Category: Equitablog

Should-Read: Henry Farrell: The Thousand Day Reich: Civil Society

Posted on by Brad DeLong

Should-Read: By Henry Farrell. Very good throughout. I would add that there is something to be said about anti-semitism: Jew-hatred precisely because Jews in the diaspora require the pluralistic foundations of civil society (and thus a civil society) in order to flourish. What is going on is, no accident, in many dimensions:

Henry Farell: The Thousand Day Reich: Civil Society: “Ethnic nationalism (and–to extend Gellner’s thought a little to the US context–religious fundamentalism)…

…is generically hostile and contemptuous towards liberalism precisely because the latter is based around a plural notion of civil society. Bannon’s “civic society” is a society where Asian immigrants are frightening… because they embody the far more insidious threat of peaceful co-existence between a variety of ways of life, rather than a single moral order…. Trump’s (and Orban’s, and Kaczynski’s, and Erdogan’s) politics purports to offer… not simply an economic restoration for those who think that they have been screwed by the bloodless cosmopolitans… [but also] a moral restoration… in which everyone knows, or ought to know, where they belong…. Gellner’s account… suggests a closer alliance between the left and a certain strand of libertarianism (there is nothing in Gellner that is more than slightly uncongenial e.g. to the people who are associated with the Niskanen Center)…. Some people on the left–especially those committed to a strong state–would be left out of such a putative alliance.

It’s also one that emphasizes the value of social movements such as the Women’s March and Black Lives Matter…. As Tyler Cowen argues, there’s a strong libertarian case for the value of #BLM. The detestation of many libertarians for the cause is less grounded in political principle than in their own peculiar identity politics.

Yet Gellner’s argument also points to the potential weaknesses of any such movement. If Gellner is right, civil society goes together with an ambiguous, even ironic attitude towards specific identities (they are of value, but no single one should be allowed to become overwhelming). Civil society is a faith without foundations, a faith that believes that there are no foundations in any absolute sense, and hence it is a faith composed of a mixture of attachments and ironies (non credo, quia absurdum est). This means that any broad movements in defense of civil society – such as the one that may be coming to life around us – will have always to struggle with itself, and specifically with those within it who are non-ironic partisans of their specific causes and identities. Even if it somehow succeeds, it will never be surely capable of generating the foundations for its own long term stability, since it is based on non-belief in a set of universal foundations that can reconcile facts and values.

Finally, and most importantly, the challenge that civil society faces – if it is to be a bulwark against the domination of the state – is to identify the political tools and conditions that allow it to exercise its strength. Many invocations of the strength of civil society aim merely to identify it as an enabling condition for forms of politics that they find attractive. The specific means, however, through which it may enable, are left largely undescribed, perhaps, in fairness, because they vary from context to context. The mere fact that civil society (or one version of civil society anyway) seems to be finding its voice is not sufficient to ensure that it can work to constrain the state as it ought in Gellner’s argument.

But two buts, one minor and one major.

The one minor but: I know few people on the left committed to a “strong state” (though there are some who do or whose dearest wish is to identify them with a Lenin or a Castro). The left is committed to a somewhat broader, stronger, and more subtle definition of negative liberty than some (but not than the Niskanen Center), and is strongly attached to positive liberty to make negative liberty worth more than the liberty to sleep under bridges, beg in the streets and steal loaves of bread

The one major but, which is closely tied to the minor: Farrell channels Gellner as saying “civil society goes together with an ambiguous, even ironic attitude towards specific identities (they are of value, but no single one should be allowed to become overwhelming). Civil society is a faith without foundations, a faith that believes that there are no foundations in any absolute sense, and hence it is a faith composed of a mixture of attachments and ironies (non credo, quia absurdum est)…” Here in America, at least, there is nothing ambiguous about being called by God to build utopia and believing very strongly that the right to float your own boat and choose your own identity is a part of utopia. A BIGLY part. And even in the British isles we have people like John Maynard Keynes:

There will still remain a wide field for the exercise of private initiative and responsibility… [where] the traditional advantages of individualism will still hold good. Let us stop for a moment to remind ourselves what these advantages are. They are partly… efficiency…. But, above all, individualism, if it can be purged of its defects and its abuses, is the best safeguard of personal liberty… greatly widens the field for the exercise of personal choice. It is also the best safeguard of the variety of life… the loss of which is the greatest of all the losses of the homogeneous or totalitarian state. For this variety preserves the traditions which embody the most secure and successful choices of former generations; it colours the present with the diversification of its fancy; and, being the handmaid of experiment as well as of tradition and of fancy, it is the most powerful instrument to better the future.

Whilst, therefore, the enlargement of the functions of government, involved in the task of adjusting to one another the propensity to consume and the inducement to invest, would seem to a nineteenth-century publicist or to a contemporary American financier to be a terrific encroachment on individualism. I defend it, on the contrary, both as the only practicable means of avoiding the destruction of existing economic forms in their entirety and as the condition of the successful functioning of individual initiative…

Should-Read: Tim Duy: Was Kevin Warsh Really A Fed Governor?

Posted on by Brad DeLong

Should-Read: Tim Duy: Was Kevin Warsh Really A Fed Governor?: “Kevin Warsh’s column in Tuesday’s Wall Street Journal was so riddled with errors and misperceptions…

…that it is hard to believe he was actually a governor…. Earlier Warsh complained that the Fed reacted to the financial cycles–easing policy when equity prices were falling and vice-versa. Now he wants the Fed to react to those cycles?… The Fed does have a strategy…. The focus of that strategy is the medium run forecast…. The Fed changes their behavior in a systematic way to pursue that strategy. In short, the Fed’s already acts in accord with this supposed “reform.” Move along, folks, nothing to see here…. If you want to understand the Federal Reserve… I don’t think reading Warsh’s op-ed gives you much to work with.

An uncertain time at the Federal Reserve

Posted on by Bridget Ansel
Federal Reserve Board Chair Janet Yellen listens as Vice Chair Stanley Fischer as he speaks during an open meeting in Washington last December.

Later today the Federal Open Markets Committee, the monetary policy arm of the Federal Reserve, will end its current meeting and release a statement about the course of U.S. monetary policy. The committee seems unlikely to announce any change in monetary policy, which means short-term interest rates will remain flat. But changes in the statement may give signs about changing views on the outlook for the U.S. and global economy and the impact of policy changes or international developments. With the start of a new year and a new presidential administration, two large uncertainties hang over the Federal Reserve.

The first is uncertainty about how much labor slack remains in the U.S. economy. A growing consensus holds that the economy is, if not already at full employment and potential, then very close to it. But if the economy were close to its potential growth rate, inflation would be close to 2 percent or accelerating toward it. But inflation, measured by the committee’s preferred Personal Consumption Expenditure index, is still below 2 percent. And, after stripping out volatile food and energy prices, the index seems to show inflation slowing down, as former Federal Reserve Bank of Minneapolis President Narayana Kocherlakota points out.

But perhaps the tightening labor market will push inflation upward as wage growth accelerates. The data on wage growth, however, are sending more mixed signals. Average hourly earnings for all private-sector workers grew at a 2.9 annual rate in December, a sign of accelerating wage growth. But at the same time, average hourly earnings for production and nonsupervisory workers hasn’t budged from a steady 2.5 percent annual rate since December 2015. This could mean that wage growth is tilted toward managers and other higher earners. But the Employment Cost Index also shows wage growth that isn’t accelerating. The data for the fourth quarter of 2016 shows wage and salaries growing at 2.3 percent for all workers, slightly lower than the rate in third quarter. With other measures of the labor market—such as the prime-age employment-to-population ratio—showing continuing slack, it’s far from clear the U.S. economy is very close to full potential.

The other large uncertainty is about the path of federal fiscal policy. The new Trump administration has sent signals that it wants to conduct more expansionary fiscal policy by increasing the budget deficit. The Federal Reserve is keeping an eye on fiscal policy, as it tries to understand how more expansionary policy would affect the real economy and in turn the conduct of monetary policy.

But sorting through the impact will be difficult as the fiscal policy of the administration isn’t entirely clear at the moment. A tax cut geared toward high-income households seems likely, but the exact design (never mind the timing) is unknown. During the recent presidential campaign, talk of a large infrastructure plan had many analysts convinced that a big boost to aggregate demand was coming. But details remain sparse and the details that do exist indicate the plan is less about direct government spending and more about private-sector inducements through tax credits. Such a plan seems unlikely to increase aggregate demand in the economy as much as direct purchases as it would not spur as much new investment and construction.

In the face of these uncertainties, it makes sense for the Fed to stand pat for now. This is even more true considering it’s unclear the extent to which the administration’s new policies will reduce economic growth. Caution, at least for now, is the best course.

Must-Read: Martin Wolf: Donald Trump Will Not Bring US Jobs Back

Posted on by Brad DeLong

Must-Read: A truly amazing number of people right now are doing a great deal to submerge the distinction between:

  • The effects of “trade deals” on the U.S. manufacturing sector (on net, next to zero)
  • The effects of our macroeconomic and industrial–or, rather, financialization–polices on the U.S. manufacturing sector (highly destructive, most particularly in the administrations of Reagan and Bush 43)

To submerge this distinction is to allow–encourage–your readers to imagine Trump’s forthcoming abrogation of NAFTA will provide a significant boost to American manufacturing. That is false. And as Barry Eichengreen and Larry Summers pointed out in the FT last week, Trump’s policies–what we know of them–if there are “policies” rather than simply attitude–are highly likely to further weaken American manufacturing employment.

So why would people who ought to know otherwise submerge this–important–distinction?

It’s possible–and in fact correct–to think that (a) our macro-industrial policies have been disastrous for manufacturing, and (b) NAFTA didn’t materially accelerated mfg employment decline and NAFTA abrogation will not repair it. So many working so hard to keep their readers from seeing that is really dismaying. And why? Because they hope to steal Trump’s nativism and use it to energize their own preferred policy proposals? Or is there some other reason?

Martin Wolf: Donald Trump’s tough talk will not bring US jobs back: “Blame foreigners first. This strategy is always the companion of aggrieved nationalism…

…Trump’s ban on immigrants… his protectionism. A kernel of truth… bolsters a lie: my actions are enough to keep you safe and restore the prosperity you once knew…. The main explanation for the long-term decline in the share of manufacturing employment… has been the rise in employment elsewhere. In 1950, employment in manufacturing was 13m, while that in the rest of the economy was 30m. By the end of 2016, it was 12m and 133m…. Yet output of US manufacturing was not stagnant. Between 1950 and 2016, output rose 640 per cent, while employment fell 7 per cent…. The explanation for the contrast… is rising productivity. Yet no one is proposing to stop this….

The increase in the trade deficit in the early 2000s had a significantly negative effect on employment in manufacturing, but next to none on the long-term decline in the share of overall employment in manufacturing….

Daron Acemoglu of MIT and others concluded that trade with China directly caused the loss of about 10 per cent of the total number of jobs lost in manufacturing between 1999 and 2011. But analysis of linkages among firms and the impact upon local demand gives far larger negative effects… though… still less than 2 per cent of total employment…. The effect of import competition is often geographically concentrated…. The need to sustain demand and so ensure that new jobs replace the old ones in the economy as a whole…

Must-Read: Mark Roe: Surviving the Next Housing-Market Hurricane

Posted on by Brad DeLong

Must-Read: Mark Roe: Surviving the Next Housing-Market Hurricane: “illiquid real estate cannot solidly underpin a stable market for overnight obligations forever…

…Like a hurricane, this disaster smashed into the financial system, which could not absorb the losses smoothly. So regulators are constructing stronger buildings that can withstand a financial hurricane…. But what if overnight mortgage-pool buyers decide, in the face of a crisis, that it is not worth waiting around to find out whether the highly complex mechanisms meant to ensure that they are paid will work as planned?… The safety level for a single failed bank is probably high nowadays. But there seem to be too many weaknesses in the overall system to guarantee against a rout if several banks failed simultaneously–or, worse, if the entire housing market, built on an unstable market of overnight lending, suffered another of its once-in-a-generation crises. By making housing-based short-term debt more attractive than other savings channels, we are courting trouble…. It is impossible, even for regulators, to know for sure whether the system can withstand a market-wide failure. Given that the world suffers from major housing bubbles every decade or so, it might not be many years before we find out.

The vast wealth gap between black and white women in the United States

Posted on by Bridget Ansel

Women of all races in the United States don’t get paid as much as men for doing the same job, but the financial discrepancies for black women are especially troubling. That’s not just in terms of income—black women bring home 63 cents (compared to 75 cents for white women) for every dollar a white man earns—but also in terms of wealth. A new report looks at household wealth between black and white women and find that black women face a glaring gap in terms of wealth in comparison to men as well as to white women.

The report, by Khaing Zaw, Anne Price, William Darity, Jr., all of Duke University, Jhumpa Bhattacharya of the Insight Center for Community Economic Development, and Darrick Hamilton of The New School of Social Research, is important in an era in which women are increasingly playing the role of breadwinner and a growing number of men are dropping out of the labor force altogether. But as the authors point out, black women face more significant roadblocks despite having the highest growth rate of college enrollment of any other group.

The authors of the report look at patterns of household wealth between black and white women, separating the results out by education and marital status, both of which are traditionally seen as a factor in women’s wealth accumulation. They find that marriage and education do have a significant impact on how much wealth white women amass compared to married and/or educated black women, who only see slight increases—and the wealth gap is even wider compared to single, uneducated women. (See Figure 1.)

Figure 1

Wealth is measured by the total of one’s assets—cash in banks, stocks, bonds, and real estate—minus debts such as home mortgages, auto loans, credit card debt, and student loans. Therefore, it’s important to note that a young woman who has a well-paying job but is paying off student debt and a mortgage isn’t necessarily in bad financial shape. Instead, she is investing in things that will likely yield high returns in the future. But when the five researchers separate out their results by age, they find that the wealth gaps persist even among older women, who are more likely to have paid off these kinds of investments. (See Figure 2.)

Figure 2

The median wealth levels of single black women ages 60 and older with a college degree is $11,000 compared to a whopping median of $384,400 for their white counterparts,  nearly 35 times the black median. And, while married, college-educated black women see greater gains, it is still half of what white women in the same category have accumulated. In an era in which employers are rapidly moving away from traditional pensions and toward individual retirement plans, the fact that black women have been hindered from saving enough is a big problem.

This is just one of the reasons that wealth inequality in the United States is arguably just as important, if not more important, than income inequality. While income is used to pay for daily and monthly necessities, it is the accumulation of wealth that allows individuals and families to attain long-term financial stability. Wealth allows families to buy a home, start a business, or make other forward-looking investments. It serves as a buffer in the case of job-loss or illness. Family wealth is also passed onto the next generation, whether through direct transfers or indirect ones such as college tuition.

The racial wealth gap can be directly attributed to a confluence of discriminatory policies going back to the New Deal and extended through the GI bill, the mortgage-interest tax deduction and other real-estate tax deductions, and discrimination embedded in higher education, labor markets, and housing policies—all of which helped build the white American middle class while leaving other racial and ethnic groups behind. The Great Recession of 2007-2009 further deepened the divide, as black and Hispanic individuals received subprime loans at a rate much higher than white individuals with the same credit score and bore the brunt of the collapse.

While there is no single solution to address the racial wealth gap, overhauling the mortgage credit system, combating unemployment and mass incarceration, and ending discriminatory housing policies are places to start. What is clear is that market forces or individual determination alone cannot overcome the decades of barriers put in place by decades of discriminatory policies and lack of equal enforcement of the law.

Must- and Should-Reads: January 31, 2017

Posted on by Brad DeLong

Interesting Reads:

Helicopter Money: When Zero Just Isn’t Low Enough: Milken Review

Posted on by Brad DeLong

At Milken Review: Helicopter Money: When Zero Just Isn’t Low Enough: If you pay much attention to the chattering classes — those who chatter about economics, anyway — you’ve probably run across the colorful term “helicopter money.” At root, the concept is disarmingly simple. It’s money created at the discretion of the Federal Reserve (or any central bank) that could be used to increase purchasing power in times of recession. But the controversy over helicopter money (formally, money-financed fiscal policy) is hardly straightforward… Read MOAR at Milken Review

Should-Read: Neil Cummins: Longevity and the Rise of the West: Lifespans of the European Elite, 800-1800

Posted on by Brad DeLong

Should-Read: Neil Cummins: Longevity and the Rise of the West: Lifespans of the European Elite, 800-1800: “From the age at death of 121,524 European nobles from 800 to 1800…

…Longevity began increasing long before 1800 and the Industrial Revolution, with marked increases around 1400 and again around 1650. Declines in violence contributed to some of this increase, but the majority must reflect other changes in individual behavior. The areas of North-West Europe which later witnessed the Industrial Revolution achieved greater longevity than the rest of Europe even by 1000 AD. The data suggest that the ‘Rise of the West’ originates before the Black Death.

Berkeley Economic History Seminar 211 :: Monday, January 30, 2017 2:00pm – 3:30pm :: 639 Evans Hall

Must-Read: Simon Schama: Joyless Fantasies Abound in Trump’s Inauguration Speech

Posted on by Brad DeLong

Must-Read: Simon Schama: Joyless Fantasies Abound in Trump’s Inauguration Speech: “The 45th president is not only a cantankerous man but… a mentally lazy one…

…who cannot be bothered to read daily intelligence briefings and whose speech was a barely defrosted abridgment of the acceptance tirade at Cleveland… a red rag of an address stitched together from other people’s rhetorical cast-offs…. Bannon… may think he’s restarting the New Deal’s investment in infrastructure but, if historical memory serves, Roosevelt did not actually start with a massive tax break for the top 1 per cent. In all likelihood the president will not be sweating the small stuff, emerging from the sand trap every so often to snarl and bludgeon frightened executives with taking away their toys unless they repair immediately to Duluth and open a widget factory. The actual heavy lifting will be delegated to his cabinet which largely conforms to what the Greeks called a “kakistocracy”: ​government of the least-qualified….

When it’s a matter of Rick Perry, nominated as energy secretary not knowing that his department is responsible for America’s nuclear stockpile, incredulous derision turns to red alert…. A minority vote has, through the anachronisms of the electoral college, imposed the priorities of rural and small town America on the great, populous, cosmopolitan cities…. ​The rest of the world might feel inclined to greet this swerve into isolationism, the arrival of a smaller, narrower, not a greater America, with a shrug were it not for the fact that however much President Trump wants to decree it away, global interconnectedness is an unavoidable fact of life in the 21st century…. Mr Trump’s repeated declaration of Nato’s obsolescence, and the doubt he has cast over the treaty’s obligation to treat an attack on one member as an attack on all, is tantamount to an invitation to Russian adventurism… greeted by ultranationalists and fascists from in Europe with the kind of manic glee displayed by beach bullies kicking in the sandcastle….

“The time for empty talk is over. The time for action is here,” the president proclaimed. The American majority, multitudes of whom look on his proposals with dismay and revulsion, should now take those words to heart.