Category: Equitablog

Should-Reads:

1. Echidne: The Day Of Retribution. On Elliot Rodger, the Butcher of Santa Barbara: “This post is about the slaughter carried out by Elliot Rodger in Santa Barbara. It is about violence, the hatred of women and the general hatred of humans. Consider carefully whether you wish to read it…”

2. Jonathan Hopkins: Piketty Debunked? Not So Fast: “Piketty’s book was so universally lauded by such a chorus of great minds… that it was only a matter of time before someone pushed back…. Chris Giles in the FT takes issue with Piketty’s data on rising wealth inequality… struck by the marked difference between the wealth figures used by Piketty for the UK, and those published recently by the UK Office for National Statistics, which suggest much lower levels of inequality…. By adding the raw data from the UK Inland Revenue figures… and the ONS data… Giles… [claims] that the books ‘central findings… no longer seem to hold’. That’s quite a big claim. Is it true? Well, here I’ll just look at the data for the UK. There is a problem with [Giles’s] chart…. By throwing in new data that gives a lower figure in the same chart, the visual impact is of a different trend that is not really supported by the data…. The fair test of whether Piketty’s trend exists or not is to compare the IRS numbers with data for the earlier period. In fact those numbers track the trend of the Piketty series fairly closely, but with lower absolute values…”

3. Dan Alpert: Why Tim Geithner Is Wrong About the TARP Bailouts: “Former U.S. Treasury Secretary Timothy Geithner muses over the bailout of the financial system during the 2008-09 financial crisis. He concludes not only that, however flawed, the Troubled Asset Relief Program (TARP) was a ‘best of all possible bailouts’, given the constraints of contemporary politics and law, but also that it has ultimately been justified by the fact that it has made money for the American government and taxpayer. Both of these conclusions are inaccurate. While the first no doubt will continue to be the subject of debate for many years to come, the second is nothing short of a weak apologia, featuring an incomplete assessment of the collateral damage of the bailouts, including the enormous costs to Americans that don’t appear directly on the government’s balance sheets…”

4. Kevin O’Rourke: The Irish Economy: “The European election results are coming in, and in France they are catastrophic. There are two obvious points to be made which work in opposite directions. First, the vote for the FN and similar parties is an under-estimate of eurosceptic opinion, since these parties come with so much baggage that many voters who hate what Europe has become would never, ever dream of voting for them. And quite right too. Second, it may well be that these parties would have done less well if there had been national elections last weekend: voting for the EP is one thing, voting for national governments another. (But who really knows.) Expect many mainstream commentators to point out that the centre has held, that the EPP have won, that Juncker is the people’s choice for EC President, and all the rest of it. This strikes me as exactly the wrong response. My big worry this Monday morning is that Hollande and others (but I am mainly thinking of Hollande) will continue with their current economic strategy, which as far as I can see consists of crossing their fingers and hoping that something will turn up…”

Should Be Aware of:

• * Jane M. von Bergen:* Union workers see only part of big hourly markups at Convention Center
• Sarah Marshall: The Way We Live Now: The Adjunct
• Matthew Yglesias: How African-Americans in South Carolina invented Memorial Day
• Adrianna Macintyre: The NRA has been blocking a nominee for surgeon general since February because he thinks gun violence is a public health problem
• David Meyer: Bots were responsible for Bitcoin’s stratospheric ascent, anonymous report claims
• David Atkins: Eurojolt: Fascists win when the left embraces Bloomberg-style austerity
• Matthew Martin: Economic mobility is irrelevant
• Farangis Najibullah: Russian Television Fraudulently Reported Ukraine’s Elections
• Reed Abelson: Insurers Once on the Fence Plan to Join Health Exchanges in ’15
• Annalee Newitz: The Rise of the Evolutionary Paychology Douchebag
• Andrew Solomon: How the worst moments in our lives make us who we are
• Paul Mason: Thomas Piketty’s real challenge was to the FT’s Rolex types

And:

Continue reading “Things to Read on the Evening of May 26, 2014” →

Mark Thoma sends us to Larry Summers at Michael Tomasky’s Democracy Journal:

Lawrence H. Summers: The Inequality Puzzle “And there is the basic truth that technology and globalization…

…give greater scope to those with extraordinary entrepreneurial ability, luck, or managerial skill. Think about the contrast between George Eastman, who pioneered fundamental innovations in photography, and Steve Jobs…. Eastman Kodak Co. provided a foundation for a prosperous middle class in Rochester for generations, no comparable impact has been created by Jobs’s innovations….

Even where capital accumulation is concerned, I am not sure that Piketty’s theory emphasizes the right aspects. Looking to the future, my guess is that the main story… will be the devastating consequences of robots, 3-D printing, artificial intelligence, and the like for those who perform routine tasks. Already there are more American men on disability insurance than doing production work in manufacturing. And the trends are all in the wrong direction, particularly for the less skilled, as the capacity of capital embodying artificial intelligence to replace white-collar as well as blue-collar work will increase rapidly in the years ahead….

I looked at the first paragraph of this last Friday, so let me today focus on the second paragraph…

Continue reading “Reviewing Lawrence H. Summers’s Review of Piketty III: The Rise of the Robots: Monday Focus: May 26, 2014” →

Jérémie Cohen-Setton: The Financial Times Attack on Thomas Piketty: “Matt O’Brien writes that [Chris] Giles identifies…

…simple transcription errors… 1908 instead of 1920…. They’re embarrassing, but they don’t change the big picture…. [Chris] Giles thinks Piketty should average European data by population, not by country…. And Giles isn’t sure why Piketty has put together some of his wealth data—which is sparse, and needs to be adjusted, if not constructed—the way that he has. But these aren’t errors. They’re questions….Ryan Avent writes that while some of the data and adjustments in the spreadsheets lack adequate documentation, Giles does not have the evidence to justify the implication that figures are drawn ‘from thin air’. Data fabrication is a serious charge to make, and I am surprised Mr Giles would allege it without clearer proof. Simon Wren-Lewis writes that the only issue of substance involves trends in the UK wealth income ratio, but of course an article headlined ‘Data sources on UK wealth income ratio differ’ would not have had the same punch. Justin Wolfers writes that while it’s quite natural for a journalist to emphasize the differences between his findings and those of a famous author, the most striking fact is how closely The F.T.’s analysis agrees with Mr. Piketty’s. Their preferred time series for the evolution of wealth inequality are remarkably similar…

Dylan Scott: The Toughest Questions The GOP Should Have To Answer On Obamacare: “Three Questions For Republicans…

…Who Want To Repeal The Affordable Care Act: 1. How would any alternative policy account for the millions of previously uninsured people who have gotten health coverage under Obamacare?… 2. Do you think covering the uninsured should be the goal of federal policy? If so, how would your alternative policy achieve that and keep insurance costs stable without an individual mandate?… 3. You have criticized President Obama for canceled policies under Obamacare. If your alternative policy is intended to expand health coverage, how would it achieve that without causing the same kind of disruption in the market?… Three Questions For Republicans Who Don’t Want To Repeal The Affordable Care Act: 1. Would you oppose continued efforts by Republican leadership to repeal Obamacare or intentionally undercut its effectiveness?… 2. What serious improvements to the law are you ready to propose that could win support from congressional Democrats and the White House?… 3. If your state has not expanded Medicaid under the law, what are you willing to do to persuade GOP state leaders to accept expansion?

Charlie Stross: Amazon: malignant monopoly, or just plain evil?: “Last week, Amazon.com began removing…

…the pre-order links from titles by the publishing group Hachette. This is a cruel and unpleasant action, from an author’s point of view; if you’re a new author with a title about to come out, it utterly fucks your first-week sales and probably dooms your career from the outset. And if you’re someone like me, with a title about to come out, it frustrates and irritates your readers and also damages your sales profile and screws your print run…. Forbes mostly calls it right, at least at the corporate level, and until the end of this paragraph, where their ‘free-market’ knee-jerk kicks in and they bottle it:

What we’re really seeing is a battle between the people who make the product and the people who distribute it as to who should be getting the economic surplus that the consumer is willing to hand over. Like all such fights it’s both brutal and petty. Amazon is apparently delaying shipment of Hachette produced books, insisting that some upcoming ones won’t be available and so on. Hachette is complaining very loudly about what Amazon is doing, entirely naturally. The bigger question is what should we do, if anything, about it? To which the answer is almost certainly let them fight it out and see who wins.

Planet earth calling: Hachette is the publishing arm of… Lagardère… annual turnover of €7.37Bn…. Hachette turned over €2.1Bn in 2012…. Amazon’s sales… €45-50Bn)…. It’s a big-ish corporation being picked on by a Goliath more than ten times its size, in an attempt to extort better terms…. Forbes seem to think that Hachette is a producer and Amazon is a distributor. This isn’t quite true. I am a producer…. Amazon’s strategy (as I noted in 2012) is to squat on the distribution channel… eventually… leaving just Amazon as a monopoly distribution channel retailing the output of an atomized cloud of highly vulnerable self-employed piece-workers like myself….

Should-Reads:

1. Julie Rovner: The Politics Of Health In 2014 Aren’t What You Think: “Last year, the GOP playbook for keeping the U.S. House in 2014 and winning the Senate consisted of a fairly simple strategy: Run against Obamacare. But now… that strategy is looking not so simple…. Republicans face two key problems using the law as a political cudgel, analysts say. One is that with millions of people now signed up for coverage, making the law go away would result in taking away something tangible for a large and growing group of voters. ‘So in short order it’s going to be about what you lose as a consequence’, Jennings says. The second problem is with the back half of what Republicans have continually branded as a ‘repeal and replace’ strategy, says Clancy. ‘In my 20 years of following health care policy, (Republicans) have never been able to coalesce around en electorally inspiring alternative on health care…. [Republicans are] fundamentally divided between pro-market and pro-business factions’ when it comes to health care… ‘that makes it difficult for Republicans to come together over truly pro-patient reforms.'”

2. Carola Conces Binder: Kocherlakota’s Case for Price Level Targeting: “Narayana Kocherlakota, President of the Federal Reserve Bank of Minneapolis, described the benefits of price level targeting to the Economic Club of Minnesota on May 21…. ‘The low inflation in the United States tells us that resources are being wasted. What exactly are these wasted resources?…. The biggest and most disturbing answer is our fellow Americans…. The FOMC is undershooting its price stability objective and is expected to continue to do so. But we should all keep in mind that this outcome–and especially the forecast for continued undershootin–typically means that the FOMC is also underperforming on its other objective of promoting maximum employment…. If my inflation forecast is right, the price level in 2018 will be about 2.5 percent below what it would have been had the FOMC hit its inflation target over the preceding six years’…. He describes two main benefits of adopting price level targeting…. ‘The first reason is that price level targeting makes long-term contracts safer’…. The second reason that the FOMC might want to use price level targeting is that it would serve as an automatic stabilizer…. I don’t think a switch to price level targeting is likely in the near term. It would (nearly) be a global first. Only the Swedish Riksbank, from 1931-37, has explicitly targeted the price level. The Bank of Canada, an inflation-targeting regime since 1991, seriously considered switching to price level targeting, but decided against it in 2011…. A shift to treating the [inflation] target as a true target, with symmetric costs of overshooting and undershooting, and sufficient weight on the employment part of the mandate, may be an easier-to-implement solution than an explicit price-level target.”

Should Be Aware of:

• Peter Bright: Surface Pro 3 review: Is the third time the charm?
• Squarely Rooted: Capital and Moral Inheritance
• Amy Lynn Smith: Pharmacy technician sees Obamacare working every day
• Farhad Manjoo: Amazon’s Tactics Confirm Its Critics’ Worst Suspicions
• Fabrizio Perri: Inequality, Recessions and Recoveries
• Mike Konczal: The FT Gets Piketty’s Capital Argument Wrong
• Edmund Fawcett: How Republicans became the “stupid” party: Turning right, refusing to recognize facts and change
• Reading is for Snobs: Welfare Recipient Ben Carson Complains About Welfare Recipients On The View
• David Autor: Inequality Among the “99 percent”

And:

Continue reading “Things to Read on the Morning of May 25, 2014” →

• Weekend Reading; Robert Skidelsky: Review of Thomas Piketty: Capital in the 21st Century (Brad DeLong’s Grasping Reality…)
• Weekend Reading: Irving Fisher’s 1918 Presidential Address to the American Economic Association (Brad DeLong’s Grasping Reality…)

• Mr. Piketty and the ‘Neoclassicists’: A Suggested Interpretation
• Slides

The physiocrats of eighteenth-century France saw the country as having four kinds of jobs:

1. Farmers
2. Skilled artisans
3. Flunkies
4. Landowning aristocrats

Farmers, they thought, produced the net value in the economy–the net product. Their labor combined with water, soil, and sun grew the food they and others ate. Artisans, the physiocrats thought, were best seen not as creators but as transformers of wealth–transformers of wealth in the form of food into wealth in the form of manufactures. Aristocrats collected this net product–agricultural production in excess of farmers’ subsistence needs–and spent it buying manufactured goods and, when they got sated with manufactured goods, employing flunkies.

Set the wage needed to attract people into the artisan professions as numeraire: set it equal to 1. Then in this framework, the key economic variables are:

• the fraction of the population who are farmers: f.
• the net product per farmer: n.
• the fraction of the population who can be set to work making manufactured goods that aristocrats can consume before becoming sated: m.

The key equilibrium quantity in this system is:

(nf-m)/(1-f-m) = w

This gives the standard of living of the typical flunky–say, a runner for His Grace the Cardinal. The numerator is the amount of resources on which flunkies can subsist: the net product received by landlords minus the amount of the net product spent employing artisans. The denominator is the flunky share of the population. The quotient of the two is the flunky wage: w.

If this flunky wage w is low, the country is poor. Flunkies are then ill-paid. Begging and thievery are then rampant. Moreover, the reserve army of underemployed and potentially-unemployed flunkies puts downward pressure on artisan and farmer living standards as well.

If this quantity w is high, the country is prosperous.

The physiocrats saw a France undergoing a secular decline in the farmer share f. They worried. A fall in f produced a sharper decline in w. Thus they called for:

• Scientific farming to boost n, and so boost the net product nf.
• A reallocation of the tax burden to make it less onerous to be a farmer–and so boost the farmer share f and thus the net product nf.

With the unquestioned assumption that there were limits on how high the net product per farmer n could be pushed, the physiocrats would have forecast that France of today, with only 5% of the population farmers, would be a hellhole: enormous inequality and absolute poverty, with huge numbers of ill-paid flunkies sucking up to the aristocratic landlords.

Well, the physiocrats were wrong about the decline of the agricultural share of the labor force…

And let us hope that the techno-pessimists are similarly wrong about the rise of the robots…