Things to Read at Dinnertime on February 6, 2014

Must-Reads:

1. Mark Peters and David Wessel: More Men in Prime Working Ages Don’t Have Jobs: “Mark Riley was 53 years old when he lost a job as a grant writer for an Arkansas community college. ‘I was stunned’, he said. ‘It happened on my daughter’s 11th birthday’. His boss blamed state budget cuts. That was almost three years ago and he still hasn’t found steady work…. More than one in six men ages 25 to 54, prime working years, don’t have jobs—a total of 10.4 million. Some are looking for jobs; many aren’t…. Having so many men out of work is partly a symptom of a U.S. economy slow to recover from the worst recession in 75 years. It is also a chronic condition that shows how technology and globalization are transforming jobs faster than many workers can adapt, economists say.”

2. Robert M. Solow: The One Percent: “Mankiw’s… paper… without making an explicit claim, carries on tacitly as if the One Percent consists mainly of entrepreneurs whose innovations generate a lot of consumer surplus for the world. There would be less alarm if that were so. But… the financial services industry… trading profits… the payoff to asymmetric information, and generates precious little in the way of aggregate consumer surplus…. From 1970 to about 1995, the median realized compensation for chief executive officers in Standard and Poor’s 500 broker-dealer firms was essentially indistinguishable from that of Standard and Poor’s 500 banks and industrials. Rather suddenly, between 1996 and 2006, the median broker-dealer chief executive officer started to collect anywhere between 7 and 10 times the median compensation of the other two groups. This does not smell like the Goldin and Katz (2008) story. I’ll swallow “innovation,” but socially productive innovation, no thanks. Extreme inequality is not primarily about useful entrepreneurs. On financial profits and inequality, Mankiw waffles uncomfortably.”

3. Jonathan Chait: The Lonely Death of the Republican Health Plan: “Last week, Republican Senators Tom Coburn, Richard Burr, and Orrin Hatch unveiled a health-care proposal – or, at least, a close approximation of one. Conservatives hailed it as a seminal event, the moment when the Republican Party would finally dispel the accusation of mindless obstructionism and assert its full equal status as a vessel for serious health-care policymaking. Ross Douthat rejoiced, ‘mirabile dictu, an actual health care reform proposal!’ The new plan ‘explode[s] the myth’, exulted a National Review editorial, that ‘Obamacare or something like it is the only game in town’…”

4. Tim Duy: Markets Tumble. How Will the Fed React?: “The Fed’s decision to taper despite the obvious challenge to their inflation target looks increasingly questionable…. Across the Curve points us to the Wall Street Journal’s anecdotal account of intense pricing pressures (and still weak demand) facing firms…. Despite the Fed’s claim that tapering is not tightening, that it is the stock of assets held, not the flow, that matters, that they could change the policy mix without changing the level of accommodation, market participants are acting as if tapering is indeed tightening…. Bond market participants, who had been starting to get optimistic that improving economic conditions would prompt the Fed to tighten sooner than later are now rethinking that scenario…. If this keeps up, it looks like Yellen will face an early test in her first few weeks as Chair. And I would say there is a good chance this does keep up until the Fed changes direction and decides that the US economy may not have reached escape velocity as believed…. The hawks fought long and hard for the taper; they will not be easily dissuaded from by a few sloppy days on Wall Street….”

Should-Reads:

• Diane Coyle: How useful a measure is GDP?: Measure a country purely in terms of its GDP and you neglect the wellbeing of its people. Yet can that be measured?

• Tim Duy: No End To Tapering Yet: “Today we learn via Bloomberg: ‘The hurdle ought to remain pretty high for pausing in tapering’, Richmond Fed President Jeffrey Lacker said…. Chicago’s Charles Evans said… policy makers probably face ‘a high hurdle to deviate’ from $10 billion cuts in monthly bond buying at each of their next several meetings…. One hawk, one dove, both concluding that the bar to stopping the taper is quite high…. I would suggest that the decline in rates indicates the Fed is too tight, not too easy. Indeed, we would hope that they would only be tapering in the context of a rising interest rate environment as it would suggest that market participants were anticipating higher growth and inflation. But the Fed doesn’t see it that way. They see lower rates as a signal that policy is easier. And hence are not inclined to react to ease policy further by stopping the taper. Moreover, I don’t think the Fed believes that the end of asset purchases is impacting global markets because they are convinced that tapering is not tightening. If it is tightening, then why should global markets react?  And even if it was tightening, the Fed wouldn’t see it as their problem…. The Fed isn’t ready to change course.  Recent turbulence is enough to pique their curiosity, not enough to suggest that tapering was premature.”

• Antonio Fatas: The conservative bias of economic models: “Noah Smith… argues that there is no such [conservative] bias in economic facts, quite the opposite, the evidence is weak…. So where is the bias coming from? My sense is that it is coming from models…. Their economic logic is the one that allows us to show the value that our profession adds. Let me explain. Economists do not have a great reputation when it comes to forecasting…. But even if you avoid those difficult empirical questions you can still impress your friends by showing how the logic of simple economic concepts can go very far in understanding complex real world phenomena. Talking about opportunity cost, the difference between nominal and real variables, introducing a general equilibrium effect in a macroeconomic question or using game theory to help improve the analysis of a strategic situation are examples where economists thrive and show the added value of the discipline…. The origin of the conservative bias of economists… [is the] conservative nature of the benchmark model that economists use…. And what is interesting is that this bias does not always show in casual conversations. Many macroeconomists do not use the intuition of the benchmark model when having a casual conversation about economic policy.”

• Matthew Yglesias: “Here’s Chris Cillizza on the Congressional Budget Office and Obamacare: ‘My job is to assess not the rightness of each argument but to deal in the real world of campaign politics in which perception often (if not always) trumps reality….’ Personally, it would make me very sad to have a job that was more about explaining who was perceived to be right about important arguments than a job that’s about trying to explain who is in fact right. But… is… it… true… perception often trumps reality in campaign politics[?] My read… is that it mostly doesn’t work that way…. ‘The fundamentals’… drive election outcomes…. So if you want to know whether Mary Landrieu is likely to get re-elected in Louisiana in 2014… how a Congressional Budget Office report from February could be characterized in a television ad is just very unlikely to matter. On the other hand, the Congressional Budget Office report does give us some interesting insights into how the health care bill is likely to affect people’s lives and the economy. That’s a pretty good reason to write about it!”

Sabrina Corlette: New CBO Numbers: Cause for Controversy or Celebration? | David Frum: The Dark Matter of the Republican Right | Peter Dreier: ‘America The Beautiful’ Author Katharine Lee Bates Is Rush Limbaugh’s Favorite Lesbian Socialist | Greg Sargent: What the CBO report on Obamacare really found |

Should Be Aware of:

1. Paul Krugman: Austerity Memories: “Cooper in passing reminds me of something I wrote during the depths of oh-my-God-90-percent-debt enthusiasm. As Cooper suggests, way back then I made all the key anti-debt-panic arguments that would be vindicated in 2013 — which is not so much a comment on my own perspicacity as it is a comment on how easy it was to see the flaws in the debt-panic argument right from the beginning, never mind the spreadsheet. And following the link from my post to the article that inspired it, I see a reminder of what was really going on before the debt scolds tried to rewrite history. These days, they always insist that they weren’t arguing for short-run fiscal austerity. Oh yes they were: in the linked article, Ken Rogoff explicitly attacks those who wanted to maintain fiscal stimulus, and ridicules those suggesting that pursuing fiscal consolidation ‘risks throwing already weak economies into double-dip recessions, or even a sustained depression’. Um, Europe?”

2. Sarah Kliff: Yes, Obamacare will probably downsize the workforce. Economists explain why: “If you want to understand the newest Obamacare projection coming out of Washington–the one that says health reform will convince millions of Americans to work less–the best place to start might be Tennessee…. When Tennessee ended Medicaid coverage for tens of thousands of residents, Google searches for ‘job openings’ increased. And Tennessee’s employment rate began to tick up, in a way that was distinct from its neighboring states. The type of jobs they were finding, Garthwaite and his colleagues found in a recent National Bureau of Economic Research paper, were over 20 hours per week, suggesting they were more likely to provide health insurance benefits.”

3. Troy Davig and José Mustre-del-Río (2013) The Shadow Labor Supply and Its Implications for the Unemployment Rate: “The number of individuals expressing interest in work, but who are not looking for a job, has swelled in the years since the Great Recession. While a rapid return of this group into the labor force is possible, their flow rate back into unemployment has been declining and, therefore, their potential to slow or reverse the decline in the unemployment rate appears modest.”

And:

Ryan Cooper: On jobs [and ObamaCare], conservatives are completely full of it | Tim Berners-Lee: We need to re-decentralize the Web | Jay Rosen: Features and details of the personal franchise model in digital journalism, with 11 examples |