Things to Read on the Evening of May 1, 2014

Should-Reads:

1. Today’s Bad Piketty Review: Benjamin Domenech: The Right Needs a New Message on Income Inequality: “Few French economists have achieved the kind of adulation Thomas Piketty has experienced recently from the media and the left… fit perfectly with the left’s frame of an inequality message… plays to the strengths of the old-school class-warfare terminology used by Paul Krugman and others…. But… the Democratic Party largely owns the current regulatory system and the relationship between government and Wall Street… proposals to raise the minimum wage and enact crushing, anti-growth taxes on high earners and inheritances are provocative but unlikely to go anywhere… Hillary… [is] as closely tied to America’s 1% as, well, Mitt Romney. And… income inequality is simply not a significant problem…. U.S. economic mobility is very good: Most Americans will move up and down the income ladder… little to none of the class stratification and inheritance concerns…. What the right should learn from the Piketty pother is that… there is an enormous opportunity here for a message of free-market fairness…”

2. Jonathan Chait: Did the Supreme Court Tip Its Hand on Climate?: “Few people noticed when the Supreme Court issued a ruling in favor of the Environmental Protection Agency yesterday…. The EPA now has an effective tool to prevent states from allowing nitrogen oxide and sulfur dioxide to waft into neighboring states…. But perhaps more important is what it augurs…. In June, the Environmental Protection Agency will issue regulations of greenhouse-gas emissions from existing power plants. My tediously reiterated belief is that the fate of these regulations constitutes the biggest story by far of President Obama’s second term, and arguably his entire presidency…. In 2007, the Court not only allowed but actually ordered the EPA to regulate heat-trapping gasses. The Bush administration evaded the order by refusing to open an email containing the agency’s official finding that greenhouse-gas emissions cause temperatures to rise…. Existing power-plants remain the key obstacle… the legal nuances… are devilish. The Clean Air Act simply requires the cleanest feasible technology, which would require shuttering all coal-burning plants…. The EPA wants to tailor its standards…. Whatever plan emerges will venture onto newer legal ground. Conservatives have adopted the paradoxical strategy of denying the EPA any flexibility to craft regulations, the theory being that forcing it to issue only massively expensive (and therefore politically toxic) regulations will result in them being overridden…. Yesterday’s ruling, which concerns different sections of the Clean Air Act, provides some clues to the Court’s disposition. And for those of us uncomfortable with unleashing runaway temperatures upon future generations, those clues seem encouraging…”

Should Be Aware of:

1. Tim Pawlenty: Republican Party must back wage hike: “If you’re going to talk the talk about being for the middle class and the working person, if we have the minimum wage, it should be reasonably adjusted from time to time. For all the Republicans who come on and talk about, ‘we’re for the blue-collar worker, we’re for the working person,’ there are some basic things that we should be for. One of them is reasonable increases from time to time in the minimum wage…”

2. Terrance Odean: Five Good Questions: “Investors will always have cognitive biases. One approach to overcoming them is to practice recognizing biases when they manifest themselves and then adjusting our behavior. This is what Daniel Kahneman describes in Thinking: Fast and Slow as System 2 monitoring System 1. Another approach to overcoming biases is to develop practices and systems that mitigate these biases…. Professional money managers have more opportunity to learn to control their investment biases than do individuals. Some learn. Some don’t…. Professional money managers often don’t take a careful look at their own behavior…. [Individual investors’ most common errors are] underdiversification, holding onto losers, chasing winners, buying stocks that catch their attention, systematically ignoring important information, paying too little attention to fees, and trading too much…. One difficulty in understanding the biases of institutional investors is that apparent errors could result from biases or they could be driven by how a manager is compensated…. Managers who have been very successful during the first part of the year often reduce the risk in their portfolio as the year winds down, while managers who have done poorly in the first part of the year tend to increase risk near the end of the year…. Does this behavior make sense for the investors in their funds? No. But it can be understood if you consider the manager’s incentives…”

And:

• James Kwak: Retirement Accounts for Everyone
• PW: European stress tests: Let’s try again
• Q&A With Jed Kolko of Trulia
• Paul Krugman: The Folly of Prudence
• Evan Soltas: The Fishermen
• Dylan Scott: Desperate House GOP Releases Its Own Incomplete Obamacare Data
• Hal Varian: New Data Sources: A Conversation
• Andrew Prokop: There are tons of anti-Obamacare ads and almost none defending it
• Ryan Cooper: This is a perfect example of why scientists don’t vote Republican
• OECD: Growth and inequality: A close relationship?

Already-Noted Must-Reads:

1. Matthew Yglesias: Our Vacant Homes Aren’t Where People Need Houses: “I argued… zoning regulations are holding back a potential construction boom…. One key challenge to that view comes from… housing vacanc[ies]… which… remains stubbornly high…. Banks who’ve foreclosed on homes prefer to keep these houses vacant and preserve their paper value as assets than to sell the houses at current market rates and acknowledge the extent of their financial losses. But… if rents are rising nationwide… why aren’t these empty houses increasing in value and being brought back to the market?… Vacancies are in the wrong places. People can’t move into vacant homes in Florida, Detroit, and Las Vegas and commute to jobs in Silicon Valley, Manhattan, or Washington DC…. The markets in the San Francisco Bay… have super-low vacancy rates… so do the suburbs of the three major cities of the Northeast Corridor, and… the two highest-wage cities in the interior of the country, Denver and Minneapolis. The places where people could find the most economic opportunities, in other words, don’t have the housing supply…. Rents are rising in these areas, but they’re also the toughest markets to get permission to build. So we’re left with the worst of both worlds–high rents and empty houses…”

2. Annie Lowrey: Recovery Has Created Far More Low-Wage Jobs Than Better-Paid Ones: “The poor economy has replaced good jobs with bad ones. ‘Fast food is driving the bulk of the job growth at the low end…’ said Michael Evangelist…. Higher-wage industries–like accounting and legal work–shed 3.6 million positions during the recession and have added only 2.6 million positions during the recovery. But lower-wage industries lost two million jobs, then added 3.8 million…”

3. Mike Konczal: Studying the Rich: “Piketty’s book warns that capital and inequality are likely to make even greater strides in the next few decades; the influence of wealth and inheritance could make our economy look a lot more like the nineteenth century, with its dominance of dynastic fortunes, than the joint prosperity we have come to assume is the natural state of advanced economies…. Piketty’s argument is convincing and well-supported. So what is the debate over?… Generally, critics have come at him from two different directions…. By not locking his own argument tightly to a model he also leaves himself vulnerable to criticism that there are trends towards equality…. Some… have argued… the more capital there is… the rate of return should fall. If it falls rapidly, the capital share of national income will not increase…”

4. Zsolt Darvas: 10 years EU enlargement anniversary: Waltzing past Vienna: “Since their accession to the European Union ten years ago, something extraordinary has has been going on in the central European capitals. Measured in purchasing power…. Warsaw, Bratislava and Prague now have a higher GDP per capita than Vienna. The Österreichs Kaiserstadt has been the reference point for central European countries for centuries – and a reference point now too, due to geographical closeness and strong trade and financial links. Budapest is also not far behind… other anniversary members’ capitals are closing the gap as well, except the Ljubljana region… in sharp contrast to the relative positions of capitals in southern European countries, which have not converged to the average of the core EU countries during the past decade and have even diverged since 2009. Rome, Madrid and Lisbon now have a GDP per capita at PPS comparable to Bucharest and lower than in Warsaw, Bratislava, Prague and Budapest…”