Category: Equitablog

I have already written about how the world looked as Paul Krugman saw it at the start of 2008:

Paul Krugman: “The last slump de facto lasted about 2 1/2 years.

And I don’t see why the same couldn’t happen this time. After all, what’s supposed to take the place of weak housing and consumer spending. Exports, yes — but how much will come, how fast?… The last recession was not, in reality, short — and this one might not be, either” | “Deep? Maybe. Long? Probably…. There’s a huge overhang of excess housing inventory; it will probably take several years before housing prices fall to realistic levels; and it’s not at all clear what will fill the gap left by weak housing and consumer spending. There’s still the question of how deep the slump will be. I can see the case for arguing that it will be nasty. The 1990-91 recession was brought on by a credit crunch, the 2001 recession by overinvestment; this time we’ve got both” |

And you get a very similar vibe from Larry Summers’s speeches at the time:

Lawrence H. Summers: “We are facing the most serious combination of macroeconomic and financial stresses that the United States has faced in at least a generation….

The essential policy problem is to manage a combination of… vicious cycles… the traditional Keynesian vicious cycle… [the] more serious… Liquidation vicious cycle… the Credit Accelerator vicious cycle…. It is a grave mistake to believe in the self-equilibrating properties of the economy or markets in the face of large shocks….

I have talked – and I suspect we will talk later in this conference – of these issues as an abstraction. As a Recession. As a Cyclical Down-Turn. As Declining Asset Values. Make no mistake, there will be millions of people who have never heard of a CDO or a CLO and who think triple A refers to the American Automobile Association, whose lives will be very much affected by the wisdom with which macroeconomic financial policy is made in the weeks and months ahead. The individuals for whom this will be the difference between staying in a home and the humiliation of a Bailiff removing one’s kids from one’s home. The individuals for whom this will be the difference between having a job and not having a job. Between being able to afford to borrow and not being able to afford to borrow. The stakes are not small.

Continue reading “Tuesday Focus: Macroeconomics and the Crisis: March 4, 2014” →

Aaron Carroll and Austin Frakt: Zombie Medicaid arguments: “They just won’t die….

We want to focus on the first statement, the one that declares that Medicaid doesn’t improve patients’ health. That’s not true…. There are lots of legitimate claims to make against Medicaid. It under-reimburses physicians, for instance, causing access problems in some areas and for some beneficiaries…. But the natural response to saying docs don’t get paid enough would be to increase Medicaid funding to improve that. Gutting the program will do the opposite…. We look forward to a continuing and lively debate on how to reform the health care system. But declaring that health insurance in the form of Medicaid hurts people or “doesn’t work” ignores the real good that it does…. Let’s listen to each other’s arguments and respond to them, instead of repeating talking points past each other.

Must-Reads:

1. Yonatan Ben-Shalom et al.: An Assessment of the Effectiveness of Anti-Poverty Programs in the United States: “We assess the effectiveness of means-tested and social insurance programs in the United States. We show that per capita expenditures on these programs as a whole have grown over time but expenditures on some programs have declined. The benefit system in the U.S. has a major impact on poverty rates, reducing the percent poor in 2004 from 29 percent to 13.5 percent, estimates which are robust to different measures of the poverty line. We find that, while there are significant behavioral side effects of many programs, their aggregate impact is very small and does not affect the magnitude of the aggregate poverty impact of the system. The system reduces poverty the most for the disabled and the elderly and least for several groups among the non-elderly and non-disabled. Over time, we find that expenditures have shifted toward the disabled and the elderly, and away from those with the lowest incomes and toward those with higher incomes, with the consequence that post-transfer rates of deep poverty for some groups have increased. We conclude that the U.S. benefit system is paternalistic and tilted toward the support of the employed and toward groups with special needs and perceived deservingness.”

2. Izabella Kaminska: Bitcoin: Magic: The Undercapitalised Gathering Online/a>: “Who’d have thought that there might be an incentive for operators in a totally unregulated market to take people’s assets and run? Or that self-regulation would be so lacking in a market that purposefully concocts information asymmetries that benefit money creators/the tech-savvy…. or that the Bitcoin system was only recreating and replicating all the bad incentives we know and love in our current system, which are now being curbed by intensified post-crisis regulation?”

3. Andrew Kramer: Ukraine Turns to Its Oligarchs for Political Help: “Mr. Turchynov on Sunday vetoed a divisive law passed last week that would have eliminated Russian as an official second language: about half of Ukraine’s population speaks Russian.”

Continue reading “Things to Read on the Afternoon of March 4, 2014” →

Yonatan Ben-Shalom et al.: An Assessment of the Effectiveness of Anti-Poverty Programs in the United States: “We assess the effectiveness of means-tested and social insurance programs in the United States.

We show that per capita expenditures on these programs as a whole have grown over time but expenditures on some programs have declined. The benefit system in the U.S. has a major impact on poverty rates, reducing the percent poor in 2004 from 29 percent to 13.5 percent, estimates which are robust to different measures of the poverty line. We find that, while there are significant behavioral side effects of many programs, their aggregate impact is very small and does not affect the magnitude of the aggregate poverty impact of the system. The system reduces poverty the most for the disabled and the elderly and least for several groups among the non-elderly and non-disabled. Over time, we find that expenditures have shifted toward the disabled and the elderly, and away from those with the lowest incomes and toward those with higher incomes, with the consequence that post-transfer rates of deep poverty for some groups have increased. We conclude that the U.S. benefit system is paternalistic and tilted toward the support of the employed and toward groups with special needs and perceived deservingness.

Izabella Kaminska: Bitcoin: Magic: The Undercapitalised Gathering Online/a>: “Who’d have thought that there might be an incentive for operators in a totally unregulated market to take people’s assets and run?

Thomas Frank: Paul Krugman won’t save us: “When President Obama declared in December that gross inequality is the ‘defining challenge of our time’, he was right, and resoundingly so….

However, he quickly backed away… at the urging of pollsters and various Democratic grandees. I can understand the Democrats’ fears… a throwback to an incomprehensible time…. Unfortunately, they really have no choice. Watching… the bankers steered us into disaster in 2008 and then… harvested the fruits of our labored recovery–these spectacles have forced the nation to rediscover social class…

My thought here is to ask the Tonto question: “Who is this ‘us’, kemosabe?”

Continue reading “DeLong/Equitable Growth Smackdown Watch: Thomas Frank on How he Doesn’t Want to Be Lectured by Paul Krugman or Joe Stiglize Anymore: Monday Focus: March 3, 2014” →

Andrew Kramer: Ukraine Turns to Its Oligarchs for Political Help: “Mr. Turchynov on Sunday vetoed a divisive law passed last week that would have eliminated Russian as an official second language: about half of Ukraine’s population speaks Russian.”

Last night pieces by the thoughtful and knowledgeable Uwe Reinhardt, the smart and hard-working Marty Lederman, and that brilliant man of unsound methods Richard Epstein collided on my computer screen, and then held an all-night insomniac hoedown.

This is the result:

Continue reading “ObamaCare as Dire Infringement of Individual Liberty and in a “Death Spiral”, and LADYPARTS: (Trying to Be) the Honest Broker for the Week of March 8, 2014″ →

Must-Reads:

1. Noah Smith: Noahpinion: Behavioral economics vs. behavioral finance: “Chris House has a new blog post that is pretty dismissive of behavioral economics…. I don’t think Chris gives a particularly enlightening explanation of where behavioral economics is falling short (what does ‘helps us much’ or ‘transcendent principle’ even mean??… It’s important to point out that ‘behavioral economics’ is a different thing from ‘behavioral finance’…. ‘Behavioral economics’ means something along the lines of ‘economics in which individual decision-making behavior is assumed to be subject to observable, predictable psychological biases’…. ‘Behavioral finance’… began… with Robert Shiller, who showed that stock prices fluctuate more than the standard theories would suggest…. A bunch of other ‘anomalies’ in standard theory were soon discovered… value… momentum…. These anomalies have proven so durable that they have become standard pieces of the risk models used by every large financial institution…. Most phenomena that don’t agree with classic, Gene Fama vintage efficient-markets theory have come to be labeled ‘behavioral finance’…. A second strand… finance based on informational frictions…. A third strand… that deals with individual investor behavior…. A fourth strand… noise-trader bubble models…. A fifth strand… tests the usefulness of psychological biases for investing strategies…. And of course a sixth strand… is experimental finance…. The behavioral finance rebels are merging with the old establishment instead of overthrowing it. So behavioral finance is not a speculative, marginal, or incipient field. It has already won at least two Nobel prizes (Smith and Shiller), or maybe four if you want to count Stiglitz and Kahneman.”

2. Suzanne Mettler: College, the Great Unleveler: “The G.I. Bill of Rights…. Robert Maynard Hutchins, the president of the University of Chicago, worried that it would transform elite institutions into ‘educational hobo jungles’. But the G.I. Bill… federal student aid… increasing state investment… transformed American higher education over the course of three decades from a bastion of privilege into a path toward the American dream. Something else began to happen around 1980. College graduation rates kept soaring for the affluent, but for those in the bottom half, a four-year degree is scarcely more attainable today than it was in the 1970s…. The demise of opportunity through higher education is, fundamentally, a political failure. Our landmark higher education policies have ceased to function effectively, and lawmakers — consumed by partisan polarization and plutocracy — have neglected to maintain and update them.”

3. Going Bayesian: From Nature:

Continue reading “Things to Read on the Afternoon of March 2, 2014” →