Must-Read: Naughty, naughty, Marty…

You know better.

You say: “Patients in the Oregon Medicaid study show no significant improvement in clinical physical health outcomes”. You know as well as I do that you should say: “Patients in the Oregon Medicaid study showed the expected and clinically significant improvement in physical health outcomes, but the study had low statistical power, and so the researchers could not dismiss, at conventional levels of statistical significance, the possibility that the improvement was due to chance.”

Back in the early 1980s you used to try very hard to teach your students not to confuse statistical significance with economic significance.

What has happened?

Martin Feldstein: How Would Health-Care Reform Affect Patient Health?: “People who qualify for Medicaid do receive substantially more care than those without formal insurance… https://www.project-syndicate.org/commentary/us-health-care-reform-medicaid-cuts-by-martin-feldstein-2017-07

…have substantially lower out-of-pocket medical costs… much less likely to skip paying other bills because of medical debts or to have nonmedical bills sent to collection. If reform legislation reduces Medicaid benefits, the individuals who lose benefits would continue to receive free care in outpatient departments, emergency rooms, and as hospital in-patients…. Individuals who are billed for services understand that providers generally do not attempt to collect from low-income patients. Moreover, those who are no longer in the Medicaid program do not lose care from the many doctors who now refuse to serve Medicaid patients because of the low fees allowed in the program. The most important fact to bear in mind is that enrollees in Medicaid show no significant improvement in clinical physical health outcomes. This was the main finding of a large “natural experiment” supported by the federal government…

Should-Read: This is not even sausage-making: this is taking an intestinal casing, putting nothing in it, and saying that you are going to add the meat by-products later:

Leigh Ann Caldwell and Vaughn Hillard: Senate Considers ‘Skinny’ Repeal of Obamacare in Tuesday’s Voting: “The plan… is for senators to… a ‘skinny’ repeal… eliminat[ing] Obamacare’s individual mandate penalty, the employer mandate penalty, and the tax on medical devices…. The Senate would then go to conference…. Conferees would work out a final bill. Both chambers would then have to vote…” http://www.nbcnews.com/politics/congress/senate-sets-sights-skinny-repeal-obamacare-tuesday-s-voting-n786296

Must-Read: The quick and careful Justin Fox is unhappy with—and makes me aware of—this.

All I can say is: unprofessional

I would not have thought that it was an argument that could be maintained by any economist of reputation—even though, as John Stuart Mill once said, “what was affirmed by Cicero… [of] philosophy…may be asserted without scruple of the subject of political economy—that there is no opinion so absurd as not to have been maintained by some person of reputation”. I don’t think that this is an opinion. And the cost to your reputation—I’m looking at you, John Taylor, and you, Glenn Hubbard, and you Kevin Warsh—may well exceed whatever your current positive balance is plus your available credit limit:

John F. Cogan, Glenn Hubbard, John B. Taylor, and Kevin Warsh: On the Prospects for Higher Economic Growth: “Productivity growth declined in the 1970s, rose markedly through the 1980s and 1990s, and fell again sharply in recent years. The data are not supportive of the popular contention that the United States is in the midst of a long-term decline in productivity growth…” http://www.hoover.org/sites/default/files/research/docs/on_the_prospects_for_higher_economic_growth_0.pdf

Here is the post-WWII quarterly productivity growth rate scatter:

Here is the nonparametric smoothed lowess trend:

Let’s take a closer look at that:

Yes, the U.S. experience since World War II is best characterized as one of a long-term decline in productivity growth, with a recovery triggered by the Information Age that turned out to be (a) temporary and (b) minor. Even if you (for some reason) do not think this, you do not say that you do not think this, lest other people (rightly) conclude that you are a loon.

And if you don’t like the nonparametrics? The linear trend says the same thing:

And, of course, Justin has his own fish to fry.

I, however, want to draw a simple line: economists who grossly misrepresent what the basic data say are not economists of reputation.

How do Cogan, Hubbard, Taylor, and Warsh make their case? They don’t do any form of estimation: they simply draw arrows—arrows that do not match any trends that could be estimated—to make you think the data trends are other than they are:

iPython Notebook File: http://delong.typepad.com/2017-07-23-u.s.-labor-productivity.ipynb

Should-Read: Medicaid expansion vs. non-expansion and household financial adversity:

Kenneth P. Brevoort, Daniel Grodzicki, and Martin Hackmann: Medicaid and Financial Health https://www.fdic.gov/news/conferences/consumersymposium/2016/documents/brevoort_presentation.pdf:

Plus state government nullification or non-nullification and insurer competition:

Hannah Recht: Health Insurance Marketplaces: Looking Forward to 2018: “Most of the 12 million people who got health insurance through Obamacare’s individual marketplaces will have the same number of companies to choose among next year as they did in 2017…” https://www.bloomberg.com/graphics/health-insurance-marketplaces-for-2018/:

Where state governments want to diminish the threat of medical bankruptcy, medical bankruptcy is diminished. Where state governments want individuals to see competition for their business from health insurers, individuals see competition for their business from health insurers.

Should-Read: Jonathan Baker: Market power in the U.S. economy today: “The U.S. economy has a ‘market power’ problem, notwithstanding our strong and extensive antitrust institutions… https://equitablegrowth.org/research-analysis/market-power-in-the-u-s-economy-today/

…The surprising conjunction of the exercise of market power with well-established antitrust norms, precedents, and enforcement institutions is the central paradox of U.S. competition policy today…. The harms from the exercise of firms’ market power may extend beyond individual markets affected to include slower overall economic growth and increased economic inequality. The implications for future economic productivity and welfare are troubling, but before detailing these consequences, it is necessary to understand why market power is a major issue despite well-established antitrust enforcement institutions and legal precedents…

Should-Read: Doug Elmendorf et al.: Letter from Former CBO Directors on the Importance of CBO’s Role in the Legislative Process: “The undersigned represent every former Director of the Congressional Budget Office (CBO)… https://medium.com/@douglas.elmendorf/letter-from-former-cbo-directors-on-the-importance-of-cbos-role-in-the-legislative-process-278863b7e1c6

…We write to express our strong objection to recent attacks on the integrity and professionalism of the agency and on the agency’s role in the legislative process…. Over the past 42 years CBO has been firmly committed to providing nonpartisan and high-quality analysis—and that commitment remains as strong and effective today as it has been in the past. Because CBO works for the Congress, and only the Congress, the agency’s analysis addresses the unique needs of legislators. To meet the standard of nonpartisan objectivity, CBO makes no recommendations about policy, regularly consults with researchers and practitioners with a wide range of views (as can be seen in the agency’s panels of advisers and reviewers for major studies), and enhances its transparency by releasing extensive descriptions of its analytic techniques and forecast record. To produce estimates of high quality, CBO uses its detailed understanding of federal programs and economic conditions, ongoing interactions with government officials and private-sector experts, the best academic research, and the latest available data consistent with the timing of the Congressional budget process…

Must-Read: Ryan Avent: Making Monetary Policy Great Again: “Obama’s response to the economic crisis… the timidity of his stimulus plan… his failure to provide broad support to struggling homeowners… his premature pivot to deficit cutting… http://democracyjournal.org/magazine/45/making-monetary-policy-great-again/

…While Roosevelt’s New Deal programs left an indelible mark on the American economy and society, it was his decisive monetary action that saved America from continuing depression. On just his third day… Roosevelt declared a bank holiday… suspended… the… gold standard… a policy of reflation. The economic response was immediate…. Obama would not pursue any comparably radical policy…. His Administration left the hard work of rehabilitating the economy to the Federal Reserve, while the federal government turned to deficit reduction….

The decades prior to the crisis taught political leaders that economic management was the Fed’s job, one it could handle ably. Experience since the financial crisis strongly suggests that assumption was mistaken. It should not have taken six years to return the unemployment rate to the pre-crisis level, nor should so much of the reduction in unemployment have come in the form of frustrated workers leaving the labor force. American incomes should not have been allowed to fall below the pre-crisis trend, and at least some of that shortfall ought to have been made up. Most critically, now, nearly ten years after the start of the Great Recession, the economy should be far better prepared to deal with the next crisis, not trapped with interest rates stuck near zero and the labor market still signaling that more people could be put to work for longer hours at higher rates of pay.

As the Great Recession recedes into the past, the sense that urgent change in the making of economic policy is needed also fades…

Should-Read: Pedro Nicolaci da Costa: Ex-Bank of England official says Fed has wrong idea on jobs, inflation: “The Fed’s misleading view of the job market reflects ‘a huge intellectual failure’… http://www.businessinsider.com/ex-bank-of-england-official-says-fed-has-wrong-idea-on-jobs-inflation-2017-7

…That’s the view of David Blanchflower…. “Prior to 2008, the unemployment rate was a sufficient statistic to tell you about the labor market,” Blanchflower said. “The employment rate was mirror image.” Today, however, “a cyclical decline in demand means the unemployment rate has fallen but the employment rate has not recovered to precrisis levels,” he said. In other words, the economy is still too weak to sustain full employment, and policymakers are not doing enough about it. Explaining the gap are high levels of long-term unemployment and severe underemployment, in addition to persistent racial disparities in job availability and incomes….

“This is a huge intellectual failure,” said Blanchflower…. The same inflation hawks within and outside the central bank have been warning about imminent inflation for years, Blanchflower said, only to be proved wrong time and again: “It’s really here, it’s really coming, it’s really coming, inflation is right around the corner.” Indeed, it never has. US inflation continues to undershoot the Fed’s 2% target, and it is in fact moving further below it, despite a low headline jobless rate. This suggests there’s much room for improvement yet, something most jobseekers would attest to.