Brad DeLong: Worthy reads on equitable growth, April 6-12 2021

Worthy reads from Equitable Growth:

1. This was an excellent hour-and-a-half event. These “Research on Tap” events have been some of the best that we have done here at Equitable Growth. And this, I think, was an especially good show. You will profit enormously from watching and listening to “Research on Tap: Investing in an Equitable Future.”

2. Very interesting evidence that those of us who have been seeing a low rather than a high multiplier as governing the effect of direct-transfer fiscal expansion this winter and spring are likely to be correct. Thus I now see it as more likely that fears of an explosion of inflation of any kind this year is simply whistling past the graveyard. Read Carmen Sanchez Cumming and Raksha Kopparam, “What the U.S. Census Household Pulse Survey reveals about the first year of the coronavirus recession, in six charts,” in which they write: “Eight months after the CARES Act was enacted, a second $600 Economic Impact Payment was sent to most U.S. households. By this time, multiple waves of coronavirus cases damaged employment opportunities and the general livelihood of many U.S. workers and their families. One of the results was more debt: Approximately 30 percent of adults reported having increased credit card debt, taking out loans, or asking for financial help from friends and family between June and December 2020. When the $600 stimulus payments arrived, households across all races and income groups—but especially Black, Latinx, and low-income households—used this money to begin paying off the debt they had accumulated rather than spending it on household expenses. The disparities in use of the two stimulus payments highlight the importance of providing timely relief.”

3. There was a substantial infrastructure gap before the coming of the Great Recession of 2007–2009. Since then, it has been an absolute disaster as far as public investment in America is concerned. And we are now greatly poorer for it. Read Equitable Growth, “More than 200 Economists to Congress: Seize “historic opportunity to make long-overdue public investments” to boost economic growth,” a statement from more than 200 economists, led by Hilary Hoynes, Trevon Logan, Atif Mian, and William Spriggs.

Worthy reads not from Equitable Growth:

1. Alexis de Tocqueville said that one of the things that made America great was that while people pursued self interest, they pursued self interest “rightly understood. The chairman and chief executive of JP Morgan Chase & Co., Jamie Dimon, argues that JP Morgan Chase should and does pursue shareholder value maximization “rightly understood.” Read his  “Chairman & CEO Letter to Shareholders: Annual Report 2020,” in which he writes: “We should not be buttonholed by the debate about whether there are “fiduciary” reasons to think of “shareholder value” narrowly and to the exclusion of those who work at the company, our clients and communities … To a good company, its reputation is everything. That reputation is earned day in and day out with every interaction with customers and communities. This is not to say that companies (and people) do not make mistakes—of course they do. Often a reputation is earned by how you deal with those mistakes. While all businesses are different, there are some fundamentals … Banks, in particular, have to be rigorous about standards. Unlike many companies that will simply sell you a product if you can pay for it, banks must necessarily turn customers down or enforce rules that a customer may not like (for example, covenants). This makes open and transparent dealings even more important … We must always strive, particularly in tough times, to earn the trust of our customers and communities…. If you live in a small town and run a corner bakery, it is very easy to understand the value of being a responsible community citizen. Most businesses on “Main Street” keep the sidewalk in front of their store clean so people don’t slip and fall … A bakery or a restaurant will often donate surplus food at the end of the day to a local homeless shelter … Doing their part to make the community a better place is both the moral thing to do and a driver of better commercial outcomes for the town.”

2. History does not repeat, but it does rhyme. Bill Janeway attempts to drill down and draw the lessons for today from the fact that Roosevelt’s New Deal was so extraordinarily successful. Read Bill Janeway, “Lessons from the first New Deal for the Next One,” in which he writes: “FDR’s New Deal … was complicated and conflicted … Successive experiments … characterized the New Deal … [and] illustrate the conflicts—even contradictions—that … result from improvising policy responses to crisis … FDR’s New Deal encompassed three strategic missions: recovery … reform of particular aspects … and regime change in the fundamental structure of the American political economy … Today: The immediate strategic priority facing the Biden Administration embodies no conflict: to accelerate Recovery from the pandemic in order to Restore economic prosperity … Measures such as expanded child and earned income tax credits may be formally time limited, but they suggest this Administration knows how to exploit crisis for progressive ends, very much in the spirit of the second phase of FDR’s New Deal.”

3. The past year has been marked by both bold policy successes and extraordinary, horrible, and pitiful policy failures—one of which continues today with the failure of global coordination of vaccine production and distribution. History will, I think, judge—and not kindly. Read Monica de Bolle, Maurice Obstfeld, and Adam S. Posen, “Economic Policy for a Pandemic age,” in which they write: “A year ago, there were 132,492 confirmed cases of COVID-19 and 4,917 deaths worldwide … Now … The world lost 8.3 percent of a year’s combined income, with the distribution of economic losses mapping largely to where the infection was least controlled, and the poorest in each country suffering the most for the failures of the Group of Twenty (G20) governments … Cooperative forward-looking policy action will materially improve our chances of truly escaping today’s plague and making future plagues less costly … Nowhere are the policy implications of the pandemic age more evident than in the area of vaccine distribution … The comparatively good experience in East Asia and the Pacific shows what may be possible … Where the leaders failed even to attempt significant collective action, notably in vaccine production and distribution, lives and livelihoods were indeed unnecessarily lost. Agreements on transparent common standards of behavior, all governments pulling in the same direction or forswearing the same bad actions simultaneously, matter.”

April 12, 2021


Brad DeLong


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