Category: Equitablog

Jared Bernstein: Fed Vice-Chair Stan Fischer on Whether Stronger Actual Growth Can Boost Potential Growth: “Stan poses the right question…

…this part of his answer is particularly important[:]… ‘There are good reasons to believe that some of the surprising weakness in labor force participation reflects still poor cyclical conditions…. It may also be possible to reverse or prevent declines from becoming permanent through expansive macroeconomic policies.’… The implication for current policy is clear: we need to run a high-pressure economy for a while not just to close existing output gaps but to increase potential growth by pulling more people and capital investment back into the economy…

Sahil Kapur: GOP States Give Up $423 Billion By Rejecting Medicaid Expansion “The 24 states which refused to expand Medicaid under Obamacare…

…are poised to give up $423.6 billion in federal funds over a decade and keep 6.7 million residents uninsured, according to a new study by the Urban Institute and Robert Wood Johnson Foundation…. Since September 2013 the number of uninsured fell by 38 percent in expansion states and just 9 percent in non-expansion states, the study found…. The study pointed to other economic costs for non-expansion states, notably the higher cost of uncompensated care for hospitals, who are legally required to provide emergency care for patients whether or not they’re insured…

Simon Wren-Lewis: On Macroeconomic Forecasting: “Macroeconomic forecasts produced with macroeconomic models…

…tend to be little better than intelligent guesswork. That is not an opinion–it is a fact…. The sad news is that this situation has not changed since I was involved in forecasting around 30 years ago. During the years before the Great Recession (the Great Moderation) forecasts might have appeared to get better, but that was because most economies became less volatile. As is well known, the Great Recession was completely missed…. Does that mean that macroeconomics is not making any progress?… [This] raises an obvious question: why do people still use often elaborate models to forecast?… Why use the combination of a macroeconomic model and judgement to do so, rather than intelligent guesswork?…

Scott Lemieux: Halbig Trooferism: ‘Nice catch by Abbe Gluck: ‘It is no secret that the people bringing the challenge…

…to the Obamacare subsidies in the Halbig and King… are some of the same people who brought the 2012 constitutional challenge…. What’s less known, however, is that in the 2012 constitutional case, these same challengers filed briefs describing Obamacare to the court in precisely the way they now say the statute cannot possibly be read….’ It must be remembered here that the… challenge to the ACA… [must] show that there is no other reasonable interpretation of the statute…. The argument that the statute could not possibly have meant what everyone on both sides of the political spectrum thought it meant in 2010 is so preposterous it’s profoundly embarrassing that even two federal judges bought it. This litigation, admittedly, does seem to be based on a principle… that it’s not a lie if you [claim to] believe it.

Must- and Shall-Reads:

1. Paul Krugman: Inequality Is a Drag: “Almost everyone who matters… has agreed that higher taxes on the rich and increased aid to the poor have hurt economic growth…. But there’s now growing evidence… [that] high inequality is a drag on growth…. Do talented children in low-income American families have the same chance… as those born higher up the ladder? Of course not…. Consider… food stamps…. The historical evidence does indeed suggest… food stamps… somewhat reduces work effort, especially by single mothers. But it also suggests that Americans who had access to food stamps when they were children grew up to be healthier and more productive…. The same thing, I’d argue, will end up being true of Obamacare…. Will the new view of inequality change our political debate? It should. Being nice to the wealthy and cruel to the poor is not, it turns out, the key to economic growth…. Hello, trickle-up.”

2. Matt Zwolinski: The Pragmatic Libertarian Case for a Basic Income Guarantee: “Not only does the U.S. welfare state spend a lot; it spends it badly. Poor Americans receiving assistance face a bewildering variety of phase-outs and benefit cliffs that combine to create extremely high effective marginal tax rates on their labor. As a result, poor families often find that working more (or having a second adult work) simply doesn’t pay. And still, despite massive expenditures by the welfare state, some 16% of Americans are left living in poverty. Wouldn’t it be better just to scrap the whole system and write the poor a check?…”

3. Jerry Coyne: Our letter to the New York Times criticizing Nicholas Wade’s book on race: “As scientists dedicated to studying genetic variation, we thank David Dobbs for his review of Nicholas Wade’s A Troublesome Inheritance: Genes, Race, and Human History, and for his description of Wade’s misappropriation of research from our field to support arguments about differences in human societies. As discussed by Dobbs and many others, Wade juxtaposes an incomplete and inaccurate account of our research on human genetic differences with speculation that recent natural selection has led to worldwide differences in I.Q. test results, political institutions, and economic development. We reject Wade’s implication that our findings substantiate his guesswork. They do not…”

4. Mike Konczal: The Pragmatic Libertarian Case for a Basic Income Doesn’t Add Up “For the pragmatic case to work, it has to be founded on an accurate understanding of the current welfare state. And here I think Zwolinski is wrong…. He describes a welfare state where… bureaucracy… overwhelms and suffocates the individual…. Zwolinski puts significant weight on the idea that there are… 126 welfare programs spending nearly $660 billion dollars…. Medicaid… $228 billion… six big programs… $212 billion dollars…. What about the remaining 119 programs?… Quick examples involve $2.5 billion to facilitate adoption assistance, $500 million to help with homeless shelters, $250 million to help provide food for food shelters (and whose recent cuts were felt by those trying to fight food insecurity), or $10 million for low income taxpayer clinics. These grants go largely to nonprofits who carry out a public purpose…. Our rich civil society has always been built alongside the state. Perhaps these are good programs or perhaps they are bad, but the sheer number of programs have nothing to do with the state degrading the individual through deadening bureaucracy…”

5. Miles Kimball (2013): Contra John Taylor: “Having tweeted that John Taylor’s op-ed… ‘Fed Policy is a Drag on the Economy’ was ‘extraordinarily bad analysis’, I need to back up my view…. Not all of John’s points are equally problematic…. It is implausible for critics of Fed policy to say that (holding short-term rates fixed) changes in the holdings of long-term government bonds and mortgage-backed securities have no power… when the economy is in a slump, but… could have a dangerously powerful negative effect on aggregate demand once the economy is on the mend…. ‘Forward guidance as a price ceiling causing disequilibrium???’… This is just wrong…. Interest rate ceilings come in two types… [those] that cause the supply of assets… to exceed the demand… [those] that come from a commitment to buy as many assets as it takes…. John Taylor confuses these two types of interest rate ceilings.”

6. Izabella Kaminska: Piketty and the randomness of wealth “Gary Jenkins of LNG Capital…. ‘Some of these themes are not new but they are a good reminder of how random the accumulation of wealth can be. Sometimes it is nothing to do with a good idea or hard work; it’s just where your forebears happened to settle…. We don’t think the point about the randomness of capital allocation has been stressed enough. It’s an extremely important point because of the standing notion, especially in the land of opportunity, that capital always flows to those who work hard enough for it…. But this is simply not true. If you are of low or working class birth, the chances of becoming a gazillionaire by means of honest hard work alone are almost zero…. The mega rich like to justify their wealth with the theory that somewhere down the line one of their ancestors earned it…. Even in America, it would be a bold claim indeed to suggest land was allocated fairly to all settlers (and that’s without going into the whole native American issue)…. We think it’s better to say, that those who have inherited their wealth–especially through land–have done so thanks to the cunning use of paperwork and flags…”

7. Barry Eisler: On Torture: The New York Times Gets the Right Result for the Wrong Reasons “I’ve been trying to feel good about [Dean Baquet of] the New York Times’ decade-late decision to call torture torture—that is, to ‘deploy the English language to describe things’…. But the decision’s purported reasoning rendered me partially anhedonic about the result…. The Times… explains its reversal essentially by noting there had been a ‘dispute’… and now there isn’t…. What happens the next time the government alerts the New York Times of the alleged existence of some sort of linguistic ‘dispute’?… We’re talking about a newspaper, not a courtroom…. Hundreds of words… have legal as well as plain-English meaning…. Is it really Times policy to eschew all such words? Of course not…. Is the Times saying it only just figured out that the plain meaning of torture and the legal meaning are virtually one and the same? They had no way of knowing this until just now?… Does it make any sense for a free press to base its linguistic decisions on what the government ‘insists’ on? This is the key question behind the Times’ conversion to Newspeak, and the new reversal does nothing to address it…. The Times needed to… acknowledge… its position from the start was insidious, incoherent, and indefensible; and that it has learned from its egregious error…. But that’s not what happened…”

And:

• Andrew Farrant et al.: Preventing the “Abuses” of Democracy: Hayek, the “Military Usurper” and Transitional Dictatorship in Chile?
• Atif Mian and Amir Sufi More Evidence Supporting the House of Debt
• Alan Kirman: Demand Theory and General Equilibrium: From Explanation to Introspection, a Journey down the Wrong Road
• John Quiggin: “The NY Times has a lengthy thumbsucker from Robert Draper, repackaging claims by Nick Gillespie of Reason that the ‘libertarian moment’ has finally arrived. Jonathan Chait takes out the garbage on the dodgy opinion poll that is the primary factual basis for the story…”
• Janet Currie: Health, wealth and foreclosure
• Robert Lynch: “Congress: please get involved and resolve the Argentinian legal bankruptcy mess…”

Should Be Aware of:

1. Timothy B. Lee: The NYT is calling CIA torture “torture” now that it’s too late to do anything about it “We don’t know if the president would have made a different decision if the Times and other elite media organizations had eschewed euphemisms. But failing to describe the CIA’s actions as torture certainly reduced political pressure on Obama (and before him, President Bush) to hold those who engaged in torture responsible for their actions. In the process, the Times did its readers a disservice, failing to clearly and accurately explain to them what their government had done in their name.”

2. Kevin Hoover: Lucas the zealot “The moral problem of science is how, in the phrase of the great pragmatist philosopher C.S. Peirce, to fix belief. The failure of the Cowles Commission program in the 1970s was less from its supposed predictive failure or the failure of its models to be invariant to policy, than from a lack of conviction on the part of macro-economists in the soundness of its identifying assumptions. Sims responded by trying to live without theoretical convictions, but with limited success. Lucas tried to find conviction in a zealous commitment to Walrasian theory. Lucas carried the day; but, as with other cases of zealotry, there is a gap between the ideal (a macroeconomics built from individual micro-economic behaviors) and the practice (a macroeconomics that mimics the forms of microeconomics, but never deals with individuals). This zealotry has been damaging to empirical macro-economics because it dismisses particular, useful empirical investigations, not because they are not informative, but because they do not appear in appropriate dress.”

3. Joel Mokyr: What Today’s Economic Gloomsayers Are Missing “In the speculation on what the new technologies will look like and do, robots and artificial intelligence remain front and center, at once wished for (who likes making beds?) and feared as job-killers…. The breakthroughs are not ‘on the horizon’. They are here…. So: If everything is so good, why is everything so bad? Why the gloominess of so many of my colleagues? Part of the story is that economists are trained to look at aggregate statistics like GDP per capita… designed for a steel-and-wheat economy, not one in which information and data are the most dynamic sectors…. Many new goods and services are expensive to design, but once they work, they can be copied at very low or zero cost. That means they tend to contribute little to measured output even if their impact on consumer welfare is very large…. If telecommuting or driverless cars were to cut the average time Americans spend commuting in half, it would not show up in the national income accounts—but it would make millions of Americans substantially better off…”

Jerry Coyne: Our letter to the New York Times criticizing Nicholas Wade’s book on race: “As scientists dedicated to studying genetic variation…

…we thank David Dobbs for his review of Nicholas Wade’s *A Troublesome Inheritance: Genes, Race, and Human History*, and for his description of Wade’s misappropriation of research from our field to support arguments about differences in human societies. As discussed by Dobbs and many others, Wade juxtaposes an incomplete and inaccurate account of our research on human genetic differences with speculation that recent natural selection has led to worldwide differences in I.Q. test results, political institutions, and economic development. We reject Wade’s implication that our findings substantiate his guesswork. They do not…

Mike Konczal: The Pragmatic Libertarian Case for a Basic Income Doesn’t Add Up “For the pragmatic case to work…

…it has to be founded on an accurate understanding of the current welfare state. And here I think Zwolinski is wrong…. He describes a welfare state where… bureaucracy… overwhelms and suffocates the individual…. Zwolinski puts significant weight on the idea that there are… 126 welfare programs spending nearly $660 billion dollars…. Medicaid… $228 billion… six big programs… $212 billion dollars…. What about the remaining 119 programs?… Quick examples involve $2.5 billion to facilitate adoption assistance, $500 million to help with homeless shelters, $250 million to help provide food for food shelters (and whose recent cuts were felt by those trying to fight food insecurity), or $10 million for low income taxpayer clinics. These grants go largely to nonprofits who carry out a public purpose…. Our rich civil society has always been built alongside the state. Perhaps these are good programs or perhaps they are bad, but the sheer number of programs have nothing to do with the state degrading the individual through deadening bureaucracy…

Matt Zwolinski: The Pragmatic Libertarian Case for a Basic Income Guarantee: “Not only does the U.S. welfare state…

…spend a lot; it spends it badly. Poor Americans receiving assistance face a bewildering variety of phase-outs and benefit cliffs that combine to create extremely high effective marginal tax rates on their labor. As a result, poor families often find that working more (or having a second adult work) simply doesn’t pay. And still, despite massive expenditures by the welfare state, some 16% of Americans are left living in poverty. Wouldn’t it be better just to scrap the whole system and write the poor a check?…

Paul Krugman: Inequality Is a Drag: “For more than three decades, almost everyone who matters…

in American politics has agreed that higher taxes on the rich and increased aid to the poor have hurt economic growth…. But there’s now growing evidence for a new view… coming from places like the International Monetary Fund… high inequality is a drag on growth…. Do talented children in low-income American families have the same chance… as those born higher up the ladder? Of course not…. Consider… food stamps, perennially targeted by conservatives who claim that they reduce the incentive to work. The historical evidence does indeed suggest… food stamps… somewhat reduces work effort, especially by single mothers. But it also suggests that Americans who had access to food stamps when they were children grew up to be healthier and more productive…. The same thing, I’d argue, will end up being true of Obamacare…. Will the new view of inequality change our political debate? It should. Being nice to the wealthy and cruel to the poor is not, it turns out, the key to economic growth…. Hello, trickle-up.