Things to Read on the Morning of March 28, 2014

March 28, 2014

Must-Reads:

  1. Kathy Ruffing: SSI Should Be Strengthened, Not Cut: “House Budget Committee Chairman Paul Ryan’s misleading review of the safety net attacks Supplemental Security Income (SSI) — an important program that provides cash income to seniors, the blind, and people with severe and long-lasting disabilities who have little income and few assets.  This vital program aids some of the poorest and most vulnerable Americans and, rather than attack it, policymakers should strengthen it. In December 2013, 8.4 million people collected SSI:  2.1 million seniors age 65 or older, 4.9 million disabled adults age 18-64, and 1.3 million disabled children under age 18.  Until the deep recession caused a modest uptick, SSI participation had generally been flat or falling as a share of the population since at least the mid-1990s (see graph). SSI benefits alone don’t lift recipients living independently out of poverty; the maximum benefits for individuals ($721 a month) and couples ($1,082, if both spouses qualify) are about three-fourths of the poverty level.  But SSI greatly reduces the number of people in extreme poverty and lessens the burden on other family members…”

  2. Steve Randy Waldmann: The Asymmetric Informtion Industries: “Government, health care, education, and finance…. Information asymmetries are unusually difficult to resolve in these industries… even after we have purchased services, we are often unable to evaluate their quality…. Absent reliable markers of quality, we imagine that unreliable self-evaluations are probably better than nothing…. As these are fields in which providers themselves can’t reliably evaluate the quality of the services provided, the rest of us will have a very hard time distinguishing between corrupt practices and natural variability…. We need the “information asymmetry industry”…. But we should acknowledge these are problematic industries for a capitalist economy and a democratic polity…”

  3. Ed Glaeser: Raise earnings, but go beyond the minumum wage to do it: “CAN’T AMERICA, and Massachusetts, find a better weapon to combat income inequality than raising the minimum wage? I don’t oppose the efforts of those, including Speaker DeLeo and President Obama, who want to raise the minimum… but I’ll be sad if we once again resort to this hoary policy sledgehammer…. Oceans of ink have been spent disputing the employment effects of the minimum wage…. In my view… no major impact on employment levels is likely…. The good news is that we have had a better way to raise wages for the lowest-paid workers for more than 40 years: the earned income tax credit…. Raising the minimum wage isn’t necessarily wrongheaded. But if we want a better way to reduce inequality and raise earnings for the least fortunate Americans, targeted tax credits and government subsidies are a more creative, fair, and effective course.”

Should-Reads:

  1. Paul Pfleiderer: Chameleons: The Misuse of Theoretical Models in Finance and Economics: “I discuss how theoretical models in finance and economics are used in ways that… devalue the intellectual currency and muddy policy debates. A model becomes a chameleon when it is built on assumptions with dubious connections to the real world but nevertheless has conclusions that are uncritically (or not critically enough) applied to understanding our economy. I discuss how chameleons are created and nurtured by the mistaken notion that one should not judge a model by its assumptions, by the unfounded argument that models should have equal standing until definitive empirical tests are conducted, and by misplaced appeals to ‘as-if’ arguments, mathematical elegance, subtlety, references to assumptions that are ‘standard in the literature’, and the need for tractability.”

  2. Simon Wren-Lewis: It’s the economics, not the politics: “What was missing [in my paper] was an equivalent paragraph saying that, even if there was no economic problem with raising debt, debt financed fiscal expansion might be resisted for political reasons…. It was politics – and ideology – that got in the way of good macroeconomics, which is why the UK and global recession has been so prolonged. And it is that tendency that is personified by George Osborne…. You could perhaps argue is that I’m being politically naive: that all Chancellors maximise political advantage at the expense of national economic interest. The fact that Gordon Brown’s scorecard seems much better (including resisting Blair to stay out of the Euro) could just reflect opportunities and circumstances rather than anything else…. At the end of 2008 Labour did undertake fiscal expansion, and it was opposed by Cameron and Osborne. As I noted here, Osborne in April 2009 argued that monetary policy should “bear the strain of stimulating demand”, seemingly oblivious to interest rates being as low as they could go…”

  3. Duncan Black: Eschaton: Why Did We Invade Iraq: “Errol Morris was on Colbert last night, discussing Don Rumsfeld…. I used to spend some time trying to figure this out. Those of us who were against it were against it, in part, because it didn’t make any f—ing sense at all. The nation was gaslighted by the Very Serious People who had no idea why the fuck they thought this was a glorious adventure. The stated reasons were bullshit, the implicit reasons were gibberish. Yes you can chalk it all up to OIL or making the military industrial complex rich or whatever. I’m not dismissing those reasons. But everybody seemed to have their own reasons. For Christopher Hitchens it seemed to about the Kurds. And punching hippies. Left blogs thrived largely because it provided about the only place we could gather and say… uh, you know this is crazy, right?”

Should Be Aware of:

  1. Buttonwood: Markets, inequality and monetary policy: Collateral damage: “Ian Harnett… argues that the turning point coincided with the arrival of Paul Volcker at the Federal Reserve…. ‘In the post-Volcker world, the drive to squeeze inflation out of the system has come at the expense of lower wage rates, and labour’s share of income. Labour costs are a high proportion…. Thus the only way to constrain inflation below 2% was to constrain wage growth. Any time wages accelerated, central banks tightened monetary policy, pushing up unemployment and squeezing labour’s share.’… Clearly, such a huge change in the distribution of wealth and income is unlikely to have had a single cause…. There is no statistically significant relationship between the decline in top marginal tax rates and the rate of productivity growth since 1980…. So might a dose of inflation reduce inequality? It depends.”

  2. Austin Frakt: Job lock: Job mobility: “Gruber and Madrian surveyed 18 papers…. Six studies found statistically significant results consistent with job lock. Six returned only statistically insignificant results. Results in six other studies were mixed or could not be evaluated…. Their own work based on continuation coverage policies provides a lower bound, while work based on spousal insurance coverage provides an upper bound…. Many (though a minority) of studies of the effect of health insurance on job mobility did not find consistent, statistically significant results indicating job lock. If one was motivated to argue against job lock, this is where one should look, though it requires willfully ignoring the majority of studies that do find a statistically significant job lock effect. Of course, it’s important to keep in mind that the effect of health insurance on job mobility is only one kind of job lock. It tells you nothing about its effect on labor force participation, covered earlier in the series.”

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March 28, 2014

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