Category: Equitablog

…which none of us can deny is the outstanding conundrum of today. We all agreed that, whatever the best remedy may be, we must reject all those alleged remedies that consist, in effect, in getting rid of the plenty. It may be true, for various reasons, that as the potential plenty increases, the problem of getting the fruits of it distributed to the great body of consumers will present increasing difficulties. But it is to the analysis and solution of these difficulties that we must direct our minds.

…Everything I wrote, I wrote in the hopes that someone else would take it and try to use it on their site, with a link back to my site. The lesson of that, to me, was that writing on the internet is a positive-sum endeavor: I was creating content that helped other people make their sites better, and in using that content, they were helping me grow my site. Vox’s approach to aggregation–which Nate Silver criticized today on Twitter–is informed by that. Our policy, to our staff, is simple: any time we use work created by someone else, we need clear attribution to the original author and a link back to the source. When appropriate, we should do more than that: we should add to the conversation with new facts, ideas, or reporting.

The problem comes when we do it poorly–and in those cases, we deserve to get called out. Take the post that frustrated Silver. The attribution there was clear…. The post went on to argue with Silver…. This wasn’t just aggregation…. The graphic itself included a FiveThirtyEight watermark…. But the post didn’t include a link. This was carelessness, not malice, but it’s a violation of Vox’s internal standards…. Silver’s right to be upset… He has my apologies….

Aggregation has been around a whole lot longer than Google. Time magazine, for instance, began its life as an aggregation shop…. If you read Alan Brinkley’s biography of Henry Luce, you’ll find a furor that feels very familiar…. I helped to create Know More, a site dedicated to aggregating in a more ethical way. We wanted a way to make clear that even when something is aggregated well, that doesn’t mean there’s not much more information at the source… a big ‘Know More’ button that would lead people back to the original source to, well, learn more….

While aggregation has always been a clear service to readers, it can be enormously frustrating to writers…. But aggregation, when done correctly, offers value to the original source…. This informs Vox’s policies…. We want people to talk about our work, put it elsewhere, spread the Vox word. We’re currently working on products that will make it even easier for other sites to use our work…. This stuff is complex, and we don’t always get it right. So if you ever feel Vox isn’t using your work in the way you’d want, email me at ezra@vox.com and let me know. Our intention is always to do things in a way that is positive-sum, and if you ever feel we’re failing that ideal, we want to know, and we’ll work with you to change it.

…Espresso is again meant to be the daily desert-island briefing…. What we wanted to be was forward-looking — to give you the feeling of being ahead of the news, ‘this is what’s coming up today, and look out for this.’ Another aspect of it is… that we don’t do links…. If you want to get links you can get them from other people. You can go on Twitter and get as many as you like. But the idea was… you can get to the end of it without worrying that you should’ve clicked on those links in case there was something interesting…. We’ve clicked on the links already and we’ve decided what’s interesting, and we’ve put it in Espresso.

That’s the same that we do in the weekly as well–we’re not big on linking out. And it’s not because we’re luddites, or… don’t want to send traffic…. It’s that we don’t want to undermine the reassuring impression that if you want to understand Subject X, here’s an Economist article on it–read it and that’s what you need to know. And it’s not covered in links that invite you to go elsewhere. We’ll link to background, and we’ll link to things like white papers or scientific papers and stuff like that. The idea of a 600-word science story that explains a paper is that you only need to read the 600-word science story–you don’t actually have to fight your way through the paper. There is a distillation going on there.

That’s a big thing that we’re focusing on. How else can we apply the same values–which is the distillation and the finishability, the trend-spotting and the advocacy–how else can we apply them to new areas? So we have various things that are on the boil…

…but Vox’s Dylan Matthews brings something news to the table, pointing to the contemporary Democrats’ default anti-poverty policy: get people into a job, any job. Translated that means work supports for jobs with very low pay and scant prospects for upward mobility. The genesis of this policy was the so-called Personal Responsibility and Work Opportunity Reconciliation Act of 1996, also known as “welfare reform.”… From 1996 to 2000, most of the evidence on TANF, with one important exception, showed up positive. Poverty decreased, employment and wages increased. The problem for evaluation is that this same period happened to be one of the best in U.S. history, in terms of labor market advance. In addition, the minimum wage (in 1996 and 1997) and the Earned Income Tax Credit (in 1993) increased. This makes it hard to isolate any beneficial effects of TANF. Unfortunately, the positive signs for those in the bottom income quintile (20%) of the population have crumbled since 2000. Truth is, they weren’t that positive to begin with. The impact on work in “leavers” studies (where TANF recipients were tracked after graduating from the program) tended to show work effects in the high teens. Think about that for a second. You’re working, say, one week a month. You increase work (assuming you have the option) by the top of the range, 20%. Instead of working five days a month, you work six days. Twelve extra days a year. Nor does work necessarily mean higher income, since increased earnings offset benefits, and work expenses reduce net income. The other ominous, early sign was income decline for the poorest single mothers’ families, documented by the saintly Wendell Primus and colleagues. (Primus actually resigned from his post with the Clinton Administration after the welfare was signed. How often do you see that.)…

At the time I hoped that the reform might cast a different light on welfare recipients. Instead of being bums, they would be workers. But enrollment in TANF has dropped off the table. Meanwhile, Barack Obama is slurred as “the Food Stamp president.” So the meanness has not dissipated, it has just been redirected…. All this is a lengthy prelude to Matthews’ post. His remedy for a future of lousy jobs is the UBI…. You’re not as much at the mercy of employers…. The chief benefit of the ‘exit’ option is the implied upward pressure on wages. So far, so good. But Matthews’ thrust is actually more radical than that. He is throwing shade on the moral obligation and axiomatic economic imperative of work itself, in particular employed work…. Let’s desacralize work. Dignity of work, my fanny. Work that is truly voluntary would be nice. Work that is compelled as an alternative to destitution does not comport with any reasonable concept of dignity. It’s like the dignity of kicking back to Tony Soprano…

Finally, there is output growth. In the UK, real (inflation-adjusted) GDP fell by 3.8% from the fourth quarter of 2007 to the second quarter of 2010. It then rose by 8.1% from that point until the fourth quarter of 2014. In the US, real GDP fell by 1.6% from the fourth quarter of 2007 to the second quarter of 2010, and then rose by 10.5% from then until the fourth quarter of 2014. Thus, both countries have experienced moderately high and broadly similar growth rates since May 2010, when Cameron’s government took power.

I have no idea what Paul Krugman did to tick off Jeffrey Sachs so I’ll let him speak for himself. But let’s note the fact that the real GDP in the US was a mere 8.7% higher in 2014QIV than it was in 2007QIV. That is by any measure a terrible economic performance. We should also note that real GDP in the UK has increased only 3.7% over the same period. For anyone to suggest that such a dismal economic record justifies fiscal austerity leaves me wondering where this person learned their macroeconomics.

From my perspective, the remarkable–and remarkably stupid–thing we see here is Jeffrey Sachs’s belief claim that U.S. economic performance since the second quarter of 2010 has been in any sense praiseworthy, and that a government that accomplished that is worth voting for.

It hasn’t.

And the reason that it hasn’t has been (a) extraordinary state- coupled with moderate federal-level fiscal austerity, (b) the failure of the Obama administration to use its housing-finance regulatory powers as tools of macroeconomic management, and (c) the unwillingness and perhaps inability of the Federal Reserve to take up the slack.

In the United Kingdom, the Prime Minister who possesses a majority of the House of Commons is the government: Cameron rules fiscal policy, regulatory policy, and monetary policy. Cameron bears responsibility. In the United States, since the second quarter of 2010 Obama has had no power to pass additional fiscal stimulus and no power to reshape the FOMC. Only housing regulatory policy was under his control. Obama gets to claim nearly-full responsibility for the relatively good things. But Obama has to share only a portion of the blame for the bad things.

…This justifies a large part of the rate increase shown in the dots chart, a view also explicitly stated by Ms Yellen in her speech on policy normalisation. Mr Summers agrees that the Fed will be forced to deliver the equilibrium rate most of the time, but argues that it cannot do so at the moment because of the zero lower bound…. Summers implies that the equilibrium real rate is not only extremely low… [but] may stay there for many years, thus failing to validate the rise in the equilibrium rate implied by the Bernanke/Yellen view. One interpretation of the market’s pricing of forward short rates is therefore that investors lean on the side of Mr Summers…. The resulting abnormally low real bond yields are obviously a critical under-pinning for buoyant asset prices…. If the FOMC were to make it crystal clear that investors are just downright wrong about the forward path for interest rates, the resulting correction in both bond and equity markets could be severe….

The FOMC… are certainly willing to publish the dots, and to spell out their views on the most likely path for the equilibrium real rate. But they are far from ready to risk a major disruption in the markets by telling investors explicitly that they have misjudged the hawkishness of the Fed. Why is this? Presumably it is because the Yellen camp concedes that there is great uncertainty about the equilibrium real rate…. The Bernanke/Yellen belief that the equilibrium rate will rise in the next 3 years as headwinds diminish is at best conjectural….

What would cause Ms Yellen to act more decisively by ‘shocking’ the market’s path for forward short rates? The equilibrium rate is not directly observable, and is very hard even to estimate within a narrow range. This invites caution. The only reliable signal that the equilibrium rate is rising would be upward pressure on inflation. The so-called ‘whites of their eyes’ policy stance, supported by Mr Summers and several members of the FOMC, would therefore wait until there is clear evidence of rising inflation before becoming confident that the equilibrium rate is rising. Fortunately for global asset prices, Ms Yellen is not yet willing to oppose that point of view with any real conviction.