Things to Read on the Morning of July 16, 2014

Should-Reads:

1. Paul Krugman: On the Neo-paleo-Keynesian Phillips Curve: “I mentioned…in passing that recent data actually look like an old-fashioned pre-accelerationist Phillips curve–that is, unemployment determines the inflation rate, not the rate of change of the inflation rate…. There seems to be one of these funny situations right now where people who don’t work on such issues consider this a wild and crazy, or maybe just silly assertion, while those actually doing serious empirical work treat it as a matter of course…. Is that just me? No. Consider two recent studies on unemployment and inflation…. Michael Kiley… had the very good idea of adding power by estimating the relationship across a number of metropolitan areas… his Phillips curve is non-accelerationist for the past 15 years…. Klitgaard and Peck at Liberty Street… does a similar exercise for eurozone countries. Their results… [are] a relationship between the change in unemployment and the change in inflation, equivalent to a relationship between the level of unemployment and the level of inflation–i.e., an old-fashioned Phillips curve…. All I’m saying is that people trying to fit recent data keep finding something that looks like the old-fashioned relationship. You can offer various explanations–downward wage rigidity, anchored expectations, or maybe it just isn’t worth adjusting price-setting to match fairly small variations in expected inflation. But anyway, that’s what the data look like.”

2. Tim Duy: Yellen Testimony: “Her choice of words is important here.  Note that she does not say ‘If the labor market improves more quickly’. Yellen says ‘continues to improve more quickly’ which means that the economy is already converging towards the Fed’s objective more quickly than anticipated by current forecasts…. It brings into question whether or not the Fed should maintain its ‘considerable period’ language: ‘The Committee continues to anticipate, based on its assessment of these factors, that it likely will be appropriate to maintain the current target range for the federal funds rate for a considerable time after the asset purchase program ends…’. There will be resistance… the Fed will want to ensure that any change is interpreted as the result of a change in the outlook rather than a change in the reaction function.  But the hawks will argue that the communications challenge is best handled by dropping the language sooner than later…. Bottom Line: A generally dovish performance by Yellen today consistent with current expectations…”

Should Be Aware of:

• Harold Pollack: Tobacco is still America’s top health threat. But Washington doesn’t treat it that way
• Jason Millman: Even with Obamacare, shopping for health insurance isn’t as easy as buying a plane ticket
• Sudeep Reddy: Live Blog: Federal Reserve Chairwoman Janet Yellen’s Semi-Annual Testimony
• Janet Yellen: Semiannual Monetary Policy Report to the Congress

And:

1. Zack Beauchamp: Why Hamas’ military wing scuttled a ceasefire with Israel: “Just hours after Israel accepted an Egyptian-brokered cease fire agreement on Tuesday morning, the calm collapsed. Hamas continued to fire rockets into Israel, and its militant wing announced ‘We will continue to bombard until out conditions are met’…. After six hours of holding its fire, Israel resumed bombing the Gaza Strip–and it’s not clear, now, when the fighting is going to stop…. No one’s quite sure what Hamas thinks about the cease fire agreement. That may sound bizarre, given that they’ve clearly violated its terms and never accepted it, but the group has not yet issued any official statement on the deal. The New York Times, CNN, and leading Israeli newspaper Ha’aretz all reported that Hamas’ cabinet was still considering the proposal as rockets were falling. What this suggests is that there may be a real division between Hamas’ military wing, the Izz ad-Dim al-Qassam Brigades, and its political leadership. Nominally, the military wing reports to the political wing, but it’s not clear that the political wing has total control over rocket fire. Notably, an al-Qassam statement, not a Hamas political spokesman, claimed responsibility for the rocket attacks that continues after the ceasefire. And just after the proposal was announced, a military wing statement said the ceasefire agreement ‘is not worth the ink that wrote it’…”

2. Nate Cohn and Derek Willis: More Evidence That Thad Cochran Owes Runoff Win to Black Voters: “The precinct-level results for… Mississippi… all but prove that Senator Thad Cochran defeated Chris McDaniel, a Tea Party-backed state senator, through a surge in black, Democratic turnout…. Cochran won by 7,682 votes in the state’s 286 most Democratic precincts, where President Obama won a combined 93 percent of the vote in 2012. That tally slightly exceeds Mr. Cochran’s… margin of… 7,667…. He won 92 percent of the vote in the state’s most uniformly Democratic precincts, where Mr. Obama won 99 percent of the vote. These precincts voted for Mr. Cochran by 3,889 votes, or more than half of his statewide margin of victory…”

3. Zeynep Tufekci: Engineering the public: Big data, surveillance and computational politics: “Digital technologies have given rise to a new combination of big data and computational practices which allow for massive, latent data collection and sophisticated computational modeling, increasing the capacity of those with resources and access to use these tools to carry out highly effective, opaque and unaccountable campaigns of persuasion and social engineering in political, civic and commercial spheres. I examine six intertwined dynamics that pertain to the rise of computational politics: the rise of big data, the shift away from demographics to individualized targeting, the opacity and power of computational modeling, the use of persuasive behavioral science, digital media enabling dynamic real-time experimentation, and the growth of new power brokers who own the data or social media environments. I then examine the consequences of these new mechanisms on the public sphere and political campaigns…”

4. John Holbo: Dreams and Plagiarism: “In other news: Zizek isn’t looking like an especially responsible scholar. I find the explanation that ‘a friend’ sent him a long passage cribbed from a white supremacist book review and told him ‘he could use it freely’, in addition to being insufficient, rather incredible. With ‘friends’ who trick you into plagiarizing white supremacists, who needs enemies?…”

Already-Noted Must-Reads:

1. Chris Blattman: Links to Reviews of James Scott’s “Seeing Like a State”: “Daron Acemoglu and James Robinson discuss the work of Jim Scott in a (so far) three-part series: here, here and here…. Brad Delong on Seeing Like a State. Also, Paul Seabright’s review in the LRB.

2. Chang-Tai Hsieh and Enrico Moretti: Growth in Cities and Countries: “We use a Rosen-Roback model of urban growth to show that a summary statistic for the aggregate effect of local growth (decline) is whether it shows up as an increase (decrease) in local employment or as an increase (decrease) in the nominal wage relative to other cities. Differences in the nominal wage across cities reflect differences in the marginal product of labor across cities which, ceteris paribus, lower aggregate output. We show that the dispersion of the average nominal wage across US cities increased from 1964 to 2009 and may be responsible for a 13% decline in aggregate output. Changes in amenities appear to account for only a small fraction of this output loss, with most of the loss likely caused by increased constraints to housing supply in highly productive cities. We conclude that welfare gains from spatial reallocation of the US labor force are likely to be substantial…”

3. Mark Blyth: Europe’s Goldilocks Dilemma: “The policy of austerity has twin goals: reducing growth in public debt and boosting investor confidence. On both counts, the eurozone’s attempts have been an unmitigated failure…. The confidence-inspiring powers of what was curiously called ‘expansionary fiscal contraction’, the idea that budget cuts today make people spend more since they will have lower taxes in the future, haven’t been any better. European consumer confidence dropped precipitously during the crisis and has yet to return to positive territory. Investment expectations, as measured by business confidence surveys, similarly fell as austerity took its toll and are now barely positive. Growth rates track these declines but with a North-South twist: Germany is pulling ahead, France is flat-lining, Italy is stagnating, and the periphery remains in negative territory. Unemployment rates (outside the export-driven North) are stuck at levels last seen on the eve of World War II. Given all this, you would think a halt to such self-defeating policies would be a good idea. And indeed, it is. But that doesn’t mean that Brussels and Berlin can actually stop austerity…”

4. Joe Romm: Hottest March-June On Record Globally, Reports Japan Meteorological Agency: “The JMA reported Monday that last month was the hottest June in more than 120 years of record-keeping…”