Category: Equitablog

Mark Thoma: Inequality in Capitalist Systems is Not Inevitable: “At some point, one I believe we’ve passed already, the benefits of inequality in terms of incentives are surpassed by the costs.

As Joseph Stiglitz argues:

Inequality leads to lower growth and less efficiency. Lack of opportunity means that its most valuable asset – its people – is not being fully used. Many at the bottom, or even in the middle, are not living up to their potential, because the rich, needing few public services and worried that a strong government might redistribute income, use their political influence to cut taxes and curtail government spending. This leads to underinvestment in infrastructure, education, and technology, impeding the engines of growth.

Capitalism is a wonderful economic system, but it is not perfect. Government intervention is needed to soften the impact of recessions, to overcome market failures, and to offset the rising inequality that threatens capitalism’s ability to serve the vast majority of households to the fullest possible extent.

Kevin Drum: Dianne Feinstein Upset that CIA Is Spying on Dianne Feinstein: “If the CIA has lost Dianne Feinstein….

The head of the Senate Intelligence Committee on Tuesday sharply accused the CIA of violating federal law and undermining the constitutional principle of congressional oversight as she detailed publicly for the first time how the agency secretly removed documents from computers used by her panel to investigate a controversial interrogation program.

Sen. Dianne Feinstein (D-Calif.) said that the situation amounted to attempted intimidation of congressional investigators, adding: “I am not taking it lightly.” In the end, I suspect that she will indeed take it lightly. Still, if there’s one thing an intelligence agency shouldn’t do, it’s get caught monitoring the Senate committee that oversees it. The intelligence community can spy on millions of Americans and Dianne Feinstein yawns. But spy on Dianne Feinstein and you’re in trouble.

Continue reading “Lunchtime Must-Read: Dianne Feinstein Upset CIA Is Spying on Dianne Feinstein” →

On the case is Igor Volsky:

Igor Volsky: The Campaign Begins: Media Seizes On Hillary’s Health Care Statements From Two Decades Ago: “In a speech to Democrats in 1993,

Hillary Clinton characterized the individual mandate to purchase coverage–then a centerpiece of the [Heritage Foundation’s and the] GOP’s counter-proposal–as a “much harder sell” than… [requiring] employers to provide coverage to their employees. “That is politically and substantively a much harder sell than the one we’ve got,” Clinton said. “Because not only will you be saying that the individual bears the full responsibility; you will be sending shock waves through the currently insured population that if there is no requirement that employers continue to insure, then they, too, may bear the individual responsibility.”

An individual mandate was, she argued, both less fair than an employer mandate–it would be hard to finance an adequate subsidy pool to help the working poor finance insurance–and, if there were an adequate subsidy pool, be more disruptive, causing pointless churn as employers dropped coverage in order to push their employees into the exchanges.

And guess what? There is and will be some such pointless churn.

Continue reading “Yes, Back in 1993 Hillary Rodham Clinton Argued That the Democratic Plan for an Employer Mandate Was Fairer than the Republican Plan for an Individual Mandate. Why Do You Ask?” →

Yuriy Gorodnichenko and Gérard Roland: What is at stake in Crimea? “Annexing Crimea [is not] likely to be his ultimate objective: Crimea obtains almost all of its fresh water and electricity from continental Ukraine, many of its people will resist a return to Russia….

What are the real reasons for Putin’s actions and what is at stake?… There is a strong determination among a large majority of Ukrainians to live under democratic institutions of high quality, similar to those in the West…. The success of this revolution is Putin’s worst nightmare, because such a revolution could extend to Russia too…. Putin is therefore determined to do everything he can to make the young Ukrainian democratic experience a failure. The invasion of Crimea was a first step….

Continue reading “Morning Must-Read: Yuriy Gorodnichenko and Gérard Roland: What Is at Stake in Crimea?” →

Thomas Piketty’s Capital in the Twenty-First Century comes out today:

Heather Boushey: Against U.S. Economic Clichés: “Keynes wrote The General Theory… in reaction to… ‘classical economists’… Marx wrote Das Kapital in reaction to the ‘bourgeois economists’… Piketty writes in reaction to the ‘U.S. economists’….

He moved back to Paris at 25, in 1995, because “I did not find the work of U.S. economists very convincing.” Piketty’s method is an explicit critique of academics “too often preoccupied with petty mathematical problems of interest only to themselves.”… The main finding of his investigation is that capital still matters… a recent resurgence… of… capital income relative to national income… to levels last seen before World War I…. Inheritances and income inequality will [probably] keep rising, possibly to levels higher than ever seen…. The data lead Piketty to describe the popular argument that we live in an era where our talents and capabilities matter most as “mindless optimism.”…

Piketty’s evidence suggests it is the rise of what he calls the “supermanager” among the top 1 percent since 1980 that is driving the rise in earnings inequality. It is here that Piketty takes his sharpest swipe at economists. In his discussion of the thriving top decile, he points out that

among the members of these upper income groups are U.S. academic economists, many of whom believe that the economy of the United States is working fairly well and, in particular, that it rewards talent and merit accurately and precisely. This is a very comprehensible human reaction….

It’s easy—and fun—to argue about ideas. It is much more difficult to argue about facts. Facts are what Piketty gives us, while pressing the reader to engage in the journey of sorting through their implications.

Continue reading “Heather Boushey (and Me) on Thomas Piketty: Tuesday Focus: March 11, 2014” →

Joe Weisenthal reports on Vince Reinhart: Economy’s Growth Potential Is Now 2 percent – Business Insider: “So what’s behind the new slow potential growth rate for the U.S. economy?…

Declining Labor Force Participation… [and] declining productivity [growth]…. The big ramifications here are probably for the Fed, which may get unwanted levels of inflation faster than they want or expect. Bigger picture is that this is something that a lot of folks are talking about right now: The end of extensive slack in the economy. Just as an example, this is a chart from a new chartbook from Deutsche Bank’s Torsten Slok, who spends a lot of time look at wage inflation trends.

Continue reading “Morning Must-Read: Vince Reinhart: Economy’s Growth Rate Potential Is Now 2 Percent” →

Must-Reads:

1. Tim Noah: GOP’s tough love isn’t inspiring the unemployed: “A common conservative argument against any program to help jobless people is that it will discourage those people from seeking work…. The… UI extensions expired at the end of 2013. And so far, there’s been no visible effect…. In sum, the GOP’s tough-love stimulus of allowing long-term UI benefits to expire has produced no detectable effect on employment, or improvement of any other kind, for the long-term unemployed. We can allow this cruel experiment to continue, but the only group likely to benefit would be congressional Democrats eager to use UI benefit cancellation against the Republicans in the next midterm election. A better solution would be to restore long-term UI benefits to the two million people (including 200,000 veterans) who’ve lost them.”

2. Vox | Understand the News * http://www.vox.com * http://facebook.com/vox * https://twitter.com/intent/user?screen_name=voxdotcom * https://plus.google.com/u/0/110525221945179942553 * https://www.linkedin.com/company/3635659 * http://instagram.com/voxdotcom * https://www.youtube.com/user/voxdotcom

3. Watch for the launch of @FiveThirtyEight on March 17. We'll make you smarter — probably. @micahcohen @NateSilver538

   — Mike Wilson (@mWilstory) March 8, 2014

1. Robert Pollin: Public debt, GDP growth, and austerity:: “In 2010… Carmen Reinhart and Kenneth Rogoff published… “Growth in a Time of Debt”… [which] has been frequently cited by major economic policymakers… Paul Ryan… George Osborne… Olli Rehn…. Herndon… Ash and I showed… that several of the critical findings advanced in the Reinhart-Rogoff paper were wrong…”

2. Dani Rodrik: Foxes Over Hedgehogs: “We live in a complicated world, so we are forced to simplify it….

But, because such ‘mental models’ are simplifications, they are necessarily wrong…. And yet, without these shortcuts we would be either lost or paralyzed. We have neither the mental capacity nor the understanding to decipher the full web of cause-and-effect…. Good social science turns our unexamined intuitions into a map of causal arrows…. In a world of diverse and changing circumstances, social scientists can do real harm by applying the wrong model. Neoliberal economic policies, predicated on well-functioning markets, misfired in developing countries – just as planning models, presuming competent and capable bureaucrats, failed in an earlier era. The efficient-markets theory led policymakers astray by encouraging them to undertake excessive financial deregulation…. So how should we choose among alternative simplifications of reality?… Often we need to make decisions in real time…. Unfortunately, economists and other social scientists get virtually no training in how to choose among alternative models. Neither is such an aptitude professionally rewarded…

Continue reading “Things to Read on the Evening of March 10, 2014” →

Dani Rodrik: Foxes Over Hedgehogs: “We live in a complicated world, so we are forced to simplify it….

But, because such ‘mental models’ are simplifications, they are necessarily wrong…. And yet, without these shortcuts we would be either lost or paralyzed. We have neither the mental capacity nor the understanding to decipher the full web of cause-and-effect…. Good social science turns our unexamined intuitions into a map of causal arrows…. In a world of diverse and changing circumstances, social scientists can do real harm by applying the wrong model. Neoliberal economic policies, predicated on well-functioning markets, misfired in developing countries – just as planning models, presuming competent and capable bureaucrats, failed in an earlier era. The efficient-markets theory led policymakers astray by encouraging them to undertake excessive financial deregulation…. So how should we choose among alternative simplifications of reality?… Often we need to make decisions in real time…. Unfortunately, economists and other social scientists get virtually no training in how to choose among alternative models. Neither is such an aptitude professionally rewarded…

Tim Noah: GOP’s tough love isn’t inspiring the unemployed: “A common conservative argument against any program to help jobless people is that it will discourage those people from seeking work….

The… UI extensions expired at the end of 2013. And so far, there’s been no visible effect…. In sum, the GOP’s tough-love stimulus of allowing long-term UI benefits to expire has produced no detectable effect on employment, or improvement of any other kind, for the long-term unemployed. We can allow this cruel experiment to continue, but the only group likely to benefit would be congressional Democrats eager to use UI benefit cancellation against the Republicans in the next midterm election. A better solution would be to restore long-term UI benefits to the two million people (including 200,000 veterans) who’ve lost them.

Back in the 1970s and 1980s I was told over and over again–by pundits, right-of-center politicians, political scientists, and not a few economists–that the source of the North Atlantic’s economic problems play in its overly-democratic politics. The argument went more-or-less like this:

Some voters want goodies; other voters want low taxes; politician satisfy them by expanding programs and cutting taxes, Producing debt. The debt must either be amortized through high taxes that discourage investment, entrepreneurship, and enterprise, or through printing money which produces inflation and also deranges the price system and slows growth.

Thus, I was told over and over again, the economic problems of the north Atlantic in the 1970s and 1980s–the productivity growth slowdown in the inflation of the 1970s–were the result of an overly-large welfare state produced by an overly-democratic government. Both of these, the argument went, needed to be fixed.

This never seemed to me to make quantitative sense…

Continue reading “The Social Insurance State, Economic Problems of the North Atlantic, Redistribution, and the Lesser Depression: Monday Focus: March 10, 2014” →