Category: Equitablog

About one evening in three I spent with him as an adult–and after he had had his third Bombay Sapphire martini–my late grandfather Earl H. DeLong would start to rant about how the study of public policy as an academic discipline had gone way downhill over his lifetime as people who saw themselves as studying “public administration” were replaced by people who saw themselves as studying “political science”. Oh, there were exceptions–Grandfather Earl had a lot of respect for Aaron Wildavsky and James Q. Wilson–but, he said, rather than building up the mass of case studies and analyses from which one might actually be able to generalize and begin to draw useful and durable lessons about public management, people with chairs in graduate schools of public policy increasingly wanted to build orrerys and explain how their policies would bring about utopia.

As he used to say: “everyone wants to fantasize about Rommel, and nobody wants to be a real quartermaster, even though real quartermasters won a lot more battles than real Rommels have”.

But James Q. Wilson was an exception. And Buce has a very nice catch from his Bureaucracy::

Continue reading “Public Administration vs. Political Science” →

WCEG: Things to Read at Dinnertime on November 19, 2013##

Must Reads:

1. Simon Johnson: It’s Fed Versus Moody’s for ‘Most Wrong’ Crown: “Who was more wrong in the run-up to the financial crisis of 2008: the Federal Reserve or Moody’s Investors Service? This isn’t an academic question; both organizations are still hugely relevant to shaping the way we see our financial system and the risks it contains. And both are now apparently underestimating the dangers again. To be fair, the thinking at both places has shifted, but not anywhere close to enough. The reason for this is simple: The incentives that encouraged their misperceptions before 2008 remain in place today…”
2. Joshua Angrist et al: Semiparametric Estimates of Monetary Policy Effects: String Theory Revisited: “House Committee on Banking and Currency, March 18, 1935: Goldsborough: ‘You mean you cannot push a string…’ Eccles: ‘That is a good way to put it: one cannot push on a strong…. Beyond creating an easy-money situation through reduction of discount rates and through the creation of excess reserves, there is very little if anything the reserve organization can do toward bringing about recovery. I believe that in a condition of great business activity that is developing to a point of credit inflation, monetary action can very effectively curb undue market expansion…'”

Should-Reads:

1. cingraham: Ideology and party unity in the House, 1857-2011
2. Wolfgang Munchau: Why Europe needs to try unconventional policy: “Last week’s dreadful data for the eurozone tell us that a long period of low economic growth and excessively low inflation lies ahead…. What should the European Central Bank do now?… If Mario Draghi, the ECB president, wants to make a real difference, he should contemplate quantitative easing…. QE has the advantage that it is legally beyond reproach… a pure monetary policy operation… cannot be mistaken for an illegal monetisation of sovereign debt…. Would QE work? Once you hit the zero limit on interest rates, QE is the most effective policy instrument…. And if you are worried about the impact of QE on financial stability, you might want to consider the impact of a long depression…”
3. Daniel Altman: Predicting the Economic Future Through Convergence: China: “So economists re-examined the theory of convergence… countries’ living standards could converge in the long term, but only if they had similar economic foundations… deep factors whose importance was easily perceptible yet hard to quantify…. There are still vast differences between China and these wealthier economies that are likely to hold China back…. Two factors… particularly important… are openness to trade and the ease of starting a business (Aghion and Howitt 2009). China has done much to open its markets since Mao’s death, but it still has a long way to go…. When it comes to opening a business, China ranks even further behind…”
4. Paul Krugman: The New Keynesian Case for Fiscal Policy: “Much of the academic profession decided more than 30 years ago that… what we needed was an equilibrium model of the business cycle. By the time the utter failure of the equilibrium project became apparent, you had a whole generation of economists who knew that Keynesianism of any form was nonsense based on what they had heard somewhere, so they didn’t read any of the stuff… and were flabbergasted to learn that there was in fact an extensive New Keynesian literature…. So some props to John Cochrane for at least trying to catch up. Unfortunately, he’s still working from the baseline assumption that people like me (and Mike Woodford, whom he really should be reading) must be kind of stupid, and so he can’t be bothered to actually figure out how the models work. At least I think that’s what’s happening…. Cochrane’s latest seems to be driven by a confusion between the effect of fiscal expansion on GDP… and… on consumption…. I won’t try to figure out the roots of this failure of reading comprehension…. This isn’t hard–at least it shouldn’t be for anyone with a graduate training in economics. Just try actually reading what New Keynesians write.”
5. Joe Gagnon (2009): Low Interest Rates May Be Here To Stay: “One of the most striking features of today’s economy is that interest rates… are at 50-year lows…. ‘Normal’ interest rates are likely to be lower than most people expect…. Investment demand has declined in the advanced economies… slower population growth… the winding down of the productivity ‘catch-up’… lower marginal tax rates and declining rates of inflation… the governments of many Asian economies have funneled unprecedented amounts of capital into advanced-country financial markets in an effort to hold their currencies down and maintain export-led growth… commodity exporters, especially oil exporters, saved a high fraction of their revenues…. What are the prospects going forward?… We need to craft a regulatory framework that enables our financial system to operate safely in an environment of low interest rates…”
6. Mark Thoma: How Economists Can Tame Irrational Exuberance: “Is Shiller correct? Should economists drop the assumption of rational expectations, at least in some instances?… The rationality assumption is reasonable in some cases…. For monetary policy, where the Fed goes out of its way to make its policy rule known, and in financial markets where the participants study the markets as part of their jobs and there are considerable amounts of money on the line, perhaps those conditions are approximated. But does anyone understand what policy rule can be used to anticipate fiscal policy actions (who expected Congress to cut spending in a recession?), and does the typical household sufficiently understand how policy shocks affect the economy?”

Things You Should Be Aware of:

Jared Bernstein: Inequality’s Roots: Beyond Technology | Max Chafkin: Udacity’s Sebastian Thrun, Godfather Of Free Online Education, Changes Course | Joseph E. Gagnon: Stabilizing Properties of Flexible Exchange Rates: Evidence from the Global Financial Crisis | James Surowiecki: Valuing the Free Digital Economy | Paul Krugman: Bubbles, Regulation, and Secular Stagnation | Jay Inslee, Steve Beshear and Dannel P. Malloy: How we got Obamacare to work | Lincoln’s Gettysburg Addresses |

The thoughtful, estimable, and underpaid Aaron Bady gets one mostly wrong, I think:

Aaron Bady: Public universities should be free:

This should not be a controversial assertion. This should be common sense. But Americans have forgotten what the “public” in “public education” actually means…. Where there once was a public mission to educate the republic’s citizens, there is now the goal of satisfying the educational needs of the market, aided by PR departments that brand degrees as commodities and build consumer interest, always with an eye to the bottom line. And while public universities once sought to advance the industry of the state, as a whole, with an eye to the common good, shortfalls in public funding have led to universities treating their research capacity as a source of primary fund-raising, developing new technologies and products for the private sector, explicitly to raise the money they need to operate. Conflicts of interest are now commonplace….

Continue reading “Should Public Education Be Free? Or, Perhaps, What Should the Phrase “Free Public Education” Mean?” →

ObamaCare always was supposed to launch three arrows in its effort to increase health-insurance coverage:

1. Getting individuals and small groups better options through the exchange-marketplace (and then making people take advantage of those options whether they want to or not),
2. Expanding coverage by making more people eligible for Medicaid and by providing subsidies to make exchange-marketplace coverage affordable to those of the working poor and lower middle class who would not qualify for even expanded Medicaid.
3. Expanding coverage by getting those currently eligible for Medicaid who had not signed up for it to do so.

Ezra Klein writes up a good catch here. Only I did not think that this third arrow was “unexpected”–I thought it was part of the design:

Ezra Klein: Obamacare is having one huge success nobody knows about:

People are, rightly, upset about all that’s going wrong…. But something unexpected is going very, very right. The background here is that before the rollout of the Affordable Care Act there were a lot of people eligible for Medicaid who simply didn’t know it… with some states as low as 36 percent [of eligible people signing up] and others as high as 81 percent. The publicity around the new health-care law has led a lot of those people to inquire about whether they’re eligible for health insurance–and they’re finding out that they are…. In the red states… 91,000 people have… learned… that they are already eligible…. Of the 70,000 people who’ve enrolled in Medicaid in Washington State, 30,000 were eligible before the new law took effect–they just didn’t know it…

288 words

This means a roughly $60 billion direct federal transfer away from Red States over the next two years, and roughly $200 billion in lower economic activity in Red States–call it a negative of 4%-point-years of GDP, and of 2%-point-years of excess Red State unemployment.

Interesting times…

And last weekend three Democratic governors–all of whom should be mentioned much more often by substance-oriented reporters as future presidential possibilities than the standard senators whom lazy reporters focus on–weighed in:

Continue reading “Over the Next Two Years ObamaCare Is Going to Succeed Where Local Politicians in Office Want It to Succeed, and Is Likely to Fail Where Local Politicians in Office Want It to Fail” →

Richard Dobbs and Susan Lund write:

The [Big] Four central banks… have injected a $4.7 trillion tidal wave of liquidity….The consensus is that these actions have raised GDP by between 1 and 3 percent and prevented a catastrophic failure in the global financial system…. Our contribution to this on-going debate suggests that… the clearest impact from ultra-low interest rates appears to have come from enabling government expenditure, and possibly boosting housing construction. Non-financial companies… have been large beneficiaries of low interest rates, saving $710 billion on their debt service costs between 2007 and 2012. However, companies have not lowered the hurdle rates they use…. Credit [remains] tight for… many small companies in the United States and Europe….

Continue reading “Has Quantitative Easing on a $5 Trillion Global Scale Paid Noticeable Benefits? I Think So…” →

Every time I see the extremely smart and capable Bob Reich, I feel guilty.

I was a small part of the Treasury team within the Clinton administration that shut down a lot of ideas he had as Secretary of Labor–ideas to spend a little bit of money and quite possibly significantly improve the job the American economy does at matching workers with skills with jobs that need those skills. We thought that it was a much higher priority to pursue a bipartisan deal–a “grand bargain”–to set the financing of America’s social insurance system on a sound long-run basis, and if we could not get such a deal we would do it ourselves

Given that George W. Bush and his Republicans were going to gleefully smash much of our hard budget-balancing work over eight years on the floor in 2001-3–and given that the senior Republican policy barons like Alan Greenspan would only quietly whimper in private about how this was bad policy–it would have been better in retrospect to focus less on long-term fiscal stabilization as the road to equitable growth and to focus more on, well, on equitable growth as the road to equitable growth.

Continue reading “We Need a Less Ideological Language to Describe Politicians…: Tuesday Focus” →