Category: Equitablog

…wholesale gasoline distributors… will have to buy… one emissions allowance for every metric ton of greenhouse gases you emit when you burn the gasoline…. At the current price of allowances… that works out to about 10 cents per gallon of gas…. Unfortunately, as the date for expanding cap-and-trade to transportation fuels approaches, both the program’s opponents and supporters have been exaggerating how much or little impact it will have….

The oil lobby… is claiming that the change will raise gas prices 16 to 76 cents… based on two analyses that were done many years ago…. The oil industry knows what allowances actually sell for today…. But they are choosing to stick with the outdated–and scarier–estimates…. Some proponents… are saying that Big Oil is not required by law to raise its prices, so it will be its own choice if it does, not the fault of the cap-and-trade program. This is just as disingenuous….

By establishing a price for emissions, California sends a signal to the rest of the country and the world that we recognize the risk of climate change and are willing to take actions to address it…. No one thinks California’s climate change program alone will solve this global problem, but if advanced economies like ours aren’t willing to step up, there will be no solution at all.

Must- and Shall-Reads:

• Gianfranco Poggi:
  Discussing Karl Polanyi, Understanding the Current Crisis: Reviewing Bloch and Somers “The Power of Market Fundamentalism: Karl Polanyi’s Critique”
• Laura Tyson:
  The Rising Costs of US Income Inequality
• Simon Wren-Lewis:
  Bond market Fairy Tales: Part 1 | Part 2
• Binyamin Applebaum:
  The Vanishing Male Worker: How America Fell Behind
• Tom Vanderbilt:
  The Counterintuitive Science of Traffic
• Erwin Chemerinsky:
  Prosecute John Yoo, Says Law School Dean
• Ron Wyden:
  Torture Rebuttal
• Jacob Schlesinger:
  For Japan’s Shinzo Abe, Now Comes the Hard Part

1. Marcy Wheeler:
   As Last Piece of Business, Carl Levin Reiterates that Dick Cheney Lied Us into War: “Carl Levin… released a letter he received from John Brennan demonstrating what a liar Dick Cheney is…. Levin has been trying to get the CIA to declassify a March 13, 2003 cable…. Brennan still refuses to declassify the cable, but his letter does explain some of CIA’s assessment of that source. ‘On 13 March 2003, CIA headquarters received a communication from the field responding to a request that the field look into a single-source intelligence report indicating that Mohammed Atta met with former Iraqi intelligence officer al-Ani in Praque in April 2001. In that communication, the field expressed significant concern regarding the possibility of an official public statement by the United States Government indicating that such a meeting took place. The communication noted that information received after the single-source report raised serious doubts about that report’s accuracy.’… Brennan’s letter goes on to quote on line from the report. ‘The field added that, to its knowledge, ‘there is not one USG [counterterrorism] or FBI expert that… has said they have evidence of ‘know’ that [Atta] was indeed [in Prague]. In fact, the analysis has been quite the opposite.’ [brackets original] Four days after this report, Cheney fought mightily to make the Atta claim once more…. I raise all this when I should instead be talking about the torture report because it gets to the point…. This all was about exploitation, not intelligence. And for over a year, Dick Cheney’s goal for exploitation was to create a fraudulent case for the Iraq war, whether via torture or dubious single source claims in Prague. As Cheney complains that the torture report (which reported on the anal rape done in the guise of rectal rehydration done on his order) is ‘full of crap,’ we should never forget that one end result of this was the disastrous Iraq war…”
2. Cory Doctorow:
   Reviewing “How We Got to Now: Six Innovations That Made the Modern World”: “In How We Got to Now, [Steven] Johnson picks six profound technologies and follows their path from earliest prehistory to the modern age… glass (from Venetian glassblowers to telescopes and microscopes); cold (from icehouses to modern refrigeration, and the way our food infrastructure, medical science, and geography have been transformed by the ability to manipulate heat); sound (from early chanted ritual to phonographs, to music, urban noise, and radar); hygiene (the key innovations that let cities grow without being destroyed by disease, the germ theory of medicine, and clean rooms in microprocessor factories); time (early astronomy, the age of navigation and the Longitude Prize, the industrial revolution and the timeclock, and microsecond timing in modern computers); and, finally, light (from candles to whaling; the changes to human sleep cycles thanks to artificial light, lasers and electron microscopy). Each of these six lively stories is a tapestry worn of fascinating technical tid-bits and engrossing stories of personal sacrifice, genius, error, foolishness and difficulty from the cluster of inventors who are responsible for each one…”
3. Stanley Fischer:
   Fed’s Stanley Fischer Discusses Big-Bank Political Influence: “Mr. Fischer suggested rules set directly by legislatures can be imperfect, lamenting the role of Wall Street banks in shaping the 2010 Dodd-Frank financial overhaul law. ‘I thought that when Dodd-Frank started, that the banks would not succeed in influencing it, having lost all the prestige they lost,’ he told a crowd of several dozen at the Washington, D.C., think tank. ‘Boy, was I wrong.’ His remarks came less than a day after the House passed a spending bill that included a provision, long sought by banks, to scale back a Dodd-Frank requirement. Mr. Fischer also recalled how… leading the Bank of Israel…. When his central bank colleagues asserted that the institution acted independently of the elected government, his reply was, ‘Yes. And we are two bad decisions away from not being an independent central bank.’ Mr. Fischer said he believes the Financial Stability Board, an organization of regulators set up to coordinate the global response to the financial crisis, has been ‘a great success,’ in part because it has been more inclusive than other international bodies…”
4. Roger Farmer:
   Real business cycle theory and the high school Olympics:
   “I have lost count of the number of times I have heard students and faculty repeat the idea in seminars, that ‘all models are wrong’. This aphorism, attributed to George Box, is the battle cry  of the Minnesota calibrator, a breed of macroeconomist, inspired by Ed Prescott…. The cr  has been used for three decades to poke fun at attempts to use serious econometric methods to analyze time series data. Time series methods were inconvenient to the nascent Real Business Cycle Program that Ed pioneered because the models that he favored were, and still are, overwhelmingly rejected by the facts. That is inconvenient. Ed’s response was pure genius. If the model and the data are in conflict, the data must be wrong…. In a puff of calibrator’s smoke, the history of time series econometrics was relegated to the dustbin of history to take its place alongside alchemy, the ether, and the theory of phlogiston. How did Ed achieve this remarkable feat of prestidigitation? First, he argued that we should focus on a small subset of the properties of the data…. Ed argued that the trends in time series are a nuisance if we are interested in understanding business cycles and he proposed to remove them with a filter… remov[ing] a different trend from each series and the trends are discarded when evaluating the success of the theory…. He proposed that we should evaluate our economic theories of business cycles by how well they explain co-movements among the wiggles. When his theory failed to clear the 8ft hurdle of the Olympic high jump, he lowered the bar to 5ft and persuaded us all that leaping over this high school bar was a success. Keynesians protested. But they did not protest loudly enough and ultimately it became common, even among serious econometricians, to filter their data with the eponymous Hodrick-Prescott filter…. We don’t have to play by Ed’s rules…. Once we allow aggregate demand to influence permanently the unemployment rate, the data do not look kindly on either real business cycle models or on the new-Keynesian approach. It’s time to get serious about macroeconomic science and put back the Olympic bar.”
5. Daniel Davies:
   Reputations are made of…:
   “It is certainly true that one of the benefits of doing something stupid is that it saves you from having to spend money on maintaining your reputation as an idiot. However, is the reputation of an idiot really worth having?… It can be proved… the answer is no. If… being a belligerent idiot with no sensible regard for one’s own welfare was worth the candle… then everyone would want to get that reputation…. But if everyone wanted that reputation, then everyone would know that simply acting like an idiot didn’t mean that you were one, in which case it would be impossible to establish a reputation as an idiot in the first place…”
6. Noah Smith:
   Ross Douthat ponders the Liberal Marriage Hypothesis:
   “Finally, Douthat suggests his alternative to the Liberal Marriage Hypothesis: ‘We may have a culture in which the working class is encouraged to imitate what are sold as key upper-class values–sexual permissiveness and self-fashioning, spirituality and emotivism–when really the upper class is also held together by a kind of secret traditionalism, without whose binding power family life ends up coming apart even faster.’ This would be very convenient for a traditionalist who didn’t want to have to change his view of reality very much!… It sort of sounds like a version of what many traditionalist conservatives say when I bring up the LMH. In one form or another, they tell me that liberalism only works for smart people. Not-so-smart people, they tell me, need simple rules and guidelines, and guiding institutions like churches, in order to live safe, clean, successful, moral, industrious lives. You can’t just give them total social freedom and license and let them figure it all out for themselves, the traditionalists tell me. Well, maybe…. Or maybe… it just takes… a little more time. Maybe the upper class are the first to encounter… and therefore the first to figure out…. Maybe the working class is doing now what the educated class did in the 1970s and 1980s–responding to [the pill and] the advent of the service economy by adopting more equal gender roles…”

Should Be Aware of:

• Nick Szabo:
  The dawn of trustworthy computing
• Catherine Thompson:
  Cheney Throws Bush Under The Bus On Torture Program
• Mark Blaug: The Formalist Revolution of the 1950s
• Magda Fontana:
  The Santa Fe Perspective on Economics: emerging patterns in the science of complexity
• The Top 100 Star Trek Episodes Of All Time!
• [Exit Polls Project Big Win for Japan Ruling Party–AP(http://www.nytimes.com/aponline/2014/12/14/world/asia/ap-as-japan-election.html?partner=rss&emc=rss&smid=tw-nytimes&_r=1)
• Elias Asquith:
  Bush’s Willful Ignorance: Why He Wanted to Know as Little About Torture as Possible
• Jeet Heer:
  Out Here It’s 2014

1. Kathleen Geier:
   The importance of having skin in the game: thoughts on economic diversity and liberal elitism:
   “Human beings’ economic background and experiences shape their political views and priorities in profound ways…. Most liberals freely acknowledge that race and gender diversity are important and that when organizations include women and people of color, they often bring unique and valuable perspectives…. So why are some liberals so resistant to the idea that economic diversity is also important, and for similar reasons?… In the dementedly pompous editors’ letter published last week, ex-TNR staffers proclaimed that their former magazine is ‘liberalism’s central journal’ and ‘a kind of public trust.’ With the shakeup at the magazine, ‘The Promise of American Life has been dealt a lamentable blow.’ Oh my. Yet… for at least as long as I’ve been reading it, the New Republic been a profoundly elitist and insular institution, not just in terms of race and gender, but perhaps even more centrally, in terms of class…. [That] helps to explain why it supported many neoliberal economic policies and did not begin taking economic inequality seriously until recently. But then again, why would you expect them to?… They had no skin in the game…. Trashing welfare, labor unions, and ‘entitlements’ while cheerleading for privatization and ‘free’ trade, the magazine that perennially policed the leftmost bounds of American political expression helped push the terms of the political debate ever rightward…. Take, for example, this snotty editorial about Occupy…. Liberals need to seriously commit themselves to narrowing the economic divide…. And pay your interns a living wage, dammit!…”
2. Ryan Avent:
   Labour Markets: On “Bullshit Jobs”:
   “Why… would firms spend… employing people to do worthless tasks (especially when they’ve shown themselves to be exceedingly good at not employing people)?… Says Mr Graeber: ‘The ruling class has figured out that a happy and productive population with free time on their hands is a mortal danger (think of what started to happen when this even began to be approximated in the ‘60s).’ I am immediately bursting with questions…. How does the ruling class co-ordinate… this?… If much… employment is useless… why not just keep them on during recessions?… As technology has improved, it has become ever easier to dispense with human labour in mechanical processes…. not surprising that employment growth has shifted elsewhere…. Administrative jobs are the modern equivalent of the industrial line worker…. Why today’s workers aren’t rewarded with high wages… one possible answer is that, well, they are. Real wages for today’s clerical workers are far higher than they were for manufacturing workers a century ago…. If firms had to pay more to get a body in the deskchair, they would…. The issue is not that jobs used to have meaning and now they don’t…. The issue is that too little of the recent gains from technological advance and economic growth have gone toward giving people the time and resources to enjoy their lives outside work…”
3. Dara Lind:
   Ted Cruz just did a huge favor for Democrats:
   “The Senate is unexpectedly staying in session over the weekend… thanks to a late-night maneuver by Senators Ted Cruz and Mike Lee…. Because of the extra session over the weekend, Senate Majority Leader Harry Reid is going to be able to secure votes on up to 20 Obama administration nominees… Surgeon General, the head of the country’s chief immigration enforcement agency, and several federal judgeships who Republican senators have been blocking…. What happened?… Last night, the Senate was supposed to pass a bill funding the government through Wednesday. Then, they would adjourn for the weekend, and come back on Monday to… fund most of the government through September, 2015. This plan got worked out by Senate Majority Leader Harry Reid and Senate Minority Leader Mitch McConnell…. Sens. Ted Cruz (R-TX) and Mike Lee (R-UT)… refused to consent to the procedural plan…. Congressional expert Sarah Binder of the Brookings Institution describes the result as ‘full bloom procedural nuttiness.’… At this rate, they’ll be able to start voting for cloture on the nominees on Monday…”

…[Steven] Johnson picks six profound technologies and follows their path from earliest prehistory to the modern age… glass (from Venetian glassblowers to telescopes and microscopes); cold (from icehouses to modern refrigeration, and the way our food infrastructure, medical science, and geography have been transformed by the ability to manipulate heat); sound (from early chanted ritual to phonographs, to music, urban noise, and radar); hygiene (the key innovations that let cities grow without being destroyed by disease, the germ theory of medicine, and clean rooms in microprocessor factories); time (early astronomy, the age of navigation and the Longitude Prize, the industrial revolution and the timeclock, and microsecond timing in modern computers); and, finally, light (from candles to whaling; the changes to human sleep cycles thanks to artificial light, lasers and electron microscopy).

Each of these six lively stories is a tapestry worn of fascinating technical tid-bits and engrossing stories of personal sacrifice, genius, error, foolishness and difficulty from the cluster of inventors who are responsible for each one…

One of the things I have never understood is why Barack Obama and Tim Geithner

Roger Farmer:
Real business cycle theory and the high school Olympics:
“I have lost count of the number of times…

…I have heard students and faculty repeat the idea in seminars, that ‘all models are wrong’. This aphorism, attributed to George Box, is the battle cry  of the Minnesota calibrator, a breed of macroeconomist, inspired by Ed Prescott…. The cry has been used for three decades to poke fun at attempts to use serious econometric methods to analyze time series data. Time series methods were inconvenient to the nascent Real Business Cycle Program that Ed pioneered because the models that he favored were, and still are, overwhelmingly rejected by the facts. That is inconvenient.

Ed’s response was pure genius. If the model and the data are in conflict, the data must be wrong…. In a puff of calibrator’s smoke, the history of time series econometrics was relegated to the dustbin of history to take its place alongside alchemy, the ether, and the theory of phlogiston. How did Ed achieve this remarkable feat of prestidigitation? First, he argued that we should focus on a small subset of the properties of the data….

Ed argued that the trends in time series are a nuisance if we are interested in understanding business cycles and he proposed to remove them with a filter… remov[ing] a different trend from each series and the trends are discarded when evaluating the success of the theory…. He proposed that we should evaluate our economic theories of business cycles by how well they explain co-movements among the wiggles.

When his theory failed to clear the 8ft hurdle of the Olympic high jump, he lowered the bar to 5ft and persuaded us all that leaping over this high school bar was a success. Keynesians protested. But they did not protest loudly enough and ultimately it became common, even among serious econometricians, to filter their data with the eponymous Hodrick-Prescott filter….

We don’t have to play by Ed’s rules…. Once we allow aggregate demand to influence permanently the unemployment rate, the data do not look kindly on either real business cycle models or on the new-Keynesian approach. It’s time to get serious about macroeconomic science and put back the Olympic bar.