Things to Read at Lunchtime on November 7, 2014

Must- and Shall-Reads:

1. Jeff Cox: Ben Bernanke: “Very Difficult” for ECB to Do QE: “‘The barriers to doing it are not really economic. The legal and political barriers being thrown up are going to make it very difficult to do that.’ Bernanke also fired back at critics of the Fed’s own easing programs, accusing them of ‘bad economics’ for saying that QE… would lead to inflation…. ‘There never was any risk of inflation. The economy was in great slack. If anything we were worried about deflation. Four years later there’s not a sign of inflation. The dollar is strengthening. They’re saying, “Wait another five years, it’s going to happen”. It’s not going to happen.'”

2. Matt O’Brien: Here’s the latest dumb argument from a billionaire that will hurt the economy: “Hedge fund billionaire Paul Singer…. Never underestimate the ingenuity of inflation truthers…. His latest investor letter recycles all these ideas, inveighing against the Fed’s ‘fake prices,’ ‘fake money,’ and ‘fake jobs,’ before zeroing in on where inflation is really showing up–his wallet: ‘Check out London, Manhattan, Aspen and East Hampton real estate prices, as well as high-end art prices, to see what the leading edge of hyperinflation could look like.’ That’s right: Paul Singer thinks Weimar-style inflation might be coming because he has to pay more for his posh vacation homes and art pieces…. The Fed, you see, isn’t worried about the Billionaire Price Index. It’s worried about inflation on goods and services we all face…. Just because the super-rich are bidding up the prices of houses in the Hamptons doesn’t mean that middle-class people, whose wages are flat, are going to bid up the price of, well, anything…. If this is the best the inflation truthers can do, they should probably follow Mark Twain’s advice and keep their mouths closed…”

3. Ugo Panizza: Rashomon in Euro Land: “Expansionary monetary policy is better than nothing, but a more stable euro zone requires expansionary fiscal policy now…. The problem is that northern countries do not want to implement expansionary fiscal policy…. Public debt is riskier in countries that cannot print their own currency… and the fiscally fragile periphery cannot implement expansionary policy without a backstop that can rule out debt runs. The only institution that can play this role is the European Central Bank…. If peripheral countries undershoot ECB’s ‘close, but below 2%’ inflation target, somebody needs to overshoot it. If Germany wants peripheral countries to become more like Germany, Germans may need to become more like southern Europeans….The euro zone is flirting with deflation and yet there are members of the ECB board who oppose a more aggressive policy stance. It would be good to know what economic model they have in mind. Charles Wyplosz asked; Mr Weidmann did not answer.”

4. Kevin Drum: Are Central Banks Losing Their Credibility on Inflation?: “We now have three major economies—the US, Japan, and Europe—which have persistently undershot their own inflation targets despite having enormous incentives to at least meet them as they try to recover from the Great Recession…. Everyone has assumed all along that if they were sufficiently motivated, central banks could always generate high inflation…. But what if it turns out that in practice it’s all but impossible for a modern central bank to meet even a modest inflation target during a severe economic downturn? How do we know whether this is due to lack of will; lack of technical firepower; or lack of political support? And how long does it take before markets decide it doesn’t much matter? After all, at some point there’s no practical difference between unwillingness and inability…. The longer this goes on, the more their credibility gets shredded. It’s a mystery why this isn’t an issue of bigger concern.”

5. Hal Varian: Big Data: “In this period of ‘big data,’ it seems strange to focus on sampling uncertainty, which tends to be small with large datasets, while completely ignoring model uncertainty, which may be quite large. One way to address this is to be explicit about examining how parameter estimates vary with respect to choices of control variables and instruments.”

6. Paul Krugman: International Mensch Fund: “The IMF… concludes that it messed up by embracing fiscal austerity in 2010. It failed to understand that you need to differentiate between economies that borrow in someone else’s currency and those that don’t; it failed to appreciate that the negative effects of fiscal contraction would be much larger in a zero-lower-bound environment than historical patterns might suggest…. Let us nonetheless celebrate the IMF’s willingness to look honestly at its own record and learn from it…. Being a mensch… is all too rare in modern economic discourse, as the comedic evasions of the open-letter crew demonstrate. The Fund, it turns out, is better than that, and deserves praise.”

7. Ricardo Hausman: The Tacit Knowledge Economy: “Brazil in 2010… better social indicators than the United Kingdom had in 1960…. Colombia, Tunisia, Turkey, and Indonesia in 2010 compare favorably to Japan, France, the Netherlands, and Italy, respectively, in 1960. Not only did these countries achieve better social indicators in these dimensions; they also could benefit from the technological innovations of the past half-century…. So today’s emerging-market economies should be richer than today’s advanced economies were back then, right? Wrong…. Why can’t today’s emerging markets replicate levels of productivity that were achieved in countries with worse social indicators and much older technologies?… To make stuff, you need to know how to make it, and this knowledge is, to a large extent, latent–not available in books, but stored in the brains of those who need to use it…. Human capital is knowledge that is hard to transfer. Information is knowledge that is easy to transfer.”

Should Be Aware of:

• Nadia Drake: How One Experimental Drug, ZMapp, May Be Defeating Ebola and Saving People

1. Jonathan Chait: Salon Writer Condemns Arithmetic As Racist: “Salon’s Jenny Kutner… refuses to concede… that Davis lost among women: ‘The Tribune cited CNN exit polls to illustrate the landslide, saying Abbott “beat Davis… with… women (52-47)…. Last time I checked, though, there were thousands upon thousands of women in Texas considered Latina and African-American… their votes were solidly in Davis’ favor: 94 percent of black women and 61 percent of Latinas voted for her. Only 32 percent of white women did. That’s certainly not enough women to say that Abbott won the whole gender….’ It’s… not? My admittedly crude method of answering the question ‘Did Greg Abbott or Wendy Davis win the female vote’ would be to compare the number of women who voted for Abbott with the number of women who voted for Davis, and define the larger number as the winner. No way, says Kutner, citing Andrea Grimes…. ‘You’ll hear that Greg Abbott “carried” women voters in Texas. Anyone who says that is also saying this: that Black women and Latinas are not “women”… that carrying white women is enough…. As if women of color are some separate entity, some mysterious other, some bizarre demographic of not-women.’ Nobody is saying the votes of women of color don’t count. Everybody’s vote counts for one vote. I am comfortable stating that Barack Obama won the women’s vote in 2012, even though he lost white women. Kutner calls this method ‘the erasure of votes from women of color’. Well, no. Being outvoted is not erasure. Until somebody develops a new, less racist way of comparing the value of two numbers, people are going to define the winner of a group as the candidate with more votes.”

2. Scott Lemieux: Knowing That Pundits Don’t Know What They’re Talking About Is A Huge Strategic Advantage: “Most political coverage is premised on some potentially noble lies about how the public will punish politicians who subvert basic institutional norms or prevent popular things from being done. McConnell’s evil genius is to see that it’s all nonsense. The public generally doesn’t pay attention to the details of political squabbles. For all intents and purposes nobody in Congress pays a real price for obstructionism; even if the popularity of the party is dragged down it doesn’t affect the election chances of the vast majority of members. By the same token, Republican statehouses can refuse the Medicaid expansion and Obama will get more blame than the Republicans who turn it down, and so on. This cold strategic logic presents a serious problem because the structure of American government requires certain norms of comity to function in most circumstances — we’re about to get a lot of grim lessons about the superiority of parliamentary systems that don’t massively dilute and misallocate accountability–but this isn’t McConnell’s problem.”

3. Kevin Drum: President Obama Can Safely Keep His Veto Pen in Mothballs: Ramesh Ponnuru is completely correct about this: ‘A strange amnesia has settled over much of the political world. I can’t count the number of articles I’ve read saying that the new Republican Congress is going to pass all sorts of legislation that President Barack Obama will veto. The latest example: George Will’s syndicated column urging the Republicans to pass several bills even if it results in ‘”a blizzard of presidential vetoes”.’ There’s no blizzard in the forecast. Senate Democrats will have the power to subject almost all legislation to filibuster (a word that does not appear in Will’s column).’…I’ve noticed the same thing Ponnuru did, and it’s weird. Is there some kind of unspoken assumption among pundits that Democrats aren’t going to routinely insist on a 60-vote threshold for Republican legislation? If so, I don’t know why. It seems pretty obvious to me that they will. At the very least, it allows them to keep most legislative negotiating leverage safely within the Senate, which is just where they want it. Basically, the next two years are going to be just like the last two. The only thing that will change is the order of the signatures on the consent agreements.”