Brad DeLong: Worthy reads on equitable growth, May 18-24, 2021

Worthy reads from Equitable Growth:

1. This is (part of) the argument that Stephen S. Cohen and I were trying to make in our 2016 book Concrete Economics: The Hamilton Approach to Economic Policy. Our conception of how our economic policy was in the past—when successful, pragmatic, and utilitarian—has been largely lost during the ideological age of the past generation. Read Nic Johnson, Robert Manduca, and Chris Hong, “The American anti-austerity tradition,” in which they write: “The victory of neoliberalism beginning in the 1980s has … totally vitiated our historical imaginations, it can be hard to picture the American past as anything other than a laissez faire frontier society … Recogniz[ing] our unfamiliar history can give policymakers the confidence they need to move forward on the public investments necessary … Three early 20th century perspectives on the U.S. economy … Underconsumption theory …  When workers can’t afford to buy everything they produce, it creates imbalances in the economy that are papered over by unsustainable extensions of credit … Channel finance … When financial markets fail to support productive investment, they encourage bubbles, hurt workers, and slow growth … Secular stagnation … When the state fails to boost investment, mature capitalism suffers from a congenital insufficiency of aggregate demand. Mass unemployment creates social and political antagonisms that are a danger to democracy. Each of these perspectives over time coalesced into a set of policy prescriptions, some of which were implemented then and all of which offer important lessons for policymakers today.”

Worthy reads not from Equitable Growth:

1. I am very unhappy that we do not yet have a handle on exactly what the coming of robotization is going to do to the demand for different skill and experience levels of labor. We should know this by now. We don’t. We need to know this if we are going to plan. Read Karen Eggleston, Yong Suk Lee, and Toshiaki Iizuka, “Robots and labour in the service sector,” in which they write: “Firm-level studies are important for understanding how robots augment some types of labour while substituting for others, yet evidence outside manufacturing is scarce. This column reports on one of the first studies of service sector robots, which suggests that robot adoption has increased some employment opportunities, provided greater flexibility, and helped to mitigate turnover problems among long-term care workers. The wave of technologies that inspires fear in many countries may be a remedy for the social and economic challenges posed by population ageing in others.”

2. A very nice explication of current thinking at the Federal Reserve by Steve Matthews. I think Matthews is right here. And I think the Fed is right here. Read his “Fed Officials Have Six Reasons to Bet Inflation Spike Will Pass,” in which he writes: “Acceleration in U.S. price growth this year will have “only transitory effects on underlying inflation,” Fed Vice Chair Richard Clarida said Wednesday. Governor Lael Brainard said the day before that officials should be “patient though the transitory surge.” Powell has made the same argument … Measures of expected inflation suggest price gains … [after] the next year or so … [will] drop back to more normal levels …Powell said … “It seems unlikely, frankly, that we would see inflation moving up in a persistent way that would actually move inflation expectations up while there was still significant slack in the labor market”… The sticky-price index rose a modest 2.4% over 12 months through April … A number of structural factors have led to global disinflation over the past three decades … Outside of passing on commodities prices, most U.S. firms remain reluctant to raise prices on other goods … Business survey shows limited price increases over next 5–10 years … “Base effects will contribute … to core inflation in April and May,” Powell said … “and they’ll disappear.”

3. An excellent video of the gender discrimination problem in economics. View Soumaya Keynes’ “Why Are There So Few Women In Economics.”

May 24, 2021


Brad DeLong


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