Category: Equitablog

Must- and Should-Reads:

• Robert Reich: What Happened to the Moral Center of American Capitalism?
• Yael T. Abouhalkah: Woeful new jobs figures should embarrass Govs. Sam Brownback and Jay Nixon
• Yuriy Gorodnichenko: Infrequent but Long-Lived Zero-Bound Episodes and the Optimal Rate of Inflation
• Must-Read: Jared Bernstein: How Welfare Reform Ruined Public Assistance for the Very Poor, According to Kathryn Edin and Luke Shaefer’s New Book, $2.00 a Day
• Jonathan Portes: What’s The Effect Of Immigration On London?
• Must-Read: Paul Krugman: Trump Is Right on Economics
• MaxSpeak: A Postscript on Job Guarantees
• Cathy O’Neil: Big Data, Disparate Impact, and the Neoliberal Mindset

Might Like to Be Aware of:

• Must-Read: Chad Orzel: Planning To Study Science In College? Here’s Some Advice

I am now swinging into the camp of thinking that the only way to understand this–and by “this” I mean everything from Peter Schiff to Robert Lucas–is as a form of affinity fraud:

Must-Watch: Josh Barro Laughs At Peter Schiff Claiming Economy In Recession For Entire Obama Presidency:

I find the very sharp Marty Felstein engaging in a goalpost-moving effort that I cannot endorse:

There may be some powerful argument that the true consumer price index has risen more for the rich than for the middle class and the poor. But if there is, I am not aware off it. And so I think: The existence of downward bias from failure to measure the value of new good and new kinds of goods in official statistics of real income growth does not reduce the rise in inequality over the past generation–although it does mean that we collectively are richer now relative to our predecessors than we would be if official statistics were gospel.

Here I think we need to draw some distinctions. If you are not tech-savvy–if you are not a relatively intensive user of modern information, entertainment, and communication technologies–then you do not benefit from them. Then the official statistics showing declining median incomes over the past generation apply to you. And you are certainly much poorer now than you reasonably expected back then to be now. And it is wholly reasonable for you to believe that, while the economy has worked for the rich, it has not worked for you and somebody should be held accountable.

If you are tech-savvy, then it is still reasonable for you to complain. You do need to praise the bureaucrats of DARPA and the other pieces of government support for what became Silicon Valley. You do need to be grateful for California entrepreneurship and enterprise. But that enormous outpouring of wealth and enterprise is orthogonal to the rest of the economy–which has still failed you. And, especially, it is not irrational for you to feel upset by the fact what you thought were the standard indicia of middle-class status now seem beyond your grasp and getting further beyond every day.

Thus while I very much agree with Marty that we should be doing much more to boost the growth of middle-class incomes in the future, I do think it is very important to look at the reasons why the coming of Silicon Valley was not associated with an increase in the pace of growth of middle-class incomes but, even with Marty’s adjustments of the statistics, a decline.

It is not as though median incomes remained a constant fraction of per capita net economic product, is it? And it is not as though the rise in income inequality brought forth anything of the promised increase in the ex-Silicon Valley rate of economic growth, is it? And it is not as though Silicon Valley was in any sense the product of lower tax rates on the rich, is it?

In my view, not reduced marginal tax rates and their result of still less social insurance is the road to faster growth of median incomes. Rather, it is a government that pragmatically identifies the true industries of the future and makes it easy for the economy to move into them that we should seek.

Martin Feldstein: The U.S. Underestimates Growth: “Statisticians are supposed to measure price inflation and real growth…

…Which means that, with millions of new and rapidly changing products and services, they are supposed to assess… exactly how much it costs now to buy the same quantity of “value” or “satisfaction” that $1,000 could buy a year ago. These tasks are virtually impossible…. It is relatively easy to add up the total dollars that are spent in the economy–the amount labeled nominal GDP…. Comparing the increase of nominal GDP to the increase in the price level… is impossibly difficult… particularly… for new products…. The official method of calculating the price index doesn’t incorporate this new product until total spending on it exceeds some threshold level…. The main effect of raising well-being… [by] introduc[tion] is completely ignored…. The result is that the rise in real incomes is underestimated….

Over the past two decades…. the… [measured] increase of [median] real household income [is] down to less than 5%… [in] official statistics also… a 10% decline… since 2000, fueling economic pessimism. But these low growth estimates fail to reflect the remarkable innovations in everything from health care to Internet services to video entertainment that have made life better…. We should worry less about the appearance of slower growth of middle-class incomes and do more to increase that growth in the future.

Must-Read: Paul Krugman: Trump Is Right on Economics: “The economy has nonetheless done far better than should have been possible…

…if conservative orthodoxy had any truth to it. And now Mr. Trump is being accused of heresy for not accepting that failed orthodoxy?… [Moreover,] Bush’s attacks on Mr. Trump are falling flat, because the Republican base doesn’t actually share the Republican establishment’s economic delusions…. We didn’t really know that until Mr. Trump came along. The influence of big-money donors meant that nobody could make a serious play for the G.O.P. nomination without pledging allegiance to supply-side doctrine, and this allowed the establishment to imagine that ordinary voters shared its antipopulist creed…. Bush’s hapless attempt at a takedown suggests that his political team still doesn’t get it, and thinks that pointing out The Donald’s heresies will be enough to doom his campaign…. Trump, who is self-financing, didn’t need to genuflect to the big money…. It turns out that the base doesn’t mind his heresies….

I’m not making a case for Mr. Trump. There are lots of other politicians out there who also refuse to buy into right-wing economic nonsense, but who do so without proposing to scour the countryside in search of immigrants to deport, or to rip up our international economic agreements and start a trade war. The point, however, is that none of these reasonable politicians is seeking the Republican presidential nomination.

Must-Read: Jared Bernstein: How Welfare Reform Ruined Public Assistance for the Very Poor, According to Kathryn Edin and Luke Shaefer’s New Book, $2.00 a Day: “Over the past few decades, anti-poverty policy in this country…

…has evolved to be ‘pro-work.’… Low-income parent[s] who[‘re] well connected to the job market the government will help…. But if you’re disconnected from the job market public policy won’t help you much…. How do people in that second group survive?… Edin and… Shaefer…. A few… strategies: availing themselves of charities and public spaces (like libraries), selling food stamps for cash (illegal, and they typically get just 60 cents on the dollar on the street), relying on relatives (who can be as hurtful as helpful), selling scrap metal or aluminum cans, selling plasma (which involves considerable angst as to whether a person’s blood’s iron levels are sufficiently high, especially difficult around menstruation), receiving some public support (housing vouchers, nutritional support, disability payments), occasionally holding a job, and—the most common strategy of all—just going without…. $2-a-day poverty doesn’t mean that their subjects really survive for long periods on nothing but $2 a day… no one could survive in this country if that was all they had to live on over an extended period. What they call ‘$2-a-day poverty’ means spells of scraping by on almost no regular, reliable income, though many may be able to access the dicey income sources just noted above…. ‘1.5 million households with roughly 3 million children were surviving on cash incomes of no more than $2 per person, per day in any given month’ in 2011. That’s about 4 percent of all families with kids, though once you start adding other resources, like the value of SNAP (Supplemental Nutrition Assistance Program, more commonly known as food stamps), that percentage declines. Though blacks and Hispanics are disproportionately likely to be deeply poor, half are white…

Must-Read: Chad Orzel: Planning To Study Science In College? Here’s Some Advice: “I’ll outsource a bit of this to… Rhett Allain…

…who explained why your intro physics class should include computer programming…. I wholeheartedly agree with Rhett–computer simulations need to be a part of the intro science courses…. When we start doing programming, I tell students that this matters because there are only about a dozen problems in physics that you can readily solve exactly with pencil and paper…. And that goes double, maybe triple for engineering, where you can’t get away with the simplifying spherical-cow approximations…. Any really interesting problem in any technical field is going to require some numerical simulation, and the sooner you learn to do that, the better. The best way to handle this is to have it integrated into your intro courses in your chosen major field–the best way to learn to code is to have a problem you need a computer to solve…

Rhett Allain: You Should Be Coding in Your Physics Course: “Let’s talk about the numerical calculations…

…breaking a complicated problem into many smaller (and easier) problems. Since this makes many problems to solve, the simplest strategy is to use some type of computer…. I think it’s an important topic to cover in introductory classes. What are some of the reasons faculty don’t include numerical calculations?… ‘Numerical calculations are too complicated and require too much setup to be used in an intro course.’ I admit that this used to be true—but no longer. In the past, it was a huge pain in the rear to get into some type of computing environment for non-programmers…. But it’s not 1995 any more. Numerical calculations aren’t out of reach of beginning students. They aren’t even out of reach for physics faculty…. Python and VPython…. GlowScript…. Trinket…. There are certainly many other tools…

Preliminary Initial Notes on the Economics of Star Trek:

• Look, 1776 North America was a very rich country by 18th Century standards because of the enormous land to labour ratio, and yet still 75% of our people were farmers engaged in growing your 2,500 calories per day plus essential nutrients plus other things…
• Today, here in the United States, we are down to 3% of the labour force who are growing our food…
• Going from 75% to 3% means as far as basic calories and nutrients are concerned we have gone 95% of the way to the Replicator as far as basic calories plus essential nutrients are concerned…
• Agriculture has been the occupation of most of the human race since the invention of, well, agriculture…
• Roman legions conquered much of Europe and some of Asia on basically a big loaf of barley bread a day, plus some salt and garlic–plus whatever squirrels they could catch, and whatever greens they could gather where the legions were marching…
• They were happy to have this diet as long as they had sufficient salt attached to it…
• That 2,500 calories plus essential nutrients plus enough protein was the destiny for most of human history…
• That average diet of bare calories and nutrient–even with 75 to 80% of your labour force devoted to producing it, produced adult males whose average height was maybe 5’2″ or 5’3″…
• Such a diet! If you were to try to give it to your children today Alameda County Child Protective Services would come and take your children away and you would never see them again…
  On comfort:
• We [lucky enough to be here in the middle-class North Atlantic] have solved scarcity with respect to food, have solved scarcity with respect to clothing…
• Consider that the average Prussian noble family in the 18th Century had one gown suitable for court appearances to be shared among all of the females–and these are people who are nobles, these are people with a “von” in their surname…
• Last time I was in Britain, we went to Oliver Cromwell’s house in Ely–the house he lived in when he was parliamentary representative: the ceilings are seven feet tall…
• When I was 25, my house in Waltham Massachusetts was more comfortable and had many more square feet per person than Oliver Cromwell’s house–plus we had appliances, and we had central heat and air conditioning…
• Nathan Rothschild, the richest man of the world in the 19th Century, died when he was younger than I am of an infected abscess in his back. We don’t die of infected abscesses.”
• People regard Riker as a weirdo because he would rather be second-in-command to Picard than to control his own spaceship. And it’s pretty clear that that quest for honor and authority is a feature of society, rather than errors by screenwriters who haven’t gotten the memo…

Must- and Should-Reads:

• Noah Smith: China May Never Get Rich – Bloomberg View
• Must-Read: Kevin Drum: The Future of Health Care Costs Looks Surprisingly Rosy
• Must-Read: Paul Krugman: Bubblewashing
• Must-Read: Carmen Reinhart: Inflation, the Fed, and the Big Picture
• Must-Read: Ben Thompson: Tesla Model X Pricing Revealed, Consumer Reports and the Tesla P85D
• Must-Read: Daniel Davies: The shortest Greece post ever

Might Like to Be Aware of:

• Cahokia
• Digby: Journalists Are Not Potted Plants: They Have Agency

Must-Read: One important question (and answer) are missing from the very sharp Daniel Davies’s latest:

Daniel Davies: The shortest Greece post ever: “It has been suggested… that 10000 words about a bailout…

from 5 years ago… was a bit too much. I disagree…. But… this is the Twitter generation, so here is a very, very condensed version of my “Relitigating the 2010 bailout” series: How much primary deficit financing did Greece get from the troika? Roughly, EUR15bn. How much primary deficit financing could Greece have got from anywhere other than the troika?: Roughly, zero. So, how much did Greece benefit from the troika, in terms of smoothing output and consumption?: Roughly, 6% of [annual] GDP over four years. Is that a lot?: Yes, proportionately, it’s about half as big again as what West Germany received under the Marshall Plan.

The missing question and answer is: How much extra did Greece suffer because its attachment to the eurozone prevented its following the depreciation road to structural adjustment?: 15% of annual GDP x 5 years so far = 75% of annual GDP

And there is also: How much does Germany benefit from the export powerhouse role it could not assume if the DM were not in the eurozone?: I leave that as an exercise for the reader.

Must-Read: Ben Thompson: Tesla Model X Pricing Revealed, Consumer Reports and the Tesla P85D: “Stepping back, when have new things ever not been expensive?…

…Back in 1900 cars were hand-made and cost $1,000, while a horse was only $70. It hardly followed that cars were doomed, or that those building them ought to have f—ed themselves. Moreover, this $132,000 crossover, and the other high-priced Tesla’s that have come before it, are absolutely necessary for the Model 3, and for multiple reasons: –From a technical perspective, every model to date has moved Tesla down the learning curve from the perspective of actually making cars, making batteries, and making software. The importance of this process–and the exponential gains that result–cannot be overstated. –From a financial perspective, the high-priced models sold to-date have helped in two ways: most obviously unit profits can go straight into R&D for future models, but also impressive sales, enthusiastic customers, and rapturous reviews support Tesla’s stock, further issuances of which have been used to pay for launching first the Model S and now the Model X. –Relatedly, and most importantly, from a product perspective, by not prioritizing low prices Tesla has been able to focus on selling a superior experience. This is a big reason why recent low oil prices haven’t put a damper on Tesla’s sales: Tesla’s customers aren’t buying electric vehicles to save on gas! Musk explained this himself in 2006 in a blog post called The Secret Tesla Motors Master Plan (just between you and me)…