Brad DeLong: Worthy reads on equitable growth, February 22-28, 2020

Worthy reads from Equitable Growth:

1. As of the end of February, U.S. stock markets are forecasting a very sharp, sudden recession, with that probability going from near zero a week ago to better-than-even today. That is the only way to make sense of the drop of the S&P 500 over the past week. Thus it is not too late to plan. It is, rather, time to act to offset the likely spending economic contraction that may well be closer on the horizon. Here are the plans we should have made. Read Alyssa Fisher, “Planning for the next recession by reforming U.S. automatic stabilizers,” in which she writes: “Equitable Growth has joined forces with The Hamilton Project to advance a set of specific, evidence-based policy ideas for shortening and easing the impacts of the next recession [in] Recession Ready: Fiscal Policies to Stabilize the American Economy [offering] six concrete ideas … expand eligibility for Unemployment Insurance and encourage take-up of its regular benefits … reduce state budget shortfalls during recessions [by] increasing the federal matching rate for Medicaid and the Children’s Health Insurance Program … eliminate work requirements for supplemental nutrition assistance during recessions … expand federal support for basic assistance during recessions … [create] an automatic infrastructure investment program [to] boost consumer spending during recessions by creating a system of direct stimulus payments to individuals that would be automatically triggered when rising unemployment signaled a coming recession … Congress should consider them now, because when the next recession appears on the horizon, it may be too late.”
2. Perhaps the greatest harm done by Robert Bork and Richard Posner to American well-being was their extremely aggressive push of the idea that vertical merger integration could never be bad. Read Phil Weiser, “Competitive Edge: The states’ view of vertical merger guidelines in U.S. antitrust enforcement,” in which the Colorado Attorney General writes: “Vertical integration is not always benign and indeed has the potential to create significant anticompetitive harms … Indeed, in some cases, a vertical merger may remove the most likely potential rival to an incumbent firm. Consider, for example, the case of Live Nation Entertainment Inc.’s merger with Ticketmaster in 2010. In that case, Live Nation’s concert promotion and venue business prepared Live Nation to enter into the ticketing platform business, but the merger with Ticketmaster undermined that nascent competition. Indeed, Live Nation had already begun that entry before the merger. This is why a vertically related firm in one market (say, wholesale distribution) might be the natural entity to sponsor entry against a dominant firm in a related market (say, retail sales), and that potential sponsorship could be undermined on account of the merger between the dominant firm and the vertically related one. That is particularly true in evolving or fast-growing sectors such as technology markets. Second, it is important to recognize how vertical mergers, once completed, can be used to undermine existing rivals or raise entry barriers that make future entry materially more difficult. Colorado, like other states, has addressed such dangers.”
3. If we do not remember our history, we are condemned to repeat it. Read Robynn Cox and Dania Francis, “Improved public school teaching of racial oppression could enable U.S. society to grasp the roots and effects of racial and economic inequality,” in which they write: “There is a lot more to black history than what our schools showcase during the shortest month of the year. Many Americans don’t ever truly discover the depths of the African American experience in ways that fully convey the harm inflicted upon those enslaved before the Civil War and the generations of blacks who continued to suffer from blatant and pervasive racial discrimination over the next 150-odd years. Public schools tend to gloss over the details of enslavement. And most teachers are not properly equipped to handle discussions of this sordid past in their classrooms or to teach their students about the violent resubjugation of blacks in the South after the Civil War via race riots, lynchings, mass incarceration, voter disenfranchisement, and segregation—actions that spread across the nation as African Americans embarked on the Great Migration out of the South beginning in the late 19th century and continuing well into the post-WWII era.”
4. This is excellent from Kate Bahn and Adia Harvey Wingfield, “In Conversation with Adia Harvey Wingfield,” in which “Director of Labor Market Policy and economist Kate Bahn talks with sociologist Adia Harvey Wingfield, the Mary Tileston Hemenway Professor of Arts & Sciences and associate dean for faculty development at Washington University in St. Louis. Her research examines how and why racial and gender inequality persists in professional occupations. She is the author of several books, most recently Flatlining: Race, Work, and Health Care in the New Economy … Bahn and Wingfield explore: Racial and gender inequality and U.S. labor market outcomes; race, gender, and occupational status; lack of diversity and representation in U.S. services industries; the consequences of lack of diversity for black professionals in the healthcare industry; policies to improve racial and gender inequality in U.S. labor market outcomes; how sociologists can elevate their findings and solutions in economic policymaking; lack of racial diversity in scholarly research; and diversity itself as a research topic.”

Worthy reads not from Equitable Growth:

1. Kevin Drum is correct in his “The Great Income Decline Is Real.” Moreover, real disposable income as economists measure it is not everything. Many for whom real income has risen find that the indicia of middle-class status have moved further out of reach: In his piece, Drum writes: “A little spate of skepticism over the notion that middle-class incomes have been stagnant … a reaction to Bernie Sanders, who certainly has a habit of making things sound a little more catastrophic than they really are. But that’s no reason to doubt the basic fact … Since 1980, the income of every men’s age group has declined except for those ages 55 to 64—and even that age group has been stagnant since 2000 … Women’s incomes have been rising steadily, though they’re still considerably lower than men’s incomes. Now, this is cash income and … it uses CPI-U-RS as its inflation gauge … However, cash income is best if you’re interested in how people view their own financial situation … Middle-class men of prime working age have been on a slow downward slide for 40 years, and an even steeper slide since 2000 … Just about everyone has good cause to be frustrated and unhappy. That’s especially true since the affluent have been doing so well during the same period. Frankly, it’s sort of a miracle that people aren’t more pissed off than they are.”
2. One of the big lessons that Paul Krugman’s 1999 paper on the liquidity trap ought to have taught economists and central bankers is that inflation targeting has absolutely no place in a financial crisis, or any time interest rates have any provability of approaching the zero lower bound. Yet remarkably few were able to grasp that lesson then. And a great many still refuse to learn that lesson now. Read Wolfgang Münchau, “The ECB Should Ditch Its Inflation Target,” in which he writes: “The ECB remains critical for the eurozone’s cohesion, if not survival … Over the course of this year, the ECB will put its entire monetary policy strategy on the table … Under European law, the ECB’s primary target is to deliver price stability. The lack of precision was deliberate. It was supposed to give central bankers room for interpretation and manoeuvre—room the ECB chose not to use. In late 1998, the ECB adopted its first inflation targeting regime. Four years later, it modified it to an annual inflation rate of close to, but below, 2 per cent … The ECB’s research staff have recently published a fascinating 300-page working paper that has a direct bearing on this discussion. Its goal has been to shed some light on the successes and failures of the ECB’s policies over the past 20 years. The paper tries to establish how the ECB’s policies affected the economy. The surprise result was that the effect on inflation was smaller than previously thought, but the impact on economic growth larger. This finding suggests that a policy based only on inflation targeting is not very effective at a time like this. My own preferred target would be based on nominal gross domestic product—economic activity measured in actual euro prices. You can think of it as a metric of both economic activity and inflation folded into one.”
3. John Taylor thinks that the main threat to economic freedom is the Business Roundtable. At least, that is the only threat to economic freedom that he names in his “The New-Old Threat to Economic Freedom.” And the point is really weird. In all long-term win-win economic relationships the duties of managers and representatives are always diffuse: they are agents not just of their formal principals but of all those whose participation is essential to the value creation process. Recognizing this is not a threat to freedom. And I do not understand what kind of mind thinks it is. Here is what Taylor writes: “Achieving economic freedom is difficult: one always must watch for new obstacles … Many such obstacles are simply arguments rejecting the ideas that underpin economic freedom … Even the Business Roundtable is weighing in, announcing last August that U.S. corporations share ‘a fundamental commitment to all of our stakeholders,’ including customers, employees, suppliers, communities, and, last on the list, shareholders. That is a significant departure from the group’s 1997 statement, which held that ‘the paramount duty of management and of boards of directors is to the corporation’s stockholders; the interests of other stakeholders are relevant as a derivative of the duty to stockholders.’ Moreover, as that earlier statement was right to point out, the idea that a corporate board “must somehow balance the interests of stockholders against the interests of other stakeholders” is simply ‘unworkable.’”