Category: Equitablog

Nelson Mandela: 1918-2013:

I am the first accused. I hold a bachelor’s degree in arts and practised as an attorney in Johannesburg for a number of years in partnership with Oliver Tambo. I am a convicted prisoner serving five years for leaving the country without a permit and for inciting people to go on strike at the end of May 1961.

Continue reading “Nelson Mandela (April 20, 1964): I have cherished the ideal of a democratic and free society…. It is an ideal which I hope to live for and to achieve. But if needs be, it is an ideal for which I am prepared to die.” →

Must-Reads:

1. Alan Blinder (1994): Overview: Reducing Unemployment: Current Issues and Policy Options: “The answer to the question is no. There is no correlation… between how much inflation fell [over 1980-93] and the legal charge of the central bank. The lower panel shows that there was some correlation… between the rise in unemployment and the central bank’s objective… unemployment rose in every one of these countries, essentially; and it rose more in the countries whose central banks were more single-minded…. But the difference is not tremendously significant. The message, I think, may be that the significance of the central banks’ charge may be more apparent than real. But I wouldn’t dismiss it entirely. Now, there is a two-handed answer for you!”

2. Menzie Chinn: Some Observations on the Efficacy of Monetary and Fiscal Policy: “Based on these observations, a reasonable conclusion is that expansionary monetary and fiscal policy work, even in a highly indebted country such as Japan. Whether these policies ultimately lead to a durable recovery depends on a number of factors, not the least is the strength of the world economy. (Deployment of the “third arrow”, structural reform, isn’t seen as critical by Roubini, for instance.) Further monetary stimulus is being considered; additional action is likely if next year’s sales tax hike noticeably slows growth…”

Should-Reads:

1. Mark Thoma: God Didn’t Make Little Green Arrows: “The issue is the stability of the deflation[ary] steady state [in which expanding the supply of liquid assets generates deflation]. This is precisely the issue George [Evans] studied… with E. Guse and S. Honkapohja… for inflation and consumption expectations under adaptive learning (in the New Keynesian model both consumption or output expectations and inflation expectations are central). The… deflation steady state… is not locally stable and there are nearby divergent paths with falling inflation and falling output…. The full EER reference is Evans, George; Guse, Eran and Honkapohja, Seppo, ‘Liquidity Traps, Learning and Stagnation’, European Economic Review, Vol. 52, 2008, 1438 – 1463.”

2. Paul Krugman: The Trouble With Economics Is Economists: “That’s in large part what Simon Wren-Lewis is saying in this post defending mainstream economics. And I largely agree. It is deeply unfair to blame textbook economics either for the crisis or for the poor response…. The mania for financial deregulation… flew in the face of the canonical model of banking crises, Diamond-Dybvig…. Efficient markets theory arguably deserves more blame for the failure of too many economists to recognize the housing bubble, but textbook economics always presented EMT as a baseline, not a revealed truth. As for the crisis response, the remarkable thing has been the determination of policy makers to do the opposite of what textbook macroeconomics said they should have been doing….. The problem, of course, is that this wasn’t just a case of ignorant or bull-headed political appointees ignoring economic wisdom: many prestigious economists were all too eager to turn their backs on standard macro, even when it was working very well, on behalf of their political leanings. And that, I think, says that there is something wrong with the structure of the economics profession. We don’t seem to need different economics as much as we need different economists…”

3. Matthew Yglesias: Elizabeth Warren vs Third Way: Legislative subtweeting at its finest: “Elizabeth Warren sent a letter today asking major banks to disclose what money they’re giving to D.C. think tanks…. The context… Jon Cowan and Jim Kessler of Third Way… banal and contentless op-ed in the Wall Street Journal… arguing… Elizabeth Warren… is bad…. They offered a made-up criticism of ‘the populists’ staunch refusal to address the coming Medicare crisis’. That one’s particularly odd since one of the two populists they’re critiquing was Bill de Blasio, who, as mayor of New York City, has nothing whatsoever to do with Medicare. As for Warren, it is simply false—as in, ignorant or dishonest—to say that Democrats have done nothing to reduce Medicare costs or that they have no further proposals to do so…. Third Way’s board is jam-packed with finance guys…. So the general suspicion… is that… the ‘think tank’ is just acting as a kind of hatchet operation for the financial sector…. Warren wants to smoke them out…. So good for Warren.”

Should Be Aware of:

1. Jonathan Chait: 12 Years a Slave and the Obama Era: “To identify 12 Years a Slave as merely a story about slavery is to miss what makes race the furious and often pathological subtext of American politics in the Obama era…. To make a person a slave requires making them complicit in their own subservience, through rituals of degradation…. It was precisely Northup’s calm, dignified competence in the scene that so enraged his oppressor…. That context was fresh in my mind when I read this column in National Review by Quin Hillyer… [who] unleashes this: ‘Every time decent people think the scandals and embarrassments circling Barack Obama will sink this presidency, we look up and see Obama still there…. The man has no shame, no self-doubt, not a shred of humility, no sense that anybody else has legitimate reason to question him or hold any other point of view.’… Why would Hillyer believe such a factually bizarre thing?

   “One answer is that, by the evidence of this column, Hillyer believes all sorts of factually bizarre things. But most African-Americans, and many liberal whites, would read Hillyer’s rant as the cultural heir to Northup’s overseer: a southern white reactionary enraged that a calm, dignified, educated black man has failed to prostrate himself…. Conservatives see racism as a series of discrete acts of overt oppression. After slavery had disappeared, but before legal segregation had, conservatives considered it preposterous to claim that blacks suffered any systematic disadvantage in American life. (For an lengthy but fascinating expression of the conservative view, watch William F. Buckley in 1965 sneering his way through a debate over race relations with James Baldwin.)

   “Today, conservatives retroactively agree that legal segregation may have been unfair, but now things run on an even footing. Republicans, by a 60-40 margin, now believe discrimination against whites has grown to be a larger problem than discrimination against minorities…. Conservatives have made endless jokes based on the strange premise that Obama is unable to express coherent thoughts unless reading from a teleprompter, defined health-care reform as ‘reparations’, imagined a Reagan-era program to subsidize telephone use for the indigent is actually ‘Obamaphones’, or complained when black entertainers or athletes socialize with the First Family…”

2. Joe Conason: Why Republicans Can’t Address Rising Inequality: “Congress could begin to address the income gap…. Raising the minimum wage…. Rebuilding the nation’s infrastructure and school systems…. Removing obstacles to unionization would begin to level the gross disparities in economic power between the 1 percent and the rest of us. Now the president has vowed to fight inequality for the rest of his days in office. He is taking that fight directly to the Republicans who have frustrated so many of his initiatives. He will have to cast aside the last illusions of bipartisanship. No matter what he does or says, he may not be able to win a higher minimum wage or a serious jobs program or universal pre-school with the other party controlling Congress. But if he consistently challenges us–and his adversaries–to restore an American dream that includes everyone, he may yet fashion a legacy worthy of his transformative ambitions.”

3. Erick, Son of Erick: The Fix Is in: “John Boehner has hired Rebecca Tallent… [who] worked for the left-of-center “Bipartisan Policy Center,” and is a serious amnesty advocate… helped John McCain and Ted Kennedy…. Boehner will wait until 2014… [then] get all these Republicans talking out of both sides of their mouths and the Democrats together for a bipartisan immigration reform push. The threat of primary challenges well passed, they’ll get their amnesty deal done. The only way conservatives can stop this from happening now is to line up primary challenges early…. If conservatives do not find credible, quality challengers ASAP, we’ll see amnesty steam roll through once the threat of the primaries is passed. The Republicans are so convinced you will turn out and vote for them in 2014 to spite Obama, they are perfectly happy to screw you over in this fight knowing how cheap a date the conservative movement has become. BOHICA kids, BOHICA.”

Austin Frakt: Erosion of confidence in the confident market solution | Richard Floria: Where ‘Eds and Meds’ Industries Could Become a Liability | Top 10 film noir | Brad Plumer: For the last 400,000 years, CO2 in the atmosphere never topped 300 ppm. Now it’s near 400 ppm | Consumer Reports gives thumbs up to Healthcare.gov | Jonathan Bernstein: Nobody Cared About George HW Bush’s Tax Pledge |

The unfunded British national debt in 1715, at the end of the War of the Spanish Succession, was roughly £30 million. The individual securities that made up this unfunded debt were not standardized, hence not very liquid. Hence the arbitrage opportunity call the South Sea Company. The South Sea Company would buy up the debt from the government, collect the interest, and pay out the interest as dividends on its own standardized shares. Because the debt would be consolidated into one single security–South Sea Company equities–the debt would become liquid and easily traceable, hence more valuable. The government would still further sweeten the deal by offering the company the monopoly over trade to the South Sea, and the resulting profits would also go to those who had purchased shares. A small amount of the extra value created could be skimmed off to the benefit of the projectors, Including that powerful politician the Earl of Oxford. A win for projectors who got cash, a win for the government that found itself with extra debt capacity, a win for old debtholders who found themselves with more liquid and hence more valuable securities. What could possibly go wrong?

Continue reading “Bitcoin, the South Sea Bubble, and Chartalism: Thursday Focus” →

Must-Reads:

1. Ken Rogoff: Kenneth Rogoff Calls for Expansionary Fiscal Policy via Infrastructure Investment: “Summers is certainly right that productive infrastructure investment is the low-hanging fruit…. Productive infrastructure investment that generates long-term growth pays for itself, so there need not be any conflict between short-term stabilization and risks to long-term debt sustainability. With today’s ultra-low interest rates and high unemployment, public investment is cheap and plenty of projects offer high returns: fixing bridges and roads, updating badly outmoded electricity grids, and improving mass-transportation systems, to take just a few notable examples…. Those… [with] faith that Keynesian multipliers are much bigger than one… [think] even wasteful government spending is productive. But… with so many options for the productive use of resources, this seems like a titanic ideological distraction…. Barack Obama suggested the creation of an infrastructure bank to help promote public-private partnerships. It is still a good idea, particularly if the bank maintained a professional staff to help guide public choice…. Even if Keynesian multipliers are truly at the upper end of consensus, mobilizing private capital for investment has most of the advantages of issuing public debt…. The case for expanding productive infrastructure investment does not rest on one narrow ideological viewpoint or economic theory…. it is time to break the political gridlock and restore growth.”

2. Ashok Rao: Inflation as Insurance: “A liquidity trap is not perfectly analogous, but it’s not hard to see its similarity with a heart attack…. We get risky and untested asset purchase programs as well as forward guidance which suffers from time inconsistency and relies heavily on the credibility of a decentralized institution. We get political dysfunction and immobility. The Tea Party and Occupy Movements are at least second cousins of the liquidity trap…. My point here is that including political and social costs of mass unemployment, it is not enough to say the [economic] costs of inflation outweigh the benefits. The Fed understands this, to some extent, considering its heroic effort…. I don’t think the costs of inflation outweigh the benefits, but I can’t construct a fancy model to prove that. It is worth asking why we target a lowly 2% to begin with. Because New Zealand did it?”

3. David Cutler: JAMA Forum: Lessons From the ACA Crash « news@JAMA: “The Affordable Care Act (ACA) had a rough October and November… the federal health insurance exchange website http://www.healthcare.gov did not work… a number of people received insurance cancellation notices that they were not expecting. Insurance cancellation is common this time of year, but these notices were particularly troubling because people were told to look for replacements on the (nonfunctioning) exchange website…. The failure of the ACA rollout has many ramifications…. Two are particularly central to physicians and their patients: the future of the insurance exchanges and the lessons for running complex enterprises. The immediate danger from the rollout fiasco is to the health insurance exchanges….

   “The potential problem with the president allowing insurers to opt out of the ACA rules is that it creates a 2-tiered system for individuals getting insurance outside of an employer’s plan. One tier includes young and healthy individuals who can buy outside the exchanges; the second includes people who are older and those with preexisting conditions, for whom the exchange is the only option. Such an outcome could be very damaging. One immediate concern about the 2-tiered option is that insurers who have chosen to enter the exchanges will lose money…. It will be incumbent on the administration to watch out for these vulnerable plans. Having some of the most innovative plans fail in the first year would not be a good way to start reform…. The administration needs to develop a plan to merge the exchange and nonexchange populations in short order. In this case, “in short order” means a deadline of late spring 2014, when insurers will set premiums for 2015….

   “The second lesson from the rollout debacle is about the importance of good management…. All of the most admired health care systems—the Mayo Clinic, the Cleveland Clinic, Geisinger Health System, Virginia Mason Medical Center, Kaiser Permanente, and so on—have first-rate IT systems. Outside health care, Walmart became the largest company in the world in large part because of its good IT system…. Good companies promote those who do well and let go or counsel those who do not…. People in charge are familiar with the problems and able to focus effort, and operational employees are empowered to identify and solve problems. The Obama Administration failed in this last task…. Fixing the administration’s implementation efforts will require more than just fixing the website. It will mean changing the entire organization of the government’s ACA efforts…”

4. Mark Thoma: Is There One Economic Model to Rule Them All?: “Models are built to answer specific questions. We don’t have one grand model that can explain everything…. The best map to use to drive from Seattle to Los Angeles is a lot different from the best map to find out if it is safe to dig a deep hole in someone’s yard…. And if we try to stuff even more information onto the map so that it can answer all of our questions, telephone poles, roads, elevation, every side road, every house and every store, all the bus routes, rainfall, the types of vegetation, etc. etc. the map becomes too complicated to be useful. Economic models are no different. The trick in modeling is to pare away all the inessential features so that there can be a sharp focus on the question of interest. The best maps are very specialized and highlight only what we need to know. The best economic models do the same…. Where I disagree with many of my colleagues is in the assertion that we should limit ourselves to a single class of models, e.g. variations on the New Keynesian model… built to explain a world of moderate fluctuations in GDP… featur[ing] temporary price rigidities… [with] aggregates… consistent with the optimizing behavior of individual consumers and producers. For certain types of questions – how should policymakers behave to stabilize an economy with mild fluctuations induced by price rigidities–it is the best model to use…. When a different world emerged, a large financial shock and the ensuing Great Recession, the model was of little use…. The IS-LM model, on the other hand, was built in the aftermath of the Great Depression to examine precisely the kinds of questions we faced throughout the Great Recession, issues such as a liquidity trap, the paradox of thrift, and how policymakers should react in such an environment. Why is it surprising that a model built to explain a particular set of questions does better than a model built to explain other things?”

Should-Reads

1. Martin Wolf: Wincott Lecture: “The economics establishment failed. It failed to understand how the economy worked, at the macroeconomic level, because it failed to understand financial risk, and it failed to understand financial risk partly because it failed to understand how the economy worked at the macroeconomic level. The work of economists who did understand these sources of fragility was ignored because it did not fit into the imagined world of rational agents, efficient markets and general equilibrium these professors Pangloss had made up…. I focus on just five transformations… economic performance, the fiscal situation, monetary conditions, the financial system, and economic ideas…. The crisis has lowered economic output vastly below the pre-crisis trend…. The crisis has had dramatically adverse fiscal consequences…. Third, the crisis has also had a dramatically adverse impact on the operation of the monetary system…. Fourth, the crisis has revealed the extreme fragility of the contemporary financial system and so of the economy with which it is intimately intertwined…. Finally, the crisis puts into question the pre-crisis conventional wisdom, particularly on monetary policy. The notion of a “great moderation” stands revealed as vainglorious. This has–or should–lead to a ferment of new (and recovered old) ideas. The idea that monetary policy should ignore what is happening in the financial sector has had to be (or at least should be) abandoned. The least that is required is a new concept of ‘macro-prudential policy’, buttressed by far higher capital requirements. But more radical ideas are also being advanced, as they should be. The case for a radical transformation of the banking sector is strong…”

2. Robert Skidelsky: Comment on the Wincott Lecture: “[Martin Wolf’s] argument ignores the loss of productive capacity through hysteresis…. [And] I’m not sure there wasn’t after all, something illusory, or unsustainable, about GDP growth in the pre-recession years. Four features need to be noticed: 1. Growth (and employment) seems to have been driven disproportionately by the financial services and the public sector…. 2. Relative to other countries, UK productivity growth pre-recession was unimpressive…. 3. Not enough attention has been given to the fact that a sizeable proportion of British jobs depend on ‘in work’ benefits…. 4. One should not ignore the increasing difficulty of the British economy in creating ‘good jobs’, by which I mean jobs which pay a decent wage; or more precisely, reverse the growing gap between mean and median incomes…”

Things You Should Be Aware of:

1. Harold Meyerson: The 40-Year Slump: “If Volcker’s and Carter’s attacks on unions were indirect, Reagan’s was altogether frontal. In the 1980 election, the union of air-traffic controllers was one of a handful of labor organizations that endorsed Reagan’s candidacy. Nevertheless, they could not reach an accord with the government, and when they opted to strike in violation of federal law, Reagan fired them all…”

2. Daniel Little: Understanding Society: Who made economics?: “The discipline of economics has a high level of intellectual status, even hegemony, in today’s social sciences — especially in universities in the United States. It also has a very specific set of defining models and theories that distinguish between “good” and “bad” economics. This situation suggests two topics for research: how did political economy and its successors ascend to this position of prestige in the social sciences? And how did this particular mix of techniques, problems, mathematical methods, and exemplar theoretical papers come to define the mainstream discipline? How did this governing disciplinary matrix develop and win the field? One of the most interesting people taking on questions like these is Marion Fourcade. Her Economists and Societies: Discipline and Profession in the United States, Britain, and France, 1890s to 1990s…. Since the middle of the nineteenth century, the study of the economy has evolved… into a fully ‘professionalized’ enterprise, relying on both a coherent and formalized framework, and extensive practical claims in administrative, business, and mass media institutions. And she argues that this process was contingent, path-dependent, and only loosely guided by a compass of ‘better’ science… ‘considerable cross-national variation in (1) the and nature of the institutionalization of an economic knowledge field, (2) the forms of professional action of economists, and (3) intellectual traditions in the of economics… the entrenchment of the economics profession was profoundly shaped by the relationship of its practitioners to the larger political institutions and culture of their country’…”

3. Jonathan Chait:: Politico Stonewalls Mike Allen Payola Scandal: “VandeHei begins by calling the report ‘nonsense’ without explicitly denying it. He asserts that a reporter ‘could find any pattern he wants to’ in Allen’s prodigious output. Really? Any pattern? A pattern of support for Russian strongmen? A pattern of furtive endorsements of anarcho-syndicalism?…. The only pattern that really matters is a pattern of giving favorable coverage to interests that are paying him. VandeiHei does not deny that Allen has done that…. VandeHei’s final defense verges on parody: Allen, he argues, has ‘no business interest’ in giving favorable treatment to advertisers. There is the fact that advertisers pay him $35,000 a week, or up to $1.8 million a year. If those clients realize that their paid advertisements also buy them favorable coverage in Playbook, that would make them dramatically more interested in paying Allen’s exorbitant rates.”

4. Yichuan Wang: Synthenomics: Why Dynamic Stories are Important: “Steve Williamson… helicopter drops in liquidity traps reduce the inflation rate…. ‘What happens if there is an increase in the aggregate stock of liquid assets, say because the Treasury issues more debt? This will in general reduce liquidity premia on all assets, including money and short term debt. But we’re in a liquidity trap, and the rates of return on money and short-term government debt are both minus the rate of inflation. Since the liquidity payoffs on money and short-term government debt have gone down, in order to induce asset-holders to hold the money and the short-term government debt, the rates of return on money and short-term government debt must go up. That is, the inflation rate must go down. Going in the other direction, a reduction in the aggregate stock of liquid assets makes the inflation rate go up.’… Steve’s story is as follows: 1. The central bank prints more money. 2. People don’t want to hold onto that money. 3. To make sure people hold onto that money, the inflation rate must fall (to make holding money more attractive). 4. Hence, printing money lowers the inflation rate. Any cursory scholar of monetary economics should find that counterintuitive. I would suggest that it’s counterintuitive because it’s, well, wrong…. A much more realistic view would be a ‘monetary disequilibrium’… David Hume…. At the moment that people get more money, the inflation rate is fixed. Hence the rate of return isn’t high enough to hold money, and so people spend that money. This causes prices to rise and generates inflation. Here’s the fundamental problem with Steve’s model: he acts as if equilibrium conditions are enough to explain causality. Sure, in equilibrium it must be that the inflation rate must equal the liquidity value of holding onto money. But that can happen in two ways. Either the inflation rate could fall (Steve’s story), or people could hold less cash, thereby raising the marginal value of their liquidity holdings. Dynamic stories matter, and if you can’t explain how you get to equilibrium, you may end up on the wrong side of truth.”

Olivier Blanchard: Monetary policy will never be the same | David Callahan: The Single Best Argument Against Inequality | Scott Lemieux: Green Lanternism Yet Again: Post-Political Critiques of “Post-Political Politics” | Simon Wren-Lewis: Bertrand Russell’s chicken (and why it was not an economist) | Paul Krugman: Bubbles, Regulation, and Secular Stagnation | Dylan Scott: At Least 1.5 Million People Enrolled In Medicaid Since Obamacare Launch | Rachel Goldfarb: Youth Unemployment Is Leading to Tragedy |

David Cutler: JAMA Forum: Lessons From the ACA Crash « news@JAMA:

The Affordable Care Act (ACA) had a rough October and November… the federal health insurance exchange website http://www.healthcare.gov did not work… a number of people received insurance cancellation notices that they were not expecting. Insurance cancellation is common this time of year, but these notices were particularly troubling because people were told to look for replacements on the (nonfunctioning) exchange website…. The failure of the ACA rollout has many ramifications…. Two are particularly central to physicians and their patients: the future of the insurance exchanges and the lessons for running complex enterprises. The immediate danger from the rollout fiasco is to the health insurance exchanges….

The potential problem with the president allowing insurers to opt out of the ACA rules is that it creates a 2-tiered system for individuals getting insurance outside of an employer’s plan. One tier includes young and healthy individuals who can buy outside the exchanges; the second includes people who are older and those with preexisting conditions, for whom the exchange is the only option. Such an outcome could be very damaging. One immediate concern about the 2-tiered option is that insurers who have chosen to enter the exchanges will lose money…. It will be incumbent on the administration to watch out for these vulnerable plans. Having some of the most innovative plans fail in the first year would not be a good way to start reform…. The administration needs to develop a plan to merge the exchange and nonexchange populations in short order. In this case, “in short order” means a deadline of late spring 2014, when insurers will set premiums for 2015….

The second lesson from the rollout debacle is about the importance of good management…. All of the most admired health care systems—the Mayo Clinic, the Cleveland Clinic, Geisinger Health System, Virginia Mason Medical Center, Kaiser Permanente, and so on—have first-rate IT systems. Outside health care, Walmart became the largest company in the world in large part because of its good IT system…. Good companies promote those who do well and let go or counsel those who do not…. People in charge are familiar with the problems and able to focus effort, and operational employees are empowered to identify and solve problems. The Obama Administration failed in this last task…. Fixing the administration’s implementation efforts will require more than just fixing the website. It will mean changing the entire organization of the government’s ACA efforts…

Ash nazg durbatalik!–no, that is wrong: “nazg” is the Orcish word for “ring”. What is the Orcish word for “economic model” anyway?

I find this morning that the intelligent, thoughtful, and extremely hard-working Mark Thoma is pleading for appropriate model-using: use the right tool for the job, rather than simply building the biggest hammer you can under the assumption that everything is a nail:

Mark Thoma: One Model to Rule Them All?:

Continue reading ““Microfoundations”: I Do Not Think That Word Means What You Think It Means: Wednesday Focus” →

Mark Thoma: Is There One Economic Model to Rule Them All?:

Models are built to answer specific questions. We don’t have one grand model that can explain everything…. The best map to use to drive from Seattle to Los Angeles is a lot different from the best map to find out if it is safe to dig a deep hole in someone’s yard…. And if we try to stuff even more information onto the map so that it can answer all of our questions, telephone poles, roads, elevation, every side road, every house and every store, all the bus routes, rainfall, the types of vegetation, etc. etc. the map becomes too complicated to be useful. Economic models are no different. The trick in modeling is to pare away all the inessential features so that there can be a sharp focus on the question of interest. The best maps are very specialized and highlight only what we need to know. The best economic models do the same….

Where I disagree with many of my colleagues is in the assertion that we should limit ourselves to a single class of models, e.g. variations on the New Keynesian model… built to explain a world of moderate fluctuations in GDP… featur[ing] temporary price rigidities… [with] aggregates… consistent with the optimizing behavior of individual consumers and producers. For certain types of questions – how should policymakers behave to stabilize an economy with mild fluctuations induced by price rigidities–it is the best model to use…. When a different world emerged, a large financial shock and the ensuing Great Recession, the model was of little use…. The IS-LM model, on the other hand, was built in the aftermath of the Great Depression to examine precisely the kinds of questions we faced throughout the Great Recession, issues such as a liquidity trap, the paradox of thrift, and how policymakers should react in such an environment. Why is it surprising that a model built to explain a particular set of questions does better than a model built to explain other things?

Ken Rogoff: Kenneth Rogoff asks whether we need to know what’s ailing the advanced economies in order to boost growth. – Project Syndicate:

Summers is certainly right that productive infrastructure investment is the low-hanging fruit…. Productive infrastructure investment that generates long-term growth pays for itself, so there need not be any conflict between short-term stabilization and risks to long-term debt sustainability. With today’s ultra-low interest rates and high unemployment, public investment is cheap and plenty of projects offer high returns: fixing bridges and roads, updating badly outmoded electricity grids, and improving mass-transportation systems, to take just a few notable examples…. Those… [with] faith that Keynesian multipliers are much bigger than one… [think] even wasteful government spending is productive. But… with so many options for the productive use of resources, this seems like a titanic ideological distraction…. Barack Obama suggested the creation of an infrastructure bank to help promote public-private partnerships. It is still a good idea, particularly if the bank maintained a professional staff to help guide public choice…. Even if Keynesian multipliers are truly at the upper end of consensus, mobilizing private capital for investment has most of the advantages of issuing public debt…. The case for expanding productive infrastructure investment does not rest on one narrow ideological viewpoint or economic theory…. it is time to break the political gridlock and restore growth.

From the New Yorker:

John Cassidy: U.S. Inequality in Six Charts:

Continue reading “John Cassidy’s Six Favorite U.S. Inequality Charts : The New Yorker” →

Austin Frakt: Chart: Growth trajectory of national health expenditures | The Incidental Economist:

Aaron noted a recent JAMA study titled “The Anatomy of Health Care in the United States.” It turns out it’s chock full of great charts. We like charts! So, I’ll share some over the next few weeks. Here’s one that you’ve no doubt seen before, or part thereof. Still, it’s too nice a chart not to share. It certainly puts the recent slowdown (bottom time series) in perspective, doesn’t it? Unprecedented.

Continue reading “Austin Frakt Marvels at the Slowing Growth Trajectory of National Health Expenditures” →