…because I’ve been there…. I had my road-to-Damascus moment… in 1998…. Back in 1998 I… believed that the Bank of Japan could surely end deflation if it really tried. IS-LM said not, but I was sure that if you really worked it through carefully you could show… doubling the monetary base will always raise prices even if you’re at the zero lower bound…. (By the way, I screwed up the aside on fiscal policy. In that model, the multiplier is one.)

To my own surprise, what the model actually said was that when you’re at the zero lower bound, the size of the current money supply does not matter at all…. Doubling the current money supply and all future money supplies will double prices. If the short-term interest rate is currently zero, changing the current money supply without changing future [money] supplies… matters not at all….

As a result, monetary traction is far from obvious. Central banks can change the monetary base now, but can they commit not to undo the expansion in the future, when inflation rises? Not obviously…. But, asks Evans-Pritchard, what if the central bank simply gives households money? Well, that is, as he notes, really fiscal policy…. I’m pretty sure that neither the Fed nor the Bank of England has the legal right to just give money away as opposed to lending it out; if I’m wrong about this, put me down for $10 million, OK?…

I can say that! How liberating!

You are almost surely not at the zero lower bound–in the liquidity trap–because there are few worthwhile investments to be made and so desired saving at full employment exceeds planned investment.

You are almost surely at the zero lower bound–in the liquidity trap–because the credit channel has broken down. Private financial markets can no longer mobilize enough of society’s risk-bearing capacity to keep The keeper risk spreads at reasonable levels. Nobody trusts investment banks and commercial banks to have the skill, competence, and incentives to correctly classify risks and so make win-win Bond sales to savers.

Basically, those who could usefully and profitably borrow and spend is liquidity-constrained. And those who would like to lend do not believe they can distinguish those who could usefully and profitably borrow from those who would simply take the money and run.

But even though private financial markets cannot mobilize risk-bearing capacity–in large part because nobody outside trusts the investment banks that could distinguish between sound and unsound long-run risks to be sound themselves, and so the limits to arbitrage have been reached (see Murphy and Shleifer)–the central bank can.

This is the point of the Bagehot Rule:

[The central bank] must lend to merchants, to minor bankers, to ‘this man and that man’…. In wild periods of alarm, one failure makes many, and the best way to prevent the derivative failures is to arrest the primary failure which causes them…. The ultimate banking reserve of a country (by whomsoever kept) is not kept out of show, but for… meeting a demand for cash caused by an alarm…. [W]e keep that treasure for the very reason that in particular cases it should be lent…. [W]e must keep a great store of ready money always available, and advance out of it very freely in periods of panic, and in times of incipient alarm…. The way to cause alarm is to refuse some one who has good security to offer…. If it is known that the Bank of England is freely advancing on what in ordinary times is reckoned a good security–on what is then commonly pledged and easily convertible–the alarm of the solvent merchants and bankers will be stayed…

Lend freely on “what in ordinary times is reckoned a good security–on what is then commonly pledged and easily convertible”.

This isn’t fiscal policy: once the economy has rebalanced the collateral is “good security” again, so the central bank acquires an asset that is, after the storm is passed and when the sea is calm again, worth more than the money it has lent.

This, however, does enrich those to whom the government lends: they value the cash the government lends to them in the crisis very highly, and so they spend it. The Bagehot rule says that the lending should be done at a “penalty rate”–so that nobody is happy that they had to resort to the discount window, and everybody wishes that they had been more prudent during the previous boom-bubble and had been able to ride out the crisis without support. But lend. This is expansionary. And it is not fiscal policy–the government is not giving money away or spending money by buying assets at prices that worsen its own future fiscal position and raise its debt.

This is what the Treasury and the Fed did during 2008-9 for too-big-to-fail financial institutions–albeit not at a penalty rate: lending to Goldman Sachs at 5% without obtaining any control rights at a time when Warren Buffett was demanding 10%, heavy option kickers, and control rights if things went seriously south was uncool. Lending to a Citigroup that was insolvent under any definition–that still, in spite of its enormous subsidies, has not recovered even 10% of its pre-crisis equity value–without as part of the “penalty rate” claiming 100% of the equity was seriously uncool. Yes: we are looking at you, Paulson, Bernanke, Geithner, Bush, Obama.

But there is no reason why, if the forecast is for continued depression, this policy should stop at too-big-to-fail financial institutions. They are not the only organizations and individuals that are liquidity-contrained by the collapse of the credit channel and the depression. They are not the only places where the Fed can do asset swaps that are truly not fiscal policy–i.e., not a net loss for the Fed given its time horizon–and yet are stimulative.

So: lend to everyone.

Lend to banks.

Lend to auto companies.

If things are bad enough, allow individual households to incorporate themselves as bank holding companies, join the Federal Reserve system, and borrow at the discount window on the security of their cars, their houses, their washing machines.

Do this at a penalty rate so that nobody is happy that they wedged themselves and had to resort to the discount window–which means taking equity-option kickers from individuals and corporations and decapitating the leadership of financial institutions that ought to have known better that find themselves forced to resort to the discount window. But do it.

How effective will such expanded Bagehot-Rule policies be? Are they the credit-channel equivalent of the real balance effect used in the 1940s to claim that Keynesian depressions were not really “equilibria”–a clever theoretical point, of no practical-policy force whatsoever?

I am not sure.

But it would have been really nice if somebody had tried it in 2008-9, so that now we would know.

Must- and Shall-Reads:

• Mark Thoma:
  “Fiscal policy failed…. [The] fiscal stimulus… wasn’t big enough and did not last long enough to make the kind of difference that was needed. Fear of deficits stood in the way, though all the dire predictions that were made about the debt associated with the stimulus package did not come to pass. We could have done so much more…”
• Martin Wolf: “We are bundles of emotions, not calculating machines…. ‘Behavioural economics’ alters our view of human behaviour in three ways: first, most of our thinking is not deliberative, but automatic; second, it is socially conditioned; and, third, it is shaped by inaccurate mental models…”

1. Gregor Aisch et al.:
   Where Men Aren’t Working:
   “There are still places in the United States where nearly all men in their prime working years have a job. In the affluent sections of Manhattan; in the energy belt that extends down from the Dakotas; in the highly educated suburbs of San Francisco, Denver, Minneapolis, Boston and elsewhere, more than 90 percent of men between the ages of 25 and 54 are working in many neighborhoods. The male employment rates in those areas resemble the nationwide male employment rates in the 1950s and 1960s…. On the whole, however, it’s vastly more common today than it was decades ago for prime-age men not to be working…”
   

2. Dirk Schoenmaker:
   Macroprudentialism:
   “As the macroprudential toolbox is slowly being filled with new instruments, central banks need to learn how to use them. This will not be easy since the exact effect depends on the specifics of a country’s financial system and there may be unintended consequences…. Macroprudential policy, just like monetary policy, is more art than science…. The high costs of financial crises suggest that it may be better to err on the side of a pro-active macroprudential policy stance…. Macroprudential policy requires complete independence from short-term political pressures to deal with the inherent conflict between the short and the long term. This is why independent agencies, such as the central bank or the financial supervisory authority, are made responsible for macroprudential policy. This requires adequate arrangements for democratic accountability, as macroprudential decisions, such as lowering the loan-to-value ratio, can have a major impact on citizens.”
   

3. Noah Smith:
   Cultural Liberalism Is About Personal Responsibility:
   “Under a social censure model, punishment is communally imposed to get people to avoid unhealthy behaviors, such as drugs and broken families. Under a personal responsibility model, people are educated about the risks and dangers, and told that it is incumbent upon them to avoid doing the bad stuff…. Of course, this is a huge generalization, but I think you see this dynamic at work in the case of marriage and the case of drugs. The ‘secret traditionalism’ of upper-class liberals is no secret. It is simply the outcome of the repeated quiet exercise of personal responsibility…. Social conservatives, in my experience, often tend to argue that the lower classes of society are not smart enough to handle personal responsibility…. I am not a big fan of that idea…. But I suspect you’ll find at least hints and threads of this idea throughout the arguments of many social conservatives. So that leaves the question: If personal responsibility works better than social censure, why?… At the aggregate level we now have a bit of circumstantial evidence favoring the liberal, health-and-responsibility-based approach over the conservative, punishment-and-censure-based approach on both marriage and drug use.”
   

4. Matt O’Brien:
   Sorry, Putin. Russia’s economy is doomedt:
   “Russia doesn’t so much have an economy as it has an oil exporting business that subsidizes everything else…. Cheaper oil means Russian companies have fewer dollars to turn into rubles…. It hasn’t helped, of course, that sanctions over Russia’s incursion into Ukraine have already left Russia short on dollars…. The Russian ruble has fallen even further than the Ukrainian hryvnia or Brent oil has this year. The only asset, and I use that word lightly, that’s done worse than the ruble’s 50 percent fall is Bitcoin, which is a fake currency that techno-utopians insist is the future we don’t know we want…. Russia, you see, is stuck…. Its economy needs lower interest rates to push up growth, but its companies need higher interest rates to push up the ruble and make all the dollars they borrowed not worth so much…. Putin could afford to invade Georgia and Ukraine when oil prices were comfortably in the triple digits, but not when they’re half that. Russia can’t afford anything then.”
   

Should Be Aware of:

• Brian Buetler: “GOP donor class flirtation with Jeb Bush is… a huge, implicit rebuke to the senators, governors and former vice presidential nominees who have been jockeying for front-runner status… a recognition… that being a conservative movement celebrity isn’t synonymous with general election viability…”
• Andrew Hawkins: “I made the conscious decision to wear the T-shirt. I felt like my heart was in the right place. I’m at peace with it and those that disagree with me, this is America…. Support the causes and the people and the injustices that you feel strongly about. Stand up for them. Speak up for them. No matter what it is because that’s what America’s about and that’s what this country was founded on”)
• Stan Collender: John Kasich Isn’t Ready For Prime Time On The Federal Budget
• Perry Anderson (1983): In the Tracks of Historical Materialism
• Ben Smith: “Jeb… is deeply committed to centrist causes–federalized education, legal status for undocumented immigrants–that alienate key Republican groups; and he’s vaguely willing to go along with vestigial conservative issues that Republicans don’t care as much about, like standing up for Wall Street… and opposing marriage equality…”
• Edmund Wilson To the Finland Station https://db.tt/ZqZJDcBd 1940-06-01

1. Rick Perlstein:
   The Reason for Reagan: “Understanding Ronald Reagan requires looking beyond clichés to the cultural climate of the time. A response to Jacob Weisberg…. In 1980… pollsters… asked Americans whether they thought, as Reagan did, that ‘too much’ was being spent on welfare, health, education, environmental, and urban programs. Only 21 percent did…. Historiography on the rise of conservatism and the triumph of Ronald Reagan must obviously go beyond the deadening cliché that since Ronald Reagan said government was the problem, and Americans elected Ronald Reagan twice, the electorate simply agreed with him that government was the problem. But in his recent review of my book… Jacob Weisberg just repeats that cliché–and others…. The reviewer’s inattentiveness…. He must have missed Chapter 1… Chapter 15…. Did he not notice my extensive (and laudatory) discussion of Reagan’s welfare reforms as governor in Chapter 18?… Three chapters, ranging over some 102 pages, specifically about what made Reagan tick. Perhaps Weisberg skipped those, because he writes, ‘Perlstein doesn’t wonder about what made Reagan tick.’… Weisberg thinks I ‘pathologize conservative views.’ There are many pages in my book I could cite in refutation, but for the sake of brevity I’ll single out Chapter 15…. In some places Weisberg accuses me of writing things I did not actually write…. ‘Ronald Reagan,’ Weisberg writes, ‘was refining Goldwater’s pitch, shedding the warmongering, the pessimism, and the anti-New Deal extremism.’ No. He called the New Deal ‘fascism.’ Weisberg continues: ‘Reagan’s views were not simply Goldwater’s views; they were Goldwater’s views purged of their excesses and abstraction, grounded in the country’s lived experience, and given a hopeful cast.’… There was much… mind-blowingly excessive, unrefined, and not hopeful at all: For instance, that teachers unions were following a script laid down by Hitler and the Nazi Party…”
   

2. Perry Anderson (1976): Considerations on Western Marxism: “Paul Sweezy retraced and summarized the whole history of the Marxist debates on the laws of motion of capitalism, from Tugan-Baranovsky to Grossmann, himself endorsing Bauer’s last solution of the problem of underconsumption, in a work of model clarity, The Theory of Capitalist Development…. Sweezy… implicitly renounced the assumption that crises of disproportionality or underconsumption were insur­mountable within the capitalist mode of production, and accepted the potential efficacy of Keynesian counter-cyclical interventions…. The ultimate disintegration of capitalism was for the first time entrusted to a purely external determinant–the superior economic performance of the Soviet Union and the countries which could be expected to follow its path at the end of the War, whose ‘persuasion effect’ would eventually render possible a peaceful transition to socialism in the United States itself. With this conception, The Theory of Capitalist Development marked the end of an intellectual age…”

3. Steve M.:
   Did the GOP Establishment Learn the Wrong Lessons from 2014?: “[Jeb Bush]going to run with a Mitt Romney level of financing but a Jon Huntsman approach to the issues…. He’s likely to clear the field quite a bit…. Clearing the field for an establishmentarian ultimately worked for the GOP in 2014 in Kansas, Mississippi, South Carolina, and Kentucky because those are deeply red states — once you got to the general election, the Republican candidate was pretty much a shoo-in. But this isn’t a deeply red country…”
   

4. Echidne (2006):
   The Fertility Gap:
   “According to one Arthur Brooks, we liberals are going extinct because the conservatives are outbreeding us… far lefties are more hateful than far righties… conservative young people are more compassionate than liberal young people. This is one busy professor, isn’t he?… There is no study available at all anywhere online or listed on the Professor’s homepage…. We are steered to the raw data he presumably has used. Go on, he dares us, go and make up your own studies. I’m not telling you what variables I picked and how I standardized for them. This makes discussing the fertility gap a little bit iffy, largely because I have no way of checking Professor Brooks’s arguments….”
   

…punishment is communally imposed to get people to avoid unhealthy behaviors, such as drugs and broken families. Under a personal responsibility model, people are educated about the risks and dangers, and told that it is incumbent upon them to avoid doing the bad stuff…. Of course, this is a huge generalization, but I think you see this dynamic at work in the case of marriage and the case of drugs. The ‘secret traditionalism’ of upper-class liberals is no secret. It is simply the outcome of the repeated quiet exercise of personal responsibility….

Social conservatives, in my experience, often tend to argue that the lower classes of society are not smart enough to handle personal responsibility…. I am not a big fan of that idea…. But I suspect you’ll find at least hints and threads of this idea throughout the arguments of many social conservatives. So that leaves the question: If personal responsibility works better than social censure, why?…

At the aggregate level we now have a bit of circumstantial evidence favoring the liberal, health-and-responsibility-based approach over the conservative, punishment-and-censure-based approach on both marriage and drug use.

Must- and Shall-Reads:

• Josh Marshall:
  “In his latest effort to plug the fiscal hole created by his mega-tax-cutting debacle Kansas Governor Sam Brownback has been reduced to drawing down Obamacare funds to balance his state’s budget…”)
• Dave Boucher:
  “[Tennessee] Gov. Bill Haslam has announced the new Insure Tennessee plan.. a Medicaid expansion plan that could gain approval from both federal officials and the Republican-dominated state legislature… a special session in January focused on the new Medicaid expansion plan…”
• Barry Eichengreen, Ricardo Hausmann, and Ugo Panizza (2007):
  “Currency mismatches (differences in the currencies in which assets and liabilities are denominated), debt intolerance (the inability of emerging markets to manage levels of debt that are man- ageable for advanced industrial countries), and original sin (the difficulty emerging markets face when attempting to borrow abroad in their own currencies)… are analytically distinct…”

1. Tim Duy:
   More Questions for Yellen: “1. A journalist needs to push Yellen on the secular stagnation issue…. Does she or the committee agree with Fischer?  And does she see any inconsistency with the SEP implied equilibrium Federal Funds rates and the current level of long bonds?…. 2. The 5-year, 5-year forward breakeven measure of inflation expectations. Does she see this measure as important or too noisy to be used as a policy metric?  What is her preferred metric?… 3. Considering that recent updates of your optimal control framework now suggest that the normalization process should already be underway, how useful do you believe such a framework is for the conduct of monetary policy? What specific framework are you now using to dismiss the results of your previously preferred framework?… 4. St. Louis Federal Reserve President James Bullard has defined a specific metric to assess the Fed’s current distance from its goals. What is your specific metric and by that metric how far is the Fed from it’s goals?  What does this metric tell you about the likely timing of the first rate hike of this cycle?… 5. Why is the Fed setting the stage for raising interest rates next year while inflation measures remain below target? What is the risk, exactly, of explicitly committing to a zero interest rate policy until inflation reaches at least your target?… 6. High yield debt markets are currently under pressure from the decline in oil prices. Are you confident that macroprudential tools are sufficient to contain the damage to energy-related debt? If the damage cannot be contained and contagion to other markets spreads, what does this tell you about the ability to use low interest rate policy without engendering dangerous financial instabilities?”
   

2. Severin Borenstein:
   Gas prices are going up, but it’s a small price to pay at the pump to address climate change:
   “Under California’s cap-and-trade program… wholesale gasoline distributors… will have to buy… one emissions allowance for every metric ton of greenhouse gases you emit when you burn the gasoline…. At the current price of allowances… that works out to about 10 cents per gallon of gas…. Unfortunately, as the date for expanding cap-and-trade to transportation fuels approaches, both the program’s opponents and supporters have been exaggerating how much or little impact it will have…. The oil lobby… is claiming that the change will raise gas prices 16 to 76 cents… based on two analyses that were done many years ago…. The oil industry knows what allowances actually sell for today…. But they are choosing to stick with the outdated–and scarier–estimates…. Some proponents… are saying that Big Oil is not required by law to raise its prices, so it will be its own choice if it does, not the fault of the cap-and-trade program. This is just as disingenuous…. By establishing a price for emissions, California sends a signal to the rest of the country and the world that we recognize the risk of climate change and are willing to take actions to address it…. No one thinks California’s climate change program alone will solve this global problem, but if advanced economies like ours aren’t willing to step up, there will be no solution at all.”
   

3. Tyler Cowen:
   Comparing Living Standards Over Time:
   “I say I prefer $100k[/year] today to $100k[year] in 1964, that being a nominal rather than a real comparison.  If you are not convinced, try comparing $1 million or $1 billion (nominal) today to 1964. For some income level, we have seen net deflation. But here’s the catch: would you rather have net nominal 20k[/year] today or in 1964?  I would opt for 1964, where you would be quite prosperous and could track the career of Miles Davis and hear the Horowitz comeback concert at Carnegie Hall. (To push along the scale a bit, $5 nominal in 1964 is clearly worth much more than $5 today nominal. Back then you might eat the world’s best piece of fish for that much.) So for people in the 20k a year income range, there has been net inflation. Think about it: significant net deflation for the millionaires, but significant net inflation for those earning 20k a year.  In real terms income inequality has gone up much more than most of our numbers indicate.”
   

4. Paul Krugman:
   Dodd-Frank Damaged in the Budget Bill:
   “The securities and investment industry–perhaps affected by New York’s social liberalism, perhaps recognizing the tendency of stocks to do much better when Democrats hold the White House–has historically split its support more or less equally between the two parties. But that all changed with the onset of Obama rage. Wall Street overwhelmingly backed Mitt Romney in 2012, and invested heavily in Republicans once again this year. And the first payoff to that investment has already been realized. Last week Congress… included… a rollback of one provision of the 2010 financial reform… [a] significant but not a fatal blow to reform. But it’s utterly indefensible. The incoming congressional majority has revealed its agenda–and it’s all about rewarding bad actors…. What just went down isn’t about free-market economics; it’s pure crony capitalism…. Few Democrats actually believ[e] that undoing Dodd-Frank is a good idea. Meanwhile, it’s hard to find Republicans expressing major reservations about undoing reform. You sometimes hear claims that the Tea Party is as opposed to bailing out bankers as it is to aiding the poor, but there’s no sign that this alleged hostility to Wall Street is having any influence at all on Republican priorities….”
   

5. Dani Rodrik:
   Good and Bad Inequality:
   “Latin America is the only world region where inequality has declined since the early 1990s. Improved social policies and increased investment in education… the decline in the… ‘skill premium’ has also played an important role…. If… an increase in the relative supply of skilled workers, we can be hopeful that… faster growth…. But if… decline in demand for skilled workers… industries on which future growth depends are not expanding sufficiently…. Automation and other technological changes, globalization, weaker trade unions, erosion of minimum wages, financialization, and changing norms about acceptable pay gaps within enterprises have all played a role, with different weights in the United States relative to Europe. Each… has a different effect…. Technological progress clearly fosters growth, the rise of finance since the 1990s has probably had an adverse effect…. It is good that economists no longer regard the equality-efficiency tradeoff as an iron law. We should not invert the error and conclude that greater equality and better economic performance always go together. After all, there really is only one universal truth in economics: It depends.”
   

6. Will Wilkinson:
   Blogging as Being:
   “My personal blog… goes back to November 2001, and I keep the whole thing online as a matter of principle, despite its damning evidence of a once-serious interest in Ayn Rand, because it is… a record of my intellectual and moral identity…. If I did not maintain its public existence I would begin to shade the truth about myself to myself, the better to conform to whatever idea about myself I am currently in the grip of, and would start to believe I had always been the way I’d prefer to imagine I had always been. And we don’t want that.”
   

7. 1. W.J. Astore:
      The Torture Was the Message:
      “Cheney… Rumsfeld… Rice… Wolfowitz–fancied themselves to be the new Vulcans… the Roman god of war…. They believed that Rome had prospered because of its willingness to use force with unparalleled ruthlessness…. Call it ‘shock and awe.’… In attempting to intimidate the enemies they saw everywhere, they tortured widely as well…. People like Cheney concluded the same: they had to be willing to use brutal force at whatever cost… project an image of ruthlessness, because the language of brutality was the only language ‘they,’ the enemy, could and would understand. It wasn’t necessary to sacrifice democracy to defend democracy, since to the Vulcans, America wasn’t really a democracy anyway.  No: America was the new Rome, the new global hegemon, and it had to act like it…. Torture was not an aberration. It was method.  A method of intimidation that sent a message to barbarians about America’s willingness to use whatever force was necessary to defend itself. Whether torture yielded reliable intelligence was beside the point. The torture was the message. That’s why you’ll hear no apology from Dick Cheney or the other Vulcans…”
      

Should Be Aware of:

• John Eligon:
  “As Gov. Sam Brownback of Kansas campaigned… he assured Kansans… those who predicted budgetary Armageddon were pandering and misleading…. Within days of winning re-election, the governor was confronted with a grimmer budget picture…. His plan has only stoked more unease even among Mr. Brownback’s Republican allies…”
• Justin Fox:
  “I really can’t think of any good reason why the y-axis on a bar chart shouldn’t go to zero…. This chart was obviously crafted to deceive…. The Businessweek.com chart, on the other hand, was crafted to show the data as fully as possible…”
• Messy Nessy:
  “Between the 1890s and early 1900s, thousands of illustrations like this were produced and distributed…. The message was that women’s rights were dangerous and letting women think for themselves could only end in a nightmarish society…”
• Amanda Taub:
  Rape culture isn’t a myth. It’s real, and it’s dangerous. – Vox:
  “Rape culture… sexual violence is treated as the norm and victims are blamed for their own assaults…cultural norms and institutions that protect rapists, promote impunity, shame victims, and demand that women make unreasonable sacrifices to avoid sexual assault…”
  
• Ed Kilgore:
  “We need to call B.S. on this idea of Elizabeth Warren (or any other ‘populist) becoming a pied piper to the Tea Folk…. Yes, many ‘constitutional conservatives’ oppose corporate bailouts… but [also] regulation of big banks and other corporations… the social safety net… legalized abortion and marriage equality…”
• Yuriy Gorodnichenko, Gerard Roland, and Edward W. Walker:
  “Since Russia’s annexation of Crimea, tensions… have not abated. Nonetheless, it has been striking how much support Putin still enjoys in Europe… intellectuals and politicians… the extreme left and extreme right… Viktor Orban, Marine Le Pen… Gerhard Schroeder, and from the ‘Putinversteher’ of Germany…”

1. Lizzie Wade:
   Wealth may have driven the rise of today’s religions:
   “Today’s most popular religions all have one thing in common: a focus on morality. But the gods didn’t always care whether you are a bad person. Researchers have long puzzled over when and why religions moved away from a singular focus on ritual…. A new study proposes that the key to the rise of so-called moralizing religions was, of all things, more wealth…. Baumard and his colleagues… [believe] that when people have fewer resources at their disposal, prioritizing rewards in the here and now is the best strategy…. But when you become more affluent, thinking about the future starts to make sense…. The values fostered by affluence, such as self-discipline and short-term sacrifice, are exactly the ones promoted by moralizing religions…. In cultures where people had access to fewer than 20,000 kilocalories a day, moralizing religions almost never emerged. But when societies crossed that 20,000 kilocalorie threshold, moralizing religions became much more likely, the team reports online today in Current Biology. ‘You need to have more in order to be able to want to have less,’ Baumard says.”
   

2. Daniel Davies:
   The most powerful financial regulators in the world — and they never asked for the job**:
   “The deep issue here is that clearing houses are the choke-points of financial trading… even more the case going forward, as regulators have insisted that more and more markets should be centrally cleared. Given this, you can see why it’s such a big priority for supervisors and market players alike that a clearing house should never be allowed to fail…. I worry, quite a lot, that people are kind of missing the point. The problem with clearing houses is really not the remote, theoretical (although admittedly horrifying) risk that one of them might suffer a counterparty default which forced it into insolvency. The problem about clearing houses is that the ways in which they protect themselves against credit risk tend to have the effect of radiating liquidity problems out into the rest of the system…”
   

3. Ian Millhiser:
   A Non-Lawyer’s Guide To The Latest Supreme Court Case Attacking Obamacare:
   “An amendment to the Affordable Care Act requires the federally-run exchanges to report various information that they would only be able to report if they were providing subsidies, such as whether taxpayers received an ‘advance payment of such credit’; information needed to determine individuals’ ‘eligibility for, and the amount of, such credit’; and ‘[i]nformation necessary to determine whether a taxpayer has received excess advance payments.’ These reporting requirements make no sense if federally-run exchanges were not intended to offer subsidies”
   

When I read this piece, it struck me that the stakes were unusually large–that what Lant Pritchett and Larry Summers were really trying to do was to reopen questions of how to think about long-run economic growth that had been largely settled back in the 1950s and 1960s, with the intellectual victory of Robert Solow and company over incremental-institutionalists like Walt Rostow…

Lant Pritchett and Lawrence Summers: Growth Slowdowns: Middle-Income Trap vs. Regression to the Mean: No question is more important for the living standards of billions of people or for the evolution of the global system than the question of how rapidly differently economies will grow over the next generation. We believe that conventional wisdom makes two important errors….

First, it succumbs to the extrapolative temptation and supposes that, absent major new developments, countries that have been growing rapidly will continue to grow rapidly, and countries that have been stagnating will continue to stagnate…. Past is much less the prologue than is commonly supposed. Second, conventional wisdom subscribes to the notion of a ‘middle-income trap’…. What is often ascribed to the middle-income trap is better thought of as growth rates reverting to their means….

First, we find it difficult to understand the meaning of the ‘middle-income trap’ when it is used to discuss countries that range from Latin American countries to Russia to China to Indonesia to India to Vietnam to Ethiopia…. Second… rapid growth [is] a much more powerful predictor of the likelihood of a deceleration than level of income…. Third… the impact of the current growth rate on the likelihood of deceleration is large, significant, and important… whereas the effect of the ‘middle-income trap’ is small….

Sustaining growth is not a ‘middle-income’ problem… [but] the fundamental challenge… at all stages…