Must-Read: Ryan Avent: Free exchange: A new anthology of essays http://amzn.to/2pYyN2A reconsiders Thomas Piketty’s “Capital”: “The book explores arguments left undeveloped in Mr Piketty’s masterwork… http://www.economist.com/news/finance-and-economics/21722166-book-explores-arguments-left-undeveloped-mr-pikettys-masterwork-new

…The Economist… Thomas Piketty… Capital in the Twenty-First Century… advi[sed] to take the analysis seriously, yet to treat the policy recommendations with caution. The book’s striking warning of the creeping dominance of the very wealthy, looks as relevant as ever: as Donald Trump’s heirs mind his business empire, he works to repeal inheritance tax. But “Capital” changed the agenda of academic economics far less than it seemed it might.

A new volume of essays reflecting on Mr Piketty’s book, published this month, prods economists to do better. It is not clear they can. After Piketty: The Agenda for Economics and Inequality, edited by Heather Boushey, Bradford DeLong and Marshall Steinbaum, is a book by economists, for economists…. Piketty argued that wealth naturally accumulates and concentrates, so that familial riches are ever more critical to determining an individual’s success or failure in life. The extravagant inequality of the Gilded Age could return if no preventive action is taken…. Despite its 700-odd pages, “Capital” gave important details short shrift. “After Piketty” takes these lacunae in turn, pointing out, essay by essay, how Mr Piketty might have devoted more space to the role of human capital and technological change, the structure of the firm and the rise in outsourcing, sexual inequality, geography and so on….

[The] damning critique [of Piketty]… treats the elasticity of substitution as a meaningful parameter in a well-behaved economy. It may not be. In the most incisive essay in “After Piketty”, Suresh Naidu describes a “domesticated Piketty” who communicates in the language of economics and whose argument hinges on things like the elasticity of substitution… [and] a “wild Piketty” who pays attention to social norms, political institutions and the exercise of raw power. He suggests that r > g is not a theory to be disproved but a historical fact to be explained. And he suggests that the wealthy use their influence to shape laws and society in order to guarantee themselves a better return on their wealth….

Politics is “everywhere and nowhere” in Mr Piketty’s book, as Elisabeth Jacobs notes in her essay. What “After Piketty” reveals is the message lurking within all the undeveloped arguments in “Capital” about politics and ideology. It is that economists set themselves too easy, too useless a task if they can describe how capitalism works only when politics is unchanging…

Should-Read: The problem is that nobody really knows—yet—how to accomplish the successful “scaling [of] faculty productivity through online education”. The people who can successfully take MOOCs—at least as they are currently organized and envisioned—are people who could perfectly well learn via sustained interaction with the Turing-class virtual instantiation of the thinker they could construct and run on their wetware—in other words, by reading and thinking about the book.

The fact that the lecture survived Gutenberg strongly suggests that that slice of the population—the successful MOOC-takers—is a relatively small fraction of even those who excel and strongly benefit from our current system of higher education.

Rick Levin: Toward Sustainable Financing of Higher Education: “In the face of rising costs of attendance and an escalating burden of student debt… http://www.cshe.berkeley.edu/events/toward-sustainable-financing-higher-education-0

…universities are under pressure to increase productivity and control costs.  This lecture offers three suggestions: (1) a novel framing of the argument for public support of universities, (2) conserving capital expenditures by proper accounting for the cost of facilities, and (3) scaling faculty productivity through online education…

Must-Read: My two—three—macro papers would be: Krugman (1998) https://www.gc.cuny.edu/CUNY_GC/media/LISCenter/pkrugman/1998b_bpea_krugman_dominquez_rogoff.pdf, Blanchard-Leigh (2013) https://www.aeaweb.org/articles?id=10.1257/aer.103.3.117, and Mian-Sufi (2011) https://www.aeaweb.org/articles?id=10.1257/aer.101.5.2132…

Paul Krugman: Calling Literatures From The Vasty Deep: “Noah [Smith’s]… Two Paper Rule…

…Give me two papers in this vast literature that are “exemplars and paragons” of the literature. If you can’t, the whole literature is probably a waste of time. Which… sets some of us to work trying to think of the two papers…. My examples. [While] Noah is generally very down on macroeconomics… I believe that we’ve learned a lot… since… 2008…. Fiscal policy: before the crisis there was strikingly little solid evidence… because history gave us so few natural experiments…. I’d point to Blanchard and Leigh https://www.aeaweb.org/articles?id=10.1257/aer.103.3.117, using austerity as an experiment, and Nakamura-Steinsson http://www.columbia.edu/~en2198/papers/fiscal.pdf, exploiting regional shocks from defense spending. Not saying these are the only fine papers, but they’re enough to show that there’s a real there there…. Dramatic confirmation of what some of us thought we knew about monetary policy at the zero lower bound. I can think, for example, of a 1998 paper https://www.gc.cuny.edu/CUNY_GC/media/LISCenter/pkrugman/1998b_bpea_krugman_dominquez_rogoff.pdf that has held up really well…. Trade? Autor/Dorn/Hanson https://www.aeaweb.org/articles?id=10.1257/aer.103.6.2121 on the China shock may not be the last word, but surely a revelatory approach…. Subramanian and Kessler https://piie.com/publications/wp/wp13-6.pdf… realizing that this globalization is different….

I’m pushing back against Noah’s nihilism (noahlism?) even while endorsing his method…

Should-Read: Matt O’Brien: How Japan proved printing money can be a great idea: “Falling prices would mean falling wages, but not falling debts, so they would become harder to pay back… http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11857507

…In the best case, the economy would get stuck in a cycle of low consumer spending leading to low business investment leading to low hiring, and then even lower consumer spending. And in the worst, everyone would go bankrupt. That’s why Japan has put so much emphasis on getting its inflation rate back above zero. It wants to get into the opposite cycle of higher prices leading to higher wages leading to lower debt burdens leading to more consumer spending and then more business investment…. That has been the whole point of “Abenomics”…. Although there have been stops and starts, and debates and doubts, the reality is that it is working, emphasis on those last three letters…. The best way to tell isn’t its super-low unemployment rate, but rather its super-high employment rate… 83.5 per cent, making our own 78.3 per cent rate look downright measly in comparison…. Japan’s unemployment rate hasn’t fallen for the bad reason that people have given up looking for work, but for the good one that almost everyone who isn’t drawing a pension has found one. It’s what unfinished progress looks like…

Should-Read: Branko Milanovic is what Marx used to call a petty-bourgeois socialist: tame capitalism by making sure that valuable property is widely distributed. Marx thought that this was doomed to fail under industrial capitalism, but Marx’s arguments have big holes in them. It might well work:

Branko Milanovic: Reducing inequality by deconcentrating capital: “The capital–income ratio continues to rise… http://voxeu.org/article/reducing-inequality-deconcentrating-capital

…This increases interpersonal inequality when three conditions are met (as they are in all rich economies today): the rate of return to capital outstrips that of income, income from capital is concentrated among the rich, and the income source that is less equally distributed is correlated with overall income. This column argues that the third condition is not inevitable, and that policies to share income from capital more equally would decrease overall inequality. We have tools to do this, but policymakers lack the political will…

Should-Read: David Anderson: Revisiting Cassidy-Collins: “Engagement either leads to burning Senate time if there is no productive grounds for a deal… https://www.balloon-juice.com/2017/05/16/revisiting-cassidy-collins/

…which is a good in and of itself in a normal legislative environment and extremely valuable in today’s climate, or a deal that cements the federal role in healthcare where the argument is over which dial to turn and how far to turn it. That returns healthcare to normal politics and cements a massive ideological victory for liberalism bought at the cost of a tactical policy retreat and giving up the ability for Democrats to use healthcare as a board with a nail on it to beat up on Republicans in the 2018 midterms.

Cassidy-Collins is fundamentally a healthcare bill. I am still scratching my head at how to make auto-enrollment work with deductibles for a single individual under $10,000 but it is a healthcare bill. The AHCA is a tax cut bill with massive Medicaid cuts attached to it. A few cups of coffee to see if there is a plausible agreement zone by both conservative Democrats in vulnerable seats and Senators who liberals can trust as policy validators are worth drinking…