea…. As long as some part of the private sector has… levels of debt that now look excessive, the efforts of debtors to pay off their debts… [is] a persistent drag… hard to counter with monetary policy, because many players in the economy can’t or won’t spend more…. Deficit spending can play a useful role… by providing a favorable environment for debtors to deleverage…. This is a very useful insight…”
   

5. Richard Florida:
   Is Life Better in America’s Red States?:
   “Blue states… are generally richer than red states. But red states, like Texas, Georgia and Utah, have done a better job over all of offering a higher standard of living relative to housing costs…. Red state economies based on energy extraction, agriculture and suburban sprawl may have lower wages, higher poverty rates and lower levels of education… [but] the American dream of a big house with a backyard and a couple of cars is much more achievable in low-tax Arizona than in deep-blue Massachusetts…”

6. Jérémie Cohen-Setton:
   Permanent QE and helicopter money:
   “What’s at stake: QE… is believed to matter (beyond the portfolio channel) for inflation and growth… the associated monetary base growth needs to be permanent… the pros and cons of helicopter money… as compared with permanent QE…. David Beckworth writes that… [in] the Fed’s quantitative easing programs… the large expansion of the monetary base under QE is temporary… [but] for QE to have made a meaningful difference the associated monetary base growth needed to be permanent. This… is the standard view in modern macroeconomics… Woodford, Svensson, and Obstfeld among others)…”

7. Eric Engen et al.:
   The Macroeconomic Effects of the Federal Reserve’s Unconventional Monetary Policies:
   “After reaching the effective lower bound for the federal funds rate in late 2008, the Federal Reserve turned to two unconventional policy tools—quantitative easing and increasingly explicit and forward‐ leaning guidance for the future path of the federal funds rate—in order to provide additional monetary policy accommodation. We use survey data from the Blue Chip Economic Indicators to infer changes in private‐sector perceptions of the implicit interest rate rule that the Federal Reserve would use following liftoff from the effective lower bound. Using our estimates of the changes over time in private expectations for the implicit policy rule, and estimates of the effects of the Federal Reserve’s quantitative easing programs on term premiums derived from other studies, we simulate the FRB/US model to assess the actual economic stimulus provided by unconventional policy since early 2009. Our analysis suggests that the net stimulus to real activity and inflation was limited by the gradual nature of the changes in policy expectations and term premium effects, as well as by a persistent belief on the part of the public that the pace of recovery would be much faster than proved to be the case. Our analysis implies that the peak unemployment effect—subtracting 1 1⁄4 percentage points from the unemployment rate relative to what would have occurred in the absence of the unconventional policy actions—does not occur until early 2015, while the peak inflation effect—adding 1⁄2 percentage point to the inflation rate—is not anticipated until early 2016…”
   

8. Paul Krugman:
   About That French Time Bomb:
   “I’ve written often about the remarkable track record of U.S. debt-and-inflation doomsayers… now completely unwilling to admit that they were wrong, or even that their model of how the world works needs some revision. But… let’s look back at the bad-mouthing of another economy, which looks equally wrong-headed if not more so…. It was the Economist that declared, on its cover more than two years ago, that France was the time bomb at the heart of Europe. And of course the inflationistas were even more certain that France faced imminent doom; for example, John Mauldin proclaimed that France was in fact worse than Greece. Now that time bomb–which has actually had better economic growth since 2007 than Britain–can borrow at an interest rate of only 0.8 percent. It seems obvious to me that the bad-mouthing of France was and is essentially political. Of course France has big problems; who doesn’t? But the real sin of the French body politic is its refusal to buy into the notion that the welfare state must be sharply downsized if not dismantled; hence the continuing warnings that France is doomed, doomed I tell you. And this in turn reflects the larger issue of what calls for austerity are really about. Can we imagine a clearer demonstration that they’re not really about appeasing bond vigilantes?”
   

Should Be Aware of:

• Chris Buckley and Andrew Jacobs:
  “China’s Maoist ideologues are resurgent after languishing in the political desert, buoyed by President Xi Jinping’s traditionalist tilt and emboldened by internal party decrees that have declared open season on Chinese academics, artists and party cadres seen as insufficiently red…”
• Charles Stross:
  “Concorde, flying trans-Atlantic at Mach 2.0, burned about the same amount of fuel as a Boeing 747 of similar vintage flying trans-Atlantic at Mach 0.85 … while carrying less than a quarter as many passengers…”
  Austin Frakt:
  “What else can researchers do to keep managers and policymakers informed? There must be something–some kind of an electronic, updatable, web-based thingamabob where one can report on new evidence and put it in context and in relatively simple terms. I can’t quite make out the details, but there’s a free idea out there for someone who can dream up such a thing…”
• Jim Webb:
  Remarks at the Confederate Memorial

1. Mark Mazower:
   Napoleon the Great by Andrew Roberts:
   “Hitler took the most powerful country in Europe and wrecked it for a generation, demonstrating in the process how not to run a continent. The one debt we owe Stalin is that he ensured Hitler’s defeat…. Napoleon–another case entirely. He took a country in the throes of acute fiscal crisis and social unrest and made it the dominant power in Europe; he oversaw the shattering of the old ruling order across the continent; he reformed the government; and he transformed the very idea of what politics could be and man could do. All of these achievements proved to be irreversible…”