Things to Read on the Morning of September 13, 2014

September 13, 2014

Must- and Shall-Reads: (MOVE UP TO BELOW “PLUS” AND BEFORE “AND OVER HERE”)

 

  1. Luigi Guiso, Paola Sapienza and Luigi Zingales: Monnet’s Error?: “Do partial steps toward European integration generate support for further steps or do they create a political backlash? We try to answer this question by analyzing the cross sectional and time series variation in pro-European sentiment in the EU 15 countries. The two major steps forward (the 1992 Maastricht Treaty and the 2004 enlargement) seem to have reduced the pro-Europe sentiment as does the 2010 Eurozone crisis. Yet, in spite of the worst recession in recent history, the Europeans still support the common currency. Europe seems trapped in catch-22: there is no desire to go backward, no interest in going forward, but it is economically unsustainable to stay still.”

  2. Simon Wren-Lewis: Scotland and the SNP: Fooling yourselves and deceiving others: “Scotland’s fiscal position would be worse as a result of leaving the UK for two main reasons. First, demographic trends are less favourable. Second, revenues from the North Sea are expected to decline…. The SNP do not agree…. The main reason in the near term is that they have more optimistic projections for North Sea Oil…. So how do the Scottish government get more optimistic numbers? John McDermott examines the detail here, but perhaps I can paraphrase his findings: whenever there is room for doubt, assume whatever gives you a higher number…. Governments that try to borrow today in the hope of a more optimistic future are not behaving very responsibly…. Is this a knock down argument in favour of voting No? Of course not: there is nothing wrong in making a short term economic sacrifice for the hope of longer term benefits or for political goals. But that is not the SNP’s case…. I kept thinking I had seen this kind of thing before: being in denial about macroeconomic fundamentals because they interfered with a major institutional change that was driven by politics. Then I realised what it was: the formation of the Euro in 2000…. So maybe that also explains why I feel so strongly this time around. I have no political skin in this game: a certain affection for the concept of the union, but nothing strong enough to make me even tempted to distort my macroeconomics in its favour. If Scotland wants to make a short term economic sacrifice in the hope of longer term gains and political freedom that is their choice. But they should make that choice knowing what it is, and not be deceived into believing that these costs do not exist.”

  3. Stephanie Aaronson et al.: Labor Force Participation: Recent Developments and Future Prospects: “More than five years after the Great Recession ended, the labor market has, by many metrics, finally shown substantial improvement. The unemployment rate is now nearly 4 percentage points below the peak reached in late 2009…. However, one lingering concern is the ongoing decline in the labor force participation rate and the concomitant absence of a significant rise in the percentage of the working-age population who are employed…. To an important extent, this decline in the labor force participation rate likely reflects the ongoing influence of the aging population…. Our overall assessment is that much–but not all–of the decline in the labor force participation rate since 2007 is structural in nature…. Policymakers can view some of the current low level of the participation rate as indicative of labor market slack beyond that indicated by the unemployment rate alone, they should not expect the participation rate to show a substantial increase from current levels as labor market conditions continue to improve…”

  4. MaxSpeak: In Defense of Social Insurance: “It’s true that we have non-insurance programs providing means-tested benefits: anti-poverty programs. These programs are under attack. This is not a sea-worthy vessel you would want everyone else to board. I have urged UBI partisans to direct their attention to the atrocity of welfare reform. The biggest hole in the U.S. safety net is the misery of families with children whose wage-earners are unable, often for reasons beyond their control, to solidify an attachment to the labor market and the social insurance provided to wage-earners. In 1972 Senator George McGovern proposed a demogrant of $2,000 as part of his electoral campaign for president. He received 17 electoral votes, winning Massachusetts and the District of Columbia, to cheatin’ Dick Nixon’s 520 votes. We still live in Nixonland.”

  5. Clay Shirky: Publishing and Reading “Bezos… wants to increase access to ebooks in order to make money, of course, just as the publishers want to restrict access in order to make money. Bezos doesn’t love books (something his critics never fail to note, as if selling things designed to be sold is an atrocity) but his motivations are producing better outcomes than those of the dominant cartel. If we have to pick between two corporate strategies for making money, the one offering more access is better.”

  6. The Economist: Economic convergence: Headwinds Return: “NOWHERE are the consequences of different rates of growth clearer than on a trip up the Pearl River Delta…. Hong Kong… Shenzhen… Guangzhou, capital of Guangdong…. Average incomes in Guangdong are just a quarter of those in Hong Kong, equivalent to Algeria or Costa Rica. Finally… the tributaries reach across Guangxi into Yunnan…. Incomes there are but a tenth of those in Hong Kong, on a par with those in Angola or the Republic of the Congo. Over the past 15 years the currents that take people from such hinterlands of poverty to the broad open reaches of wealth have been flowing at an unprecedented rate…. This burst of growth struck an extraordinary blow against deprivation…. [But] since 2008 growth rates across the emerging world have slipped back toward those in advanced economies. When the new ICP estimates are applied, the average GDP per head in the emerging world, measured on a purchasing-power-parity (PPP) basis, grew just 2.6 percentage points faster than American GDP in 2013. If China is excluded from the calculations the difference is just 1.1 percentage points. At that pace convergence with rich-economy incomes happens over a period of time more like a century than a generation…. In 1997, just before the great catch-up got into its swing, the World Bank’s senior economist, Lant Pritchett, described a widening income gap between rich and poor countries as ‘the dominant feature of modern economic history’. Its dominance was rendered particularly galling by the fact that orthodox economics struggled to explain it…. [But] the world shifted beneath economists’ feet as growth in the developing world shot up from the end of the 1990s. A great deal of this was due to the rise of China as a manufacturing superpower, but that was far from being the whole story…. It looks like the world is now being reminded that catching up is hard to do.”

  7. William G. Gale and Andrew Samwick: Effects of Income Tax Changes on Economic Growth: “The structure and financing of a tax change are critical to achieving economic growth. Tax rate cuts may encourage individuals to work, save, and invest, but if the tax cuts are not financed by immediate spending cuts they will likely also result in an increased federal budget deficit, which in the long-term will reduce national saving and raise interest rates. The net impact on growth is uncertain, but many estimates suggest it is either small or negative. Base-broadening measures can eliminate the effect of tax rate cuts on budget deficits… at the same time they also reduce the impact on labor supply, saving, and investment and thus reduce the direct impact on growth. However, they also reallocate resources across sectors… resulting in increased efficiency…. Not all tax changes will have the same impact on growth. Reforms that improve incentives, reduce existing subsidies, avoid windfall gains, and avoid deficit financing will have more auspicious effects on the long-term size of the economy, but may also create trade-offs between equity and efficiency.”

Should Be Aware of:

 

  1. Jose Orozco and Sebastian Boyd: Venezuela Threatens Harvard Professor for Default Comment: “Venezuelan President Nicolas Maduro instructed the attorney general and public prosecutor to take ‘actions’ against Harvard Professor Ricardo Hausmann, saying the economist sought to destabilize the country by suggesting the government default on its debt. Maduro lashed out at Hausmann during a televised address last night, calling him a ‘financial hitman’ and ‘outlaw’ who forms part of a campaign ‘that has been initiated around the world against Venezuela’. He didn’t specify what actions he had asked the attorney general and prosecutor to take…. Maduro’s speech was ‘the despotic diatribe of a tropical thug’, Hausmann said by phone today. ‘He uses his position as head of state to intimidate people who think differently’. The president’s office, the attorney general and the information ministry didn’t reply to e-mails seeking comment…. Born in Venezuela, Hausmann had served as planning minister in the 1990s under the president that Maduro’s mentor and predecessor, the late Hugo Chavez, tried to topple in a coup attempt…. ‘Ricardo Hausmann is without a question one of Latin America’s most distinguished thinkers’, former Chilean finance minister Andres Velasco said today by phone from Santiago. ‘Maduro’s threats are more confirmation that freedom and democracy are under threat in Venezuela. Some of the country’s best and brightest have been bullied and mistreated. This is bad news for Venezuela’.”

  2. Sanjait: On “Henry Aaron, David Cutler, and Peter Orszag: Stop the Anti-Obamacare Shenanigans”: “The thing I find most strange about all this [Halbig lawsuit, etc.] is that, if the Republican argument prevails in court, then the near-term result will be that blue states, generally, have functioning health insurance markets with subsidies and Medicaid to prop up the low end, and red states, generally, will have dysfunctional markets with adverse selection spirals on their exchange and legions of uninsured. At which point they will declare a victory against the ‘monstrosity’ that is ‘Obamacare’, even while the states that embrace it are demonstrating in real time how well it works without monkey wrenches thrown in the gears. Again… that’s the outcome if they ‘win’ in court. They are suing to completely sc— themselves and make themselves look foolish.”

  3. Cory Doctorow: Extreme Puritan Baby-Naming: “(2) Praise-God. Full name, Praise-God Barebone. The Barebones were a rich source of crazy names. This one was a leather-worker, member of a particularly odd Puritan group and an MP. He gave his name to the Barebones Parliament, which ruled Britain in 1653. (3) If-Christ-had-not-died-for-thee-thou-hadst-been-damned. Praise-God’s son, he made a name for himself as an economist. But, for some inexplicable reason, he decided to go by the name Nicolas Barbon. (4) Fear-God. Also a Barebone…”

  4. Clive Cookson and Tyler Shendruk: Evolutionary biology: Rabbit DNA Decoded: “By comparing the full DNA sequence of wild and tame rabbits, an international team of scientists has shown that domestication relies on small tweaks to gene regulation at many points throughout the genome rather than a few critical genetic changes. In rabbits, the majority of changes relate to brain development, which provides evidence that modifying behavioural traits is critical during the initial stages of domestication. While dogs were domesticated tens of thousands of years ago from wolves, tame rabbits have a much clearer origin. In the seventh century, Pope Gregory I declared that rabbits were in fact fish, which freed medieval French monks to eat their meat during Lent and triggered their domestication–first as food and only later as pets. ‘One of the really cool things about our rabbit study is that the domestication event was so recent that it has a very clear signal for a lot of the early changes’, says Kerstin Lindblad-Toh, professor in comparative genomics at Uppsala University and a senior author of the study, which is published in Science…”

Comments:

  • Brad DeLong: On “Delong on Mearsheimer is Unintentionally Hilarious”: I would note that Mearsheimer is not trying to explain the behavior of Muscovy’s bureaucracy via Graham Allison Model I: Rational Actor. Mearsheimer is claiming that we have moral obligations not to interfere with the behavior of Muscovy’s bureaucracy because Muscovy has preferences, interests, and feelings. That, for me, is a bridge too far…

  • Brad DeLong: On ‘Department of “Huh?!” John J. Mearsheimer Thinks the West Caused the Ukraine Crisis?: The Honest Broker for the Week of September 19, 2014’: So because the U.S. did bad things in Guatemala in the 1950s and in Chile in the 1970s, neither we nor the Europeans have a right to even call for democracy in Kiev or to complain when Russia does a bad thing in the 2010s? I don’t quite follow…

  • Brad DeLong: Mearsheimer says that we should–that’s a moral claim about what we “ought” to do–not fence with Muscovy to limit its domination of Kiev and Tbilisi. I say we should fence with Muscovy to limit is domination of Luhansk, Donetsk, and Kharkiv so that we do not have to fence with Muscovy over Kiev and Tbilisi so that we do not have to fence with Muscovy over Berlin, Prague, and Bucharest so that we do not have to fence with Muscovy over London, Paris, Instanbul, and Tehran…

  • Brad DeLong: I don’t think you read Mearsheimer correctly. His point is not that Russia has legitimate interests in protecting the Great Russian ethnic minority in Ukraine. His point is that Russia ought to dominate Kiev…

September 13, 2014

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