Things to Read on Thursday Evening: April 10, 2014

April 10, 2014

Must-Reads:

  1. Ezra Klein: Why Won’t Obama Lead?: “Unlike in parliamentary systems, the president is not the leader of the party that wields power in the legislature. Instead, the president often leads the party that is the minority in one or both chambers of Congress. And in those cases the president’s intervention can actually make Congress less cooperative. Elections are zero-sum affairs: for one party to win the other party has to lose. Since elections are typically a referendum on the party in power that sets up a very simple incentive for the minority party: they need the majority party to fail, or at least to be seen to fail, if they’re to regain power. What makes the American political system unusual is that its checks and balances, alongside unusual minority protections like the filibuster, actually give the minority party the power to make the majority party fail. A system that typically requires the minority party’s cooperation to work is nevertheless built to penalize that cooperation. The result is much as you’d expect. When the president takes a position on an issue the opposing party becomes far more likely to take the opposite position…”

  2. Daniel Kuehn: Botched Economics of Gender by Mark Perry and Andrew Biggs in the WSJ: “Mark Perry and Andrew Biggs have a really unfortunate op-ed in the Wall Street Journal yesterday perpetuating the idea that the gender pay gap is a ‘myth’…. Why[?]… Because surprise, surprise the conditional difference in means is smaller than the unconditional difference in means! I sent this letter to the editor in. It has not been published at this point: ‘Mark Perry and Andrew Biggs (April 7th, 2014, “The ’77 Cents on the Dollar’ Myth About Women’s Pay”) seem to confuse our ability to attribute the gender pay gap to various factors with the idea that the gap itself is a ‘myth’…. By highlighting the various determinants of pay disparities Perry and Biggs are actually confirming the existence of the gap and presenting evidence on where it originates…. We know… that many occupations are highly segregated by gender, and that large gender disparities exist in the amount of time dedicated to household work. Young women may be nominally free to major in whatever they choose, as Perry and Biggs suggest, but these choices are heavily conditioned by earlier experiences in the home and in primary and secondary school. All of these disparities are closely related to each other and to the pay gap, and they pose a real problem for those of us that value gender equity. Dismissing the gender pay disparity because it is deeply embedded with other disparities does not clarify the issue at all; it confuses the issue.'”

  3. Adam Posen: Monetary Policy Normalization: Challenges for Fiscal Policy:

  4. Lawrence Summers et al.: We haven’t done it in 15 years and Japan hasn’t done it in a generation:

Should-Reads:

  1. Amanda Marcotte: Charles Murray on female philosophers:: “Charles Murray, author of The Bell Curve… has been in the news lately because Republican politicians like Greg Abbott… and Paul Ryan like citing him as an expert on things like education and economics. On Tuesday, however, audiences at the University of Texas at Austin had the pleasure of hearing Murray’s half-baked theories regarding the limits of the female intellect. Murray was on campus, disturbingly, as counterprogramming to the Civil Rights Summit happening elsewhere at the school… asked… about a 2005 piece he wrote arguing that women are, as a group, innately less capable of abstract thought than men…. his statement that ‘no woman has been a significant original thinker in any of the world’s great philosophical traditions’…. Murray dithered condescendingly for a bit but eventually coughed up the money quote, saying, ‘Until somebody gives me evidence to the contrary, yeah, I’ll stick with that statement…'”

  2. Jason Furman: Whatever Happened to the Great Moderation?: “One critical and sometimes underappreciated goal of a reformed system is that it should enhance macroeconomic stability. The residential sector has historically been one of the most cyclically volatile, and, as was acutely felt in the Great Recession, this volatility can take a severe toll on all Americans homeowners but especially those middle-income families that have a disproportionate share of wealth in their homes. Housing finance reform can thus play a critical role by providing both a structure that makes housing finance, and in turn the housing sector, more cyclically resilient, and also providing a mechanism that helps lean against the wind of the worst downturns in housing. The motivation behind cyclical resilience is straightforward: even if the economy is in a downturn, and even if there are disruptions to financial markets, the housing finance system should still continue providing reasonably-priced mortgages to creditworthy borrowers. Instead, even to this day, roughly five years after the Great Recession, lending standards remain tight and many creditworthy borrowers are still unable to get a mortgage. The natural cyclical volatility of housing should not continue abetted by financial market failures that stifle lending in the mortgage market…”

Should Be Aware of:

  1. James Kwak: The Desperation of the Vanishing Middle Class: “I recently finished reading Pound Foolish, by Helaine Olen… a condemnation of just almost every form of personal financial advice out there…. A lot of what’s going on is just semi-sleazy entrepreneurs trying to make a buck, taking ‘advice’ that is equal parts routine, wrong, and contradictory and packaging it into attractive-looking books, TV shows, and in-person events. A lot of the rest is marketing by the real financial industry, which either (a) wants to make a show of promoting financial education so people will think they are good or (b) wants to teach people that they need their products…. The underlying financial problem that most Americans have isn’t that they buy too many lattes or pick the wrong stocks. It’s that they don’t make enough money to begin with…. This, as I’ve written before, is the fundamental reason why many people won’t be prepared for retirement…. But the big question is why this stuff is so popular…. We live in an age of stagnant real wages and rising inequality. Add that to a culture that fetishizes individualism and rejects government support programs, and you have a market that is ripe for self-proclaimed gurus or self-interested advertising campaigns that claim that you can get ahead by (insert your choice) drinking less coffee, or going into more real estate debt, or buying a variable annuity, or picking the right stocks…”

  2. David Glasner: The Real Problem with High-Frequency Trading | Uneasy Money: “I am not a fan of Thorstein Veblen; his celebration of engineering over finance at least partly reflected a crude misunderstanding of the operation of the price system and a failure to grasp the difference between engineering efficiency and economic efficiency. But lurking in his diatribes, there may have been some inkling that much of what financiers do is a waste of real resources in a battle over the surplus generated by the real economy. It is depressing to reflect on the fact that when more than a century ago Veblen was complaining that financiers, though less productive, were more highly remunerated than engineers, the engineers were still out there designing bridges, and railroads, and other wonders of late nineteenth and early twentieth century technology, while, now in the twenty-first century, the engineers are actually employed by the financiers to design complex high-frequency trading systems, connecting New York and Chicago with fiber-optic cable to speed up trading by fractions of a second, and designing complicated software to implement trading strategies designed to exploit socially useless informational advantages. Does that sound like progress?…”

And:

April 10, 2014

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