Things to Read at Night on August 3, 2014

Must- and Should-Reads:

1. Sky Masterson: Comedic Monologue: “On the day when I left home to make my way in the world, my daddy took me to one side. ‘Son’, my daddy says to me: ‘I am sorry I am not able to bankroll you to a very large start, but not having the necessary lettuce to get you rolling, instead I’m going to stake you to some very valuable advice. One of these days in your travels, a guy is going to show you a brand new deck of cards on which the seal is not yet broken. Then this guy is going to offer to bet you that he can make the jack of spades jump out of this brand new deck of cards and squirt cider in your ear. But, son, do not accept this bet, because as sure as you stand there, you’re going to wind up with an ear full of cider…'”

2. Gary Clyde Hufbauer and Cathleen Cimino: NAFTA Rejoinder: The Effects are Positive (Part I): “[The CEPR] preferred the pre-1980 Mexican economic developmental model of protection and state control to the NAFTA model of free trade and private markets…. Everyone agrees that Mexican economic performance over the past 20 years has been subpar…. The question is why: Too big a dose of liberal economic policies and integration with the US economy (the CEPR explanation), or negative factors that were partly offset by a strong push from NAFTA (the PIIE explanation)?… McKinsey’s research shows that the ‘NAFTA sector’ of the Mexican economy (large firms with 500 employees or more) has performed strongly over the past 20 years…. Unfortunately, the large firms in the NAFTA sector still employ only 20 percent of the labor force… productivity has actually declined among smaller firms… falling by 6.5 percent per year. Oppressive regulation largely explains the poor performance of these firms…. Three other negative factors… are the chaos and cost of drug wars (largely fueled by American dollars), widespread corruption, and continued monopolistic control in critical sectors (illustrated by telecommunication and petroleum)…. While Mexico’s growth performance falls short of other countries that have liberalized their economic policies, it exceeds the performance of many economies still relying on state control in an overall assessment of past and potential growth.”

3. Frank Rich: ‘The Invisible Bridge,’ by Rick Perlstein: “It says much about Perlstein’s gifts as a historian that he persuasively portrays this sulky, slender interlude between the fall of Nixon and the rise of Reagan (as his subtitle has it) not just as a true bottom of our history but also as a Rosetta stone for reading America and its politics today. It says much about his talent as a writer that he makes these years of funk lively, engrossing and on occasion mordantly funny…. ‘The Invisible Bridge’ takes its title from a bit of cynical political advice bestowed on Nixon by Nikita Khrushchev: ‘If the people believe there’s an imaginary river out there, you don’t tell them there’s no river there. You build an imaginary bridge over the imaginary river’…. One of Perlstein’s enduring themes is that when it comes to the steady ascent of the conservative movement, contemporaneous journalists and Democratic and Republican elites alike are the last to figure out what is going on. He’s a connoisseur of wrong calls, many of them premature obituaries for the right, from now all-but-forgotten opinion titans of the day (Reston, Kraft, Alsop, Sidey, Evans and Novak)…. What’s particularly striking in the new book, though, is the cluelessness of the stalwart Republican grandees of the Ford presidential campaign, who were both blindsided and baffled by Reagan’s guerrilla victories in their own midst…”

4. Congressional Budget Office: 2014 Long-Term Budget Outlook: “In CBO’s extended baseline the fiscal gap for the 2015–2039 period amounts to 1.2 percent of GDP… a combination of cuts in noninterest spending and increases in revenues that equaled 1.2 percent of GDP in each year beginning in 2015…. After 2039, the pressures of rising federal budget deficits and debt held by the public would increase further unless laws governing taxes and spending were changed. Although projections for the very long term are highly uncertain, CBO estimates… the fiscal gap would be roughly 50 percent larger over a 75-year period than over a 25-year period…. For the extended alternative fiscal scenario… the 25-year fiscal gap amounts to 3.4 percent of GDP, the 50-year fiscal gap to 5.6 percent of GDP, and the 75-year fiscal gap to 7.4 percent of GDP…”

5. Simon Wren-Lewis: US savings behaviour, and empirical research strategies: “Chris Carroll, Jiri Slacalek and Martin Sommer…. The mainstay of modern macroeconomics is the consumption Euler equation…. Periods of high saving can reflect periods of temporarily higher income, or temporarily high real interest rates. Adaptations… assume that some proportion of consumers are liquidity constrained, and therefore consume all their income, or that consumption is subject to ‘habits’, which generates additional inertia. This model with or without these adaptations is not very helpful in explaining… the Great Recession…. This model is not very good at explaining US savings behaviour before the Great Recession either…. Consistency with the data is not the admissibility criteria for a microfounded macromodel. The Carroll et al paper finds two explanations… easier credit conditions, and the second is employment uncertainty…. Now for the methodology part…. In order to get their structural model they have to make the highly unrealistic assumption noted above. The reduced form, on the other hand, does not have this assumption imposed on it. So I do not think we can say that the results in Section 5 are more or less interesting than those in Section 4…. Is it the case that, compared to a few decades ago, there are far fewer papers in the top journals that simply try and explain historical time series for a single key macro aggregate (like consumption or saving)? If that is the case, is this due to the difficulties in getting microfounded models to fit, or something else?”

6. Adam S. Posen: The Errors of Conservatives Obscure the Case for Trade: “Twenty years after Bill Clinton, former US president, signed the North American Free Trade Agreement (NAFTA), its very name chills the spines of US voters and congressmen alike…. Yet NAFTA-phobia is irrational…. Consumers in all three countries have gained…. America’s less-skilled workers have received an increasingly raw deal since the 1970s. But NAFTA is not to blame. To claim otherwise is at best to mistake coincidence for causation. At worst, it is a cynical tactic employed to protect special interests at the expense of the common good…. There have been job losses as a result of competition from Mexican (and Canadian) exports. Some critics of NAFTA estimate these at an average of 45,000 a year…. But out of a US workforce of 135 million workers—between 4 million and 6 million of whom leave or lose their jobs every month—that is less than 0.1 percent of turnover…. Since such a tiny fraction of total labor force churn in the United States is due to NAFTA, that deal cannot be a significant cause of wage or employment conditions at home…. This bogeyman-based approach to trade has failed both the progressive agenda and the US economy as a whole. America has ended up delaying or missing out on opportunities for trade expansion and thus income growth, while the welfare state continues to shrink…”

And:

• Sam Wang: Princeton Election Consortium
• First observations of methane release from Arctic Ocean hydrates
• Gary Clyde Hufbauer and Cathleen Cimino: NAFTA Rejoinder: The US Effects Are Clearly Positive for Most Workers (Part II)
• Timothy B. Lee: The case for investing in stocks, in two charts
• Velella
• Michael Santoli: In a mature bull market, financial engineering trumps business innovation
• Danielle Kurtzleben: The amazingly rapid suburbanization of poverty: “Once upon a time (specifically, the 1990s), the US was making remarkably fast progress against concentrated poverty. During that decade, the number of poor people living in poor neighborhoods fell by 24 percent. That progress has entirely reversed, according to a new report from the Brookings Institution. The share of people living in neighborhoods with 40 percent or higher poverty grew by 76 percent between 2000 and the 2008-12 period. And that concentration is growing in suburban neighborhoods in particular…”

Should Be Aware of:

1. Dante Atkins: CA-Gov: Kashkari spends a week homeless, learns nothing, hurts Republican Party: “This battle for the right to lose to Jerry Brown was widely seen as a referendum on the future of the Republican Party, at least in California. One one hand, there was Neel Kashkari: the son of South Asian immigrants, moderate on hot-button social issues, and focused on conservative, pro-business economic policies. Donnelly, by contrast, is a border-patrolling minuteman who was arrested for trying to bring loaded guns onto an airplane, and race-baited Kashkari by claiming that he supported fundamentalist Islamic law. Donnelly earned the vast bulk of grassroots Republican support, but Kashkari had better fundraising and far more support from establishment figures, and prevailed…”

2. James Hanley: Great Moments in Rent-Seeking: “‘The distinction between natural butter artificially colored, and oleomargarine artificially colored so as to cause it to look like butter…was held to be so marked, and the aptitude of oleomargarine when artificially colored to deceive the public into believing it to be butter was decided to be so great, that it was held no violation of the due process clause of the Fourteenth Amendment was occasioned by state legislation absolutely forbidding the manufacture, within the State, of oleomargarine artificially colored. As it has been thus decided that the distinction between the two products is so great as to justify the absolute prohibition of the manufacture of oleomargarine artificially colored, there is no foundation for the proposition that the difference between the two was not sufficient, under the extremest view, to justify [tax rates] distinguishing between them…. That is, that the manufacture of artificially colored oleomargarine may be prohibited by a free government without a violation of fundamental rights.’ From McCray v. United States (1904), one of the most turgidly written Supreme Court decisions I’ve ever read, but not without its unintentional moments of comedy gold…”

3. Peter Bright: With Mobile Safari as the new IE6, Microsoft modifies Windows Phone: “The mobile browsing experience on Windows Phone has steadily improved, taking a big leap forward in Windows Phone 8.1…. Internet Explorer team has looked at the 500 most popular mobile sites to check their behavior on Windows Phone, and, if they behave poorly, figure out what the problem is. The company says that the work it has done for the Update improves the browser’s behavior in more than 40 percent of these sites…”