Category: Equitablog

Matthew Yglesias: Facebook product director furious at Facebook’s effect on news: “Mike Hudak — who, importantly, is Director of Product at Facebook…

…has a little rant about the state of the media and his view that we at http://vox.com have failed to cure what ails it:

And we come to Ezra Klein. The great Ezra Klein of Wapo and msnbc. The man who, while a partisan, does not try to keep his own set of facts…. They write stupid stories about how you should wash your jeans instead of freezing them. To be fair their top headline right now is “How a bill made it through the worst Congress ever.” Which is better than “you can’t clean your jeans by freezing them.”… It’s hard to tell who’s to blame. But someone should fix this shit.

Here’s where I disagree–it is not hard to tell who is to blame for the fact that the jeans story (which is a great, interesting, informative story) got more readers than Andrew Prokop’s excellent feature on the DATA Act. Facebook is to blame…. The jeans story has been shared 1,062 times on Facebook while the DATA Act story has been shared just 242 times. That’s why the jeans story has been read by more people. We featured the DATA Act story much more prominently on our home page, but these days the bulk of web traffic is driven by social media and the bulk of social traffic is driven by Facebook…. Traffic on the internet right now is all about Facebook sharing behavior…. On Twitter if you share something, your followers see it. On Facebook, what is seen is driven by algorithm that Facebook controls–if they wanted to promote more hard news they could do it….

The Facebook Gods smiled upon my sharing of ‘Buzzfeed’s founder used to write Marxist theory and it explains Buzzfeed perfectly’ and I hope the Gods will be as friendly to my share of Max Fisher’s brilliant 4,000 word explanation of the endless political crisis in Thailand. But, frankly, my experience as a veteran professional in this field is that the Facebook Gods will not smile on Max’s Thailand piece…. If Facebook executives don’t like a world in which those are the kind of stories people read, they should do something about it…

Erik Loomis: Histories of the Gilded Age, Written by Hacks of the New Gilded Age: “National Review troll Amity Shlaes…

…in lamely attempting to write the “humanitarian case” for repealing the minimum wage, writes her own history of the Gilded Age…. ‘Employers and employees believed that their relationship, the two-party one, was key. Outsiders… were intruders…. The two-party dynamic often succeeded. Because the employee-employer pair set their terms together, they trusted each other…. Andrew Carnegie and Henry Frick… shot at the workers…. What is mostly forgotten is that the workers also shot at the detectives. What is entirely forgotten is that Carnegie and Frick did much for workers, precisely because they felt responsible…. In 1905, the Supreme Court supported this old view when it held that New York State might not regulate the hours worked at a bakery because doing so interfered with the sanctity of the contract between worker and employer.’… Equality of contract between the billionaire employer and unemployed worker, now that’s bringing the first Gilded Age into the second Gilded Age! It’s also amazing how workers’ desires for a minimum wage are never taken into consideration…

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

Lawrence H. Summers: The Inequality Puzzle: “Piketty’s treatment of inequality is perfectly matched to its moment….

His work richly deserves all the attention…. Painstaking empirical research… transformed political discourse… a Nobel Prize-worthy contribution… elegant framework for making sense of a complex reality… theorizing is bold and simple and hugely important if correct…. Piketty makes a major contribution by putting forth a theory of natural economic evolution under capitalism….

Books that represent the last word on a topic are important. Books that represent one of the first words are even more important. By focusing attention on what has happened to a fortunate few among us, and by opening up for debate issues around the long-run functioning of our market system, Capital in the Twenty-First Century has made a profoundly important contribution.

Yes, Thomas Piketty and Emmanuel Saez are now a lock on a Nobel Prize someday for their extraordinarily impressive empirical work on inequality…

Mr. Piketty and the “Neoclassicists”: A Suggested Interpretation

J. Bradford DeLong

U.C. Berkeley and NBER :: delong@econ.berkeley.edu :: https://equitablegrowth.org/blog/ :: @delong :: http://delong.typepad.com/

May 2014

Slides: https://www.icloud.com/iw/#keynote/BAJs-2mixMk5lB4hKcKBifsco49lBMrormKF/20140520_Mr._Piketty_and_the_%22Neoclassicists%22–A_Suggested_Interpretation.key

I. Introduction

The reference of course, is to Hicks (1937): “Mr Keynes and the ‘Classics’: A Suggested Interpretation”. An important, sprawling book of economic analysis. A complex and nonobvious relationship to a previous economics literature. Large political economy and policy stakes at hazard. Is this John Maynard Keynes’s General Theory of Employment, Interest, and Money? Or is this Thomas Piketty’s Capital in the Twenty-First Century?

Continue reading “The Honest Broker: Mr. Piketty and the “Neoclassicists”: A Suggested Interpretation: For the Week of May 17, 2014” →

Heather Boushey: It Wasn’t Household Debt That Caused the Great Recession: “Given the troubling rise in economic inequality over the past four decades, this research could not be more timely….

Mian and Sufi are part of a new generation of economists who examine detailed microeconomic data and analysis to understand the macroeconomy, giving us a deeper understanding of how inequality affects economic growth and stability…. Mian and Sufi’s research shows that the marginal propensity to consume… depends not just on the value of the asset but also the debt burden…. Mian and Sufi provide a definite ‘yes’ to the question of whether we could have prevented the Great Recession…. Policymakers could have seriously mitigated the damage, pointing out that debt forgiveness would have been much more effective that the policies implemented because it would have targeted households with the largest marginal propensity to consume. This is a failure on a massive scale, and more economists need to follow the lead of Mian and Sufi and look deep into the data to understand what we got wrong. Mian and Sufi’s argument hinges on the conclusion that it was the supply of credit that drove the bubble and the heightened debt burdens… people were just acting irrationally—given that the massive increase in borrows during the credit boom was among borrowers with declining incomes…. As families sought to cope with the slow-job growth economy in the 2000s and a labor market that still does not provide the kinds of supports and protections working parents need, many turned to increasingly-readily-available credit as a way to cope…. The story that emerged in the early days of the Great Recession was that too many people borrowed too much to afford fancy houses. That’s not what Mian and Sufi’s data show…. Subsequent reforms to our financial system give policymakers more tools to police housing finance, yet the continuing over-reliance on debt and a lack of good jobs leaves families at risk and exposes our economy to the whipsaw of another debt-fueled credit bubble…

Should-Reads:

1. Tim Duy: Dudley Revisits Exit Strategy: “William Dudley gave what was both an interesting and depressing speech.  Interesting in that he provides some new thoughts on the exit strategy. Depressing in that he outlines a case for persistently low interest rates. One wonders why, given such an outlook, the Fed is so firmly focused on the exit strategy to begin with, rather than accelerating the pace of the recovery…. Three percent growth is not exactly anything to write home about; the only thing exciting about 3 percent is that we just can’t seem to get there…. Trend productivity growth of just 1 to 1.5 percent is very, very low and feeds into the Fed’s belief that potential growth is in the 2.2 to 2.3 percent range…. Dudley anticipates that the tapering process will continue, and thus turns his attention to the lift-off from the zero bound. Here he admits the reality of the situation. They really have no idea when the first rate increase will occur…. He too expects rates will be subdued over the longer term…. Dudley is saying that the Fed can reduce accommodation via raising rates or reducing the balance sheet, and  they should should begin with the former to normalize policy. This reveals his confidence in being able to manage the balance sheet while raising rates…. Dudley reinforces expectations that the low rate environment will persist long into the future. The data flow is not providing reason to think otherwise at this point…. It remains interesting that the Fed does not view their own outlook as reason to accelerate the pace of activity. They seem relatively content to accept what they themselves acknowledge is an ongoing disappointment…”

2. Jesse Eisinger: The Buck Stops With Obama on Tepid Financial Reform: “These were Mr. Geithner’s failures, but they were more deeply Mr. Obama’s. The flaws we thought we were seeing during Mr. Geithner’s tenure turn out to have replicated themselves in other Obama departments. And they have persisted after Mr. Geithner left. Why, it’s almost as if the Treasury secretary wasn’t the one making decisions and setting the tone after all…. Eric H. Holder Jr…. Mary L. Schapiro… oversaw the inadequate enforcement response to the crisis…. Ben S. Bernanke… didn’t push for more aggressive regulatory and financial reform. Mr. Geithner didn’t run those shops. And Geithner-like characters keep popping up, while appointees who are unlike the president get ousted. At the Federal Deposit Insurance Corporation, the outspoken Sheila Bair was replaced with the low-profile Martin J. Gruenberg. Gary S. Gensler… didn’t get nominated to a second term. In his place, we got a Treasury official whose cipher of a record was almost treated as a virtue by the Obama administration…. Mary Jo White, has been disappointing on regulatory questions…. Reform health care? Take the right-of-center Heritage plan, hopeful of bipartisan support that never materializes. Reform the financial markets? Don’t do anything that someone could deride as simplistic and unsophisticated…. The biggest disappointments were failing to be more aggressive on housing policy and failing to hold wrongdoers accountable in the aftermath of the crisis. But the Obama administration’s failure on financial regulatory reform may be the most emblematic of the president’s halting leadership qualities…. Give credit to Mr. Geithner: He was consistent in his hostility to significant action. In his book, Mr. Geithner reveals that he undercut the support of the British prime minister, Gordon Brown, for a financial transaction tax, knowing that such a global tax, which is backed by respected economists and is politically popular, had ‘no chance without our support’. Even today, he doesn’t believe we can–or should–solve ‘too big to fail’, calling it a ‘Moby-Dick’ policy. But if he ever steered a path too middling for Mr. Obama, the president never made it clear…. President Obama could consider financial regulatory reform a signature achievement and work to consolidate it. But he doesn’t appear to. It’s not surprising his appointees don’t either…”

3. Nick Rowe: How long is the short run?: “The answer we normally give… is: ‘It depends on price stickiness; if prices are very flexible it will be short, and if prices are very sticky it will be long’. A better answer would be: ‘It depends on monetary policy; if monetary policy is very good it will be short, and if monetary policy is very bad it will last forever’…. In the AD-AS framework. Put the price level (P) on the vertical axis, and real output (Y) on the horizontal axis. Draw a downward-sloping AD curve, a vertical LRAS curve, and an upward-sloping (or horizontal) SRAS curve…. A shock shifts the AD curve to the left… there is a recession. But eventually, prices (including wages) adjust, the SRAS curve slowly shifts down/right, and the economy eventually returns to (a new) long run equilibrium at point C. And the time it takes for prices to adjust determines how long it takes for the economy to get to point C. We then say it might be better for the central bank to respond to the shock by loosening monetary policy and shifting the AD curve back to the original red curve, so the economy returns to long run equilibrium at point A more quickly…. We then talk about lags in monetary policy, and compare the speed of the central bank’s response to the speed of price adjustment. And we discuss the difficulties the central bank may face in identifying shocks and responding appropriately, and discuss rules vs discretion, etc. It all makes for a nice little essay question…. But it does set up a false dichotomy between using the discretionary actions of the central bank vs relying on the ‘natural’ self-equilibrating properties of the economy…. If the central bank ‘did nothing’… how long would it take for the economy to… return to long run equilibrium? That depends on what we mean by ‘doing nothing’. And it could mean almost anything…. It makes no sense to say that the length of the short run depends on the degree of price stickiness, without mentioning monetary policy…”

4. Ezra Klein: The simple reason Republicans don’t have an answer on the minimum wage: “Ramesh Ponnuru… thinks there are better policies Republicans could propose that would help the same people… expanding the Earned Income Tax Credit…. There’s only one problem: Republicans oppose expanding the Earned Income Tax Credit. In fact, they’re trying to cut it. The most recent Republican budget lets a stimulus-era boost in the EITC to expire and, on top of that, includes huge cuts to the part of the budget… that houses the EITC. Meanwhile, President Obama and the Democrats do have a position on the EITC. They want to increase it, just like Ponnuru suggests. But they have not found Republican partners…. Ponnuru obviously doesn’t answer for the Republican Party. But… his column [is] a bit odd. At no point does he mention that pretty much the entirety of the Republican Party is on record, within the last few months, voting to cut the EITC and refusing to join Democrats in their effort to expand it. Of late, the Republican Party is trying to figure out how to show they care more about people in and near poverty. That’s led to a lot of good ideas about policies Republicans could support if they want to help people in or near poverty. In particular, it’s led to a lot of praise for the EITC. The problem is that the Ryan budget has put almost all Republicans on record cutting spending on those policies. This has placed Republicans and their allies in a really difficult position. That includes [Paul] Ryan himself, who recently told Buzzfeed’s McKay Coppins that he shouldn’t have to answer for the budget he’s written: ‘I’ve got two roles’, he says. ‘I’m chairman of the House Budget Committee representing my conference… and I’m a House member representing Wisconsin doing my own thing. I can’t speak for everybody and put my stuff in their budget. My work on poverty is a separate thing’…. Republican reformers… write or talk as if the problem is that the Republican Party has somehow just missed all these great programs that would show the American people they really care about the poor. But the GOP’s problem is harder… they’re on record trying to cut almost all those programs, and the main cutter is also the guy who’s trying to present himself as the GOP’s new face on poverty.”

Should Be Aware of:

• John Aziz: Could a robot do my job?
• Adam J. Levitin: The Politics of Financial Regulation and the Regulation of Financial Politics: A Review Essay
• Jared Bernstein: Talking Manufacturing and Its Wage Premium
• Ashok Rao: Declining Consumption and Secular Stagnation
• James Kwak: Incentives and Ideology: Financial regulation is constrained by politics as well as bureaucracy

And:

Continue reading “Things to Read at Nighttime on May 21, 2014” →

Mark Thoma sends us to William Dudley: What Kinds of Jobs Have Been Created During the Recovery?: “A feature of the Great Recession…

…and indeed the prior two recessions, is that the middle-skill jobs that were lost don’t all come back during the recoveries that follow. Instead, job opportunities have tended to shift toward higher- and lower-skilled workers…. While there’s been a good number of both higher-skill and lower-skill jobs created in the region during the recovery, opportunities for middle-skilled workers have continued to shrink…. There have been significant and long-lasting changes to the nature of work… many middle-skilled workers displaced during the recession are likely to find that their old jobs will never come back… and workers are increasingly facing higher skill requirements in order to land a good job…. One thing is clear: workers will need more education, training and skills…

Ezra Klein: Does David Brooks know that Simpson-Bowles failed?: “In a mighty odd column…

David Brooks pens a paean to technocratic autocracies like Singapore and suggests that the US needs to “make democracy dynamic again” if it’s going to keep up. How will it make democracy dynamic again? Glad you asked:

The quickest way around all this is to use elite Simpson-Bowles-type commissions to push populist reforms. The process of change would be unapologetically elitist. Gather small groups of the great and the good together to hammer out bipartisan reforms–on immigration, entitlement reform, a social mobility agenda, etc.–and then rally establishment opinion to browbeat the plans through.

Of course, there already was a Simpson-Bowles-type commission that overwhelmingly rallied establishment opinion to its side. It was called the Simpson-Bowles commission. And it failed. So did its descendants like the Senate’s Gang of Six and the Supercommittee. Whatever you think of the Simpson-Bowles plan, the outcome proved that these kinds of elite committees aren’t able to browbeat their plans through Congress. The outcome of Simpson-Bowles is a big part of the reason some in Washington have begun envying the decisiveness of East Asian autocracies, not a model for how the US can mimic their decisiveness…

Should-Reads:

1. Mark Thoma: 4 Reasons the Fed Should Not Raise Interest Rates: “No rule… can anticipate all contingencies, and when the economy is experiencing conditions a rule could not have foreseen… deviations from the rule are necessary…. Any benefit from the reduction in uncertainty would be small and would not compensate for the negative effect that higher interest rates would have…. Some have argued that we need to raise interest rates to help savers. But when the economy is experiencing a severe recession, the demand for investment is low, so low that even at zero interest rates there can be an excess of saving over investment… [and good policy] reduce[s] saving and increase[s] investment until equilibrium is restored…. There have been many calls to raise interest rates to reduce the risk of inflation, but there is no sign whatsoever of problematic inflation anywhere on the horizon. End of story…. Some economists have argued that when policymakers hold the nominal interest rate at the zero bound, it is deflationary…. Even if this does work in the long-run, in the short-run it would be a disaster…”

2. Eric Michael Johnson: On the Origin of White Power: “A Troublesome Inheritance has been roundly criticized by scientists and journalists alike. Biologists such as H. Allen Orr and Jerry Coyne…. Statistician and political scientist Andrew Gelman… anthropologist Agustin Fuentes observed, ‘Wade ignores the majority of data and conclusions from anthropology, population genetics, human biology and evolutionary biology’. Even Wade’s former newspaper, the New York Times, carried a review panning the book. Unfortunately, readers lacking a background in science or journalism may not so easily spot Wade’s many errors. This could lead to even more troublesome issues given the excitement the book has generated among those predisposed to accept its conclusions. ‘Wade says in this book many of the things I’ve been saying for the last 40 years of my life’, said David Duke, the white nationalist politician and former Grand Wizard of the Knights of the Ku Klux Klan, on his radio program…”

3. Lloyd Grove: New York Times publisher Arthur Ochs Sulzberger Jr. has just suffered a miserable week nursing a PR black eye after his May 14 firing of executive editor Jill Abramson…. Things seemed to deteriorate as the week unfolded, culminating in… Sulzberger’s ill-advised decision to sit down on Sunday with Vanity Fair for his first press interview since Abramson’s sacking…. Sulzberger’s VF interview… was very off-message…. He elaborated on Abramson’s alleged flaws as a manager, blamed her for the unseemly public manner of her defenestration, defended himself against charges of sexism regarding Abramson’s compensation, expressed implied regret that back in 2011, he had chosen Abramson over Dean Baquet (who has the job now), and resisted taking responsibility for his own errors in judgment…. Abramson, reached by The Daily Beast, declined to comment… she has displayed the sort of restraint that has so far eluded Sulzberger…. Auletta’s stories have provoked Sulzberger, who initially vowed not to discuss Abramson’s dismissal further, to write several stunning staff memos concerning her compensation and alleged managerial failings. His VF interview ‘was a disaster’, said a prominent public relations executive who, not wishing to alienate the publisher/chairman of The New York Times Co., spoke on condition of anonymity. ‘I can’t understand what possessed him to sit down with her’—a reference to the magazine’s ace media correspondent, Sarah Ellison. ‘My sympathy for him arises from the fact that her contempt for him was so palpable… I suspect most readers will take the piece at face value and come away persuaded that Abramson was unfairly ditched by a sexist, privileged dilettante who doesn’t know what he’s doing.’… Ellison told The Daily Beast: ‘I’ll let the piece speak for itself’. Eileen Murphy, the Times Co.’s vice president of corporate communications, likewise declined to address the interview…”

Should Be Aware of:

• Dylan Matthews: The case for raising chickens in virtual reality
• Matthew Yglesias: The plot to use Fannie Mae and Freddie Mac to steal billions from the taxpayer
• Charles Cao et al: Hedge fund holdings and stock market efficiency
• Arthur Okun (1975): Equality and Efficiency: The Big Tradeoff
• Tim Geithner (2004): Change and Challenges Facing the U.S. Financial System
• Anat Admati and Martin Hellwig: If Not Now, When?: Financial Reform Must Not Await Another Crisis
• Arindrajit Dube, T. William Lester, and Michael Reich (2013): Minimum Wage Shocks, Employment Flows and Labor Market Frictions
• Andrej Svorencik: Towards a Prosopography of the MIT Economics Department
• Rachel Feltman: The complete guide to fighting jet lag
• Teaching economics as if the last three decades had happened
• Bryce Covert: No, Taking Away Unemployment Benefits Doesn’t Make People Get Jobs
• Joe Romm: Biggest Loser: Thawing Greenland Competes with Collapsing Antarctic for Fastest Ice Loss

And:

Continue reading “Things to Read on the Morning of May 21, 2014” →

Ezra Klein: The Green Lantern Theory of the Presidency, explained: “Presidents consistently overpromise and underdeliver….

Obama… didn’t just promise health-care reform, a stimulus bill, and financial regulation. It also promised a cap-and-trade bill to limit carbon emissions, comprehensive immigration reform, gun control, and much more. His presidency, he said, would be change American could believe in. But it’s clear now that much of the change he promised isn’t going to happen–in large part because he doesn’t have the power to make it happen. You would think voters in general and professional media pundits in particular would, by now, be wise to this pattern. But they’re not…. The criticism is always the same: why can’t the president be more like the Green Lantern?… The Green Lantern Theory of the Presidency is “the belief that the president can achieve any political or policy objective if only he tries hard enough or uses the right tactics.”… The Reagan version, he says, holds that “if you only communicate well enough the public will rally to your side.” The LBJ version says that “if the president only tried harder to win over congress they would vote through his legislative agenda.” In both cases, Nyhan argues, “we’ve been sold a false bill of goods.”…

The Green Lantern Theory of the Presidency… denies the very real (and very important) limits on the power of the American presidency, as well as reduces Congress to a coquettish collection of passive actors who are mostly just playing hard to get…. The Green Lantern Theory isn’t just false. It’s often backwards. The basic idea is that more aggressive and consistent applications of presidential power will break down opposition. But political science research shows the truth is often just the opposite…. Elections are zero-sum affairs. The more the American people perceive the president as successful the less likely they are to vote for the opposition in the next election…. The Green Lantern Theory also infantilizes Congress…. This kind of thing both lets Congress off the hook and confuses Americans about where the power actually lies in American politics–and thus about who to hold accountable….

Why do so many people believe in the Green Lantern Theory of the Presidency?… Even as the US executive is structurally weak he’s perceptually strong… dominates culture…. Both in fiction and in reporting American politics is a drama that is told through the character of the president…. Obama can do a good or bad job within the actual limits of the presidency. The problem with the Green Lantern Theory is that it focuses so much attention on the presidency that it lets everyone else off the hook–and thus makes it harder for voters to hold elected leaders accountable…. The executive branch is a big and powerful that manages programs of enormous consequence to Americans–and it’s often run quite poorly. That’s something the president really should answer for. But political reporting in America tends to focus more on new laws that are being pushed through congress than on… implementation…