Category: Equitablog

Going Bayesian: From Nature:

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….

Continue reading “Morning Must-Read: Noah Smith: Behavioral Economics vs. Behavioral Finance” →

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.

Must-Reads:

1. Uwe Reinhardt: How the Medical Establishment Got the Treasury’s Keys: “The proponents of Medicare… were anything but stupid…. Confronted by the health care sector with a harsh trade-off between their cherished vision for health care, on the one hand, and a sensible payment policy, on the other, they let their vision override economically sound payment policy. Millions upon millions of America’s senior citizens are indebted to them for a program that remains highly popular to this day. Younger leaders of medicine and the hospital industry would do well to recall this dubious social contract struck by their predecessors to appreciate that the countless amendments to Medicare and the ever-new regulations emanating from the program are just the byproduct of many skirmishes in a protracted and tenacious war over possession of the keys to the Treasury…. The fiercest generals in this war on the government’s side have been Republican stalwarts… Reagan and George H.W. Bush. Desperate over the ever-escalating costs of Medicare during the 1970s and ’80s, both presidents resorted to what has been described as a Soviet-style payment policy for Medicare: administered prices set by the central government for the whole country…. But the war over the keys to the Treasury will probably never be fully concluded…. In retrospect, it would have been better all around to cut a more rational deal from the outset.”

2. Glenn Greenwald: On the Meaning of Journalistic Independence: “This morning, I see that some people are quite abuzz about a new Pando article ‘revealing’ that the foundation of Pierre Omidyar, the publisher of First Look Media which publishes The Intercept, gave several hundred thousand dollars to a Ukraininan ‘pro-democracy’ organization…. This, apparently, is some sort of scandal…. That several whole hours elapsed since the article was published on late Friday afternoon without my commenting is, for some, indicative of disturbing stonewalling…. The Pando article adopts the tone of bold investigative journalism that intrepidly dug deep into secret materials…. But as I just discovered with literally 5 minutes of Googling, the Omidyar Network’s support for the Ukrainian group in question, Centre UA, has long been publicly known: because the Omidyar Network announced the investment at the time in a press release and then explained it on its website…”

Continue reading “Things to Read on the Evening of March 1, 2014” →

Uwe Reinhardt: How the Medical Establishment Got the Treasury’s Keys: “The proponents of Medicare… were anything but stupid….

Confronted by the health care sector with a harsh trade-off between their cherished vision for health care, on the one hand, and a sensible payment policy, on the other, they let their vision override economically sound payment policy. Millions upon millions of America’s senior citizens are indebted to them for a program that remains highly popular to this day. Younger leaders of medicine and the hospital industry would do well to recall this dubious social contract struck by their predecessors to appreciate that the countless amendments to Medicare and the ever-new regulations emanating from the program are just the byproduct of many skirmishes in a protracted and tenacious war over possession of the keys to the Treasury…. The fiercest generals in this war on the government’s side have been Republican stalwarts… Reagan and George H.W. Bush. Desperate over the ever-escalating costs of Medicare during the 1970s and ’80s, both presidents resorted to what has been described as a Soviet-style payment policy for Medicare: administered prices set by the central government for the whole country…. But the war over the keys to the Treasury will probably never be fully concluded…. In retrospect, it would have been better all around to cut a more rational deal from the outset.

Glenn Greenwald: On the Meaning of Journalistic Independence: “This morning, I see that some people are quite abuzz about a new Pando article ‘revealing’ that the foundation of Pierre Omidyar, the publisher of First Look Media which publishes The Intercept, gave several hundred thousand dollars to a Ukraininan ‘pro-democracy’ organization….

This, apparently, is some sort of scandal…. That several whole hours elapsed since the article was published on late Friday afternoon without my commenting is, for some, indicative of disturbing stonewalling…. The Pando article adopts the tone of bold investigative journalism that intrepidly dug deep into secret materials…. But as I just discovered with literally 5 minutes of Googling, the Omidyar Network’s support for the Ukrainian group in question, Centre UA, has long been publicly known: because the Omidyar Network announced the investment at the time in a press release and then explained it on its website. 

Kevin Drum: Senate Report: Torture Didn’t Work and the CIA Lied About It: “The Washington Post….

It’s impossible to say if these sources are characterizing the report accurately, and their summary descriptions of the report make it very hard to judge how fair the report’s conclusions are. But with those caveats and cautions out of the way, what does the report say? This….

Its most troubling sections deal… with discrepancies between the statements of senior CIA officials in Washington and the details revealed in the written communications of lower-level employees directly involved…. The CIA’s ability to obtain the most valuable intelligence against al-Qaeda–including tips that led to the killing of Osama bin Laden in 2011–had little, if anything, to do with “enhanced interrogation techniques.”… “The CIA conflated what was gotten when, which led them to misrepresent the effectiveness of the program”….

However, for those of us who think that detainee abuse is, in fact, as important as the lies that were told about it, there’s this:

Classified files reviewed by committee investigators reveal internal divisions over the interrogation program, officials said, including one case in which CIA employees left the agency’s secret prison in Thailand after becoming disturbed by the brutal measures being employed there. The report also cites cases in which officials at CIA headquarters demanded the continued use of harsh interrogation techniques even after analysts were convinced that prisoners had no more information to give. The report describes previously undisclosed cases….

So the torture was even worse than we thought; it produced very little in the way of actionable intelligence; and the CIA lied about this in order to preserve their ability to torture prisoners. Anybody who isn’t sickened by this needs to take very long, very deep look into their souls. For myself, I think I’ll go take a shower now.

Yes, there were grave failures of macroeconomic analysis, failures of surveillance, failures of organization, and failures of imagination at the Federal Reserve from 2003-2008. But once–*after* they had let Lehman Brothers go into its uncontrolled bankruptcy–those worrying about inflation and moral hazard on the FOMC got quiet and Ben Bernanke got out the financial crisis Bagehot-Minsky-Kindleberger playbook, what followed in dealing with the crisis was not a failure of economic analysis: it was not the case–then, after Lehman–that macroeconomists, reality-based macroeconomists at least, were like French generals in 1940 (or, for that matter, French generals in 1914, or French generals in 1870).

What was an enormous post-September 2008 failure was a complete failure of the policymakers and the public sphere to grapple with a persistently depressed economy in which monetary policy was constrained by the zero lower bound and hysteresis threatened–reality-based ex-Keynesian and ex-monetarist economies willing to mark their beliefs to market understood what was and is going on rather well…

Paul Krugman: Fighting the Last Macro War?: “Noah Smith… argues that macroeconomic theorists have been like French generals…

Always preparing to fight the last war–in the 80s they were working on finding solutions for the problems of the 70s, in the 90s they were working on the problems of the 80s, and so on….

Continue reading “Fighting the Last Macro War?: Friday Focus: February 28, 2014” →

Must-Reads:

1. Yuriy Gorodnichenko and Gerard Roland: Ukraine: Emergency Economic Measures: “It is only a few days after the successful February revolution and the country is still in a state of flux. Nevertheless, a new government is needed to deal with emergency economic measures: The country is days away from facing a $2bln payment to international bondholders. The provisional Ukrainian government does not have the necessary legitimacy to make all the changes demanded by the Maidan protesters…”

2. Binyamin Applebaum: The Curse of Unanimity: “The transcripts that the Federal Reserve released… of… 2008… record in painful detail the ignorance of its officials…. What the transcripts do not explain is why the Fed failed at one of its most basic tasks…. The Fed discounted good data, failed to build better models… persisted in its mistaken assumptions… [even though] other people were able to see the cliff…. Fed officials strongly prefer to agree with each other. They are not satisfied with making decisions by a majority vote. They prefer to act unanimously. Sandra Pianalto, president of the Federal Reserve Bank of Cleveland, said in a speech Thursday that this esprit de corps has been a great strength…”

Continue reading “Things to Read on the Evening of February 28, 2014” →

Yuriy Gorodnichenko and Gerard Roland: Ukraine: Emergency Economic Measures: “It is only a few days after the successful February revolution and the country is still in a state of flux.

Nevertheless, a new government is needed to deal with emergency economic measures:

• The country is days away from facing a $2bln payment to international bondholders.
• The provisional Ukrainian government does not have the necessary legitimacy to make all the changes demanded by the Maidan protesters.

Continue reading “Evening Must Read: Yuriy Gorodnichenko and Gerard Roland: Ukraine: Emergency Economic Measures” →