Category: Equitablog

Must- and Shall-Reads:

• Matt O’Brien: The bottom 90 percent are poorer today than they were in 1987 – The Washington Post
• Mark Thoma: Will the big banks ever clean up their act?
• Richard Mayhew: Calling the consolidation efficiency bluff

1. Michela Giorcelli and Petra Moser: Copyright and Creativity: Evidence from Italian Operas: “This paper exploits variation in the adoption of copyright laws within Italy – as a result of Napoleon’s military campaign – to examine the effects of copyrights on creativity. To measure variation in the quantity and quality of creative output, we have collected detailed data on 2,598 operas that premiered across eight states within Italy between 1770 and 1900. These data indicate that the adoption of copyrights led to a significant increase in the number of new operas premiered per state and year. Moreover, we find that the number of high-quality operas also increased – measured both by their contemporary popularity and by the longevity of operas. By comparison, evidence for a significant effect of copyright extensions is substantially more limited. Data on composers’ places of birth indicate that the adoption of copyrights triggered a shift in patterns of composers’ migration, and helped attract a large number of new composers to states that offered copyrights…”

2. Alan Zibel: Low Down Payments Are Coming Back: “On Monday, Federal Housing Finance Agency Director Mel Watt announced that mortgage-finance companies Fannie Mae and Freddie Mac would start backing loans with down payments as low as 3%. And on Tuesday, three federal agencies approved a loosened set of mortgage-lending rules, removing a requirement for a 20% down payment for a class of high-quality loan known as a ‘qualified residential mortgage’…. In addition, veterans can apply for 100% financing on loans insured by the Veterans Administration, and the U.S. Department of Agriculture has several loan programs…. Borrowers with low down payments do default in higher numbers than similar borrowers with higher down payments, said Mark Zandi…. However, Mr. Zandi still believes that low-down-payment lending can be done in a responsible way, by making sure borrowers have solid credit, have low ratios of debt compared with their income and are taking on standard loans…”

3. <Gavyn Davies: China’s Slowdown Is Secular, Not Cyclical: Is China bouncing back from a weak patch of growth, or is it headed for a prolonged slowdown lasting many years?… Both are probably true. Cyclical fluctuations are occurring around a clearly slowing long-term trend…. Until 2011, mainstream economic forecasters… believed that the trend growth rate in China would remain in the 9-10 per cent region for as far ahead as the eye could see. Now almost no one thinks that…. The Conference Board forecast this week that trend growth after 2020 would be only 4 per cent a year…”

4. Jeff Weintraub: China’s Man in Hong Kong Explains the Problem with Democracy–It’s a Threat to Capitalism: “The argument that democracy is dangerous because it means mob rule by the ignorant unwashed masses–or rule by unscrupulous and even tyrannical demagogues who can manipulate those masses–is a very old one…. [The] more specific version… that political democracy… threatens the basic requirements of a capitalist market economy, was made quite often throughout the 19th and into the early 20th century…. For better or worse, history seems to have demonstrated that such claims about the fundamental incompatibility… were exaggerated…. [The] inherent tensions… [are] a good thing…. Some pro-plutocratic and market-fundamentalist ideologues still share that 19th-century fear of the perils of democracy, and occasionally some billionaire will blurt this out in an unguarded interview. But in most western societies, people who hold these views can’t state them… openly and straightforwardly… [but] euphemistically… with various circumlocutions. In some other parts of the world, however, those anti-democratic arguments can still be made publicly with refreshing honesty.”

5. Conference Board: How will the long fall in China’s growth impact risks and opportunities for business?: “Is the China slowdown over? Many analysts think China has had a ‘soft landing’ that will yield about 8 percent annual growth for the next decade. We disagree. Absent reforms that resolve China’s productivity and debt challenges, we expect a ‘soft fall’ to growth of about 4 percent by 2020, including negative growth for certain sectors and regions. While there is tremendous potential for reform, political economy challenges make bold action difficult. Our research provides guidance for companies looking to optimize investment and sustain growth.”

6. Larry Mishel: Chair Yellen Is Right: Income and Wealth Inequality Hurts Economic Mobility | Economic Policy Institute: “Janet Yellen gave a speech this week… no mincing of words as to what has happened: ‘It is no secret that the past few decades of widening inequality can be summed up as significant income and wealth gains for those at the very top and stagnant living standards for the majority. I think it is appropriate to ask whether this trend is compatible with values rooted in our nation’s history, among them the high value Americans have traditionally placed on equality of opportunity.’ I appreciate both the straightforward description of the rise of both income and wealth inequality, and the explicit connection between these growing inequalities and the threat this poses to future generations’ upward mobility and opportunity…. Conservatives seem to only be concerned with facilitating opportunity or social mobility, and consider income inequality itself not a worthy focus…. Various reporters have noted the Obama administration backing away from making ’income inequality’ a key issue and shifting to a focus on opportunity or mobility. Is this tenable, deciding to focus on the upward mobility of today’s poor children without any focus on the incomes and wealth of their parents and the circumstances of their lives—where they live, in what housing, with what safety, and so on?”

Should Be Aware of:

• Jude Isabella: The Intelligent Life of the City Raccoon
• How to become an equity fund manager
• : NOAA Climate: ENSO Blog
• Denise Grady: Ebola Vaccine, Ready for Test, Sat on the Shelf
• Pascal-Emmanuel Gobry: “Here’s corporations’ basic message to women: Just ‘lean in.’ And if leaning in leaves no time for marriage or kids, here’s a free freezer for your eggs…”
• Jay Rosen: Journalists need a point of view if they want to stay relevant

1. Charles A.E. Goodhart and Dirk Schoenmaker: The ECB as lender of last resort?: “As part of the move to a banking union, the largest banks in the Eurozone will soon be supervised by the ECB. This column argues that supervision and the lender of last resort function should be seen as a joint product. After the introduction of the euro, the national central banks continued to act as lenders of last resort because bank supervision remained at the national level. Now that supervision is moving to the ECB, so should the lender of last resort function for the larger, cross-border, banks.”

2. Corey Robin: On David Brooks on Edmund Burke: “Burke is… often held up as the source of conservatism, [but] I get the feeling he’s not often read… quotations inevitably have a whiff of cliché about them—little platoons and so on—emitting that stale blast of familiarity you sense when you listen to someone go on about a text he may or may not have read during one week in college…”

3. Simon Wren-Lewis: Helicopter Money: “The original Friedman thought experiment involved the central bank distributing money by helicopter… by the central bank printing money, rather than the government issuing debt…. Helicopter money is… QE coupled with a tax cut. Another way of thinking about it: instead of using money to buy assets (QE alone), the central bank gives it away to people…. It could be that advocates of helicopter money really want higher inflation targets, but do not want to be explicit about this, just as they may not want to call helicopter money a fiscal stimulus. The problem with this is that central bankers do understand the macroeconomics…. As Willem Buiter says, ‘there always exists a combined monetary and fiscal policy action that boosts private demand’.”

4. Paul Krugman: Plutocrats Against Democracy: “The very success of the conservative agenda only intensifies this fear. Many on the right–and I’m not just talking about people listening to Rush Limbaugh; I’m talking about members of the political elite–live, at least part of the time, in an alternative universe in which America has spent the past few decades marching rapidly down the road to serfdom. Never mind the new Gilded Age that tax cuts and financial deregulation have created; they’re reading books with titles like [Nick Eberstadt’s] A Nation of Takers: America’s Entitlement Epidemic, asserting that the big problem we have is runaway redistribution. This is a fantasy…. If you worry that low-income voters will run wild, that they’ll greedily grab everything and tax job creators into oblivion, history says that you’re wrong. All advanced nations have had substantial welfare states since the 1940s–welfare states that, inevitably, have stronger support among their poorer citizens. But you don’t, in fact, see countries descending into tax-and-spend death spirals–and no, that’s not what ails Europe…. The obvious answer is Mr. Leung’s: Don’t let the bottom half, or maybe even the bottom 90 percent, vote. And now you understand why there’s so much furor on the right over the alleged but actually almost nonexistent problem of voter fraud, and so much support for voter ID laws that make it hard for the poor and even the working class to cast ballots. American politicians don’t dare say outright that only the wealthy should have political rights–at least not yet. But if you follow the currents of thought now prevalent on the political right to their logical conclusion, that’s where you end up. The truth is that a lot of what’s going on in American politics is, at root, a fight between democracy and plutocracy. And it’s by no means clear which side will win.”

5. Prairie Weather: The real villain of the Clinton impeachment: “The Republicans who set up a crooked Republican lawman to go after Clinton. Ken Starr crooked? A Freedom of Information Act search reveals that, yes, during the probe into Clinton’s relationship with an intern, he used agents who bullied and ‘mistreated’ the key witness, Monica Lewinsky, threatening her and her family if she didn’t provide them with grounds to remove the Democratic president. ‘The report also lays out the encounter in detail, suggesting that it quickly spun out of control as a shocked and hysterical Lewinsky asked to consult a lawyer or a parent–even as prosecutors grew increasingly determined to persuade her to agree on the spot to cooperate against the president…’ Keep this in mind:  the actions taken were the result of Republican demands. The actions were political and illegal. The report on the matter was kept under wraps for years and only now has emerged as a result of a FOIA demand…”

6. 
   André Christoffer Andersen: Interactive map: World population by latitude and longitude: “André Christoffer Andersen created this nifty interactive map that estimates world population at any coordinate. Andersen was inspired by Bill Rankin’s data visualizations. According this this map, the most populous coordinate is in the Punjab region. Some of the data seems shifted a bit, so the spike for Mexico City is a little too far east, but it’s a cool proof of concept!”

Jeff Weintraub: China’s Man in Hong Kong Explains the Problem with Democracy–It’s a Threat to Capitalism: “The argument that democracy is dangerous…

…because it means mob rule by the ignorant unwashed masses–or rule by unscrupulous and even tyrannical demagogues who can manipulate those masses–is a very old one…. [The] more specific version… that political democracy… threatens the basic requirements of a capitalist market economy, was made quite often throughout the 19th and into the early 20th century…. For better or worse, history seems to have demonstrated that such claims about the fundamental incompatibility… were exaggerated…. [The] inherent tensions… [are] a good thing…. Some pro-plutocratic and market-fundamentalist ideologues still share that 19th-century fear of the perils of democracy, and occasionally some billionaire will blurt this out in an unguarded interview. But in most western societies, people who hold these views can’t state them… openly and straightforwardly… [but] euphemistically… with various circumlocutions. In some other parts of the world, however, those anti-democratic arguments can still be made publicly with refreshing honesty.

Must- and Shall-Reads:

• Lawrence MacDonald and Jing Cao: The Sudden Rise of Carbon Taxes, 2010–2030
• Larry Mishel: Economist: Skills, Tech Gap Can’t Explain Inequality
• William C. Dudley: Enhancing Financial Stability by Improving Culture in the Financial Services Industry
• Danny Vinik: The Federal Reserve Should Not End Its Quantitative Easing Program

1. Charles Steindel: For Thursday… How Mainstream Economic Thinking Imperils America: “Your comments on how economics should… be constructed are very well-stated (actually making it more of a social science, and less model-juggling. However, it also would change the sort of person going into the field and change the field’s criteria for success. Not easy!). One thing… is the optimizing behavior of economic policy analysts. Fiscal policy seems off the table, so macroeconomists dive into unconventional monetary policy, which, one trusts, all know is extremely dicey. Why not more emphasis on yelling from the rooftops that the usual economic fears of expansionary fiscal policy (debt accumulation, waste)are simply off target, and less time worrying about the fine points of ‘tapering’? Your Brookings work with Larry shows the analytics of fiscal policy at this juncture very well. Criticizing the critics of expansionary fiscal policy as evil 0.01% oligarchs or mindless racist Tories might make one feel good and righteous but doesn’t get anybody anywhere; basic analysis held by what seems everybody but a few denizens of the Booth School shows the economic sense of the policy. The notion of criticizing Christie Romer as in thrall to Milton Friedman is indeed droll in the extreme. I guess to have to see the book to see what his problem is with Olivier.”

2. Note That Politico Does Not Label Advertisements as Advertisements: Geoff Morrell: No, BP Didn’t Ruin the Gulf: “What impact did the spill actually have on the Gulf Coast environment?… [10 paragraphs]… Geoff Morrell is senior vice president of U.S. communications and external affairs for BP.“

3. Richard Mayhew: Keeping it like the Kaiser: “The payer provider model has been around US healthcare for a very long time, but the Kaiser twist on it is very wierd and as far as I know, no one else does it quite like Kaiser… a fully integrated payer provider with exclusive usage…. Almost all other non-governmental payer-providers are not exclusive walled gardens that systematically seek to minimize interaction with the entire US healthcare delivery ecosystem…. So what does this difference mean?… I think the Kaiser model allows it to capture and internalize significantly higher percentage of preventive and care coordination benefits than most other integrated payer provider models and far more benefits are captured than segregated payer/provider models. It allows for a common focus and a shared focus on quality and risk minimization as aligning incentives to pay docs to not order a needless test actually makes sense in all scenarios. Other integrated payer providers that are not exclusive walled gardens have the incentive to perform high quality and efficient care on their insured members but wasteful care on patients who are insured by someone else. A Sutter doc who orders an MRI on a non-best practice basis for a Sutter member is costing the company money, but ordering that MRI for an Anthem or United Health insured patient is a a revenue gain. Most providers don’t change their patterns of practice on a patient by patient basis, that means aggregate performance on minimizing needless tests, minimizing preventable care incidents is conflicted with revenue maximization…. The revenue risk is the biggest risk that will stop non-exclusive mostly open payer providers from converting to a Kaiser walled-garden approach…. At least a few payer-providers will install significant gatekeepers and low walls for their network to keep most of their members in and other people out, but the walls won’t be high nor hard to hop over. Kaiser is weird in the American context, and I anticipate it will continue to be an unusual but highly successful implementation of a fairly unique non-governmental model.”

4. Noah Smith: Forecasting Is Risky, Especially About the Future: “I wrote about the people who warned in 2010 that quantitative easing would result in inflation, but who didn’t seem to change their beliefs very much after inflation failed to materialize…. Of all the defenses offered by the 2010 inflationistas for the constancy of their views, the most subtle and interesting is the claim that predicting an event is different than predicting the risk of an event…. It is indeed a subtle distinction. In fact, it is several subtle distinctions rolled into one. First, there is the issue of how to trust a forecaster who only forecasts risks…. Ideally, the way you would deal with this is to get the forecaster to make many repeated predictions…. Second, there is the distinction between making a prediction and updating one’s beliefs based on the outcome…. Third, there is the issue of time. What if, in 2027, there is a burst of inflation for no apparent reason? Will the people who predicted inflation as a result of QE in 2010 say ‘See? We told you that Fed balance sheet expansion had to cause inflation sooner or later!’?… Finally, there is the question of what information set someone used when issuing his or her warning. Did the signatories of the 2010 letter think only about the experience of the U.S. in the 1970s when they warned about inflation? Or had they stopped to consider the experience of Japan, whose repeated rounds of QE have never unleashed inflation of more than 1 percent? The fundamental question is this: Suppose there are people out there who are broken records when it comes to inflation. Rain or shine, come what may, they warn of inflation…. Obviously, these warnings would have zero informational content…. Is there some kind of Turing Test for macroeconomic forecasters?… Our tools for identifying unreliable forecasters are rather primitive–a combination of reputation, bluster, excuses, insults and counter-insults. It’s all a bit silly, and it generates a lot of bad feelings all around. But what else can we do?”

Should Be Aware of:

• Alan Krueger: A Blog for Teachers
• Jesse Singal: Gamergate Should Stop Lying to Itself
• Dylan Stableford: How One Doctor [Stella Ameyo Adadevoh] Saved Nigeria from Ebola Catastrophe
• Gandalf Is Vaguely Concerned With Your Life Choices…

1. Nancy Cartwright: Evidence for Policy: “To repeat, our assessment of the probability of effectiveness is only as secure as the weakest link in our chain of reasoning to arrive at that probability. We may have to ignore some issues or make heroic assumptions about them. But that should dramatically weaken our degree of confidence in our final assessment. Rigor isn’t contagious from link to link. If you want a relatively secure conclusion coming out, you’d better be careful that each premise is secure going in.”

2. Daniel Davies: Bonus regulation–a terrible idea whose time has come?: “Finally, it appears that the investment banking industry (in Europe at least) has got the kind of regulation it deserves. Which is to say, capricious, wrongheaded, arrogant and systematically destructive. As someone who worked in this industry until about three months ago, all I can say is that I feel for my ex-colleagues, but that this was not a disaster which fell on the industry like a Black Swan from a blue sky–it was more like the kind of injuries that you get if you climb into the lion enclosure at the zoo, and repeatedly kick a sleeping lion up the bum to see if it will wake up…”

3. Bruce Bartlett: Obama Is a Republican: “I wrote a piece for the New Republic soon afterward about the Obamacon phenomenon–prominent conservatives and Republicans who were openly supporting Obama. Many saw in him a classic conservative temperament: someone who avoided lofty rhetoric, an ambitious agenda, and a Utopian vision that would conflict with human nature, real-world barriers to radical reform, and the American system of government. Among the Obamacons were Ken Duberstein, Ronald Reagan’s chief of staff; Charles Fried, Reagan’s solicitor general; Ken Adelman, director of the Arms Control and Disarmament Agency for Reagan; Jeffrey Hart, longtime senior editor of National Review; Colin Powell, Reagan’s national security adviser and secretary of state for George W. Bush; and Scott McClellan, Bush’s press secretary. There were many others as well…. They were not wrong…. Obama has governed as a moderate conservative—essentially as what used to be called a liberal Republican before all such people disappeared from the GOP. He has been conservative to exactly the same degree that Richard Nixon basically governed as a moderate liberal, something no conservative would deny today…”