Category: Equitablog

So I see a twitter squib that makes me think that the article it links to must be really interesting and would teach me a lot, and so I click, and I find…

Continue reading “The Worm Ouroboros on the Internet” →

Noah Smith: Heroes of NoahSmithian Weblogging: James Pethokoukis:

American conservatism needs to start thinking again. The Reagan-era package… reached the end of its usable shelf life sometime in the late 90s and went plunging off a cliff in the Bush years, finally degenerating into the dead end that is the Tea Party. Many people have been cited as thinkers who were destined to reform the movement…. But as I see it, Jim Pethokoukis, a blogger for the American Enterprise Institute, is the best of the crop…. He has aggressively promoted the monetarism of Milton Friedman… that inflation is not the big danger when there is slack in the economy… actively worries about the plight of the unemployed, the unemployed, and families for whom income has fallen… the ‘rise of the robots’ and the replacement of human jobs with automation. But he’s no liberal convert – he’s trying to find a new way for conservatism to be relevant to the majority of working, struggling Americans, not to cave in and embrace the positions of the Left.

Paul Krugman: Changing Circumstances: “You can pretty clearly see three things:

1. Until 2008, the Fed leaned against the wind, raising rates when inflation was high or unemployment low.
2. After 2008, the Fed would have liked to cut rates but couldn’t.
3. Also after 2008, as a result of the zero constraint, monetary policy no longer leaned against the wind.

Point 3 strongly suggests that you would expect different results from many kinds of economic policies, such as cutting unemployment benefits. Now, there are a couple of points that will predictably come up here. Some people will argue that the Fed coulda and shoulda and maybe even did make up for its inability to lower short-term rates with other policies. My view would be that making monetary policy truly effective at zero rates, if it was possible at all, would have required more radical action than the Fed was willing or politically able to take.

Continue reading “Evening Must-Read: Paul Krugman: Changing Circumstances, Monetary Policy, and Fiscal Policy” →

Ryan Avent and Karl Smith are having a debate about Thomas Piketty’s Capital in the Twenty-First Century, and both are, I must say, getting rather (Henry) Georgist about it:

Ryan Avent: Inequality: Capital and land: “FOR a book that hasn’t even been published in English yet, Thomas Piketty’s Capital in the Twenty-first Century has prompted quite a lot of discussion….

I think it’s worth addressing some points made in a recent Alphaville post by Karl Smith. Mr Smith… writes:

Importantly, however, the resurgence in [the importance of] capital is driven almost exclusively by a rise in housing values, and those values stem almost entirely from what classical economists would have termed land… the value of land… the value of… structures… [and] in the modern world… the option value induced by zoning and land use restrictions. Paris is the perfect example of the powerful effects of such land use restrictions. The demand for housing in Paris is extremely high…. If you wish to be doing business at a certain level in France then you must live in or around Paris… [or if you] wish to experience the legendary culture and beauty of the city and to live in proximity with others who value it. Paris maintains the latter demand in large part by severe restrictions on the height and architecture of buildings… preserve the history of Paris, but also make it impossible for it to house all of the millions who would come today to live and work….

Continue reading “Land Rather than Capital the Long-Run Oppressor of the Workers…” →

So this morning I am reading Phil Mirowski’s presidential address to the historians of economic thought, and trying to keep my ire contained…

Mirowski has one good point: that Paul Samuelson, in his Economics principles textbook, started or at least greatly amplified the movement of economists citing Adam Smith’s “Invisible Hand” as his summary statement of his belief in the magic of the market–and that is not what the “Invisible Hand” did in Smith’s writings.[1]

Phil Mirowski: Does the Victor Enjoy the Spoils?: Paul Samuelson as Historian of Economics: “There are a number of articles repeatedly pointing out that Adam Smith intended nothing resembling Pareto optimality or general equilibrium by his use of the [invisible hand] metaphor; but Gavin Kennedy (2010) has demonstrated that it was Samuelson’s 1948 introductory textbook that first ushered us down that particular cul-de-sac…”

But Mirowsky takes off from there and uses that as a springboard to say things that strike me as completely false:

Phil Mirowski: Does the Victor Enjoy the Spoils?: Paul Samuelson as Historian of Economics: “The whole fallacious drive to recast Adam Smith as a proto-neoclassical… was largely instigated by Samuelson….

Adam Smith was, in order:

1. An Enlightenment Scottish moral philosopher, a la David Hume…
2. A contributor to the existing eighteenth-century literature on “Political Oeconomy”…
3. The founder of Economics, and an extraordinarily strong believer in the efficacy, power, and natural justice of the properly-structured and properly-regulated competitive free market.

But when he talked about (3), he used not the metaphor of the “Invisible Hand”, but spoke instead about the “system of natural liberty”.

Thus when Mirowski says that Paul Samuelson erroneously painted Adam Smith as a “proto-neoclassical… [when he actually] intended nothing resembling Pareto optimality or general equilibrium”, it is Mirowski who is wrong, and not Samuelson

Here are five examples of how Smith uses the concept of the “system of natural liberty”–and, yes, it is something that he sees as something like general equilibrium, and something he sees as like Pareto optimality:

Continue reading “The Invisible Hand and the System of Natural Liberty: Tuesday Focus: February 4, 2014” →

Josh Barro: CBO Report Obamacare Discouraging Work: “The law will reduce work hours through several mechanisms, some of which are desirable and some of which aren’t….

The decline in work will be almost entirely because people choose to work less, not because employers choose to hire less. Republicans tend to talk about Obamacare as ‘forcing people into part-time work’. But CBO expects the law to have ‘small or negligible’ effects on labor demand…. This has important implications for wages: While a decline in labor demand will tend to reduce wages, a withdrawal of labor supply may actually help push them up, as employers compete to hire from a reduced pool of available workers….

Continue reading “Evening Must-Read: Josh Barro: How Obamacare Discourages Work — And Why That Could Be A Good Thing” →

Dylan Scott: The GOP Has It Wrong: Obamacare Won’t ‘Cost’ 2 Million Jobs: “The CBO report, in fact, specifically undermines that [Republican] claim.

Those lost hours will ‘almost entirely’ be the result of people choosing to work fewer hours because of Obamacare–not because they lost their jobs or can’t find a full-time job.

The estimated reduction stems almost entirely from a net decline in the amount of labor that workers choose to supply, rather than from a net drop in businesses’ demand for labor, so it will appear almost entirely as a reduction in labor force participation and in hours worked relative to what would have occurred otherwise rather than as an increase in unemployment (that is, more workers seeking but not finding jobs) or underemployment (such as part-time workers who would prefer to work more hours per week).

The report explicitly says that Obamacare isn’t going to force businesses to cut jobs on any grand scale. What it is going to do is change how much Americans work. ‘I think it’s important to distinguish between people choosing to work less and jobs being lost’, Larry Levitt, vice president at the non-partisan Kaiser Famiy Foundation, told TPM. ‘That is something important to keep an eye on, since you don’t want to discourage work. But, it’s not in all cases a bad thing’.

Tim Duy: Markets Tumble. How Will the Fed React?: “The Fed’s decision to taper despite the obvious challenge to their inflation target looks increasingly questionable….

Across the Curve points us to the Wall Street Journal’s anecdotal account of intense pricing pressures (and still weak demand) facing firms…. Despite the Fed’s claim that tapering is not tightening, that it is the stock of assets held, not the flow, that matters, that they could change the policy mix without changing the level of accommodation, market participants are acting as if tapering is indeed tightening…. Bond market participants, who had been starting to get optimistic that improving economic conditions would prompt the Fed to tighten sooner than later are now rethinking that scenario…. If this keeps up, it looks like Yellen will face an early test in her first few weeks as Chair. And I would say there is a good chance this does keep up until the Fed changes direction and decides that the US economy may not have reached escape velocity as believed…. The hawks fought long and hard for the taper; they will not be easily dissuaded from by a few sloppy days on Wall Street….

Continue reading “Late-Afternoon Must-Read: Tim Duy: Markets Tumble. How Will the Fed React?” →

Must-Reads:

1. Harold James: Europe’s fringes appear determined to escape into the past: “Europe’s western and eastern fringes obsess about dates that recall their struggles with the core: 1914, 1815, 1709, 1707, 1704, and 1612, among others. By contrast, the European core is obsessed with transcending history, with working out institutional mechanisms for overcoming the conflicts that scarred Europe in the first half of the twentieth century. The European integration project is a sort of liberation from the pressures and constraints of the past…. Is the European center currently too naive, or too idealistic? Is it really possible to escape from history? Or, on the contrary, is there something odd in the way that the European fringes obsessively resort to historical milestones?…. De Gaulle and Churchill knew plenty about war, and they wanted to transcend the blood-soaked legacy of Poltava, Blenheim, and Waterloo. They viewed history as offering concrete lessons about the necessity of escaping from the past. Today, Europe’s fringes, by contrast, appear determined to escape into it.”

2. Elias Asquith: The 1 percent’s most ruinous sin: How they sap our politicians of all decency: “‘Mitt’, Netflix’s recently released documentary… has, on the whole, been rather well-received…. Not everyone believes that the film succeeds in giving viewers a behind-the-scenes look… but most seem to have found it… a humanizing depiction of a seemingly decent man…. Even if the man in “Mitt” is not so charming and sympathetic a figure as to counterbalance the woeful policies on which he ran, there is the lingering question of why there is such a great distance between Candidate Romney and Mitt Romney. How could the same guy who at one point in the film acknowledges the immense privilege he was born into repeatedly insist, on the campaign trail, that he was a self-made man, a testament to the American meritocracy? How could the guy who infamously sneered that roughly half of the country were irresponsible, entitled, greedy moochers seem, in another context, to be kind, thoughtful, polite and fundamentally well-meaning?”

3. Paul Krugman: Demography and Employment: “A blog post reporting research by Samuel Kapon and Joseph Tracy of the New York Fed is creating a splash…. The aging of the adult population would have meant a considerable [i.e., 1.5%-point] decline in the employment-population ratio over the past 7 years even if the economy had remained near full employment…. [But their] other [claim]… far from obvious is that the economy was highly overheated in late 2007…. The actual decline was from 62.9 to 58.6, or 4.3 points…. [Their] small employment gap [today] isn’t mainly because of the demographic adjustment…. The dramatic-sounding result that we don’t have much labor market slack isn’t… unless you accept the idea that the U.S. economy was above full employment even during the early-Bush slump years, and that by late 2007 it was a highly overheated economy on the edge of major inflation.”

4. Nicholas Crafts and Terence C. Mills: Rearmament to the Rescue? New Estimates of the Impact of “Keynesian” Policies in 1930s’ Britain

5. Paul Krguman: The Great Recession: Lecture 1
6. Richard Startz : How Should an Economist Do Statistics?

Continue reading “Things to Read at Lunchtime on February 4, 2014” →

Harold James: Europe’s fringes appear determined to escape into the past:

Europe’s western and eastern fringes obsess about dates that recall their struggles with the core: 1914, 1815, 1709, 1707, 1704, and 1612, among others. By contrast, the European core is obsessed with transcending history, with working out institutional mechanisms for overcoming the conflicts that scarred Europe in the first half of the twentieth century. The European integration project is a sort of liberation from the pressures and constraints of the past…. Is the European center currently too naive, or too idealistic? Is it really possible to escape from history? Or, on the contrary, is there something odd in the way that the European fringes obsessively resort to historical milestones?…. De Gaulle and Churchill knew plenty about war, and they wanted to transcend the blood-soaked legacy of Poltava, Blenheim, and Waterloo. They viewed history as offering concrete lessons about the necessity of escaping from the past. Today, Europe’s fringes, by contrast, appear determined to escape into it.