Things to Read at Night on January 17, 2015
Must- and Shall-Reads:
- : [ECB Set to Bow to German Pressure Over QE](http://www.ft.com/intl/cms/s/0/98b78292-9da3-11e4-8ea3-00144feabdc0.html
- : What Does the End of the Swiss Peg Tell Us About Central Banks?
- : The world’s worst idea: taking out a mortgage in a foreign currency
- : “Psychologist Laurie Santos trains monkeys how to use money, and has learned that they attempt to solve the same sort of financial problems humans have attempted…”
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: There Are No Friedmans Today, Except Maybe Friedman: “No economist on the right is asking ‘Where are the Galbraiths of yesteryear?’? It’s because Milton Friedman won the debate, and John Kenneth Galbraith lost…. By sheer chance, I found a Brad DeLong post…. In an alternate universe, Galbraith won and Friedman lost, and economics would be very different today. So I decided to post this…. We are all Friedman’s children and grandchildren. The way that New Keynesians approach macroeconomics owes more to Friedman than to Keynes: the permanent income hypothesis; the expectations-augmented Phillips Curve; the idea that the central bank is responsible for inflation and should follow a transparent rule. The first two Friedman invented; the third pre-dates Friedman, but he persuaded us it was right…. Friedman had a mountain to move, and he moved it. And because he already moved it, we simply cannot have a Friedman today…”
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: A 2017 Agenda
: “A 160-page white paper from a think tank titled Report of the Commission on Inclusive Prosperity is not exactly designed to set the world ablaze. But the timing and circumstance of its authorship make it the best guide… endorsing fiscal stimulus and a strong pro-labor union agenda… downplaying the strong education-reform streak… liberal ambitions it pushes aside. There’s no cap-and-trade or carbon tax in here, no public option for health care, and no effort to break up or shrink the largest banks. Nor is there an ambitious agenda to tackle poverty. Instead, you get a multi-pronged push to boost middle-class incomes. After an extended period in which Democratic Party politics has been dominated by health care for the poor, environmental regulation, and internecine fights about Wall Street… back-to-basics middle-class populism…”
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: Marriage Decline in U.S. Didn’t Increase Inequality, the Economy Did: “David Leonhardt claimed that liberals overlook evidence that… the relative decline of… married couple [households] increases inequality… cited a paper by Professor Molly Martin of Penn State. But Martin… ‘cannot determine the degree to which family structure changes caused the observed changes… family formation probably reacts to prevailing economic conditions and, in that response, sets the conditions for perpetuating broader inequality patterns’…. She notes that ‘the relationship between family formation behavior and inequality appears to be declining over time’ and even during the period where it was most influential, it accounted for very little of the change…. Bruce Western writes, ‘Most of the increase in family income inequality was due to increasing within group inequality that was widely shared across family types and levels of schooling…. Though family structure, more than the educational inequality in earnings, is closely associated with the rise in inequality from 1975 to 1995, both effects were small after 1995’…. The evidence shows that family structure has changed because economic opportunities for most people have worsened…” -
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The Yellen Fed: Model-Based Policy:
“The dots matter more than Eurodollars…. This is heresy to a generation of investors, who became accustomed to the “Greenspan put”–the view that the Fed would always be there to bail out the equity market–and trust that the prices in the bond market at any point in time reflected the likely forward path of policy changes…. We’ve heard for five years that all of the Fed’s actions have helped Wall Street but done nothing for Main Street. Easy money’s been available to corporations, who have done buybacks but not invested in their businesses…. The wealth effect from elevated asset prices has helped the 1%. But mortgage and household credit to non-pristine households and small firms has remained tight…”
Should Be Aware of:
- : “Sometimes soft targets are the bars on the cage. You grab them and rattle them and howl because they’re the only thing you can grasp. But if there are hacksaws or other tools around, it would be a shame to keep rattling the bars rather than patiently filing through them, one millimeter at a time”
- : “The ‘reformocons’, the small coterie of pundit-adviser-activists trying to coax the Republican Party back toward sanity, may be doing the most politically significant work of any faction in America today. But the task of talking sense to the senseless is tricky business, involving lots of soft whispering and noble lies. Peter Wehner, the former Karl Rove aide, has taken on an important role in this movement, but his recent New York Times op-ed urging conservatives to be less crazy, reveals just how cautiously the reformocons must tread.
“ - : “Many are treating the news of this year’s flu shot as if there’s some monstrous difference from other years, and that we should behave differently this year than other years. That’s just not the case. The difference between 60% effective and 23% effective is subtle. It’s real, but not that huge. Yes, you should get a flu shot, because the NNT is still pretty great. Herd immunity is important. But you should always, always practice good infection control as well.”
- : ‘The Organised Mind’, by Daniel J Levitin; ‘The Life-Changing Magic of Tidying’, by Marie Kondo
- : Ross Douthat ponders the Liberal Marriage Hypothesis
- : Half Of The United States Lives In These Counties
- : Conservatives Misfire on ‘Pagan Green’ Pope’s Encyclical
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: Rebooting: “A growing sense of perplexity and unease about online discourse… academia… the political moment… as if I’m losing my voice… it’s not worth speaking up… sometimes, that the risks to speaking outweigh any benefits… my middle-aged anomie… a narcissism that encourages them to confuse a confessional for an analysis…. I started this blog uncertain about whether to trust my own readings and arguments, and have become less trusting with each passing year…. I want to start a new year of writing in public with a series of fragments that will repeat each other, as well as some old themes…. Call the whole thing Grasping the Nettle…” -
: Lunch with the FT: Marc Andreessen: “He asks what I have been struck by on this visit to Silicon Valley, and, when I cite its collaborative culture, he beams as if it is a personal compliment. ‘I couldn’t believe that people were volunteering to help [me],” he recalls of his own arrival 20 years ago. “It didn’t match anything where I grew up’…. Waggling his iPhone affectionately, he says: ‘This little guy right here is the equivalent power capability of the $20m supercomputer I was using. This thing is in two billion people’s hands’…. His interests on Twitter are promiscuous, ranging from multi-part tweet epics on economics to immigration. His tech-optimism attracts both admiration and mockery…. In person, it is not so much his voice as the speed at which he talks that makes lunch like navigating conversational rapids…. All will be well, he says, provided we allow more technology. ‘If we don’t get it quite quickly, we will not be able to afford things like social security, Medicare. We need far higher productivity for the shrinking percentage of people who are going to be working’…. He leaves as I pay, but soon sends a text about an app that fights your parking ticket for you, confirming his faith: tech has an answer for everything.” -
: Why Republicans are starting to sound like Elizabeth Warren
: “Lynn Vavreck’s… The Message Matters is by far the best analysis of the interplay between campaign messages and economic fundamentals…. If the recovery really does continue strengthening… Republicans [must] pursue… an ‘insurgent’… strategy…. Setting the agenda on something other than the economy. Persuading voters the insurgent has a novel position…. Clarifying and framing the insurgent stance in a popular way. The poverty and opportunity frames may work for Warren… but they essentially fail for Republicans… don’t really change the conversation from the economy.. cuts against the existing Republican brand… doesn’t tie in to any notably popular Republican policy positions…. Faced with the strong economic climate of the late 1990s, [George W.] Bush… distanced Al Gore from economic success, emphasizing divided government and… Alan Greenspan… changed the subject to… restoring ‘honor and dignity to the White House’, military preparedness, and management of K-12 schools. His agenda for steep tax cuts was framed as a common sense corrective to budget surpluses…. It was clever and it worked. Sort of. Bush, famously, received fewer votes than his opponent even though Gore simultaneously had to fend off a Ralph Nader campaign to his left…. There’s plenty of time for things to take another turn for the worse. But if they don’t, trying to sell themselves as the real progressives on economics isn’t an especially promising means of coping…” -
: Nit-Picking Piketty: “I attended a panel convened by right-wing Harvard economist Greg Mankiw that should have been entitled ‘Nit-Picking Piketty.’… At one point, Mankiw even put up a slide, ‘Is Wealth Inequality a Problem?’ Any economist who ventures across the disciplinary ramparts will, of course, find a veritable genre of research on the dangerous impacts of extreme inequality…. Mankiw, at another point in his presentation…. Piketty, he intoned, must ‘hate the rich.’ Piketty’s financial success with his best-selling book, Mankiw added, just might lead to self-loathing. These clearly well-rehearsed quips, aimed at knee-capping the humble French economist, fell flat. Mankiw’s presentation, entitled ‘R > G, so what?,’ came across as little more than an apologia for concentrated wealth…. Piketty observed that he has nothing against the rich and said he believes that capital has a useful role to play. He would like to see more of our wealth, he explained, reside with the middle class and the poor. Piketty’s one poke back at the nitpickers came in response to their unanimous support for a progressive consumption tax as an alternative to any other progressive income or wealth tax.
‘We know something about billionaire consumption,’ Piketty observed, ‘but it is hard to measure some of it. Some billionaires are consuming politicians, others consume reporters, and some consume academics.’ And therein lies the point: Too many in the economics profession are ideologues masquerading as mathematicians… hired guns for the privileged classes…”