Category: Equitablog

Must- and Shall-Reads:

• Core-Econ: Teaching economics as if the last three decades had happened
• Tony Yates: A mauling Minsky moment: comment on Martin Wolf
• Andre Sapir and Guntram Wolff: #eu2do
• Nolan McCarty, Keith T. Poole, and Howard Rosenthal (2006): Polarized America: The Dance of Ideology and Unequal Riches
• John V. Duca and Jason L. Saving: Income Inequality and Political
  Polarization: Time Series Evidence Over Nine Decades

1. Murat Tasci and Jessica Ice: Reassessing the Beveridge Curve “Shift” Four Years Later: “Early on in the current recovery, economists and policymakers were worried about a potential shift in the Beveridge curve…. Job vacancies were rising, but the unemployment rate was not declining, fueling a debate about a structural problem in the labor markets. Exactly four years ago, we… argued that it was too early to call what had happened a shift…. We concluded that the Beveridge curve behavior we were seeing in this recovery was typical of recoveries in general, and that the curve would likely follow its historical business-cycle pattern going forward, erasing any evidence of a shift. Well, four years later, we have 16 more quarterly data points to inform us…. It is safe to say that what seemed like a shift in the Beveridge curve ended up being another manifestation of the ‘normal’ dynamics of unemployment and vacancies in the United States…”

2. Noah Smith: Job Shortage or Stagnation Vacation?: “Are Americans working less because the government is paying them not to work? A large number of people seem to think this. Obviously the idea is popular on the right–recall Mitt Romney’s infamous ’47 percent’ speech in 2012. But a surprising number… have picked up the idea…. Casey Mulligan…. Kurt Mitman…. Jordan Weissmann…. Economists… like simple stories… like effects that they understand… the idea that taxes are an incentive not to work is a simple, uncontroversial idea….But… if government programs are paying people not to work, then that should put upward pressure on real wages…. But when we look at the data, that’s not what we see happening…. When you break up the wage data by percentile, it looks even worse for the vacation thesis…. Economics 101 says that when the price of something and the quantity produced both fall, demand, not supply, has fallen. In America, the price of labor and the quantity of labor have both fallen and stayed low since 2009. That is a hint that the government’s welfare programs are having only a minimal impact on the number of Americans with jobs. Whatever caused us to stagnate for five years and counting, it probably wasn’t welfare.”

3. Chris Blattman: What The Economist should have read before suggesting that US slavery wasn’t always so bad: “Here’s the jawdropping finale: ‘Slave owners surely had a vested interest in keeping their “hands” ever fitter and stronger to pick more cotton. Some of the rise in productivity could have come from better treatment. Unlike Mr Thomas, Mr Baptist has not written an objective history of slavery. Almost all the blacks in his book are victims, almost all the whites villains. This is not history; it is advocacy.’ What could have shed light on this, had The Economist writer bothered to read?… Violence and pain work better in labor markets where people have really poor options, and are easily controlled, like children or the least educated. You see this in child labor during British industrialization, or even in child soldiering in Uganda…. Adults will tend to escape if you use violence, so slavery and serfdom work best when the overlords control the legal system or can hunt you down. You see this with servants in 19th century Britain or with European feudalism and US slavery. When you make it harder for employers to use force, wages go up. You see this in 19th century Puerto Rico coffee growing, or in the Emirates today. It’s not unusual to see a mix…. And when you turn the entire system against them, yes, whipped people work harder…. Suresh Naidu… yes, rewards can be a substitute for violence, but in a coercive labor market, better pay or food is just service to your larger evil plan to enslave more people more profitably…. Places in Peru and Bolivia with forced labor several hundred years ago are now poorer than other parts of the country…. Racially hostile attitudes also get passed down generation to generation in the US…. Is anyone else feeling depressed and hopeless?”

4. djw: The predatory, broken municipal governments of St. Louis County: “[Radley] Balko is doing some extraordinary and important work here: ‘”She was crying as I explained the situation to her”, Voss says. “So then I started to cry as I explained it her. One of the really frustrating things about what’s happening here is that this system is breaking good people. These are people just trying to get by, just trying to take care of their families”. Voss’s eyes well up as he talks about Bolden. This isn’t just an attorney defending his client. It’s a guy who is concerned about what’s happening to another human being. Bolden is a single black woman with four kids. She has several tattoos. It’s easy to see how cops might target her, or court officials might dismiss her. But Voss points out that she had already earned an associate’s degree in medical assistance. And while dealing with all of the arrests and the harassment, she earned another in paralegal studies. The Foristell warrant stemmed from a speeding ticket in 2011. As mentioned before, Bolden didn’t show up in court because she didn’t have the money to pay it and feared they’d put her jail. It’s a common and unfortunate misconception among St. Louis County residents, especially those who don’t have an attorney to tell them otherwise. A town can’t put you in jail for lacking the money to pay a fine. But you can be jailed not appearing in court to tell the judge you can’t pay…. While in jail, she missed a job interview. She fell behind in her paralegal studies. When she finally got her day in court, she was told to change out of her jail jumpsuit into the same clothes she had worn for three days straight, and that had been sitting in a bag for the previous two weeks.’ It’s long, but read the whole thing. I confess I was actually surprised when the ‘three outstanding warrants per household’ in Ferguson fact first came to light; it’s now clear in St. Louis County, this is par for the course, and there are far worse examples–the extremely misleadingly named ‘Country Club Hills’ has 26 outstanding warrants per resident… a long piece filled with rage-inducing anecdotes…. In the short run, a democratic revival is clearly and badly needed, and one simply has to hope that perhaps this moment of sunshine on these governments will produce something of that sort…”

5. Kent Daniel and Tobias J. Moskowitz: Momentum Crashes: “Despite their strong positive average returns across numerous asset classes, momentum strategies can experience infrequent and persistent strings of negative returns. These momentum crashes are partly forecastable. They occur in “panic” states – following market declines and when market volatility is high – and are contemporaneous with market rebounds. We show that the low ex-ante expected returns in panic states are consistent with a conditionally high premium attached to the option-like payoffs of past losers. An implementable dynamic momentum strategy based on forecasts of momentum’s mean and variance approximately doubles the alpha and Sharpe Ratio of a static momentum strategy, and is not explained by other factors. These results are robust across multiple time periods, international equity markets, and other asset classes.”

6. Myles Udland: Fidelity Reviewed Which Investors Did Best And What They Found Was Hilarious: “If you want good investment performance, forget you have an account…. O’Shaughnessy relays one anecdote from an employee who recently joined his firm that really makes your head spin. O’Shaughnessy: ‘Fidelity had done a study as to which accounts had done the best at Fidelity. And what they found was…’ Ritholtz: ‘They were dead.’ O’Shaughnessy: ‘…No, that’s close though! They were the accounts people who forgot they had an account at Fidelity.’… Due to our behavioral biases, we often find ourselves buying high and selling low…”

7. Robert Waldmann (2012): “Here we go a second time. Neither the Beveridge curve nor the quasi-Beveridge curve show how much employment can increase without ‘truly massive and successful public active labor market policies to better match workers to jobs’. It is more useful to look at the matching function showing hires as a function of vacancies and unemployed workers (or, to be quasi-, the peak minus the current employment to population ratio). If the matching function is stable, then the lowest sustainable unemployment rate is stable. However when there is a recession the Beveridge curve will show a huge ugly (as you graph it) clockwise pattern causing alarmed reports of worsened matching. It looked much worse in the UK in the late 90s just before the UK switched from being a high unemployment to low unemployment country.”

Should Be Aware of:

• Pedro da Costa: Don’t Blame Shrinking Work Force Participation on Great Recession
• Let’s Look at These Slavery-Inspired #EconomistBookReviews, Shall We?
• Brad DeLong (2007) Cui Bono? from North American Slavery

1. Iván Werning: Positive Long Run Capital Taxation: Chamley-Judd Revisited: “According to the Chamley-Judd result, capital should not be taxed in the long run. In this paper, we overturn this conclusion, showing that it does not follow from the very models used to derive them. For the model in Judd (1985), we prove that the long run tax on capital is positive and significant, whenever the intertemporal elasticity of substitution is below one. For higher elasticities, the tax converges to zero but may do so at a slow rate, after centuries of high capital taxation. The model in Chamley (1986) imposes an upper bound on capital taxation and we prove that the tax rate may end up at this bound indefinitely. When, instead, the bounds do not bind forever, the long run tax is indeed zero; however, when preferences are recursive but non-additive across time, the zero-capital-tax limit comes accompanied by zero private wealth (zero tax base) or by zero labor taxes (first best). Finally, we explain why the equivalence of a positive capital tax with ever rising consumption taxes does not provide a firm rationale against capital taxation.”

2. Anna Orlik and Laura Veldkamp: Understanding Uncertainty Shocks and the Role of Black Swans: “A fruitful emerging literature reveals that shocks to uncertainty can explain asset returns, business cycles and financial crises. The literature equates uncertainty shocks with changes in the variance of an innovation whose distribution is common knowledge. But how do such shocks arise? This paper argues that people do not know the true distribution of macroeconomic outcomes. Like Bayesian econometricians, they estimate a distribution. Using real-time GDP data, we measure uncertainty as the conditional standard deviation of GDP growth, which captures uncertainty about the distributions estimated parameters. When the forecasting model admits only normally-distributed outcomes, we find small, acyclical changes in uncertainty. But when agents can also estimate parameters that regulate skewness, uncertainty fluctuations become large and counter-cyclical. The reason is that small changes in estimated skewness whip around probabilities of unobserved tail events (black swans). The resulting forecasts resemble those of professional forecasters. Our uncertainty estimates reveal that revisions in parameter estimates, especially those that affect the risk of a black swan, explain most of the shocks to uncertainty.”

3. Paul Krugman: Obamacare Life Spiral: “Ezra Klein directs us to… the Kaiser Family Foundation, which asks what the average Obamacare 2015 premium increase will be…. Ezra tries to get us to appreciate just how good the Obamacare news has been with a thought experiment: ‘Imagine taking a time machine back to 2010 and… [bet] Republicans in Congress… that the law would be cheaper… and… cover more people than the CBO thought…. What odds do you think Obamacare’s critics would have offered? 2:1? 5:1? 10:1?’ But you don’t have to go back to 2010. Look at John Cochrane in late 2013, taking it for granted that Obamacare would implode in a death spiral within a few months. Look at The Hill just four months ago, telling us that double-digit premium hikes were coming…. Is our conservatives learning? Are those who bought into the death spiral stories, who seized on every hint of bad news, asking themselves how they got it so wrong? Are they, maybe, considering the possibility that they’re listening to the wrong people, that maybe Jon Gruber knows what he’s talking about and John Goodman is a hack? Hahahaha.”

4. Lorenzo from Oz: Ahistorical pomposity and gnostic sneering: why academics write deep crap about “neoliberalism”: “A nice example of such nonsense is provided in a post by philosopher Robin James: ‘neoliberals think everything in the universe works like a deregulated, competitive, financialized capitalist market.’ No one believes this. For a start, no ‘neoliberal’ believes the state works like that. Nor do they advocate abolition of the state–anarcho-capitalism is not a widely held position, particularly not among policy wonks, policy advisors or policy-setting politicians (what we might call policy makers). It is one thing to be struck by how remarkable it is that there is any economic order at all, it is quite another to think such is the template for all that there is…. To the extent the term has a useful meaning, neoliberalism is economic liberalisation in the context of an expansive state: either the welfare state (in the developed world) or the development state (in the developing world). Key underpinning ideas in the original ‘neoliberal turn’ include Milton Friedman’s rehabilitation of monetary economics (pdf) and his critique of (pdf) policy reliance on a presumed trade-off between inflation and unemployment, Friedrich Hayek’s analysis of the uses of knowledge in society, the development of public choice theory, feeding into (pdf) the analysis of rent-seeking (pdf), Ronald Coase’s development of (pdf) the concept of transaction costs and its application to property rights (pdf), and the development of supply-side ideas (pdf). The Lucas critique (plus rational expectations) and Fama’s efficient-market hypothesis came along a bit too late to have much influence on the original ‘neoliberal turn’. What these key ideas have in common is that they cast strong doubt on belief in the omni-competent state, either directly or by comparison with market-based alternatives. Hence the ‘neoliberal trifecta’ of corporatisation (restructuring of state institutions), privatisation (transfer or creation of property rights) and de-regulation (reduction of transaction costs). Plus the adoption of inflation-targeting by central banks…. The critique of the widely assumed omni-competence of the state also encouraged taking gains from trade more seriously, while the policy premium for economic efficiency (see below) put the issue of opportunity costs in sharper policy focus. The policy debates in which ‘neoliberals’ have been engaged in have been very much about boundaries between state and non-state action, but that is a very different matter than the sort of absolutist claim James [makes]…”

5. Kurt Freiherr von Hammerstein-Equord: “I divide my officers into four groups:…. Some are clever and diligent–their place is the General Staff. The next lot are stupid and lazy–they make up 90 percent of every army and are suited to routine duties. Anyone who is both clever and lazy is qualified for the highest leadership duties, because he possesses the intellectual clarity and the composure necessary for difficult decisions. One must beware of anyone who is stupid and diligent–he must not be entrusted with any responsibility because he will always cause only mischief…”

Robert Waldmann (2012): “Here we go a second time. Neither the Beveridge curve nor the quasi-Beveridge curve…

…show how much employment can increase without ‘truly massive and successful public active labor market policies to better match workers to jobs’. It is more useful to look at the matching function showing hires as a function of vacancies and unemployed workers (or, to be quasi-, the peak minus the current employment to population ratio). If the matching function is stable, then the lowest sustainable unemployment rate is stable. However when there is a recession the Beveridge curve will show a huge ugly (as you graph it) clockwise pattern causing alarmed reports of worsened matching. It looked much worse in the UK in the late 90s just before the UK switched from being a high unemployment to low unemployment country.

Chris Blattman: What The Economist should have read before suggesting that US slavery wasn’t always so bad: “Here’s the jawdropping finale:…

Slave owners surely had a vested interest in keeping their “hands” ever fitter and stronger to pick more cotton. Some of the rise in productivity could have come from better treatment. Unlike Mr Thomas, Mr Baptist has not written an objective history of slavery. Almost all the blacks in his book are victims, almost all the whites villains. This is not history; it is advocacy.

What could have shed light on this, had The Economist writer bothered to read?… Violence and pain work better in labor markets where people have really poor options, and are easily controlled, like children or the least educated. You see this in child labor during British industrialization, or even in child soldiering in Uganda…. Adults will tend to escape if you use violence, so slavery and serfdom work best when the overlords control the legal system or can hunt you down. You see this with servants in 19th century Britain or with European feudalism and US slavery.

When you make it harder for employers to use force, wages go up. You see this in 19th century Puerto Rico coffee growing, or in the Emirates today. It’s not unusual to see a mix…. And when you turn the entire system against them, yes, whipped people work harder…. Suresh Naidu… yes, rewards can be a substitute for violence, but in a coercive labor market, better pay or food is just service to your larger evil plan to enslave more people more profitably…. Places in Peru and Bolivia with forced labor several hundred years ago are now poorer than other parts of the country…. Racially hostile attitudes also get passed down generation to generation in the US…. Is anyone else feeling depressed and hopeless?

Today’s lunchtime Twitter exchange:

@trish_regan: How bad is the U.S. labor market? @delong and @billjaneway break it down w/me (and explain the low participation rate!) at 3pm E”

@delong: .@trish_regan @billjaneway 3 PM E? I thought it was 4PM E/1 PM Pacific. I had better shave and find my suit pants…

@delong: .@trish_regan @billjaneway …and shave…

At Bloomberg TV, at 3 PM, apparently.

Noah Smith: Job Shortage or Stagnation Vacation?: “Are Americans working less because the government is paying them not to work?…

…A large number of people seem to think this. Obviously the idea is popular on the right–recall Mitt Romney’s infamous ’47 percent’ speech in 2012. But a surprising number… have picked up the idea…. Casey Mulligan…. Kurt Mitman…. Jordan Weissmann…. Economists… like simple stories… like effects that they understand… the idea that taxes are an incentive not to work is a simple, uncontroversial idea….But… if government programs are paying people not to work, then that should put upward pressure on real wages…. But when we look at the data, that’s not what we see happening…. When you break up the wage data by percentile, it looks even worse for the vacation thesis…. Economics 101 says that when the price of something and the quantity produced both fall, demand, not supply, has fallen. In America, the price of labor and the quantity of labor have both fallen and stayed low since 2009. That is a hint that the government’s welfare programs are having only a minimal impact on the number of Americans with jobs. Whatever caused us to stagnate for five years and counting, it probably wasn’t welfare.

UPDATE: And there are four more contributions worth reading on the Equitable Growth: Pick-Up Symposium: Why the Love of Hard Money?: Wednesday Focus for September 3, 2014:

Paul Krugman sums up what he thinks he knows and doesn’t know:

Paul Krugman: The Deflation Caucus: “Europe… is…

… in the grip of a deflationary vortex… [Its] central bank understands that. But its epiphany may have come too late…. And there but for the grace of Bernanke go we…. We seem (at least for now) to have steered clear of the kind of trap facing Europe. Why?… The Federal Reserve started doing the right thing years ago, buying trillions of dollars’ worth of bonds…. The Fed should have done even more. But Fed officials have faced fierce attacks all the way…. The predicted surge in inflation has never arrived, but despite being wrong year after year, hardly any of the critics have admitted being wrong, or even changed their tune. And the question I’ve been trying to answer is why. What is it that makes a powerful faction in our body politic–call it the deflation caucus–demand tight money even in a depressed, low-inflation economy?

One thing is clear: Like so much else these days, monetary policy has become very much a partisan issue…. Inflation paranoia has, to a remarkable extent, become a matter of conservative political correctness, so that even economists who should know better have joined in the chorus…. Leading politicians get their monetary theory from Ayn Rand novels…. Class interest. Inflation helps debtors and hurts creditors, deflation does the reverse. And the wealthy are much more likely than workers and the poor to be creditors…. You could argue that big investors should like the Fed’s expansionary policies, which have been very good for the stock market. But the wealthy may not trust that connection, in part because the inflationary ’70s were very bad for stocks….

The dominance of creditor interests on both sides of the Atlantic, supported by false but viscerally appealing economic doctrines, has had tragic consequences. Our economies have been dragged down by the woes of debtors, who have been forced to slash spending. To avoid a deep, prolonged slump, we needed policies to offset this drag. What we got instead was an obsession with the evils of budget deficits and paranoia over inflation–and a slump that has gone on and on.

Simon Wren-Lewis does the full Michel Kalecki:

Simon Wren Lewis: Class Interests: “[That] the wealthy want to raise interest rates, even when the economy remains depressed…

…is not just a US phenomenon. In the UK the right wing Institute for Economic Affairs set up what they call the ‘shadow MPC’, and they were voting for higher interest rates before the recovery began! The highly influential FT journalist Chris Giles, who has become a bellwether for right wing interests, has been championing the cause of an early rise in rates for many months…. Is it any wonder… that the ‘1%’ who started to become much richer in the 1980s should see tight money as an essential condition of their new found wealth? But what about the ‘interests of capital’: surely the owners of business should see that firms will be less prosperous if demand is kept too low through tight money? Here I can only quote Michal Kalecki: ‘But “discipline in the factories” and “political stability” are more appreciated than profits by business leaders. Their class instinct tells them that lasting full employment is unsound from their point of view, and that unemployment is an integral part of the “normal” capitalist system.’…

This sets up two areas of political tension between the interests of the wealthy and, of all people, academic macroeconomists. First academic macroeconomists… see monetary policy as a means of achieving the natural unemployment rate and steady inflation. The wealthy see monetary policy as a means of maintaining a degree of unemployment that reduces the political threat to their wealth. Second, when monetary policy stops working in a liquidity trap, most academic macroeconomists want to use fiscal policy to take its place. To the wealthy this… seems unnecessary… [and] calls into question their ideology about the failure of pre-neoliberal times….

The aftermath of financial crisis is extremely threatening to the neoliberal political consensus and the position of the 1%. I remember saying shortly after the crisis that the neoliberal position that government regulation was always bad and unregulated markets always good had been blown out of the water by the crisis. This was politically naive, in part because a crisis caused by unregulated markets was morphed by the right into a crisis caused by too much government debt, or too many immigrants. But that fiction will not be sustainable once a strong recovery has reduced both government debt and unemployment. For the 1%, these are very dangerous times, and they want to be on favourable territory for the battles ahead.

Nick Rowe dodges the question–which is why do the arguments for austerity have so much more traction than they deserve to, and why are the austerians so allergic to in any way marking their beliefs to market?

Nick Rowe: How to destroy the “neoliberal consensus”: “C’mon guys. If you are going to put forward a lefty conspiracy theory…

…to explain why monetary policy is tighter than you (and I) think it should be, you at least need to get your story straight. How many times have I heard the lefty argument that it was ‘Keynesian policies”‘… that saved capitalism from itself [in the 1930s]?… Or just look at those Eurozone countries which have very high unemployment today. Which political parties have gained votes? The communists and near-communists; and the fascists and near-fascists. Not the neoliberals, or near-neoliberals….

<sarc> Right. So the aftermath of the financial crisis is an especially dangerous time for the “neoliberal consensus”. OK. So to save the neoliberal consensus, let’s make unemployment temporarily even higher to make it even more dangerous for the neoliberal consensus??? </sarc> This makes no sense whatsoever. If you are trying to avoid having an accident, while keeping your average speed the same, you don’t increase your speed on the dangerous bits of the road, and slow down on the safer bits….

Look. We think that monetary policy is too tight. And some other people disagree with us. You don’t need to cook up some daft conspiracy theory to explain why people disagree with us. They just do. They have their reasons for thinking they are right, just like we have our reasons for thinking we are right. They are wrong and we are right (I think), but they don’t know that. Those disagreements are what happen all the time in a free society. Get over it. Conspiracy theories are a cop-out.

Murat Tasci and Jessica Ice: Reassessing the Beveridge Curve “Shift” Four Years Later: “Early on in the current recovery…

…economists and policymakers were worried about a potential shift in the Beveridge curve…. Job vacancies were rising, but the unemployment rate was not declining, fueling a debate about a structural problem in the labor markets. Exactly four years ago, we… argued that it was too early to call what had happened a shift…. We concluded that the Beveridge curve behavior we were seeing in this recovery was typical of recoveries in general, and that the curve would likely follow its historical business-cycle pattern going forward, erasing any evidence of a shift. Well, four years later, we have 16 more quarterly data points to inform us…. It is safe to say that what seemed like a shift in the Beveridge curve ended up being another manifestation of the ‘normal’ dynamics of unemployment and vacancies in the United States…

Must- and Shall-Reads:

• Dana Goldstein: The Teacher Wars: A History of America’s Most Embattled Profession

1. Gerard Roland and Yuriy Gorodnichenko: Putin’s endgame: “To Putin’s surprise, the Ukrainian government and army have put up serious resistance to his earlier moves. The level of popular support for his people’s republics in the East has also been surprisingly low…. The possible outcomes: (1) Ukraine continues fighting without any material help from the West…. (2) Ukraine continues fighting, the West radically tightens economic sanctions and gives more economic help to Ukraine…. (3) Ukraine continues fighting, the West radically tightens economic sanctions, gives more economic help to Ukraine, and provides military help. While Mr Putin has spent copious amounts of oil dollars to modernise the Russian army, it is no match for Western forces. Even if the West does not send troops to Ukraine and limits military support to supplies of weapons and intelligence, the Ukrainian forces will be able to have an upper hand in combat and it will be a matter of time before they retake the east of Ukraine…. It may take many thousands of lives on both sides before the war is over (scenario 1), or the war may end soon. The tally largely depends on the West’s policy response…. The West’s policy of appeasement has so far been utterly ineffective…”

2. Daniel Kuehn: Study Design and the Minimum-Wage Debate: “Studies that match labor markets experiencing a minimum-wage increase with an appropriate comparison labor market… tend to find that minimum-wage increases have little or no effect on employment…. Studies that do not match labor markets experiencing a minimum-wage increase with a comparison labor market tend to find that minimum-wage increases reduce employment…. Labor market policy analysts strongly prefer studies that match ‘treatment’ with ‘comparison’ cases in a defensible way over studies that simply include controls and fixed effects in a regression model…”

3. Paul Krugman: Dangerous for Evil: “2009, when I was lamenting bad ideas from freshwater economists and Justin Fox was dismissing them as having no influence on policy…. It turned out that the bad ideas mattered a lot…. The Keynesian policy consensus… was fragile…. Republicans in the US, Germany, and the Trichet-era ECB were strongly anti-Keynesian by instinct. They were temporarily bowled over by the vocal Keynesian consensus… but were ready to grab hold of seemingly credentialed people willing to offer justifications for austerity and hard money. And a quorum of economists obliged. Alesina-Ardagna… good enough to give the austerians an intellectual fig leaf…. Reinhart-Rogoff and the 90 percent of doom. Having John Cochrane insist that Keynesian economics had been proved wrong and nobody was teaching it helped the austerian case even though it was completely untrue; so did having Robert Lucas accuse Christy Romer of being intellectually corrupt. Bad economic ideas didn’t really drive bad policy, but they acted as enablers for bad policy instincts. And the people who promulgated these bad ideas therefore have a lot to answer for.”

4. Jonathan Chait: Economist Denounces One-Sided Slavery Account: “The Economist reviews The Half Has Never Been Told: Slavery and the Making of American Capitalism, by Edward Baptist. Not having read the book, I cannot credibly assess it. I do have enough familiarity with the basic facts to know that The Economist’s reviewer’s argument that the book is fatally biased seems a little… off: ‘Mr Baptist has not written an objective history of slavery. Almost all the blacks in his book are victims, almost all the whites villains. This is not history; it is advocacy.’ I can think of reasons other than ideological bias to explain why almost all the black people would be victims, and the white people villains, in a book about white people who captured black people and subjected them to torture, rape, murder, humiliation, and oppressive forced labor. Unless The Economist wants to suggest that there were overlooked cases of deserved slavery, it seems pretty intuitive that the black people are mostly going to be victims in a book about slavery. It also seems like the white people are inevitably not going to come off terribly well, either, in a book about slavery. Sure, there were plenty of white people who had nothing to do with slavery, but they may not feature so heavily in a book about slavery.”

5. Richard Mayhew: En bancing on Halbig “Noted a—- and Washington Post blogger Jonathan Adler’s quest to deny poor people the freedom of getting subsidized health insurance that could improve their well-being was dealt another blow… ‘the U.S. Court of Appeals for the D.C. Circuit granted rehearing en banc in Halbig v. Burwell….’ Oral argument is scheduled for December 17.  In all likelihood, an opinion would not issue before mid-to-late Spring…. En banc rehearings only occur… to… re-affirm a high priority decision or to correct what the majority of that circuit believes to be a monumental f—–. Halbig is a monumental f—–. Vacating Halbig means there is no Circuit disagreement at this time, so the Supremes are highly unlikely to grant cert for the Oklahoma King case…”

6. Cosma Shalizi (2012): No, Really, Some of My Best Friends Are Data Scientists: “If, however, the name ‘statistician’ is avoided because that connotes not a powerful discipline which transforms profound ideas about learning from experience into practical tools, but, rather, a meaningless conglomeration of rituals better conducted with twenty-sided dice, then we as a profession have failed ourselves and, more importantly, the public, and the blame lies with us. Since what we have to offer is really quite wonderful, we should not let that happen.”

7. The Economist: American slavery: Blood cotton: “How slaves built American capitalism: Apology: In our review of The Half Has Never Been Told: Slavery and the Making of American Capitalism by Edward Baptist, we said: ‘Mr Baptist has not written an objective history of slavery. Almost all the blacks in his book are victims, almost all the whites villains.’ There has been widespread criticism of this, and rightly so. Slavery was an evil system, in which the great majority of victims were blacks, and the great majority of whites involved in slavery were willing participants and beneficiaries of that evil. We regret having published this and apologise for having done so. We are therefore withdrawing the review but in the interests of transparency, anybody who wants to see the withdrawn review can click here.”

Should Be Aware of:

1. Gillian Tett: An unequal world is an uncharted economic threat: “What is really interesting about this year’s WEF report… [is] a furtive debate bubbling about income inequality…. If a country (such as America) is becoming polarised, in other words, does this make it less likely to grow?… Since the global economic crisis of 2008, western growth rates have been disappointing…. What is also evident is that inequality has grown in the past few decades in America and many other rich countries. The issue is not simply that wealth has become concentrated (as Thomas Piketty, the French economist, explains in his bestselling book, Capital in the Twenty-First Century). Wage inequality has increased, too…. Then there is the thorny issue of social cohesion and political stability…. Perhaps the biggest single contribution that groups such as the WEF can now make is the simplest: talk loudly about data voids and force governments to collect better data on inequality in America and elsewhere. Particularly if the level of inequality keeps growing…”

2. Robin Harding: Inequality rises in US despite recovery: “The boom in the stock market and a recovery in house prices fuelled large gains in the wealth of the richest, with the share of assets held by the top 3 per cent of households rising from 51.8 per cent in 2007 to 54.4 per cent in 2013…. Real pre-tax incomes fell in every part of the income distribution except the very top, as income was redistributed upwards. Average incomes for the decile of households rose by 10 per cent from $361,500 to $397,500. Families at the bottom of the income distribution saw continued substantial declines in average real incomes between 2010 and 2013, continuing the trend observed between the 2007 and 2010 surveys…. An important reason for the rising wealth share of the richest was the surge in asset prices that has seen the S&P 500 rally by more than 100 per cent from its trough to trade above 2,000. But again, Fed economists said that is not the whole story…. Ownership rates of housing and businesses fell substantially between 2010 and 2013. For families in the bottom 50 per cent, participation in retirement plans kept falling, further reducing their asset ownership.”