Things to Read on the Afternoon of December 18, 2013

Must-Reads:

1. Jared Bernstein: Budget Deal’s Impact Is Only a Blip:

2. Noah Smith: I love microfoundations. Just not yours: “Check out the debate between Tony Yates and Simon Wren-Lewis…. It was kind of cute that Yates singled out Calvo pricing as an unrealistic, kludgey, hold-your-nose sort of microfoundation…. Lagos-Wright (2005)… is every bit as unrealistic as Calvo pricing, but you don’t hear Freshwater guys like Yates kvetching about that…. In the comments to Wren-Lewis’ post, I wrote ‘YES YES A THOUSAND TIMES YES’. In a follow-up post, Yates caricatures my comment as ‘NO NO GET RID OF ALL THE MOTHER&&&&&&G MICROFOUNDATIONS WHILE YOU ARE AT IT’. But let us ignore that particular flerp-o’-derp for now, and focus on why Wren-Lewis is so very very right….

   “Yates says I just want to get rid of all the microfoundations. But that is precisely, exactly, 180 degrees wrong! I think microfoundations are a great idea! I think they’re the dog’s bollocks! I think that macro time-series data is so uninformative that microfoundations are our only hope for really figuring out the macroeconomy. I think Robert Lucas was 100% on the right track when he called for us to use microfounded models. But that’s precisely why I want us to get the microfoundations right. Many of microfoundations we use now (not all, but many) are just wrong…”

3. Greg Sargent: Prioritize combatting inequality. It’s popular: “Short version: While generic “government” still polls badly, the notion that government should act to combat inequality is popular, even among independents and moderates…. A sizable majority of Americans, 57 percent, believes that ‘the federal government should pursue policies that try to reduce the gap between wealthy and less well-off Americans’…. Only Republicans and conservatives believe government should not act to reduce inequality, but even among them the numbers are surprising…. Among Republicans the numbers are 40-54, and among conservatives they are 45-48…. Though it’s often said Americans reject ‘class warfare’, individual government policies to fight inequality–higher taxes on the rich, strengthening the safety net, funding for education, infrastructure spending to create jobs, hiking the minimum wage–are broadly popular. Also, as Paul Krugman and Alec MacGillis argue, treating inequality as a central challenge is the right thing to do”

4. C. Northcote Parkinson: Parkinson’s Law: “When first examined under the microscope, the cabinet council usually appears–to comitologists, historians, and even to the people who appoint cabinets–to consist ideally of five. With that number the plant is viable, allowing for two members to be absent or sick at any one time. Five members are easy to collect and, when collected, can act with competence, secrecy, and speed. Of these original members four may well be versed, respectively, in finance, foreign policy, defense, and law. The fifth, who has failed to master any of these subjects, usually becomes the chairman or prime minister…”

Should-Reads:

1. Charles Stross: Why I want Bitcoin to die in a fire: “Mining BtC has a carbon footprint from hell (as they get more computationally expensive to generate, electricity consumption soars)…. Bitcoin mining software is now being distributed as malware because using someone else’s computer to mine BitCoins is easier than buying a farm of your own mining hardware…. Bitcoin violates Gresham’s law: Stolen electricity will drive out honest mining…. Bitcoin’s utter lack of regulation permits really hideous markets to emerge…. It’s also inherently damaging to the fabric of civil society. You think our wonderful investment bankers aren’t paying their fair share of taxes? Bitcoin is pretty much designed for tax evasion. Moreover, The Gini coefficient of the Bitcoin economy is ghastly, and getting worse, to an extent that makes a sub-Saharan African kleptocracy look like a socialist utopia…. BitCoin looks like it was designed as a weapon intended to damage central banking and money issuing banks, with a Libertarian political agenda in mind…. Which is fine if you’re a Libertarian, but I tend to take the stance that Libertarianism is like Leninism: a fascinating, internally consistent political theory with some good underlying points that, regrettably, makes prescriptions about how to run human society that can only work if we replace real messy human beings with frictionless spherical humanoids of uniform density…. The current banking industry and late-period capitalism may suck, but replacing it with Bitcoin would be like swapping out a hangnail for Fournier’s gangrene.”

2. Kevin Drum: National Review Lets Its Freak Flag Fly: “National Review is being sued by climate scientist Michael Mann for defamation…. Mark Steyn quoted Rand Simberg calling Mann the ‘Jerry Sandusky of climate science’…. I’m personally a little uneasy about this, since I’d normally think of Steyn’s post as hyperbolic and stupid, but still fair comment on a public figure. It’s a close call, though. I suspect Mann will lose his case, but that’s for a jury to decide…. Today, though, I read this blog post over at NRO asking for money to help them with their defense: One reader supports NRO with $50 and this note: ‘I have followed the catastrophic global warming argument since I retired in 2007. In a few years it will be seen as the greatest “scientific” scam of all time. Best wishes on your court case, and glad to help.’… And another reader, sends $200 in support and this: ‘Have tried in past to support, fully agree with your efforts here. As a chemical engineer, I have been looking at “global warming” for over a decade. Such nonsense.’ Questioning climate science is one thing, and National Review has done plenty of that. But I’m still a little surprised that apparently they aren’t embarrassed at having readers who believe that global warming is ‘the greatest scientific scam of all time’…. NR is so far from being embarrassed that they put these letters front and center on their website as a call to arms. Wasn’t there a time when a serious publication would quietly bury correspondence like this?… Either that’s hopelessly old-fashioned thinking, or else National Review really does believe that climate change is just flatly a scientific scam…. Shouldn’t they be leaving this kind of thing in Glenn Beck’s capable hands?”

3. James Forder: Could Reputation-Bias Be a Bigger Problem than Inflation-Bias?: “The theory of policy credibility has been influential in both the design of monetary policymaking institutions and in the implementation of policy. In particular, the idea that ‘reputation’ is important has been widely accepted. However, careful attention to its assumptions and implications of the theory reveals many sources of doubt as to its empirical value. First, the theory is implausible, and even if taken seriously does not point to many of the conclusions frequently supposed to be based on it. Second, evidence suggests the theory is false. Third, even policymakers who profess themselves concerned about the maintenance of credibility do not behave consistently in the way the theory says they should. Although many policy proposals ostensibly based on the theory of credibility therefore seem to lack persuasive support, the idea of credibility still poses a danger to effective policymaking since it creates motives for excessively contractionary policy. Although it is frequently asserted that monetary policy can have no long-term effects on economic performance, the idea that a loss of ‘reputation’ will have lasting detrimental effects appears to motivate much policy. In the absence of convincing arguments that reputation–in its technical sense–is important, this would seem to be undesirable and probably dangerous.”

And:

• Christina Romer: Monetary Policy in the Post-Crisis World: Lessons Learned and Strategies for the Future
• David Glasner: Hawtrey’s Good and Bad Trade: A Centenary Retrospective

Bryce Covert: Your Assumptions About Welfare Recipients Are Wrong | Barry Ritholtz: Visualizing Income Distribution | Nicholas Bagley: Why Medicare’s coverage decisions don’t work Sarah Kliff: Why Obamacare won’t spiral into fiery, actuarial doom | Aaron Carroll: Conservatives See the Light on High Deductibles | Harlan Green: The Great Divergence | Billmon: The Corporate “New Class” • Storify |

Should Be Aware of:

1. Matthew Yglesias: What is Medium? It’s the best writing tool on the Web today: “Like Jon Gruber and many other online media professionals I know, I’ve been puzzled for a while by Medium…. Everything changed for me over the weekend when I took the time to write a blog post on Medium…. This is, by far, the best tool for simply writing that I’ve seen. You type, you edit, you format, you toss some images or headers in. It’s really nice. I came away from writing the post wanting to proclaim Medium the greatest CMS (‘content management system’, if you’re not in the business) in the world. But that’s actually wrong. The genius of using Medium as a writer is that it isn’t a CMS. It’s a writing tool that has a publish button and a share button. But precisely because it isn’t tasked with a lot of difficult content management problems, it focuses very effectively on being a text editor…. I’m telling you that I was blown away by the quality of the product as a writing tool.”

2. M.S.: Inequality: A defining issue, for poor people : “IS INEQUALITY the ‘defining issue of our time’, as Barack Obama said in a speech last week? Ezra Klein thinks not; unemployment and slow growth, he writes, are clearly bigger problems at the moment. This certainly seems true… unless you are poor or working-class. Because this is the whole crux of the inequality argument: recent history, at least since the 2002 recovery began, suggests that unless you are rich, GDP growth isn’t doing much to raise your income anymore. And the trend seems to be getting worse…. Mr Klein’s post has generated a lot of pushback from liberals…. A different response would be that distinguishing between inequality and unemployment or growth is a false dilemma…. But here’s the thing: at some level that issue is beside the point…. Americans have traditionally been inclined to embrace the idea that dividing the pie equally is less important than increasing the total size of the pie. But if the lower 50% to 80% of the income spectrum finds, over a period of decades, that their slice keeps shrinking while the pie gets bigger, they will eventually start demanding more equal slices…. If we don’t find ways of redistributing national income that don’t hurt growth, we’re going to end up with ways of redistributing national income that do.”

And:

• Daniel Tompkins: Moses Finley and the American Scene: The Political Formation of Moses Finley, 1932-1955
• J. Bradford DeLong (1997): The Corporation as a Command Economy
• Ryan Lizza: Why Won’t Obama Rein in the N.S.A.?

Ari Phillips: Alps Warming At Double The Average Global Rate | Jeff Spross: It Doesn’t Take Much Global Warming To Drive Global Water Scarcity Way Up | J. Bradford DeLong (2010): Stephen Williamson Commits Himself to Cargo-Cult Macroeconomics | C. Northcote Parkinson |