Category: Equitablog

VIDEO: Amir Sufi presents House of Debt:

Broadcast live streaming video on Ustream

Ezra Klein: Obama’s climate change regulations are less ambitious than what Republicans were proposing in 2008: “In May 2008, Sen. John McCain traveled to Portland, Oregon…

…and delivered a speech that no Republican presidential candidate would consider giving today. It doesn’t matter “whether we call it ‘climate change’ or ‘global warming,'” McCain warned. “Among environmental dangers it is surely the most serious of all.” McCain went on to propose a cap-and-trade plan far more aggressive than the power-plant rules the Obama administration is announcing today….

In 2008, it still looked plausible that with American leadership, the world could limit the rise in temperatures to about two degrees Celsius. Today, that goal looks laughable. We’re on track to see temperatures rise by about four degrees Celsius…. The power plant regulations the Obama administration will announce today are far less ambitious than the proposal McCain offered in Oregon in 2008. They’re less ambitious than the proposals Newt Gingrich championed through the Aughts. They’re far less than what’s required to keep the rise in temperatures to two degrees Celsius. But they’re probably at the outer limit of what can be done so long as the Republican Party refuses to even believe in climate change, much less work with the Obama administration on a bill….

“We have many advantages in the fight against global warming, but time is not one of them,” McCain said in 2008. “Instead of idly debating the precise extent of global warming, or the precise timeline of global warming, we need to deal with the central facts of rising temperatures, rising waters, and all the endless troubles that global warming will bring. We stand warned by serious and credible scientists across the world that time is short and the dangers are great. The most relevant question now is whether our own government is equal to the challenge.”

We’re about to find out.

…in exchange for blocking Obama’s attempt to get John McCain’s cap-and-trade environmental plan through congress actually did was to change Barack Obama’s negotiating partner.

Instead of, on global-warming policy, negotiating with Mitch McConnell, he is now negotiating with Anthony Kennedy.

What was the point? Certainly the coal barons would rather have had a sensible cap-and-trade policy that gave them tradeable permits as valuable assets than be under the EPA’s command-and-control regulatory hammer. Yet this was predictable from the Supreme Court’s 2008 (and earlier!) line of thinking…

Yet more things I simply do not understand…

As time passes, it seems to me that a larger and larger fraction of Piketty’s critics are making arguments that really make no sense at all–that I really do not understand how people can believe them, or why anybody would think that anybody else would believe them. Today we have Per Krusall and Tony Smith assuming that the economy-wide capital depreciation rate δ is not 0.03 or 0.05 but 0.1–and it does make a huge difference…

Continue reading “Department of “Huh?!”–I Don’t Understand More and More of Piketty’s Critics: Per Krusell and Tony Smith” →

Should-Reads:

1. Ian Johnson: “Every spring, an old friend of mine named Xu Jue makes a trip to the Babaoshan cemetery in the western suburbs of Beijing to lay flowers on the tombs of her dead son and husband. She always plans her visit for April 5, which is the holiday of Pure Brightness, or Qingming…. A few days before Xu Jue’s planned visit, two police officers come by her house to tell her that they will do her a special favor. They will escort her personally to the cemetery and help her sweep the tombs and lay the flowers. Their condition is that they won’t go on the emotive day of April 5. Instead, they’ll go a few days earlier. She knows she has no choice and accepts…. On her husband’s tombstone is a poem explaining what killed both men: ‘Let us offer a bouquet of fresh flowers/Eight calla lilies/Nine yellow chrysanthemums/Six white tulips/Four red roses’. Eight-nine-six-four: June 4, 1989…”

2. Buce: Underbelly: The Best (Though Incomplete) Case Against the Bailout: “This is where Mian/Sufi get really interesting. They argue that there are really two banking systems at issue here: one, the mundane, boring payment system… the other is the business of mega-borrowing and mega-lending that gives Wall Street so much of it swashbuckling charm. The government did need to step in and save the ‘fluid flowing’ part…. But… once they’d saved the fluid-flowing system, they could safely have let the swashbuckling system just dangle from the yardarm. No, strike that: not only could we have let the swashbucklers go: it would have been good to let them go…. And that, dear reader, is the case.  It’s almost elegant, straightforward, and as a contribution to our understanding of the crisis, I’d say it is as helpful as anything since The Banker’s New Clothes by Anat Admati and Martin Hellwig. But… I’m not as clear as I would like to be on the relationship between the two parts of the banking system…”

3. Suresh Naidu: Capital Eats the World: “The forces that drive the wealthy to accumulate might not just be the realization of future consumption, but instead an insatiable drive for security, sociological pressures, psychological fantasies of future empires, or other structural imperatives. When you start thinking of savings this way, the case for taxing capital becomes much clearer. If the supply of capital is more like immobile real estate and less like footloose cash, basic economics suggests that we can tax it, because it won’t disappear, and you might even be doing some social good. If people are saving to pass inheritances onto their kids, then the cost of taxing capital is depriving some of trust funds, not a comfortable retirement. Not only does it mean that certain standard theories saying optimal capital taxation is zero don’t hold up anymore. It also means that one-off redistributions of assets won’t stay equal for long, so some kind of permanent capital tax is needed…”

Should Be Aware of:

• Brad DeLong (2013): Noise Trading, Bubbles, and Excess Volatility in the Aggregate Stock Market: Noah Smith and Robert Shiller and Andrei Shleifer and Jeremy Greenwood vs. John Cochrane and Gene Fama and Company: Progressive vs. Degenerative Research Programs in Finance
• Peter Rubin: The Inside Story of Oculus Rift and How Virtual Reality Became Reality
• William Davies: After Neoliberalism
• Marcos Otero: The real 10 algorithms that dominate our world
• John Locke: “And a man can no more justly make use of another’s necessity to force him to become his vassal by withholding that relief God required him to afford to the wants of his brother, than he that has more strength can seize upon a weaker, master him to his obedience, and, with a dagger at his throat, offer him death or slavery…”
• Amartya Sen: “Peter Bauer’s rhetorical question (point 9) as to ‘How far back should we go to redress historical wrongs?’ does not really affect those who do not seek moral justification of inherited advantage. It is, on the contrary, peculiarly relevant to the position of those who—like Bauer—do seek it…”

And:

Continue reading “Things to Read on the Morning of June 1, 2014” →

Over at Project Syndicate: The best review of Thomas Piketty’s Capital in the Twenty-First Century that I have read so far is the review in Michael Tomasky’s Democracy Journal by my good friend and frequent co-author Lawrence Summers. Go read the whole thing. And subscribe to Democracy Journal. If you do that, you will make better use of your time than reading further here…

Still here? You are, you say, unwilling to read 5000 words? It would be time well spent, I assure you. But if you are still here, let me give not a highlight but a brief expansion of a very small and minor sidelight, an aside in Summers’s review about moral-philosophy:

There is plenty to criticize in existing corporate-governance arrangements…. I think, however, that those like Piketty who dismiss the idea that productivity has anything to do with compensation should be given a little pause…. The executives who make the most money are not… running public companies… pack[ing] their boards with friends… [but] chosen by private equity firms to run the companies they control. This is not in any way to ethically justify inordinate compensation—only to raise a question about the economic forces that generate it…

Continue reading “Over at Project Syndicate: What Do We “Deserve” Anyway?: Monday Focus: June 2, 2014″ →

(1) Suresh Naidu: Capital Eats the World: “Piketty oscillates between paying homage to fundamental forces…

of technology, tastes, and supply and demand, and then backtracking to say that politics and institutions are important…

Continue reading “Afternoon Must-Read: Suresh Naidu: Eight Theses on Thomas Piketty from His Jacobin Review, “Capital Eats the World”” →

Jason Furman and James Stock: On Energy, ‘All of the Above’ Is Working: “U.S. gasoline consumption has fallen by 5.5 percent since 2007…

…or half a million barrels per day… gasoline consumption is now on a path to plateau, then decline after 2019…. Production of renewable energy has increased rapidly… electricity generation from wind has tripled while solar generation is up more than tenfold….Much of this energy revolution has been driven by technological advances and entrepreneurial risk-taking by a dynamic private sector. These trends have been supported and advanced by President Obama’s ‘all-of-the-above’ energy strategy… responsible development of oil and natural gas resources… accelerated the development and deployment of low-carbon wind, solar and nuclear projects… advanced energy efficiency… light-duty vehicles… appliances… buildings through the president’s Better Buildings partnership…”

Should-Reads:

1. Giovanni Peri, Kevin Shih, and Chad Sparber: How highly educated immigrants raise native wages: “The canonical economic model, based on demand and supply, holds that, all else equal, an increase in labour supply should cause wages to fall…. [But the labour market is more complex than the market for typical goods. Adjustment mechanisms exist to allow natives and firms to respond to immigration without experiencing lower wages or fewer employment opportunities. Immigrants may also generate positive externalities that benefit native workers…. Native and foreign labour differ…. Immigrants possess a comparative advantage and specialise in STEM. Thus, we might expect that natives respond… inflows of highly educated immigrants cause natives switch to more communication-intensive occupations…. A rather simplistic estimate of the contribution of foreign-born STEM to productivity in the US can be calculated… 50% of US total factor productivity (TFP) growth in recent decades is attributable to scientists and engineers… college-educated STEM workers grew from 2.9% of total employment in 1990 to 3.7% of employment in 2010… foreign-born workers were responsible for 80% of this growth…. Roughly 40% of aggregate productivity growth may be due to foreign-born college-educated STEM workers…”

2. Adam Posen: Kuroda’s plan is working: “The Bank of Japan’s policies over the last 14 months are a welcome return to sanity. Mainstream economists inside and outside Japan had been asking the BOJ to stand up against deflation for nearly two decades…. There are three important improvements that the BOJ has made to its monetary regime… buying long-duration government bonds… the statement of a clear, positive inflation target… how the BOJ reacts to shocks…. This new regime of accommodating positive price shocks, at least under the current circumstances, is an extremely powerful shift…”

3. Greg Sargent: Morning Plum: Mitch McConnell effectively abandons Obamacare repeal: “Today we have a big break in the Case of the Pathologically Dissembling Senate Minority Leader. As you know, Mitch McConnell has been struggling to articulate his position on the Affordable Care Act, ever since he laughably declared that the fate of Kentucky Kynect — the state exchange that has signed up over 400,000 people for coverage and is more popular than the hated Obamacare — is ‘unconnected’ to his push to repeal the law…. Now, however, the McConnell campaign has issued a new statement to Post fact checker Glenn Kessler that… suggests he might largely retain the Medicaid expansion…. ‘Medicaid existed before Obamacare and will exist if we are able to repeal it. Obamacare loosened eligibility requirements for Medicaid recipients, and in the process, helped find many who were already eligible but no enrolled.  These people would remain eligible even after a repeal. The federal government does allow states flexibility in setting requirements and Kentucky could be able to keep many of the newly enrolled in the program if we decided to’. Well, there you have it… Kentucky could keep people on the Medicaid expansion…”

4. Steve Beshear: Gov. Beshear Slams McConnell: “If each of the over 421,000 people who signed up via “kynect” could grab 10 minutes of Sen. McConnell’s time to explain what health care coverage means for their families, and if the Senator had the endurance to listen 24/7, it would take eight years to hear from each enrollee. That’s longer than the entire new Senate term he says he deserves…”

Should Be Aware of:

• Andrew G Haldane: Unfair Shares
• Mark Sumner: Science Friday: Sixty Men from Ur
• Paul Krugman: Inflation Targets Reconsidered | Is Globaliza+on Stalling? Should We Care?
• Adam Radwanski: The long, slow decline of Canada’s industrial heartland
• Dylan Matthews: Limiting access to guns reduces suicides. Really
• Adrianna McIntyre: Obamacare might benefit college grads more than less-educated young adults
• Fever° Red hot. Well read.
• Paul Krugman: That Old-Time Inequality Denial – NYTimes.com

And:

1. Jonathan Chait: Why Republicans Always Say ‘I’m Not a Scientist’: “Asked by reporters yesterday if he accepts the scientific consensus that greenhouse gas emissions contribute to global warming, John Boehner demurred on the curious but increasingly familiar grounds that he is not a scientist. ‘Listen, I’m not qualified to debate the science over climate change’, the House Speaker said. Boehner immediately turned the question to the killing of jobs that would result from any proposal to reduce greenhouse gas emissions, which he asserts with unwavering certainty. (On this question, Boehner is not held back by the fact that he is also not an economist.)… This particular demurral seems to be in vogue for the Grand Old Party…. It’s a strange form of reasoning. Very few of us are scientists, which is exactly why we tend to defer to scientific judgment…. Scientists… believe that chugging Liquid Drano is bad for your health, which is why, precisely because of my lack of scientific training, I hold off on the Drano Cocktails. ‘I am not a scientist’ makes sense as a way to resolve a tension within Republican politics…. [They might] concede that anthropogenic global warming is indeed real, but that any solution is simply too costly…. The trouble with the it’s-real-but-let’s do-nothing line is that might give offense to the kooks… the Glenn Becks, George Wills, and Wall Street Journal editorial page columnists of the world are out there fighting the good denier fight, and they don’t want to be undercut…. ‘I’m not a scientist’ allows Republicans to avoid conceding the legitimacy of climate science while also avoiding the political downside of openly branding themselves as haters…”

2. Richard Clarke: Bush Administration Committed War Crimes: “Amy Goodman: “I think things that they authorized probably fall within the area of war crimes. Whether that would be productive or not, I think, is a discussion we could all have. But we have established procedures now with the International Criminal Court in The Hague, where people who take actions as serving presidents or prime ministers of countries have been indicted and have been tried. So the precedent is there to do that sort of thing. And I think we need to ask ourselves whether or not it would be useful to do that in the case of members of the Bush administration. It’s clear that things that the Bush administration did — in my mind, at least, it’s clear that some of the things they did were war crimes…”

3. Tim Urban: The Fermi Paradox: “If we’re neither rare nor early, Group 1 thinkers conclude that The Great Filter must be in our future… something prevents life from going much further and reaching high intelligence in almost all cases—and we’re unlikely to be an exception… a regularly-occurring cataclysmic natural event… the possible inevitability that nearly all intelligent civilizations end up destroying themselves…. This is why Oxford University philosopher Nick Bostrom says that ‘no news is good news’. The discovery of even simple life on Mars would be devastating, because it would cut out a number of potential Great Filters behind us. And if we were to find fossilized complex life on Mars, Bostrom says ‘it would be by far the worst news ever printed on a newspaper cover’, because it would mean The Great Filter is almost definitely ahead of us—ultimately dooming the species. Bostrom believes that when it comes to The Fermi Paradox, ‘the silence of the night sky is golden’…”

4. Doug J: It’s in the look they give you down their nose: “The most revelatory piece on Washington that I’ve ever read is Sally Quinn’s infamous “Village” piece. If you haven’t read it before, and you’re interested in American politics, drop what you’re doing and read it right now. Establishment media’s dudebro heh-indeedy response to Michael Kinsley’s ridiculous anti-Greenwald screed is almost as telling…”

Already-Noted Must-Reads:

1. Thomas Piketty: Technical Appendix: Inequality of Capital Ownership Addendum: Response to FT: “This is a response to the criticisms… which I interpret as requests for additional information – that were published in the Financial Times on May 23 2014…. These criticisms only refer to the series reported in chapter 10 of my book “Capital in the 21st century”, and not to the other figures and tables presented in the other chapters…. Let me start by saying that the reason why I put all excel files on line, including all the detailed excel formulas about data constructions and adjustments, is precisely because I want to promote an open and transparent debate about these important and sensitive measurement issues. Let me also say that I certainly agree that available data sources on wealth inequality are much less systematic than what we have for income inequality…. My problem with the FT criticisms is twofold. First, I did not find the FT criticism particularly constructive. The FT suggests that I made mistakes and errors in my computations, which is simply wrong, as I show below. The corrections proposed by the FT to my series (and with which I disagree) are for the most part relatively minor, and do not affect the long run evolutions and my overall analysis, contrarily to what the FT suggests. Next, the FT corrections that are somewhat more important are based upon methodological choices that are quite debatable (to say the least). In particular, the FT simply chooses to ignore the Saez-Zucman 2014 study, which indicates a higher rise in top wealth shares in the United States during recent decades than what I report in my book (if anything, my book underestimates the rise in wealth inequality). Regarding Britain, the FT seems to put a lot of trust in self-reported wealth survey data that notoriously underestimates wealth inequality…”

2. Mark Thoma: The Great Recession’s “biggest policy mistake”: “The balance sheets of financial institutions were also severely damaged as the assets they held lost value during the crash. Many of these institutions became illiquid and insolvent….The government’s response was… TARP that helped to restore the balance sheets of financial institutions…. Banks had a tough time to be sure, but the bailout worked…. Households didn’t get the same amount of help in large part due to the opposition of Geithner’s Treasury. That’s why I concur with Mian and Sufi that this is ‘the biggest policy mistake of the Great Recession’. A policy that would have provided households with mortgage debt relief could have made a big difference to those trying to rebuild their balance sheets and eliminate debt…. Americans were forced to mostly rebuild on their own, and this is a primary cause of the ongoing, slow recovery. It would have still taken time to recover even if households had been helped the way banks were helped. A nation can’t quickly dig out of a recession that’s so deep–but it didn’t have to take as long as it has.”

3. Ezra Klein: Obama’s management problem: “It’s clear that Obama doesn’t personally hold Shinseki responsible for the problems at the VA. Quite the opposite: he thinks he’s a victim whose career is being sacrificed to help calm this storm. He’s furious about the abuses themselves just as he was furious about the deficiencies in HealthCare.Gov. But he never quite seems to be furious at the managers he’s appointed to run these bureaucracies.”

4. Andrew White: Book Review – Timothy Geithner’s Stress Test… only just worth the read…: “Oh, and one Dragon is laid to rest too.  It becomes clear that the US Government could have saved Lehman.  After all that hot air about how there were no rules allowing the Fed or Treasury to save Lehman, Geithner explains all the rule bending they did for everyone else (‘exigent conditions’).  They (whoever ‘they’ refers too) could have saved Lehman.  For a number of reasons partially explained in the book, ‘they’ didn’t…”

Andrew White: Book Review – Timothy Geithner’s Stress Test… only just worth the read…: “Oh, and one Dragon…

…is laid to rest too.  It becomes clear that the US Government could have saved Lehman.  After all that hot air about how there were no rules allowing the Fed or Treasury to save Lehman, Geithner explains all the rule bending they did for everyone else (‘exigent conditions’).  They (whoever ‘they’ refers too) could have saved Lehman.  For a number of reasons partially explained in the book, ‘they’ didn’t…