Must- and Shall-Reads:
David Dayen: Pundits are trying to bring subprime mortgages back. Don’t let them
Amir Sufi: Who is the Economy Working For? The Impact of Rising Inequality on the American Economy
Charles C. Mann: How to Talk About Climate Change so People Will Listen
Steve Randy Waldmann: The political economy of a universal basic income
Gideon Rachman: The dangerous revival of nationalism
Max Sawicky: Economic security and “the great disturbing factors of life”: “Steve Randy Waldman of the interfluidity blog pulls me back into Universal Basic Income (UBI) land…. I share his foreboding of a political future without a labor movement. It’s unpleasant to imagine how bad things could get, even aside from that whole destruction of the planet thing. In troubled times, there is a natural conflict between trying to preserve old, embattled forms of social protection and casting about for new, more viable ones. In general I have no problem with providing unconditional cash money to the poor rather than in-kind benefits. The problem of course is that we have in-kind benefits for food and housing because of the historic, political weakness of free-standing cash assistance. So we need a political environment that would be conducive to some kind of conversion. The Supplemental Nutrition Assistance Program (SNAP), formerly known as “Food Stamps,” got its political boost from agri-business interests, support which is waning…. I believe SRW’s characterization of the libertarian impulse is wrong. At its root I would say is not some desire for minimal bureaucracy and free choice, but a drive to drown a whittled-down welfare state in the bathtub. If you don’t like bureaucracy, try not to spend much time dealing with private health insurance companies. The Koch-fueled libertarians use UBI to trash existing programs and advocate a wholesale trade. Big government for all its flaws provides some measure of protection from predators that abound in the private sector…. Steve claims the UBI is a bridge from the U.S. to welfare states that are more effective in addressing poverty. By this criterion the U.S. certainly ranks comparatively low. The question is where such a bridge would lead. Existing, more effective welfare states are built on big social insurance, not UBIs…”
Jeffrey Frankel: Piketty’s Fence: “One could just easily find other a priori grounds for reasoning that countervailing forces might kick in if things get bad enough. Democracy is one such force. Progressive taxation arose in the 20th century, following the excesses of the Belle Époque. A political trend of that sort could recur in this century if the gap between rich and poor continues to grow. A few years ago, American voters and politicians were persuaded to reduce federal taxes on capital income and estates. They phased out the estate tax completely (effective in 2010), even though this would benefit only the upper 1 per cent. This is standardly viewed as an example of the rich manipulating the political economy for their own benefit. Indeed, we know that campaign contributions buy some very effective advertising. But imagine that in the future we lived in a Piketty world, a return to the golden age of Austen and Balzac, where inheritance and unearned income were the sources of stratospheric income inequality. Would a majority of the 99 % still be persuaded to vote against their self-interest?”
Rob Stavins: Climate Realities: “In theory, we can avoid the worst consequences of climate change with an intensive global effort over the next several decades. But given real-world economic and, in particular, political realities, that seems unlikely…. The world is now on track to more than double current greenhouse gas concentrations in the atmosphere by the end of the century. This would push up average global temperatures by three to eight degrees Celsius and could mean the disappearance of glaciers, droughts in the mid-to-low latitudes, decreased crop productivity, increased sea levels and flooding, vanishing islands and coastal wetlands, greater storm frequency and intensity, the risk of species extinction and a significant spread of infectious disease…. Two points are important to understand if we’re going to be serious about attacking this problem. One, it will be costly…. And two, things become more challenging when we move from the economics to the politics…. If the new technologies we hope will be available aren’t, like one that would enable the capture and storage of carbon emissions from power plants, the cost estimates more than double. Then there are the politics, which are driven by two fundamental facts. First, greenhouse gases mix globally…. Second, some of these heat-trapping gases–in particular, carbon dioxide–remain in the atmosphere for centuries…. Reducing greenhouse gas pollution will require the unalloyed cooperation of at least the 15 countries and one region (the European Union) that together account for about 80 percent of global carbon dioxide emissions…. Making matters more difficult, climate change is essentially unobservable by the public. On a daily basis, we observe the weather, not the climate. This makes it less likely that public opinion will force action the way it did 50 years ago when black smoke rose from industrial smokestacks…”
Robert Skidelsky: Vanguard Scotland?: “Many are now convinced that the current way of organizing our affairs does not deserve such unquestioning allegiance; that the political system has closed down serious debate on economic and social alternatives; that banks and oligarchs rule; and that democracy is a sham. Nationalism promises an escape from the discipline of ‘sensible’ alternatives that turn out to offer no alternative. Nationalists can be divided into… those who genuinely believe that independence provides an exit from a blocked political system, and those who use the threat of it to force concessions from the political establishment. Either way, nationalist politicians enjoy the huge advantage of not requiring a practical program: all good things will flow from sovereignty…. Practically all of Europe’s existing nation-states contain geographically concentrated ethnic, religious, or linguistic minorities. Moreover, these states’ incorporation into the European Union–a kind of voluntary empire–challenges their citizens’ allegiance…. People are more willing to discount nationalism’s costs, because they have come to doubt the benefits of its liberal capitalist rival. Ordinary Russians, for example, refuse to face the costs of their government’s Ukraine policy, not just because they underestimate them, but because they somehow seem unimportant relative to the huge psychological boost the policy brings. Nationalism today is not nearly as virulent as it was in the 1930s, because economic distress is much less pronounced. But its revival is a portent of what happens when a form of politics claims to satisfy every human need except the coziness of communal belonging – and then lets the people down.”
Heidi Moore et al. Why is Thomas Piketty’s 700-page book a bestseller?: “There’s been a bizarre phenomenon this year… it’s a bestseller…. Why this book? The themes that Piketty brings up have been enshrined in discussion about progressive economists for decades…. Now, over to the experts…. Stephanie Kelton: What explains the Piketty phenomenon?… The title,… doesn’t exactly carry the titillating allure of a bestseller like, say, Fifty Shades of Grey…. The Occupy movement laid the groundwork for a great debate. What was happening to America? Were we witnessing the rise of a plutocracy or the emergence of a meritocracy? Chris Hayes and Joe Stiglitz made the case on the left, while Tyler Cowen and David Brooks provided a counter-narrative for the right… but it was Piketty whose meticulous examination of the evidence, seemed to provide the impartial proof audiences were craving. The left was right…. Tyler Cowen: Thomas Piketty’s Capital in the Twenty-First Century has been a hit for several reasons, most notably the quality of the work. But I’d like to focus on a neglected reason why the book has found so much support, namely it appears to strengthen the case for redistribution…. As these issues get processed by the public there is a common attitude–whether justified or not–that many of the lower earners are partially or fully responsible for their own plight. The egalitarians don’t tend to win these policy debates…. If you are an activist who favors lots of redistribution, the Piketty story is a lot easier to tell yourself and to tell your audiences–and that is yet another reason for its popularity…. Emanuel Derman: Economists are the new nuclear physicists, turned to by governments for advice as though they are heirs to the power of the scientists who created Hiroshima…. Though I should, I can’t bring myself to read Thomas Piketty. I wish I could…. I am just spiritually weary of the ubiquitous cockiness of economists, though Piketty sounds as though he’s less guilty of this than most of the pundits in the daily papers…. My gripe with economists is not that their models don’t work well–they don’t, look at the role of central banks in the financial crisis–but that they seem so reluctant to acknowledge the riskiness of their advice. And yet, beware their fearsome unelected power…”
Andy Jalil: A New History of Banking Panics in the United States, 1825–1929: Construction and Implications: “There are two major problems in identifying the output effects of banking panics of the pre-Great Depression era. First, it is not clear when panics occurred because prior panic series differ in their identification of panic episodes. Second, establishing the direction of causality is tricky. This paper addresses these two problems (1) by deriving a new panic series for the 1825-1929 period and (2) by studying the output effects of major banking panics via vector autoregression (VAR) and narrative-based methods. The new series has important implications for the history of financial panics in the United States.”
Should Be Aware of:
Richard Eskow: Ayn Rand’s capitalist paradise lost: The inside story of a libertarian scam: “Galt’s Gulch of Chile” promised a retreat for the world’s movers and shakers. Then came the charges of fraud…
Linda Tirado: Poor people don’t plan long-term. We’ll just get our hearts broken
Economist: The rise and rise of Xi Jinping: The most powerful and popular leader China has had for decades must use these assets wisely
New Perspectives in South Asian Economic History Conference: November 7-8, 2014: 28 Hillhouse Avenue, Tobin Lounge, Yale University, New Haven, CT
Eric T. Swanson and John C. Williams: Measuring the Effect of the Zero Lower Bound on Medium- and Longer-Term Interest Rates: “The federal funds rate has been at the zero lower bound for over four years, since December 2008. According to standard macroeconomic models, this should have greatly reduced the effectiveness of monetary policy and increased the efficacy of fiscal policy. However, these models also imply that asset prices and private-sector decisions depend on the entire path of expected future short-term interest rates, not just the current level of the overnight rate. Thus, interest rates with a year or more to maturity are arguably more relevant for asset prices and the economy, and it is unclear to what extent those yields have been affected by the zero lower bound. In this paper, we measure the effects of the zero lower bound on interest rates of any maturity by comparing the sensitivity of those interest rates to macroeconomic news when short-term interest rates were very low to that during normal times. We find that yields on Treasury securities with a year or more to maturity were surprisingly responsive to news throughout 2008–10, suggesting that monetary and fiscal policy were likely to have been about as effective as usual during this period. Only beginning in late 2011 does the sensitivity of these yields to news fall closer to zero. We offer two explanations for our findings: First, until late 2011, market participants expected the funds rate to lift off from zero within about four quarters, minimizing the effects of the zero bound on medium- and longer-term yields. Second, the Fed’s unconventional policy actions seem to have helped offset the effects of the zero bound on medium- and longer-term rates.”
Chris Dillow: Capitalism & the low-paid: “Is capitalism compatible with decent living standards for the worst off* This old Marxian question is outside the Overton window, but it’s the one raised by Ed Miliband’s promise to raise the minimum wage to £8 by 2020…. Miliband’s promise… amounts to little better than a pledge that the incomes of the low paid won’t fall in real terms…. This raises the issue: what would serious policies to help the low-paid entail? I suspect they would require: Macroeconomic policies to boost employment…. A serious jobs guarantee; this would help give work to the less skilled, who might not benefit so much from higher aggregate demand alone…. Policies to strengthen the bargaining power of low-paid workers…. Are these policies compatible with capitalism?… This is precisely the debate we should be having. It could be that, whilst the constraints imposed by capitalism are tight, Labour might be over-estimating their tightness, and so will under-deliver for the low-paid.”
Roy Edroso: Rice, Peterson NFL Scandals Really About Liberals’ Plan to Pussify America, Say Rightbloggers: “Even non-fans know that Baltimore Raven Ray Rice was seen cold-cocking his fiancee and Minnesota Viking Adrian Peterson allegedly beat his kid hard enough with a switch to raise welts…. Rightbloggers used the controversies to promote their pet cultural theories: for example, that it’s really liberals, not football players, who beat up women, and that the NFL, which is liberal like all corporations, is being Rice-baited into paying off feminists and sissies who, like liberal sportswriters, just want to ruin America’s Game for conservatives. The most prominent… has come from Rush Limbaugh, who you may remember attacked the NFL as liberal-biased when they wouldn’t let him buy a share of the St. Louis Rams in 2009. Limbaugh has so much yak… we could fill this column with it, but let’s not: The lesser rightbloggers are much more fun. Many of the brethren were outraged that popular sportswriters did not immediately say “what’s the big deal?” but actually acted appalled…. ‘No man has ever hit a woman because she “throws like a girl”‘, point-missed [Ben] Shapiro. ‘But plenty of young men have hit women because they had no moral compass and did not believe in basic concepts of virtue — and plenty of young men lack such a moral compass and belief in virtue thanks to lack of male role models’…. At National Review, Andrew C. McCarthy criticized ‘tendentious “sports journalists”… decidedly left of center… much less guarded about their hostility to conservatives’…. He gave exactly one example of this: ESPN allowed its own correspondent, Kate Fagan, to speak on the issue…. Fagan… wanted the NFL to… [go] into schools… ‘talking to young men about dealing with anger about how they treat women: I think that’s where you’re going to see change… going into the school systems and the younger spaces and really reprogramming how we raise men’. This McCarthy took to mean that ‘boys would be instructed that differentiating men from women breeds domestic violence’, and that was ‘how radical ideas–like the Left’s war on boys–get mainstreamed’. He proposed instead that we focus on ‘the breakdown of the family, the scorn heaped on chivalry, the disappearance of manners, and the general coarsening of our society that result from relentless progressive attacks on traditional values and institutions’. If only boys opened doors for girls again, there’d be no need for this reprogramming! (Other key phrases in McCarthy’s column: ‘the Obama Left’s agenda’, ‘ACORN’, ‘Al Sharpton’s National Action Network’, and ‘Alinsky-style community organizing’)…”
Melting Asphalt: Ads Don’t Work That Way: “A lot of ads work simply by raising awareness…. Liquid Draino, for example, is a product that thrives on simple awareness…. Occasionally an ad will attempt overt persuasion…. Perhaps the most important mechanism used by ads (across the ages) is making promises. These promises can be explicit, in the form of a guarantee or warrantee, but are more often implicit, in the form of a brand image…. There’s one more honest ad mechanism to discuss… honest signaling…. ‘We’re willing to spend a lot of money on this product. We’re committed to it. We’re putting money where our mouths are.’… But… not every ad is so straightforward and above-board…. Corona wasn’t specifically designed for the beach, nor does ‘beach-worthiness’ emerge from any distinguishing features of Corona…. Cultural imprinting is the mechanism whereby an ad, rather than trying to change our minds individually, instead changes the landscape of cultural meanings — which in turn changes how we are perceived by others when we use a product. Whether you drink Corona or Heineken or Budweiser ‘says’ something about you. But you aren’t in control of that message; it just sits there, out in the world, having been imprinted on the broader culture by an ad campaign. It’s then up to you to decide whether you want to align yourself with it…. The class of products for which this is the case is surprisingly large. Beer, soft drinks, gum, every kind of food (think backyard barbecues). Restaurants, coffee shops, airlines. Cars, computers, clothing. Music, movies, and TV shows (think about the watercooler at work). Even household products send cultural signals, insofar as they’ll be noticed when you invite friends over to your home. Any product enjoyed or discussed in the presence of your peers is ripe for cultural imprinting. For each of these products, an ad campaign seeds everyone with a basic image or message. Then it simply steps back and waits–not for its emotional message to take root and grow within your brain, but rather for your social instincts to take over…”