Should-Read: Patrick Iber: On Twitter: “.@davidsess has a phenomenal review/essay

Should-Read: Patrick Iber: On Twitter: “.@davidsess has a phenomenal review/essay of @dandrezner’s The Ideas Industry in the latest @NewRepublic… https://twitter.com/PatrickIber/status/874438806287659008

…Whatever comes next, I think there’s a good chance people will use this essay for years to describe our era’s climate for intellectual work… https://newrepublic.com/article/143004

David Sessions**: The Rise of the Thought Leader: “Daniel W. Drezner… argues that… the evaporation of public trust… the polarization of American society, and growing economic inequality… the last of these as the most important… https://newrepublic.com/article/143004/rise-thought-leader-how-superrich-funded-new-class-intellectual

…have… empowered a new kind of thinker—the “thought leader”—at the expense of the much-fretted-over “public intellectual.”… While public intellectuals traffic in complexity and criticism, thought leaders burst with the evangelist’s desire to “change the world.”… The case against thought leaders, The Ideas Industry shows, is damning… some of the marquee names in thought leadership are distinguished by their facile thinking and transparent servility to the wealthy… Thomas Friedman…. Parag and Ayesha Khanna… Khanna’s Connectography… “globaloney”… “a TED talk on a recursive loop.” Drezner traces how the pursuit of money in the new corporate ideas industry—through television shows, high-dollar speeches, and lavish book advances—pushes thought leaders to bloat their expertise and hustle in so many markets that they end up selling fakes….

Despite Drezner’s impatience with the delusions of thought leaders, he shrinks from the darker implications of his evidence. When it comes time to render a verdict on whether the Ideas Industry is “working,” he conjures an economic metaphor: “For good and ill, the modern marketplace of ideas strongly resembles modern financial markets. Usually, the system works. On occasion, however, there can be asset bubbles.”… The evidence in Drezner’s book contributes to a startling picture of a country in which the superrich actively seek to sabotage institutions that have formed the backbone of consensus and public trust for a large part of the twentieth century…. Surveying this new landscape, it is clear that the true role of the thought leader is to serve as the organic intellectual of the one percent—the figure who, as Gramsci put it, gives the emerging class “an awareness of its own function” in society. The purpose of the thought leader is to mirror, systematize, and popularize the delusions of the superrich: that they have earned their fortunes on merit, that social protections need to be further eviscerated to make everyone more flexible for “the future,” and that local attachments and alternative ways of living should be replaced by an aspirational consumerism….

An opening—albeit a very slim one—for a different kind of organic intellectual. The one percent’s attempts to disrupt the media and universities have had the unintended consequence of radicalizing a generation of young writers and academics on the left—those recently dubbed “the new public intellectuals” in The Chronicle for Higher Education…. Already these new intellectuals on the left have begun to emerge as editors, authors, organizers, and gadflies in the new social media ecosystem. They have a greater presence in the public sphere than at any point in the last half century, and have shown themselves willing to expose the prattle of thought leaders, to attack the rhetorical smoke screens of the liberal center, and to defend working-class voters against accusations of incurable racism and mindless populism…. We are finally getting clear about who its enemies are.

Should-Read: Paul Krugman (2015): When Values Disappear

Should-Read: Paul Krugman (2015): When Values Disappear: “Back in the 60s and 70s… there was much talk about the disintegration of… African-American values… https://krugman.blogs.nytimes.com/2015/03/11/when-values-disappear/

…and how that was the root cause of America’s poverty…. The social dysfunction was clearly real. But was it cause or effect? William Julius Wilson, in When Work Disappears, famously argued that it was a symptom: good jobs in inner cities, where African-American men could take them, went away, and the cultural changes followed. So, how could you test that hypothesis? Well, here’s an experiment: change the structure of the economy in such a way that a large class of white men—say, white men without a college degree—similarly lose access to good jobs. If Wilson was right, we’d expect to see a sharp decline in stable marriages, a rise in unwed births, growing drug use, and other forms of social disruption. And that is, in fact, exactly what happened: William Julius Wilson was right.

Which makes it remarkable to see people look at that very evidence and say that it shows that the real problem isn’t money, it’s values…

Must-Read: James Hamilton: Are we in a new inflation regime?

Must-Read: James Hamilton: Are we in a new inflation regime?: “I’m not saying the Phillips Curve has no basis in facts… http://econbrowser.com/archives/2017/07/are-we-in-a-new-inflation-regime

…I agree that the Phillips Curve is the correct framework for thinking about these questions. But I also agree with President Evans that other factors seem to be more important than the unemployment rate right now in determining inflation.

Because they always have been.

And I also agree with President Evans’s conclusion. Given that inflation has stayed so low for so long, it makes sense to wait to see stronger evidence that inflation is really picking up before we put the brakes on the economy…

Must-Read: Laura Tyson and Lenny Mendonca: Kansas or California?

Must-Read: Laura Tyson and Lenny Mendonca: Kansas or California?: “Donald Trump and congressional Republicans[‘]… claims are baseless… https://www.project-syndicate.org/commentary/increase-earned-income-credit-and-minimum-wage-by-laura-tyson-and-lenny-mendonca-2017-07

…Countless international, national, and state comparisons have demonstrated overwhelmingly that trickle-down economics is a regressive fantasy. The latest evidence of this comes from Kansas, where tax cuts signed by Governor Sam Brownback in 2012 have utterly failed to deliver growth…. Trump should take a lesson from California–a progressive state that he loves to hate. California raised taxes for top earners in 2012 and has since enjoyed one of the strongest growth rates in the country. And now, California is significantly expanding its earned income tax credit, CalEITC, building on the proven record of the federal earned income tax credit (EITC)… originally based on the negative income tax proposed by Nobel laureate economist Milton Friedman. The EITC… it was enacted under President Gerald Ford, and has been expanded under Republican and Democratic presidents alike: Ronald Reagan, Bill Clinton, George W. Bush, and Barack Obama….

California is also one of 21 states that raised its minimum wage this year. By 2022, its statewide minimum wage will be $15 per hour–the highest in the country. Kansas, by contrast, is one of a handful of states that still adheres to the federal minimum wage of $7.25 per hour… 20% lower than… during the Reagan presidency…. The EITC and the minimum wage are complementary policies that bring about better outcomes when used in tandem. Because the EITC expands the supply of low-income workers, it can exert downward pressure on wages. But with a higher minimum wage, that “leakage” effect is mitigated. Accordingly, California plans to increase its CalEITC income-eligibility threshold as it phases in its higher minimum wage….

Trump… should take a lesson from progressive states like California… unlike the supply-side embarrassment that Kansas has become…

Public Spheres for the Trump Age: Fresh at Project Syndicate

Fresh at Project Syndicate: Public Spheres for the Trump Age https://www.project-syndicate.org/commentary/universities-in-the-age-of-trump-by-j–bradford-delong-2017-07: BERKELEY – In many societies, universities are the main bastions of ideological and intellectual independence. We count on them to transmit our values to the young, and to support short- and long-run inquiries into the human condition. In Donald Trump’s America, they are more important than ever.

Unlike universities, for-profit media enterprises have never been up to the task of nurturing a robust “public sphere.” Inevitably, their coverage reflects enormous pressure to please the base – their advertisers or investors – or at least to avoid giving offense. That is why the American writer and political commentator Walter Lippmann – no stranger to journalism – ultimately put his trust in public intellectuals working in universities, think tanks, or other niches. Read MOAR at Project Syndicate

Must-Read: Dylan Matthews: What’s the point of an anti-immigrant left?

Must-Read: I must say: many—most?— of those who made their careers at the Old New Republic—advancing in the world by catering to the prejudices and bigotries of Marty Peretz—acquired some very bad habits of rhetoric and argument thereby, which still poison what they say and think.

Indeed, in many cases I think that they can no longer think honestly and accurately.

Give me a ticket-punching card-carrying member of the Juicebox Mafia any day.

Dylan Matthews on Peter Beinart

Dylan Matthews: What’s the point of an anti-immigrant left?: “Beinart’s policy argument is… mistaken… https://www.vox.com/2017/7/2/15847840/beinart-atlantic-left-immigration

…Beinart gives readers a totally false sense of the state of research… the overwhelming academic consensus that the other 92.4 percent are held harmless or benefit from immigration, and that Americans gain overall. Nor does he note that immigration appears to increase high school graduation rates among natives…. Beinart portrays a National Academy of Sciences study on immigration as showing major costs to native workers, when the study actually concluded, “the impact of immigration on the wages of native-born workers overall is very small”….

Beinart’s political argument is disconnected from this narrative of immigration battering the working classes. He… argue[s] that Democrats… “must take seriously Americans’ yearning for social cohesion” and “dust off a concept many on the left currently hate: assimilation.” The idea that the US has gotten worse at assimilating new immigrants, though, is unfounded…. “They’re integrating as well as, or even faster, than immigrants who came from Europe in the last century”…. Beinart’s concern about public opinion more generally is also odd, given that Americans have become more pro-immigration, not less, in recent decades….

This is the point where you have to ask yourself what Beinart actually thinks the Democratic party is for. Personally, I think any center-left party worth its salt has to be deeply committed to egalitarianism… fighting for LGBT rights against bathroom bills, fighting mass incarceration and police violence victimizing black Americans… working for more domestic redistribution to address poverty and hardship, including through universal health care… treating people born outside the US as equals… generously funding foreign aid for health programs that have saved hundreds of thousands, even millions of lives. And it means a strong presumption in favor of open immigration. Not only does migration help native workers overall, it enables a massive increase in the welfare of people abroad, typically people much poorer than even poor Americans, who come here…

Must-Read: Paul Krugman: Oh! What a Lovely Trade War

Must-Read: Well, I’ll make the purist case for free trade: The China shock was a shock. Shocks are bad for those who get hit, and are much, much worse when the overall macroeconomy is not at full employment. Because foreigners don’t vote, blaming trade rather than accepting responsibility is the modal response of politicians to any shock that can be linked to trade in any way. We economists need to push back against that modal political response:

Paul Krugman: Oh! What a Lovely Trade War: “I’m not making a purist case for free trade here… https://www.nytimes.com/2017/07/03/opinion/trump-trade-war.html?_r=0

…Rapid growth in globalization has hurt some American workers, and an import surge after 2000 disrupted industries and communities. But a Trumpist trade war would only exacerbate the damage, for a couple of reasons…. Globalization has already happened…. U.S. industries are now embedded in a web of international transactions…. A trade war would disrupt communities the same way that rising trade did in the past…. A motorist who runs over a pedestrian, then tries to fix the damage by backing up—running over the victim a second time….

The tariffs now being proposed would boost capital-intensive industries that employ relatively few workers per dollar of sales… [and] further tilt the distribution of income against labor.

So will Trump actually go through with this? He might. After all, he posed as a populist… The base might indeed like to see something that sounds more like the guy they thought they were voting for. But Trump’s promises on trade… were just as fraudulent as his promises on health care. In this area, as in, well, everything, he has no idea what he’s talking about. And his ignorance-based policy won’t end well.

Hoisted from the 2007 Archives: Clueless Brad DeLong Was Clueless: Central Banking and the Great Moderation

Hoisted from the 2007 Archives: Wow! I had no clue in mid-2007 what was about to come down.

I had no idea of how the money-center universal banks had exposed themselves to housing derivatives, how strongly the right-wing noise machine would lobby against the Federal Reserve’s undertaking its proper lender-of-last-resort job, or how hesitant and ineffective the Federal Reserve would turn out to be in the summer and fall of 2008:

Central Banking and the Great Moderation http://www.bradford-delong.com/2007/07/central-banking.html: http://www.businessday.co.za/articles/topstories.aspx?ID=BD4A507305 IT HAS been 20 years since Alan Greenspan became chairman of the US Federal Reserve. The years since then have seen the fastest global average income growth rate of any generation, as well as remarkably few outbreaks of mass unemployment-causing deflation or wealth-destroying inflation. Only Japan’s lost decade-and-a-half and the hardships of the transition from communism count as true macroeconomic catastrophes of a magnitude that was depressingly common in earlier decades. This “great moderation” was not anticipated when Greenspan took office.

US fiscal policy was then thoroughly deranged — much more so than it is now. India appeared mired in stagnation. China was growing, but median living standards were not clearly in excess of those of China’s so-called “golden years” of the early 1950s, after land redistribution and before forced collectivisation turned the peasantry into serfs. European unemployment had just taken another large upward leap, and the “socialist” countries were so incompatible with rational economic development that their political systems would collapse within two years. Latin America was stuck in its own lost decade after the debt crisis at the start of the 1980s.

Of course, the years since 1987 have not been without big macroeconomic shocks. America’s stock market plummeted for technical reasons that year. Saddam Hussein’s invasion of Kuwait in 1991 shocked the world oil market. Europe’s fixed exchange rate mechanism collapsed in 1992. The rest of the decade was punctuated by the Mexican peso crisis of 1994, the east Asian crisis of 1997-98, and troubles in Brazil, Turkey, and elsewhere, and the new millennium began with the collapse of the dotcom bubble in 2000 and the economic fallout from the terrorist attacks of September 11 2001.

So far, none of these events — aside from Japan starting in the early 1990s and the failures of transition in the lands east of Poland — has caused a prolonged crisis. Economists have proposed three explanations for why macroeconomic catastrophes have not caused more human suffering over the past generation. First, some economists argue that we have just been lucky, because there has been no structural change that has made the world economy more resilient.

Second, central bankers have finally learned how to do their jobs. Before 1985, according to this theory, central bankers switched their objectives from year to year. One year, they might seek to control inflation, but the previous year they sought to reduce unemployment, and next year they might try to lower the government’s debt refinancing costs, and the year after that they might worry about keeping the exchange rate at whatever value their political masters preferred.

The lack of far-sighted decision-making on the part of central bankers meant that economic policy lurched from stop to go; to accelerate to slow down. When added to the normal shocks that afflict the world economy, this source of destabilising volatility created the unstable world before 1987 that led many to wonder why somebody like Greenspan would want the job.

The final explanation is that financial markets have calmed down. Today, the smart money in financial markets takes a long-term view that asset prices are for the most part rational expectations of discounted future fundamental values. Before 1985, by contrast, financial markets were overwhelmingly dominated by the herd behaviour of short-term traders, people who sought not to identify fundamentals, but to predict what average opinion would expect average opinion to be, and to predict it before average opinion did.

When I examine these issues, I see no evidence in favour of the first theory. Our luck has not been good since 1985. On the contrary, I think our luck — measured by the magnitude of the private sector and other shocks that have hit the global economy — has, in fact, been relatively bad. Nor do I see any evidence at all in favour of the third explanation. It would be nice if our financial markets were more rational than those of previous generations. But I don’t see any institutional changes that have made them so.

So my guess is that we would be well-advised to put our money on the theory that our central bankers today are more skilled, more far-sighted, and less prone to either short-sightedly jerking themselves around or being jerked around by political masters who unpredictably change the objectives they are supposed to pursue year after year. Long may this state of affairs continue.

And Felix Salmon had little clue either:

Felix Salmon (2007): Subprime Mess: It’s Not Derivatives’ Fault: “I’m sure it’s been happening a lot in idle conversation… http://www.bradford-delong.com/2007/07/subprime-mess-i.html

…but it’s still disheartening to see it happening in on the front page of a WSJ section: confusing illiquidity problems in the subprime market with more theoretical worries about derivatives…. Scott Patterson… should know better, in his Ahead of the Tape column….

There is no indication whatsoever here that Patterson understands that the illiquid securities which are causing so much trouble in the “subprime-mortgage crackup” aren’t derivatives…. CDOs are securities–not derivatives–which are very, very rarely traded. As a result, they’re often “marked to model” rather than being marked to market. That seems to be the problem that Patterson’s column is concerned about, and it’s silly for him to be complaining about derivatives in this regard.

It’s true that the troubled Bear Stearns funds did invest in some derivatives–mainly bets on the direction of the ABX.HE index of subprime bonds. Those investments rose and fell in value very transparently, and were by far the easiest part of the Bear portfolio to unwind. So let’s not start blaming illiquid derivatives for Bear Stearns’ problems. Right now, illiquid derivatives are the least of anybody’s problems…

Must- and Should-Reads: July 3, 2017


Interesting Reads: