Must- and Shall-Reads:

• Thomas Piketty, Claudia Kemfert, and Cameron Hepburn: Europe must set a course to decarbonise world’s economies
• Karl Whelan: The Money Supply
• Paul Farmer: “I have just returned from Liberia with a group of physicians and health activists. We are heading back in a few days. The country is in the midst of the largest ever epidemic of Ebola haemorrhagic fever. It’s an acute and brutal affliction”
• John Williams: Federal Reserve Bank San Francisco | Navigating toward Normal: The Future for Policy |
• Martin Wolf: Reform alone is no solution for the eurozone

1. Gauti Eggertsson and Neil Mehrotra: Secular stagnation and the paradox of worth: “It is important to ensure that the asset cannot operate as a perfect storage technology as this may put a zero bound on the real interest rate… a secular stagnation equilibrium remains a possibility as the natural rate can be negative while the discount rate relevant for risky assets remains positive. The real interest rate and the possibility of a secular stagnation can also be affected by the presence of bubble assets… [such] bubbles may be efficient, but depending on the stability of the bubble, interesting tradeoffs may emerge between the level and volatility of employment…”

2. Izabella Kaminska: Cult Markets: When the bubble bursts: “We’re going to stick our neck out at this stage and call this the end of Bitcoin… the positive-feedback loop forces which drove Bitcoin to $1124.76 have now become the same very same which will drive it down… the fact that the mechanism that ensures coins cannot be overproduced to benefit from high prices also prevents supply from being contracted when prices/demand collapses… in a race to the bottom it doesn’t pay to switch off your mining machine if you’re the most efficient miner. So how did we find ourselves on this delusional joy ride to begin with?… It’s the same old story of frivolity, irrational exuberance, hysteria and of course the mistaken belief that something like a free lunch is truly possible… the sort of irrationality and bad allocation of capital that the Fed is trying to shake-out at this stage with tightening talk. We’re sure we may still see a few deep pocketed VCs or ‘believers’ throw more money at defending the dream, but chances are we’ve now gone through the exponential break point. Time and money would probably be better spent trying to pump up Bitcoin V.2.”

3. Larry Mishel: The Wage Message: “The intellectual basis for [skill-biased technological change, SBTC] in my view has collapsed. It has very little to contribute to the understanding over inequality over the last 20 years, and is not the basis for thinking about the future so much.”

4. David Drake: Newsletter #82: “I was a conservative kid. Dad worked with his hands–he was an electrician–but he was anti-union and identified with the middle class rather than radical labor. Our family had middle-class values, read slick magazines rather than pulps, and voted Republican…. A lot of people raised the way I was think that Something Should Be Done about this or that world problem… Boko Haram’s kidnapping… the Lord’s Resistance Army… the Islamic State…. All of these organizations do horrific things by the standards of any civilized human being, myself included… [and] are demonstrably beyond the capacity of local governments to deal with…. If I hadn’t ridden a tank in SE Asia, I probably would have been on one or all of those bandwagons and on many others over the years. The thing is, I know what Doing Something means at the sharp end. I’ve helped to burn a village, I’ve watched a gutshot girl die (she’d been transporting rice for the NVA), and I was involved with a variety of other things that make me doubt the value to the ordinary people of Viet Nam and Cambodia of what we did there. Would it be different in Africa or the Middle East? Maybe, but I find wars have a logic of their own for the people in the mud and the dust and the insects. I think it would be good for folks who say, ‘We have to do something!’ to at least talk to some of us who’ve Done Something ourselves. Talk to us–or keep their mouths shut.”

5. Fabian Kindermann and Dirk Krueger: High Marginal Tax Rates on the Top 1%? Lessons from a Life Cycle Model with Idiosyncratic Income Risk: “Very high marginal labor income tax rates are an effective tool for social insurance even when households have preferences with high labor supply elasticity, make dynamic savings decisions, and policies have general equilibrium effects. To make this point we construct a large scale Overlapping Generations Model with uninsurable labor productivity risk, show that it has a wealth distribution that matches the data well, and then use it to characterize fiscal policies that achieve a desired degree of redistribution in society. We find that marginal tax rates on the top 1% of the earnings distribution of close to 90% are optimal. We document that this result is robust to plausible variation in the labor supply elasticity and holds regardless of whether social welfare is measured at the steady state only or includes transitional generations.”

6. Barry Eichengreen: Doctrinal Determinants, Domestic and International, of Federal Reserve Policy 1914-1933: “International considerations were part, but only part, of the constellation of factors shaping the Fed’s outlook and policies in the gold standard era… and their importance waxed and waned with circumstance, personality, and the changing influence of competing doctrines…. Gold Standard Doctrine… rules and, more broadly, the gold standard mentalité were standard central banking doctrine in this period…. Real Bills Doctrine… enshrined in the ‘elastic currency’ terminology of the Federal Reserve Act. Riefler-Burgess Doctrine… pointed to interest rates as the only adequate summary statistics for the stance of monetary policy. Warburg Doctrine… emphasized the advantages of internationalizing the dollar…. privileged developing a market in trade acceptances–an instrument which, it turned out, was also convenient for intervening in financial markets. Strong Doctrine: Strong’s views are not easily summarized…. Rather than looking exclusively at interest rates, he looked also at money and credit aggregates…. Believed in discretionary policy…. Comfortable with… steriliz[ing] gold inflows… to achieve other targets…. Harrison Doctrine… difference from Strong was primarily one of temperament, not doctrine… where Strong was willful and assertive, Harrison was thoughtful and reflective…”

Should Be Aware of:

• Emily Washington: The Status of Smart Growth Regulation)
• “We paint women with one arm as ‘aloof,’ yet women with three arms as ‘trying too hard.’ And good luck being a two-armed actress over 45 and getting cast as anything but a two-armed mom to some newly discovered Disney Channel pop star with a tail. What any woman, in any profession, of any age, chooses to do to augment her own body is not fair game for public ridicule, be it a third arm, a little Botox, or acid-spitting glands.”

1. Paul Krugman: The Invisible Moderate: “[O]ne of the enduringly weird aspects of our current pundit discourse: constant calls for a moderate, sensible path that supposedly lies between the extremes of the two parties, but is in fact exactly what Obama has been proposing…. [Brooks:] ‘The federal government should borrow money at current interest rates to build infrastructure, including better bus networks so workers can get to distant jobs. The fact that the federal government has not passed major infrastructure legislation is mind-boggling, considering how much support there is from both parties.’ Well, the Obama administration would love to spend more on infrastructure; the problem is that a major spending bill has no chance of passing the House. And that’s not a problem of ‘both parties’…. Also, there’s this: ‘[T]he government should reduce its generosity to people who are not working but increase its support for people who are. That means reducing health benefits for the affluent elderly…’ Hmm. The Affordable Care Act subsidizes insurance premiums for lower-income workers, and pays for those subsidies in part by eliminating overpayments for Medicare Advantage. So conservatives are celebrating both ends of that deal, right? Oh, wait, death panels. It’s an amazing thing: Obama is essentially what we used to call a liberal Republican, who faces implacable opposition from a very hard right. But Obama’s moderation is hidden in plain sight, apparently invisible to the commentariat.”

2. • Duncan Black: Eschaton: Savvy “One of the most annoying tics of our establishment press is, years later, to announce ‘yes we all knew that’ when new information comes to light. Yes we did all know that the AIG bailout was a bailout of the vampire squids, but our insider press generally talked about things as if that wasn’t the case. ‘Critics’ spend years trying to point this out, and then when it becomes irrefutable suddenly it’s ‘yes that’s old news’…”

3. Josh Marshall: Sarah, Bristol & The Recurrence Of The Eternal Victim: “In very broad terms, the origin of Fox News is analogous. Conservatives in the ’70s and ’80s looked at the mainstream media and saw it as liberal and against them. That was largely bogus but not entirely. The mid-late 20th century elite ‘media’ did generally buy into a series of cosmopolitan assumptions about public and private life. That worldview generally aligns more with liberalism than conservatism, but the two are by no means identical. And this did shape coverage in significant ways. But many conservatives genuinely believed that most people in media were and are little different from Democratic political operatives writing propaganda. So when they went to create ‘their’ media, that’s basically what they created, a propaganda network. The reality is as much a matter of genuine misperception as bad faith, though it’s both and together they make for a toxic brew. But again, if you see these issues as just a cudgel that people hit each other with, it’s easy to say things that are basically nonsense. Because who cares? None of it means anything anyway. So no. Bristol is not a battered woman. She is a battering woman, which may give her some claim to being a feminist icon, as she suggests. I don’t blame or care if the Palins are defending themselves or making up stories or doing whatever else. That’s just the drama and involuntary performance art that makes up their public lives. But their dead-ender defenders need to accept that if you’re a public figure, a recent candidate for national office, and you crash a party drunk and the fists start flying and the police have to show up to sort everything out, people may end up hovering over the details and getting a chuckle out of it. That’s life.”

4. William Black: Jamie Dimon: U.S. Must Create a “Safe Harbor” Where JPM’s Corruption Is Not “Punished” – New Economic PerspectivesNew Economic Perspectives: “It never dawns on Sorkin during the interview that there might be something desperately wrong about Dimon’s belief that multinational corporations have the inalienable right to buy influence through their hires of ‘ex government officials’ and ‘Chinese princelings’ and that the duty of the U.S. government is to create a ‘safe harbor’ for JPM’s officers so that they can be assured that they can freely buy influence with no risk of ‘getting punished.’  There epitome of merit-based hiring at JPM’s China operations is based on the answer to the colloquial question:  ‘who’s your daddy?’”

I think Paul Krugman gets one wrong–or, at least, I need more convincing before I think he gets this one right, in spite of the extraordinary empirical success of my rules (1) and (2):

Must- and Shall-Reads:

• Matt O’Brien: The bottom 90 percent are poorer today than they were in 1987 – The Washington Post
• Mark Thoma: Will the big banks ever clean up their act?
• Richard Mayhew: Calling the consolidation efficiency bluff

1. Michela Giorcelli and Petra Moser: Copyright and Creativity: Evidence from Italian Operas: “This paper exploits variation in the adoption of copyright laws within Italy – as a result of Napoleon’s military campaign – to examine the effects of copyrights on creativity. To measure variation in the quantity and quality of creative output, we have collected detailed data on 2,598 operas that premiered across eight states within Italy between 1770 and 1900. These data indicate that the adoption of copyrights led to a significant increase in the number of new operas premiered per state and year. Moreover, we find that the number of high-quality operas also increased – measured both by their contemporary popularity and by the longevity of operas. By comparison, evidence for a significant effect of copyright extensions is substantially more limited. Data on composers’ places of birth indicate that the adoption of copyrights triggered a shift in patterns of composers’ migration, and helped attract a large number of new composers to states that offered copyrights…”

2. Alan Zibel: Low Down Payments Are Coming Back: “On Monday, Federal Housing Finance Agency Director Mel Watt announced that mortgage-finance companies Fannie Mae and Freddie Mac would start backing loans with down payments as low as 3%. And on Tuesday, three federal agencies approved a loosened set of mortgage-lending rules, removing a requirement for a 20% down payment for a class of high-quality loan known as a ‘qualified residential mortgage’…. In addition, veterans can apply for 100% financing on loans insured by the Veterans Administration, and the U.S. Department of Agriculture has several loan programs…. Borrowers with low down payments do default in higher numbers than similar borrowers with higher down payments, said Mark Zandi…. However, Mr. Zandi still believes that low-down-payment lending can be done in a responsible way, by making sure borrowers have solid credit, have low ratios of debt compared with their income and are taking on standard loans…”

3. <Gavyn Davies: China’s Slowdown Is Secular, Not Cyclical: Is China bouncing back from a weak patch of growth, or is it headed for a prolonged slowdown lasting many years?… Both are probably true. Cyclical fluctuations are occurring around a clearly slowing long-term trend…. Until 2011, mainstream economic forecasters… believed that the trend growth rate in China would remain in the 9-10 per cent region for as far ahead as the eye could see. Now almost no one thinks that…. The Conference Board forecast this week that trend growth after 2020 would be only 4 per cent a year…”

4. Jeff Weintraub: China’s Man in Hong Kong Explains the Problem with Democracy–It’s a Threat to Capitalism: “The argument that democracy is dangerous because it means mob rule by the ignorant unwashed masses–or rule by unscrupulous and even tyrannical demagogues who can manipulate those masses–is a very old one…. [The] more specific version… that political democracy… threatens the basic requirements of a capitalist market economy, was made quite often throughout the 19th and into the early 20th century…. For better or worse, history seems to have demonstrated that such claims about the fundamental incompatibility… were exaggerated…. [The] inherent tensions… [are] a good thing…. Some pro-plutocratic and market-fundamentalist ideologues still share that 19th-century fear of the perils of democracy, and occasionally some billionaire will blurt this out in an unguarded interview. But in most western societies, people who hold these views can’t state them… openly and straightforwardly… [but] euphemistically… with various circumlocutions. In some other parts of the world, however, those anti-democratic arguments can still be made publicly with refreshing honesty.”

5. Conference Board: How will the long fall in China’s growth impact risks and opportunities for business?: “Is the China slowdown over? Many analysts think China has had a ‘soft landing’ that will yield about 8 percent annual growth for the next decade. We disagree. Absent reforms that resolve China’s productivity and debt challenges, we expect a ‘soft fall’ to growth of about 4 percent by 2020, including negative growth for certain sectors and regions. While there is tremendous potential for reform, political economy challenges make bold action difficult. Our research provides guidance for companies looking to optimize investment and sustain growth.”

6. Larry Mishel: Chair Yellen Is Right: Income and Wealth Inequality Hurts Economic Mobility | Economic Policy Institute: “Janet Yellen gave a speech this week… no mincing of words as to what has happened: ‘It is no secret that the past few decades of widening inequality can be summed up as significant income and wealth gains for those at the very top and stagnant living standards for the majority. I think it is appropriate to ask whether this trend is compatible with values rooted in our nation’s history, among them the high value Americans have traditionally placed on equality of opportunity.’ I appreciate both the straightforward description of the rise of both income and wealth inequality, and the explicit connection between these growing inequalities and the threat this poses to future generations’ upward mobility and opportunity…. Conservatives seem to only be concerned with facilitating opportunity or social mobility, and consider income inequality itself not a worthy focus…. Various reporters have noted the Obama administration backing away from making ’income inequality’ a key issue and shifting to a focus on opportunity or mobility. Is this tenable, deciding to focus on the upward mobility of today’s poor children without any focus on the incomes and wealth of their parents and the circumstances of their lives—where they live, in what housing, with what safety, and so on?”

Should Be Aware of:

• Jude Isabella: The Intelligent Life of the City Raccoon
• How to become an equity fund manager
• : NOAA Climate: ENSO Blog
• Denise Grady: Ebola Vaccine, Ready for Test, Sat on the Shelf
• Pascal-Emmanuel Gobry: “Here’s corporations’ basic message to women: Just ‘lean in.’ And if leaning in leaves no time for marriage or kids, here’s a free freezer for your eggs…”
• Jay Rosen: Journalists need a point of view if they want to stay relevant

1. Charles A.E. Goodhart and Dirk Schoenmaker: The ECB as lender of last resort?: “As part of the move to a banking union, the largest banks in the Eurozone will soon be supervised by the ECB. This column argues that supervision and the lender of last resort function should be seen as a joint product. After the introduction of the euro, the national central banks continued to act as lenders of last resort because bank supervision remained at the national level. Now that supervision is moving to the ECB, so should the lender of last resort function for the larger, cross-border, banks.”

2. Corey Robin: On David Brooks on Edmund Burke: “Burke is… often held up as the source of conservatism, [but] I get the feeling he’s not often read… quotations inevitably have a whiff of cliché about them—little platoons and so on—emitting that stale blast of familiarity you sense when you listen to someone go on about a text he may or may not have read during one week in college…”

3. Simon Wren-Lewis: Helicopter Money: “The original Friedman thought experiment involved the central bank distributing money by helicopter… by the central bank printing money, rather than the government issuing debt…. Helicopter money is… QE coupled with a tax cut. Another way of thinking about it: instead of using money to buy assets (QE alone), the central bank gives it away to people…. It could be that advocates of helicopter money really want higher inflation targets, but do not want to be explicit about this, just as they may not want to call helicopter money a fiscal stimulus. The problem with this is that central bankers do understand the macroeconomics…. As Willem Buiter says, ‘there always exists a combined monetary and fiscal policy action that boosts private demand’.”

4. Paul Krugman: Plutocrats Against Democracy: “The very success of the conservative agenda only intensifies this fear. Many on the right–and I’m not just talking about people listening to Rush Limbaugh; I’m talking about members of the political elite–live, at least part of the time, in an alternative universe in which America has spent the past few decades marching rapidly down the road to serfdom. Never mind the new Gilded Age that tax cuts and financial deregulation have created; they’re reading books with titles like [Nick Eberstadt’s] A Nation of Takers: America’s Entitlement Epidemic, asserting that the big problem we have is runaway redistribution. This is a fantasy…. If you worry that low-income voters will run wild, that they’ll greedily grab everything and tax job creators into oblivion, history says that you’re wrong. All advanced nations have had substantial welfare states since the 1940s–welfare states that, inevitably, have stronger support among their poorer citizens. But you don’t, in fact, see countries descending into tax-and-spend death spirals–and no, that’s not what ails Europe…. The obvious answer is Mr. Leung’s: Don’t let the bottom half, or maybe even the bottom 90 percent, vote. And now you understand why there’s so much furor on the right over the alleged but actually almost nonexistent problem of voter fraud, and so much support for voter ID laws that make it hard for the poor and even the working class to cast ballots. American politicians don’t dare say outright that only the wealthy should have political rights–at least not yet. But if you follow the currents of thought now prevalent on the political right to their logical conclusion, that’s where you end up. The truth is that a lot of what’s going on in American politics is, at root, a fight between democracy and plutocracy. And it’s by no means clear which side will win.”

5. Prairie Weather: The real villain of the Clinton impeachment: “The Republicans who set up a crooked Republican lawman to go after Clinton. Ken Starr crooked? A Freedom of Information Act search reveals that, yes, during the probe into Clinton’s relationship with an intern, he used agents who bullied and ‘mistreated’ the key witness, Monica Lewinsky, threatening her and her family if she didn’t provide them with grounds to remove the Democratic president. ‘The report also lays out the encounter in detail, suggesting that it quickly spun out of control as a shocked and hysterical Lewinsky asked to consult a lawyer or a parent–even as prosecutors grew increasingly determined to persuade her to agree on the spot to cooperate against the president…’ Keep this in mind:  the actions taken were the result of Republican demands. The actions were political and illegal. The report on the matter was kept under wraps for years and only now has emerged as a result of a FOIA demand…”

6. 
   André Christoffer Andersen: Interactive map: World population by latitude and longitude: “André Christoffer Andersen created this nifty interactive map that estimates world population at any coordinate. Andersen was inspired by Bill Rankin’s data visualizations. According this this map, the most populous coordinate is in the Punjab region. Some of the data seems shifted a bit, so the spike for Mexico City is a little too far east, but it’s a cool proof of concept!”