Brad DeLong: Worthy reads on equitable growth, December 15-21, 2020

Worthy reads from Equitable Growth:

1. Austin Clemens is completely correct here. Shifting the conversation about economic growth away from the topline aggregate number to a more nuanced, distributional assessment holds enormous promise in terms of getting the U.S. political system in the public sphere to focus on what is really important, and what works. Read Austin Clemens, “New distributional snapshot of U.S. personal income is a landmark federal statistical product,” in which he writes: “Policymakers and analysts should pay close attention to future releases of BEA’s distribution of personal income. Trends in the share of income held by top earners will indicate whether the benefits of the strong post-Great Recession economy have accrued to Americans broadly or to upper-income Americans more narrowly. Going forward, this new tool should give pause to those who target growth as a catch-all metric to indicate economic success. Too often, growth has been tilted in favor of those who are already doing well.”

2. If the experience of the internet tells us anything, it is that open standards are a true bonanza, a true gold rush, a true El Dorado. Unfortunately, they do not produce very many steeply wild gardens to produce mammoth profits for venture capitalists and shareholders. And even more unfortunately, neither the George W. Bush nor the Obama administrations understood the least thing about the importance of the government’s role in nudging the information sector into configurations with open standards. Read Michael Kades and Fiona M. Scott Morton,” Interoperability as a competition remedy for digital networks,” in which they write: “Mandatory interoperability based on robust and effective rules could overcome the network effects that protect the incumbent from entry, maximizing the potential for new entrants to enter at minimal cost, compete in the market, and take share from the incumbent. This remedy could be ordered in addition to other relief such as a divestiture, and indeed could be complementary to it, or stand on its own. In today’s internet-based network markets, interoperability carries no incremental costs such as dedicated wires and machines that were true of the telecom interoperability of past decades. Its main cost is the establishment of an open standard.”

Worthy reads not from Equitable Growth:

1. This is a very nice line from former Equitable Growth president and CEO Heather Boushey in her essay in the most recent issue of the International Monetary Fund’s publication Finance and Development: “Transforming the U.S. economy requires policymakers to recognize that markets cannot perform the work of government. The first step is to eradicate COVID-19 … [Then] the United States [needs] to address its long-term problems: a costly health system that leaves millions with insufficient care, an education system designed not to end inequality but to preserve it, lack of basic economic stability for most families, and climate change. Major public investments are required to deal with each issue.”

2. This is very well worth reading from Jason Furman and Larry Summers. Why it is not conventional wisdom now is something I do not understand. Why it was not conventional wisdom a decade ago is something I do not understand. Why it was not the background belief of the Obama administration is something I do not understand. Read Jason Furman and Lawrence Summers, “A Reconsideration of Fiscal Policy in the Era of Low Interest Rates,” in which they write: “Fiscal policy must play a crucial role in stabilization policy in a world where monetary policy can counteract financial instability but otherwise is largely “pushing on a string” when it comes to accelerating economic growth … In a world of unused capacity and very low interest rates and costs of capital, concerns about crowding out of desirable private investment that were warranted a generation ago have much less force today … Debt-to-GDP ratios are a misleading metric of fiscal sustainability … Current debt levels are at low rather than high levels relative to calculations of the present value of GDP or prospective tax receipts … Traditional notions of financial responsibility for households and businesses hold that borrowing in order to invest in assets that have a return well in excess of the cost of borrowing increases creditworthiness and benefits future stakeholders … Borrowing to finance appropriate categories of Federal expenditure pays for itself in Federal budgetary terms on reasonable assumptions.”

December 21, 2020


Brad DeLong


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