Things to Read on the Afternoon of January 15, 2015
Must- and Shall-Reads:
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Report of the Commission on Inclusive Prosperity - :
Battling Global Unemployment: Too Soon to Declare Victory - :
Economic Lessons From Switzerland’s One-Day, 18 Percent Currency Rise
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From Welfare State to Innovation State:
“When the… industrial working class began to organize, governments defused the threat of revolution from below that Karl Marx had prophesied by expanding political and social rights, regulating markets, erecting a welfare state that provided extensive transfers and social insurance, and smoothing the ups and downs of the macroeconomy… reinvented capitalism to make it more inclusive…. Today’s technological revolutions call for a similarly comprehensive reinvention…. The trouble is that the bulk of [our] new technologies are labor-saving…. Few jobs are really protected from technological innovation…. A world in which robots and machines do the work of humans need not be a world of high unemployment. But it is certainly a world in which the lion’s share of productivity gains accrues to the owners of the new technologies and the machines that embody them. The bulk of the workforce is condemned either to joblessness or low wages.
Indeed, something like this has been happening in the developed countries for at least four decades…. Imagine that a government established a number of professionally managed public venture funds, which would take equity stakes in a large cross-section of new technologies…. Central banks offer a model of how such funds might operate independently of day-to-day political pressure. Society, through its agent–the government–would then end up as co-owner…. The public venture funds’ share of profits from the commercialization of new technologies would be returned to ordinary citizens in the form of a ‘social innovation’ dividend…. The welfare state was the innovation that democratized–and thereby stabilized–capitalism in the twentieth century. The twenty-first century requires an analogous shift to the ‘innovation state’…”
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Secular Stagnation: The Long View:
“Four explanations for secular stagnation… a rise in global saving, slow population growth that makes investment less attractive, averse trends in technology and productivity growth, and a decline in the relative price of investment goods. A long view from economic history is most supportive of the last of these…. I define secular stagnation as a downward tendency of the real interest rate, reflecting an excess of desired saving over desired investment, resulting in a persistent output gap and/or slow rate of economic growth…. A wide variety of connected activities and sectors, such as health care, education, industrial research and finance, are being disrupted by the latest wave of new technologies…. Again, this is not a prediction but a suggestion to look to the range of adaptation required in response to the current wave of innovations when seeking to interpret our slow rate of productivity growth and when pondering our future…
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On the Elasticity of Capital-Labor Substitution:
“I do not believe in the basic neoclassical model. But I think it is a language that is important to use in order to respond to those who believe that if the world worked that way everything would be fine. And one of the messages of my book is, first, it does not work that way, and second, even if it did, things would still be almost as bad…. My response to Summers and others is… what we observe… [is] a rise in the capital/income ratio and a rise in the capital share… [in] the standard neoclassical model… the only possible logical… expla[nation]… would be an elasticity of substitution somewhat bigger than 1… that there are more and more different uses for capital over time and maybe in the future robots will make substitution even more…. Now, does this mean that it is the right explanation for what we have seen in recent decades? Certainly not…. All I am saying to neoclassical economists is this: if you really want to stick to your standard model, very small departures from it like an elasticity of substitution slightly above 1 will be enough to generate what we observe in recent decades. But there are many other, and in my view more plausible, ways to explain it…. It is perfectly clear to me that the decline of labor unions, globalization, and the possibility of international investors to put different countries in competition… have contributed to the rise in the capital share…”
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Quantitative easing in the Eurozone: It’s possible without fiscal transfers:
“The ECB has been struggling to implement a programme of quantitative easing (QE) that would successfully target deflation. The main difficulty is political, stemming from opposition from German institutions. Their argument against is that a government bond buying programme by the ECB would mix fiscal and monetary policy. This column argues the opposite – such a programme can be structured so that it does not mix fiscal and monetary policy. It, therefore, would not impose a risk on German taxpayers.”
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Robert Waldmann:
Angry Bear » Secular Stagnation, The US Recovery, and Houses:
“Larry Summers… responds to Marc Andreesen on secular stagnation. The post is rather brilliant (no surprise there)…. I like Summers’s list of possible causes of secular stagnation… it is appropriately long. A model-addicted economist would look at one possible explanation and assume away all the others…. The point (if any) of this post is to add another explanation–lower demand for housing…. First lower population growth causes much lower housing investment…. Second… maybe the housing bubble has lasted for decades and the generally-recognised housing bubble post 2000 was just more extreme…. There is a similar issue related to consumption and savings. The suspicion that inequality leads to secular stagnation is based on the idea that the super rich are satiated…”
Should Be Aware of:
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Bitcoin revealed: a Ponzi scheme for redistributing wealth from one libertarian to another - (2007):
Trending Toward Inanity: Mark Penn’s Microtrends Is so Epically Awful It Could Take the Entire Polling Industry Down with It - :
Mission District Is More Hipster Than Brooklyn
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The Republic: “Sok: One woman has a gift of healing, another not; one is a musician, and another has no music in her nature? Gla: Very true. Sok: And one woman has a turn for gymnastic and military exercises, and another is unwarlike and hates gymnastics? Gla: Certainly. Sok: And one woman is a philosopher, and another is an enemy of philosophy; one has spirit, and another is without spirit? Gla: That is also true. Sok: Then one woman will have the temper of a guardian, and another not. Was not the selection of the male guardians determined by differences of this sort? Gla: Yes. Sok: Men and women alike possess the qualities which make a guardian; they differ only in their comparative strength or weakness. Gla: Obviously. Sok: And those women who have such qualities are to be selected as the companions and colleagues of men who have similar qualities and whom they resemble in capacity and in character? Gla: Very true. Sok: And ought not the same natures to have the same pursuits? Gla: They ought. Sok: Then, as we were saying before, there is nothing unnatural in assigning music and gymnastic to the wives of the guardians—to that point we come round again. Gla: Certainly not…” -
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Eviscerating Chris Caldwell’s “Why History Will Eviscerate Obama”:
“From the right, the argument should be even easier—most of what Obama has done will either result in the entrenchment of policies inconsistent with conservative values or fail to endure. Which makes Christopher Caldwell’s attempt to argue that historians will ‘eviscerate’ Obama such a remarkable achievement. It reads as if he had outtakes from some random Weekly Standard articles lying around, and given the assignment, hastily complied some sentences from them at random while pretending that his argument had something to do with Obama. Laden with falsehoods, remarkable feats of illogic, implausible predictions, non-sequiturs, and some ugly race-baiting, almost every sentence of the Caldwell’s argument makes a better case for Obama’s positive legacy than the most fawning hagiography could. Hence, we bring you the annotated Christopher Caldwell…”
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Dollar Guilt in the Land of the Collapsing Ruble:
“I’ve gotten a 100 percent raise. Not as a reward for hard work or long-term loyalty to my employer, but as a gift of timing. This windfall isn’t a one-off like a bonus, nor is it evenly spaced like paychecks after a promotion. I get richer at random. Almost every time I visit the ATM, what I take out is a smaller slice of what I make than it was the time before. I’m paid in dollars, but I live in Russia, where the currency is currently collapsing…. As the ruble falls, I think back on a night in late autumn of 2007…. Moscow had been named the world’s most expensive city for expatriates to live in…. My driver heard my foreignness…. ‘Americans, what do they think in America now that it’s 25 rubles to the dollar!’ he demanded…. When I first visited Russia seven years ago, Ziploc bags were commonly washed and hung to dry on a clothesline in the kitchen, and not out of environmentalism…. Russia was ‘rising from its knees’… but it hadn’t stood up quite yet…. But although the city felt, objectively, far from the most desirable place in the world to live, a personal-sized pizza with gluey cheese cost $30…. By the time I arrived for my gig in Moscow this June, the ruble was clocking in at around 35…. There is a giddy gambler’s thrill to watching your money gain value for reasons beyond your control…. Taxis no longer felt like an indulgence and on more than one occasion, I ordered an extra two entrees for dinner to meet the delivery minimum…. I walked in the cold among these masses and the thought went through my mind repeatedly: ‘I’m getting richer and richer, they’re getting poorer and poorer.’ That night I gave the woman who walks my dog while I’m at work a 60 percent raise…. After the ruble hit 80 to the dollar yesterday, I walked down Tverskaya Street toward the Kremlin. Every single pedestrian I passed averted their eyes from the neon displays that advertise currency exchange rates…”