Things to Read on the Evening of March 10, 2014
Must-Reads:
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Tim Noah: GOP’s tough love isn’t inspiring the unemployed: “A common conservative argument against any program to help jobless people is that it will discourage those people from seeking work…. The… UI extensions expired at the end of 2013. And so far, there’s been no visible effect…. In sum, the GOP’s tough-love stimulus of allowing long-term UI benefits to expire has produced no detectable effect on employment, or improvement of any other kind, for the long-term unemployed. We can allow this cruel experiment to continue, but the only group likely to benefit would be congressional Democrats eager to use UI benefit cancellation against the Republicans in the next midterm election. A better solution would be to restore long-term UI benefits to the two million people (including 200,000 veterans) who’ve lost them.”
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Watch for the launch of @FiveThirtyEight on March 17. We'll make you smarter — probably. @micahcohen @NateSilver538
— Mike Wilson (@mWilstory) March 8, 2014
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Robert Pollin: Public debt, GDP growth, and austerity:: “In 2010… Carmen Reinhart and Kenneth Rogoff published… “Growth in a Time of Debt”… [which] has been frequently cited by major economic policymakers… Paul Ryan… George Osborne… Olli Rehn…. Herndon… Ash and I showed… that several of the critical findings advanced in the Reinhart-Rogoff paper were wrong…”
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Dani Rodrik: Foxes Over Hedgehogs: “We live in a complicated world, so we are forced to simplify it….
But, because such ‘mental models’ are simplifications, they are necessarily wrong…. And yet, without these shortcuts we would be either lost or paralyzed. We have neither the mental capacity nor the understanding to decipher the full web of cause-and-effect…. Good social science turns our unexamined intuitions into a map of causal arrows…. In a world of diverse and changing circumstances, social scientists can do real harm by applying the wrong model. Neoliberal economic policies, predicated on well-functioning markets, misfired in developing countries – just as planning models, presuming competent and capable bureaucrats, failed in an earlier era. The efficient-markets theory led policymakers astray by encouraging them to undertake excessive financial deregulation…. So how should we choose among alternative simplifications of reality?… Often we need to make decisions in real time…. Unfortunately, economists and other social scientists get virtually no training in how to choose among alternative models. Neither is such an aptitude professionally rewarded…
Should-Reads:
- Kathleen Geier: Taking on the Heiristocracy: Review of Thomas Piketty: Capital in the Twenty-First Century
- Phillip Longman: Oops: The Texas Miracle That Isn’t
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Matthew O’Brien: Fixing Inequality Won’t Hurt the Economy: “Inequality is a choice, but it’s not one we have to make to grow. That might sound obvious, but isn’t to economists. Most of them think there has to be a trade-off between equality and efficiency…. 1. If two countries have the same amount of redistribution, the one with more inequality will tend to grow less. Specifically, moving from the 50th to the 60th percentiles for inequality will knock 0.5 percentage points off of per capita growth a year. 2. If two countries have the same amount of inequality, the one with more redistribution will not tend to grow any less—at least not in a statistically significant way. 3. But this doesn’t tell us the whole story…. That’s because redistribution… reduces inequality. So what we really want to do is add these two together…. Since the former helps growth and the latter doesn’t hurt it that means that redistribution overall tends to increase growth…. 4. The more inequality there is, the greater the chance that a growth spell will end the next year. The researchers found that every point the Gini index goes up makes growth six percent more likely to stop soon…”
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Kathleen Geier: A new study strongly suggests there’s something else Robert Bork was wrong about: antitrust law: “The policies Bork supported have not had the effects he predicted. ‘Did Robert Bork Understate the Competitive Impact of Mergers? Evidence from Consummated Mergers’… by economists Orley C. Ashenfelter [et al.]… investigate one of Bork’s most important claims: that horizontal mergers (mergers between firms producing the same good or service) in oligopolistic markets are unlikely to increase prices. They find overwhelming evidence contradicting this claim. Bork’s theory was that horizontal mergers generate economic efficiencies…. ‘The empirical evidence that mergers can cause economically significant increases in price is overwhelming. Of the 49 studies surveyed, 36 find evidence of merger induced price increases…. Overall, the results from the merger retrospective literature show that mergers in oligopolistic markets can result in economically meaningful price increases.’… The authors’ most important finding is that Bork’s fundamental prediction — that mergers wouldn’t cause price increases in oligopolistic markets — is wrong…”
Should Be Aware of:
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Jared Bernstein: Undoing the Structural Damage to Potential Growth: “I disagree! I think the damage can be at least partly reversed precisely by running ‘a high-pressure economy’… ‘reverse hysteresis’…. By running the economy well below conventional estimates of the lowest unemployment rate consistent with stable inflation, and doing so for a while, we can pull workers back in, raise their career trajectories, improve their pay and their living standards, and turn that downshift to an upshift that raises the level and growth rate of G.D.P. Won’t that be inflationary?… First, if anything, the current economy is suffering from inflation that is too low…. Second, the precise relationship between full employment and inflation is poorly understood…. Third, the correlation between… inflation and labor market tightness… has become far weaker in recent years…”
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Nicholas Lemann: A bygone age… The unraveling… Faith in institutions: “This column marks the dawn of the post-Charles Peters era of ‘Tilting at Windmills’…. Journalists starved for good news have been cheering about Ezra Klein’s departure from the Washington Post for Vox Media, to start a policy-oriented site. The hosannas are a tribute to the quality of Wonkblog, the site Klein built at the Post, and also to a deep collective yearning for the elusive new business model for online to arrive. Maybe this is it! It’s great that Klein, and others, have demonstrated that a more substantive, policy-oriented form of journalism, if executed with authority and flair, can attract large audiences. This kind of journalism has always been a cause of the Washington Monthly’s…. [But] what if it turns out that journalism’s social mission and its economic fortunes have simply diverged—that ventures like Klein’s do a superb job of informing the public, but don’t make money?…”
And: